PSN

Parsons has gotten torched over the last six months - since March 2026, its stock price has dropped 32% to $46.15 per share. This was partly due to its softer quarterly results and may have investors wondering how to approach the situation. Is now the time to buy Parsons, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free. Even though the stock has become cheaper, we’re cautious about Parsons. Here are three reasons we avoid PSN, plus one stock we’d rather own. In addition to reported revenue, backlog is a useful data point for analyzing Defense Contractors companies. This metric shows the value of outstanding orders that have not yet been executed or delivered, giving visibility into Parsons’s future revenue streams. Parsons’s backlog came in at $9.26 billion in the latest quarter, and over the last two years, its year-on-year growth averaged 1.1%. This performance was underwhelming and suggests that increasing competition is causing challenges in winning new orders. Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite. Over the next 12 months, sell-side analysts expect Parsons’s revenue to rise by 4.1%. While this projection implies its newer products and services will fuel better top-line performance, it is still below the sector average. Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity). Parsons historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 6.9%, somewhat low compared to the best industrials companies that consistently pump out 20%+. Parsons’s business quality ultimately falls short of our standards. Following the recent decline, the stock trades at 14.8× forward P/E (or $46.15 per share). This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We’re pretty confident there are more exciting stocks to buy at the moment. We’d suggest looking at a safe-and-steady industrials business benefiting from an upgrade cycle. WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses. But our AI platform says the party isn’t over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating Stocks for Free HERE. Stocks that have made our list include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.

Image source: The Motley Fool. Wednesday, July 29, 2026 at 8:00 a.m. ET Vice President of Investor Relations - Dave Spille Chair, President and Chief Executive Officer - Carey Smith Chief Financial Officer - Matt Ofilos Operator: Good day, and thank you for standing by. Welcome to the Parsons Corporation Second Quarter 2026 Earnings Conference Call. Please be advised that today's conference is being recorded. I will now hand the conference over to your first speaker today, Dave Spille, Vice President of Investor Relations. Please go ahead. David Spille: Thank you. Good morning, and thank you for joining us today to discuss our second quarter 2026 financial results. Please note that we provided presentation slides on the Investor Relations section of our website. On the call with me today are Carey Smith, 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 second quarter financial results as well as a review of our 2026 guidance. We then will close with a question-and-answer session. Management may also make forward-looking statements during the call regarding future events, anticipated future trends and the anticipated future performance of the company. We caution you that such statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. Actual results may differ materially from those projected in the forward-looking statements due to a variety of factors, including the risk factors described in our Form 10-K for fiscal year ended December 31, 2025, and other SEC filings. Please also refer to our earnings press release and presentation slides for additional forward-looking statement disclosures. We do not undertake any obligation to update forward-looking statements. Management will also make reference to non-GAAP financial measures during this call. We remind you that these non-GAAP financial measures are not a substitute for the comparable GAAP measures. Please refer to the earnings press release and presentation slides for a reconciliation of the non-GAAP financial measures. In addition, for the second quarter of 2026, management is presenting certain financial measures on a normalized basis to exclude the effect of certain portfolio shaping actions and a joint venture charge. Normalized financial measures are also non-GAAP financial measures, and the earnings press release and presentation slides include reconciliations to the customary GAAP or non-GAAP presentation as applicable. And now I will turn the call over to Carey. Carey Smith: Thank you, Dave. Good morning. Welcome to Parsons' Second Quarter 2026 Earnings Call. During the second quarter, Parsons demonstrated the robust demand for our integrated solutions, discipline of our strategy and the profitability and resilience in our core business and what remains a dynamic macro environment for both the U.S. federal government and the Middle East region. Both segments continue to post strong book-to-bill ratios and win strategic awards with Federal Solutions bookings up 51% year-over-year. On a normalized basis, our core business delivered profitable organic growth in line with our expectations and strong adjusted EBITDA, particularly in Critical Infrastructure. The Middle East business maintained excellent performance with book-to-bill exceeding 1.0x and 10% organic revenue growth, illustrating our strong alignment to regional spending priorities throughout the ongoing conflict. While we experienced strong demand for our high-value offerings, we also took decisive actions related to projects that do not align with our strict profitability and risk criteria. Since our 2019 IPO, we've been focused on acquiring businesses that expand our capabilities and customer base while exiting those that do not support growth. These disciplined decisions strengthen our company for the long term. This quarter, adjusted EBITDA was impacted by $118 million of nonrecurring events, including a $77 million charge on a remote contract and $41 million related to an extraordinary weather event and schedule delays. In our Federal Solutions segment, we took portfolio shaping actions to focus on profitable, sustainable growth. This resulted in a $19 million gain from selling 2 advisory contracts and $77 million loss on 2 nonstrategic remote contracts that are held for sale. The advisory contracts in our Federal Solutions segment, known as SETA, Systems Engineering and Technical Assistance contracts, provide independent advice to the government. This work created a potential organizational conflict of interest with our growing development work for an intelligence community customer. By divesting these contracts, we've enhanced our ability to focus on delivering critical national security space ground solutions at substantially higher margins. This is a clear case of exiting good work to win better work and our continued high-value solutions evolution. We made the deliberate decision to exit 2 Federal Solutions programs in a remote location that no longer fit our risk profile. These programs face staffing and supply chain challenges and increased costs and continuing to perform them would have required extensive subcontracting and disproportionate management attention. With a signed letter of intent in place and the customer indicating a willingness to support novation subject to the customary approval process, we believe this action meaningfully reduces our exposure with the financial impact appropriately reflected in our current results. We expect to close in Q3 2026. This lets us focus our resources on higher growth, more profitable areas of the business. We continually review the performance of all our programs with a focus on execution, opportunities, risks and financial results. These 2 contracts are not indicative of our consistently strong operational performance and high-value solutions portfolio in Federal Solutions. In addition to these portfolio actions, we recorded a $41 million charge in Critical Infrastructure on a joint venture project following an extraordinary weather event that disrupted productivity and schedule performance. In June, the region experienced historic rainfall at the highest level in over a century. These very unusual conditions and program delays reduced productivity and increased the cost to complete the project. Our team acted swiftly and responsibly by adding labor, equipment and subcontractor resources to keep the program on schedule and meet our customer commitments. We have updated our estimate to complete, and that revised view is reflected in this quarter's results, and the program is expected to be 90% complete at year-end. Importantly, Parsons is a non-managing partner in this joint venture. And since 2019, we have not pursued similar consortium projects. Matt and I will present today's financial results on a normalized basis without the portfolio actions and charge, to provide a clear view of our core business performance. The reconciled financials are included in the PowerPoint presentation. In the second quarter, in line with expectations, total revenue rose 8% and organic revenue increased 3%, excluding the confidential contract. Federal Solutions grew by 11% and Critical Infrastructure by 5%. We delivered an adjusted EBITDA margin of 10.1%, powered by an 11.9% margin in Critical Infrastructure. This continued improvement in Critical Infrastructure margins underscores the strength of the backlog and new business as we deliver growth with favorable business mix. The 70 basis point margin increase builds on last year's 40 basis points. Bookings were outstanding across both segments this quarter with contract awards up 24% year-over-year, resulting in an overall book-to-bill ratio of 1.2x. Federal Solutions bookings increased by a robust 51% year-over-year, delivering a 1.3x book-to-bill ratio. Critical Infrastructure achieved 1.1x, representing the 23rd consecutive quarter at or above 1.0x, demonstrating sustained demand and the Middle East remains strong with a 1.1x book-to-bill. Bookings in the first half of 2026 were very strong with Federal Solutions up 45% and book-to-bill ratios of 1.3x for both Parsons and Federal Solutions and 1.2x for Critical Infrastructure. This provides a solid foundation for accelerating growth in the second half of this year and demonstrates the strength and differentiation of our portfolio. The work we're winning is strategically important in well-funded areas. This quarter, Parsons won 5 contracts exceeding $100 million, including 2 for new work. For the first 6 months of 2026, we've won 9 contracts over $100 million compared to 7 in the first half of 2025 and 5 in the first half of 2024. Our technology leadership is a decisive competitive advantage in securing large-scale programs. 4 of our 5 $100 million wins this quarter incorporated artificial intelligence, a key differentiator for Parsons. In the last 3 quarters, we secured 13 contracts over $100 million with 10 involving advanced AI. With over 20 years in operational AI, we apply it to areas, including autonomous cyber, counter unmanned aircraft systems, electronic warfare and smart mobility, supporting revenue growth and margin expansion. Our marquee wins this quarter underscore our strategic positioning and technology leadership. We received a 2-year $514 million option under the Missile Defense Agency's Technical Engineering Advisory and Management Support Systems Engineering contract, continuing our 4-decade partnership with MDA. The contract covers advanced engineering for the integrated missile defense system, including work on Golden Dome, which contributes to additional growth. We booked $195 million during the second quarter. We secured $400 million in contract awards through 2 other transaction agreements, each with a 3-year period of performance. These new OTAs reflect demand for our mission-critical defense and intelligence solutions and confidence in our ability to rapidly deliver. We booked $125 million on these contracts during the quarter. We were awarded a 5-year $245 million single award IDIQ contract from the United States Naval Research Laboratory with both recompete and new work. Under this contract, Parsons will enhance mission-critical software and cybersecurity for space and ground systems, and we booked $71 million on this contract during the second quarter. We were awarded a 7-year single award IDIQ contract with a ceiling value of $184 million to support the Department of Navy's Intelligence Carry-on program. This contract represents new work and supports rapid delivery of innovative capabilities to enhance speed and agility for the war fighter. We booked $26 million on this contract during the second quarter. We were awarded $161 million contract to continue serving as the main construction manager for the Canadian Giant Mine Remediation Program. We booked the full amount of this contract during the second quarter. In the first quarter, we booked $250 million on the Joint Cyber Hunt Kit. This quarter, Cyber Command expressed their intent to increase the Joint Cyber Hunt Kit or JCHK contract ceiling to $750 million. This is a testament to our ability to deliver advanced deployable solutions at scale. Our effective M&A strategy has enabled us to win larger and more profitable programs across both segments, and I'd like to highlight a few recent examples. JCHK brought together Parsons cyber operations experience with Sealing Tech's advanced edge computing capabilities, including agentic AI. Sealing Tech also played a role in securing the $184 million Navy Intelligence win this quarter. Similarly, the $400 million in OTA wins were led by Chesapeake Technologies. Black Signal enhanced Parsons classified capabilities, making us an approved contractor with greater access to highly classified projects and secure networks. The biometrics capabilities from Xator enabled the $392 million classified win we announced in the fourth quarter. We're capitalizing on Altamira synergies in signals intelligence, space and missile defense and foreign military equipment analysis. Recent critical infrastructure acquisitions strengthened our transportation and water market position and expanded our customer presence. As a preferred acquirer, we continue to buy differentiated companies to produce new integrated solutions for our customers. Alongside securing new strategic contracts, our acquisitions and internal investments have established a robust portfolio of mission-focused products. Today, products account for 10% of our federal business and with their rapid growth, they're expected to bolster our bottom line results. We offer both hardware and software products directly to customers or as components with their broader company solutions. Parsons national security products and solutions provide operational advantage in cyber operations, electronic warfare and tested environments and include the Joint Cyber Hunt Kit and TReX threat emulation tools. We protect critical infrastructure, public venues and transportation using advanced security and identity management. DroneArmor counters unmanned aircraft systems. AresNXT and Javelin deliver biometric identity management and the tactical awareness kit improves situational awareness for major recent sporting events. Our OrbitXchange and GOCaaS space products enable resilient satellite operations. The iNET Advanced Traffic Management platform helps global transportation agencies enhance mobility, safety and efficiency. Throughout our product portfolio, we leverage artificial intelligence to automate operations, optimize efficiency and create personalized user experiences for faster and better solutions. This quarter, we earned top 3 global rankings from Engineering News Record for program management, professional services and program construction management for-fee, and we won 2 American Council of Engineering Companies Engineering Excellence Awards. The Canadian Institute of Steel Construction awarded us for infrastructure, and we were named the VETS Indexes 5-star Employer for our support of Veterans. Looking forward, we are very confident in Parsons' future with a strong and synergistic position in Federal Solutions and Critical Infrastructure segments. Within Federal Solutions, we are closely aligned with the administration's priorities and equipped to deliver the speed, agility and advanced solutions the Department of War requires. We're encouraged by the ongoing bipartisan momentum to increase U.S. defense spending. For fiscal year 2027, the administration has proposed a $1.15 trillion base defense budget, representing more than 28% increase over 2026. Importantly, the proposed FY '27 budget is closely aligned with Parsons' core strengths in missile defense, cyber, space, counter unmanned aircraft systems, electronic warfare, facilities modernization and joint all-domain command and control. Our purpose-built portfolio has differentiated capabilities to help safeguard our nation and stay ahead of evolving threats. Strong demand continues in our Critical Infrastructure segment across North America and the Middle East. In North America, our emphasis on hard infrastructure such as roads and highways, bridges, airports, rail and transit and intelligent transportation systems matches bipartisan priorities and aligns with the proposed Surface Transportation Reauthorization Bill. Notably, as of May 2026, only 44% of the Infrastructure Investment and Jobs Act funds have been spent. The Build America 250 Act proposes $580 billion of stable funding with the largest bridge investment to date. Both bills increased formula funding to 90% and permitting reforms help states advance major infrastructure projects and ensure sustained demand. Our Middle East business performed well in the second quarter, exceeding expectations despite geopolitical issues and affirming our brand strength and leadership. EMEA saw 10% organic revenue growth, a 1.1x book-to-bill ratio and strong profitability. Opportunities remain robust due to ongoing investments in transportation, urban development and infrastructure for major events, all areas that align well with our core strengths. We expect increased investments in counter UAS, cyber defense, integrated air and missile defense, desalination and critical infrastructure protection of water, energy, transportation pipeline and data centers. Reconstruction in Syria, Gaza and Ukraine may offer additional long-term potential. The Middle East continues to be an attractive growth market with strong demand and a promising pipeline. Entering the second half of the year, we expect growth driven by our backlog of $9.3 billion, of which 71% is funded, excellent book-to-bill ratios in both segments, strong win rates and $11 billion of contract awards not yet booked. We are adjusting our fiscal year '26 guidance for the portfolio actions and timing-related items, which Matt will discuss. This quarter, Parsons secured major contracts and made strategic moves that strengthen our competitiveness and long-term growth and profitability. Our diverse portfolio spans 6 end markets with growth rates ranging from mid-single digits to greater than 10%. With strong leadership, a talented 21,000-person workforce and an innovation-driven approach, we are well positioned for sustainable growth and shareholder value. With that backdrop, Matt will provide more details on our second quarter financial results. Matt? Matt Ofilos: Thank you, Carey, and good morning, everyone. The second quarter was highlighted by a strong underlying core business as we continue to focus on derisking and stabilizing the portfolio to drive long-term growth and shareholder value. With book-to-bill ratios of greater than 1x in both segments for the second straight quarter, revenue of $1.6 billion, in line with expectations, normalized adjusted EBITDA margin of greater than 10% for the second straight quarter and $9.3 billion of total backlog, we are well positioned to capitalize on favorable market conditions with tailwinds in both segments. Before turning to our results, I will provide clarifying details on the items we have excluded from our adjusted core operating performance to ensure full transparency. The portfolio shaping actions Carey described further strengthen our market position by expanding development work with a strategic intelligence community customer. Additionally, we will enhance our margin profile by exiting a business that no longer meets our risk and margin criteria. Related to portfolio shaping during the quarter, we recorded a $19 million gain from the divestiture of 2 SETA contracts and a $77 million loss on programs that are currently treated as held for sale as we have a signed letter of intent with the intended buyer. We do not anticipate material residual obligations beyond the customary transition period. Both actions are accretive to our go-forward organic growth and margin profile. Additionally, we recorded a $41 million charge related to a joint venture on a project that was affected by historic rainfalls in Q2. This charge reflects a full reestimate of the cost to complete the project, including the additional labor, equipment and subcontractor resources we deployed to keep the program on schedule. We believe this charge appropriately captures the impact and the program is expected to be 90% complete by the end of 2026. As a reminder, we have not pursued this type of consortium business since 2019. My discussion today will highlight our results on a normalized basis since we believe this approach offers a clearer picture of how our business is performing. You can find a complete reconciliation for both revenue and profitability in our PowerPoint presentation, which is available on our Investor Relations website. Turning to the details of our second quarter results. Consistent with our expectations, total revenue grew 8% and 3% on an organic basis, excluding our confidential contract. These increases were driven by growth in our transportation and urban development markets. Highlights included strong growth on key contracts, including FAA, Air Base Air Defense, King Salman International Airport and CAIA. Total revenue, including the confidential contract, grew 1% from the prior year period and was down 4% on an organic basis. SG&A expenses for the second quarter increased 3% from the prior year period, primarily driven by acquisitions. Strategic investments in both SG&A and CapEx remain focused on long-term growth and sustainable competitive differentiators. Normalized second quarter adjusted EBITDA of $161 million increased 8% from the prior year period, and adjusted EBITDA margin expanded 70 basis points to 10.1%. These increases were driven by improved infrastructure margins and contributions from accretive acquisitions, building on the 40 basis points of expansion we delivered in the second quarter of 2025. I'll turn now to our operating segments, starting with Critical Infrastructure, where second quarter revenue grew by 5% year-over-year, led by organic growth of 4% and inorganic revenue contributions from our Applied Sciences acquisition. Organic growth was primarily driven by strong performance in the Middle East, where revenue grew 10% on an organic basis. Critical Infrastructure adjusted EBITDA of $97 million increased 18% from the second quarter of 2025, and adjusted EBITDA margin expanded 140 basis points to 11.9%. These increases were driven by accretive growth in the Middle East as well as improved mix in North America on higher Parsons labor contributions. Moving to our Federal segment, where second quarter revenue increased 11% and 2% on an organic basis, excluding the confidential contract. These increases were driven by growth in our space and missile defense market and transportation markets and contributions from our acquisitions of Altamira and CTI. Total Federal Solutions revenue, including the confidential contract, decreased 3% from the prior year period and 12% on an organic basis. Federal Solutions adjusted EBITDA of $64 million on a normalized basis declined 5% compared to the second quarter of 2025, with an adjusted EBITDA margin of 8.2%. The decrease was primarily driven by lower volume on the confidential contract and unfavorable mix as a result of higher materials and subcontractor efforts diluting margins. Looking ahead to the second half of 2026, federal margins are expected to expand to 9.4%, supported by increased product sales, revenue growth from accretive contracts and contributions from acquisitions. Next, I'll discuss cash flow and balance sheet metrics. Our net DSO at the end of Q2 was 76 days. The increase in DSO from the prior year period was primarily driven by lower volume on the confidential contract and timing of collections in the Middle East. During the second quarter of 2026, our operating cash flow was impacted by a strategic supply chain investment. We proactively ordered memory and storage inventory for high-margin, high-demand products aligned with national security priorities to maintain critical schedule dates while delivering accretive margins. This working capital investment, together with the timing of customer payments, temporarily impacted our cash flow for this quarter. We expect this investment to generate revenue and cash in the coming quarters and benefit the second half results. Capital expenditures totaled $16 million in the second quarter of 2026. Looking ahead, we expect CapEx to increase in the second half as we deliver investments in classified facilities and achieve critical milestones related to enterprise systems upgrades to support Parsons long-term growth and enhance efficiency across the business. CapEx remains well controlled and is anticipated to be approximately 1.5% of total revenue for 2026. Trailing 12-month free cash conversion was 74%. For the full year, we are reaffirming our conversion target of greater than 100%, reflecting our disciplined focus on collections. During the second quarter, we repurchased approximately 295,000 shares for a total of $15 million. Our capital allocation priorities remain unchanged, and our Board recently increased our buyback authority. We'll continue to invest organically to further differentiate our capabilities, pursue accretive acquisitions that enhance our win rates and ability to capture large pursuits and remain opportunistic with share repurchases. Turning next to bookings. In the second quarter, we secured $1.9 billion in contract awards, a 24% increase year-over-year, driving a strong enterprise book-to-bill ratio of 1.2x. Through the first half of the year, the book-to-bill ratio was 1.3x, supporting a favorable outlook as programs receive funding and are scheduled to ramp. On a trailing 12-month basis, our book-to-bill ratio stood at 1.1x. Both segments had solid bookings for the quarter. Our Critical Infrastructure segment continues its impressive streak with its 23rd consecutive quarter at or above 1.0x, with a book-to-bill ratio of 1.1x, including strong performance in the Middle East, where we also achieved a 1.1x ratio. In Federal Solutions, contract awards increased 51% year-over-year, resulting in a book-to-bill ratio of 1.3x. Our backlog at the end of the second quarter totaled $9.3 billion. Funded backlog of $6.6 billion increased 6% year-over-year. At the end of Q2, our funded backlog represented 71% of total backlog. Now let's turn to our outlook for the remainder of the year. We are updating our 2026 guidance based on first half results and our expectations for the balance of the year. This change is driven by the previously described divestitures, joint venture charge and timing. For fiscal year 2026, we now expect revenue in the range of $6.2 billion to $6.5 billion, adjusted EBITDA between $500 million and $560 million and operating cash flow ranges from $430 million to $490 million. We are lowering the midpoint of revenue guidance by $300 million. To provide context related to the items impacting guidance, let me walk through the adjustments in 3 parts. First, $85 million was related to the planned divestitures, which will benefit long-term growth and margins. Second, the anticipated infrastructure ramp has been reduced by $125 million due to lower pass-through costs in North America and timing of new awards. While the lower pass-through has a negative effect on revenue, it benefits the Critical Infrastructure margins, which continue to deliver above 10% given strong labor growth at mid- to high single digits. Third, the remaining $90 million is impacted by federal contract timing to include a protest on a large new contract award and realized delays of funding on recent contract wins. Demand remains robust with strong book-to-bill ratios, win rates near 60% and improving margins. Our focus is on delivering solid financial results in the latter half of 2026 and building momentum going into 2027. Adjusted EBITDA and cash flow guidance have also been updated accordingly. Adjusted EBITDA has been lowered to reflect the $118 million in charges, approximately $14 million on lower revenue volume, partially offset by $18 million of favorable margin trends, cost controls and program performance across the portfolio. In total, adjusted EBITDA has been lowered by $115 million at the midpoint. Note that the $19 million gain related to the Federal Charge and Divestiture benefits GAAP net income but not adjusted EBITDA. Operating cash flow has been lowered by $40 million at the midpoint due to the impact of divestitures and revenue timing. Our updated guidance ranges and key assumptions, including quarterly cadence and a breakdown of the revision are detailed in our PowerPoint presentation on Slides 16 through 18. In summary, we delivered strong normalized financials in the quarter to include adjusted EBITDA margins, new contract awards and backlog growth. We continue to deploy capital effectively by investing in organic growth initiatives and pursuing strategic acquisitions. These actions demonstrate our disciplined execution, and we remain confident in our ability to achieve our 2026 guidance and create long-term value for our shareholders. With that, I'll turn the call back over to Carey. Carey Smith: In closing, this quarter demonstrates the continued strength and resilience of our business. We delivered solid results across our core business, including adjusted EBITDA margins, contract awards and backlog while making deliberate decisions that strengthen our portfolio for the long term. The actions we took this quarter define our company's discipline. We reshaped our portfolio to align with our long-term strategy and redirected resources toward higher-margin, higher growth work. We resolved a conflict of interest to unlock greater opportunities, and we absorbed the impact of an extraordinary weather event. These were deliberate decisions, and we've applied the lessons learned directly and permanently. Since 2019, we have not pursued similar joint ventures, and we only accept work where we have clear control over execution. These are lasting changes to how we operate, and they make Parsons a stronger, more resilient company going forward. Parsons is a business with powerful momentum. Demand for our solutions has never been stronger as evidenced by our strong backlog, a robust book-to-bill in both segments and a growing pipeline. These provide a solid foundation for accelerated growth in the second half of 2026 and build momentum for 2027 and beyond. As I look ahead, my confidence has never been higher. We are in the right markets at the right time with the right strategy and a talented team of over 21,000 people executing with discipline every day. We've strengthened our foundation, sharpened our focus and positioned Parsons to deliver sustained, profitable growth and lasting value for our shareholders this year, in 2027 and well beyond. With that, I'll turn the call over for questions. Thank you. Operator: [Operator Instructions] Our first question in queue coming from the line of Mariana Perez Mora with Bank of America. Mariana Perez Mora: So my first question is on when I think about the underlying business that, as you mentioned, continues to have like strong demand, but also this -- what was the trigger for you to make the decision to, I don't know, like stop the work on this like SETA work or the remote contracts? Because I could imagine you have been seeing like headwinds from growth and margins for a while. What changed for you to make this decision? Carey Smith: Yes. Thanks, Mariana. So to your point, the core business is very healthy. The divestitures that we announced are going to improve both long-term quality and margins. They don't affect future earnings potential. The normalized margin was very strong, excluding the charges at 10.2%. The bookings, the backlog, the funded opportunities we have also support future growth. And then I'd also say during the quarter, we delivered normalized profitable revenue growth that was in line with our expectations. Middle East performance continues to be strong, and our guidance change is primarily portfolio composition plus timing. So let me start with the SETA contract. We divested the SETA work because with the intelligence community and a particular customer, you have to either be a developer or a SETA contractor. And if you're in an advisory role, it can have a potential organizational conflict that will restrict our ability to pursue higher-value development work. When you look at the opportunity that we have in the development side, it's over 8 to 10x the opportunity we had on the SETA side. So we needed to make a decision which side we were going to play on. Particularly with the acquisition of Altamira. This reinforces the strategic logic because of their very strong position with that intelligence community customer. So from a shareholder value standpoint, it's a favorable trade. We're giving up a modest amount of low-margin revenue in exchange for access to a development opportunity that's 8 to 10x larger and has a stronger margin profile. On the second contract, these were contracts initially, we thought that we could execute through self-performance. But over time, the operating environment got more challenging, particularly around staffing and supply chain, and we ran into some recent challenges with the Strait of Hormuz closure. The work is in a very remote location and a difficult one to perform work. So when these conditions evolved, we assessed the risk return profile of the work and concluded no longer met our standards for long-term value creation. We do have -- we also put a new business unit leadership team in place earlier this year that's gone through and reviewed the detailed execution plan. And it was pretty clear to us that self-performing would require a disproportionate amount of management attention. We have to continue to subcontract. And the bottom line is it was an operating model that just does not align with our strategic priorities or our margin objectives. So the right decision was to pursue an exit. And the party that's assuming the work already has an established presence at the location as well as resources and assets. So once again, it's the right thing for long-term shareholder value. Mariana Perez Mora: And then going back to the underlying businesses versus some of these, I don't know, like businesses that are pruning out or just like dying, but also the headwinds that you just mentioned on the second half on the infrastructure in North America not ramping up that fast and funding on Federal Solutions also being slower than expected. How should we think about -- and I know it's probably too early to talk '27 exactly, but like when we think like a year or 2 from here, how much of those headwinds should be over? Carey Smith: Yes. So we've been saying that we would be mid-single digits or better looking forward. And we still expect that off of what we're going to deliver in 2026. From a margin perspective, we expect to deliver 10 to 20 basis points margin expansion. That's on top of 110 basis points of margin expansion we've had over the last 2 years. Operator: Our next question coming from the line of John Godyn with Citi. John Godyn: Obviously, a little bit of a complicated quarter. I just wanted to kind of focus on this idea of core businesses being strong. It sounded like when you were bridging the guidance update, some of the delays in funding and timing mismatches are affecting the core business and weighing on EBITDA. So I was trying to just square that circle a bit and maybe revisit that bridge and make sure we kind of all understood what was going on there. Carey Smith: Yes. Let me start, and then Matt will jump in. But the guidance revision is about portfolio composition and timing. It has nothing to do with demand. And a portion of the reduction reflects revenue associated with the contracts that I just discussed that we're going to divest. Those are, again, deliberate decisions to focus on the long-term quality of our portfolio, the margin profile and management focus. The remaining reduction, what you're referring to is largely timing related. We saw a protest on a large federal contract, which we were awarded $190 million contract over 5 years. So uncertain as to how long that protest will last. There have been some funding and award timing delays on recent wins. An example I mentioned the Intelligence Carry-On Program. That one we've been slow to get funding from the customers as well as the other transaction agreements. And then we're taking a prudent view of infrastructure ramp-up in the second half based on timing of some new business wins, which we had mentioned in the prior quarter that we're waiting to receive award. I think what's important to note, since Q4, we've won 13 contracts over $100 million. 6 of those are for entirely new work and 11 of the 13, including all 6 for new work are within the Federal Solutions segment. But when you look at the federal environment, it still does remain choppy because of uneven timing with delays associated caused by budget uncertainty. If you look at whether it's the NDAA budget approval, reconciliation bill, the supplemental potential CR, all those are kind of unknown actions. And then we're still waiting on the reconciliation funds to flow. They indicated that those funds would flow very strong between now and September. We've seen some uptick on FAA, which we're expecting to have very strong results for the year as well as our teams contract, but we're still expecting more between now and November. There's also some procurement backlogs and workforce constraints within the federal government. So when you look at the underlying business, our bookings, our backlog and our margin all reinforce confidence, and this is really a timing story, not a demand story. And the strength in the bookings is what gives us confidence for the second half of this year as well as 2027 and beyond. Matt Ofilos: Yes, John, the only thing I would add to that is, as you mentioned, the revenue impact, if you look at the adjustment to adjusted EBITDA, we're coming down about $115 million at the midpoint with the charges in the quarter of about $118 million. That means we're overcoming $200-ish million worth of revenue volume. So we're offsetting that with the outperform on EBITDA. So the underlying EBITDA performance is actually improving, particularly in the Critical Infrastructure area where about half of the revenue volume reduction within the quarter was related to pass-throughs of materials and ODCs, and those come at very low margins. So we've seen particularly strong margins within Critical Infrastructure. And so we've been able to overcome the impact of the revenue volume. John Godyn: Okay. I appreciate that color. After a quarter where there are some large charges, I think it's sort of natural for people to worry a little bit whether there's a pattern of charges. Obviously, the nature of some of these events is that they're unpredictable and a surprise. But maybe you guys can comment on your confidence that this is a bit of like a one-and-done type situation as opposed to the beginning of risk factors that may continue. Carey Smith: Yes. So let me start with the infrastructure program, the one that had faced the weather-related issues. It was a historic once-in-a-century weather event. This is an old program where we're a non-managing partner in a joint venture consortium. This contracts equity and earnings. There's no revenue impact. In 2019, we made the decision to no longer pursue similar joint venture consortiums like this program was bid under. We strategically changed the focus on design engineering and program management. So when you look at the quality of our portfolio in Critical Infrastructure, it's the best it's ever been. And I'll reiterate, this program is nearing completion. We're in our seventh year. It will be 90% done at the end of this year. I think our strategy to revert back to program management and design subcontract has been validated. We have 5 consecutive quarters of greater than 10% margins in Critical Infrastructure. Our book-to-bill has been greater than 1.0x for 23 consecutive quarters. Win rates have remained greater than 60% for the past 3 years, and we've delivered strong profitable organic revenue growth. So I think that kind of answers that one. With respect to the federal one, that's an anomaly in our federal business. We have always had very strong operational performance within the federal business. And that was a situation where we had aspired to expand in a geographic location and without kind of recognition of how difficult it was going to be to manage staffing and supply chain, we are no longer bidding work in that location. Operator: [Operator Instructions] Our next question queue coming from the line of Sheila Kahyaoglu with Jefferies. Sheila Kahyaoglu: Maybe just on -- I understand the CI contract issue now with the JV structure. Maybe going back to the Federal Solutions $77 million write-down. I guess what resulted in that write-down given it's 1/3 of your full year EBIT essentially? And at what point did you think about divesting the SETA businesses? And is there any other SETA business left in the portfolio? Carey Smith: Yes. So let me start with the SETA one. We are continually looking at our portfolio for divestitures and exits. I mean we've exited base operations support a couple of years ago in our federal business. We've exited hard-bid construction in our critical infrastructure business and reverted back to program management and design subcontracting. We're no longer bidding consortium models. So I'd say in the federal, SETA is an area that we're always looking at. With respect to this intelligence community customer, we now with the Altamira acquisition have prime contracts there. Previously, we were largely a subcontractor. And we looked at the addressable market for Parsons at a time where that customer needs very fast innovative solutions, and we think we're the best company to provide it. So when you have an addressable market that's 8x to 10x larger, and we, quite frankly, are generally a developer contractor, it just makes sense. I would say the largest kind of remaining SETA program that we have would be the Missile Defense Agency TEAMS contract. And relative to that contract, it's important. We've done it for 4 decades. It's a critical driver for Golden Dome, both the work we're doing on systems engineering as well as our facilities life cycle management work and as well as our test work, and we see substantial growth. So with the Missile Defense Agency, we've made a conscious decision that we are going to stay on the CA side of the house. But you have to do that on a case-by-case basis with each customer. Relative to the remote contract, this quarter, I would say we really reassessed where we were. We looked at the amount of management time and attention it was taking. And we thought about the customers' interest and needs as well, and there was really another company that was already there that was better equipped to perform that work. And with kind of some of the recent issues with supply chain holdups with Strait of Hormuz, we just felt it was the right time to divest that business and exit for the long-term strength of the business and also to expand our margin profiles over the long term. Operator: Our next question in queue coming from the line of Gavin Parsons with UBS. Gavin Parsons: Two-parter. First, just can you help us bridge the second half revenue step-up versus the first half? And then second question, I mean, bookings have been pretty strong for a while, but you've had to cut revenue guide a couple of times in the last year or 2. I mean I appreciate timing is unpredictable. protests happen frequently. Funding timing has been wacky under this administration. I mean, how do you think about guidance so that we can be sure that this kind of appropriately contemplated that risk? Carey Smith: Yes, I'll start with the bookings, and then Matt will take the bridge to second half revenue. The bookings, to your point, really tell you about demand and the demand is very strong when you look at 23 consecutive quarters greater than 1.0 in Critical Infrastructure and the very strong federal bookings that we've posted up 51%. The guidance really reflects the pace at which it's going to convert within a specific window. I would say within federal, that's been affected by the protest, number one, because we can't predict timing on how long a protest is going to last. And then the uncertainty of federal timing on jobs that we've already won. What we're seeing, it's difficult right now for some of the contracting offices to get federal funding flowing in particular, GSA. In Critical Infrastructure, it's strictly timing of large jobs. When you look at a couple of years ago, we won these multibillion-dollar jobs, whether it was Georgia State Route 400, Hawaii Rail and Transit Newark AirTrain. And those work had peaked as we went throughout this year and last year. Those multibillion-dollar jobs are timing related because they only come up periodically. So we've got several in the second half of this year that we're looking forward to winning, but we're just being prudent in guidance relative to timing on those large jobs. Matt Ofilos: Yes. And I would just add, Gavin, the second half growth, if you look sequentially Q2 to Q3, about 3% sequential growth and then just up a little bit about $20 million from Q3 to Q4 at the midpoint. So it's kind of a mix of seasonality plus new business. So on the seasonality side, it's really timing on the mine jobs up in Canada. So that's -- as you come out of the winter season, you have a higher -- stronger second half traditionally. On kind of the new business side, you think about programs like Nammo, Kings Salman International Airport, some additional scope within CAA, a lot of the programs we talked about previously. Those are all ramping. And then a little bit on the OTAs as well. We essentially did minimal revenue on those OTAs in the first half that were recently won. And so those have to ramp up as we bring new work to those in the second half of the year. So it's a mix of kind of seasonality plus new business, but high confidence in that $55 million kind of 3% sequential from Q2 to Q3 and then up just a little bit in Q4. Operator: Our next question comes from the line of Andrew Wittmann with Baird. Andrew J. Wittmann: I guess maybe I wanted to ask to start with on -- maybe on cash flow here. So maybe, Matt, you can just help us understand. I heard you reiterate the kind of cash flow target for the year, and that's great. But just in terms of the inventory pull-through on the memory and other things that I think you articulated, if you had to quantify that, can you just help us understand that? And I also just noticed here in the first half of the year that your contract assets are up like $158 million, contract liabilities are about flat. So you're getting paid or I was just wondering like when that reverses, like when -- is that -- or what's driving that and when that reverses? Just trying to get a better sense of kind of the cash flows here so far year-to-date. Matt Ofilos: Yes. So to your point, Andy, the biggest -- I'd say the strategic investment was as we get into production on Joint Cyber Hunt Kit and other products, everybody has heard the stories around chips and memory and things. And so that's a major challenge for everybody. And so in order to achieve committed delivery dates as we enter production on this contract, it was prudent for us to invest ahead of schedule. And so that was probably $30-ish million in Q2. So the majority of the kind of downward pressure on cash flow within Q2. To your point on kind of the net investment balances, we're seeing an uptick a bit on Middle East. I mentioned in my script, Middle East has been a little bit slower to pay throughout the first half. I've gone directly to customers along with our President over there, who is -- it's really systems related. So they have some new cash systems that they've implemented that are delaying some payments. We saw some really strong cash payments at the start of Q3. And so all in all, we see -- if you look at the second half, it's about $350 million worth of cash. So we have a clear line of sight to deliver on that in the second half as these things kind of normalize. And then on the federal side, Andy, I would say we have some milestones and deliveries within federal that will generate, call it, $50 million worth of cash in the second half as well. Operator: Our next question coming from the line of Jonathan Siegmann with Stifel. Jonathan Siegmann: Just a follow-up on some of the earlier questions. Does the portfolio still have additional non-managing partner programs that we should be aware of? I understand you're not taking any new ones, but are there still additional carryover ones that we should keep in mind could be unattractive business in the long run? Carey Smith: Yes. So there are 3 where we're the non-managing partner. One of those will wrap up as we go into 2027. The other 2, including the weather-related contract, those wrap up in early '28 for one of them and mid-'28 for the other one. And again, these were all contracts we pursued and won back in the 2019 and 2020 time frame. The other 2, by the way, are performing well and have executed very well. Matt Ofilos: Yes. I would just add, John, the -- we've talked previously about kind of legacy programs. The majority of the, I would say, high-risk joint venture structures were in those legacy programs that are essentially at complete, and we're just in the final negotiations on change orders and things. So to Carey's point, significantly derisked from where we were a few years back. Operator: Our next question coming from the line of Gautam Khanna with TD Cowen. Gautam Khanna: I was wondering, Matt, maybe if you could just articulate very clearly the $300 million reduction in sales guidance, could you quantify the various buckets? Because I heard a number of things from pass-throughs to all the issues you raised. Could you just walk through explicitly how much was pass-throughs? How much was contract divestments? Et cetera, et cetera, just so I can bridge it. Matt Ofilos: Yes. So. Happy to do that. So $300 million reduction in revenue guide, $85 million was related to the divest. So that leaves about $215 million of reduction. In Infrastructure, it's about $125 million, which you can see in the table that we have on Slide 18 of the PowerPoint. But $215 million total spread of $125 million for Critical Infrastructure and $90 million for Federal. Of the $125 million, call it, $50 million to $60 million of that is pass-through revenues. So we've seen lower pass-throughs through the first half of the year of about $25 million. So we've extended that to the end of the year, so call it $50 million to $60 million of lower pass-through, which, to my point in the script as carries very little EBITDA, so it actually benefits the margins in Critical Infrastructure. The rest is, as Carey mentioned, kind of timing on new business. And so if we get some favorable outcomes over the next couple of months, hopefully, we'll see some favorable new business there. but we'll wait and see on those just because of the timing has been a little bit more unpredictable. When I look at the federal side, if you use, I guess, $90 million of delta, $90 million, about $20 million of that, so 1/4 of it is protest. And then the rest has been timing of IDIQ and task orders and funding, I would say, to summarize. Carey Smith: On work that we've won. Matt Ofilos: On work that's already in backlog to be executed. Operator: Our next question coming from the line of Matt Akers with BNP Paribas. Matthew Akers: I was wondering if you could talk a little bit more just about what you're seeing in the Middle East right now. It sounds like demand is holding up, but just curious if you're hearing anything different from your customers as the conflict in that region goes on. Carey Smith: Yes. Thanks, Matt. So our first concern in the Middle East is safety and security of our 7,500 employees in the region, and they are all very safe. In fact, when I talk to them every day, it's pretty much business as usual, which is good. As you can see, we haven't seen any slowdown in contract awards reflected by our 1.1x book-to-bill. We also haven't had any force majeure or insurance claims. It's important to note when you look at the EMEA profile, no program represents more than 1.6% of revenue, and we have 20% of the Middle East is in backlog. Our average contract duration runs about 5 years and 49% of the revenue is tied to long-term frameworks and 80% of our EMEA business is tied to long-term sustainable programs. So what we're seeing still is a focus on the sectors that we participate in. The public investment fund during the conflict just came out with a new strategic profile that runs from 2026 to 2030. It's focused on tourism, travel and entertainment, urban development, advanced manufacturing and innovation, industrials and logistics, clean energy, water, renewables and NEOM. And we happen to participate in every single one of those areas. Then when you look at post conflict, and I'd even say those discussions are starting now, we plan to expand and prioritize areas like how can they have an integrated air and missile defense system. In the past, they've typically bought products without looking at a system of systems approach. They're more interested now in border security. We've won a contract, our first border security contract over there. They would like to focus on counter unmanned air systems, critical infrastructure protection, how do you protect water, utility and data centers from attacks. So we're leveraging, for example, we'got a lot of water clients, utility clients. We've got 12 data center clients. So we're working with those customers to kind of get started on how we would master plan the security of those. And it will come in twofold. One will be kind of an active system like a counter unmanned air system. The other one will be like a passive system where you look at how are you going to secure and harden various assets. And then you look at longer term, we're kind of excited about the rebuild opportunity, which we think has a total addressable market that ranges from $800 billion to $1 trillion. And then out of that total addressable market, we think our addressable market is about $5 billion to $10 billion per year. There's obviously uncertainty relative to geopolitical tensions, timing and unknowns, but that's currently how we're looking at it with the biggest opportunity being in Syria, which is going to range from about $250 billion to $400 billion and Ukraine, which is about $500 billion over 10 years. Operator: Our next question coming from the line of Tobey Sommer with Truist. Tobey Sommer: I was wondering if you could comment on what your expectations are for contract mix changing between cost-plus T&M and fixed price over the medium term with customers looking at cost-plus contracts to see what can be converted and the detail that you provided around OTAs? Carey Smith: Yes. So today, we're at about 55% fixed price time and material, 25% -- or 45% reimbursable. We're higher on reimbursable within the federal business. And then the Critical Infrastructure business is higher on fixed price time and material. I'd say it's going to stay pretty consistent. And the reasons are Critical Infrastructure has kind of always been about 75% fixed price T&M, 25% cost reimbursable. Federal is going to stay relatively consistent because we're getting growth on cost-plus contracts, particularly FAA, where we've seen very strong growth and the Missile Defense Agency teams contract where we've also seen strong growth. offset by increase in products portfolio. The Joint Cyber Hunt Kit is going to be ramping up. We've just completed delivery of 12 low-rate initial production units. And so we're going to be going into full rate production, and we need to deliver 62 this year and 74 in 2027 and 74 units in 2028. We also expect our overall products business is going to increase by 30% to 40% next year, and the majority of that resides within federal. Operator: Our next question coming from the line of Sangita Jain with KeyBanc. Sangita Jain: I'll just keep it to one. So Carey, Matt, I understand the breakdown of the reduction in revenue that you've taken. I kind of just want to see how you're seeing the end of this fiscal year shaping up. Usually, there's a fiscal flush. I'm guessing you're not seeing that based on the revenue cut. And then also, how is your guidance sensitized for potential government shutdown later this year? Carey Smith: Yes. So end of fiscal year, again, and I would -- I'm going to put the reconciliation, the first reconciliation -- going with that. We started to see some funds flow, particularly FAA and the Missile Defense Agency for the Golden Dome work. But I would say not some huge flush yet. And part of the challenge they've got with some of the contracting offices is the backlog that they're facing and the workforce constraints that they're up against. So that kind of remains to be seen how strong that's going to be over the next couple of months. Relative to a government shutdown, the nice thing with our business, first, 50% of it is not tied to the federal government. And then the 50% that is, we've got very strong backlog, $9.3 billion, 71% funded, and we have $11 billion of awarded not booked. So we have a lot of ceiling value contracts that we can drive work to, including the 2 new OTAs that we announced for $400 million. So we can run with for quite a while without having an impact. In prior shutdowns, we've seen very little impact to the company. Operator: Our next question coming from the line of Noah Poponak with Goldman Sachs. Noah Poponak: Can you hear me okay? Carey Smith: Yes. Noah Poponak: I guess at a high level, is it a fair question if there needs to be some rethinking of investor communication and disclosure and balance, I guess, in the way you discuss the business because we had the confidential, then we had the FAA, now we have this. And totally appreciate that it's not easy to run a business and it's complex and guidance is predicting the future and these things are hard. But I don't remember you discussing wanting to look at portfolio reshaping. I didn't know there was OCI. I'm trying to find you discussing OCI anytime recently. I don't see that. And I guess the discussion of the business is usually just quite bullish versus some of these potential headwinds. So how are you thinking about that, if at all? Carey Smith: Yes. So first, we do plan to hold an Investor Day sometime next year. So we'll be talking more about that. On the confidential contract, again, that was canceled by the administration. We obviously could not have predicted that, and they gave us no heads up on that. The FAA, I would say we've kind of made out on that because we're under better contract terms under our existing contract. and we expect to realize over 30% year-over-year growth. So I think that's ended up largely in our favor. Portfolio shaping is something we're always looking at. I think any company has to continually be looking at that, how do you move to higher growth markets and how do you move to higher-margin business. So that's something we're always taking a look at. And we've always had SETA work, the Missile Defense Agency for 4 decades, but we try and minimize SETA work where we can because we prefer to be a developer. But we are looking at having an Investor Day to further our communications. Matt Ofilos: No, the only thing I would add, just a reminder is the sale of the SETA work was actually a $19 million gain for us. So that was a favorable outcome. The charges at the remote location that we're going through the divestiture process is really all associated with the risk and the kind of the tolerance around the multiyear risk there. So that's the balance on the 2. Operator: And our last question will come from the line of Louie DiPalma with William Blair. Louie Dipalma: I'm interested in like breaking out like the one-time charges versus like the recurring impact from the different divestitures and the write-downs. And it's a pretty simple question, but like net for everything, how much was the second half EBITDA guidance reduced like relative to your prior assumptions that were embedded in the guidance that you issued last quarter? Matt Ofilos: Second half EBITDA in theory, would be raised, Louie, on -- so we took $118 million in charges, and we reduced guidance by $115 million. So in theory, the total year EBITDA was raised on core performance despite $200 million in headwind on revenue. Operator: And that's all the time we have for our Q&A session. I will now turn the call back over to Dave for any closing comments. David Spille: Thank you. Thanks for joining us this morning. If you have any additional questions, please feel free to contact me directly, and we look forward to connecting with many of you in the weeks ahead. So with that, we'll end today's call. Thank you very much. Operator: This concludes today's conference call. Thank you for your participation, and you may now disconnect. Before you buy stock in Parsons, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Parsons wasn’t one of them. The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $397,405!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,344,091!* That performance is why people listen. With a track record of beating the S&P 500 by 4x, Stock Advisor offers a distinct advantage. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built for the long haul. See the 10 stocks » *Stock Advisor returns as of August 7, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Parsons (PSN) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

Parsons (NYSE:PSN) reported second-quarter 2026 results that management characterized as strong in its core operations, while portfolio exits and a weather-related joint-venture charge affected reported profitability and prompted a reduction in full-year guidance. Chair, President and CEO Carey Smith said total revenue rose 8% and organic revenue increased 3% when excluding a confidential contract. On that normalized basis, Federal Solutions revenue grew 11%, while Critical Infrastructure revenue rose 5%. The company reported normalized adjusted EBITDA of $161 million, up 8% year over year, with margin expanding 70 basis points to 10.1%. → Refiner Stocks Are Near Record Highs—Can Iran-Driven Margins Keep Them There? Management said the quarter included $118 million in non-recurring items: a $77 million loss associated with two remote Federal Solutions contracts held for sale, a $19 million gain from the sale of two advisory contracts, and a $41 million charge on a Critical Infrastructure joint-venture project following historic rainfall and schedule delays. Parsons said it sold two Systems Engineering and Technical Assistance, or SETA, contracts because the advisory work created a potential organizational conflict of interest with development work for an intelligence-community customer. Smith said divesting the contracts enables the company to pursue a development opportunity that is “8-10x larger” than the SETA opportunity and has a stronger margin profile. → Why SK hynix Could Be the Best AI Chip Stock to Buy Now The company also decided to exit two programs in a remote location that faced staffing, supply-chain and management challenges. Parsons has signed a letter of intent with an intended buyer and expects the transaction to close in the third quarter, subject to customary approvals. Smith said the work would have required extensive subcontracting and disproportionate management attention, making it inconsistent with the company’s risk and margin criteria. In Critical Infrastructure, Parsons recorded a $41 million charge after what Smith described as historic rainfall in June disrupted a joint-venture project. The company added labor, equipment and subcontractor resources to maintain the schedule. Parsons is a non-managing partner in the venture, and management said the project is expected to be 90% complete by year-end. The company said it has not pursued similar consortium projects since 2019. → 3 Value ETFs to Consider as Growth Stocks Lag Behind During the question-and-answer session, Smith said Parsons has three remaining programs where it is a non-managing partner. One is expected to conclude in 2027, while the other two are expected to wrap up in early and mid-2028. She said the other two programs are performing well. Second-quarter contract awards totaled $1.9 billion, up 24% from a year earlier, producing an enterprise book-to-bill ratio of 1.2x. Federal Solutions bookings rose 51% year over year and generated a 1.3x book-to-bill ratio. Critical Infrastructure posted a 1.1x ratio, marking its 23rd consecutive quarter at or above 1.0x. Total backlog stood at $9.3 billion at quarter-end, including $6.6 billion of funded backlog, which was up 6% year over year and represented 71% of total backlog. Parsons also cited $11 billion in contract awards not yet booked. Critical Infrastructure adjusted EBITDA increased 18% to $97 million, and margin expanded 140 basis points to 11.9%. Management attributed the improvement to accretive growth in the Middle East and improved North American mix. Middle East organic revenue grew 10%, while the region produced a 1.1x book-to-bill ratio. Federal Solutions normalized adjusted EBITDA declined 5% to $64 million, with an 8.2% margin. CFO Matt Ofilos said lower volume on the confidential contract and a greater mix of materials and subcontractor work weighed on margins. However, management expects Federal Solutions margin to expand to 9.4% in the second half, supported by product sales, accretive contract growth and acquisition contributions. Among the quarter’s major awards, Parsons cited a two-year, $514 million option under the Missile Defense Agency’s Technical Engineering Advisory and Management Support Systems Engineering contract; $400 million in awards through two other transaction agreements; a five-year, $245 million Naval Research Laboratory contract; a seven-year Navy contract with a ceiling value of $184 million; and a $161 million Canadian Giant Mine Remediation Program award. Parsons lowered its 2026 revenue outlook to a range of $6.2 billion to $6.5 billion, adjusted EBITDA guidance to $500 million to $560 million, and operating cash flow guidance to $430 million to $490 million. Ofilos said the midpoint of revenue guidance was reduced by $300 million. The company attributed $85 million of the reduction to planned divestitures, $125 million to a reduced infrastructure ramp driven by lower North American pass-through costs and timing of new awards, and $90 million to Federal Solutions timing issues, including a protest on a large new award and funding delays on recent wins. Approximately $50 million to $60 million of the Critical Infrastructure reduction reflects lower pass-through revenue, which management said carries little EBITDA and therefore supports segment margins. Of the $90 million Federal Solutions reduction, about $20 million relates to the protested contract, with the remainder tied to timing of task orders and funding on work already in backlog. Adjusted EBITDA guidance was reduced by $115 million at the midpoint, largely reflecting the $118 million in charges. Management said favorable margin trends, cost controls and program performance partly offset the impact of lower revenue volume. Parsons reported operating cash flow was temporarily affected by a strategic inventory investment in memory and storage for high-demand national-security products. Ofilos estimated that investment at roughly $30 million in the second quarter and said the company expects it to generate revenue and cash in coming quarters. The company reaffirmed its target of converting more than 100% of adjusted EBITDA into free cash flow for the full year. Looking ahead, Smith said Parsons continues to expect mid-single-digit or better growth from its 2026 base and 10 to 20 basis points of margin expansion, while citing demand across defense, cyber, space, transportation, water and Middle East infrastructure markets. Parsons Corporation (NYSE: PSN) is a technology-driven engineering, construction, technical and professional services firm. The company delivers end-to-end solutions that span feasibility studies, design and engineering, construction management, system integration and ongoing operations support. Parsons serves both government and commercial clients and focuses on critical infrastructure, defense, security, intelligence and environmental programs. Core services include program and construction management for transportation systems, water and environmental infrastructure, cybersecurity and advanced systems integration. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Parsons Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for July 2026.

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Management initiated a deliberate portfolio reshaping to exit low-margin advisory (SETA) work and high-risk remote contracts, prioritizing higher-value development opportunities. The divestiture of two SETA contracts was driven by organizational conflicts of interest that restricted Parsons from pursuing a development market 8 to 10 times larger. A $77 million loss was recorded for two remote federal programs that no longer fit the company's risk profile due to staffing, supply chain, and geopolitical challenges in the Strait of Hormuz. Critical Infrastructure margins expanded to 11.9% on a normalized basis, driven by a favorable business mix and increased labor contributions in North America. The Middle East segment demonstrated resilience with 10% organic growth and a 1.1x book-to-bill ratio, despite ongoing regional geopolitical tensions. Management emphasized that the core business remains robust, with win rates near 60% and 13 contracts over $100 million secured in the last three quarters. A $41 million charge was taken on a legacy joint venture project following a historic, once-in-a-century rainfall event that disrupted productivity and schedules. Fiscal year 2026 revenue guidance was lowered by $300 million at the midpoint, primarily due to divestitures, lower pass-through costs, and federal contract timing delays. Federal Solutions margins are expected to expand to 9.4% in the second half of 2026, supported by increased product sales and accretive contract contributions. The company anticipates a 30% to 40% increase in its products business next year, led by the full-rate production of the Joint Cyber Hunt Kit. Guidance assumes a prudent view of infrastructure ramp-up in North America, accounting for timing uncertainties of large-scale new business awards. Management remains confident in long-term growth targets of mid-single digits or better, supported by a $9.3 billion backlog and $11 billion in awarded-but-not-booked contracts. Total adjusted EBITDA was impacted by $118 million in non-recurring events, including the remote contract exit and the weather-related joint venture charge. The company recorded a $19 million gain from the sale of advisory contracts, which benefited GAAP net income but was excluded from adjusted EBITDA. Operating cash flow was temporarily impacted by a $30 million strategic inventory investment in memory and storage to secure production timelines for high-margin products. The legacy joint venture project impacted by weather is expected to be 90% complete by the end of 2026, reducing future exposure to similar consortium risks. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management explained that SETA work created conflicts of interest preventing them from bidding on much larger development contracts with intelligence customers. The remote contracts were exited because the operating environment became too difficult to manage without disproportionate management attention and excessive subcontracting. Revenue timing was impacted by a protest on a $190 million federal award and slower-than-expected funding flows from agencies like the GSA. Despite these delays, management noted that 71% of the current backlog is already funded, providing a buffer against potential government shutdowns. Management reported no slowdown in awards, citing a 1.1x book-to-bill in the region and strong alignment with Saudi Arabia's 2026-2030 strategic priorities. Future opportunities in the region are shifting toward integrated air and missile defense, border security, and critical infrastructure protection. The reduction consists of $85 million from divestitures, $125 million from Critical Infrastructure (mostly low-margin pass-throughs), and $90 million from federal timing and protests. CFO Matt Ofilos noted that the underlying core EBITDA performance actually improved despite the lower revenue volume.

This article first appeared on GuruFocus. Total Revenue: $1.6 billion, up 8% year over year. Organic Revenue Growth: 3%, excluding the confidential contract. Adjusted EBITDA Margin: 10.1%, with critical infrastructure at 11.9%. Federal Solutions Revenue Growth: 11% overall, 2% organic growth excluding the confidential contract. Critical Infrastructure Revenue Growth: 5% overall, 4% organic growth. Bookings: $1.9 billion in contract awards, a 24% increase year over year. Book-to-Bill Ratio: 1.2 times overall, with Federal Solutions at 1.3 times and Critical Infrastructure at 1.1 times. Backlog: $9.3 billion, with 71% funded. SG&A Expenses: Increased 3% from the prior year, driven by acquisitions. Capital Expenditures: $16 million in Q2 2026. Operating Cash Flow Guidance: $430 million to $490 million for fiscal year 2026. Adjusted EBITDA Guidance: $500 million to $560 million for fiscal year 2026. Revenue Guidance: $6.2 billion to $6.5 billion for fiscal year 2026. Warning! GuruFocus has detected 9 Warning Signs with GEF. Is PSN fairly valued? Test your thesis with our free DCF calculator. Release Date: July 29, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Parsons Corp (NYSE:PSN) demonstrated robust demand for its integrated solutions, with strong book-to-bill ratios and strategic awards, particularly in the Federal Solutions segment, which saw bookings increase by 51% year over year. The company delivered profitable organic growth and strong adjusted EBITDA, especially in critical infrastructure, with a 10% organic revenue growth in the Middle East. Parsons Corp (NYSE:PSN) secured major contracts, including five exceeding $100 million, and achieved a book-to-bill ratio of 1.2 times, indicating sustained demand and a solid foundation for future growth. The company's technology leadership, particularly in artificial intelligence, has been a decisive competitive advantage, contributing to large-scale program wins. Parsons Corp (NYSE:PSN) has a strong backlog of $9.3 billion, with 71% funded, and $11 billion in contract awards not yet booked, providing a solid foundation for growth in the second half of 2026 and beyond. Parsons Corp (NYSE:PSN) faced a $118 million impact on adjusted EBITDA due to nonrecurring events, including a $77 million charge on a remote contract and $41 million related to an extraordinary weather event. The company experienced challenges with staffing and supply chain issues in remote locations, leading to the decision to exit certain Federal Solutions programs. There were delays in federal contract funding and award timing, affecting revenue guidance and causing a reduction in the revenue forecast by $300 million. The company faced a protest on a large federal contract, adding uncertainty to the timing of revenue realization. Parsons Corp (NYSE:PSN) had to make strategic divestitures, including exiting SETA contracts, to resolve potential conflicts of interest and focus on higher-margin opportunities, impacting short-term revenue. Q: What was the trigger for Parsons Corp to stop work on the SETA contracts and remote contracts? A: Carey Smith, CEO, explained that the decision to divest the SETA contracts was due to potential organizational conflicts of interest with their growing development work for an intelligence community customer. The opportunity on the development side was significantly larger and more profitable. The remote contracts faced staffing and supply chain challenges, making them no longer viable for long-term value creation. Q: How should we think about the headwinds in infrastructure and Federal Solutions for the second half of 2026 and beyond? A: Carey Smith stated that while there are timing-related headwinds, the company expects mid-single-digit growth or better moving forward. They anticipate 10 to 20 basis points of margin expansion, building on previous years' improvements. Q: Can you clarify the impact of the charges and how confident are you that these are isolated events? A: Carey Smith assured that the infrastructure program affected by weather was a historic event and not indicative of ongoing issues. The federal contract challenges were due to geographic and operational difficulties, and Parsons has since ceased bidding in that location. The company has taken steps to mitigate similar risks in the future. Q: What are the expectations for cash flow and the impact of strategic investments? A: Matthew Ofilos, CFO, explained that strategic investments in inventory, particularly for high-demand products, impacted cash flow in Q2. However, they expect these investments to generate revenue and cash in the coming quarters, with a clear line of sight to deliver $350 million in cash flow in the second half of 2026. Q: How is the Middle East market performing amid ongoing conflicts, and what are the future opportunities? A: Carey Smith noted that demand remains strong in the Middle East, with a 1.1 book-to-bill ratio. The company is focused on sectors like urban development and infrastructure, with potential long-term opportunities in post-conflict reconstruction in regions like Syria and Ukraine. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Infrastructure and defense services provider Parsons (NYSE:PSN) will be reporting results this Wednesday before the bell. Here’s what you need to know. Parsons missed analysts’ revenue expectations last quarter, reporting revenues of $1.49 billion, down 4.1% year on year. It was a satisfactory quarter for the company, with an impressive beat of analysts’ EBITDA estimates but full-year EBITDA guidance slightly missing analysts’ expectations. Is Parsons a buy or sell going into earnings? Read our full analysis here, it’s free for active Edge members. This quarter, the market is expecting Parsons’s revenue to grow 1.4% year on year, a reversal from the 5.2% decrease it recorded in the same quarter last year. Analysts covering the company have generally reconfirmed their estimates over the last 30 days, suggesting they anticipate the business will stay the course heading into earnings. Parsons has missed Wall Street’s revenue estimates multiple times over the last two years. Looking at Parsons’s peers in the defense contractors segment, some have already reported their Q2 results, giving us a hint as to what we can expect. RTX delivered year-on-year revenue growth of 14.5%, beating analysts’ expectations by 7.8%, and Lockheed Martin reported revenues up 10.5%, topping estimates by 3.8%. RTX traded up 9.2% following the results while Lockheed Martin was also up 13.3%. Read our full analysis of RTX’s results here and Lockheed Martin’s results here. Over the past year, investors have repeatedly shifted their focus from one macro narrative to another (AI disruption and AI capex spending to geopolitics, interest rates, and the broader health of the economy). While some of the defense contractors stocks have shown solid performance in this choppy environment, the group has generally underperformed, with share prices down 3.3% on average over the last month. Parsons is up 15.9% during the same time and is heading into earnings with an average analyst price target of $69.18 (compared to the current share price of $59.50). ONE MORE THING: 3 Hidden Platforms Growing 3X Faster than Amazon, Google, and PayPal. Amazon, Google, and Meta all followed the same playbook: Dominate an ignored market. Build an unbeatable moat. Scale until you’re unstoppable. These three platforms are running that exact playbook right now. The early investors in Amazon made fortunes. The early investors in these could do the same. Get All 3 Stocks Here for FREE.

BigBear.ai Holdings, Inc. BBAI is scheduled to report second-quarter 2026 results on July 30, 2026, after the closing bell. The upcoming quarter is expected to reflect continued execution of defense and security contracts, growing adoption of generative AI solutions and sustained momentum across its National Security and Trade & Travel markets.BigBear.ai delivered a stable first-quarter 2026, with revenues of $34.4 million remaining largely flat year over year as growth from its Ask Sage generative AI platform offset lower Army program volumes. The company significantly improved gross margin to 34% from 21.3%, secured several high-value defense and AI contracts that lifted backlog 14% sequentially to $281.9 million and ended the quarter with a strong $431.5 million in cash and investments.BigBear.ai reported a loss per share of 8 cents, which came in line with the Zacks Consensus Estimate but narrower than the year-ago level of a loss per share of 25 cents. While adjusted EBITDA declined due to higher growth investments, BigBear.ai reaffirmed its full-year 2026 revenue guidance of $135-$165 million, reflecting confidence in its growth outlook.This artificial intelligence (AI) provider surpassed earnings estimates in two of the trailing four quarters and missed on one and met on one occasion, with an average surprise of 4.4%, as shown below. Image Source: Zacks Investment Research The Zacks Consensus Estimate for the second-quarter bottom line has remained unchanged at a loss of 4 cents over the past 60 days. The estimated figure indicates a narrower loss from the year-ago reported loss of 6 cents per share. The consensus mark for revenues is pegged at $36.4 million, suggesting 12% year-over-year growth.For 2026, BigBear.ai is expected to register a 14.8% increase in revenues from a year ago. Its bottom line is expected to witness a loss of 25 cents per share, which is narrower than the 2025 figure of an 82-cent loss. BBAI’s Earnings Estimate Image Source: Zacks Investment Research BBAI’s Revenue Estimate Image Source: Zacks Investment Research Second-quarter revenues are expected to benefit from the execution of recently awarded contracts, including a classified intelligence community program, airport security deployments and additional work related to Shipyard AI and Ask Sage. Management has also highlighted a stronger pipeline supported by improving Department of Homeland Security funding, an enhanced go-to-market structure and increasing opportunities across defense and border security. These factors are expected to support revenue growth through the remainder of 2026. BigBear.ai continues to prioritize National Security and Trade & Travel as its two core growth markets. During the second quarter, investors will look for progress in deploying Ask Sage across government agencies, commercialization of the platform beyond federal customers and continued adoption of CargoSeer's AI-powered inspection capabilities. Management also expects organizational realignment to improve customer engagement and accelerate solution delivery. Margins are expected to remain supported by a richer mix of software and AI platform revenues, particularly from Ask Sage, which carries higher profitability than traditional services. However, continued investments in research and development, sales expansion, marketing initiatives and integration of recent acquisitions may limit the pace of operating margin improvement during the quarter. Our proven model does not conclusively predict an earnings beat for BigBear.ai for the quarter to be reported. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) for this to happen, which is not the case here, as you will see below.Earnings ESP: BBAI has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.Zacks Rank: The company currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here. BigBear.ai stock has lost 47.6% year to date, lagging the Zacks Computers - IT Services industry, the Zacks Computer & Technology sector and the S&P 500 Index. BBAI Stock’s Performance Image Source: Zacks Investment Research BigBear.ai competes with Palantir Technologies Inc. PLTR, C3.ai, Inc. AI and Parsons Corporation PSN across AI-powered decision intelligence, defense technology, homeland security and mission-critical software markets. So far this year, all three peers have faced selling pressure, with Palantir declining 26%, C3.ai falling 34.6% and Parsons slipping 3.8%. In terms of the forward 12-month price/sales (P/S), BBAI stock is currently trading at a discount to its industry, as shown below. BBAI’s P/S Ratio (Forward 12-Month) vs. Industry Image Source: Zacks Investment Research At 8.66X forward 12-month sales, BigBear.ai trades below Palantir Technologies at 33.08X, reflecting a substantially more conservative valuation despite operating in similar AI-driven defense and national security markets. However, its multiple remains above C3.ai at 6.06X and Parsons at 0.92X, indicating investors are assigning a premium for BigBear.ai's higher-growth, mission-ready AI strategy and expanding generative AI platform. The current valuation suggests the market recognizes the company's long-term growth potential but remains cautious about execution and profitability. Continued progress in scaling Ask Sage, converting its growing backlog into revenue and securing additional defense and homeland security contracts could support further multiple expansion over time. The company continues to benefit from a growing backlog, expanding adoption of its Ask Sage platform and steady demand across defense and homeland security markets, while analysts expect narrower losses and double-digit revenue growth. Although execution risks remain, its reasonable valuation relative to key AI peers and improving business fundamentals support a balanced risk-reward profile. Investors should maintain their positions and watch for further progress in contract execution, AI platform adoption and margin expansion. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report BigBear.ai Holdings, Inc. (BBAI) : Free Stock Analysis Report C3.ai, Inc. (AI) : Free Stock Analysis Report Parsons Corporation (PSN) : Free Stock Analysis Report Palantir Technologies Inc. (PLTR) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Record profitability and backlog: Parsons reported its highest adjusted EBITDA margin ever at 10.1% with adjusted EBITDA of $151 million, record total backlog of $9.3 billion (funded backlog $6.6B), and $2.0 billion in Q1 contract awards with a 1.4x book‑to‑bill. Major contract wins: Q1 bookings included a $593 million FAA extension ($410M booked), a sole‑source Joint Cyber Hunt Kit program with a ceiling up to $500 million ($250M booked), a >$340M Middle East transportation award, plus post‑quarter awards (~$400M, an $84M classified IDIQ and an $87M increase); management says the Cyber Hunt Kit is margin‑accretive and should add roughly $50M in H2 vs H1. Guidance and capital priorities: Management reiterated full‑year 2026 guidance despite Middle East regional risks and U.S. procurement complexity but lowered Q2 expectations due to timing/phasing (including a ~$10–15M workday shift); net leverage is ~2.0x, Q1 share repurchases were $35M, and M&A is the top capital deployment priority with 2–4 deals targeted. Interested in Parsons Corporation? Here are five stocks we like better. Parsons (NYSE:PSN) executives said the company opened fiscal 2026 with record profitability metrics, strong bookings, and higher backlog, while reiterating full-year guidance despite geopolitical uncertainty in the Middle East and a complex U.S. government procurement environment. Chair, President and CEO Carey Smith said the first quarter reflected “the resilience of our business and our team's high level of execution,” pointing to record adjusted EBITDA margin, record total and funded backlog, and strong book-to-bill ratios in both operating segments. → Meta Posted Its Best Sales Growth Since 2021—So Why Did Shares Fall? Smith said Parsons delivered its “highest adjusted EBITDA margin ever,” reaching 10.1% in Q1, and generated “record Q1 cash flow.” She also reported record total backlog of $9.3 billion and funded backlog of $6.6 billion, with bookings producing a 1.4x book-to-bill ratio “in both segments.” CFO Matthew Ofilos added that the company recorded $2.0 billion in contract awards in the quarter, up 17% year over year, and noted that on a trailing 12-month basis book-to-bill was 1.1x, extending what he called a track record of 1.0 or greater for every quarter since the IPO. → 5 Stocks to Buy in May Before the Next AI Surge Hits Ofilos said total revenue grew 8% year over year and 3% organically excluding the company’s confidential contract. He also noted that total revenue including the confidential contract declined 4% year over year and was down 8% organically. Adjusted EBITDA was $151 million, up 1% year over year, and adjusted EBITDA margin expanded 50 basis points to 10.1%, which management attributed to improved execution and contributions from accretive acquisitions. Ofilos said SG&A rose 10% year over year “primarily driven by costs related to recent acquisitions and higher transaction expenses.” → Verizon’s Signal Strength: The Turnaround Call Is Loud and Clear In Critical Infrastructure, Q1 revenue increased 3%, driven by 2% organic growth and contributions from the TRS and Applied Sciences acquisitions. Ofilos said Critical Infrastructure adjusted EBITDA was $79 million, up 8%, and the segment posted a record Q1 adjusted EBITDA margin of 10.8%. In Federal Solutions, Q1 revenue increased 12% and 4% organically excluding the confidential contract. Including the confidential contract, Federal Solutions revenue declined 10% year over year and was down 17% organically. Federal Solutions adjusted EBITDA increased 5% and margin expanded 40 basis points to 9.4%, with Ofilos citing lower volume on the fixed-price confidential contract as a headwind to EBITDA dollars and favorable mix and acquisitions as drivers of margin improvement. Management highlighted several large awards and extensions, including four single-award contracts valued at more than $100 million. Smith said these included: A $593 million extension under the FAA Technical Support Services (TSSC-V) contract, with $410 million booked in Q1, extending performance through 2030. A Joint Cyber Hunt Kit production award notification from U.S. Cyber Command, a new sole-source contract with a ceiling value up to $500 million, with $250 million booked in Q1. A new five-year Middle East transportation program management contract valued at more than $340 million, with over $300 million booked in Q1. More than $145 million under the GARDEM contract to enhance command and control, space, and intelligence, surveillance and reconnaissance technologies, with $38 million booked in Q1. Smith also noted an additional $150 million added to two Canada mine remediation construction management programs (Faro Mine and Giant Mine), with the full amount booked in Q1. After the quarter ended, Smith said Parsons received four additional strategic federal awards previously unannounced, including $400 million for two other transaction agreements, an $84 million ceiling classified IDIQ representing “entirely new work,” and an $87 million increase on a national security prime contract. On the Joint Cyber Hunt Kit program, Smith said the company had already produced more than 500 kits and expected “another 500–750” under the new contract. She called the program margin accretive, saying it carries “double-digit margins.” Ofilos said the contract is expected to contribute roughly $50 million of growth in the second half versus the first half. Smith opened the call by emphasizing employee safety, saying the company’s 7,500 Middle East employees “have remained safe during the current regional conflict.” She said the business had not been affected to date, and during Q&A reiterated that Parsons had not seen delays in funding, slower awards, pauses in negotiations, or force majeure insurance claims. Smith said no single Middle East program represents more than 1.6% of company revenue, and that 20% of Middle East backlog is in the region. She added the average contract duration is 4.7 years, and 49% of revenue is tied to long-term frameworks. Smith reiterated the company’s “full year guidance for the Middle East of 8.5% organic.” Ofilos said Middle East revenue in Q1 was negatively impacted by fewer workdays due to the holiday schedule compared to last year, and he quantified the impact as roughly $10 million to $15 million shifting from Q1 into Q2. He said Q2 has three additional workdays compared to the prior year and expects the workday headwind to resolve in the second quarter. Looking ahead, Smith said the company sees potential post-conflict needs including “integrated air and missile defense, border security, counter unmanned air system, Critical Infrastructure protection, water security and desalination, rail, pipeline security, and rebuild opportunities.” Ofilos said Parsons continued to deploy capital across acquisitions, internal R&D, and share repurchases. In Q1, the company repurchased about 583,000 shares for $35 million. He also cited a strong balance sheet, with net debt leverage at 2.0x, including the impact of the upfront cash consideration for the Altamira acquisition. During the quarter, Parsons used $4 million of operating cash flow, which Ofilos said was an $8 million improvement from the prior year period. He reported net DSO of 72 days, up 14 days year over year, driven by lower volume on the confidential contract and timing of collections in the Middle East. He said trailing 12-month free cash conversion was 102%. On working capital, Ofilos said higher contract asset balances were tied mainly to federal munitions projects and upcoming milestones expected to convert over the next two quarters. He added that production ramp on Cyber Hunt Kits could cause some fluctuation, “but not to the same scale.” Parsons reiterated its full-year 2026 guidance ranges issued Feb. 11. Ofilos said guidance reflects “the evolving budget environment, a competitive labor market, and the realities of a challenging government procurement landscape,” while also citing tailwinds including record backlog, recompute risk of less than 3% of 2026 total revenue, and $11 billion in awarded contracts not yet booked. However, Ofilos said the company “lowered Q2 expectations due to the timing of recent wins,” describing the change as largely phasing—roughly half attributable to Middle East program timing and some awards that were expected earlier in the year. In Q&A, Ofilos provided implied organic growth assumptions within the full-year outlook excluding the confidential contract: 6.6% organic growth in Federal Solutions and “just north of 6.61%” in Critical Infrastructure. He said the cadence is expected to skew to the back half, with Federal roughly 4% in the first half and 9% in the second half, and Critical Infrastructure roughly 3% in the first half and 9% in the second half. Smith also discussed M&A, calling it the company’s “number one focus for capital deployment,” and said Parsons expects to close “between two to four deals” this year, maintaining criteria including “greater than 10% on the top line” and “greater than 10% EBITDA margin.” Parsons Corporation (NYSE: PSN) is a technology-driven engineering, construction, technical and professional services firm. The company delivers end-to-end solutions that span feasibility studies, design and engineering, construction management, system integration and ongoing operations support. Parsons serves both government and commercial clients and focuses on critical infrastructure, defense, security, intelligence and environmental programs. Core services include program and construction management for transportation systems, water and environmental infrastructure, cybersecurity and advanced systems integration. The article "Parsons Q1 Earnings Call Highlights" was originally published by MarketBeat.

Achieved record adjusted EBITDA margin of 10.1% and record total backlog of $9.3 billion, driven by high-level execution and strategic accretive acquisitions. Middle East operations remained resilient despite regional conflict, with 7,500 employees safe and no impact to funding or contract awards to date. Federal Solutions growth of 12% (excluding confidential contract) was fueled by demand for cyber, electronic warfare, and space capabilities. Critical Infrastructure performance reached a record 10.8% margin, supported by 22 consecutive quarters of book-to-bill ratios above 1.0. Management attributed strong bookings to the company's 'purpose-built' portfolio, which aligns with national security priorities and global infrastructure spending. Strategic acquisition of Altamira Technologies expanded market presence in signals intelligence and space, adding critical depth with intelligence community customers. Leveraging artificial intelligence across all federal wins to enhance solution differentiation and drive superior mission outcomes for national security clients. Reaffirmed 2026 guidance based on a $54 billion pipeline and $11 billion in awarded contracts that are not yet booked into backlog. Anticipates a significant second-half revenue ramp driven by the transition of the Joint Cyber Hunt Kit to production and major infrastructure projects in Riyadh. Expects to close between 2 to 4 M&A deals in 2026, maintaining a focus on companies with >10% growth and >10% EBITDA margins. The administration's submitted $1.5 trillion defense budget for fiscal year 2027 represents a 'generational investment' opportunity. in missile defense, cyber, and space where Parsons is heavily aligned. Guidance assumes continued organic growth of approximately 6.6% in Federal Solutions and 6.1% in Critical Infrastructure for the full year. The 'confidential contract' continues to create year-over-year revenue and margin volatility, though its impact is expected to diminish as other programs scale. Middle East revenue in Q1 was negatively impacted by holiday schedules, with the shift of three workdays from Q1 to Q2 representing an impact of approximately $10 million to $15 million., which is expected to reverse in Q2. Net DSO increased by 14 days to 72 days, primarily due to lower volume on the confidential contract and timing of collections in the Middle East. Management noted a challenging government procurement landscape and competitive labor market as ongoing headwinds to be monitored. Management stated they have seen no cancellations or funding delays, noting that GCC countries are using high oil prices to diversify into non-oil sectors. Post-conflict, Parsons expects significant new investment in redundancy, resiliency, and hardened underground facilities for data and military assets. Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. The lower Q2 expectation is due to the timing of recent wins and phasing of Middle East customer prioritizations, not a loss of work. Growth in the second half will be supported by a $50 million ramp in Cyber Hunt kits and increased activity on the FAA-TSSC5 contract. Management remains bullish on long-term expansion but noted Q1 benefited from lower pass-through materials, which may normalize in future quarters. The company has flexibility to accelerate legacy contract closeouts, which could influence margin timing throughout the year. The contract is a sole-source production award following a successful prototype phase, representing a high-margin, product-based revenue stream. It features the first use of generative AI in a threat hunt solution, which served as a key discriminator during the selection process. Management expressed confidence in navigating a CR, noting that 50% of the business is non-federal and large existing task orders are already funded. Record funded backlog of $6.6 billion provides a significant buffer against near-term legislative budget delays. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here.