Parsons Corporation (NYSE: PSN) — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual report; the supplied filing text does not provide standalone fourth-quarter results. Parsons provides technology, engineering, and program-management services through Federal Solutions and Critical Infrastructure.
Financial results and liquidity
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Revenue | $3.661 billion | $3.919 billion | -6.6% |
| Operating income / margin | $132.4 million / 3.6% | $177.8 million / 4.5% | Income -25.5% |
| Net income attributable to Parsons | $64.1 million | $98.5 million | -35.0% |
| Diluted EPS | $0.59 | $0.97 | Lower |
| Adjusted EBITDA / margin | $309.7 million / 8.5% | $342.6 million / 8.7% | -9.6% |
| Cash provided by operations | $205.6 million | $289.2 million | -28.9% |
| Cash, cash equivalents and restricted cash | $343.9 million | $487.2 million | Down $143.3 million |
| Total debt | $591.9 million | $590.0 million | Approximately flat |
Working capital was $601.6 million, versus $655.7 million a year earlier. The company reported no borrowings under its $650 million revolving credit facility at year-end; $44.3 million of letters of credit under that facility reduced available capacity. Net DSO rose to 68 days from 64 days.
Revenue fell in both segments: Federal Solutions revenue was $1.888 billion (-1.2%) and segment Adjusted EBITDA attributable to Parsons was $162.7 million (-2.8%); Critical Infrastructure revenue was $1.773 billion (-11.7%) and segment Adjusted EBITDA was $121.7 million (-21.2%).
Material changes and notable items
- Critical Infrastructure accounted for most of the revenue and segment earnings decline, reflecting project completions and transitions, lower pass-through revenue, and project write-downs. Federal Solutions was affected by program completions, a program reserve, and competition for cleared personnel; acquisitions partly offset these pressures.
- New awards increased to $4.566 billion from $4.196 billion; book-to-bill was 1.2, up from 1.1. Backlog reached $8.347 billion, up 3.1%, including $4.373 billion funded and $3.974 billion unfunded. Management expected to recognize about $2.9 billion of year-end funded backlog as revenue over the following 12 months.
- FY2021 operating cash flow declined by $83.6 million, with working-capital movements and payment of deferred Social Security taxes contributing to the change. Net investing cash outflow was $240.9 million, including acquisitions; financing cash outflow was $106.5 million, including repayment of $50 million of senior notes, $21.7 million of share repurchases, and $37.9 million of distributions to noncontrolling interests.
- Parsons acquired BlackHorse Solutions for $205 million and Echo Ridge for $9 million, both funded with cash on hand. BlackHorse contributed $35.3 million of FY2021 revenue after acquisition. Goodwill and intangible assets totaled approximately $1.621 billion at year-end; no goodwill impairment was identified.
Outlook, risks, and contingencies
The filing provides no quantified company revenue or earnings guidance. Management described growth opportunities in cybersecurity, space, missile defense, and infrastructure, including potential benefits from increased infrastructure spending, and emphasized revenue growth, margin expansion, and positive cash flow. It stated that it anticipated no material change to financial condition or results from COVID-19, while noting uncertainty and continuing effects on work volumes and award timing.
- Major risks include changes in government budgets and priorities, contract termination or nonrenewal, award and funding delays, competition, staffing and security-clearance constraints, cost-estimation risk, and failure to realize backlog. Backlog includes unfunded work and probable options or task orders and is not assured revenue.
- Cybersecurity incidents, regulatory and government-contract compliance, audits, supply-chain disruption, inflation, international operations, and acquisition integration are also identified risks. The company reported that SolarWinds- and Log4j-related threats did not compromise its systems.
- A $15.6 million write-down on a Critical Infrastructure unconsolidated joint venture reduced FY2021 operating income by $15.6 million, net income by $11.6 million, and diluted EPS by $0.10. Separately, revisions in estimates for prior-period performance obligations reduced FY2021 revenue by $30.8 million. Federal Solutions Adjusted EBITDA was also affected by a $5.5 million net impact from a program reserve.
- A False Claims Act qui tam lawsuit remains in discovery; Parsons said it could not determine the probability of loss or a potential loss range. The company reported no other claims or assessments expected to materially affect its financial position or results, and said asbestos-related claims were expected to be covered by insurance.
- Debt agreements impose financial and operating covenants; the company reported compliance at year-end. The $400 million 0.25% convertible notes mature in 2025 and carry potential share dilution, subject to the note terms and related hedge and warrant arrangements.
Most important facts for investors to verify
- Whether the Critical Infrastructure decline and project write-downs persist, and how segment margins and cash conversion trend.
- How much of the $8.347 billion backlog is funded, converted to revenue, and ultimately profitable; confirm that backlog and funded-backlog figures are understood consistently across the filing.
- Whether net DSO, receivables, and operating cash flow improve after the FY2021 deterioration.
- Acquisition performance and integration, including BlackHorse’s contribution relative to the purchase price and acquired goodwill.
- Developments in the False Claims Act litigation, government audits, and other contractual claims.
- Debt covenant headroom, revolver availability after letters of credit, and dilution exposure from the convertible notes.