Parsons Q3 Earnings Call Highlights

Key Points

• Parsons exceeded Q3 commitments: Revenue rose 2% year over year, adjusted EBITDA increased 6% to a record $168 million, margin expanded to 10.2%, and operating cash flow jumped to $269 million. Backlog reached a record $9.4 billion, with 73% funded.
• Bookings and Federal Solutions momentum strengthened: Quarterly awards rose 14% to $1.8 billion, while Federal Solutions awards surged 53%, producing a 1.2x book-to-bill ratio. Management expects recent cybersecurity, missile defense and other contract wins to accelerate growth, though protests and procurement timing remain risks.
• Full-year guidance was narrowed, while capital allocation continued: Parsons forecast 2026 revenue of $6.25 billion–$6.45 billion and adjusted EBITDA of $510 million–$550 million, maintained cash-flow guidance, and repurchased $60 million of shares during the quarter. CFO Matt Ofilos will step down, with former CFO George Ball serving as interim CFO from Nov. 6.

Parsons NYSE: PSN reported third-quarter 2026 results that management said exceeded its commitments for revenue, adjusted EBITDA, adjusted EBITDA margin and operating cash flow, while highlighting strong contract awards and a record backlog.

Total revenue rose 2% year over year, while revenue excluding a confidential contract increased 5%, including 2% organic growth. Adjusted EBITDA increased 6% to a record $168 million, and adjusted EBITDA margin expanded 40 basis points to a record 10.2%. Operating cash flow was $269 million, compared with $163 million in the third quarter of 2025.

Chair, President and CEO Carey Smith said demand remained healthy in both the Federal Solutions and Critical Infrastructure segments despite macroeconomic and geopolitical uncertainty. The company ended the quarter with total backlog of $9.4 billion, up 6% from a year earlier, including $6.8 billion of funded backlog, or 73% of the total.

Bookings and Federal Solutions Outlook

Parsons secured $1.8 billion in contract awards during the quarter, up 14% year over year, producing a consolidated book-to-bill ratio of 1.1x. Federal Solutions awards rose 53% year over year, resulting in a 1.2x book-to-bill ratio, while Critical Infrastructure recorded a 1.0x ratio for its 24th consecutive quarter at or above that level.

Smith said Federal Solutions has won more than 12 contract actions valued at more than $100 million since the beginning of the year. She also said Parsons has more than $850 million of awards over five years under protest, plus another $495 million still within the protest period. Management expects Federal Solutions growth to accelerate as recent awards convert into revenue, though it noted that protests and procurement timing could delay program ramps.

Among the quarter’s awards, Parsons received a $495 million ceiling-value contract for a national security customer involving communications, power and software capabilities, booking $37 million during the quarter. The company also said the ceiling value of its five-year sole-source production contract with U.S. Cyber Command was increased to $750 million. The contract supports the Joint Cyber Hunt Kit, a modular mobile cybersecurity system, and Parsons has booked $250 million under the agreement to date.

Parsons also booked $234 million of a $514 million two-year option period under the Missile Defense Agency’s TEAMS-Next program. The company said it won four additional other transaction agreement, or OTA, awards with aggregate ceiling values exceeding $370 million and booked about $140 million under those agreements during the quarter.

Smith said Parsons has 26 OTA contracts with $1.6 billion in total ceiling value, including 12 awarded during 2026. Its OTA pipeline totals about $2 billion. Management said these agreements can provide faster contracting, flexibility and production-transition opportunities, and are generally margin accretive because many are fixed-price arrangements.

Segment Performance and Infrastructure Demand

Critical Infrastructure posted record third-quarter revenue of $846 million, up 2% year over year, including 1% organic growth. Adjusted EBITDA rose 9% to $94 million, while adjusted EBITDA margin increased 80 basis points to 11.1%.

CFO Matt Ofilos said the segment’s margin rate benefited from lower pass-through revenue, which does not carry the same profit contribution as other work. He said third-quarter pass-through revenue was about $19 million lower than the prior-year period, while underlying execution and business mix also supported earnings.

Smith said North American demand remains solid in transportation, environmental, water and wastewater markets. She noted that 48% of Infrastructure Investment and Jobs Act funding had been spent as of August 2026. She also cited the proposed BUILD America 250 Act, which would authorize at least $580 billion in surface transportation funding through 2031 if enacted.

In the Middle East, management said Saudi Arabia experienced some program rephasing by its Public Investment Fund, affecting the quarter’s timing. Smith said the company expects the region’s book-to-bill ratio to return above 1.0x in the fourth quarter, aided by annual renewals on large programs. Parsons’ Middle East net headcount has increased each month during 2026, according to Smith.

Federal Solutions revenue excluding the confidential contract rose 9% year over year and 3% organically. Including the confidential contract, segment revenue increased 2% and declined 3% organically. Segment adjusted EBITDA rose 2%, while margin remained unchanged at 9.2%.

Ofilos said Federal Solutions’ fourth-quarter margin is expected to rise to about 9.7%, driven by product ramps including Joint Cyber Hunt Kit and air base air defense work. Management said product and related-services revenue is approximately $350 million in 2026 and is expected to grow 20% to 30% in 2027. Ofilos said product margins are generally expected to exceed 20%.

Guidance, Capital Allocation and Leadership Change

Parsons narrowed its full-year 2026 outlook, forecasting revenue of $6.25 billion to $6.45 billion and adjusted EBITDA of $510 million to $550 million. The company maintained its operating cash flow guidance of $430 million to $490 million, citing uncertainty in the geopolitical environment.

The company ended the quarter with net-debt leverage of 2.1x. During the quarter, Parsons repurchased 1.3 million shares for $60 million, bringing year-to-date repurchases to $110 million. Management said it continues to pursue selective acquisitions focused on capabilities, and expects to maintain a pace of roughly two to four acquisitions annually.

Parsons also announced that Ofilos will step down as CFO to pursue another professional opportunity. Former CFO and current board member George Ball will become interim CFO effective Nov. 6. Smith said Ball’s 13 years of prior experience as Parsons’ CFO and institutional knowledge are expected to support a seamless transition.

About Parsons (NYSE:PSN)

Parsons Corporation NYSE: PSN is a technology-driven solutions provider serving government and commercial customers in the defense, intelligence, critical infrastructure and transportation markets. The company develops and integrates solutions for complex security, engineering and infrastructure challenges, combining software, systems engineering, cybersecurity, data analytics and program management capabilities.

Parsons operates through its Federal Solutions and Critical Infrastructure segments.

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