Parsons drops 22% as $118M in charges force guidance cut

Parsons Corp. reported second-quarter normalized adjusted EBITDA of $161 million, up 8% from a year earlier, as $118 million in non-recurring charges tied to portfolio exits and a weather-related joint-venture project prompted management to lower full-year guidance.

"The quarter was highlighted by strong core operational performance," Chair, President and CEO Carey Smith said. The company's normalized adjusted EBITDA margin expanded 70 basis points to 10.1%, she said.

Total revenue rose 8%, with Federal Solutions growing 11% on a normalized basis and Critical Infrastructure up 5%. The non-recurring items included a $77 million loss on two remote Federal Solutions contracts held for sale, a $41 million charge on a Critical Infrastructure joint-venture project disrupted by historic rainfall in June, and a $19 million gain from the sale of two advisory contracts.

Parsons lowered its 2026 revenue outlook to a range of $6.2 billion to $6.5 billion, down $300 million at the midpoint from prior guidance. Adjusted EBITDA guidance was cut to $500 million to $560 million, reflecting the $118 million in charges. The company attributed $85 million of the revenue reduction to planned divestitures, $125 million to a lower infrastructure ramp and timing of new awards, and $90 million to Federal Solutions timing issues including a protest on a large new award.

Contract awards totaled $1.9 billion in the quarter, up 24% from a year earlier, producing an enterprise book-to-bill ratio of 1.2 times. Federal Solutions bookings rose 51% year over year with a 1.3 times book-to-bill ratio, while Critical Infrastructure posted a 1.1 times ratio for its 23rd consecutive quarter at or above 1.0 times. Total backlog stood at $9.3 billion, with funded backlog of $6.6 billion up 6% year over year.

Critical Infrastructure adjusted EBITDA increased 18% to $97 million, with margin expanding 140 basis points to 11.9%, driven by accretive growth in the Middle East and improved North American mix. Federal Solutions normalized adjusted EBITDA declined 5% to $64 million, with an 8.2% margin, as lower volume on a confidential contract and a greater mix of materials and subcontractor work weighed on results. Management expects Federal Solutions margin to expand to 9.4% in the second half, supported by product sales and acquisition contributions.

Smith said the company sold two Systems Engineering and Technical Assistance contracts because the advisory work created a potential organizational conflict of interest with a development opportunity for an intelligence-community client that is "8 to 10 times larger" and carries stronger margins. Parsons also signed a letter of intent to exit two remote-location programs that faced staffing and supply-chain challenges.

The stock fell 21.8% in the session, its steepest decline in recent history, as investors weighed the guidance reduction against the core operational strength. The company reaffirmed its target of converting more than 100% of adjusted EBITDA into free cash flow for the full year. Smith said Parsons continues to expect mid-single-digit or better growth from its 2026 base and 10 to 20 basis points of margin expansion, with demand across defense, cyber, space, transportation, water and Middle East infrastructure markets. Investors will watch the third-quarter earnings call for progress on the protested contract and the pace of the infrastructure ramp.

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