Parsons Corp Q1 2025 Earnings Call Transcript

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

Question: Andrew Whitman - Baird - Analyst : Great. Thanks for taking my questions, and good morning. I guess I'm going to start with this kind of a technical question here for Matt. Just in the critical infrastructure segment margins were actually -- were very strong this quarter over 10%, and it's been kind of the place where you're kind of trying to get to for some time, and I guess my question is it looks like the 10-Q says there was no big adjustments on any kind of percentage of completion or anything? Were there any closeouts or anything that contributed unusually to that margin performance in the quarter because obviously, the first quarter is seasonally not usually a particularly strong quarter yet your results were so -- I was hoping that you could just speak to that a little bit more detail, please.

Question: Andrew Whitman - Baird - Analyst : But what's the implication for the balance of the year if it's this strong in this seasonally the weak quarter? Should we read anything into like the momentum in that business for the balance of the year then? Because it seems like you'd be tracking well above what your plan would be for that segment.

Question: Andrew Whitman - Baird - Analyst : Got it. And then Carey, just on that Middle East, I think there was a comment in your prepared remarks related to the Middle East talking about how you're expecting a little bit better growth as the year goes on. I think there's something -- some comments about larger contracts in the Middle East, maybe with a delayed start or delayed ramp. Maybe you can clarify that comment a little bit more. But you just talk to what's behind maybe a little bit slower start of some of these larger contracts, and what gives you confidence that they are indeed going to ramp. Just vis-a-vis the overall economic environment given oil prices, I guess.

Question: Andrew Whitman - Baird - Analyst : Okay, I will, leave it there. Thank you so much.

Question: Mariana Perez Mora - Bank of America - Analyst : Good morning, everyone.

Question: Mariana Perez Mora - Bank of America - Analyst : So my first question is about the solicitation award environment. I'm surprised to see like quite resilient award environment or backlog for Federal solutions. And I'd like to know if you can add any color about like post -- continual resolution extension and with this reconciliation if you have seen any speeding up of the solicitation environment, and what are your expectations for the full year?

Question: Mariana Perez Mora - Bank of America - Analyst : Thank you so much. That that was a great color. And then if I can follow up on the confidential contract, I know you're limited to what you could say, but I don't know if you can share any call around. Remember last call you defined the program as like steps one to five and you're managing REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 30, 2025 / 12:00PM, PSN.N - Q1 2025 Parsons Corp Earnings Call steps one to four and there's this fifth step that didn't depend on you. Have they resolved, how they managed this last piece of the mission or not? What are your expectations there and how is the program trending so far in terms of like volumes versus last year and how that compares to your expectations for the full year?

Question: Toby Summer - Truist - Analyst : Thank you, Carey. I appreciate the illustrative examples for the new budget alignment. I'm curious if there's been anything on the other side of the ledger relative to DOGEDOGE or perhaps civil agency activities where investors broadly seem to think there's the most risk that activities could be diminished going forward?

Question: Toby Summer - Truist - Analyst : I'm curious. Do you think that there will be material and tangible change towards fixed-price contracting? And if so, what kind of change an order of magnitude may result?

Question: Toby Summer - Truist - Analyst : And then if I could just ask the last question on the M&A front, what are your expectations for the balance of the year, and do you have -- are you seeing more or less opportunities in any on either side of the business?

Question: Toby Summer - Truist - Analyst : Thank you.

Question: Sheila Kahyaoglu - Jefferies - Analyst : Good morning, Carey, Matt, Dave. Carey, I want to focus on the revenues. I'm sorry, I'm going to have to ask you so many questions on this confidential program and how we think about it. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 30, 2025 / 12:00PM, PSN.N - Q1 2025 Parsons Corp Earnings Call So maybe broader actually, on slide 13 you point to a sequential increase in Q2. But it still implies sales are about flattish year over year or down low-single organic. So when we think about the first half, second half dynamics, what drives that second half inflection? And maybe more broadly, you're targeting 15% organic growth for the full year, I think. How do we think about that ramp up?

Question: Sheila Kahyaoglu - Jefferies - Analyst : Got it, thank you so much. And then maybe one on just the FS margins then being at 9%, the confidential contract, I think, is a creative. So just how do we think about the path to get back to 9%? Or sorry, how do we get to the high 9% range back again?

Question: Sheila Kahyaoglu - Jefferies - Analyst : Great. Thank you so much.

Question: Gautam Khanna - TD Securities - Analyst : Hey, thanks. Good morning, guys.

Question: Gautam Khanna - TD Securities - Analyst : Just to clarify, I wanted to ask again about DOGE. So have you guys had extensive dialogue with the DOGE liaisons at some of your customers and literally the result is only a couple contracts of de minimis value that have been removed or is this still an ongoing dialogue? So that we could actually see something more substantial in terms of negative impact a quarter or two from now. What's your best guess on that?

Question: Gautam Khanna - TD Securities - Analyst : Okay. And there was some discussion early in the quarter from the new administration on stopping offensive cyber operations against Russia, and what have you. And I know you guys are involved in some of that type of activity, and there was no discernible impact from some of those initiatives on the business.

Question: Gautam Khanna - TD Securities - Analyst : Got you. And just on the confidential contract with respect to guidance, I think, just to be clear, the midpoint assumes what you assumed at the beginning of the year, right? That it will get to whatever rate you anticipated it to get to, which is still down year over year. I want to make sure that's right, and then -- is that right?

Question: Gautam Khanna - TD Securities - Analyst : And given that Q1 seemed to be underrunning that rate, is there -- if first like in May or whenever, if they go ahead and say let's turn it back on at full rate. Is there enough time to catch that under run level from Q1 up in the year and if not -- if you could just quantify, what is that delta?

Question: Gautam Khanna - TD Securities - Analyst : Okay. And last one for me, it sounds like bookings since the quarter end also seem pretty upbeat. I'm just curious, what are you seeing broadly in terms of procurement pace of adjudications in the second calendar quarter, and do you expect a big flush in the third calendar quarter of the year as we typically have?

Question: Gautam Khanna - TD Securities - Analyst : And do you expect Q2 to be pretty strong with respect to the contract awards given what you have outstanding? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 30, 2025 / 12:00PM, PSN.N - Q1 2025 Parsons Corp Earnings Call

Question: Gautam Khanna - TD Securities - Analyst : Great. Thank you, guys. I appreciate it.

Question: Josh Sullivan - The Benchmark Company - Analyst : Hey, good morning. (multiple speakers) Just going to keep it to one here just given the dynamics around DOGE various programs being curtailed, buyouts being offered. What are you seeing on the hiring front for cleared personnel? Are you in better position to hire and access more of your backlog going forward?

Question: Josh Sullivan - The Benchmark Company - Analyst : Thank you for your time.

Question: Alex Dwyer - KeyBanc Capital Markets - Analyst : Hey, thanks for taking my question, good morning. (multiple speakers) Hey, so I think last quarter, you mentioned a $54 billion pipeline and several $100 million and some $500 million awards. Apologies if I missed it, but did you provide an update on this today and how it trended in the first quarter? And I guess, should we think of your 68% win rate as you pursue this pipeline? Should we expect this to sustain or should we ultimately expect this to come back down to defense industry averages? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 30, 2025 / 12:00PM, PSN.N - Q1 2025 Parsons Corp Earnings Call

Question: Alex Dwyer - KeyBanc Capital Markets - Analyst : Got it. Okay. And I appreciate the 2% recompete exposure comment for this year. But I guess as we're thinking about next year, I think the confidential contract was supposed to be rebid in February, but did that get exercised early in the rebid, or is that really the only major contract as we think about 2026 recompete, or are there any other larger ones we should be thinking about?

Question: Alex Dwyer - KeyBanc Capital Markets - Analyst : Okay, thank you.