Parsons' agenda for 2025 after zeroing out State Department contract

Parsons Corp. has essentially zeroed out a confidential State Department contract for the rest of 2025 due to uncertainty with that customer and its massive reorganization plan unveiled over the past week.

More than 3,400 employees and 45% of the State Department’s structural entities are being included in the downsizing and consolidation plan, which involves the shuttering or reassignment of at least 300 offices and bureaus.

Speaking Wednesday at an investor conference hosted by Baird, Parsons’ chief executive Carey Smith said that plan eliminates the program office responsible for the contract and creates some uncertainty.

Smith told attendees the company is in year number three of that 10-year contract, which covers program management work and technology services.

But a Securities and Exchange Commission filing posted Monday quantifies how Parsons is apparently not counting on anything from that contract in its outlook.

Parsons now sees full-year revenue of between $6.45 billion and $6.65 billion, down from its prior forecast of $7 billion to $7.5 billion.

That new range removes anticipated financial effects from the contract after June, which is when the company says it can no longer estimate the size and scope of work.

The company posted $6.8 billion in sales for 2024, so that new guidance signals a decline of between roughly 2% and 5%. U.S. federal government work represented approximately 59% of the 2024 revenue profile, according to Parsons’ annual report. 

Profit expectations were also lowered to a new range of $590 million-to-$630 million, compared to the prior outlook of $640 million-to-$710 million in adjusted EBITDA (earnings before interest taxes, depreciation and amortization).

Much of Parsons’ uncertainty surrounding its contract stems from President Trump’s Jan. 20 executive order to halt some foreign aid contracts, which did not directly affect the contract in question.

But Smith said the pause of a different contract caused the one Parsons holds to run at 80% of volume in the first quarter, then 50% in the second quarter.

“We have assumed that for June, we would be demobilizing. But it could trickle on. Of anything that would come out after this time, we would disclose separately,” Smith told attendees at the Baird Global Consumer, Technology & Services Conference.

On the workforce front, Smith said the company “will basically reassign a handful of people” from that contract.

So where does Parsons go from here, now that the company has “zeroed the contract” for the year as Smith put it?

Centreville, Virginia-headquartered Parsons expects the rest of the business to grow 14% organically in 2025 and is touting its work with the Federal Aviation Administration as a key cog in that expansion engine.

The company is in year two of its potential 10-year, $1.8 billion contract with the FAA that covers broad engineering work with an infrastructure modernization angle. Roughly $306.9 million in order volume has flowed through that contract to-date, according to Deltek data.

Parsons’ relationship with the FAA dates back over four decades under the Technical Support Services Contract and its predecessors.

Smith said the company’s work spans permitting, site access, design, program management and construction management functions for all of the FAA’s systems including those for air traffic control.

In May, Transportation Secretary Sean Duffy unveiled a sweeping air traffic control modernization plan that FAA officials have said they need $22 billion to carry out.

Lawmakers on the House Transportation and Budget Committee have budgeted $12.5 billion for the effort, an amount that is in a reconciliation bill for FAA modernization.

“They've laid it out over a four-year period,” Smith said of the plan. “Once the funding is authorized, they're ready to go and that four-year clock will start moving.”

A second pathway Smith highlighted in Parsons’ February earnings call, and again on Wednesday at the Baird conference, pertains to its Missile Defense Agency customer and the work to build out the Golden Dome for America.

Golden Dome is of course the Trump administration’s envisioned system for protecting the U.S. from missile attacks. MDA issued a request for information in late May to preview the contract for Golden Dome, aptly named SHIELD, and a draft solicitation is due to be out any day now.

Parsons is in year three of a potential seven-year, $2.2 billion contract at MDA that covers broad systems engineering, integration and technical support work.

The company’s status as an integration partner of MDA dates back four decades and is also the line of work for Golden Dome that Parsons is watching closely.

As Smith told the audience, “a lot of the systems are out there” to begin with and will become part of Golden Dome.

“They just need to be put together, to be able to provide coverage across the United States for unmanned air systems, cruise missiles, hypersonic missiles, all the way up to intercontinental ballistic missiles,” Smith said.