Parsons Stock Plunges On Missing Q2 Earnings Estimates, Lowered FY21 Outlook

Parsons Corp PSN reported a second-quarter revenue decline of 10.2% year-over-year to $879.36 million, missing the consensus of $984.97 million.
Sales by segments: Federal Solutions $442.67 million (-8% Y/Y) and, Critical Infrastructure $436.68 million (-12% Y/Y).
Adjusted EPS decreased to $0.32 from $0.49 in 2Q20, missing the consensus of $0.51.
The operating income decreased by 56.3% Y/Y to $20.22 million due to a $15.4 million reserve taken on a legacy Critical Infrastructure program, a $6.9 million reserve taken on a Federal Solutions program, contract delays, and a competitive hiring environment. The operating margin contracted by 240 bps to 2.3%.
Parsons generated cash from operating activities year-to-date of $38.46 million, compared to cash used of $31.44 million a year ago.
Adjusted EBITDA declined by 27.9% Y/Y to $65.73 million, with a margin contracted by around 180 bps to 7.5%.
The company’s backlog at the end of the quarter was $8.4 billion +9% Y/Y. The book-to-bill ratio for Q2 was 1.9x on net bookings of $1.7 billion, and for the trailing twelve months was 1.3x on net bookings of $4.9 billion.
Parsons cash and cash equivalents were $483 million, and total debt was $641 million at the end of the quarter. Net debt to trailing twelve-month adjusted EBITDA leverage ratio was 0.5x.
FY21 Outlook: Parsons expects revenue of $3.6 billion - $3.7 billion (down from prior $3.85 billion - $4.05 billion) vs. consensus of $3.94 billion.
Adjusted EBITDA including non-controlling interest of 295 million - $315 million (prior $350 million - $375 million).
It expects Cash Flow from Operating Activities of $195 million - $215 million (prior $280 million - $310 million).
Price action: PSN shares are down by 18.2% at $30.7 during the premarket session on the last check Wednesday.

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