Parsons (NYSE:PSN) executives told investors the company delivered a “successful year” in fiscal 2025 despite what CEO Carey Smith described as a dynamic federal government environment, highlighting revenue growth outside of a confidential contract, record profitability metrics, and cash generation that supported acquisitions and share repurchases.
FY 2025 performance and three-year targets
Smith said Parsons generated 12% total revenue growth in 2025 and 8% organic revenue growth excluding a confidential contract. By segment, she cited 10% organic growth in Critical Infrastructure and 7% organic growth in Federal Solutions, excluding the confidential contract. The company expanded adjusted EBITDA margin by 60 basis points to a record 9.6% and delivered 100% free cash flow conversion, exceeding the high end of its full-year cash flow guidance.
Q4 results: growth outside the confidential contract and record margins
In the fourth quarter, Smith said revenue came in below the company’s expectations but still increased 11% year-over-year and 8% organically excluding the confidential contract, despite impacts from a 43-day government shutdown referenced during the Q&A portion of the call. She reported adjusted EBITDA margin expanded 110 basis points in the quarter and operating cash flow was $168 million, up 32% year-over-year.
CFO Matt Ofilos said that on a reported basis including the confidential contract, fourth-quarter revenue decreased 8% from the prior-year period and fell 10% organically. Fourth-quarter adjusted EBITDA rose to $153 million, up 5%, with margin expanding to 9.6%. He attributed margin improvement to execution and growth on accretive contracts, partly offset by lower volume on the confidential contract. Ofilos also said fourth-quarter SG&A declined 2% year-over-year, driven by cost management and lower transaction-related expenses, partially offset by acquisitions.
Segment results: Critical Infrastructure strength, Federal Solutions headwinds
Critical Infrastructure posted what Ofilos called record quarterly results. Fourth-quarter segment revenue rose 12%, driven by 9% organic growth plus contributions from acquisitions. Segment adjusted EBITDA increased 87% year-over-year, with margin expanding 420 basis points to 10.6%. For the full year, Critical Infrastructure revenue increased 15% (and 10% organically), while adjusted EBITDA increased 73% and margin expanded 350 basis points to 10.4%, which management said reflected a shift toward higher-margin work and improved program performance.
Federal Solutions results continued to be affected by the confidential contract’s lower volume and other execution issues. Ofilos said that excluding the confidential contract, fourth-quarter Federal Solutions revenue increased 9% (and 6% organically), driven by Critical Infrastructure Protection, Space and Missile Defense, and transportation markets. Including the confidential contract, segment revenue fell 22% year-over-year (and 24% organically). Federal Solutions adjusted EBITDA fell 34% in the quarter, with margin at 8.4%, which Ofilos said was primarily impacted by lower volume on the fixed-price confidential contract and “recent execution challenges on a program in a remote region.”
For the full year, excluding the confidential contract, Federal Solutions revenue increased 9% (and 7% organically), but including the confidential contract it declined 20% (and 21% organically). Full-year Federal Solutions adjusted EBITDA declined 32% and margin decreased 170 basis points to 8.7%, driven by confidential contract volume decline and growth investments.
Bookings, backlog, and notable contract activity
Ofilos reported fourth-quarter contract awards of $1.5 billion, equating to an enterprise book-to-bill of 0.9x. Trailing 12-month book-to-bill was 1.0x, extending a streak of 1.0x or higher in every quarter since the IPO. Critical Infrastructure reported 1.1x book-to-bill in Q4 and 1.2x for the year, marking 21 consecutive quarters at 1.0x or higher in the segment. Federal Solutions reported 0.8x book-to-bill for both the quarter and full year.
Total backlog ended the quarter at $8.7 billion, down 2% year-over-year, which management attributed mainly to the confidential contract nearing completion. Funded backlog was $6.4 billion, up 8% year-over-year and representing 73% of total backlog, both cited as company records. Smith also pointed to a $55 billion pipeline, a 61% win rate in 2025, and $11 billion of contract wins not yet booked.
Management highlighted several contract wins and developments discussed on the call:
- A 10-year, $392 million single-award contract for biometrics and identity management solutions, with $36 million booked in Q4.
- A five-year classified single-award contract valued at $200 million, with $23 million booked in Q4.
- A five-year, $125 million Army-related contract supporting high performance computing modernization, with $44 million booked in Q4.
- A contract valued at over $100 million with Nammo for a rocket motor manufacturing facility in Perry, Florida, with the full value booked in Q4.
- After quarter-end, an early $593 million FAA technical support services extension, as the FAA exercised a three-year option period nearly a year early.
- After quarter-end, an intent-to-award for a sole-source national security contract with a ceiling of up to $500 million, with $13 million booked in Q4 for low-rate initial production.
Capital deployment, M&A, and 2026 outlook
Parsons completed three acquisitions in 2025 and increased share repurchases, while maintaining what it called a strong balance sheet. Ofilos said the company ended Q4 with net leverage of 1.3x. In Q4 alone, Parsons repurchased approximately 856,000 shares for $60 million; for the full year, it repurchased about 1.8 million shares for $125 million at an average price of $68.59.
Smith discussed the Q4 acquisition of Applied Sciences Consulting, describing it as a Florida-based engineering firm specializing in water and stormwater solutions, and said water is the “most profitable and fastest-growing” market within the North American infrastructure unit. After quarter-end, Parsons closed its acquisition of Altamira Technologies Corporation in an all-cash transaction valued at up to $375 million, including a $45 million earnout. Smith said Altamira adds multi-intelligence technology capabilities and customer depth in the intelligence community and classified environments, with more than 600 employees, about 90% holding security clearances.
Looking to 2026, Ofilos guided revenue to $6.5 billion to $6.8 billion, representing 4.5% growth at the midpoint and 0.5% organic growth at the midpoint. He said the company expects a $345 million year-over-year headwind from the confidential contract as it completes in Q1 2026, with $275 million of that headwind in the first half. Excluding the confidential contract, management projected the rest of the portfolio would grow total revenue 10.5% and 6% organically.
Adjusted EBITDA is expected to be $615 million to $675 million, implying a midpoint margin of about 9.7%, and cash flow from operations is expected to be $470 million to $530 million. Ofilos said capital expenditures are expected to increase to approximately 1.5% of revenue, driven mainly by demand for additional classified facilities. Management reiterated longer-term goals of mid-single-digit or better organic growth, a target of double-digit margins by 2028, and free cash flow conversion of at least 100% of adjusted net income.
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.
