Parsons Corporation (NYSE: PSN) today announced financial results for the fourth quarter and fiscal year ended December 31, 2022.
CEO Commentary
“We had a strong finish to 2022, achieving record revenue and adjusted EBITDA for both the fourth quarter and for the full year, while generating solid cash flow. We also delivered on our 2022 objectives, which resulted in strong, consistent organic revenue growth throughout the year,” said Carey Smith, chair, president and chief executive officer of Parsons.
“In 2022, we maintained our hiring and retention momentum, won large contract awards, closed our largest acquisition since our IPO, and continued to be recognized for our long-standing commitment to ESG. We are well-positioned in two complementary and growing markets, and we will continue to invest in our people, technology, business development initiatives and strategic M&A to maintain our momentum and drive shareholder value.”
Fourth Quarter 2022 Results
Year-over-Year Comparison (Q4 2022 vs. Q4 2021)
Total revenue for the fourth quarter of 2022 increased by $152 million, or 16%, to $1.1 billion. This increase was primarily driven by organic growth of 9% as a result of the strength of our Critical Infrastructure operations. The company’s Xator acquisition contributed approximately $67 million of revenue in the fourth quarter of 2022. Operating income increased 14% to $53.3 million primarily due to lower acquisition amortization and the ramp-up of new contract awards. Net income decreased to $28 million. Diluted earnings per share (EPS) attributable to Parsons was $0.25 in the fourth quarter of 2022, compared to $0.26 in the fourth quarter of 2021.
Adjusted EBITDA including noncontrolling interests for the fourth quarter of 2022 was $98 million, an 8% increase over the fourth quarter of 2021. This increase was driven by Xator and the ramp-up on new contract awards. Adjusted EBITDA margin was 8.9% in the fourth quarter of 2022, compared to 9.6% in the fourth quarter of 2021. The margin decrease was driven by unfavorable indirect rate impacts, higher incentive compensation costs given the company’s strong performance in 2022, and volume on a lower margin federal solutions program. Adjusted diluted EPS was $0.51 in the fourth quarter of 2022, compared to $0.55 in the fourth quarter of 2021. The decrease in adjusted EPS was driven primarily by higher interest and income tax expenses.
Fiscal Year 2022 Results
Fiscal Year Comparison (fiscal year 2022 vs. fiscal year 2021)
Total revenue for the year ended December 31, 2022, increased by $535 million, or 15%, to $4.2 billion. This increase was primarily driven by organic growth of 9% as a result of strong operating performances in both the company’s Critical Infrastructure and Federal Solutions segments. Acquisitions contributed approximately $205 million of revenue in fiscal year 2022. Operating income increased 40% to $186 million primarily due to improved program performance and operating leverage. Net income increased to $97 million. Diluted earnings per share (EPS) attributable to Parsons was $0.87, compared to $0.59 in the prior fiscal year.
Adjusted EBITDA including noncontrolling interests for the year ended December 31, 2022, was $353 million, a 14% increase over the prior year. This increase was driven primarily by improved program performance and accretive acquisitions. Adjusted EBITDA margin was 8.4% for the year ended December 31, 2022, compared to 8.5% for the year ended December 31, 2021. The margin decrease was driven by lower equity in earnings 2022 from joint ventures. Adjusted diluted EPS was $1.81 for the year ended December 31, 2022, compared to $1.65 for the year ended December 31, 2021. The year-over-year adjusted EPS increase was driven by the stronger operating income as noted above.
Segment Results
Fourth quarter 2022 Federal Solutions revenue increased by $69 million, or 14%, to $563 million. This increase was driven by organic growth of 1% and $67 million from Xator. Organic revenue growth was impacted by a program which completed at the end of the first quarter of 2021 and expected seasonality on specific programs.
Federal Solutions adjusted EBITDA including noncontrolling interests decreased by $4 million, or 8%, to $48 million. Adjusted EBITDA margin decreased to 8.5% from 10.5% in the fourth quarter of 2021. These decreases were driven primarily by unfavorable year-over-year indirect rate impacts, higher incentive compensation, and volume on a lower margin federal solutions program.
Federal Solutions revenue for the year ended December 31, 2022, increased by $325 million, or 17%, to $2.2 billion. This increase was primarily driven by organic growth of 6% and approximately $205 million of revenue from acquisitions. Organic growth was driven by the ramp-up of work on existing Federal Solutions Transportation and Cyber contracts.
Significant Contract Wins in the Fourth Quarter of 2022
Parsons continues to win large strategic contracts in both the Critical Infrastructure and Federal Solutions segments. During the fourth quarter of 2022, the company won three single-award contracts worth more than $100 million each, bringing the company’s total to eleven contract wins worth $100 million or more during the full year. In addition, Parsons continues to win meaningful multiple-award IDIQ contracts.
Awarded a 12-year follow-on contract for environmental remediation on the Giant Mine program in Canada, which is one of the largest mine reclamation projects in the world. The expected value of this program to Parsons is approximately $2 billion, of which the company booked $270 million in the fourth quarter. This is the 3rd largest contract win in Parsons’ history, and a significant ESG accomplishment that reinforces our commitment to protecting human health and safety, restoring the environment, and maximizing socio-economic benefits.
Awarded a $122 million option year contract for C5ISR, exercises, operations, and information services by the General Services Administration. Under this contract, the company booked $40 million in the fourth quarter of 2022. Parsons is pleased to support the Intelligence Community by providing critical global cyber and intelligence technologies.
Xator’s Overseas Security Installation Services (OSIS) II program received its second of five potential award years, valued at $119 million. Through OSIS II, Xator provides the Department of State with technical security installation and support services, operations centers and Counter Unmanned Aerial Systems services worldwide. Xator also won two task orders totaling $79 million under the Integrated Base Defense Security System contract to provide the U.S. Air Force with a platform that seamlessly integrates computing power, communications, and tools for situational awareness.
Won a single-award IDIQ contract to partner with a chemicals customer to develop and implement innovative and sustainable solutions for environmental remediation including emerging contaminants at both active and inactive manufacturing sites across North America. The total contract value for the five-year period is estimated at $75 million.
Awarded more than $125 million of contract wins on five different transportation projects, providing design expertise.
Awarded prime positions on three multiple-award IDIQ contacts. The first one is an Air Force Life Cycle Management contract to perform capability development, systems development, and synthetic environment development with a $900 million ceiling value over 10 years. The second one is a Naval Facilities Engineering Systems Command contract with a $95 million ceiling value over five years to provide engineering services. The third multiple-award IDIQ win is for the Toronto Transit Commission’s renewable energy program to assist with project management in the fields of renewable energy, fleet charging and de-carbonization. This contract has a $58 million ceiling over three years.
After the fourth quarter of 2022 ended, the company was awarded a $94 million single-award recompete contract from a classified customer for cyber capabilities development and support services.
Additional Fourth Quarter 2022 Corporate Highlights
Parsons continues to build on its long-standing commitment to environmental, social, and governance (ESG) initiatives and Delivering a Better World. During the quarter, Parsons received three different awards for being a military friendly employer. These awards complement other ESG awards the company received during 2022 including being named as one of the World’s Most Ethical Companies by Ethisphere for the 13th consecutive year, being honored by the Human Rights Campaign as a 2022 best places to work for the LGBTQ+ community, and for being recognized by other institutions for its STEM and diversity hiring practices.
Recognized with the 2023 Gold Award: Top 10 employer designation by Military Friendly®, an advocacy program that sets standards that measure an organization’s commitment, effort and success in creating sustainable and meaningful opportunity for the military community. Over 1,500 companies compete annually for this coveted designation. Parsons is pleased to have exceeded the standards of recruiting, hiring, supporting, retaining, and providing a culture of commitment, opportunity and advancement of veterans.
Recipient of the 2022 HIRE Vets Medallion Award at the Gold level. The Honoring Investments in Recruiting and Employing American Military Veterans Act (HIRE Vets Act) Medallion Program is the only federal award program that recognizes employers who are committed to veteran hiring, retention, and professional development.
Recognized as a top Best for Vets company by Military Times. This sought-after distinction recognizes organizations for their programs and policies that support veterans’ post-military careers.