Maybe that's a little too much. The following session is not open to the press. Okay. Good to go? All right. All right. Good afternoon, everybody. We'll keep forging ahead in the aerospace and defense sector with our next presentation from Parsons, and with me on the stage here is Carey Smith, who is the CEO, and Matt Ofilos, who is the CFO. So, Carey and Matt, thanks so much for joining me here today. Thanks for having us back, Bill. It's great to have you. Maybe just starting high level at the sort of industry and market level and the backdrop and environment. You know, we've had DOGE and similar efforts. Then we had a government shutdown. Where are we now? Are things normal? Are they close to normal? Are they still completely abnormal? What are you seeing in the marketplace? Sure, so I would say with DOGE, I think that's pretty much behind us. I will say it affected a lot of the companies in our sector. From a Parsons perspective, we were very fortunate 'cause we were not impacted by DOGE, other than that our stock price went down with our peers. But we did not have any contracts that were terminated or canceled. And the main reason is because we're a solutions-oriented company. We don't do IT work, and we don't do consulting work. So we really weren't on their target list. But I do think that's behind us. Relative to the shutdown, we're happy that's behind us for now, and hopefully it'll be behind us as we approach January 30th. And the last nine bills will be able to be passed so that we can continue to operate. I would say things are slowly getting back to normal. We're still seeing a little bit of delays in terms of award and contract actions. And then we're gonna obviously be going after our cash for the remainder of the year. Fortunately, 50% of our business is not federal government, though, and so really hasn't been impacted by that. On a positive note, I would say the reconciliation bill passage and starting to see the flow of funds is very important for Parsons. And as we go into the next couple of years, our portfolio aligns perfect with the budget because there's $160 billion that's for border security, $25 billion for Golden Dome, another $21 billion for the Pacific Deterrence Initiative, or Indo-Pacom region, $12.5 billion for the Federal Aviation Modernization and brand new Air Traffic Control System, and then another, 12 well, I'm sorry, $21 million was for the Army Munitions, and then $12 million for the Indo-Pacom region. So when you re-look at each of those areas, Parsons is very fortunate that our portfolios align to that. So we have very good, strong tailwinds as we go into 2026. Have you studied those numbers previously? A few times. Okay. Good. I wanna talk about each of those, but maybe just, Matt, on the rest of the year and into next year, I just wanted to get your updated thinking on, growth in federal solutions, and you have the confidential program that's now rolled out of the business. Yeah. For the rest of this year, I think you still have FS, if you call it kinda core, excluding confidential, at a pretty high growth rate to finish the year. Can you do that with this, you know, we gotta spool back up from government shutdown? And then as we go into 2026, how should we think about FS core, and then what is the confidential headwind that, you know, everybody will need to attempt to model correctly when trying to model FS in 2026? Yeah. So to your point, Noah, Q4 is strong growth within our federal segment. It is. I don't wanna call it a slam dunk by any means, but we do have clear line of sight to mid-teens growth in federal for Q4 in order to get to the midpoint of guide. Obviously, some pressure coming out of the shutdown. What we've seen really is, you know, just slower contracting actions. So things that we thought would get done in late summer, early fall have kinda just continued to slip. Everything's a, "Hey, next week this'll come in. Next week that'll come in." But, you know, we still have line of sight to that midpoint, of course. The way we put guidance together was the low end would consider kind of a shutdown through year-end.. And so, we feel pretty comfortable that, you know, kinda that that's a good balance for us. So the shutdown being behind us, to Carey's point, is a good thing, and we're just pushing hard with our contracts, contracting officers to get back on track. We did have some kinda built-up materials and products deliveries that were scheduled for kinda late Q3, early Q4. And so those are all gonna still intended to deliver before year-end. That'll help get the federal growth up into that mid-teens growth, so not too far off from where we were in Q3. When we look at 2026, you know, the contribution from the confidential contract was in total for 2025 will be about $350 million. $285 million of that is in the first half. So kinda the headwind is all in the first half. feel really good about the overall portfolio. Carey, I'm sure we'll get into more details about some of these large game-changing type opportunities. What we've said publicly is kinda mid-single digit or better growth just on the core business and continue to execute on backlog growth. IDIQs that we have, I think we're seeing with the customers, the easy button is a really great place to be where you can get, you know, work done on existing vehicles. So we're lucky enough to have, you know, over $11 billion worth of work awarded to Parsons that's still not quite in backlog, just waiting on task orders to be awarded. And so we just have a lot of capacity within our existing vehicles to go execute for the customer. So mid-single digit or better is a good place for us to start when we look at federal for 2026. But, you know, big game-changing opportunities like FAA, Southern Border, big Golden Dome, another one. So some big ones ahead of us. If you're exiting at 15 w hy should we not think next year can be closer to 15 than five and before the big stuff that we're gonna talk about? Yeah. That's a great question. That's probably the question we're getting the most often. But as I mentioned, there is some timing on material deliveries, product deliveries that it's non-recurring. And so those are the things we're just normalizing for. To your point, you know, if we at our exit rate, it's really strong support for what we're expecting. When we look at 2026, we only have about 6%, 6% of revenue from recompetes. So that's a pretty low level in terms of history. Typically, you'll start off the year high single digit, low double digit on recompete revenue. And so we're already in a really good place for next year. You know, to start the year where we're at is that we feel comfortable with mid-single digit or better. We do plan to update our guidance as we go into the next earnings call. Plus, we'll have better line of sight because the FAA program should be awarded as well as some of the border security work. Okay. Let's use that as the segue to FAA. When do you expect an award? And what can you tell us about what it could mean for your financials if you were to win? Yeah. So I would say, repeating what Secretary Duffy said last week at the Aviation Summit, that the award is imminent. The customer is looking forward to Department of Transportation and FAA to picking a builder and a program manager that will manage this very important project for the country and for everybody's flying public safety. I'd say it's really important that we have a national airspace system that is safe, that is resilient, that is reliable, and also that's upgraded and transformed for the future. Some of the equipment is quite old. So as we start to look at the areas, whether it's automation, telecommunications, surveillance, or facilities, across the first three years, those will be our immediate focus. And that aligns to the $12.5 billion that was in the reconciliation bill. And then there will be seven one-year options. And those are put in place to be able to do the common automation platform as well as the facilities consolidation. There is an additional $19 billion that is needed for that. So if everybody can help lobby Congress because it's important that we do have the best and the safest national airspace system in the world. We are very excited about, hopefully receiving the award. We strategically partner with IBM as our technology partner. And we also have built a team of, I'm gonna call them the who's who of the FAA companies that have long done business with the FAA, including Regulus on the surveillance front, Mosaic on the automation front, Tetra Tech on the communications front, and Noblis on the acquisition front. So again, hopefully an imminent award. And I think we've put together a very compelling offer. Over what period of time would the $12.5 billion be spent? That's over the first three years of the contract, and then the additional $19 billion would be needed over the last seven years. And that's specifically relative to areas like upgrading the radar systems, going from copper to fiber, analog to digital, doing some of the voice communication system work. Those are the primary areas of focus. I would say from a Parsons perspective too, we treat this as like an aviation modernization franchise. We think it's a great opportunity to work with the United States first, but also then take those capabilities global. And this is a great example of why we have the portfolio we do. This was an entire company effort because when you look on the federal side of the house, we've been supporting the FAA for over five decades, doing a lot of facilities work. But when you look at our critical infrastructure business, we've done over 450 airport projects all over the world. So we understand how airports work. We understand how the airlines work, and we understand how the FAA works. So it's truly a one-Parsons effort. Okay. Is there any simple framework for how to think about the 12 and a half or the four a year translating to Parsons? Yeah. So we've not shared financial information. And the reason is we're still in a competition. And there's some flexibility with how each bidder approached the job, and that's dependent on how much procurement would go through your books. So what we've indicated is that we'd be happy to share financial information post-contract award. Okay. There has been some discussion of uniquely running a lot of the revenue through the prime integrator, and then the prime pays the subs as opposed to the subs having their own contracts with the government. Is that, am I correct, that that's being evaluated? And, I guess where I'm going with that is, will we all need to understand what, how, whether or not that's happening because it has a significant implication for the margin on whatever the revenue number's going to be? Yeah. Again, I think. Or should I not even worry about that because you'll just lay it out for us? Yeah. I'd say we're gonna lay that out for you. I think the important thing to note is that the margins will be in line with our federal business margins. They will. But other than that, we don't wanna get too much into the structure for competitive reasons right now. Okay. There's not a lot of competition for this at the moment. And I've heard some people in the industry say, "Well, that's because, as Carey Smith just said, Parsons has a long history with aviation FAA. They've done a ton of work at airports. They just know this so well. It's not even worth competing." I've heard others say that it's a high-risk project with cost overrun potential that will have low margins, and therefore others don't want to do it. Which of those is true? Are those both? Do those both have some truth, or what's your take on that? I like the former much better. I so I would say, we are well-positioned. We've put together a very strong team. We've put together a very compelling offer. We understand the FAA, but also we understand how to transform the FAA in parallel 'cause that's equally important. You've gotta make sure you keep the system operating reliably, but you also have to upgrade it so that it's ready for the future. We would not sign a bad contract. This is a cost-plus award fee contract. And again, the margins are in line with our current federal business. Okay. Great. And though importantly, I think, some of the other lower competition has created a conflict of interest for some of the system or product providers. So it made a lot of sense for somebody like Parsons who doesn't actually supply radars as an example or comm systems as an example. So that was. I was a little surprised that as that was explained to me by some of your peers, it is a little surprising that there aren't certain subcomponents or technologies or software that you would want to provide into the process? Or can you still do? You do get into a conflict of interest. So let's take a common automation platform, which will be part of phase two. If you're the integrator and you're involved in the selection of who's gonna be providing that, you shouldn't be the company providing that. So there are some inherent conflict of interest in that regard. But I'd say the most. That you do not run into. We're not bidding in areas such as those. So we're not gonna be selecting our own equipment. I think the most important thing that is needed here is a company that understands system integration and a company that most importantly understands program management and building. We're the number one program manager in the world as ranked by Engineering News-Record. Okay. All right. We will keep our eyes peeled. Golden Dome. How does Parsons participate in Golden Dome? And is Golden Dome definitely fully moving forward? It's been a little surprising that there hasn't been more award activity. Is there a significant priority for this administration? But administrations are only four years long. Are you feeling at all different about the likelihood this all moves forward or not? So like FAA, I would say Golden Dome has bipartisan support. It's very important for the country, to be able to protect us from all different types of attacks, whether it's counter-unmanned air systems, cruise missiles, hypersonic missiles, or intercontinental ballistic missiles. So there has been progress being made. General Guetlein was named as running Golden Dome, who was an excellent choice with his background in the Space Force and the Air Force. There has been $25 billion in the reconciliation bill for the Golden Dome. Initially, we believe a lot of the effort is gonna be to buy more capabilities that are there today, consider more THAADs, more Patriots, ground-based interceptors. And a lot of the effort will involve system engineering and integration. Parsons has supported the Missile Defense Agency for four decades. We are the system engineering and integration contractor. We are encouraging use of our vehicle, which is already in place. We have a $2.26 billion contract. We have over a billion-dollar ceiling remaining. That contract runs until January 2029. We would like to be heavily involved in the integration effort relative to Golden Dome. Beyond. Have you seen any funded task ordering from under that vehicle yet that whether it's actually specifically for Golden Dome or if it's not named for Golden Dome right now, you suspect it is eventually for Golden Dome? I would say a lot of the work that we do on that contract, because we're involved in everything from design, development, integration tests, follow-on life cycle support, we get involved in architectures, for example, in architecture development. The Missile Defense Agency has released a classified Golden Dome architecture. There are aspects of the work that we perform on our team's contract that are relative to the Golden Dome effort. Beyond them, that. You've participated in helping create the architecture? We've been involved in some of the support for the Missile Defense Agency architecture. And then I would say beyond that, there's some new areas that we plan to participate in. Non-kinetic effects are a great example because today, usually kinetic effects are used missile to missile to take out a missile system. We have exquisite capability in cyber and electronic warfare where we can defeat missile systems using non-kinetic effects. And then we're also looking at partnering with a company on the Battle Management Command and Control and then participating as a partner on some of the space-based interceptor activity. But the most important role for us is to leverage what we've done for a long time, which is system engineering and integration. Okay. In your list of growth platforms for the business, you mentioned FAA, Golden Dome. You also mentioned border security and IndoPACOM. Do those buckets have specific, sizable, you know, singular program award possibilities, or are those more, sort of, you know, you're involved in them and they're going to grow faster than the end market? Yeah. So I would say there are some specific program possibilities. Department of Homeland Security is looking at some potential procurements in the areas of the southern wall and also in counter unmanned air systems. Importantly, from a Parsons perspective, we've been involved in border security for over two decades. We support Defense Threat Reduction Agency in countries like Jordan, Armenia, Georgia, providing border security. We've also been involved in supporting Department of Energy with counter nuclear smuggling detection and deterrence program. That's a $1 billion program that has only two awardees on it. We've done work at the southern border well before as in terms of remote video or remote towers and then remote video surveillance capabilities. And we've also been involved in land ports of entry. So we feel that we bring quite a few capabilities to be able to help with the border security. Okay, and then profitability in federal solutions, Matt, maybe just talk about where the FS margin can go from here. It's been a little; it's always a little lumpy quarter to quarter, but as I think confidential was higher margin. So as that's rolled out, that pressures the margin a little bit. But then last quarter, the margin was back up again. So where do you see that, medium term? Yeah. So, to your point, within the federal business, that we don't really have performance issues necessarily. It's really always a mixed story. So last year with the confidential contract playing a big role and that being a fixed-price international contract that did have higher margins relative to the Fed, Fed margin. So long-term, Carey and I are comfortable in kind of that high eights, low nines based on the mix. Right now, we're just north of 60% cost-plus work. So if you think about our cost-plus work, you know, structurally limiting the margin expansion opportunity, you know, the good news about that is, of course, you're kind of on the front end. You're more in the research and development, the first-of-its-kind work. So you would never really wanna shift that work to fixed price just 'cause you're kind of solving problems as they come along versus, you know, building to print necessarily. And so feel really good about the Fed margins and high eights, low nines. We talked previously, Noah, about the Joint Cyber Hunt Kit program. We were notified that we were successful on that pursuit. So really big, products job for us over the next three years. So that will benefit margins over the next couple of years. FAA, as an example, as Carey mentioned, is cost-plus award fee kinda in line with, the rest of Fed margins. So, you know, it'll always be a mixed shift story. But I think that the tailwinds on margin, without a doubt, are expanded products opportunity. We've gone through our customers with a lot of ideas around shifting to fixed-price 'cause that's what we had heard they wanted. But we haven't really had a lot of movement on that side as of yet. But we're very comfortable in the fixed-price world where it's pretty well-defined. And so I would say a shift to fixed-price and more products will benefit margins. And then the additional cost-plus, we kinda hold it more in the high eights, low nines. And also M&A that companies that we acquire are greater than 10% EBITDA margin on both federal and critical infrastructure. Things you buy have a higher growth rate and a higher margin, but at a lower multiple? Yeah. Pretty good, pretty good story. That's a good way to do it. The C-UAS, there was discussion in the industry of more outcome space, more fixed-price. Yeah. You're saying you went to the customer with, "Here's a menu for where we would do that," but they're not taking you up on it? I would say in general, there hasn't been a big shift there, and it really goes back to if it's something new, you can't fixed-price work. Sure. If it's something that's repeatable, you can. But in general, there hasn't. We have not seen a big transfer from reimbursable to fixed-price work. So we would be willing to do that, though, in areas that we're comfortable. I'd say a lot of the customers enjoy the flexibility of being able to kinda shift mission along the way versus kinda committing to, exactly what they want from the start. Okay. And how would FAA be both fully cost-plus but also in line with the segment average? FAA contracts cost-plus award fee. But you have basically task orders. They call them needs packages. Each needs package is gonna be assessed differently. So you can have fixed-price needs packages as well as cost-plus needs packages. So if it's something that you've been doing for a long time and you can fixed price it, both we and the FAA would agree that we should fixed price it. But if it's something brand new, then you would leave it as a reimbursable. The FAA project, if you were to have it, would literally almost be like the segment. It would have the mix of the different types of. Right. But to your point, Noah, that, you know, obviously delivering is critically important for the award fee portion of the cost-plus as well. Right. Right. Okay. Let's maybe talk about the infrastructure business, a little bit. I mean, to some degree, I feel like, you know, it's diversified across a lot of projects and several geographies, and it just keeps growing 10%-12%. And I'm just gonna assume it just keeps growing 10%-12%. Can it be as simple as that, or are there things that accelerate that, or are there reasons it would decelerate? Anything you're seeing that's notable right now by geography, or is it just forging ahead across dozens of projects? Yeah. So we're really excited about the infrastructure business. It's been hitting on all cylinders. We've had over three consecutive quarters greater than 10% margin. We've had 20 consecutive quarters of greater than 1.0 book-to-bill. So as we've continued to grow, we've been continuing to bring in more business. The demand is there. When you look at Parsons, we're about 81% focused in North America, 19% within the Middle East. We got within the US the Infrastructure Investment and Jobs Act that was passed in November of 2021. That money is not gonna peak till the 2028 timeframe. Then you have a six- to eight-year tail after that. So likewise, we're seeing a similar phenomenon, and that's $1.2 trillion. Similar phenomenon in the Middle East, which they're gonna spend about $1.5 trillion. Those funds are not gonna peak until about the 2030 to 2034 timing. So the demand is out there. It's quite substantial. We're in all the right parts of that market as well. We focus predominantly on hard infrastructure. So if you think about roads and highways, rail and transit, airports, ports, bridges, those are all the areas that we play in. We've won some of our most significant projects within the last couple of years. Within the Middle East, we're involved in almost every major project going on. I'll hit on Saudi. That makes up about 60% of our Middle East business. So we're involved in Qiddiya, the world's largest entertainment city. King Salman Park, the world's largest park. We did the Riyadh Metro, the world's longest metro. We were just awarded a job with the Ministry of Defense, a critical infrastructure job. We just won a border security job with the Ministry of Interior. We were awarded the traffic management around Riyadh, probably the most important project to be ready for the 2030 to 2034 Expo. Similarly, in the U.S., we've seen some of the biggest projects that we've seen in decades. We were awarded the Newark Bay Bridge, $147 million project for us. We're on the Hawaii Rail and Transit Program. We were awarded the Georgia State Route 400 Express Lanes, one of the first and largest public-private partnership efforts within the United States. And also, we're the program manager for the Gateway Hudson River Tunnel. So the infrastructure business has a lot of tailwinds, a lot of funding. And then I should mention that there's also gonna be a new five-year surface transportation reauthorization bill that should be passed by November 2026 in the U.S. So you're gonna have a layering effect where the IIJA is still ramping up, and then the new surface transportation bill is starting. Okay. That sounds quite robust. And the margins in that business you mentioned have expanded. You had the legacy contract, which pertains to when you, historically would do a different type of work that had different, or a different risk profile, I guess. That's now just 100% fully out of the business? Yes. So all the legacy business kinda wrapped up last year. We achieved substantial completion or final completion on the program execution. So that's behind us. The great thing now, you know, we're focused on what we do very well, which is program management and design engineering. How would you categorize where that margin lands three, five years down the road? Yeah. So I'm looking at last year, we were about 7% margin within CI. Year to date, we're at 10.3%. So, you know, 300 basis points margin expansion from CI, which has been critical to delivering 50 basis points last year at the Parsons level and another 50 basis points this year. And so we're very happy to see CI north of 10% already. And we think within North America specifically, we feel like the Middle East business is probably operating about where it needs to be, but there's still some additional opportunity within North America. So if we can get another 20 or 30 basis points out of the North America CI business as we kinda to Carey's point, we're done operationally, but there's still a little bit of a drag on some of these things. So look forward to having those, you know, completely behind us. The Middle East margins right now are higher than the North America margins. Correct. Yep. Approximately how wide is that gap? Couple points. Couple points. Yep. They should be the same over time? Yes. Could be. Yep. Okay. Got it. Okay. We have sort of 5-10 minutes left. I have a few more questions, but why don't I see if there's anybody in the audience with a question for Carey and Matt? Anybody? Don't be shy. Haven't had a question yet today. These, these lists must just be too thorough. Extinguished all possibilities. Goldman Sachs. Such a good job. Okay. Let's talk capital deployment and acquisitions. So that's a significant portion of your model as well. I guess it's been a little surprising that there maybe hasn't been a little bit more activity. And I've kind of seen that across a lot of the deal platform businesses I cover, including ones in completely different end markets than your own. So I'm sort of trying to figure out if there's some common thread to that or if it's just random. But what have you seen in the deal market? Is there anything making it harder than normal right now or not? And how much do you think you can do, you know, 2026? Yeah. So we've still been very busy. We've acquired 16 companies since 2017, including three this year. We bought TRS Group, which is a company that does thermal remediation and also supports our PFAS emerging contaminant elimination in the first quarter. Followed that with Chesapeake Technology International, a company that does end-to-end cyber, electronic warfare, signals and intelligence capability. Has a nice presence in the Indo-Pacom region, which we could tap into some of that reconciliation funding I mentioned earlier. And also, a lot of work with Special Operations Command. Then most recently, we acquired Applied Sciences Consulting, a Florida-based water firm focused on water resiliency. We had a water practice in Florida. We did a lot of wastewater treatment work. But this combined with the resiliency will enable us to tap into the billions of dollars that are gonna be spent on water within Florida. so happy with three deals we did. We're still very active. We have a long, robust list in both federal and critical infrastructure. Capital deployment's gonna continue to be our M&A's gonna continue to be our number one use of capital deployment. We like the fact that, to your earlier point, that we don't pay high multiples. We've been between nine to 13 times for all the companies that we've bought. We also buy companies generally on a preemptive basis. We try and avoid auctions. We don't include revenue or cost synergies in the companies we buy. I think we have a unique approach. When we buy a company, our objective is to keep the founders and the leaders that made that company successful. Today, one-third of my leadership team formerly came from M&A. Oh, wow. Are your thresholds specifically 10% organic revenue growth and a 10% EBITDA margin? That's correct. Has to be higher than that. That's correct. Okay. And then doing that in the 9-13 times EBITDA range? Yes. Correct. Okay. And there's plenty to do in that fit all of that? We've done three already. I was hoping to close a fourth this year, but stay tuned. Okay. I think specifically on, you know, when you think about the work that we're able to do and you think about some of these founders on the federal side specifically that are so mission-oriented, we've been really, you know, when you start to bring them the capacity, whether it's on the HR side, the, you know, classified space, the IDIQ vehicles that we have, they feel like they can make a bigger impact on the long-term mission. And that's really been what we've been focused on when we're selling them on why Parsons is, you know, we can do more together. And so we'll work with them for a little while, go through a little bit of a grooming phase, make sure that the cultures fit together. And so typically, by the time we get to negotiations, it's, we both know it's the right thing. So you can find technologies, capabilities, solutions that have a high growth rate and a decent margin but do even better on your platform. Yeah. Because of all that infrastructure. And then they want to sell to you, so it doesn't happen. Yeah. I think, you know, a perfect example of that was a win that we had with the General Services Administration a couple of years ago, a $1.2 billion job. And we brought all of our federal capabilities together. Nobody could have won that job, including Parsons, on their own. But together as a collective company, we won the job, and we also beat tier one companies to win that job. So it really goes back to we've built, an exquisite federal capability that spans end-to-end cyber, electronic warfare, signals intelligence, and then selective areas within space and missile defense. Excellent. And how large are PFAS and water as a percentage of total revenue today? And could those be significant growth drivers, or they'll just never be large enough relative to the rest of the business? The water is part of our water and environment, which makes up 15% at the Parsons level. Total of total company? It's within that group. So it includes water and some of our mine reclamation jobs and environment. But it's 15% of total company revenue. Water is our fastest growing and most profitable part of our critical infrastructure business, which is why we are very focused on it. I didn't know that. PFAS represents a component of our water business. Within PFAS, we see that as a $220 billion total market, $40 billion of which is addressable for Parsons. We think that market's gonna peak in around the 2032 timeframe. We're uniquely positioned there. We've had a research and development water facility up in Syracuse, New York, for over three decades. We've come up with a patent that we're quite excited about. It's called the Hot ISCO patent. It was approved two years ago in Canada. It was approved this year within the United States. It's first patent of its time, kind of actually destroy the PFAS molecule on site without having to require incineration. And it can be applied to water, groundwater, soil type of problems. We've already deployed that technology now three times. So we feel that we're in a great position for PFAS. We handle everything from investigations to the actual remediation and treatment to all the follow-on life cycle and support, so it's in the entire life cycle chain of how you eliminate PFAS. Okay. Wow. Excellent. All right. We're out of time. So, we'll wrap up there. So Carey and Matt, thanks so much for being with us today. This was great. Thank you very much, Noah. Appreciate it.