Executive Summary

Parsons delivered record Q3 results: revenue $1.81B (+28% y/y), adjusted EBITDA $167M (+31% y/y), GAAP EPS $0.65 (+52% y/y), adjusted EPS $0.95; management raised FY24 revenue, EBITDA, and operating cash flow guidance .
Federal Solutions drove outperformance (revenue +42% y/y; adj. EBITDA margin 10.9%), while Critical Infrastructure margin was pressured by a $23.5M legacy program write-down; ex-charge, CI margin would have been ~9.7% .
Cash generation was strong: operating cash flow $299M in Q3 (TTM $587M), net DSO fell to a record-low 51 days; net leverage 1.2x post-BlackSignal (pro forma 1.6x including BCC) .
FY24 guide raised: revenue to $6.6–$6.8B, adjusted EBITDA to $590–$620M, operating cash flow to $425–$465M; midpoint margin implies modest expansion to 9.0% .
Stock drivers: sustained >20% organic growth streak, guide raise and cash momentum vs. risk from 2025 recompetes (notably a large confidential contract potentially re-competed) and final CI legacy runoff/timing .

What Went Well and What Went Wrong

What Went Well
- Record Q3 across revenue, organic growth (+26%), net income, adjusted EBITDA, operating cash flow, and contract awards; sixth straight quarter of >20% organic growth .
- Federal Solutions strength: revenue +42% y/y (39% organic), adj. EBITDA +84% y/y, margin +260 bps to 10.9% on accretive mix and acquisitions (SealingTech, BlackSignal) .
- Cash execution: Q3 OCF $299M (TTM $587M, +91% y/y), net DSO down 14 days to 51; book-to-bill 1.0x; backlog $8.8B .
- Strategic moves: closed BlackSignal ($204M) to deepen DSP/EW/offensive cyber; definitive agreement to acquire BCC Engineering ($230M) to expand SE U.S. transport franchise .
- Quote: “We delivered record third quarter results… bottom line growth continues to outpace our strong top line growth” – Carey Smith, CEO .
What Went Wrong
- CI margin impacted by $23.5M write-down on a legacy program (substantial completion expected Q4’24); reported CI adj. EBITDA margin fell to 6.7% (from 9.8%) .
- Equity in earnings also included a ~$6M JV-related charge linked to design schedule/approvals; combined legacy impacts ~“$30M” .
- Q3 book-to-bill at 1.0x (vs. higher earlier in 2024) reflects timing; awarded-not-booked pipeline held roughly flat as major repeats converted previously .
- 2025 recompete exposure could rise to 5–15% depending on a large confidential engineering contract option/recompete decision .
- Analyst concern: CI margin run-rate post-legacy and cadence of improvement; management targets CI underlying 9–10% with 20–30 bps annual expansion at the company level .

Financial Results

Metric	Q3 2023	Q2 2024	Q3 2024
Revenue ($, millions)	$1,418.6	$1,670.5	$1,810.1
GAAP Diluted EPS ($)	$0.42	$0.63	$0.65
Adjusted EPS ($)	$0.69	$0.84	$0.95
Adjusted EBITDA ($, millions)	$127.8	$150.2	$167.0
Adjusted EBITDA Margin (%)	9.0%	9.0%	9.2%
Operating Cash Flow ($, millions)	$204 (Q3’23)	$161 (Q2’24)	$299 (Q3’24)

Segment performance (Adjusted basis):

Segment	Metric	Q3 2023	Q3 2024
Federal Solutions	Revenue ($, millions)	$780	$1,106
	Adjusted EBITDA ($, millions)	$65	$120
	Adjusted EBITDA Margin (%)	8.3%	10.9%
Critical Infrastructure	Revenue ($, millions)	$638	$705
	Adjusted EBITDA ($, millions)	$63	$47
	Adjusted EBITDA Margin (%)	9.8%	6.7%

Key KPIs:

KPI	Q2 2024	Q3 2024
Book-to-Bill (Quarter)	0.9x	1.0x
Book-to-Bill (TTM)	1.0x	1.0x
Backlog ($, billions)	$8.83	$8.78
Net DSO (days)	60	51
Operating Cash Flow ($, millions)	$161	$299
Net Leverage (x)	1.3x	1.2x; pro forma 1.6x incl. BCC

Estimates vs Actuals (Q3 2024):

S&P Global consensus for revenue/EPS was not available at time of analysis due to SPGI request limit; comparisons to consensus cannot be shown (we attempted to fetch “Primary EPS Consensus Mean” and “Revenue Consensus Mean” for Q3 2024 via S&P Global but hit rate limits).

Guidance Changes

Metric	Period	Previous Guidance (as of Q2’24)	Current Guidance (as of Q3’24)	Change
Revenue	FY 2024	$6.35B – $6.55B	$6.6B – $6.8B	Raised
Adjusted EBITDA (incl. NCI)	FY 2024	$555M – $595M	$590M – $620M	Raised
Operating Cash Flow	FY 2024	$395M – $455M	$425M – $465M	Raised
Margin Outlook	FY 2024	8.9% midpoint	9.0% midpoint (+10 bps)	Raised

Notes: Management also reiterated ~100% FCF conversion of adjusted net income at the midpoint .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2 2024)	Current Period (Q3 2024)	Trend
Organic growth/Win rates	Five straight quarters >20% org. growth; win rate 76–78% YTD; pipeline ~$56–57B; awarded-not-booked ~$13–14B	Sixth straight quarter >20% org. growth; book-to-bill 1.0x; TTM awards +13%; win rate 74% in Q3, 75% YTD	Strong and sustained
Federal cyber/EW/space	Ramping cyber, DSP, offensive cyber, space; BlackSignal agreement announced after Q2	BlackSignal closed; synergy across offensive cyber/EW/space; GSA growth synergies cited	Strengthening via M&A
Critical Infrastructure margins/legacy programs	CI margin improved in Q2 (7.0%); legacy construction JV adjustments (equity in earnings -$22M)	CI margin 6.7% due to $23.5M write-down; 98% complete; ex-charge ~9.7%	Near-term pressure; ex-legacy healthier
Middle East/Saudi	Double-digit growth; >$160M awards; diverse exposure; vision 2030 drivers	Book-to-bill 1.2x in ME; >$200M awards; headcount at all-time high; funding to peak ~2030–2032	Robust, long runway
IIJA/US transport pipeline	Gateway/JFK/Newark wins; IIJA peak ~2027; tail 6–8 years	Won 5 largest NA transport projects in ~year; ~$720B IIJA yet to be allocated; capacity/hiring solid	Pipeline expanding
Cash/DSO	Strong OCF; TTM OCF +117%; DSO 60 days	OCF $299M; TTM OCF $587M (+91% y/y); DSO record 51 days	Accelerating collections
PFAS/regulatory	New EPA MCLs; PFAS $40B TAM; remediation margins accretive	New PFAS O&M task order (Burlington ANG); Parsons’ PFAS track record highlighted	Building backlog

Management Commentary

“We delivered record third quarter results for total revenue, organic revenue growth, net income, adjusted EBITDA, operating cash flow, and contract awards.” – Carey Smith, CEO .
“Adjusted EBITDA margin expanded 20 bps to 9.2%... driven primarily by higher volume on margin-accretive contracts and a deliberate focus on indirect cost management.” – Press Release .
On CI legacy: “The adjusted EBITDA decreases were driven by a write-down on the legacy program that is expected to reach substantial completion in Q4 of 2024… pro forma CI adjusted EBITDA margin would have been 9.7%” – Matt Ofilos, CFO .
On 2025 recompete exposure: “We anticipate our recompete for 2025 to be somewhere in the range of 5% to 15%… dependent on [the confidential contract] plus one other contract” – Carey Smith .
On guide raise and margin: “We now expect adjusted EBITDA to be between $590M and $620M… midpoint margin outlook [up] 10 bps to 9.0%” – Matt Ofilos .

Q&A Highlights

CI margin trajectory: Management targets underlying CI margin 9–10% with 20–30 bps annual expansion at the company level post-legacy completion; cautious on timing around “substantial completion” closeout .
Middle East outlook: ME/Saudi performing as expected with strong KPIs and wins; funding expected to peak ~2030–2032; Parsons on “almost every major” Saudi program .
Federal recompete risk: A large confidential engineering contract may be re-competed vs. extended; Parsons’ recompete win rates are historically high (avg. 95%, 98% YTD) .
Inorganic revenue 2025: BlackSignal “just over $100M” and BCC “another 100+” expected in 2025 (combined high-$100Ms to low-$200Ms) .
AI/software leverage: Parsons emphasizes software-led differentiation (DSP/AI, DevSecOps, digital twins), with cross-over between Federal and Infrastructure (e.g., space training range, ATMS) .

Estimates Context

Consensus (S&P Global) for Q3’24 revenue and EPS was unavailable at time of analysis due to SPGI daily request limits; we attempted to retrieve “Primary EPS Consensus Mean” and “Revenue Consensus Mean” for Q3 2024 but were rate-limited. As a result, beat/miss vs. Street estimates is not shown.

Key Takeaways for Investors

Mix-driven margin expansion continues despite CI legacy noise; ex-legacy, CI margins trend toward 9–10%, supporting the raised 9.0% FY24 midpoint margin outlook .
Federal Solutions momentum remains robust (double-digit growth, >10% margins) buoyed by cyber/EW/space and BlackSignal synergies; inorganic adds sustained in 2025 (BlackSignal + BCC) .
Cash conversion and collections are a quiet strength (record OCF, record-low DSO), de-risking leverage (1.2x) and enabling continued M&A/internal investment .
Infrastructure growth visibility is high (IIJA allocations still ramping; five largest NA transport wins; strong ME pipeline through 2030+), underpinning multi-year top-line support .
Watch items: 2025 recompetes (confidential contract option vs. recompete), CI legacy final closeout in Q4, and sustainability of >20% organic growth as comps toughen .
Near-term setup: Guide raise and cash momentum are positive catalysts; disclosures on the confidential contract outcome and CI legacy wrap likely to drive sentiment into 2025 .

Supporting Items and Notable Press Releases (Q3 period)

BCC Engineering acquisition agreement ($230M) to expand SE U.S. transportation footprint (expected accretive; ~+$110M 2025 revenue) .
DTRA awards and CWMD IDIQ seat expand national security backlog and opportunities (e.g., $27M PPP task order; $4B CWMD IDIQ) .
NOAA TraCSS Phase 1.0 delivered—space SSA/STC milestone, reinforcing software and space systems integration credibility .

Non-GAAP/adjustments context: Adjusted EPS adds back amortization, equity comp, transaction costs, and other non-core items; Q3 adjusted EPS $0.95 vs. GAAP $0.65 reflects these standard adjustments .

PARSONS CORP (PSN)·Q3 2024 Earnings Summary