Parsons explains its acquisition synergy efforts

After a 2023 that saw Parsons Corp. close three acquisitions, the company has now identified how it plans to go about achieving what it calls "crossover" success from those buys.

The way Parsons sees things, that means finding more synergies between its federal and critical infrastructure businesses.

During Parsons' fourth quarter earnings call with investors Wednesday, chief executive Carey Smith laid out more of the company's blueprint for doing so.

Smith told analysts that Parsons has not "factored in revenue or cost synergies as we've made these acquisitions, so anything that we get is above and beyond."

But that merely describes where Parsons starts from in how it approaches the post-close aspect of its acquisitions.

Smith's first example of synergies was IPKeys, whose customer base primarily comprises energy and water providers. Parsons completed its purchase of IPKeys in March.

"In addition to selling those customers their capabilities, we can also sell the broader Parsons capabilities in those market areas," Smith said. "Likewise, we can take their products to our current utility and water wastewater customers and sell that."

IPKeys is also part of a new Parsons product line called CyberScape that also includes contributions from the Sealing Technologies business acquired in August.

"SealingTech really expanded our presence in defensive cyber," Smith said. "We were strong in offensive, now we can cover full-spectrum cyber operations."

Parsons' third acquisition of 2023 closed in October and was I.S. Engineers, a transportation engineering consultancy headquartered in Texas.

The Lone Star State has been allocated $30 billion in total transportation funding from the Infrastructure Investment and Jobs Act between 2022 and 2026.

"This acquisition adds critical infrastructure talent and strengthens our portfolio in this large and growing state," Smith said.

Fourth quarter revenue of $1.5 billion was 35% higher than the prior year period with an organic growth rate of 34%, while profit of $128 million showed a 30% year-over-year increase in adjusted EBITDA (earnings before interest, taxes, depreciation and amortization).

Full-year sales of $5.4 billion were 30% higher than those of 2023 with an organic growth rate of 23%, while adjusted EBITDA of $465 million showed a 32% increase on the bottom line.

Parsons' initial guidance for 2024 sees revenue in the range of $5.8 billion-to-$6 billion and adjusted EBITDA of $505 million-to-$545 million.

The company also ended 2023 with a total backlog of $8.6 billion, of which approximately $5 billion was reported as funded.