Q4 2021 Parsons Corp Earnings Call
Good day, and thank you for standing by and welcome to the fourth quarter 2021, Parsons Corporation earnings Conference call.
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After the presentation, there will be a question and answer session.
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I'd now like to hand, the conference over to David Bailey Senior Vice President of Investor Relations. Please go ahead.
Good morning, and thank you for joining us today to discuss our fourth quarter and fiscal year 2021 financial results.
Please note that we provided presentation slides on the Investor Relations section of our website on the call with me today are Carey Smith, President and CEO and George Ball CFO today, Carey will discuss our corporate strategy and operational highlights and then George will provide an overview of our fourth quarter financial results and review our two.
2022 guidance, we then will close with a question and answer session.
Management May also make forward looking statements during the call regarding future events anticipated future trends and the anticipated future performance of the company. We caution you that such statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict.
Actual results may differ materially from those projected in the forward looking statements due to a variety of factors. These risk factors are described in our Form 10-K for fiscal year ended December 31, 2021, and other SEC filings. Please refer to our earnings press release or Parsons complete forward looking statement disclosure we do.
Not undertake any obligation to update forward looking statements.
Management will also make reference to non-GAAP financial measures. During this call. We remind you that these non-GAAP financial measures are not a substitute for their comparable GAAP measures and now I will turn the call over to Kerry.
Thank you, Dave I want to welcome everyone to par since fourth quarter and fiscal year, 2020 one earnings call. We had a strong finish to the year and achieved our fourth quarter and full year 2021 objectives as we delivered encouraging second half growth over the first house maintained our hiring and retention of them no matter what large step.
T Chek contract awards and continued to be recognized for our ESG business performance. They.
This accomplishment to support our strategy to achieve top positions in high growth markets and move up the value chain, it's a solution set or greater.
As the rights of all of our strategic evolution from our services to a solutions company. Our portfolio is well positioned in high growth markets aligned with macro environment trench and well balanced across infrastructure defense and intelligence.
Our critical infrastructure segment is benefiting from increased spending on global infrastructure, including transportation, environmental remediation and water and wastewater treatment.
We also expect to gain from the United States infrastructure Bill that was signed into law in mid November .
At the same time, our federal solutions segment is providing crucial national security support to our customers and cyber space missile defense and she five ISR and an increasingly tense geopolitical environment and.
And finally, we're establishing measured 2022 guidance that supports revenue growth of 4% and 20 basis points of adjusted EBITDA margin expansion at the midpoint.
During the fourth quarter, we delivered on our stated objectives, including strong core program performance large contract wins and continued momentum in employee recruiting and retention.
In addition, we were recognized as an employer of choice and for delivering projects with a positive impact on the environment and society.
Our strong finish to the year enabled us to achieve second half revenue growth of 9% over the first half of the year with 7% organic growth and to deliver results that were above the midpoint of all three guidance metrics. We provided during our second quarter earnings call.
In terms of program performance, we continue to receive high customer satisfaction scores based upon our strong program execution.
This is further validated by delivering full year break P win rates of nearly 100% and achieving over 90% average incentive and award fees.
Our ability to successfully deliver on our customers' missions is enabling us to win large strategic contracts in areas that are aligned with the biting administrations infrastructure and national security priorities.
During the fourth quarter, we achieved a book to Bill ratio of 0.9 times on an enterprise basis, driven by a one three times book to Bill ratio in our critical infrastructure segment.
On a trailing 12 month basis, our enterprise book to Bill ratio was 1.25 times with Federal solutions at 1.3 times and critical infrastructure at 1.2 times.
We are winning a significant amount of new business in both segments, which is positioned Parsons for growth in 2020 two and beyond.
During the fourth quarter, we were awarded a 2 billion dollar contract one of our largest contract wins ever and two additional contracts worth approximately $100 million each.
Our recently acquired businesses and our strong ESG portfolio have driven these material New awards.
The 2 billion dollar contract is for a project and construction management at the Faro mine in Yukon, Canada, which one of the largest abandoned mind cleanup projects in the world.
This contract Leverages, our ESG experience and environmental remediation in the mines and reflects our commitment to projects that advance human health and safety restore the environment and maximize the socio economic benefits within the local community.
This continues our care and maintenance work, while expanding our scope to include implementation of the site remediation plans for more than 20 years.
We were awarded a $104 million single award <unk> contract by an intelligence community customer to provide cyber security and computer network operations, we would not have been able to win this type of award without the acquisitions, we have made and the technology capabilities, we've built into our portfolio over the last four years.
Yeah.
Black horse solutions, one of the companies we acquired in the third quarter, what's the word expanded scope on a single award contract that we expect to have an approximate value of $400 million on this contract. We will perform work for the department of Defense intelligence community and civilian organizations that span.
Cyber security electronic warfare checked our cooperations readiness and analytics again this type of award reinforces how our growth investments in companies with capabilities to counter a near peer threats are resulting in tangible wins.
We were awarded a prime position on a multiple award <unk> contract during the fourth quarter with a ceiling value of $1 $1 billion.
This contract will support the Army Corps of engineers to meet environmental and munitions response challenges.
This is another great example of leveraging our ESG portfolio.
Also we won over $60 million of infrastructure contracts in key transportation areas that will receive future funding under the United States infrastructure, Bill, including rail and airport modernization and advanced traffic management systems.
These went to leverage digital technologies from our acquisitions, such as data analytics and cyber security.
Right after quarter closed we were awarded a task order to provide testing solutions in response to the COVID-19 pandemic at the department of Homeland Security immigration and customs enforcement facilities across the United States.
This award is a potential total ceiling value, including search capacity of more than $100 million.
When this contract we leverage capabilities from across both personal segments and are the tech wise product offering.
Collectively these awards illustrate our ability to win as a differentiated solutions integrator and the power of our ESG portfolio.
In addition to winning new business, we're encouraged by our continued recruiting and retention momentum.
Bring in the second half of 2021 increased 30% over the first half of the year and this progress has continued into the new year.
In addition, our overall attrition rate remains in line with industry averages, we feel our proactive management of our hiring and retention process is yielding positive results and we will continue to focus on these areas in 2022.
Adding to the ESG comments I made we continue to build on our long standing commitment to ESG by delivering projects that improve the mobility safety and quality of life for our citizens during the quarter, Our New York City, RFK Bridge, and our Leesburg, Virginia Battlefield Parkway interchange projects received excellent and engineer.
[noise] awards for their positive contributions to the environment safety in society.
In addition, our Gordie Howe International Bridge project, when the highest possible distinction from the institute for sustainable infrastructure for achieving sustainable development and environmental performance standards.
Further Parsons was recognized by three different organizations for our commitment to the military and veteran community, including the 2021 above and beyond award for creating a supportive work environments for members of the United States National Guard and reserve.
After the end of the fourth quarter persons received a perfect score on the human rights campaign's annual corporate equality index. We're proud of our designation of one of the best places to work for LGBTQ plus a quality. These.
These recognitions exemplify our culture of inclusiveness and being an employer of choice.
We had a strong finish to the year and we expect this momentum to continue into 2022.
As we enter the new year, we're focused on four priorities to drive growth and profitability.
First capturing new high quality projects associated with increased global infrastructure spending.
We are proactively engaging with the United States Federal state and local authorities on a pipeline of projects. We expect Corp received prioritize funding.
Canada is also investing in their future with multiple provinces raising funds to push infrastructure programs and in the middle East oil price stability is enhancing our first structure spending for new transportation systems, and new industrial and entertainment cities like nail them in Korea.
Second ramp up staffing on new business and task order wins, we will accomplish this by delivering mission critical solutions for our customers and sustaining our recruiting and retention momentum to maximize contract ceiling values.
Third continuing to move up the solutions integration value chain by winning strategic profitable work.
Our focus is to enhance our positions in high growth markets, including cyber space. She five ISR missile defense transportation environmental remediation at water and wastewater treatment.
Facilities that we've added to our portfolio have provided us with additional strength in these markets, which we will continue to aggressively leverage.
We will also make more organic and inorganic investments to drive integrated end to end solutions that enable us to lead with technology differentiation and win large strategic programs.
And our first priority is to complete the few remaining challenging the legacy critical infrastructure projects.
As we've indicated on prior earnings calls, we are making considerable progress on these programs.
These projects will be an important milestone and symbolic upheld different person says today compared with when we started transforming the company over four years ago.
As you can likely tell I am excited about our future.
Over the last six months, we've done a tremendous amount of work to position Parsons for growth, we've solidified our base of business by winning all major recompete contracts hired and promoted new executive leaders made significant strides Tim recruiting and close two acquisitions that enhance our cyber electronic.
Airfare information operations and position navigation and timing capabilities.
We have momentum into grilling enduring unprofitable segments with total backlog of $8 $3 billion and only 3% of our total revenue up for Recompete in 2022.
We have maintained strong win rates and we have a $44 billion qualified pipeline, which will only grow as the infrastructure funding begins to flow.
We're executing our value creation framework with a strong balance sheet that will enable us to make additional organic and M&A investments to drive growth and expand margins.
We are confident in our ability to achieve that 2022 guidance ranges under their current macroeconomic outlook and look forward to reporting on our progress throughout the year.
With that I'll turn the call over to George to discuss our fourth quarter financial highlights George.
Thank you Jared as Karen indicated fourth quarter results were highlighted by delivering on our financial objectives.
Strategic contract wins and increased hiring activity.
Today I'll focus the majority of my remarks on year over year comparisons but.
But will also include commentary on second half 2021 results compared to the first half of the year.
Total revenue for the fourth quarter of 2021 decreased 1% from the prior year period.
And was down 6% on an organic basis.
These decreases were driven primarily by a reduction in pass through revenue as.
As well as project completions and transitions.
Total revenue for the second half of 2021 increased 9% over the first half of the year.
And was up 7% on an organic basis.
These increases were driven primarily by improved hiring activity.
Seasonality of the business and a reduction in write downs.
I would note that these growth rates are considerably higher than those experienced in prior year periods.
As such we are encouraged by momentum in our core business.
SG&A expenses were relatively unchanged from the fourth quarter of 2020.
Second half 2021, SG&A expenses were up 2%.
Compared to the first half of the year due largely to costs associated with our black horse and acreage acquisitions.
Adjusted EBITDA of $91 million increased 1% from the fourth quarter of 2020.
And adjusted EBITDA margin increased 20 basis points to nine 6%.
These increases were driven primarily by the impact of acquisitions.
Stronger program performance.
I'll turn now to our operating segments, starting first with federal solutions.
Our fourth quarter revenue increased by $40 million were 9%.
From the fourth quarter of 2020.
This increase was driven by acquisitions as core business revenue decreased 2% on an organic basis in the quarter when compared to the prior year period. However, federal solutions revenue grew 11% in the second half of 2021 over the first half of the year.
<unk>, 7% on an organic basis.
Federal solutions, adjusted EBITDA increased $10 million or 23% from the fourth quarter of 2020, and adjusted EBITDA margin increased 120 basis points to 10, 5%.
These increases were driven primarily by the impact of acquisitions and.
And a reduction in incentive compensation costs.
Moving now to our critical infrastructure segment.
Fourth quarter revenue decreased by $54 million or 11% from the fourth quarter of 2020.
This decrease was driven primarily by lower pass through revenue as well as project completions and transitions.
Critical infrastructure revenue grew 6% in the second half 'twenty to 'twenty one over the first half of the year all of which was organic.
Critical infrastructure, adjusted EBITDA decreased by $9 million or 18% from the fourth quarter of 2020.
And adjusted EBITDA margin decreased 80 basis points to eight 6%.
These decreases were driven primarily by higher benefits cost.
Offset in part by stronger program performance.
Next I'll discuss cash flow and balance sheet metrics.
Our DSO at the end of 2021 was 68 days.
Compared to 64 days at the end of the prior year period.
Our fourth quarter operating cash flow totaled $90 million.
Operating cash flow for the full year totaled $206 million as compared to $289 million in 2020.
This decrease results from lower earnings.
And an increase in working capital in the current year.
As well as our Q3 2021 partial repayment.
Payroll taxes deferred under the Cures Act over the course of 2020.
Capital expenditures totaled $8 million in the fourth quarter of 2021 and.
$21 million for the full year.
Our balance sheet remains strong as we ended the quarter with a net leverage ratio.
0.8 times.
As part of our $100 million share repurchase program announced in the third quarter of 2021.
We repurchased approximately 374000 shares.
For an aggregate purchase price of $13 million during the fourth quarter.
This is in line with our annual repurchases charges of $50 million, which is approximately equal to the value of her annual issuance of shares to aesop.
Our core retirement program.
$78 million remains available under this program as of the end of 'twenty to 'twenty one.
Turning to bookings for the fourth quarter, we reported contract awards of $830 million Rep.
Representing a book to Bill ratio of 0.9 times, which includes normal seasonality in our federal solutions business.
For the full year, our book to Bill ratio was a healthy 125 times.
Federal solutions at 1.3.
And critical infrastructure at 1.2.
Our backlog at the end of the fourth quarter totaled $8 3 billion up 3% from the fourth quarter of 2020.
The total backlog continues to represent more than two years of annual revenue.
Now, let's turn to our guidance.
We have taken a measured approach in developing our 2022 guidance and are confident in our ability to achieve results within these ranges.
For 2022, we expect revenue to be between three seven.
And $3 $9 billion.
This represents 4% growth at the midpoint of the range.
And 2% growth on an organic basis.
Organic growth is expected to be driven primarily by our strong backlog.
On contract growth.
Revenue from new business wins, and continued hiring momentum in growing end markets.
Our adjusted EBITDA is expected to be between 315.
$345 million.
With a margin of approximately eight 7% at.
At the midpoint of our revenue and adjusted EBITDA guidance ranges.
This represents margin expansion of 20 basis points from 2021.
180 basis points over the past three years.
The growth in adjusted EBITDA and associated margins is expected to be driven by the foregoing factors impacting revenue.
And the avoidance of legacy program write downs in the prior year.
Our cash flow from operating activities is expected to be between 240.
$280 million.
Free cash flow conversion is expected to remain at approximately 100%.
Adjusted net income.
From a timing perspective as it relates to revenue.
We expect the first quarter to be our lowest quarter of the year.
Following last year's historic pattern with revenue down approximately 7% sequentially from Q4 2021.
We anticipate first quarter 2022, adjusted EBITDA at levels consistent with the comparable prior year Peru.
From Q1 onward, we expect sequential improvements in both revenue and adjusted EBITDA through Q3.
And then down sequentially in Q4.
From a free cash flow perspective.
We expect typical seasonality throughout the year with negative operating cash flow in Q1.
And then positive cash flow with sequential improvements throughout the year, which is relatively in line with historic patterns.
Other key assumptions in connection with our 2022 guns.
Outlined on slide 11 in todays Powerpoint presentation, located on our Investor Relations website.
With that I'll turn the call back over to Gerry.
Thank you George I'm pleased with the way we finish 2021 we delivered on our on our objectives for the second half of the year and our team's hard work enabled us to increase hiring activity drive strong win rate and grow contract awards and backlog to $4 $6 billion and $8 $3 billion perspective.
Blake.
These libraries will enable us to drive growth enhance margins and increase long term shareholder value.
With that we will now open the line for questions.
As a reminder, if you'd like to ask a question at this time. Please press. The Star then the number one key on your Touchtone telephone.
To withdraw your question press the pound key.
Our first question comes from Tobey Sommer with true Securities.
Hey, Good morning. This is Jasper bibb on for Tobey just on the revenue guide I want I wanted to ask how much of a head. When you have this year from the legacy projects are letting roll off.
And do you think there'll be effectively finished exiting that work by year end.
Yeah. Thank you Josh Thanks for joining us this morning.
Roll off projects have already completed of the pass through work done in 2021.
Okay. Thank you and then Jesper.
Yeah, how should we think about the higher oil and commodity prices impacting the segment does that matter for your exposure to the middle east or are there other ways that might impact the business.
A great question Jesper.
The oil prices now approaching nearly $100 a barrel, that's actually helping our middle east business quite a bit we anticipate quite a bit of growth, particularly in Saudi Arabia out there building out new industrial cities are two of which are knee I'm in Korea, we were fortunate to win a program management contract and be on the ground floor of neon.
That value is nearly $100 million.
But that effort is just going to continue it's quite exciting when you think about how Saudi is going to transform the way he did about 30 years ago.
Got it last question for me, it's been one of the more active acquirers in the group.
Is there an appetite for something materially larger than the historical deal profile in the sub $500 million range or do you think the OCI issues might be prohibitive for something larger than that thank you.
Well first we're pleased with where our leverage is right now at <unk> eight times, where we'd be comfortable going to about a two to two and a half times source stretch up to maybe a three times, we're going to continue to keep our strict acquisition criteria, which is looking at companies that have achieved greater than 10% topline growth greater than 10% EBITDA.
Margin expansion will also remain focused on continuing to build out our cyber and space end to end solutions capabilities, and we would entertain a technology related acquisition and critical infrastructure.
Okay. Thanks for taking the questions I'll take the rest offline.
Thank you.
Our next question comes from Gavin Parsons with Goldman Sachs.
Hey, good morning.
Good morning, Kevin.
Carey a lot of your peers have really emphasized the impact of the continuing resolution.
Covid impact.
Customer order patterns.
Is that something you're seeing.
If not maybe why not versus the industry.
If it is captured in guidance.
So first start with say relative to Covid, that's become a tailwind for us it was a headwind over the last couple of years, but the two major programs that where we were impacted on which is the FAA and flatulent are starting to ramp back up so those will benefit us as we go into 2022 relative to a C. R.
Our anticipation and hope is that there won't be an omnibus signed but right now were not impacted by that yet and the reason is because we won so many single award contracts those don't fall under the CR. So we're just trying to drive task orders and hiring as long as we keep up our hiring momentum we anticipate good results and.
And then on customer awards I would say Q4 for federal is traditionally slow obviously, we had very strong book to bill our fifth quarter strength for critical infrastructure, but our proposal center right now is about the busiest it spend for federal So we're pleased to see all of the Rfps out.
Got it okay interesting.
And maybe on the 3% Recompete rate.
What's your contract completion rate or your go get in guidance for this year relative to kind of where we were this time last year.
Our new business to go get is pretty much consistent with what it was in prior years historical years and our Recompete late rate is much lower.
Great and then maybe last one on margins.
Yeah, the eight 7% EBITDA margin guide if I just take your 2021 performance and strip out the charges.
That's closer to the low to mid 9% range. So any help on the walk there would be appreciated.
Yeah. So I would say first we're taking a very measured and balanced approach to guidance and the reason is because there are macroeconomic uncertainties, such as inflationary pressures and the duration of the CR, but we're very confident in our ability to expand margins, we've been able to expand margins 180 basis points since 2008.
And we've been able to do that through multiple means one is by moving up the solutions value chain to a better mix of work. We've also been able to acquire companies that have been higher EBITDA and again, we'll have improved our performance execution and we plan to continue that as we go into 'twenty two 2022 and continue to.
Troll costs. So we believe with those levers that we will achieve our guidance, but again, we're just really taking a measured approach.
Great. Thank you.
Yes.
Our next question comes from Greg Konrad with Jefferies.
Good morning.
And then maybe to follow up with a couple of the last questions. I mean, it doesn't seem like in 2022, you have much in the way of headwinds included in the guide whether COVID-19 .
Pass through run off or just other items.
Are there any headwinds to kind of call out in 2022, and then maybe thinking about the growth drivers any key contracts or at least program areas contributing to that growth.
Yeah. So again I would just say, it's really macro environment uncertainty. He says what we're planning for the only major contract that is completing would be the salt waste processing facility at that run rate was roughly 65 million a year, we were able to offset that in fact, we offset it within that same business unit, because we wanted the Radford pro.
Graeme and also Kwajalein S. Returning post COVID-19 .
As we head into 2022 again, we do believe Copa is behind us and it will be helping us for next year.
That's helpful. And then just following up on infrastructure I mean for awhile now we've been stressing and infrastructure Bill, which we don't really have yet, but it seems like you had a lot of positive commentary around that I mean, how are you thinking about the pipeline from here and maybe catalyst for that to be a needle mover.
Sure Greg So from a planning perspective, we have put it into our 2023 plan, we anticipate that funds could start to flow late 'twenty 'twenty. Two there are basically three buckets. There is the formula funds that get rolled out to the various states there's existing grants and there are new grant programs the formula essentially acts.
Sustained grants can roll out now they'll be held at the last year's level until the <unk> approved the new grants won't start up until later so our focus really is on working the programs that are going to come out of the formula funds and the existing grant programs and again across our three focus areas of transportation and environmental remediation.
And in water and wastewater treatment, our portfolio aligns very nicely with the infrastructure Bill.
And then just last one for me I mean, you mentioned a nice step up in hiring in the second half I mean, what are your thoughts around general inflation is that a headwind tailwind for the business, maybe just thinking about dynamics around cost plus and just in general what youre seeing around inflation.
Yes, I would say again, that's why we're really taken a measured approach to guidance inflation is willing to macroeconomic uncertainties.
Last year, we had about a 2.7% labor escalation. This year, we're planning for a slightly over three but we do want to be cautious given the uncertainties that exist.
Thank you.
Thanks, Craig.
Our next question comes from Cai von <unk> with Cowen.
Yes. Thanks, so much so Carrie could you review for US. Your your problem programs are critical infrastructure that are ending what's the status, what's the risk that we might take taken adjustment there.
Sure Cai.
So the majority of the problem programs are behind US first these are legacy programs that we're bidding in 2015 to 2016 timeframe. All were awarded prior to 2019, we've really shift our focus for the business. We're focused on owner's engineer and design engineering work, which is really our core competencies and.
Not bidding programs that are hard bid construction or entirely pass through we've also put a lot of derisking measures in place and we're pleased actually with the performance that we had this year is we put a lot of those programs behind us in the rear view mirror. So as we go into 2022. There are only three remaining one is going to wrap up this quarter.
The second one will be the end of 2022 and the third one will be middle of 2023.
Got it and I mean is there risk in those that we could take another charge as we exit them.
Well theres always unknown unknowns, but per GAAP accounting, if there was a risk that we knew about we would've had to take them a charge during the quarter.
Excellent.
Hum.
Yes.
Does the fed I T.
Bookings environment has been weak and while you have a good backlog going into the year can you talk about.
What youre looking for for the solutions book.
Book to Bill in the first quarter should we be cautious about that or.
Are there some offsets.
Well, our trailing 12 months for federal spend at one three times, which were placed about we've also taken a pretty conservative bookings approach issue recall for example, if you look at some of the programs that we were awarded this quarter.
We don't book at full value, where basically booking as we receive funding I mean, a great example would be the DHS win steps over 100 million, we've only booked 8 million a lot of our single award idea acute contracts that we were awarded last year were basically the same we only booked the base share even our teams recompete.
We only book the base share not all seven years. So that said you know first quarter doesn't always tend to be our strongest.
But I'm pleased with our proposal activity that's underway.
Got it and then.
Last one if you look at.
Yeah.
M&A clearly I think as Ben pointed out you still have a strong balance sheet.
It's still a priority.
Talk about your pipeline are you seeing any things that we should expect.
There's a good chance.
If a deal this year.
Is it more likely there'll be a tech niche filler or something relatively large.
So based on the leverage ratios that I cited earlier, we could go up to about a 750 million type of acquisition and be very comfortable our pipelines are very robust within the criteria that I mentioned continuing to look at companies that give us the end to end solutions in cyber and space or a technology company.
Within critical infrastructure, you can expect us to do one to two deals per year as we have consistently and these are not accounted for in our guidance.
Got it and so I mean are they kind of on a comparable size of the recent deals or I guess someone asked a question before or any of the larger.
No I think you can expect us to do a comparable size as to recent deal okay.
Excellent. Thank you so much.
Thank you thanks guys.
As a reminder, if you'd like to ask a question at this time. Please press. The Star then the number one key on your touched on telephone.
Our next question comes from Marina Mora with Bank of America.
Good morning, everyone.
That's a lot to chi's question on that money has been macroeconomic uncertainty affecting due diligence on decision making on their jokes he passed.
Lifeline.
We'll continue to do M&A I would say the companies that we're looking at are similar companies to ourselves, which are predominantly solutions providers.
So we will continue to look at it is we have we will factor in areas like inflation and just make sure that we've assessed that as part of our diligence process.
And then the other one is could you give us some color on how important that each day on contract growth.
That's a factor of yarn.
Growth range and the top line and it's what I like to understand this well it's like how much of it is not just execution how much is that saudis determined by hiring and how much is depending on like task order.
Sure. So we do account for it on contract growth and both of those segments. It's a little different between the two and the federal side of the house. It will mostly be through these large <unk> contracts that we've won where we're moving task orders over and that's dependent on getting the task orders and the hiring on our critical infrastructure.
Structure side of the house on contract growth as a regular occurrence on all of those contracts.
Okay. Thank you very much.
Thanks, Brian .
Our next question comes from Louie Dipalma with William Blair.
Carey, George and Dave Good morning.
Good morning.
Or bedroom.
Federal solutions is activity, increasing and as it relates to.
Missile defense.
And and space surveillance reconnaissance.
In the context of the rising geopolitical tensions and I know.
I think it was in December you announced a contract win.
Or <unk>.
Jack Black.
That's associated with your your Braxton Sciences acquisition for ground station.
What is the potential you know with these rising geopolitical tensions.
For you to leverage that project blackjack win for like a larger contract win with the space Development agency, a large constellation that they were building or for hypersonic missile defense.
Yeah, Great question Louise on the missile defense side, we have the teams contract that we won which they engineering contract and again that does have a 40% surge clause, which we're not counting on right now, but they do have the ability to exercise that should they need it our large focus there right now is in hypersonic defense and building.
The space Center surveillance sensor layer to prevent a hypersonic missiles.
On the us.
On the AR space surveillance side, and the DARPA Blackjack Awards, specifically that's for ground stations for small satellite to Theres going to continue to be a lot of small satellites launched because disaggregation of satellites is one of the best resiliency means and space development agency is at the forefront of that which will eventually be rolled into.
Space Systems command, so we do see that as a potential growth area for persons also our space situational awareness contract that we were awarded last year had additional capacity in it as you start to look at not just tracking things since space, but you look at potential weapon station a space you look at space debris from.
Some of the recent incidents that have occurred we expect a continued focus on that for the space area.
Great. Thanks, Carey and you discussed in response to several questions have you have now.
We did the the churn of.
Nearly all of your your low margin construction contracts as a result should we.
Okay.
For the critical infrastructure organic revenue to turn the corner this year and to have them.
Flat to positive organic growth.
Yes, we expect growth in all four of our business units in 2020 two.
Great and one final one.
Earlier this month you.
And now it's.
A partnership.
As it related to P fast water contaminants with appeal I hope I'm pronouncing that correctly can you discuss the larger MPS bass opportunity and how Parsons is positioned as it relates to the the infrastructure Bill.
Yes, Louis the agreement, we announced with Battelle is strategic for US, we'll be able to use that at both the critical infrastructure in the federal side. That's a great example, by the way of where our two portfolios are very synergistic.
On the critical infrastructure side of the house the Big focus area are betting companies that have actually been sued for that contaminants. So that's where we're prioritizing on the federal side of the house. The majority of that piece of it is P. Fast work will come through military installations, and we're still awaiting a final E P. A a regulation.
<unk>, which was even speed that up more right now there's various states that are moving forward, but once it's better regulated there'll be more in demand.
Awesome, Thanks, Kerry, Thanks, George and Dave.
Thank you.
Yes.
Our next question comes from Josh Sullivan with the benchmark company.
Hey, good morning.
John .
Just a question or a general question on inflation generally early thoughts on the upcoming presidential defense budget request.
Thread that needle between funding growth and backfill it on inflation.
Inflation.
Yeah, I would say it clearly is going to be some impact from inflation because it has not been fully factored in but based on the numbers that are being touched around for FY 'twenty three it's looking more positive than I would've said, we would've expected when the administration took over.
Got it.
And then just on the hiring momentum that you mentioned, what's proven to be the differentiator. How do you keep that going how much of your workforce is remote just curious on some of the overall hiring practices in this environment.
Yeah. So I think it's multiple things first we did hire a new head of Chr O as well as new HR leadership back in July that's made a big difference for us, but I also would say, it's a person's employee value proposition. It's our culture, which is one of the agility innovation collaboration pork, we kind of.
The breadth and depth in many areas like cyber and space of a large company, but we've got the agility and responsiveness of our small business entrepreneurial company. We're also very flexible on work location of people want to work remote and their customer permitted their manager permitted we allow that or if they want to work hybrid or if they want to be in an office. So we're very flexible there.
And we have other unique things we offer such as a true dokdo technical career paths, where people can go all the way up to a level that technical fellow our chief Technology officer. So their technical they'd all have to go into management. So I think it's I'd say a collection of the things I'm really it's our employee value proposition plus a new leadership that we brought in.
And the HR team.
Right.
Thank you for the time.
Thanks, Josh.
As a reminder, if you'd like to ask a question at this time that is star then one.
Okay.
Our next question comes from Gavin Parsons with Goldman Sachs.
Hey, thanks for the follow up.
I know, we don't have a set up but.
Any early thoughts on kind of the growth rates beyond 'twenty two is that a pick up from 10% organic.
At this time, we're not sharing long term guidance, we plan to do so at an upcoming Investor day. Our focus is really on doing what we did the second half of 2020 , one delivering and executing and making sure we achieve our 2022 guidance.
Got it.
And then you guys talked a lot about the pipeline more than 100 million what about the pipeline and say I don't know bigger than 1 billion how many contracts.
Are you going after you have the capacity or appetite to pursue those.
Zero is that maybe a good example, and critical infrastructure, but also love to hear your thoughts on the federal solutions.
Yeah, So we're selective and make sure that when we do pursue those that we will win those and we've done that with two for two so far this year, which would be the team's contract and that was our biggest contract at the time and then the follow on Pharaoh, but we definitely will pursue contracts that are greater than $1 billion.
Do you know off the top of your head how many are in that pipeline you've discussed.
Approximately five to 10.
Okay, great. Thank you.
Yeah.
Yeah.
That's all the time, we have for questions today I'd like to turn the call back to Dave <unk> for closing remarks.
Thank you for joining us. This morning do you have any questions. Please don't hesitate to give me a call. We look forward to speaking with many of you over the coming weeks and with that we'll end today's call have a great day.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
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