Where Parsons sees similarities between his two companies

Much of Parsons’ acquisition activity in this current iteration of its strategy has been focused on the federal solutions segment, which includes technology integration work for government agencies.

While this side of the deal pipeline remains active for Parsons, company leaders are also exploring how the critical infrastructure segment can be part of this mergers and acquisitions engine.

During Parsons’ third-quarter conference call with investors, CEO Carey Smith said the company has “extended our reach” to review potential acquisition candidates in both the federal and critical infrastructure segments.

The quantitative criteria remain the same as Smith established: sales growth in excess of 10% and profit margins above that number.

As are the broader qualitative characteristics that Parsons, headquartered in Centreville, Virginia, is looking for.

“We’re still looking for companies that are focused on our strategic vision of becoming a strong solutions integrator, characterized by advanced technology,” Smith told analysts.

From Parsons’ perspective, and as this statement highlights, the company sees this trend of technology-centric thinking from customers in both the federal and infrastructure markets.

Consider the endless talk, with some movements, throughout the public sector ecosystem about how federal agencies want a vastly different technology environment than they currently have.

One mechanism that agencies must put in place to implement their vision is the government-wide Technology Modernization Fund, which essentially serves as a turret for agencies to borrow money to fund technology modernization efforts. But the agencies have to present a proper business case to the TMF officials in order to get the money.

The nearly $1.2 trillion infrastructure bill signed into law in November 2021 also has a modernization bias.

“When we start rebuilding infrastructure, it’s going to be done differently,” Smith said on the call. “In the past, it was designed to last about 30 to 35 years. In the future, it will be designed to last around 100 years, so technology is key.”

Nearly $550 billion of total planned infrastructure spend represents new funding, of which $115 billion is focused on cybersecurity and resiliency. Smith said that “any (infrastructure) component that gets built” will have those two elements as high priorities.

Parsons’ plan still sees 2023 and 2024 as the peak years for this infrastructure spending, but the first deployment of these funds is showing.

Smith said $77 million of Infrastructure Investment and Jobs Act funds were used in the third quarter for new project work under a technical support services contract with the Federal Aviation Administration.

This work for the FAA includes engineering, site supervision, installation and technical services

“We are seeing benefits from our rail and transit customers, as well as some aerospace customers moving forward with their projects,” added Smith. “Approximately $88 billion in road and highway funding has been provided and some of the formula funds will be allocated to the states.”

A second strategic priority for Parsons to work on was a turnaround in hiring and retention. Parsons said it had nearly 15,500 employees as of the end of calendar year 2021.

Smith said that for the first nine months of 2021, Parsons is up 46% year over year and has “already beaten all of our total hirings for 2021.”

Fourth-quarter revenue of $1.1 billion was up 19% from the prior-year period and showed 11% organic growth after accounting for revenue gains from acquisitions, while earnings increased 22% year-over-year to $102.7 million -dollar Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) increased.

Parsons raised its top and bottom line guidance for 2023 to these new numbers: Revenues of $4.05 billion to $4.2 billion with Adjusted EBITDA of $340 million to $360 million.

These updated ranges indicate year-over-year revenue growth of 13%, including 7% organically, and a 13% increase in earnings.



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