Parsons Corp Q3 2025 Earnings Call Transcript

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

Question: Andrew Wittmann - Robert W. Baird & Co Inc - Analyst : I wanted to ask about the top line here in the quarter and in the fourth quarter guidance. I think maybe it was a little bit lighter than you expected in the third quarter. I was wondering if you could Carey, talk about what was the variance there? And then just as it relates to the fourth quarter guidance, I heard your comments in the prepared remarks, you talked about federal customer capacity, some things about the material. I just thought maybe you could elaborate on some of that. When you talk about like materials procurement, was that like you couldn't procure because the government was shutdown? Or was there something else behind that? When you talked about customer -- federal customer capacity, is that again shutdown related? Or is there something else behind it? I think just understanding kind of what's changing or what you're seeing in the top line performance is an important topic for today.

Question: Andrew Wittmann - Robert W. Baird & Co Inc - Analyst : Got it. Okay. Great. And then I guess from my follow-up, I wanted to just drill in and get a little bit more from you on FAA. Obviously, the government has shutdown. This one notionally had a October 31 award target date. Obviously, the government controls that and can slide. But I was just wondering, you said imminence on the call. Like are the contracting personnel at the FAA on staff? Is there a dialogue happening there? What can you tell us a little bit more detail on that one in particular?

Question: Andrew Wittmann - Robert W. Baird & Co Inc - Analyst : Got it. So just as an addendum to that, then, I think in the past, you've talked about like the dollar amount of awards that you're awaiting notice on. I think in the quarter, this one, among others, many others, went in as awards that you're awaiting notice on. What does that metric stand out here at the end of the third quarter?

Question: Tobey Sommer - Truist Securities, Inc. - Analyst : Given the slightly lower top line exiting the year, I'm just wondering how we should think about modeling next year based on the midpoint of the new top line guidance, it looks like consensus is around 8% total revenue growth, which I know wouldn't necessarily be an organic number, but any color you could provide there without specific guidance, of course, at this stage would be helpful.

Question: Tobey Sommer - Truist Securities, Inc. - Analyst : And Matt, what would the total contribution this year be from confidential contract just so we have that math equation squared away? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 05, 2025 / 1:00PM, PSN.N - Q3 2025 Parsons Corp Earnings Call

Question: Tobey Sommer - Truist Securities, Inc. - Analyst : And Carey, you highlighted water as an area with the recent acquisition in critical infrastructure, you talked about the growth, et cetera. Are there any verticals within critical infrastructure that you would like to sort of further fortify or maybe gain exposure where you might not have it currently?

Question: Tobey Sommer - Truist Securities, Inc. - Analyst : Okay. And then during the shutdown, there's been kind of a new wrinkle with the administration halting funding of various things in states. Have you seen any impact from this particular facet of the shutdown. And in particular, maybe a comment on Gateway would be interesting. We have our offices nearby and it looks like there's plenty of equipment and workers still plugging away, but would love your perspective.

Question: Gautam Khanna - Cowen and Company LLC - Analyst : I was wondering if you could comment on the EBITDA contribution from the confidential contract in Q3 and for the year, just so we have a sense for what the comp to overcome is in '26?

Question: Gautam Khanna - Cowen and Company LLC - Analyst : Okay. And then I know on the FAA modernization opportunity, there was -- it sounded like there were just 2 bidders yourselves and Peraton. And there's some anecdotes that there might be some risks associated with the terms of the contract. I just wanted to get your view on how to kind of insulate the company from some risk? And how you may have gone about that bid in a way that doesn't -- is a good thing if you win it as opposed to something we should be concerned about?

Question: Mariana Perez Mora - Bofa Merrill Lynch Asset Holdings Inc - Analyst : You highlighted space and missile defense as a growth driver for FS. I was wondering if you could talk a little bit more about that, (technical difficulty) what can you expect (technical difficulty)

Question: Sheila Kahyaoglu - Jefferies LLC - Analyst : Maybe if we could talk about two questions. First on FS growth. How do we think about the FS growth given the order decline in the quarter? How much of it was attributable to the shutdown? And I know, I think, Matt, you said mid-single-digit growth outlook for '26. How we could think about the order flow and the pipeline selling together to get that growth outlook?

Question: Sheila Kahyaoglu - Jefferies LLC - Analyst : Got it. And then maybe if I could ask one on CI, please. The performance there has been pretty good. Margins are now hitting this 10% stride, what's driving that? How do we think about mix going forward?

Question: Louie DiPalma - William Blair Capital Partners - Analyst : Following up on your recent answer, it seems you've made significant progress with providing defense services to some of your Middle East customers. What types of solutions are gaining traction on the defense side? And what's the long-term outlook there?

Question: Louie DiPalma - William Blair Capital Partners - Analyst : Excellent, Carey. And in addition to the FAA brand-new air traffic control systems contract that you're pursuing, you already have an existing FAA facilities contract and should that contract also benefit from the reconciliation bill funding? And related to this, are you starting to already receive awards in October? Or did you receive awards in October that were funded from the reconciliation bill funding? Is that funding starting to flow? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 05, 2025 / 1:00PM, PSN.N - Q3 2025 Parsons Corp Earnings Call

Question: Noah Poponak - Goldman Sachs Group Inc - Analyst : Matt, can you just level set me or remind me the numbers on Federal Solutions organic growth, excluding confidential. What was it in the first half? What was it in 3Q? And what do you now have for 4Q?

Question: Noah Poponak - Goldman Sachs Group Inc - Analyst : Okay. Yes, I guess, how did you think about building that? I mean it's 1 quarter, but just given how that's progressed? how did you think about building that acceleration in 4Q versus 3Q or first 9 months in a government shutdown?

Question: Noah Poponak - Goldman Sachs Group Inc - Analyst : Okay. And Matt or Carey, I guess, we've been in this environment with lower outlays in some of your government customer markets, but you've still had that 10% federal core. If next year, some of the things that have gummed up the system get better, can that core accelerate? Or is that too optimistic just given the overall backdrop? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 05, 2025 / 1:00PM, PSN.N - Q3 2025 Parsons Corp Earnings Call

Question: Noah Poponak - Goldman Sachs Group Inc - Analyst : Just curious if I was sort of thinking of that, excluding like putting FAA aside or -- maybe you have so many large opportunities that putting them aside, is not a relevant question, but excluding any one large program totally changing the growth rate, just thinking more about the diversified core FS ex-confidential?

Question: Noah Poponak - Goldman Sachs Group Inc - Analyst : Okay. Can you frame for us for whoever wins FAA, approximately how large it could become on an annual revenue basis and then what the margins would look like roughly?

Question: Noah Poponak - Goldman Sachs Group Inc - Analyst : Okay. Last one, Matt, just on the FS margins because you had talked about confidential was accretive to the margin. And then as that came out, the margins came down a bit, but back up sequentially here nicely in the third quarter despite that. So as we move forward, what's your latest thinking on where the FS margin lands?