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Parsons Reports Strong Second Quarter 2023 Results

Q2 2023 Financial Highlights

  • Record revenue of $1.4 billion increases 34% year-over-year
  • Record organic revenue growth of 23% driven by record organic growth in both segments
  • Significant second quarter net income of $43 million increases 136%
  • Record adjusted EBITDA increases 53% to $118 million
  • Strong book-to-bill ratio of 1.4x on contract awards growth of 95%
  • Record total backlog increases 8% to $8.9 billion
  • Increasing 2023 guidance ranges for revenue, adjusted EBITDA, and cash flow from operations

CENTREVILLE, Va., Aug. 02, 2023 (GLOBE NEWSWIRE) -- Parsons Corporation (NYSE: PSN) today announced financial results for the second quarter ended June 30, 2023.

CEO Commentary

“Our momentum continues as we delivered another record quarter with all-time highs for total revenue, organic revenue growth, adjusted EBITDA, contract awards, and total backlog,” said Carey Smith, chair, president, and chief executive officer. “In the second quarter, we achieved organic revenue growth of over 20% in both business segments and won six contracts over $100 million, all company records. We are efficiently growing the business as profitability growth has outpaced our significant revenue growth for both the second quarter and for first half of the year. We have the right portfolio and the right team to continue to capitalize on unprecedented global infrastructure spending and the increasing demand for national security solutions. These positive factors provide us with the confidence and visibility to raise our full-year revenue, adjusted EBITDA, and cash flow guidance.”

Second Quarter 2023 Results

Year-over-Year Comparisons (Q2 2023 vs. Q2 2022)

Total revenue for the second quarter of 2023 increased by $348 million, or 34%, to $1.4 billion. This increase was primarily driven by organic growth of 23% due to the ramp-up of recent contract wins and growth on existing contracts. The company’s acquisitions contributed approximately $121 million of inorganic revenue in the second quarter of 2023. Operating income increased 134% to $76 million primarily due to the ramp-up of recent contract wins and contributions from the company's Xator acquisition. Net income increased 136% to $43 million. GAAP diluted earnings per share (EPS) attributable to Parsons was $0.38 in the second quarter of 2023, compared to $0.17 in the prior year period.

Adjusted EBITDA including noncontrolling interests for the second quarter of 2023 was $118 million, a 53% increase over the prior year period. The adjusted EBITDA increase was driven primarily by volume on new contract wins, $20 million of one-time incentive fees on two chemical weapons destruction programs, and contributions from the company's Xator acquisition. Adjusted EBITDA margin was 8.7% in the second quarter of 2023, compared to 7.7% in the second quarter of 2022. The year-over-year margin increase was primarily driven by recent contract awards, the company's Xator acquisition, and efficient growth across the portfolio. Adjusted EPS was $0.63 in the second quarter of 2023, compared to $0.41 in the second quarter of 2022. The year-over-year adjusted EPS increase was driven by the adjusted EBITDA increases noted above.

Segment Results

Federal Solutions Segment

Federal Solutions Year-over-Year Comparisons (Q2 2023 vs. Q2 2022)

  Three Months Ended  Growth  Six Months Ended  Growth 
(in millions) June 30, 2023  June 30, 2022  Dollars/
Percent
  Percent  June 30, 2023  June 30, 2022  Dollars/
Percent
  Percent 
Revenue $763  $538  $225   42% $1,397  $1,029  $368   36%
Adjusted EBITDA $86  $48  $38   80% $142  $90  $52   57%
Adjusted EBITDA margin  11.2%  8.9%  2.4%  27%  10.2%  8.8%  1.4%  16%

Second quarter 2023 revenue increased $225 million, or 42%, compared to the prior year period due to organic growth of 20% and $118 million from the company's Xator acquisition. Organic revenue growth was primarily driven by expansion with the Department of State, growth on new and existing contracts, and the incentive fees from the two chemical weapons destruction programs.

Second quarter 2023 Federal Solutions adjusted EBITDA including noncontrolling interests increased by $38 million, or 80%. Adjusted EBITDA margin increased to 11.2% from 8.9% in the prior year period. These increases were driven primarily by $20 million in non-recurring incentive fees, and contributions from the company's Xator acquisition.

Critical Infrastructure Segment

Critical Infrastructure Year-over-Year Comparisons (Q2 2023 vs. Q2 2022)

  Three Months Ended  Growth  Six Months Ended  Growth 
(in millions) June 30, 2023  June 30, 2022  Dollars/
Percent
  Percent  June 30, 2023  June 30, 2022  Dollars/
Percent
  Percent 
Revenue $594  $471  $123   26% $1,133  $929  $204   22%
Adjusted EBITDA $33  $30  $3   10% $67  $61  $6   9%
Adjusted EBITDA margin  5.5%  6.3%  -0.8%  -13%  5.9%  6.6%  -0.7%  -11%
                                 

Second quarter 2023 Critical Infrastructure revenue increased $123 million, or 26%, compared to the prior year period due to organic growth of 25%. Organic revenue growth was primarily driven by higher volume in both the Middle East and North America.

Second quarter 2023 adjusted EBITDA including noncontrolling interests increased by $3 million, or 10%, compared to the prior year period. Adjusted EBITDA margin decreased to 5.5% from 6.3% in the prior year period. The adjusted EBITDA increase was driven by higher volume on new and existing contracts. The stronger core margin was impacted by $28 million of write-downs related to two legacy programs.

Second Quarter 2023 Key Performance Indicators

  • Book-to-bill ratio: 1.4x on net bookings of $1.9 billion.
  • Book-to-bill ratio (trailing twelve-months): 1.2x on net bookings of $5.7 billion.
  • Total backlog: $8.9 billion, up 8% from Q2 2022.
  • Cash flow from operating activities: Second quarter 2023: $23 million compared to $51 million in second quarter of 2022. For the six months ended June 30, 2023, cash flow from operating activities was $14 million, compared to $25 million in the prior year period.

Significant Contract Wins

Parsons continues to win large strategic contracts in both the Federal Solutions and Critical Infrastructure segments. During the second quarter of 2023, the company won six single-award contracts worth more than $100 million each, a company record. In addition, the company won an additional $100 million contract after the 2023 second quarter ended.

  • Awarded the Federal Aviation Administration’s $1.8 billion ceiling value recompete contract to support their Aviation System Capital Investment Plan, of which the company booked the 3-year base period for $641 million. Parsons has been the prime contractor on this work for more than two decades. With the Infrastructure Investment and Jobs Act, the FAA has $5 billion of additional funding for facilities-related work. 
  • Awarded a new five-year single-award contract from the General Services Administration with a potential value of $1.2 billion, of which the company booked the one-year base period for $217 million. This contract supports the Department of Defense and its strategic partners in delivering global quick reaction capabilities leveraging advanced technology solutions across the all-domain battlespace. 
  • Awarded a $170 million five-year ceiling value task order by the Defense Threat Reduction Agency under the Assessments, Exercises, Modeling, and Simulation Support multiple-award IDIQ contract. This contract contains new and existing work to provide vulnerability assessments, design reviews, and analysis that advances the DoD and DTRA’s missions to counter and mitigate a broad spectrum of existing and emerging vulnerabilities and threats. The company booked $34 million on this contract in the second quarter.
  • Awarded a new $130 million single-award contract as lead designer for the Port Authority of New York and New Jersey to enhance infrastructure at the John F. Kennedy International Airport. The scope includes a new on-airport roadway transportation network, parking garage, pedestrian bridge, and utility upgrades. The company booked this entire contract value in the second quarter.
  • Awarded a new $127 million contract as a subcontractor to a federal customer, of which the company booked $25 million, to deliver detection technology solutions.
  • Awarded a $109 million recompete contract from the United States Cyber Command to provide cyber capability discovery, development, testing, and advanced analytics. The company booked $52 million on this contract in the second quarter. This is the company's second consecutive win with the Cyber Command this year.  
  • Awarded a new $93 million five-year single-award contract to complete project and design management for a major development in Saudi Arabia. The company booked the entire value of this contract in the second quarter.
  • After the second quarter ended, the company was awarded a five-year contract with an estimated value of $130 million on the Repairs, Operations, Maintenance, and Engineering contract by the National Aeronautics and Space Administration (NASA). As a subcontractor to a small business, Parsons will provide facilities construction management and engineering and technical services.

Additional Corporate Highlights

Parsons continues to build on its long-standing commitment to environmental, social, and governance (ESG) initiatives, which is interwoven with the company’s core values and how it operates. During the quarter, the company won multiple awards for being a top employer for diversity and military veterans and continued its tradition of destroying U.S. chemical weapon stockpiles.

  • Parsons was part of the team that helped the United States comply with the 1997 Chemical Weapons Convention agreement by destroying the country’s last chemical weapon. The final sarin nerve agent filled M55 rocket was destroyed on July 7, 2023.
  • Announced a commitment to set updated near and long-term targets for Greenhouse Gas (GHG) emissions aligned with 1.5°C and net-zero through the Business Ambition for 1.5°C campaign; a leading global coalition committed to taking urgent climate action.
  • Published Parsons 2023 ESG disclosures, detailing how the company is accelerating its climate objectives while creating the future of global infrastructure and national security. The report highlights the company’s transparency and key milestones, defining how ESG underpins the company’s values and drives future growth.
  • Recognized as one of the best employers for diversity by Forbes. This recognition demonstrates how the company has prioritized Diversity, Equity, and Inclusion by striving to create an inclusive workplace for all employees to be their most authentic selves. 
  • Recognized as a VETS Indexes 4 Star Employer for its commitment to recruiting, hiring, retaining, developing, and supporting veterans and the military-connected community.
  • Recognized as a top 50 employer by Women Engineer Magazine. This publication selects the top companies in the country for which they would most like to work for and/or whom they believe would provide a positive working environment for women engineers.
  • Honored by the Washington Business Journal as one of the most diverse companies and employers in the Washington, D.C. metropolitan area.

Fiscal Year 2023 Guidance

The company is increasing its fiscal year 2023 revenue, adjusted EBITDA, and cash flow from operations guidance ranges to reflect its strong second quarter operating performance and its outlook for the remainder of the year. The table below summarizes the company’s fiscal year 2023 guidance.

 Current Fiscal Year
2023 Guidance
Prior Fiscal Year
2023 Guidance
Revenue$4.85 billion - $5.05 billion$4.5 billion - $4.7 billion
Adjusted EBITDA including non-controlling interest$410 million - $440 million$375 million - $415 million
Cash Flow from Operating Activities$280 million - $340 million$275 million - $335 million


Net income guidance is not presented as the company believes volatility associated with interest, taxes, depreciation, amortization and other matters affecting net income, including but not limited to one-time and nonrecurring events and the impact of M&A, will preclude the company from providing, with reasonable certainty, net income guidance for fiscal year 2023.

Conference Call Information

Parsons will host a conference call today, August 2, 2023, at 8:00 a.m. ET to discuss the financial results for its second quarter 2023.

Access to a webcast of the live conference call can be obtained through the Investor Relations section of the company's website (https://investors.parsons.com). Those parties interested in participating via telephone may register on the Investor Relations website or by clicking here.

A replay of the conference call will be available on the company's website approximately two hours after the call concludes and will remain on the website for approximately one year.

About Parsons Corporation

Parsons (NYSE: PSN) is a leading disruptive technology provider in the national security and global infrastructure markets, with capabilities across cyber and intelligence, space and missile defense, transportation, environmental remediation, urban development, and critical infrastructure protection. Please visit Parsons.com and follow us on LinkedIn and Facebook to learn how we’re making an impact.

Forward-Looking Statements

This Earnings Release and materials included therewith contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are based on our current expectations, beliefs, and assumptions, and are not guarantees of future performance. Forward-looking statements are inherently subject to uncertainties, risks, changes in circumstances, trends and factors that are difficult to predict, many of which are outside of our control. Accordingly, actual performance, results and events may vary materially from those indicated in the forward-looking statements, and you should not rely on the forward-looking statements as predictions of future performance, results or events. Numerous factors could cause actual future performance, results and events to differ materially from those indicated in the forward-looking statements, including, among others: the impact of COVID-19; any issue that compromises our relationships with the U.S. federal government or its agencies or other state, local or foreign governments or agencies; any issues that damage our professional reputation; changes in governmental priorities that shift expenditures away from agencies or programs that we support; our dependence on long-term government contracts, which are subject to the government’s budgetary approval process; the size of addressable markets and the amount of government spending on private contractors; failure by us or our employees to obtain and maintain necessary security clearances or certifications; failure to comply with numerous laws and regulations; changes in government procurement, contract or other practices or the adoption by governments of new laws, rules, regulations and programs in a manner adverse to us; the termination or nonrenewal of our government contracts, particularly our contracts with the U.S. government; our ability to compete effectively in the competitive bidding process and delays, contract terminations or cancellations caused by competitors’ protests of major contract awards received by us; our ability to generate revenue under certain of our contracts; any inability to attract, train or retain employees with the requisite skills, experience and security clearances; the loss of members of senior management or failure to develop new leaders; misconduct or other improper activities from our employees or subcontractors; our ability to realize the full value of our backlog and the timing of our receipt of revenue under contracts included in backlog; changes in the mix of our contracts and our ability to accurately estimate or otherwise recover expenses, time and resources for our contracts; changes in estimates used in recognizing revenue; internal system or service failures and security breaches; and inherent uncertainties and potential adverse developments in legal proceedings including litigation, audits, reviews and investigations, which may result in material adverse judgments, settlements or other unfavorable outcomes. These factors are not exhaustive and additional factors could adversely affect our business and financial performance. For a discussion of additional factors that could materially adversely affect our business and financial performance, see the factors including under the caption “Risk Factors” in our Annual Report with the Securities and Exchange Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2022, on Form 10-K, filed on February 17, 2023, and our other filings with the Securities and Exchange Commission.

All forward-looking statements are based on currently available information and speak only as of the date on which they are made. We assume no obligation to update any forward-looking statements made in this presentation that becomes untrue because of subsequent events, new information or otherwise, except to the extent we are required to do so in connection with our ongoing requirements under federal securities laws.

Media:Investor Relations:
Bryce McDevittDave Spille
Parsons CorporationParsons Corporation
(703) 851-4425(571) 655-8264
Bryce.McDevitt@Parsons.comDave.Spille@Parsons.com


PARSONS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 
  
  For the Three Months Ended  For the Six Months Ended 
  June 30, 2023  June 30, 2022  June 30, 2023  June 30, 2022 
Revenue $1,356,486  $1,008,721  $2,529,952  $1,957,790 
Direct cost of contracts  1,068,220   781,772   1,985,408   1,515,672 
Equity in (losses) earnings of unconsolidated joint ventures  75   5,613   (5,765)  11,211 
Selling, general and administrative expenses  211,897   199,932   411,205   385,009 
Operating income  76,444   32,630   127,574   68,320 
Interest income  306   171   1,099   236 
Interest expense  (7,299)  (4,525)  (13,757)  (8,463)
Other income (expense), net  543   236   1,857   381 
Total other income (expense)  (6,450)  (4,118)  (10,801)  (7,846)
Income before income tax expense  69,994   28,512   116,773   60,474 
Income tax expense  (15,223)  (5,732)  (26,726)  (13,851)
Net income including noncontrolling interests  54,771   22,780   90,047   46,623 
Net income attributable to noncontrolling interests  (11,530)  (4,485)  (21,253)  (7,661)
Net income attributable to Parsons Corporation $43,241  $18,295  $68,794  $38,962 
Earnings per share:            
Basic $0.41  $0.18  $0.66  $0.38 
Diluted $0.38  $0.17  $0.61  $0.35 


Weighted average number shares used to compute basic and diluted EPS
(In thousands) (Unaudited)
 
  
  Three Months Ended  Six Months Ended 
  June 30, 2023  June 30, 2022  June 30, 2023  June 30, 2022 
Basic weighted average number of shares outstanding  104,908   103,675   104,856   103,722 
Stock-based awards  883   658   941   729 
Convertible senior notes  8,917   8,917   8,917   8,917 
Diluted weighted average number of shares outstanding  114,708   113,251   114,714   113,368 


Net income available to shareholders used to compute diluted EPS as a result of adopting the if-converted method in connection with the Convertible Senior Notes
(In thousands) (Unaudited)
 
  
  Three Months Ended  Six Months Ended 
  June 30, 2023  June 30, 2022  June 30, 2023  June 30, 2022 
Net income attributable to Parsons Corporation $43,241  $18,295   68,794   38,962 
Convertible senior notes if-converted method interest adjustment  554   542   1,106   1,082 
Diluted net income attributable to Parsons Corporation $43,795  $18,837   69,900   40,044 


PARSONS CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share information)
 
   June 30, 2023  December 31, 2022 
   (Unaudited)    
Assets      
Current assets:      
 Cash and cash equivalents (including $83,101 and $53,193 Cash of consolidated joint ventures) $178,589  $262,539 
 Accounts receivable, net (including $266,312 and $217,419 Accounts receivable of consolidated joint ventures, net)  949,493   717,345 
 Contract assets (including $9,983 and $11,313 Contract assets of consolidated joint ventures)  712,413   634,033 
 Prepaid expenses and other current assets (including $15,546 and $7,913 Prepaid expenses and other current assets of consolidated joint ventures)  139,713   105,866 
 Total current assets  1,980,208   1,719,783 
        
 Property and equipment, net (including $3,345 and $2,543 Property and equipment of consolidated joint ventures, net)  95,266   96,050 
 Right of use assets, operating leases (including $6,596 and $6,315 Right of use assets, operating leases of consolidated joint ventures)  166,797   155,090 
 Goodwill  1,692,725   1,661,850 
 Investments in and advances to unconsolidated joint ventures  118,861   107,425 
 Intangible assets, net  240,300   254,127 
 Deferred tax assets  144,782   137,709 
 Other noncurrent assets  68,568   66,108 
 Total assets $4,507,507  $4,198,142 
        
Liabilities and Shareholders' Equity      
Current liabilities:      
 Accounts payable (including $49,508 and $49,078 Accounts payable of consolidated joint ventures) $237,229  $201,428 
 Accrued expenses and other current liabilities (including $144,256 and $102,417 Accrued expenses and other current liabilities of consolidated joint ventures)  693,662   630,193 
 Contract liabilities (including $45,552 and $40,654 Contract liabilities of consolidated joint ventures)  292,404   213,064 
 Short-term lease liabilities, operating leases (including $3,197 and $2,552 Short-term lease liabilities, operating leases of consolidated joint ventures)  57,085   59,144 
 Income taxes payable  14,521   4,290 
 Total current liabilities  1,294,901   1,108,119 
        
 Long-term employee incentives  18,142   17,375 
 Long-term debt  744,777   743,605 
 Long-term lease liabilities, operating leases (including $3,399 and $3,763 Long-term lease liabilities, operating leases of consolidated joint ventures)  128,634   111,417 
 Deferred tax liabilities  20,024   12,471 
 Other long-term liabilities  110,263   109,220 
 Total liabilities  2,316,741   2,102,207 
Contingencies (Note 12)      
Shareholders' equity:      
 Common stock, $1 par value; authorized 1,000,000,000 shares; 146,311,866 and 146,132,016 shares issued; 43,665,289 and 40,960,845 public shares outstanding; 61,217,557 and 63,742,151 ESOP shares outstanding  146,312   146,132 
 Treasury stock, 41,429,020 shares at cost  (844,936)  (844,936)
 Additional paid-in capital  2,721,402   2,717,134 
 Retained earnings  111,513   43,089 
 Accumulated other comprehensive loss  (14,860)  (17,849)
 Total Parsons Corporation shareholders' equity  2,119,431   2,043,570 
 Noncontrolling interests  71,335   52,365 
 Total shareholders' equity  2,190,766   2,095,935 
 Total liabilities and shareholders' equity $4,507,507  $4,198,142 


PARSONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
   For the Six Months Ended 
   June 30, 2023  June 30, 2022 
Cash flows from operating activities:      
 Net income including noncontrolling interests $90,047  $46,623 
 Adjustments to reconcile net income to net cash used in operating activities      
 Depreciation and amortization  57,048   61,090 
 Amortization of debt issue costs  1,414   1,302 
 Loss (gain) on disposal of property and equipment  43   (96)
 Provision for doubtful accounts  91   (3)
 Deferred taxes  (5,220)  (2,149)
 Foreign currency transaction gains and losses  230   1,461 
 Equity in losses (earnings) of unconsolidated joint ventures  5,765   (11,211)
 Return on investments in unconsolidated joint ventures  9,313   19,434 
 Stock-based compensation  15,978   8,358 
 Contributions of treasury stock  29,167   26,544 
 Changes in assets and liabilities, net of acquisitions and newly consolidated joint ventures:      
 Accounts receivable  (227,756)  (109,681)
 Contract assets  (78,254)  (17,866)
 Prepaid expenses and other assets  (40,899)  (3,521)
 Accounts payable  35,043   (8,079)
 Accrued expenses and other current liabilities  33,336   (7,314)
 Contract liabilities  76,522   13,360 
 Income taxes  10,309   3,107 
 Other long-term liabilities  1,809   3,977 
 Net cash provided by operating activities  13,986   25,336 
Cash flows from investing activities:      
 Capital expenditures  (17,956)  (13,588)
 Proceeds from sale of property and equipment  65   251 
 Payments for acquisitions, net of cash acquired  (42,273)  (379,272)
 Investments in unconsolidated joint ventures  (24,507)  (11,228)
 Return of investments in unconsolidated joint ventures  72   - 
 Proceeds from sales of investments in unconsolidated joint ventures  381   - 
 Net cash used in investing activities  (84,218)  (403,837)
Cash flows from financing activities:      
 Proceeds from borrowings  187,400   347,100 
 Repayments of borrowings  (187,400)  (147,100)
 Payments for acquired warrants  -   (11,243)
 Contributions by noncontrolling interests  200   2,827 
 Distributions to noncontrolling interests  (2,487)  (10,344)
 Repurchases of common stock  (8,000)  (15,548)
 Taxes paid on vested stock  (6,838)  (5,963)
 Proceeds from issuance of common stock  2,940   2,724 
 Net cash (used in) provided by financing activities  (14,185)  162,453 
 Effect of exchange rate changes  467   (963)
 Net decrease in cash, cash equivalents, and restricted cash  (83,950)  (217,011)
 Cash, cash equivalents and restricted cash:      
 Beginning of year  262,539   343,883 
 End of period $178,589  $126,872 


Contract Awards
(in thousands)
 
  Three Months Ended  Six Months Ended 
  June 30, 2023  June 30, 2022  June 30, 2023  June 30, 2022 
Federal Solutions $1,182,127  $392,554  $1,877,771  $849,442 
Critical Infrastructure  749,035   599,057   1,435,620   1,059,325 
Total Awards $1,931,162  $991,611  $3,313,391  $1,908,767 


Backlog
(in thousands)
 
  June 30, 2023  June 30, 2022 
Federal Solutions:      
Funded $1,506,235  $1,329,695 
Unfunded  3,709,288   3,756,452 
Total Federal Solutions  5,215,523   5,086,147 
Critical Infrastructure:      
Funded  3,615,955   3,080,338 
Unfunded  70,109   61,151 
Total Critical Infrastructure  3,686,064   3,141,489 
Total Backlog $8,901,587  $8,227,636 


Book-To-Bill Ratio1:
 
  Three Months Ended  Six Months Ended 
  June 30, 2023  June 30, 2022  June 30, 2023  June 30, 2022 
Federal Solutions  1.5   0.7   1.3   0.8 
Critical Infrastructure  1.3   1.3   1.3   1.1 
Overall  1.4   1.0   1.3   1.0 


Non-GAAP Financial Information
The tables under "Parsons Corporation Inc. Reconciliation of Non-GAAP Measures" present Adjusted Net Income attributable to Parsons Corporation, Adjusted Earnings per Share, Earnings before Interest, Taxes, Depreciation, and Amortization (“EBITDA”), Adjusted EBITDA, EBITDA Margin, and Adjusted EBITDA Margin, reconciled to their most directly comparable GAAP measure. These financial measures are calculated and presented on the basis of methodologies other than in accordance with U.S. generally accepted accounting principles ("Non-GAAP Measures"). Parsons has provided these Non-GAAP Measures to adjust for, among other things, the impact of amortization expenses related to our acquisitions, costs associated with a loss or gain on the disposal or sale of property, plant and equipment, restructuring and related expenses, costs associated with mergers and acquisitions, software implementation costs, legal and settlement costs, and other costs considered non-operational in nature. These items have been Adjusted because they are not considered core to the company’s business or otherwise not considered operational or because these charges are non-cash or non-recurring. The company presents these Non-GAAP Measures because management believes that they are meaningful to understanding Parsons’s performance during the periods presented and the company’s ongoing business. Non-GAAP Measures are not prepared in accordance with GAAP and therefore are not necessarily comparable to similarly titled metrics or the financial results of other companies. These Non-GAAP Measures should be considered a supplement to, not a substitute for, or superior to, the corresponding financial measures calculated in accordance with GAAP.

_____________________________
1
Book-to-Bill ratio is calculated as total contract awards divided by total revenue for the period.

PARSONS CORPORATION
Non-GAAP Financial Information
Reconciliation of Net Income to Adjusted EBITDA
(in thousands)
 
  Three Months Ended  Six Months Ended 
  June 30, 2023  June 30, 2022  June 30, 2023  June 30, 2022 
Net income attributable to Parsons Corporation $43,241  $18,295  $68,794  $38,962 
Interest expense, net  6,993   4,354   12,658   8,227 
Income tax provision (benefit)  15,223   5,732   26,726   13,851 
Depreciation and amortization (a)  28,689   30,581   57,048   61,090 
Net income attributable to noncontrolling interests  11,530   4,485   21,253   7,661 
Equity-based compensation  9,314   4,791   16,017   8,689 
Transaction-related costs (b)  1,917   9,525   3,535   11,923 
Restructuring (c)  -   -   546   213 
Other (d)  1,399   (349)  2,120   1,046 
Adjusted EBITDA $118,306  $77,414  $208,697  $151,662 


(a)Depreciation and amortization for the three and six months ended June 30, 2023, is $24.4 million and $48.4 million, respectively, in the Federal Solutions Segment and $4.3 million and $8.6 million, respectively, in the Critical Infrastructure Segment. Depreciation and amortization for the three and six months ended June 30, 2022, is $25.9 million and $52.1 million, respectively, in the Federal Solutions Segment and $4.7 million and $9.0 million, respectively, in the Critical Infrastructure Segment.
  
(b)Reflects costs incurred in connection with acquisitions and other non-recurring transaction costs, primarily fees paid for professional services and employee retention.
  
(c)Reflects costs associated with and related to our corporate restructuring initiatives.
  
(d)Includes a combination of gain/loss related to sale of fixed assets, software implementation costs, and other individually insignificant items that are non-recurring in nature.
  


PARSONS CORPORATION
Non-GAAP Financial Information
Computation of Adjusted EBITDA Attributable to Noncontrolling Interests
(in thousands)
 
  Three months ended  Six Months Ended 
  June 30, 2023  June 30, 2022  June 30, 2023  June 30, 2022 
Federal Solutions Adjusted EBITDA attributable to Parsons Corporation $85,640  $47,645  $141,788  $90,283 
Federal Solutions Adjusted EBITDA attributable to noncontrolling interests  85   49   170   166 
Federal Solutions Adjusted EBITDA including noncontrolling interests $85,725  $47,694  $141,958  $90,449 
             
Critical Infrastructure Adjusted EBITDA attributable to Parsons Corporation  20,936   25,160   45,293   53,475 
Critical Infrastructure Adjusted EBITDA attributable to noncontrolling interests  11,645   4,560   21,446   7,738 
Critical Infrastructure Adjusted EBITDA including noncontrolling interests $32,581  $29,720  $66,739  $61,213 
             
Total Adjusted EBITDA including noncontrolling interests $118,306  $77,414  $208,697  $151,662 


PARSONS CORPORATION
Non-GAAP Financial Information
Reconciliation of Net Income Attributable to Parsons Corporation to Adjusted Net Income Attributable to Parsons Corporation
(in thousands, except per share information)
 
  Three Months Ended  Six Months Ended 
  June 30, 2023  June 30, 2022  June 30, 2023  June 30, 2022 
Net income attributable to Parsons Corporation $43,241  $18,295  $68,794  $38,962 
Acquisition related intangible asset amortization  18,117   19,714   36,126   39,804 
Equity-based compensation  9,314   4,791   16,017   8,689 
Transaction-related costs (a)  1,917   9,525   3,535   11,923 
Restructuring (b)  -   -   546   213 
Other (c)  1,399   (349)  2,120   1,046 
Tax effect on adjustments  (7,726)  (8,854)  (15,075)  (15,526)
Adjusted net income attributable to Parsons Corporation  66,262   43,122   112,063   85,111 
Adjusted earnings per share:            
Weighted-average number of basic shares outstanding  104,908   103,675   104,856   103,722 
Weighted-average number of diluted shares outstanding (d)  105,791   104,334   105,797   104,451 
Adjusted net income attributable to Parsons Corporation per basic share $0.63  $0.42  $1.07  $0.82 
Adjusted net income attributable to Parsons Corporation per diluted share $0.63  $0.41  $1.06  $0.81 


(a)Reflects costs incurred in connection with acquisitions and other non-recurring transaction costs, primarily fees paid for professional services and employee retention.
  
(b)Reflects costs associated with and related to our corporate restructuring initiatives.
  
(c)Includes a combination of gain/loss related to sale of fixed assets, software implementation costs, and other individually insignificant items that are non-recurring in nature.
  
(d)Excludes dilutive effect of convertible senior notes due to bond hedge.

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