Parsons Corporation (PSN) Earnings Call Transcript & Summary

Good day, and welcome to the Parsons Corporation Annual Shareholders Meeting. I would now like to turn the conference over to Chuck Harrington, Chairman and CEO. Please go ahead.

Thank you. Good morning. Welcome to the Annual Meeting of Shareholders of Parsons Corporation. Before commencing with the formal business of the meeting, I'd like to send our deepest sympathies to all who have been affected by the COVID-19 pandemic. This outbreak truly is a tragic event and has disrupted lives and businesses around the world. It reminds us that the true meaning of humankind is not our response in times of normalcy, but how we rise to the challenges of adversity. For this, I'm truly proud and inspired by our employee support of our communities and customers during this challenging time. I'm grateful for Parsons' team members like those in Huntsville, Alabama, who initiated an effort to print 3D face shields, which are being used to augment personal protective equipment to allow our teams to safely perform mission essential services. I'm also grateful for our team in Abu Dhabi, who are working closely with the local government to sanitize public areas to help prevent the spread of COVID-19. At Parsons, people have always been at the center of our 75-year history of excellence and performance. We look forward to upholding that legacy during COVID-19 and fulfilling our corporate purpose of delivering a better world. Now I will move to Parsons' 2019 performance. It was an eventful year as we delivered record revenue and profitability, completed 2 significant acquisitions and achieved notable recognition for our corporate social responsibility initiatives. Notable events and accomplishments include celebrating the 75th anniversary of our founding by Ralph M. Parsons, relocating our corporate headquarters from our historic location of Pasadena, California to Centreville, Virginia. I'd like to note the Washington capital region encompasses the largest concentration of Parsons' employees worldwide, is headquarters for many of Parsons' largest customers and is the epicenter for legislative and policy actions related to United States critical infrastructure. We also successfully transacting our capital structure strategy and completed our initial public offering in May 2019, making Parsons a publicly traded company for the second time in our history. Also for receiving the National Safety Council's prestigious Robert W. Campbell Award. This international award honors companies that achieve business excellence through the integration of environment, health and safety management as a key business value. And finally, being honored by the Ethisphere Institute, a global leader in defining and advancing the standards of ethical business practices, as one of 2019's world's most ethical companies for the 10th consecutive year. And I'm happy to report this recognition continues into 2020, with our recent recognition, again, making Parsons one of the world's most ethical companies for 11 consecutive years. In 2019, we delivered our strategy to achieve strong revenue growth and margin expansion across the enterprise. Specifically, total revenue grew 14.5% to a record $4 billion. Net income attributable to Parsons grew 11.3% to $120.5 million, and adjusted EBITDA from noncontrolling interest grew 24.5% to a record $325 million, and our adjusted EBITDA margin, including noncontrolling interest, grew 130 basis points to 8.2%. The successful execution of our Enhance, Extend and Transform strategy drove these strong results. Key to our transform strategy of building our technology and transactional revenue streams is augmenting our portfolio of services with scalable software and hardware technologies that bring comprehensive solutions to new and existing customers. We acquired 2 firms in 2019 to further our transform strategy, OGSystems, an innovative geo-intelligence solutions and immersive engineering provider that creates geospatial imagery for defense and intelligence customers; and QRC Technologies, a radio frequency products and integrated solutions company that provided entrance into the signals intelligence software and hardware markets. QRC is enabling us to leverage our artificial intelligence capabilities and provide signal intelligence, electronic warfare, cellular survey and situational awareness solutions to our customer base. As we look forward, I am excited about Parsons' future. We have a Federal Solutions portfolio aligned to the National Defense Strategy. We have a Critical Infrastructure portfolio, leveraging our technology and operational expertise to deliver smart mobility solutions, and we ended 2019 with a large and qualified pipeline, a healthy balance sheet to continue targeted organic and inorganic investments and a disciplined business strategy focused on leveraging our momentum to drive additional growth and margin expansion. Let us now proceed to the business agenda. We will entertain questions from shareholders once we have concluded the formal business set forth in the agenda. Pursuant to the information referenced in our proxy statement, the notice filed with the Securities and Exchange Commission and the notice posted on our website, the Annual Meeting of Shareholders is being held virtually rather than in person, for the safety of our shareholders, directors and employees. Joining the meeting today from our Board of Directors are Mr. Steven Leer; Ms. Suzanne Vautrinot and Ms. Tamara Lundgren. Also joining me from our executive leadership team are Ms. Carey Smith, President and Chief Operating Officer; Mr. George Ball, the Chief Financial Officer of the Corporation; Mr. Michael Kolloway, the Chief Legal Officer and Secretary of the Corporation; and Mr. Paul Walker-Lanz, the Chair of the ESOP Policy and Advisory Committee. Other members of the ESOP Policy and Advisory Committee serving with Mr. Walker-Lanz are Mr. Brent Harvey; Ms. Nikki Herman, Ms. Stacey Salazar and Ms. Leslie Bradley. Also joining the meeting today, representing Newport Trust Company, the trustee of the ESOP Trust, are Mr. William Ryan and Mr. William Glasgow. Joining us from American Election Services, the inspector of the election for the annual meeting, is Mr. Jim Raitt. And finally, joining us from Pricewaterhousecoopers, the corporation's independent registered public accounting firm, are Mr. Kirk Thorell and Ms. Kathleen Hopely. Mr. Kolloway will reward the proceedings and serve as the Secretary and Parliamentarian for the meeting. The polls remain open. You have a proxy card and have not yet voted or if you wish to change your vote, please provide your vote to the inspector of elections at this time. The corporation's proxy statement was sent by Broadridge Financial Services to all of the corporation's shareholders of record as of February 21, 2020. The ESOP Trust is the corporation's largest shareholder. ESOP participants hold interest in the trust. The trustee has the right to vote all of the corporation shares, which are held in the ESOP Trust. Each participant has the right to instruct the trustee on how their interest in the trust must be voted. ESOP participants may vote all of the shares allocated to their accounts, both vested and unvested. If the trustee does not receive voting instructions from a participant, the shares will be voted by the trustee in its discretion. There are 5 matters for consideration at this shareholders' meeting: The election of nominees to the Board of Directors of Parsons Corporation; two, the approval of the ratification of the corporation's independent registered public accounting firm for fiscal year 2020; three, an advisory vote on the compensation for the corporation's named executive officers as disclosed in the Compensation Discussion and Analysis section, or CD&A of the proxy statement; four, advisory vote on the frequency of future advisory votes related to the compensation of the corporation's named executive officers; and five, the approval of the corporation's Employee Stock Purchase Plan, or ESPP. The nominees for election to the Board of Directors of Parsons Corporation are Mr. James F. McGovern, Mr. Harry T. McMahon; and Ms. Letitia A. Long. Mr. McGovern, Mr. McMahon; and Ms. Long are independent directors. If nominees, McGovern, McMahon and Long, are elected, they will serve for terms ending in 2023 or until reaching our director retirement criteria, whichever comes first. The other members of the Board of Directors, who will continue in office until either 2021 or 2022 are Mr. Charles L. Harrington; Mr. M. Christian Mitchell; Mr. Steven F. Leer; Mr. Mark K. Holdsworth; and Ms. Suzanne M. Vautrinot. I now call the Parsons Corporation Annual Meeting of Shareholders to order and declare the polls closed.

Mr. Harrington, I confirm that more than 98 million shares of the corporation's common stock are present for this meeting, either through attendance or by proxy, representing a quorum for the meeting. The meeting is, therefore, legally constituted.

Thank you.

I move the election of Mr. James F. McGovern, Mr. Harry T. McMahon; and Ms. Letitia A. Long to the Board of Directors of Parsons Corporation.

I have received a motion from Ms. Lundgren, which puts in nomination for Director, the persons whose names are set forth in the proxy statement for this meeting, namely, James F. McGovern, Harry T. McMahon and Letitia A. Long. Mr. Kolloway, do you have a report on the election of directors?

Mr. Chairman, out of the total of more than 97 million votes cast, there were more than 88 million votes cast for the election of each of the nominees, which is more than 91% of the total votes cast. And these individuals, therefore, have been elected as directors of the company to serve until the 2023 Annual Meeting of Shareholders or until reaching the director retirement criteria, whichever comes first as to Mrs. McGovern and McMahon and Ms. Long and until their respective successors are elected and shall qualify.

Thank you. Is there another motion?

Mr. Chairman, I move that for the ratification of the appointment of Pricewaterhousecoopers, PWC, as the independent registered public accounting firm for Parsons Corporation for fiscal year 2020.

I have received a motion from Mr. Leer to ratify the appointment of Pricewaterhousecoopers as the independent registered public accounting firm for Parsons Corporation for fiscal year 2020. Mr. Kolloway, do you have a report on the votes for the ratification of the appointment of Pricewaterhousecoopers as the corporation's independent registered public accounting firm for 2020?

Mr. Chairman, out of the total of more than 98 million votes cast for this motion, there were more than 97 million votes cast for the ratification of the appointment of Pricewaterhousecoopers as the independent registered public accounting firm for Parsons Corporation for fiscal year 2020. Therefore, Pricewaterhousecoopers is hereby ratified to serve as the corporation's independent registered public accounting firm for fiscal year 2020.

Thank you. Is there another motion?

Mr. Chairman, I move for the consideration of the advisory vote of the corporation's shareholders for the approval of the compensation of the corporation's named executive officers as disclosed in the CD&A section of the proxy statement.

I have received a motion from Ms. Vautrinot for the consideration of the advisory vote of the corporation's shareholders for the approval of the compensation of the corporation's named executive officers as disclosed in the CD&A section of the proxy statement. Mr. Kolloway, do you have a report on the advisory vote of the corporation's shareholders with respect to the approval of the compensation of the corporation's named executives?

Mr. Chairman, out of the total of more than 97 million votes cast, there were more than 94 million votes cast in favor of the compensation of the corporation's named executive officers as disclosed in the CD&A section of the corporation's proxy statement.

Thank you. Is there another motion?

Mr. Chairman, I move for the consideration of the advisory vote of the corporation's shareholders regarding the frequency of 1 year for the shareholders to provide as an advisory approval of compensation for the corporation's named executive officers.

I have received a motion from Ms. Vautrinot for the consideration of the advisory vote of the corporation's shareholders regarding a frequency of 1 year for the corporation's shareholders to provide an advisory approval of compensation for the corporation's named executive officers. Mr. Kolloway, do you have a report on the advisory vote of the corporation's shareholders with respect to the frequency for shareholder advisory approval of the compensation of the corporation's named executive officers?

Mr. Chairman, out of the total of more than 97 million votes cast, there were more than 95 million votes cast in favor of a frequency of 1 year for the shareholders to provide an advisory approval of the compensation of the corporation's named executive officers.

Thank you. Is there another motion?

Mr. Chairman, I move for the approval of the Parsons Corporation's employee stock purchase plan as described in the corporation's proxy statement.

I have received a motion from Mr. Leer for the approval of the corporation's employee stock purchase plan. Mr. Kolloway, do you have a report on the vote of the corporation shareholders with respect to the approval of the employee stock purchase plan as described in the proxy statement?

Mr. Chairman, out of the total of more than 97 million votes cast, there were more than 96 million votes cast for approval of the Parsons Corporation employee stock purchase plan. Accordingly, the employee stock purchase plan, as described in the proxy statement, is hereby approved.

Thank you. Is there any other business to come before this Board for the meeting? This concludes the formal business of the Parsons Corporation Annual Meeting of Shareholders as detailed in the information statement. Prior to adjourning the meeting on behalf of the Board of Directors and the executive leadership team, I would like to express our appreciation to Parsons' nearly 16,000 employees for their hard work and dedication. They are the foundation of our business and their commitment to our customers' missions and our core values is inspiring. Similarly, we are extremely grateful for the continued loyalty of our customers and shareholders. Collectively, this team has placed Parsons in a position to deliver long-term revenue growth and margin expansion, utilize our strong balance sheet to invest in our employees and technology to further differentiate Parsons solutions, penetrate key growth markets such as cyber intelligence, missile defense, C5ISR, space and geospatial markets and connected communities, and bid and win work identified in our robust pipeline. Mr. Kolloway, are there any questions from the shareholders?

Mr. Chairman, there are no questions at this time.

If shareholders have questions, they may contact Mr. Dave Spille, Parsons' Vice President of Investor Relations. Before I entertain a motion to adjourn, I want to reiterate my sincere sympathies to all who have been impacted by the coronavirus. We will continue to do everything we can to preserve the safety and well-being of our employees, communities and customers, and I hope you and your families remain healthy and safe during these uncertain times.

Mr. Chairman, I move that this meeting be adjourned.

I second the motion.

It's been moved and seconded that the meeting be adjourned. All in favor, say, "aye." [Voting]

The motion is carried, and the meeting is adjourned. Thank you.

Thank you.

Conference has ended. Thank you for your attendance. You may now disconnect your line.