帕森斯：教育系列回顾

Restricted - External U.S. Machinery & ConstructionPOSITIVEU.S. Machinery & ConstructionAdam Seiden, CFA+1 212 526 2212adam.seiden@barclays.comBCI, USSteven Li+1 212 526 9497steven.li@barclays.comBCI, USTyler Russell+1 212 526 7584tyler.russell@barclays.comBCI, US Parsons. In addition, state and local funding accounts for 60-65% of total transportation fundingproviding a base of funding to supplement federal initiatives. Looking past the U.S., Parsonshighlighted significant infrastructure opportunities in the Middle East, boosted by governmentinvestment, population growth, and upcoming events (World Cup, Expo, etc.), with an expectedpeak in 2030-2032, and Parsons is one of the biggest players in Middle East, participating innumerous headline projects as highlighted by recent White House press release. Managementhighlighted they were hiring 200-250 people a month in that region just based on works theyhave already won. Parsons also highlighted its positioning in the Pacific, especially theopportunities in the Pacific Deterrence program.The company sees their Federal Solutions portfolio being aligned with thisadministration’s priorities, including exposure to 1) the Golden Dome missile defenseprogram ($175bn total project value; $25bn in the reconciliation bill) as one of the lead playersin the missile defense industry as well as a provider of non-kinetic defense solutions, leveragingits cyber capacity. 2) Ammunition modernization ($21bn in the reconciliation bill) as aparticipant in two of the five major sites, while winning another $175mn contract in this space;3) FAA modern ($15bn in the reconciliation bill) as the existing contractor for FAA; and 4) Nucleardeterrence ($13bn in the reconciliation bill); 4) Pacific deterrence program ($11bn in thereconciliation bill) from Parsons’ presence in Hawaii and Guam.Parsons sees an accommodative administration towards PFASgiven current EPA directorLee Zeldin was on the committee that set up the maximum containment requirements for PFASand 34 states have passed their own regulations. The $40bn addressable PFAS market isexpected to peak in 2032 and Parsons is well positioned to capture these opportunities, helpedby 1) its full-life cycle involvement of PFAS with 2K+ investigations of 7K+ uses; 2) investments intechnologies including the recently approved non-incineration PFAS destruction patent; and 3)ongoing acquisitions like the TRS deal closed in Q1.Parsons reiterated its 30bps margin expansion target this year, with CI at double-digitmargins and FS at 9-10%.The Afghanistan projectaffectedby recent governmentalrestructuring had a reduced run-rate of 80% in Q1, and Parsons expected it to slow furtherin Q2.Management highlighted that it would only be required to move a handful of peopleshould this project be cancelled, given its role was only on program management andtechnology. Looking specifically at the company's contract structure, CI had 75% fixed/time &material contracts and 25% reimbursable contracts, while FS had 55% fixed/time & materialcontracts and 45% reimbursable contracts. Management flagged they were able to hold costsconstant even against rising revenues, resulting in reduced SG&A y/y, and acquire margin-accretive companies with higher fixed-cost contracts. CI also lapped some legacy projects lastyear, contributing to margin expansion. Overall, management was confident in its ability tocontinue to expand margins in a market where demand outpaces supply.Acquisitions contributed to margin accretion and improved win rates in the past andremained a key component of growth for Parsons.Looking at expansion, management see arobust pipeline with a priority of targeting companies with 1) >10% EBITDA margins and 2)technologydifferentiation.They reiterated that they would not acquire for the scale and arelooking at 2-4 acquisitions this year. Unlike peers that separated their government servicesbusinesses, Parsons believes they have a deeper breadth of synergies from productofferingsand talent pool. Several examples the company provided included the shared talent poolworking on both the FAA modernization projects and airport infrastructure projects and theshared talent pool of subject experts working on PFAS solutions for both government andindustrial customers. Looking forward, management saw further untapped synergy potential inthe critical infrastructure protection market, especially for transportation, water, utilities,2 facilities, and healthcare. Parsons’ knowledge of both cyber-security and infrastructure couldmake it better positioned to service these sectors. Analyst(s) Certification(s):I, Adam Seiden, CFA, hereby certify (1) that the views expressed in this research report accurately reflect my personal views about any or all of thesubject securities or issuers referred to in this research report and (2) no part of my compensation was, is or will be directly or indirectly related to thespecific recommendations or views expressed in this research r