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.
Q1 highlights: margin, backlog, and bookings
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.
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.
Financial performance and segment results
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.”
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.
Major contract wins and post-quarter awards
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.
Middle East operating environment and outlook
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.”
Capital deployment, cash flow items, and 2026 guidance cadence
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.”
About Parsons NYSE: PSN
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.
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