Parsons Corp Q1 2019 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Matt Sharpe - Morgan Stanley - Analyst : Good morning, Chuck, George and Carey. Congratulations on the IPO and the first earnings print.

Question: Matt Sharpe - Morgan Stanley - Analyst : I just wanted to talk capital deployment a bit here. So, post IPO you guys -- I think you are at a net debt number of about $50 million and the Company should generate pretty good cash going forward from here. What's the appetite or can you give us some framework around share repurchase versus M&A versus internal investment from here? Do you have any targets in terms of those buckets on a percentage basis? Or what can you give us just to help us contextualize your approach?

Question: Matt Sharpe - Morgan Stanley - Analyst : Got it, thanks. And just a follow-up to that. So what types of companies maybe are you looking at in terms of size, in terms of market segment? And are you guys considering any divestitures potentially on the critical infrastructure side?

Question: Matt Sharpe - Morgan Stanley - Analyst : Got it. Any pressure to scale given what some of your competitors have done? Or how do you think about that in the context of M&A? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JUNE 18, 2019 / 12:00PM, PSN.N - Q1 2019 Parsons Corp Earnings Call

Question: Raymond Gonzalez - Jefferies LLC - Analyst : This is actually Raymond Gonzßlez on for Sheila. Just wanted to ask about Polaris Alpha OGSystems. How are the integrations of those two businesses tracking versus internal plan from a cost perspective? We estimate those businesses have 12% type EBITDA margins through fiscal year 2019. Should we think about that differently?

Question: Raymond Gonzalez - Jefferies LLC - Analyst : Okay, great. Thank you. And just one follow-up in general on the bid pipeline. Congrats on the all-time high there. Just wanted to figure out how has the bid pipeline grown sequentially for the two segments. And how is that impacted by the focused bid strategy for Critical Infrastructure?

Question: Edward Caso - Wells Fargo Securities - Analyst : Welcome back to the public markets here. I was wondering if you could give us a look into your crystal ball about the budget, how you see that shaking out as far as shutdown, continuing resolution -- whatever your crystal ball tells us?

Question: Edward Caso - Wells Fargo Securities - Analyst : Your revenue number came in a little higher than we were looking for. Were there some pass-throughs in the quarter, lower margin pass-throughs that raised the number?

Question: Edward Caso - Wells Fargo Securities - Analyst : Last question. Can you give us a sense, since you didn't offer any guidance today, what your approach will be to giving guidance? Thank you.

Question: Natalie O'Dea - BofA Merrill Lynch - Analyst : Hi, good morning. This is Natalie O'Dea on for Ron Epstein. My question -- so your growth strategy is predicated on targeting more advanced technologies that provide additional capabilities in Federal Solutions. I think you've already touched on what you look for in a target. Can you talk about your thresholds for return? And then as a follow-up, you've been acquiring higher-margin businesses in Federal Solutions, so how do you maintain those higher margins over time as you absorb them? Thanks.

Question: Tobey Sommer - SunTrust Robinson Humphrey - Analyst : I was going to ask you a question about margins, which you showed really nice expansion driven primarily in the Federal Solutions space. How does the business performance -- how does that compare to contract awards? And then when you look at your backlog and the potential margin associated with that, do you see margins continuing to prove as a result of the visibility that you have in contract awards and backlog?

Question: Tobey Sommer - SunTrust Robinson Humphrey - Analyst : Thanks. And when I look at the book-to-bill of 1.4, is there a way that you could characterize that in terms of your Enhance-Extend-Transform Strategy and kind of give us some color as to which element might've been most pronounced within the 1.4?

Question: Dan Flick - Cowen and Company - Analyst : This is Dan Flick on for Cai. Good morning. So, your initial share on the LOGCAP contract was small. Is there a potential to expand that share throughout the life of the contract and, if so, how big might that opportunity be? Thank you.

Question: Tobey Sommer - SunTrust Robinson Humphrey - Analyst : You cited three substantial single award contracts. I'm curious if there's something that you could describe within the Company or within the customer set that's driving these larger awards. And then you called them out, so is that an unusual amount or should that be considered something that historically is at a cadence that you would consider normal? Thanks.

Question: Matt Sharpe - Morgan Stanley - Analyst : I just want to talk network and capital for a moment here. I believe you guys made some progress on DSO days, but in general I think the Company has run a little bit higher than most peers. Is it a structural issue? What type of opportunity do guys have to drive that down and sort of provide a tailwind here -- free cash flow going forward? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JUNE 18, 2019 / 12:00PM, PSN.N - Q1 2019 Parsons Corp Earnings Call

Question: Matt Sharpe - Morgan Stanley - Analyst : Got it, thanks, that helps. And then just -- I know we've talked bookings quite a bit, but I want to touch in particular on LOGCAP as well as the Army R4 contract. Those were both incremental awards to the Company. So getting a sense here of the ramp up in the path forward, how we should think about that and whether or not that was incremental in fact to your plan say a few months ago or whether it was already baked into some extent.