Q3 2024 Parsons Corp Earnings Call

Yeah.

Okay.

Operator: Ladies and gentlemen, thank you for standing by. Welcome to the third quarter 2024 Parsons Corporation Earnings Conference Call. At this time, all participants are in the listen-only mode.

Ladies and gentlemen, thank you for standing by welcome to the third quarter 'twenty 'twenty Four Parsons Corporation earnings Conference call. At this time, all participants are in a listen only mode.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you would need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again.

After the speaker's presentation, there will be a question and answer session.

I ask a question during this session you would need to press star one one when your child town you wouldn't hear an automated message.

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I would draw your question. Please press star one again, please be advised that debt.

Operator: Please be advised that today's conference is being recorded.

<unk> conference is being recorded.

Dave Spille: I would like now to turn the conference over to your speaker today, Dave Spille, Senior Vice President, Investor Relations.

Speaker Change: I would like now to turn the conference over to your Speaker today, David <unk>.

Speaker Change: Senior Vice President Investor.

Dave Spille: Sir, please go ahead. Thanks, Michelle.

Speaker Change: Investor Relations Sir Please go ahead.

Dave Spille: Good morning, and thank you for joining us today to discuss our third quarter 2024 financial results. Please note that we provide the presentation slides on the Investor Relations section of our website.

David: Thanks, Michele good morning, and thank you for joining us today to discuss our third quarter 2024 financial results.

David: I just note that we've provided presentation slides on the Investor Relations section of our website on the call with me today are Kerry Smith, Chairman, President and CEO and Matt obelisk CFO today, Terrie will discuss our corporate strategy and operational highlights and then Matt will provide an overview of our third quarter financial results as well as a review of our.

Carey Smith: On the call with me today are Carey Smith, Chair, President and CEO, and Matt Ofilos, CFO. Today, Carey will discuss our corporate strategy and operational highlights, and then Matt will provide an overview of our third quarter financial results, as well as a review of our increased 2024 guidance.

Dave Spille: 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, 2023, and other SEC filings, including the quarterly report filed with the Securities and Exchange Commission on October 30, 2024, on Form 10-Q for the quarter ended September 30, 2024.

David: <unk> 2024 guidance, we then will close with a question and answer session.

David: That's rent 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.

David: Due to a variety of factors. These risk factors are described in our Form 10-K for fiscal year ended December 31, 2023, and other SEC filings, including the quarterly report filed with the Securities and Exchange Commission on October 30th 2024, and Form 10-Q for the quarter ended September 30.

Dave Spille: Please refer to our earnings press release for Parsons' complete forward-looking statement disclosure. We do not undertake any obligation to update forward-looking statements. Management will also reference non-GAAP financial measures during this call. We remind you that these non-GAAP financial measures are not a substitute for the comparable GAAP measures.

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David: Please refer to our earnings press release for Parsons complete forward looking statement disclosure, we do not undertake any obligation to update forward looking statements.

David: Management will also reference non-GAAP financial measures. During this call. We remind you that these non-GAAP financial measures are not a substitute for the comparable GAAP measures and now I will turn the call over to Kerry.

Carey Smith: And now we'll turn the call over to Carey. Thank you, Dave.

Carey Smith: Good morning and welcome to Parsons Third Quarter 2024 Earnings Call. We are very pleased with our third quarter and year-to-date performance, as we delivered record 2-3 results for Total Revenue, Organic Revenue Growth, Net Income, Adjusted EBITDA, Operating Cash Flow, and Contract Awards. We also achieved strong growth across the portfolio, delivering over 20% organic growth for the sixth consecutive quarter, while efficiently managing the business as bottom line growth continues to outpace our robust top line growth. In addition, we continue to leverage our strong balance sheet to invest in software and integrated solutions, as well as execute a creed of acquisitions that either provide distinguished defense capabilities to counter near-peer threats or strengthen our engineering expertise and increase our geographical footprint in high-growth infrastructure markets.

Kerry Smith: David Good morning, and welcome to person third quarter 2024 earnings call.

Kerry Smith: We are very pleased with our third quarter and year to date performance as we delivered record Q3 results for total revenue organic revenue growth net income adjusted EBITDA operating cash flow and contract awards.

Kerry Smith: We also achieved strong growth across the portfolio delivering over 20% organic growth for the sixth consecutive quarter, while efficiently managing the business as bottom line growth continues to outpace sharp robust topline growth.

Kerry Smith: In addition, we continue to leverage our strong balance sheet to invest in software and integrated solutions as well as to execute accretive acquisitions that either provide distinguished defense capabilities to counter and near peer threats or strengthen our engineering expertise and increased our geographical footprint and high growth.

Kerry Smith: <unk> infrastructure markets.

Carey Smith: As a result of our strong operating performance and our black signal acquisition, we are raising our four-year revenue, adjusted EBITDA, and cash flow guidance ranges. Our record results reflect the hard work and dedication of the entire Parsons team to deliver on our customers' national security and infrastructure missions with the urgency and operational relevance required in today's fast-paced and dynamic environment. For the third quarter, we generated $1.8 billion in revenue for the first time in our company's history and delivered organic revenue growth of 26%. During the third quarter, we also delivered double-digit total revenue growth in both business segments, illustrating the strength of our portfolio.

Kerry Smith: As a result of our strong operating performance in our Black signal acquisition, we are raising our full year revenue adjusted EBITDA and cash flow guidance ranges.

Kerry Smith: Our record results reflect the hard work and dedication of the entire persons team to deliver on our customers' national security and infrastructure, Michelle with the urgency and operational relevance required in today's fast paced and dynamic environment.

Kerry Smith: For the third quarter, we generated $1 $8 billion in revenue for the first time in our company's history and delivered organic revenue growth of 26%.

Kerry Smith: During the third quarter, we also delivered double digit total revenue growth in both business segments illustrating the strength of our portfolio.

Carey Smith: This is now the 11th consecutive quarterly record for revenue and 12th consecutive record quarterly for adjusted EBIT off. I will also note that for the third quarter and for the first nine months of 2024, total adjusted EBITDA growth exceeded revenue growth. In the third quarter, total revenue increased 28%, while adjusted EBITDA grew by 31%. And for the first nine months of 2024, total revenue grew 27%, and adjusted EBITDA increased 36%. By driving EBITDA growth faster than our robust revenue growth, our margins expanded 20 basis points in the third quarter and 60 basis points for the first nine months of the year.

Kerry Smith: This is now the 11th consecutive quarterly record for revenue and 12.

Kerry Smith: Stockholders of record quarterly for adjusted EBITDA.

Kerry Smith: I'll also note that for the third quarter and for the first nine months of 2024 total adjusted EBITDA growth exceeded revenue growth.

Kerry Smith: In the third quarter total revenue increased 28%, while adjusted EBITDA grew by 31% and for the first nine months of 2024 total revenue grew 27% and adjusted EBITDA increased 36%.

Kerry Smith: Giving EBITDA growth faster than our robust revenue growth our margins expanded 20 basis points in the third quarter and 60 basis points for the first nine months of the year.

Carey Smith: In addition, we had an exceptional quarter for operating cash flow and increased our trailing 12-month cash flow by more than 90% from the prior year period. Our strong free cash flow and balance sheet support our ability to continue to make internal investments and accretive acquisitions to strengthen our capabilities and drive long-term growth and margin expansion. These investments are enabling us to win larger and more profitable contracts, as well as new business across both segments and all six end markets. During the third quarter, we won four single-award contracts, over $100 million each, and reported a book-to-bill ratio of 1.0 times, which represents a 24 percent increase in contact-award activity over the prior year period.

Kerry Smith: In addition, we had an exceptional quarter for operating cash flow and increased starts.

Your line 12 month cash flow by more than 90% from the prior year period.

Kerry Smith: Our strong free cash flow and balance sheet support our ability to continue to make internal investments and accretive acquisitions to strengthen our capabilities and drive long term growth and margin expansion.

Kerry Smith: These investments are enabling us to win larger and more profitable contracts as well as new business across both segments and all six end markets.

Kerry Smith: During the third quarter, we won four single award contracts over $100 million, each and reported a book to Bill ratio of 1.0 times, which represents a 24% increase in contract award activity over the prior year period.

Carey Smith: In addition, the critical infrastructure segment achieved a book-to-bill ratio of 1.0 or greater for the 16th consecutive quarter. In critical infrastructure, during Q3, we were awarded Strategic Transportation and Middle East Projects. In North America, we received a new award for the Georgia State Route 400 Express Lanes, where Parsons will serve as the lead designer. This $4.6 billion project will add new express lanes and use state-of-the-art traffic, incident management, and digital twin systems. Under the Infrastructure Investment and Jobs Act, Georgia is expected to receive at least $11 billion for roads and highways, bridges, public transportation, airports, and resilient infrastructure.

Kerry Smith: In addition, our critical infrastructure segment achieved a book to Bill ratio of one point or greater for the 16th consecutive quarter.

Kerry Smith: In critical infrastructure. During Q3, we were awarded strategic transportation and Middle East projects in North America, We received a new award for the Georgia State Route 400 Express lanes, where Parsons will serve as the lead designer.

Kerry Smith: This $4 6 billion dollar project why do express lanes and use state of the art traffic incident management and digital twin systems.

Kerry Smith: Under the infrastructure investment and jobs Act, Georgia is expected to receive at least $11 billion for roads and highways bridges public transportation airports and Brazilian infrastructure.

Carey Smith: We were awarded a new LEED design contract for the Honolulu Authority for Rapid Transportation. On this $1.66 billion project, we are the LEED designer for the city center guideway and station. The scope of work includes the design of six rail stations and approximately three miles of elevated rail guideway and engineering services during construction. Over the past 16 months, we've won five of the largest North America transportation design projects in our company's history. The two wins this quarter, along with the recent Hudson River Tunnel Project, JFK International Airport Roadways, and Newark Bay Bridge wins, demonstrate the success we are having in the transportation market.

Speaker Change: We were awarded a new lead design contract for the Honolulu Authority for rapid transportation on this 166 billion dollar project, where the lead designer for the City Center Gateway and stations. The scope of work includes said this INR six rail stations and approximately three <unk>.

Speaker Change: Also of elevator Braille guide way in engineering services starting construction.

Speaker Change: Over the past 16 months, we've won five of the largest North America transportation design projects in our company's history.

Speaker Change: The two wins this quarter along with the recent Hudson River Tunnel project JFK International Airport roadways, and Newark Bay Bridge wins demonstrates the success, we're having in the transportation market.

Carey Smith: These awards also show that federal, state, and local funding continues to flow at a healthy pace. Our momentum in the Middle East continues, as we achieved a book-to-bill ratio of 1.2 times in the third quarter, and we currently have the largest qualified pipeline in our company's history in both the Middle East and Saudi Arabia. In Saudi Arabia, we were awarded contracts valued at more than $200 million, including two large program management awards. In addition, third quarter headcount in both the Middle East and Saudi reached an all-time high and continues to grow. We are very excited about the future growth opportunities in the region and continue to invest to capitalize on this unique opportunity.

Speaker Change: These awards also show that federal state and local funding continues to flow at a healthy pace.

Speaker Change: Our momentum in the Middle East continues as we achieved a book to Bill ratio of 1.2 times in the third quarter and we currently have the largest qualified pipeline in our company's history and both the middle East and Saudi Arabia.

In Saudi Arabia, we were awarded contracts valued at more than $200 billion, including two large program management Awards.

Speaker Change: In addition, third quarter head count in both the Middle East and Saudi reached an all time high and continues to grow we are very excited about the future growth opportunities in the region and continue to invest to capitalize on this unique opportunity.

Carey Smith: In our Federal Solutions segment, we received option awards totaling $287 million with a confidential customer during the third quarter. We also booked an option period totaling $245 million on our general services administration contract. This contract supports the Department of Defense and its strategic partners in delivering global quick reaction capabilities, leveraging advanced technology solutions across the all-domain battle space. We were awarded $134 million of contracts in the Indo-Pacom region. We won a three-year, $69 million contract on Kwajalein, the Marshall Islands, to provide Army Family House. We also were awarded $37 million in signals intelligence and cyber operations work.

Speaker Change: And our federal solutions segment, we received option awards totaling $287 million with a confidential customer during the third quarter.

Speaker Change: We also booked an option period totaling $245 million on our general services administration contract.

This contract supports the department of defense and its strategic partners and delivering global quick reaction capabilities, leveraging advanced technology solutions across the all of the main battle space.

Speaker Change: We were awarded a $134 million of contracts in the Endo paid Com region. We won a three year $69 million contract Unquiet chiller in the Marshall Islands to provide army family housing.

Speaker Change: We also were awarded $37 million in signals intelligence and cyber operations work.

Carey Smith: In addition, we received two contracts worth $28 million to perform advanced geophysical classification and unexploded ordnance work on Guam and upgrade utility monitoring and control systems. Parsons' presence in Guam, Kwajalein, and Hawaii continues to strengthen and is aligned to the fiscal year 25 Pacific Deterrence Initiative of $9.9 billion for targeted investment to enhance force posture, infrastructure, presence, and readiness of the United States and its allies in the Indo-Pacific region. Finally, we booked an option period totaling $54 million on the Combatant Commands Cyber Missions Support Contract. This contract includes support of multi-domain operations across cyber, space, air, ground, and maritime.

Speaker Change: In addition, we received two contracts worth $28 million to perform advanced Geophysical classification, and unexploded ordinates work on Guam, and upgrade utility monitoring and control systems.

Speaker Change: <unk> presence in Guam, Kwajalein in Hawaii continues to strengthen and it's aligned to the fiscal year 'twenty five Pacific to Torrance initiative of $9 9 billion for targeted investment to enhance force posture infrastructure presence and readiness of the United States and its allies.

Speaker Change: And the Indo Pacific region.

Speaker Change: Finally, we booked an option period totaling $54 million on the combatant commands cyber mission support contract.

Speaker Change: This contract includes support of multi domain operations across cyber space Air ground and maritime.

Carey Smith: During the third quarter, we announced and closed our Black Signal Technologies acquisition in an accretive deal valued at $204 million. This company is a next-generation digital signal processing, electronic warfare, and cybersecurity provider built to counter near-peer threats. BlackSignal expands Parsons' customer base across the Department of Defense and Intelligence community and significantly strengthens Parsons' positioning within offensive cyber operations and electronic warfare, while adding new capabilities in the counter space radio frequency domain. This strategic acquisition provides a strong cleared workforce, 90% intellectual property enabled offerings, 67% directed sole source work, and an expanded customer set enabling immediate revenue synergy.

Speaker Change: During the third quarter, we announced and closed our black signal technologies acquisition, and an accretive deal valued at $204 million.

Speaker Change: This company is our next generation digital signal processing electronic warfare, and cyber security provider to calendar near peer threats black signal expands persons customer base across the department of defense and intelligence community and significantly strengthened persons positioning within it.

Speaker Change: Offensive cyber operations, and electronic warfare, while adding new capabilities and the counter space radio frequency domain.

Speaker Change: This strategic acquisition provides a strong cleared workforce, 90% intellectual property enabled offerings, 67% direct is sole source work and an expanded customer set enabling immediate revenue synergies.

Carey Smith: After the third quarter ended, we entered into a definitive agreement to acquire BCC Engineering, one of the Southeast region's leading transportation engineering firms in an all-cash transaction valued at $230 million. BCC is a full-service engineering firm that provides planning, design, and management services for transportation, civil, and structural engineering projects in Florida, Georgia, Texas, South Carolina, and Puerto Rico. This acquisition will strengthen our position as an infrastructure leader while expanding our reach in the southeastern United States, an area where the Infrastructure Investment and Jobs Act has provided approximately $100 billion in Federal Highway Administration formula funds for fiscal years 2022 through 2026.

Speaker Change: After the third quarter ended we entered into a definitive agreement to acquire a BCC engineering one of the southeast regions, leading transportation engineering firms in an all cash transaction valued at $230 million.

Speaker Change: BCC is a full service engineering firm that provides planning design and management services for transportation Civil and structural engineering projects in Florida, Georgia, Texas, South Carolina, and Puerto Rico.

Speaker Change: This acquisition will strengthen our position as an infrastructure leader, while expanding our reach in the southeastern United States, an area, where the infrastructure investment and jobs Act has provided approximately $100 billion in Federal Highway administration Formula funds for fiscal years 2022 through 2026.

Carey Smith: BCC was our top-ranked acquisition target for geographical expansion into the Florida market and will enable us to become the number one consultant in South Florida. BCC will also double our presence and resources working with the Georgia Department of Transportation. These two acquisitions are consistent with our strategy of completing preemptive accretive acquisitions of companies we know well and of revenue growth in adjusted EBITDA margins of 10% or more. We continue to have an active M&A pipeline in both segments and we will use our strong balance sheet to complete accretive acquisitions that provide technology differentiation and drive both growth and margin expansion.

Speaker Change: BCC was our top ranked acquisition targets for geographical expansion into the Florida market and will enable us to become the number one consultant in South Florida.

Speaker Change: She will also double our presence and resources working with the Georgia Department of transportation.

Speaker Change: These two acquisitions are consistent with our strategy of completing preemptive accretive acquisitions of companies, we know well and have revenue growth and adjusted EBITDA margins of 10% or more.

Speaker Change: We continue to have an active M&A pipeline in both segments and we will use our strong balance sheet to complete accretive acquisitions that provide technology differentiation and drive both growth and margin expansion.

Carey Smith: In summary, our record performance so far this year demonstrates we are executing on our strategy to move up the value chain to drive exceptional revenue growth, margins, and cash flow. For the first nine months this year, we have achieved 25% organic revenue growth, expanded margins by 60 basis points. and increased operating cash flow by 82% to $397 million. We continue to leverage our strong balance sheet and free cash flow to make internal investments and acquire strategic assets that differentiate our solutions through software and advanced technology. We are capitalizing on the market tailwinds and unprecedented global infrastructure spend and the evolving geopolitical environment that is driving increased demand for our national security solution.

Speaker Change: In summary, our record performance. So far this year demonstrates we are executing on our strategy to move up the value chain to drive exceptional revenue growth margins and cash flow for.

Speaker Change: For the first nine months of the share we have achieved 25% organic revenue growth expanded margins by 60 basis points and increased operating cash flow by 82% to $397 million.

Speaker Change: We continue to leverage our strong balance sheet and free cash flow to make internal investments and acquire strategic assets that differentiate our solutions through software and advanced technologies.

Speaker Change: We are capitalizing on the market tailwind and unprecedented global infrastructure spend and the evolving geopolitical environment that is driving increased demand for our national security solutions.

Carey Smith: Given our strong operating performance and our outlook for the remainder of the year, we are raising all guidance metrics.

Speaker Change: Given our strong operating performance and our outlook for the remainder of the year, we are raising all guidance metrics.

Matt Ofilos: With that, I'll turn the call over to Matt to provide more details on our third quarter financial results and our increased fiscal year 2024 guidance.

Speaker Change: With that I'll turn the call over to Matt to provide more details on our third quarter financial results and our increased fiscal year 2024 guidance Matt.

Matt Ofilos: Matt. Thank you, Carey. As Carey indicated, our momentum continued through the third quarter of 2024 and was highlighted by record third quarter results for total revenue, organic revenue growth, net income, adjusted EBITDA, operating cash flow, and contract awards. We're very pleased with our results, particularly against tougher comparable periods, given the significant growth realized in the second half of 2023. Our revenue growth remains strong across the portfolio with double-digit growth in both segments. Turning to our results, third quarter revenue of $1.8 billion increased $392 million, or 28% from the prior year period, and was up 26% on an organic basis.

Matt: Thank you Jerry.

Matt: Gary indicated our momentum continued through the third quarter of 2024 and was highlighted by record third quarter results for total revenue organic revenue growth net income adjusted EBITDA operating cash flow and contract awards.

Matt: We're very pleased with our results, particularly against tougher comparable periods given the significant growth realized in the second half of 2023.

Matt: Our revenue growth remained strong across the portfolio with double digit growth in both segments.

Matt: Turning to our results third quarter revenue of $1 8 billion increased $392 million or 28% from the prior year period and was up 26% on an organic basis basis.

Matt Ofilos: For perspective, the significant growth was achieved off our record third quarter in 2023, where we grew $284 million or $25 billion. Organic growth for the third quarter was driven by the ramp-up of recent contract wins and growth on existing contracts in our critical infrastructure protection and cyber intelligence market. SG&A expenses for the third quarter were 13.6% of total revenue, compared to 15.6% in the prior year period, as we continue to focus on efficient growth across the portfolio while investing in the future through technology, business development, and hiring and retention initiatives. On a year-to-date basis, SG&A as a percentage of revenue was 13.8% compared to 16% in 2020.

Matt: For perspective, the significant growth was achieved off our record third quarter in 2023, where we grew $284 million or 25%.

Organic growth for the third quarter was driven by the ramp up of recent contract wins and growth on existing contracts and our critical infrastructure protection and cyber and intelligence markets.

Matt: SG&A expenses for the third quarter were 13, 6% of total revenue compared to 15, 6% in the prior year period as we continue to focus on efficient growth across the portfolio, while investing in the future through technology business development and hiring and retention initiatives on.

Matt: On a year to date basis SG&A as a percentage of revenue was 13, 8% compared to 16% in 2023.

Matt Ofilos: Adjusted EBITDA of $167 million increased to $39 million, or 31%, and adjusted EBITDA margin expanded 20 basis points to 9.2%. These year-over-year increases were driven primarily by a higher volume on margin of creative contracts and a deliberate focus on indirect cost management. As with revenue, our adjusted EBITDA growth was compared to a very strong third quarter in 2023, where we experienced growth of 24% over the prior year period. On a year-to-date basis, adjusted even to margin at the Parsons level increased 60 basis points to 9.1% compared to 8.5% in 2023.

Matt: Adjusted EBITDA of $167 million increased $39 million or 31% and adjusted EBITDA margin expanded 20 basis points to nine 2%.

Matt: These year over year increases were driven primarily by higher volume on margin accretive contracts and a deliberate focus on indirect cost management.

As with revenue our adjusted EBITDA growth was compared to a very strong third quarter in 2023, where we experienced growth of 24% over the prior year period.

Matt: On a year to date basis, adjusted EBITDA margin of our parcels level increased 60 basis points to nine 1% compared to eight 5% in 2023.

Matt Ofilos: I'll turn now to our operating segment. Starting first with Federal Solutions. The third quarter revenue increased by $325 million or 42% from the third quarter of 2025. This increase was driven by organic growth of 39% and the contribution from our ceiling tech and black signal acquisition. Organic growth was driven primarily by the ramp-up of recent contract wins and growth on existing contracts in our critical infrastructure protection and cyber and intelligence markets. Federal solutions adjusted EBITDA increased by $55 million or 84% from the third quarter of 2020. adjusted even the margin increased 260 basis points to 10.9% from 8.3% in the prior year period.

Speaker Change: I'll turn now to our operating segments, starting first with federal solutions, where third quarter revenue increased by $325 million or 42% from the third quarter of 2023.

Speaker Change: This increase was driven by organic growth of 39% and the contribution from our ceiling tech and black signal acquisitions.

Speaker Change: Organic growth was driven primarily by the ramp up of recent contract wins and growth on existing contracts and our critical infrastructure protection and cyber and intelligence markets.

Speaker Change: Federal solutions, adjusted EBITDA increased by $55 million or <unk>, 84% from the third quarter of 2023.

Speaker Change: Adjusted EBITDA margin increased 260 basis points to 10, 9% from eight 3% in the prior year period.

Matt Ofilos: These increases were driven primarily by increased volume on accretive contracts, contributions from high-margin acquisitions, and improved program execution.

Speaker Change: These increases were driven primarily by increased volume on accretive contracts contributions from high margin acquisitions and improved program execution.

Matt Ofilos: Moving now to our critical infrastructure. Third quarter revenue increased 10% from the prior year period on both an organic and inorganic basis. Growth was driven by higher volume in both our North America and Middle East infrastructure portfolio. Critical infrastructure adjusted EBITDA decreased by $16 million, or 25% from the third quarter of 2023. Adjusted EBITDA margin decreased 6.7% from 9.8% in the prior year period. The adjusted EBITDA decreases were driven by a write-down on the legacy program that is expected to reach substantial completion in Q4 of 2024. On a pro forma basis, our CI adjusted EBITDA margin would have been 9.7%, excluding this $23.5 million write-down.

Speaker Change: Moving now to our critical infrastructure segment.

Speaker Change: Third quarter revenue increased 10% from the prior year period on both an organic and inorganic basis growth was driven by higher volume in both our North America and middle East infrastructure portfolios.

Speaker Change: Critical infrastructure, adjusted EBITDA decreased by $16 million or 25% from the third quarter of 2023.

Speaker Change: Adjusted EBITDA margin decreased to six 7% from nine 8% in the prior year period.

Adjusted EBITDA decreases were driven by a write down on a legacy program that is expected to reach substantial completion in Q4 of 2024 on a pro forma basis, our adjusted EBITDA margin would've been nine 7%, excluding this $23 $5 million write down.

Matt Ofilos: Next, I'll discuss cash flow and balance sheet. During the third quarter of 2024, we generated $299 million of operating cash flow compared to $204 million in Q3 of 2020. On a trailing 12-month basis, we generated a record $587 million of operating cash flow, a 91% increase over the prior 12-month period. These increases were primarily driven by strong collections across the portfolio and improved profitability. During the third quarter, Net DSO declined year-over-year by 14 days to 51 days, a record low. Capital expenditures totaled $12 million in the third quarter of 2024, which is relatively consistent with prior year period.

Speaker Change: Next I'll discuss cash flow and balance sheet metrics.

Speaker Change: During the third quarter of 2024, we generated $299 million of operating cash flow compared to $204 million in Q3 of 2023.

Speaker Change: On a trailing 12 month basis, we generated a record $587 million of operating cash flow a 91% increase over the prior 12 month period.

Speaker Change: These increases were primarily driven by strong collections across the portfolio and improved profitability.

Speaker Change: During the third quarter net DSO declined year over year by 14 days to 51 days a record low.

Speaker Change: Capital expenditures totaled $12 million in the third quarter of 2024, which is relatively consistent with prior year period Capex.

Matt Ofilos: CapEx continues to be well controlled and remains in line with our planned spend of less than 1% of annual revenue, while continuing to invest in strategic areas like expanding classified facilities and space technology to support future growth. Free cash conversion was 247% for the third quarter and 139% on a trailing 12-month basis with an intentional focus on contract execution, settlement of legacy claims, and improved cash management. Our balance sheet remains strong as we ended the third quarter with a net debt leverage ratio of 1.2 times to include the impact of the all cash acquisition of BlackSignal.

Speaker Change: Capex continues to be well controlled and remains in line with our planned spend of less than 1% of annual revenue, while continuing to invest in strategic areas like expanding classified facilities, it's based technology to support future growth.

Speaker Change: Free cash conversion was 247% for the third quarter and 139% on a trailing 12 month basis with an intentional focus on contract execution settlement of legacy claims and improved cash management and collections.

Speaker Change: Our balance sheet remains strong as we ended the third quarter with a net debt leverage ratio of one two times to include the impact of the all cash acquisition of Black signal.

Matt Ofilos: On a pro-forma basis, net leverage would be 1.6 times after the recently announced $230 million all-cash acquisition of BCC. A strong cash flow is enabling us to continue to make strategic internal investments and accretive acquisitions to support our long-term growth.

Speaker Change: On a pro forma basis net leverage would be one six times after the recently announced $230 million all cash acquisition of BCC.

Speaker Change: Our strong cash flow is enabling us to continue to make strategic internal investments and accretive acquisitions to support our long term growth objectives.

Matt Ofilos: Turning to bookings. On a trailing 12-month basis, contract awards increased 13%, and our book-to-bill ratio was 1.0 times. In our critical infrastructure segment, we achieved a book-to-bill ratio of 1.1 in the third quarter, marking the 16th consecutive quarter with a book-to-bill ratio of 1.0 or greater. Third quarter contract award activity increased 24% year over year to $1.8 billion for a book to bill ratio of 1.0%. With $8.8 billion of backlog, 66% of which is currently funded, and $13 billion of awards not reflected in book-to-bill or backlog, we continue to have confidence in our ability to deliver growth.

Speaker Change: Turning to bookings on a trailing 12 month basis contract awards increased 13% and our book to Bill ratio was one <unk> times and our critical infrastructure segment, we achieved a book to Bill ratio of one one in the third quarter, marking the 16th consecutive quarter with a book to bill ratio of one point or greater.

Speaker Change: Third quarter contract award activity increased 24% year over year to $1 8 billion.

Speaker Change: For book to Bill ratio of one eight times.

Speaker Change: With $8 8 billion of backlog, 66% of which is currently funded and $13 billion of awards not reflected in book to Bill or backlog, we continue to have confidence in our ability to deliver growth.

Matt Ofilos: Now let's turn to our guide. We're increasing our 2024 guidance ranges as a result of our record third quarter performance. Black Signal Acquisition, and our favorable outlook for the remainder of the year. For 2024, we are increasing our revenue range by $250 million at the midpoint to $6.6 to $6.8 billion. This represents total revenue growth of 23% at the midpoint and 22% on an organic basis. Additionally, we are increasing our adjusted EBITDA range by $30 million at the midpoint of the range. We now expect adjusted EBITDA to be between $590 and $620 million, which represents 30% growth at the midpoint of the range and continues to exceed revenue.

Speaker Change: Now, let's turn to our guidance.

Speaker Change: We are increasing our 2024 guidance ranges as a result of our record third quarter performance.

Speaker Change: Black signal acquisition, and our favorable outlook for the remainder of the year.

Speaker Change: For 2024, we are increasing our revenue range by $250 million at the midpoint to six six to $6 8 billion.

Speaker Change: This represents total revenue growth of 23% at the midpoint and 22% on an organic basis.

Speaker Change: Additionally, we are increasing our adjusted EBITDA range by $30 million at the midpoint of the range.

Speaker Change: We now expect adjusted EBITDA to be between 590, and $620 million, which represents 30% growth at the midpoint of the range and continues to exceed revenue growth.

Matt Ofilos: At the midpoint of our increased revenue and adjusted EBITDA ranges, we are increasing our margin outlook by 10 basis points to 9.0%. which is a 50 basis point improvement to fiscal 2023 results.

Speaker Change: At the midpoint of our increased revenue and adjusted EBITDA ranges, we're increasing our margin outlook by 10 basis points to nine 8%.

Speaker Change: Which is a 50 basis point improvement to fiscal 2023 results.

Matt Ofilos: We're also increasing our cash flow guidance. We now expect operating cash flow to be between $425 and $465 million. At the midpoint of the guidance range, we expect free cashflow conversion to be approximately 100% of adjusted net income. Other key assumptions in connection with our 2024 guidance are outlined on slide 11 in today's PowerPoint presentation, located on our investor relations website.

Speaker Change: We're also increasing our cash flow guidance, we now expect operating cash flow to be between 425 million to $465 million.

Speaker Change: At the midpoint of the guidance range, we expect free cash flow conversion to be approximately 100% of adjusted net income.

Speaker Change: Other key assumptions in connection with our 2024 guidance are outlined on slide 11 in todays Powerpoint presentation located on our Investor Relations website.

Matt Ofilos: In summary, we've had an exceptional first nine months of the year with great top and low bottom line and cash flow results. We're putting the balance sheet to use after announcing two strategic acquisitions over the last two months, which we believe will further enhance our technology offerings, geographical footprint, and support long-term growth. Our execution has been strong across all business units and major geographies, and we are confident in our ability to achieve our increased 2024 guidance rate.

Speaker Change: In summary, we've had an exceptional first nine months of the year with great top and bottom line and cash flow results were putting the balance sheet to use after announcing two strategic acquisitions over the last two months, which we believe will further enhance our technology operated offerings geographical footprint and support long term growth.

Speaker Change: Our execution has been strong across all business units of major geographies and we are confident in our ability to achieve our increased 2024 guidance ranges with that I'll turn the call back to Karen.

Carey Smith: With that, I'll turn the call back to Carey. Thank you, Matt. In closing, I'm very pleased with our company's performance through the first nine months of the year. Our operating results continue to exceed our expectations as we once again delivered record results across all guidance metrics. Our 19,000 employees are consistently executing and taking advantage of the strong tailwinds that are positively impacting both of our business segments. I am thankful to be leading such a great team, and I expect our momentum to continue given our portfolios well aligned to important macroenvironment trends in two well-funded segments and six growing and enduring markets.

Karen: In closing I'm very pleased with our company's performance through the first nine months of the year. Our operating results continue to exceed our expectations as we once again delivered record results across all guidance metrics. Our 19000 employees are consistently executing and taking advantage of the <unk>.

Karen: <unk> that are positively impacting both of our business segments I.

Karen: I am thankful to be leading such a great team and I expect our momentum to continue given our portfolio is well aligned to important macro environment trends and two well funded segments and six growing and enduring markets.

Operator: Thank you and as a reminder to ask a question please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

Speaker Change: Thank you and as a reminder to ask a question. Please press star one one on your telephone.

Speaker Change: Wait for your name to be announced.

Speaker Change: To withdraw your question. Please press star one one again.

Sheila Kahyaoglu: And the first question will come from Sheila Kahyaoglu with Jeffreys. Your line is now open. Good morning guys and great quarter as always. If I could ask two questions, maybe first on the top line just given the performance has been so stellar. That $13 billion unbooked pipeline is relatively unchanged but still a very good book to bill of one times which seems nearly impossible with your growth rate. How do we think about as we enter 2025 what your growth rate could potentially look like?

Speaker Change: And the first question will come from Sheila <unk> with Jefferies. Your line is now open.

Speaker Change: Good morning, guys and great quarter as always.

Sheila <unk>: If I could ask two questions maybe first on the top line just given the performance has been so seller that $13 billion and that pipeline is relatively unchanged, but still a very good book to bill of one times, which seemed nearly impossible with your growth rate.

Sheila <unk>: How do we think about as we enter 2025, what your growth rate could potentially look like.

Carey Smith: Thank you, Sheila, and good morning. So the top line has remained relatively flat on the awarded not booked. And the reason for that is that we booked four of our repeats between July 2021 and January of 2023. So it kind of reached a peak because they were all greater than $2 billion each.

Speaker Change: Thank you Sheila and good morning.

So the top line has remained relatively flat the rates on the awarded not booked in the recent for that is that we booked four of our re competes between July 2021 and January of 2023. So we've kind of reached a peak because they were all greater than $2 billion. Each what I think is important to look at it as a combination of the <unk>.

Carey Smith: What I think is important to look at is a combination of the $13 billion awarded not booked plus the $8.8 billion in backlog, which is up significantly over 2022. I would also recommend that the 66% of funded backlog, and that's the amount that we expect to convert within the next 12 to 18 months, is very strong and probably close to an industry high. Looking forward from a top line perspective, we anticipate being at mid single digits or better, as we've indicated.

Speaker Change: Billion awarded not booked plus the $8 8 billion in backlog, which is up significantly over 2022 I would also.

I recommend that the 66% of funded backlog and that's the amount that we expect to convert within the next 12 to 18 months is very strong.

And probably close to an industry high looking forward from a topline perspective, we anticipate being at mid single digits or better as we've indicated.

Matt Ofilos: Great. And if I could ask one more, if you don't mind, on CI, the margins, extra charge were closer to 9%. Once again, they fluctuated quite a bit, Matt, over the past few quarters.

Speaker Change: Great and if I could ask one more if you don't mind on Ci the margin.

Speaker Change: Extra charge were closer to 9% and once again, they fluctuated quite a bit in that over the past few quarters, what's the right way to think about the run rate margin once legacy program Runoffs.

Matt Ofilos: What's the right way to think about the run rate margin once legacy programs are run off? Yeah, thanks, Sheila. I'd say, you know, we're, you know, we talk a lot about CI with the underlying business kind of performing in the nine to 10 range. Long term goal, of course, is double digits. We have a, you know, a path to get there. But it's, you know, it's kind of a slow trudge as we get through these programs, to your point. You know, we were expecting kind of wrap up that program, we have a couple week delay, which is not unexpected as you kind of get to the end of these programs. But, you know, the $23 million charge within the quarter was a little bit of a schedule slip.

Speaker Change: Yes, Thanks, Sheila I'd say.

Speaker Change: We talk a lot about the underlying business kind of performing in the nine to 10 range long term goal of course is double digits, we have a path to get there but it's.

Speaker Change: Kind of a slow trudge as we get through these programs to your point.

Speaker Change: We're expecting kind of wrap up that program. We have a couple of week delay, which is not unexpected as you kind of get to the end of these programs but.

Speaker Change: $23 million charge within the quarter was a little bit of the schedule slip and then as we get to close out in kind of negotiations with customer on closeout that was the biggest driver behind the charge, but generally speaking we think that underlying margin for the backlog that we've recently booked and the work that we're really performing on is kind of north of nine <unk>.

Matt Ofilos: And then, as we get to closeout and kind of negotiations with customer on closeout, that was the biggest driver behind the charge. But generally speaking, we think, you know, that underlying margin for the backlog that we've recently booked and the work that we're really performing on is kind of north of 9%. So it's kind of just a slope at which we can get there. I've kind of said, you know, 20 to 30 basis points per year of margin expansion. If you think about the federal business being kind of stable, you'd think 40 to 60 basis points from CI per year.

Speaker Change: So it's kind of just how the slope at which we can get there I've kind of said 20 to 30 basis points per year of margin expansion. If you think about the federal business being kind of stable you'd think 40 to 60 basis points from <unk>.

Carey Smith: So that's the way we're kind of looking at it.

<unk> per year. So that's the way, we're kind of looking at the Sheila.

Carey Smith: I would also add we're really excited to get rid of these legacy programs. These were jobs that were bid back in the 2010 to 2015 time frame. As we entered the year, we only had two of these remaining. We wrapped one up in the first quarter, and this last one, as Matt indicated, is just a couple of weeks away. We're 98% complete right now. So it's really exciting to have those in the rear view mirror, because improved performance execution on a critical infrastructure side is going to be the biggest driver of margin expansion.

Speaker Change: I would also add yes.

Speaker Change: But all said, we're really excited to get rid of these legacy programs. These four jobs that were made back in the 2010 to 2015 timeframe as we entered the year. We only had two of these remaining we've wrapped one up in the first quarter and the last one as Matt indicated.

Speaker Change: Just a couple of weeks away, where 98% complete right now so it's really exciting to have those to the rare view mirror because of improved performance execution on our critical infrastructure side is going to be the biggest driver of margin expansion.

Operator: Thank you. Thank you all.

Speaker Change: Thank you.

Andrew Wittmann: Thank you. And our next question comes from Andrew Wittmann with Bayard. Your line is now open. Oh, great. Good morning. And thank you for taking my questions, Matt. I guess I wanted to just understand the quarter a little bit better here, because I was reading some stuff in the queue that it seems like it relates to the CI equity and income charge. You said on your comments here $23.5 million write-down. In the queue, it says $6.7 million write-down. And so I was hoping you just could bridge the gap. Maybe there were some positive write-ups or closeouts that were offsets.

Speaker Change: Thank you. Thank you.

Speaker Change: And our next question comes from Andrew Wittmann with Baird. Your line is now open.

Andrew Wittmann: Great. Good morning, and thank you for taking my questions, Matt I guess I wanted to just understand the quarter, a little bit better here, because I was reading some stuff in the queue.

Andrew Wittmann: It seems like it relates to the <unk>.

Andrew Wittmann: Hi.

Speaker Change: Good evening from charter you said on your comments your $23 $5 million write down.

Speaker Change: In the Q, it says $6 $7 million write down.

Speaker Change: And so I was hoping you could bridge the gap.

Matt Ofilos: Maybe can you just help explain some of the movie pieces so that we can understand that segment's performance a little bit better? Yeah, sure. Thank you. Good question, Andy. So we'll talk about equity and earnings first. So to your point, we did take a smaller, obviously, the $23.5 million was the outsized impact for the quarters. That's why we kind of gave the pro forma off that. But additionally, the program that we had a sub-supply chain risk last year, we've kind of been fighting our way through completing design and kind of a little bit of a schedule extension, some approvals around the Parsons design there has kind of extended out.

Speaker Change: Maybe there were some positive write ups or closeouts that were offsets.

Speaker Change: Maybe can you just help explain some of the moving pieces. So that we can understand that segments performance a little bit better.

Speaker Change: Yeah sure. Good question, Andy So we will talk about equity and earnings first so to your point, we did take a smaller here obviously the $23 5 million was the outsized impact for the quarter Thats, why we kind of give the pro forma off that but additionally.

Speaker Change: The program that we had some supply chain risk last year, we've kind of been fighting our way through completing design and kind of saw a bit of a schedule extension some approvals around the Parsons design. There has kind of extended out. So we did take a $6 million charge within equity in earnings to your point, the 23 and a half would roll through the <unk> operating results. It wouldn't be an equity in earnings would be in the normal.

Matt Ofilos: So we did take a $6 million charge within equity and earnings, to your point. The $23.5 would roll through the CI operating results. It wouldn't be in equity and earnings. It would be in the normal profit. So kind of combined, to your point, maybe you could think about it as $30 million worth of total impacts. There were some favorable adjustments as well to a smaller extent. But all in all, if I did kind of a pro forma on both of those, excluding the $23.5, we'd go from $6.7 to $9.7. And then if we also excluded the $6.5, we'd probably be in the $10.5 range.

Speaker Change: Our profit so kind of combined to your point, maybe there you can think about it as $30 million worth of total impacts there were some favorable adjustments as well as smaller extent, but all in all if I did have kind of a pro forma on both of those excluding the 23 and a half we would go from 656, 7% to nine seven and then if we also excluded this.

Speaker Change: $6 five we'd probably be in the 10 five range, but again I think I'd say some of the smaller ones, there's there'll be fluctuations in any given quarter.

Matt Ofilos: But again, I think I would say some of the smaller ones, there'll be fluctuations any given quarter. Got it. Yeah. Again, including some of those positives, maybe some of those positives eat into that six. Then we play this mental accounting game of what's in and what's out. But I appreciate the color on that one. And I just, Carey, it's coming up a lot in investor conversations.

Speaker Change: Got it yes.

Speaker Change: Some of those positives maybe some of those partners eat into that when we play this mental accounting game of what's in and what's out but I appreciate the.

Speaker Change: The color on that one.

Speaker Change: Gary it's coming up a lot in investor conversations you addressed it in your prepared remarks, but I think it's probably worth some airtime on the middle East.

Andrew Wittmann: You addressed it in your prepared remarks, but I think it's probably worth some airtime on the Middle East. Some of your competitors have explored some of the scope there and have talked about being slow walked on some of the projects. Maybe you could just talk, I mean, you talked about the growth there. You talked about the book to build being in the Middle East, being better than your segment average. But maybe if you could just talk about what you're seeing there and the confidence that you have in the work that you're on today, continuing at full steam ahead, as well as the prospect of future wins there as you head through backfield, the good work that you're doing.

Speaker Change: Are your competitors.

Speaker Change: Slowed some of the copes scope, there and I've talked about.

Speaker Change: Being slow walked on some of the projects maybe you could just talk I mean, you talked about the growth that you talked about the book to bill being in the Middle East being better than your segment average, but maybe if you could just talk about what youre seeing there and the confidence that you have and the work that you're on today continuing at full steam ahead as well as the prospect of.

Speaker Change: Future wins, there as you head through 'twenty to backfill the good work that you're doing today.

Carey Smith: Sure. Thank you, Andy. I actually just returned from there, so it's a perfect question for this time, and Matt leaves to go there next week. So it was terrific to be on the ground and see firsthand the tremendous progress that we're making, both in Saudi Arabia programs as well as in the UAE. Overall, the region is performing as expected. There's always going to be fluctuations from one quarter to another, but if you look at year-to-date, our Saudi business has grown 17%, and this is following a year in which the Middle East revenue grew last year 33%.

Speaker Change: Sure. Thank you Andy I actually just returned from there. So its perfect question for this time in that lease to go there next week. So it was terrific to be on the ground and see firsthand the tremendous progress that we're making both in Saudi Arabia programs as well as in the UAE.

Speaker Change: Overall the region is performing as expected there is always going to be fluctuations from one quarter to another but if you look at year to date, our Saudi business has grown 17% and this is following a year in which the middle East revenue grew last year of <unk> 33 per cent.

Carey Smith: We expect to have, for the full year, double-digit growth within the Middle East, as well as year-to-date. So they're meeting and exceeding all their key performance indicators as expected. We continue to win our fair share of work. We highlighted in the second quarter, we won over $160 million in Saudi wins, and we won more than $200 million in the third quarter. So our book-to-bill was $1.2 million for the Middle East and $1.3 million for Saudi. And again, this is part of the critical infrastructure group continuing to have 16 consecutive quarters of one-oh book-to-bill or better.

Speaker Change: We expect to have.

Speaker Change: For the full year double digit growth within the middle East as well as year to date. So they are meeting and exceeding all of our key performance indicators as expected. We continue to win our fair share of work we highlighted in the second quarter, we won over $160 million in Saudi wins, and we won more than 200 million.

Speaker Change: In the third quarter. So our book to Bill was 1.2 for the Middle East and one three for Saudi and again this is part of.

Speaker Change: Credit structure group continuing to have 16 consecutive quarters of one book to Bill are better I'll also highlight that the funding is still on the uptick. So when you look at the ramp up we don't expect the funding in the middle East at peak until about the 2030 to 2032 timeframe were at an all time high this quarter.

Carey Smith: I'll also highlight that the funding is still on the uptick. So when you look at the ramp-up, we don't even expect the funding in the Middle East to peak until about the 2030 to 2032 time frame. We're at an all-time high this quarter for both the pipeline and for headcount. Saudi is going to be on the world stage many times coming up over the next decade. They're hosting major events like the Asian Winter Games in 2029. They've got the World Expo in 2030, and they have the FIFA World Cup in 2034. So a lot of these projects need to be done in time for those critical events, and infrastructure is going to continue to get prioritized and receive significant funding in Saudi Arabia.

Speaker Change: Order for both the pipeline and for head count Saudi is going to be on the world stage, Many times coming up over the next decades, our hosted major events like the Asian Winter games in 2029, they've got the World Expo in 2030, and they have the FIFA World Cup in 2834, so a lot of these projects need to be done in <unk>.

Speaker Change: For those critical events and infrastructure is going to continue to get prioritized and received significant funding in Saudi Arabia. I'd also highlight we're on pretty much all their premier programs over there, which is very exciting I had the opportunity to visit <unk>. Once again, the world's largest entertainment city. We're working on now Matt is going to be vis.

Carey Smith: I'd also highlight we're on pretty much all the premier programs over there, which is very exciting. I had the opportunity to visit Qadiyah, once again the world's largest entertainment city. We're working on Neom. Matt's going to be visiting that next week. We just were awarded a repeat for the King Salmon Park. We're involved in King Abdullah Financial District. We're involved in Daria Gates. We're involved in Al-Saddaf. So almost every major contract over there, Parsons is program manager, and these projects continue to come. So we've got a really bright future. I would mention in addition to Saudi Arabia, though, we've also seen growth in the UAE and Qatar, and that's basically on the back of other infrastructure investments.

Speaker Change: Turning that next week, we just were awarded a recompete for the King Salman Park, we're involved in King Abdullah Financial District, we're involved in Darien Gates were involved and also adopt so almost every major contract over their <unk> program manager and these projects continued our comps so we've got a really bright future.

Speaker Change: I would mention in addition to Saudi Arabia, we are also seeing growth in the UAE and Qatar.

Speaker Change: And that's basically on the back of other infrastructure investments if youll recall there was this big storm event, which was very unfortunate. This year. So person says involved in a lot of storm water drainage improvement programs in Dubai, Abu Dhabi, and Qatar and then we've seen a resurgence in the UAE property market that remains very.

Carey Smith: If you'll recall, there was this big storm event, which was very unfortunate this year. So Parsons is involved in a lot of stormwater drainage improvement programs in Dubai, Abu Dhabi, and Qatar. Then we've seen a resurgence in the UAE property market that remains very robust, and a lot of associated development since there's a lot of people that are moving into the country. This doesn't even include an area that we're starting to look at, which is opportunities for the federal business defense in Saudi and in the UAE, because we do have such a great reputation. So bottom line, they're performing as expected.

Speaker Change: Robust and a lot of associated development sensors, a lot of people that are moving into the country.

Speaker Change: And this doesn't even include an area that we're starting to look at which is opportunities for the federal business defense in Saudi and in the UAE because we do have such a great reputation. So bottom line. They are performing as expected theyre going to exceed their plan and I'm very excited about the opportunities there.

Carey Smith: They're going to exceed their plan, and I'm very excited about the opportunities there.

Andrew Wittmann: I appreciate that.

Andrew Wittmann: One last technical question, but in the past you guys have commented on your various win rates, but maybe you could inform us what your win rate was in the quarter, if you have it by segment, that's interesting as well, but just overall it would be good to understand the character there. Yes, the win rate for the quarter is 74%, the win rate year-to-date is 75%.

Speaker Change: I appreciate that one last technical question, but in the past you guys have commented on in your various win rates, but maybe.

Speaker Change: You could inform us what your win rate was in the quarter.

Speaker Change: By segment, that's interesting as well, but just overall.

Speaker Change: Understand the character there.

Speaker Change: Yes, the win rate for the quarter was 74% win rate year to date is 75%.

Operator: Thank you very much. Have a good day.

Speaker Change: Thank you very much have a good day.

Kaivon Rumor: Thank you. And our next question comes from Kaivon Rumor with T.D. Cohen. Your line is now open. Yes, thanks so much and terrific quarter again. Your engineering portion of Federal Solutions grew 70%. And you mentioned critical infrastructure protection. I mean, is that that one very large contract that you have with a confidential customer? Yes, so we're seeing growth on that contract, but we're also seeing growth in other areas. I would highlight industrial-based modernization as an example, where we're doing a lot of the Army ammunition plant work. We're also seeing some growth in the biometrics efforts that we have in place.

Speaker Change: Yes.

Speaker Change: And our next question comes from Cai von rumor with TD Cowen. Your line is now open.

Speaker Change: Yes, thanks, so much and terrific quarter again.

Speaker Change: Your engineering portion of federal solutions grew 70%.

Speaker Change: And you mentioned the critical infrastructure protection.

Speaker Change: Is that that one very large account.

Speaker Change: Contract that you have with a confidential customer.

Speaker Change: Yes, so we're seeing growth on that contract, but we're also seeing growth in other areas I would highlight industrial base modernization is an example, where we're doing a lot of the army ammunition plant work.

Speaker Change: We're also seeing some growth in the biometrics efforts that we have in place and then we had the wins and the Endo paid com reach I'm, particularly excited about the quad fun. When we have been performing quite well and airfield. We won the first quad one housing contract now we just won the second Kwajalein housing contract and we won some additional work and try.

Carey Smith: And then we had the wins in the Indo-Pacom region, particularly excited about the Kwajalein win. We had been performing Kwajalein airfield. We won the first Kwajalein housing contract. Now we just won the second Kwajalein housing contract. Then we won some additional work in trying to clean up the island of Guam so that the Missile Defense Agency come in and put equipment in for defense of Guam.

Speaker Change: And to clean up the island of Guam, So that the missile Defense Agency command and put equipment and for defensive Guam. So excited about our whole engineered systems business.

Carey Smith: So excited about our whole engineering systems business. So you've been doing great, but I think you mentioned at one point that the time, you know, the duration of engineering contracts can be a little bit shorter than normal Fed solution contracts. So is there any worry that, you know, particularly this one critical infrastructure protection contract is very big, but it could sunset relatively quickly at some point, or should it just continue on the relatively stable? Yeah, I would say that's a great question. So where we're at on that contract right now, the first option period extends through February 2025.

Speaker Change: So you've been doing great, but I think you mentioned at one point that.

Speaker Change: The time duration of engineering contracts can be a little bit shorter.

Speaker Change: Normal fed solution contracts so.

Speaker Change: Is there any worry that.

Speaker Change: Particularly this one critical infrastructure protection contract is very big but it could sunset relatively quickly at some point or should it just continue on a relatively yes already.

Speaker Change: Yeah, I would say that's a great question, so where we're at on that contract right now the first option period extends through February 2025, we do have a second option period that it fits exercised <unk> run through February 2026.

Carey Smith: We do have a second option period that if it's exercised, we'd run through February 2026. But the customer did recently advise that even though we have very strong performance, that they're considering whether or not they're going to exercise the second option period to extend it or otherwise re-compete the contract. If they do re-compete the contract, we intend to submit a proposal for the continued performance of the work. And I will note that we have an average of 95% re-compete win rates, including 98% year-to-date re-compete win rates. At the present time, though, there's no announced acquisition strategy and there's no draft or final RFP.

Speaker Change: It's a customer did recently advised that even though we have very strong performance that they are considering whether or not they're going to exercise. The section second option periods are extended or otherwise recompete. The contract if they do break pizza contract, we intend to submit a proposal for the continued performance of that work and I will note that we have an average.

Speaker Change: <unk> of 95% Recompete win rates, including 98% year to date re compete win rates at the present time, though there is no announced acquisition strategy and there is no draft or final RFP. So what this means we had indicated that we expected our 2025 recompete percent to be around 10.

Carey Smith: So what this means, we had indicated that we expected our 2025 re-compete percent to be around 10%, which is what we have in any given year. So I would say right now we anticipate our re-compete for 2025 to be somewhere in the range of 5% to 15%. And it's dependent on that contract plus one other contract that we continue to receive extensions. I mean, what I'm excited about as we look into next year, you know, hopefully we will be around the 10%, but at the high end, 15%. We've got a very strong re-compete win rate.

Percent, which is what we have in any given year. So I would say right now we anticipate our recompete for 2025 to be somewhere in the range of 5% to 15% and it's dependent on that contract plus one other contract that we continue to receive extensions.

Speaker Change: I mean, what I'm excited about as we look into next year.

Speaker Change: Hopefully, we will be around the 10%, but the high end, 15%. We've got a very strong recompete win rate. We continue to win extensive work off a higher base one one times book to Bill year to date.

Carey Smith: We continue to win extensive work off a higher base, 1.1 times booked-to-bill year-to-date. Continue to acquire more companies, two this year, potentially three. And we've had six quarters of greater than 20% organic growth. And our awards activity, as Matt highlighted during his script, has increased 24% over the prior year period and 13% on a trailing 12-month off a higher base. So we have a lot of momentum in the business.

Speaker Change: You need to acquire more companies to the share of potentially three and we've had six quarters of greater than 20% organic growth and our awards activity as Matt highlighted during his script has increased 24% over the prior year period, and 13% on a trailing 12 months off a higher base. So.

Speaker Change: We have a lot of momentum in the business.

Tobey Sommer: Terrific. Great answer.

Tobey Sommer: Thanks so much.

Speaker Change: Terrific great answer thanks, so much.

Speaker Change: Thanks Scott.

Alex Dwyer: And our next question comes from Tobey Sommer with Truist. Your line is now open. Thanks.

Speaker Change: And our next question comes from Tobey Sommer with true waste. Your line is now open.

Carey Smith: When we think about the guidance raise, could you break down the contribution from organic performance in acquisition? At this point, with the acquisitions already in hand, what is the acquired revenue that will fold into the P&L in 2021? Yeah, so Tobey, let me give you a kind of a so final three months of the quarter, or total revenue growth is at the midpoint is just under 13%, of which about, you know, 12% is, is organic. So relatively minor contribution within the fourth quarter. When we look at next year, we expect black signal will contribute just over 100Million dollars and then BCC, which is not in any guidance yet would be an additional over 100Million dollars.

Speaker Change: Thanks.

Speaker Change: When we think about the guidance raise.

Tobey Sommer: Could you break down the contribution from organic performance and acquisitions.

Speaker Change: At this point.

Speaker Change: With the acquisitions already in hand.

Speaker Change: Does the acquired revenue.

Speaker Change: Will fold into the P&L in 2025.

Speaker Change: Yes, So tobey, let me give you a kind of a.

Speaker Change: The final three months of the quarter or total revenue growth at the midpoint is just under 13% of which about.

Speaker Change: 12% is.

Speaker Change: Is organic so relatively minor contribution within the fourth quarter. When we look at next year, we expect flat signal will contribute just over $100 million in the BCC, which is not in any guidance yet would be an additional over $100 million. So.

Matt Ofilos: So, you can probably think about 200Million worth of inorganic, maybe a little bit lighter than that, because we have black signal for a few months to score this year. So, I'd say somewhere, you know, call it the high 100 to low 200, but we can give more details in the. in the later, so about $80 million is from our black, 80 to 90 million is black signal, and then BCC would be another 100 plus.

Speaker Change: You can probably think about $200 million worth of inorganic maybe a little bit lighter than that because we have black signal for a few months. This quarter. This year, so I'd say somewhere call. It the high one hundreds to low 200, but we can give more details in the year.

Speaker Change: And the later so about $80 million is from our black $80 million to $90 million is black signal and then <unk> would be another 100 plus.

Carey Smith: Okay, thank you. Could you talk about what the outlook is for revenue synergies associated with BCC and BlackSignal? Historically, you know, with whom you have a relationship, you've either worked or been on things together or competing and sometimes had line of sight into near term.

Speaker Change: Okay. Thank you.

Speaker Change: Could you talk about what the outlook is for revenue synergies associated with BCC and black signal historically.

Speaker Change: You've acquired firms that are.

No.

Speaker Change: With whom you have a relationship with you by the work to bid on things together or competing and sometimes had line of sight into near term opportunities.

Carey Smith: Yes, I'll start with BlackSignal. As I mentioned, they provide digital signal processing, electronic warfare, and cybersecurity. When you look at their capabilities, they fit in very nicely with Parsons' capabilities. We're both doing digital signal work, but we look at different parts of the electromagnetic spectrum and also for different customers. On the cybersecurity side, we're both involved in offensive. The legacy Parsons was more historically on the Department of Defense side. BlackSignal was more on the intelligence community side. And then when you look at space, we see a lot of synergies to develop a space training range.

Speaker Change: Yeah, So I'll start with black signals I mentioned, they provide digital signal processing electronic warfare and cyber security. When you look there are capabilities they fit in very nicely with Parsons capabilities, where both joined digital signal work, but we look at different parts of the electromagnetic spectrum and also for different customers on this.

Speaker Change: Cyber security side, we're both involved in offensive the legacy Parsons was more historically on the department of defense side Blacks.

Speaker Change: Black signal is more on the intelligence community side and then when you look at space, we see a lot of synergies to develop a space training range.

Carey Smith: BlackSignal is the HackASET market leader. They use on-orbit digital twin technologies, and they basically create a cyber wargaming platform for space systems. This is complementary with Parsons' capability, a system that we have called T-REX, which is an emulator system, so we're combining those capabilities. As you noted, we do buy companies that we've worked with quite a bit. We've known BlackSignal for a long time, and also their legacy companies, and it really fit in nice with us. We've already been able to capitalize on synergies, particularly on the GSA growth that I mentioned.

Speaker Change: Black signal as the HOKA set market leader they use on orbit digital twin technologies and they basically create a cyber war gaming platform for space systems. This complementary with Parsons capability of system that we have called <unk>, which is an emulator system. So we're combining those capabilities.

As you noted we do buy companies that we've worked with quite a bit we've known black signal for a long time and also their legacy companies and it really fit in.

Speaker Change: With us we've already been able to capitalize on synergies, particularly on the GSA growth that I mentioned.

Carey Smith: BCC is very exciting. They will be adding about 450 employees to our business. We both have presence in Florida. We both have presence in Georgia, as well as Texas, South Carolina. I would say they are much stronger in Florida. And we're going to be consolidating the legacy Parsons Florida activities under them. Their headquarters is in Miami.

Speaker Change: BCC is a very exciting they will be adding about 450 employees to our business. We both have presence in Florida, we both have presence in Georgia as well as Texas, South Carolina I would say they are much stronger in Florida, and we're going to be consolidating the legacy persons, Florida activities under them their.

Speaker Change: <unk> is in Miami there are evolved in four areas. They do design services, they do construction engineering and inspection.

Carey Smith: They're involved in four areas. They do design services. They do construction engineering and inspection, design, build, and general engineering capabilities. Also, I mentioned during the script, but they doubled the amount of resources that we have working in the Georgia Department of Transportation. We're really excited about that, particularly with our recent win on the State Route 400 job, because there's a lot of big opportunities coming up within Georgia. I will note on BCC, they also have fixed price, 50% time and material. So we anticipate that that's going to help us on the margin side as well in CI.

Speaker Change: <unk> build and general engineering capabilities.

Speaker Change: Also I mentioned during the script, but they double the amount of resources that we have work in the Georgia Department of transportation, We're really excited about that particularly with our recent win on the state route 400 job because theres a lot of big opportunities coming up within Georgia I will note on BCC. They also have 50%.

Speaker Change: Fixed price, 50% time and material. So we anticipate that thats going to help us on the margin side as well in Ci.

Tobey Sommer: Thank you very much. Thank you.

Speaker Change: Thank you very much.

Tobey Sommer: Thanks, Toby.

Speaker Change: Thank you.

Alex Dwyer: And the next question comes from Alex Dwyer with KeyBank Capital Markets. Your line is open. Hi Carey, Matt, and Dave. Good morning. Morning, Alex. Good morning. So I think Parsons has now won five of the largest North American transportation projects in the history of the company over the past year or so. Can you talk about the pipeline of seeing more of these large transportation projects? Are you still seeing many more of these out there that could be awarded in the next year or so? And kind of what your capacity is to take more of these on?

Speaker Change: And the next question comes from Alex Dwyer with Keybanc capital markets. Your line is open.

Speaker Change: Okay.

Hi, Gary and Matt and Dave Good morning.

Speaker Change: Good morning, Alex.

Speaker Change: Good morning.

Speaker Change: So I think Parsons has now on.

Speaker Change: Five of the largest north American transportation projects in the history of the company over the past year.

Speaker Change: A year or so can.

Speaker Change: Can you talk about the pipeline.

Speaker Change: More of these large transportation projects.

Are you still seeing many more of these out there that could be awarded in the next year or so and kind of what your capacity is to take more of these on.

Carey Smith: Yeah, thanks, Alex, for that question. We have one, five of the largest. We had mentioned the Gateway Project. That's the largest rail and transit project for the Hudson River Tunnel. It's the largest infrastructure project occurring in the United States, and we're really proud to be the program manager there. We were awarded the JFK Roads and Highways. Those of you living in New York City will be happy that we're improving the area around the airport. And we were awarded the Newark Bay Bridge, over $140 million project for us. We are a world leader in bridge design, having designed over 4,500 bridges, and particularly a leader in long-span bridges.

Speaker Change: Yes, Thanks, Alex for that question. We have won five of the largest we had mentioned the gateway project. That's the largest rail and transit project for the Hudson River Tunnel.

Speaker Change: It's the largest infrastructure project occurring in the United States, and we're really proud to be the program manager there.

Speaker Change: We're awarded the JFK roads and highways those of you living in New York City, we will be happy that we're improving the area around the airport and we were awarded the Newark Bay Bridge over $140 million project for US We are world leader in bridge design, having designed over 4500 bridges and particularly a leader in long span bridges and then the two.

Matt Ofilos: And then the two awards that we just highlighted this quarter with Hawaii Heart Rail and Transit System, which is the next phase of that extension, as well as State Route 400 job. What we're particularly excited about is we've had 16 consecutive quarters of greater than one notebook to bill, and the IIJA is still on the ramp up. I would also indicate that state and local are contributing quite a bit of funding as well. Once they saw the certainty of the IIJA passage in November of 2021, they started to contribute. As far as capacity, we're doing a terrific job hiring, terrific job retaining.

Speaker Change: Our words that we just highlighted this quarter with Hawaii Heart rail and transit system, which the next phase of that extension.

Speaker Change: As well as state route 400 job, what we're particularly excited about is we've had 16 consecutive quarters of greater than one book to Bill and the IHA a is still on the ramp up recent data shows there was out of the total $1 two trillion dollars of funding $550 billion of that was new.

Speaker Change: And we're nearly three years into the five year loss actually may of this year was the halfway point, 40% of the IHA a funds have been announced and that cover 60000 projects. So this leaves $720 billion yet to be allocated and I would note that there are announced that means they're captured for me.

Speaker Change: Chancey press releases, but that doesn't mean, there yet awarded which sexual obligations. So we're still very much on the up ramp here I would also indicate that state local are contributing quite a bit of funding as well once they saw the certainty of the IHA a passage in November 2021, they start to contribute as far as capacity we're doing.

Speaker Change: Our terrific job hiring.

Alex Dwyer: We have our lowest retention rates that we've ever had within the North America critical infrastructure business. So we're going to continue to pursue and win these large jobs throughout the United States, particularly focused on our Tier 1 states. And Alex, just to add some numbers to what Carey mentioned, I'm looking at kind of Q1 2023, about $17 billion worth of pipeline within infrastructure. Right now, we're almost at 21 billion. So you're about 23.5% over the 18 months. So really strong evidence of continued growth there. Got it. Okay. Thank you so much.

Speaker Change: Terrific job retaining we have our lowest retention rates that we've ever had within the North America critical infrastructure business. So we're going to continue to pursue and win these large jobs throughout the United States, particularly focused on our tier one stage now.

Speaker Change: And Alex just to add some numbers to what Carrie mentioned I'm looking at kind of Q1 2023 about $17 billion worth of pipeline with an infrastructure right now we're almost at 21 billion. So you are up about 23, 5% over the 18 months. So really strong evidence of continued growth there.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Got it okay. Thank you so much and then I guess just.

Carey Smith: And then I guess just I wanted to ask about just the general hiring needs across the entire company as we think about the next 12 months. I guess like over this past year, has there been areas of the business where it's been more challenging to hire or less challenging to hire? And then just talk about where the business development teams are most focused on hiring for the next year plan. Yes, I would say we've done a great job on both hiring and retention. The easiest area to hire will be the critical infrastructure business, Middle East.

Speaker Change: I wanted to ask about just the general hiring needs across the entire company as we think about the next 12 months.

Speaker Change: Over this past year has there been areas of the business, where it's been more challenging to hire.

Or a less challenging to hire and then just talk about where the business development teams are most focused on hiring for the next year plan.

Speaker Change: Yes, I would say we've done a great job on both hiring and retention the easiest area to hire will be their credit card restructure business middle East, we actually higher from about 50 countries around the world today.

Carey Smith: We actually hire from about 50 countries around the world today. And also critical infrastructure, North America would be pretty easy. When you get to the federal side, part of the engineered systems, particularly the group that is not cleared, is not very difficult to hire. So the highest bar is always going to be that cleared area of our portfolio. But again, I'm happy with what we've done there. From a retention perspective, we measure ourselves against PWC industry benchmarks. We are lower than the benchmarks, so we're doing better than the industry average in both the federal and the critical infrastructure segments.

Speaker Change: And also critical infrastructure North America would be pretty easy when you get to the federal side part of the engineered systems, particularly the group that is not cleared is not very difficult to hire the highest bar is always going to be that cleared area of our portfolio, but again I'm happy with what we've done there from a retention perspective, we measure ourselves against Pwc.

Speaker Change: Industry benchmarks, we are lower than the benchmark. So we're doing better than the industry average and both the federal and their credit card for structure segments from a business development perspective, we're going to be focused MSA in the same areas that we have been.

Carey Smith: From a business development perspective, we're going to be focused, I'm going to say, in the same areas that we have been. Our six core end markets, all of which are growing between 5% to 12% compound annual growth rate, and continuing to hire there both BD talent as well as performance execution talent to get ahead of winning these large jobs. Thank you.

Speaker Change: Our six core end markets, all of which are growing between 5% to 12% compound annual growth rate and continuing to hire there both BD talent as well as performance execution talent to get ahead of winning these large jobs.

Speaker Change: Thank you.

Speaker Change: Thank you Alex.

Josh Sullivan: And the next question comes from Josh Sullivan with the Benchmark Company. Your line is open. Hey, good morning. Good morning. Carey, to your credit, you know, you've been very deliberate in your willingness to invest.

Speaker Change: And the next question comes from Josh Sullivan with the Benchmark Company. Your line is open.

Josh Sullivan: Hey, good morning, guys.

Speaker Change: Good morning, good morning, Josh.

Josh Sullivan: Terry to your credit you've been very deliberate and your willingness to invest in any geographic region, especially when growth wasn't obvious but you know in your opening comments you call out geographic expansion. So I'm just curious what their current philosophy on that global expansion is should we expect youre just looking at the same regions, which have been delivering or are there any new op.

Carey Smith: But, you know, in your opening comments, you know, you call out Curious what the current philosophy on that global Should we expect you're just looking in the same regions which have been delivering or are there any new opportunities opening up? Yes, so I would say we have been very deliberate. We're fortunate that we're in the right places right now. If you look at the North America growth with the infrastructure bill, not peaking till the 27 timeframe. If you look at the Middle East, not peaking till the 2030-2032 timeframe. I would say there is, if I talk about any expansion within federal, we highlighted IndoPay.com.

Josh Sullivan: <unk> is opening up and I'm thinking of Europe there.

Speaker Change: Yes, so I would say we have been very deliberate we're fortunate that we're in the right places right now if you look at the North America growth with the infrastructure Bill not peaking till the 2007 timeframe. If you look at the Middle East not peak until 2000, 32032 timeframe I would say.

Speaker Change: There is if I talk about any expansion within federal we highlighted endo paid com that's been a very big focus for us because we have a purpose built federal solutions company that we've put together.

Carey Smith: That's been a very big focus for us because we have a purpose-built federal solutions company that we've put together to basically outpace near-peer threats. So the type of work that we're doing, whether it's on the defense and intelligence side, signals intelligence, electronic warfare, information operation, cybersecurity, or it's on the engineered system side with environmental remediation and infrastructure builds, IndoPay.com is going to be a significant area of focus and expansion. And as I mentioned a little bit earlier, we're also going to start to look at opportunities in the Middle East because we have such a strong branding and such high win rates, we feel that we can take our federal portfolio there as well.

Speaker Change: Basically outpace near peer threats. So the type of work that we're doing whether it's on the defense and intelligence side signals intelligence electronic warfare information operation Cyber security or it's on the engineered systems side with environmental remediation and infrastructure built into paid comps.

Speaker Change: To be a significant area of focus and expansion and as I mentioned, a little bit earlier, we're also going to start to look at opportunities in the middle East because we have such a strong brand name and such high win rates, we feel that we can take our federal portfolio there as well.

Carey Smith: Within critical infrastructure, we're going to stay laser-focused on North America as well as the Middle East. We have a small presence in Europe. We do some rail and transit work in Marseille and Paris, France, and also in the Netherlands.

Speaker Change: Saying credit core infrastructure, we're going to stay laser focused on North America as well as the middle East we have a small presence in Europe, we do some rail and transit work in Marseille and Paris, France, So we might sell and also in the Netherlands. So we might see a little expansion off of that but when youre in a position where your growth is so strong.

Carey Smith: So we might see a little expansion off of that. But when you're in a position where your growth is so strong, we just really need to continue to focus and deliver.

Speaker Change: We just really need to continue to focus and deliver.

Carey Smith: And then kind of a similar question on software capabilities that you mentioned, you know, how are you approaching this? You know, obviously, a difficult expansion, but also a very fruitful one. But, you know, we're seeing other partnerships announced like with Palantir and L3. Or should we think of, you know, your approach being more. Yes, so I would say we partner on a selective basis to win certain pursuits. We have such a strong software base. It's really our key differentiator. And when we talk about kind of purpose building the federal solutions portfolio, it's all been about software.

Speaker Change: Great.

Speaker Change: And then kind of a similar question on software capabilities that you mentioned are you approaching this obviously.

Speaker Change: Can be a difficult <unk>.

Speaker Change: Pension, but also very fruitful one, but we're seeing other partnerships announced like with volunteer in all three where should we think of your approach be more organic.

Speaker Change: Yes, so I would say we partner on a selective basis.

Speaker Change: To win certain pursuits, we have such a strong software base, that's really our key differentiator and when we talk about kind of purpose building the federal solutions portfolio. It's all been about software I think hardware is going to become more commoditized and it's really key areas like digital signal processing, where we're at when the industry leader.

Carey Smith: I think hardware is going to become more commoditized, and it's really key areas like digital signal processing, where we're one of the industry leaders. Artificial intelligence, again, where we've had a strong presence for the last couple of decades, and we apply to almost every program that we do. Software is going to be the nugget. In addition to federal, I'd highlight a couple areas within critical infrastructure, mostly our intelligent infrastructure transportation business, and our advanced traffic management system work, our intelligent intersection as a service work. Those are also heavily software driven. We use an agile approach.

Speaker Change: Artificial intelligence again, where we've had a strong presence for the last couple of decades, and we applied almost every program that we do software is going to be the nugget. In addition to federal I'd highlight a couple of areas within critical infrastructure, mostly our intelligent infrastructure transportation business.

Speaker Change: Our advanced traffic management system work, our intelligent intersection as a service work. Those are also heavily software driven we use an agile approach we have <unk> secure capability.

Carey Smith: We have a DevSecOps secure capability, and we're going to continue to lean in on software.

Speaker Change: And we're going to continue to lean in on software.

Josh Sullivan: Great. Thank you for the time.

Speaker Change: Great. Thank you for the time.

Louie Dipalma: Thank you. And our next question comes from Louie DiPalma with William Blair. Your line is now open. Carey, Matt, and Dave, good morning and congrats on the results. Thank you very much, Louie.

Speaker Change: Thank you.

Yes.

Speaker Change: And our next question comes from Louie Dipalma with William Blair. Your line is now open.

Speaker Change: Yes.

Louie Dipalma: Gary Matt and Dave.

And congrats on the results.

Speaker Change: Thank you very much Louis.

Louie Dipalma: Carey and Matt, investors often ask about the difference between your recent string of 20% plus organic growth and the long-term guidance for mid-single-digit growth. And we were wondering, is there anything specific that would prevent this year's momentum and last year's momentum from continuing next year? I did mention the one confidential contract we're awaiting to see if the customer is going to exercise the option here or if they're going to compete it. I think the key thing is for us making sure that we beat and raise and set guidance that's realistic. We anticipate as we go into next year, we'll probably have our usual runoff of programs in the amount of about 80 to 100 million, which is typical for us.

Louie Dipalma: Cary and Matt investors, often ask about the difference between your recent string of 20% plus organic growth.

Louie Dipalma: And the long term guidance for mid single digit growth and we are wondering is there anything specific.

Louie Dipalma: That would prevent this year's moment woman and last year's momentum from continuing next year.

Speaker Change: Well I did mention the one confidential contract we're awaiting to see if the customer's going to exercise the option here or if theyre going to compete it.

Speaker Change: I think the key thing is for us, making sure that we beat and raise and set guidance that's realistic.

We anticipate as we go into next year, we'll probably have our usual runoff of programs and the amount of about $80 million to $100 million, which is typical for us.

Carey Smith: Re-competes, as I mentioned, about 5 to 15 percent, but I would say continue doing what we're doing. We've got to get the high win rates as we've been able to deliver, win and move up the value chain, bid and win larger jobs, and continue to execute.

Speaker Change: Re competes as I mentioned about 5% to 15%, but I would say continue doing what we're doing we've got to get the high win rates as we've been able to deliver when and move up the value chain bid and win larger jobs and continue to execute.

Louie Dipalma: Great, Carey.

Speaker Change: Great.

Carey Smith: And at the AUSA conference, you showcased your Digital Twins software, and we were wondering, is this software being utilized for several of these recent large transportation infrastructure, IIJA contracts, such as the Newport Bay Bridge, JFK Airports, Hudson River Tunnel, Englewood Project, and are you able to use this Digital Twins software for both federal solutions and infrastructure? Yes, so we are able to use digital twin capabilities for both federal and infrastructure, and we share those capabilities across the portfolio. I would say our biggest application is with the Missile Defense Agency that we've been applying it. We have a framework that we've built out called Parsons Digital Engineering Framework, and we've been applying it there for quite a while.

Speaker Change: And at the the USA conference.

Speaker Change: You showcased your digital twins software and we were wondering is this software being utilized or.

Speaker Change: Several of these recent large.

Speaker Change: Transportation infrastructure II JA contracts, such as the Newport Bay Bridge JFK airports Hudson.

Speaker Change: Greg.

Speaker Change: Tunnel Englewood project.

Speaker Change: And are you able to use this digital twin software for both federal solutions and infrastructure.

Speaker Change: Yes, so we are able to use digital twin capabilities for both federal and infrastructure and we share those capabilities across portfolio I would say our biggest application is with the missile defense agency that we've been applying it we have a framework that we build out called Parsons digital engineering framework and we've been.

Speaker Change: Applying it there for quite a while we also now have digital twin capability on orbit with the Black signal acquisition on the infrastructure side of the house, we've been applying digital twins, mostly to our airport projects.

Carey Smith: We also now have digital twin capability on orbit with the Black Signal acquisition. On the infrastructure side of the house, we've been applying digital twins mostly to our airport project.

Carey Smith: Great, and following up on these transportation infrastructure projects, how should we think of the revenue trajectory and duration as You know, it seems that these are fairly long-term contracts. And also related, is the scope of work for these contracts significantly different from your legacy contracts that have featured write-downs? And are there any risks for write-downs for these types of IIJA contracts? Yeah, let me take the second part first. We have de-risked our portfolio starting when I took over as Chief Operating Officer, November 2018. And we've gone back to what I'm going to call our core roots.

Speaker Change: Great and following up on these transportation infrastructure projects, how should we think of.

Speaker Change: The revenue trajectory and duration.

Speaker Change: It seems that these are fairly long term contracts and also related.

Speaker Change: Scope of work for these contracts significantly different from your legacy contracts that have featured write downs and are there any risk for write downs for these types of II JA contracts.

Speaker Change: Yes, let me take the second part first we have Derisked our portfolio starting when I took over as Chief operating officer in November 2018, and we've gone back to what I'm going to call. Our core Bruce the core roots are there companies that were a designer we do program management and we do owner's engineer, where we help the owner deliver the technical.

Carey Smith: The core roots of the company is that we're a designer. We do program management and we do owner's engineer, where we help the owner deliver the technical design. So we have stopped bidding those legacy programs back in the 2015 timeframe. That's why we're really happy this year to be wrapping up the last one of those. So the projects that we've won, the one in Hawaii, the rail and transit system, and the State Route 400, we are the lead design subcontractor on both of those. Again, it's what Parsons has done for 80 years since the company was created.

Speaker Change: Design. So we have stopped bidding those legacy programs back in the 2015 timeframe. That's why we're really happy this year to be wrapping up the last one of those so the projects that we've won the one in Hawaii that rail and transit system in the state Route 400, we are the lead design sub contractor on both of those again, it's what Parsons.

Speaker Change: <unk> has done for.

Speaker Change: For eight years since the company was created so no. We don't anticipate write downs like we've had on some of these legacy construction programs. When you look at our scope because we are the designer of the majority of our work does get done early in the project. So far project is five eight years will be done in the very early parts of it.

Carey Smith: So no, we don't anticipate write-downs like we've had on some of these legacy construction programs. When you look at our scope, because we are the designer, the majority of our work does get done early in the project. So if a project is five to eight years, we'll be done in the very early parts of that project. A good example is JFK.

Speaker Change: That project. Good example, as JFK, we're nearly done with the design on that project that we won about 16 months ago.

Louie Dipalma: We're nearly done with the design on that project that we won about 16 months ago. Great.

Louie Dipalma: Thanks, everyone. Thanks Louie.

Speaker Change: Great. Thanks, everyone.

Speaker Change: Thanks, Alright, thanks Laurie.

Noah Poponak: And our next question comes from Noah Poponak with Goldman Sachs. Your line is open. Hey, good morning everyone. Good morning, y'all. Perry, it sounds like you're saying there are two contracts mainly that are creating that range that you're referencing of five to 15% of REAP for recompete next year. And you were talking about the one large confidential in the engineering business. Are you able to say what the second The second one is a contract that we continue to receive extensions. Right now, we're extended through February. Those extensions may or may not continue indefinitely. We're waiting on some actions from the.

Speaker Change: And our next question comes from Noah <unk> with Goldman Sachs. Your line is open.

Speaker Change: Hey, good morning, everyone.

Speaker Change: Good morning.

Speaker Change: It sounds like Youre, saying there are two contracts mainly that are creating that.

Speaker Change: Range that you're referencing of 5% to 15% for.

Speaker Change: For Recompete next year.

Speaker Change: You were talking about the one.

Speaker Change: Large confidential in the engineering business are you able to say what the second one.

Speaker Change: The second one is a contract that we continue to receive extensions right now were extended through February those extensions may or may not continue indefinitely, we're waiting on some actions from the customer.

Speaker Change: Okay.

Matt Ofilos: Okay. And, um, Matt, what... In the. um fourth quarter margin by segment approximately just to get to the full year EBITDA range. Yes, right now, no, we have federal just call it kind of high nines, low tens, and then CI in the low sevens. So think of that as kind of constant quarter of a quarter in a federal kind of a little bit lower than where they've been. Okay.

Speaker Change: Hey, Greg.

Speaker Change: Yes.

Speaker Change: Matt works.

Speaker Change: In the.

Speaker Change: Fourth quarter margin by segment approximately.

Speaker Change: Just to get to the full year.

Speaker Change: EBITDA range.

Speaker Change: Yes, so right now no we have federal just call it kind of high nines low tens in Ci in the low sevens, so think of that as kind of constant quarter over quarter.

Speaker Change: A federal kind of a little bit lower than where they've been.

Speaker Change: Okay.

Matt Ofilos: And maybe you could update us on. What you're now expecting is the end timing of the remaining legacy work in CI. and maybe also just talk about how you would expect that to progress. sequentially from here. Yes, so we really have just the one project and we're expecting to meet with the customer within the next few weeks to achieve substantial completion. Okay, so you carry that had previously been expected in inside of the third quarter and now it's expected in the That's correct. There were some additional systems that were added that we had to process.

And <unk>.

Speaker Change: Maybe you could update us on.

Speaker Change: What youre now expecting as the timing of the remaining legacy work MCR.

Speaker Change: And maybe also just talk about how you would expect that to progress.

Speaker Change: Really from here.

Speaker Change: Yes.

Speaker Change: We really have just the one project and we're expecting to meet with a customer within the next few weeks to achieve substantial completion.

Speaker Change: Okay.

Speaker Change: That had previously been expected in.

Speaker Change: Inside of the third quarter and now it's expected in the fourth quarter.

Speaker Change: That's correct there were some additional systems that were added that we had to process.

Matt Ofilos: And I guess once that's complete, does the CI margin just kind of flip to... you know, what it's been adjusted for charges, or is there for some other reason, some more gradual ramp to it? Yeah, I'd say no, our goal is, of course, to kind of get to the adjusted number. But Carey and I are kind of cautious, you know, substantial completion has some kind of trail to it where you're negotiating with customers and kind of completing the job. So I would say kind of that 40 to 60 basis points per year should get us there within a couple of years.

Speaker Change #100: And I guess once that's complete does the Ci margins just kind of flip to.

Speaker Change #100: You know what it's been adjusted for.

Speaker Change #100: Charges here.

Speaker Change #100: Or is there some other reason some more gradual ramp to it.

Matt Ofilos: But generally speaking, where you know, the substantive write downs that we've had, will be behind us with substantial completion. We've indicated 20 or 30 basis points at the Parsons level for our long term guidance. And as Matt mentioned, we're expecting that to come from the CI segment. Okay.

Noah Poponak: Okay, great.

Noah Poponak: Thank you so much. Thank you, Noah.

Operator: This is all the time that we do have for questions.

Dave Spille: I would like to turn the call back over to Dave Spille for closing remarks. Thank you for joining us this morning.

Dave Spille: If you have any questions, please don't hesitate to give me a call, and we look forward to speaking with many of you over the coming weeks.

Operator: And with that, we'll end today's call. Have a great day.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.

Speaker Change #100: Yeah.

Speaker Change #100: [music].