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Ladies and gentlemen, thank you for standing by, and welcome to Parsons First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would like now to turn the conference over to your speaker today, Dave Spille, Senior Vice President, Investor Relations. Please go ahead, sir.

Thanks, Michelle. Good morning, and thank you for joining us today to discuss our first quarter 2025 financial results. Please note that we provided presentation slides on the Investor Relations section of our website. On the call with me today are Carey Smith, Chair, President and CEO; and Matt Ofilos, CFO. Today, Carey will discuss our corporate strategy and operational highlights, and then Matt will provide an overview of our first quarter financial results, as well as a review of our 2025 guidance. We then will close with a question-and-answer session. Management may also make forward-looking statements during the call regarding future events, anticipated future trends and the anticipated future performance of the company. We caution you that such statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. Actual results may differ materially from those projected in the forward-looking statements due to a variety of factors. These risk factors are described in our Form 10-K for fiscal year ended December 31, 2024, and other SEC filings. Please refer to our earnings press release for Parsons' complete forward-looking statement disclosure. We do not undertake any obligation to update forward-looking statements. Management will also make reference to non-GAAP financial measures during this call. We remind you that these non-GAAP financial measures are not a substitute for their comparable GAAP measures. And now I will turn the call over to Carey.

Thank you, Dave. Good morning. Welcome to Parsons' first quarter 2025 earnings call. We are pleased with our performance this quarter as we achieved record first quarter results for total revenue, net income, earnings per share, adjusted EBITDA and adjusted EBITDA margin. In addition, total backlog and funded backlog are at all-time highs. We also delivered a $52 million year-over-year improvement in our operating cash flow, achieved our best employee retention since 2020, and we reported a 1.1 times book-to-bill ratio, which was supported by a 1.4 times ratio in our Critical Infrastructure segment. We achieved these results despite our confidential federal contract operating at a reduced volume compared to 2024. As we reported last quarter, our contract has continued. However, a related contract was paused due to a presidential executive order, which has caused lower volume on our work. On today's call, we continue to provide transparency and to illustrate the strength of our entire portfolio and the growth we're experiencing in the rest of our business, we will discuss revenue results both with and without this confidential contract. Additionally, we are reiterating all 2025 guidance metrics. As stated last quarter, the guidance midpoint is aligned to the negotiated value of option year two of the confidential contract. As we wait for the decision on this important mission to proceed, I commit to investors that we will continue to deliver best-in-class execution across the entire portfolio. In the Critical Infrastructure segment, we are capitalizing on unprecedented spending in both North America and Middle East infrastructure markets. In the United States, this is particularly exciting, given the current infrastructure spend is not expected to peak until 2028, and we'll have a six to eight year tail after that. In addition, discussions on the next surface transportation bill are already underway. Our focus on hard infrastructure such as roads and highways, bridges, airports, rail and transit has bipartisan support and is a priority for the new administration. In the U.S., we continue to win some of the largest and highest priority projects in our company's history, recognized by engineering news record in the top three companies in three categories we are punching well above our weight class. Our Middle East infrastructure business also continues to excel. Where we're the number one program manager throughout the region. In Saudi Arabia, we're involved in nearly every major project throughout the Kingdom as we help them achieve Saudi Vision 2030 and prepare for the upcoming world events, including the Asian Games, the World Cup and the Expo. The expected public investment fund giga project spend for infrastructure is $1.3 trillion by 2030. In the UAE, we're experiencing significant growth as Abu Dhabi implements their urban evolution program and Dubai to place their 2040 master plan. Also, Qatar has a National Vision 2030 objective, which is driving our expansion in that country. The focus of the Gulf Cooperation Council countries on trade and tourism, diversification and a booming real estate market is accelerating infrastructure demand. Given our six decade history in the region and proven performance on delivering new complex projects, we are well positioned to continue to capitalize on these long-term tailwinds. Representing 46% of Parsons Q1 revenue, we expect our global infrastructure portfolio to continue to thrive, not just this year, but well into the next decade. In our Federal Solutions segment, we're excited about the upward momentum in the defense budget with the congressional Republicans releasing a budget reconciliation bill that would increase defense spending in the coming years by $150 billion. Our portfolio aligns with major budget reconciliation areas, including missile defense, munitions, Pacific and nuclear deterrence, border security and more. In addition, plans were unveiled for the first potential $1 trillion defense budget in fiscal year 2026. Parsons portfolio alignment to 10 of the 17 priority areas outlined in the February 2025 Department of Defense memo is encouraging. Since we anticipate 8% of the budget to be realigned to these focus areas for each year across the future year's defense program. Parsons strong position and differentiated capabilities in integrated air and missile defense, aviation modernization, space superiority, counter unmanned air systems, cyber operations, electronic warfare, munitions and border security as well as our geographic presence in the Indo-Pacific region will enable us to capitalize on this increased spending. We are a non-traditional company that was purpose built to be agile and innovative, and we're, therefore, pleased to see the administration's focus on software acquisition pathways, commercial solutions opening and other transaction agreements to enable us to rapidly deploy solutions that are operationally relevant. This approach aligns very well with our strategy that's been in place since the day that I became the CEO of Parsons to be an advanced solutions integrator that differentiates with software. Parsons organic investments and strategic acquisitions have positioned us as a technology leader in important emerging national security markets including artificial intelligence, assured position, navigation and timing, cyber, signals intelligence and biometrics. And finally, our synergistic national security and infrastructure portfolio uniquely positions us to help solve some of the world's most difficult challenges. These include critical infrastructure protection of our utilities, water, facilities, transportation and health care systems. PFOS, PFAS, emerging contaminant elimination. Aviation modernization for both the Federal Aviation Administration and Global Airports. Events Management, such as the upcoming Olympics, World Cup and Expo. Rebuilding of cities, towns and countries throughout the world and energy resilience. We are excited about the unique growth aspects at the intersection of critical infrastructure and Federal Solutions and how we've been able to leverage our differentiated portfolio. Moving to our first quarter results. Record total revenue for the first quarter was $1.6 billion, a 1% increase over the prior year period and a 2% decline on an organic basis. If you exclude the revenue impact from our confidential contract, our total and organic revenue growth rates would have been 11% and 7%, respectively. These results are in line with the mid-single digit or better organic revenue growth target we provided on our fourth quarter 2024 earnings call. This growth validates the strength of our portfolio and our alignment to national security and infrastructure priority spending areas. Margins were exceptionally strong in the first quarter as we achieved record first quarter adjusted EBITDA margins of 9.6% at the enterprise level and 10.3% within our Critical Infrastructure segment. Our margin expansion is driven by our emphasis on our infrastructure core competencies, including program management, owners engineer and design engineering. This deliberate focus and performance execution drove 40 basis points of margin expansion in the first quarter of 2025. For the total year, margins are projected to expand 30 basis points after expanding 50 basis points in 2024. We also delivered record first quarter net income and earnings per share. Additionally, cash flow results were favorable as a result of strong collections in both segments. During the first quarter, we achieved a book-to-bill ratio of 1.1 times on an enterprise basis, driven by strong win rates of 68% and large contract wins. For the first time since our IPO, we exceeded $1 billion in quarterly contract awards in our Critical Infrastructure segment and achieved our 18th consecutive quarter with a book-to-bill ratio of 1.0 or greater. In our Federal Solutions segment, award activity met our expectations with a book-to-bill ratio of 0.9 times. In addition, this is the seventh consecutive quarter where our pipeline has exceeded $50 billion, illustrating the demand for our solutions and only the second quarter in the history of our company with a backlog of more than $9 billion. We continue to win large strategic contracts across both segments and all six end markets. In this quarter, we were awarded four contracts that each exceeded $100 million, demonstrating the demand for our Federal Solutions and the national security alignment of our portfolio, three of the four wins greater than $100 million in the first quarter were in our Federal segment, and we won an additional $95 million federal contract during the quarter. And just after the quarter ended, we were awarded another new federal contract valued at greater than $100 million. With that background, let me discuss our first significant first quarter wins. We were awarded an option year totaling $243 million on our general services administration contract. This for both new and continuing defense work, delivering global quick reaction capabilities to leverage advanced technology solutions across the old domain battle space. This award is part of our cyber and intelligence end market, which continues to achieve double-digit revenue growth after two years with growth of more than 20%. We received $232 million in option year funding from a confidential customer in our critical infrastructure protection market. We were awarded a follow-on program and construction management contract in Dubai valued at over $200 million. In the UAE, we're seeing continued growth in both our transportation and urban development markets. An additional $125 million ceiling value modification was added to Parsons cyber threat hunt forward program. In Space and Missile Defense, we received a new $95 million contract for operational fielding and sustainment of the United States Air Force Europe, Air Defense early warning capability to U.S. and NATO partners across the European Command area of operations. And after the first quarter ended, we were awarded a new five year task order for cyber assessment work, supporting the Defense Threat Reduction Agency. This single award contract has a ceiling value of $138 million. During the first quarter, we acquired TRS Group, an industry leader in PFAS, thermal and holistic environmental remediation, having cleaned hazardous and toxic substances from soil, ground water and fire suppression systems for global clients. This $37 million acquisition enhances Parsons environmental remediation capabilities in both operating segments and serves as a force multiplier for our industry leading PFAS remediation solutions. As a testament to the importance of ethics and integrity in our company, we are proud to be named one of the world's most ethical companies by Ethisphere for the 16th consecutive year. In summary, I am pleased with our first quarter results as we achieved records across the financial metrics. In addition, we leveraged our balance sheet and closed an accretive acquisition and opportunistically executed on our share repurchase program. Our balanced portfolio and 6 growing and profitable end markets are enabling us to achieve mid to high-single digit organic growth across the company, excluding the confidential contract. Simultaneously, our adjusted EBITDA continues to expand faster than our top line, resulting in margin expansion. In Critical Infrastructure, we're capitalizing on unprecedented global infrastructure spending and leveraging our strong position and reputation in the North America and Middle East markets. In Federal Solutions, our portfolio is aligned with the new administration's national security priorities as well as their desire to deliver fast, innovative and operationally relevant solutions that outpace near peer threats. As we look to the future, we have long-term tailwinds in both segments. In addition, we have record total backlog of $9.1 billion, of which 69% is funded. Approximately $12 billion of contract wins that we have not yet booked. A $55 billion pipeline that includes over 100 opportunities that are worth more than $100 million each and 19 opportunities worth more than $500 million each and we have only 2% of our revenue up for recompete in 2025. As a result of these tailwinds and the proven confidence I have in our team's ability to deliver strong financial results, I'm extremely excited about our bright future and our ability to continue to drive long term shareholder value. With that, I'll turn the call over to Matt to provide more details on our first quarter financial results. Matt?

Thank you, Carey. As Carey indicated, our first quarter results were highlighted by record revenue and profitability despite headwinds on our confidential program. Excluding this one contract, the company is delivering results in line with expectations through strong execution in six end markets aligned to critical infrastructure and national security priority spending areas. Turning to the details of our results. Total revenue of $1.6 billion for the first quarter of 2025 increased 1% from the prior year period and was down 2% on an organic basis. Excluding our confidential contracts, total revenue growth was 11% and organic revenue growth was 7%, driven by double-digit growth in our cyber, transportation and environmental remediation markets. SG&A expenses for the first quarter increased 10% from the prior year period, but decreased 8% from the fourth quarter of 2024. This year-over-year increase was primarily driven by the inclusion of recent acquisitions. The sequential decrease was driven by a reduction in incentive based compensation and transaction related expenses. SG&A expenses for Q1 were 15.7% of total revenue compared to 14.4% in the prior year period. Adjusted EBITDA of $149 million increased 5% from the prior quarter -- from the first quarter of 2024, and adjusted EBITDA margin increased 40 basis points to 9.6%, a first quarter record. The adjusted EBITDA increase was driven by accretive acquisitions and improved program performance partially offset by a shift in contract mix. I'll turn now to our operating segments, starting first with Federal Solutions, where the first quarter total revenue decreased 7% from the prior year period and 9% on an organic basis. Excluding our confidential contract, Federal Solutions revenue increased 8% and 6% on an organic basis. These increases were driven by growth on existing contracts and the ramp-up of new task order wins, specifically in the cyber and intelligence markets. Federal Solutions adjusted EBITDA decreased by 18% from the first quarter of 2024, and adjusted EBITDA margin decreased 120 basis points to 9%, driven primarily by contract mix. As anticipated in our guidance, strong growth on strategic cost type programs will impact federal margins in 2025, while the business continues to execute well. Moving now to our Critical Infrastructure segment. First quarter revenue increased by $86 million or 14% from the first quarter of 2024. This increase was driven by organic growth of 8% and inorganic revenue contributions from our BCC and TRS acquisitions. Organic growth was primarily driven by the ramp-up of recent contract wins in our North America business unit. Our Middle East business also grew but was impacted by the timing of holidays and new business ramp. Large long-term contracts and recent wins in the Middle East are expected to drive additional growth in the second quarter of 2025 and continue for several years. Critical Infrastructure adjusted EBITDA increased 51% from the first quarter of 2024, and adjusted EBITDA margin increased 260 basis points to 10.3%, a company record. These increases were driven primarily by the ramp-up of new programs, accretive acquisitions and stronger program performance. Next, I'll discuss cash flow and balance sheet metrics. Our net DSO at the end of Q1 2025 was 58 days, a five day improvement from the prior year period and a record low for the first quarter. During the first quarter of 2025, we consumed $12 million of operating cash compared to use of $63 million in the prior year period. The $52 million improvement was driven by higher net income and strong collections in both segments. Capital expenditures totaled $13 million in the first quarter of 2025 compared to $9 million in the prior year period. CapEx continues to be well controlled and remains in line with our planned spend of approximately 1% of annual revenue. Higher 2025 CapEx spend is focused on strategic classified facility expansion, product investments and enterprise systems improvements, which all support long-term growth and efficiency for Parsons. Free cash flow conversion was 125% on a trailing 12 month basis, with an intentional focus on contract execution, settlement of legacy claims and improved cash management and collections. Our balance sheet remains strong as we ended the first quarter with a net debt leverage ratio of 1.6 times, including the impact of our all-cash TRS acquisition. In addition to deploying capital for M&A, our Board of Directors recently increased our stock repurchase authorization to $250 million to drive incremental shareholder value. During the first quarter, we repurchased approximately 424,000 shares at an average price of $58.95, for an aggregate purchase price of $25 million. The $25 million in share repurchase was a quarterly high and reflects our confidence in the company's strategic direction, predictable cash performance and our commitment to return capital to shareholders. Inception to date, we've repurchased approximately 2.1 million shares at an average price of $48.98 for an aggregate purchase price of $105 million. $225 million of authorization remains under our current increased share repurchase program, and we'll continue to be opportunistic regarding future purchases. Turning to bookings for the quarter. We reported contract awards of $1.8 billion, representing a book-to-bill ratio of 1.1 times on an enterprise basis, 1.4 times in our critical infrastructure and 0.9 times in Federal Solutions. As Carey mentioned earlier, our Critical Infrastructure segment achieved its 18th consecutive quarter with a book-to-bill ratio of 1.0 or greater. On a trailing 12 month basis, our book-to-bill ratio is 1.0 times on an enterprise basis, 1.2 times in Critical Infrastructure and 0.85 times in Federal Solutions. Our backlog at the end of the first quarter totaled $9.1 billion, a company record. Additionally, our funded backlog is the highest since our IPO at 69%. Now let's turn to our guidance. We are reiterating all of our 2025 guidance ranges provided on February 19, based on our financial results for the first quarter of 2025 and our outlook for the remainder of the year. We expect total revenue to be between $7.0 billion and $7.5 billion. This represents 7% growth at the midpoint of the range and 5% growth on an organic basis. Excluding our confidential contract, we expect total revenue growth of 18% and organic revenue growth of 15%. We are pleased with our record total and funded backlog, approximately $12 billion of contract wins that we have not yet booked and $55 billion pipeline and our exceptional win rates. Adjusted EBITDA is expected to be between $640 million and $710 million with a margin of 9.3% at the midpoint of our revenue and adjusted EBITDA guidance ranges. This represents adjusted EBITDA growth of 12% and margin expansion of approximately 30 basis points from 2024. We continue to expect cash flow from operating activities to be between $420 million and $480 million. Other key assumptions in connection with our 2025 guidance, including quarterly cadence are outlined on Slide 13 in today's PowerPoint presentation located on our Investor Relations website. With that, I'll turn the call back over to Carey.

Thanks, Matt. During the quarter, we achieved record top and bottom line results, improved operating cash flow and reported a book-to-bill ratio of 1.1 times. Our unique and synergistic portfolio is a differentiator for Parsons and we'll continue to benefit from unprecedented global infrastructure spending as well as a federal portfolio that's aligned to the new administration's priorities. Our strategy of moving up the value chain is an advanced solutions integrator that differentiates with software has been working and will continue to position us well for the future. Our demonstrated ability to expand margins and deploy capital on strategic acquisitions will drive long-term shareholder value. We are very excited about Parsons future, and I think all approximately 20,000 employees worldwide for their ability to consistently deliver results. Thank you for your support, and we will now open the line for questions.

Thank you. [Operator Instructions] And our first question comes from Andrew Wittmann with Baird. Your line is now open.

Great. Thanks for taking my questions, and good morning. I guess I'm going to start with this kind of a technical question here for Matt. Just in the Critical Infrastructure segment margins were actually -- were very strong this quarter, over 10% and it's been kind of the place where you're kind of trying to get to for some time. And I guess my question is, it looks like the 10-Q says there was no big adjustments on any kind of percentage of completion or anything? Were there any closeouts or anything that contributed unusually to that margin performance in the quarter because obviously, the first quarter is seasonally not usually a particularly strong quarter yet your results were. So I was hoping that you could just speak to that in a little bit more detail, please.

Yes. Thanks, Andy, and good morning. Thanks for the question. Great question. Yeah. As Carey and I have mentioned for a couple of years now, we're really excited about the underlying performance of the CI business. Obviously, we've had the headwinds related to the legacy programs that dragged the margins down last year, CI was just below 7%. But in Q1, we did not have any favorable adjustments, whether through claims or pickups or anything. So really, as I mentioned, no negative impacts of substance either. So this is just really the underlying business performing on its backlog and the new business and the accretive acquisitions we've done as of late. So really great sign of the long-term expectations of our CI business.

What's the implication for the balance of the year, if it's this strong in the seasonally weak quarter? Should we read anything into like the momentum in that business for the balance of the year then, because it seems like you'd be tracking well above what your plan would be for that segment?

Yeah. So total year, Andy, we're expecting the CI margin as the midpoint of guidance is about 9.1%. So we do -- we have some final closeouts, some change orders, some claims, things like that, that we've got to get through on final completion on these contracts. But I think all-in-all, again, the underlying performance of that business is quite strong. Middle East is mid-teens margins. So really, really great performance across the entire portfolio. And the next three quarters are just driven by getting through the closeouts on these legacy programs.

Got it. And then, Carey, just on the Middle East, I think there was a comment in your prepared remarks related to the Middle East talking about how you're expecting a little bit better growth as the year goes on. I think there are some comments about larger contracts in the Middle East maybe with a delayed start or delayed ramp. Maybe you can clarify that comment a little bit more. But can you just talk to what's behind maybe a little bit slower start on some of these larger contracts and what gives you confidence that they are indeed going to ramp just vis-a-vis the overall economic environment given oil prices, I guess?

Yeah. Thanks, Andy. So, we have won some larger contracts. If you look last quarter, we announced two large contracts greater than $275 million. Those were a little slower to ramp than what we anticipated. And we did have more holidays within the quarter than what usually occurs within Q1. We are very well positioned once again in Saudi Arabia. What we're seeing is a big emphasis around Riyadh and focus on getting ready to be on the world stage in 2029 for the Asian Games. Followed by the Expo in 2030 and the World Cup in 2034. Once again, we're kind of on every major program there. Riyadh brings some roads. We were awarded a sole source traffic management contract, King Abdullah Financial District. Qiddiya, the world's largest entertainment city. Jeddah City, we're going to be the program manager for the new state in there for the World Cup. So really great performance. We've got a hiring demand of over 200 people per month, we're going to be hiring. So expecting double-digit results from that business for the full year. Very much on track. I'd say in addition to that, we're seeing a lot of strength out of the UAE. In fact, if you look at Saudi, UAE and Qatar, we are over double-digit in each of those with UAE being about 30% growth, driven by the reasons that I mentioned in terms of diversification, the real estate market booming. So a lot more infrastructure transportation projects.

Okay. I’ll leave it there. Thank you so much.

Thank you.

Thank you.

And our next question will come from Mariana Perez Mora with Bank of America. Your line is open.

Good morning, everyone.

Good morning, Mariana.

So my first question is about the solicitation award environment. I'm surprised to see like quite resilient award environment or backlog for Federal Solutions. I'd like to know, if you can add any color about like post continuing resolution extension and with this reconciliation, if you have seen any speeding up of the solicitation environment and what are your expectations for the full year?

Yeah. Thanks, Mariana. So, we were pleased because Q1 is traditionally a slower quarter for the federal business. So we were pleased with 0.9 book-to-bill. We expect over 1.0 for the full year. And again, at the Parsons level, we've been over a 1.0 book-to-bill since our IPO. As far as continuing resolution, this one was a little bit different and that they can add new funds and they can also shift funds around. A good example of that is the $138 million cyber award that we received just after the quarter end shows that new funds can be allocated. The reconciliation bill, I'm particularly excited about. As you're aware, the House marked up the bill yesterday. And the House bill will now be sent to the House Budget Committee. They'll compile it with the bills from 10 other committees, and that will become the reconciliation bill. The goal of the House Republicans is to pass the bill by Memorial Day and then send it to the Senate, and the objective is that the President would like to sign it by July 4. I'd say what we're particularly excited about is what was in the bill. When you look at $150 billion defense package and typically, a reconciliation bill could be spent over 10 years. But the view is that this is going to be very front end loaded and could be spent over a window as short as a two to four year period. There was $25 billion for Golden Dome Missile Defense. As you recall, we've been supporting Missile Defense Agency for four decades. The real key with Golden Dome that you need to get new systems out there for space based interceptors, but it's really about integrating a lot of the systems that exist. And we're currently the system engineering technical support contractor for MDA. The munitions production budget of $21 billion. We're currently involved in modernizing several of the largest Army ammunition plants Holston and Radford. So we think that's a good indication for the future there. Expediting innovation to the war fighter was for $14 billion as a company that was purpose built to drive innovation to get solutions out fast and on non-traditional firms, we see that as a very good move. Nuclear deterrence of $13 billion, the areas there that we're looking at are risk reduction on the Sentinel program. Once again, Parsons has been the intercontinental ballistic missile engineer of record for every intercontinental program. And then, there's also money that is going to be allocated towards system improvements on the existing Minuteman program, which was a Parsons design. $11 billion for the Pacific deterrence initiative. We've been positioning out in the INDOPACOM region for the last three decades and have a strong position. Then there's an additional $15 billion for FAA modernization for radars, facilities and personnel controllers. Parsons holds the facilities contract $1.8 billion ceiling with $1.5 billion remaining. So, we look forward to quickly helping the FAA modernize. And there's an additional over $50 billion for border security. We've done border security for two decades around the world. So that's an area that we plan to tap into and there's additional funding to support security for the Olympics and the FIFA World Cup. Parsons has been involved in Olympics, World Cups and Expos since 2016. So reconciliation bill, we're really pleased that that's moving forward. And then, I just quickly say for FY '26, I mentioned that, that's going to potentially be a $1 trillion budget. There's 10 of the 17 priority areas aligned to Parsons activities, including Southwest Border, nuclear modernization, homeland missile defense, counter unmanned air systems, cyber security, munitions and more. So very happy with federal budget alignment.

Thank you so much. That was great color. And then, if I can follow up on the confidential contract. I know you are limited to what you could say, but I don't know if you can share any color around -- remember last call, you defined a program as like steps 1 to 5, and you are managing steps 1 to 4, and there's this fifth step that didn't depend on you. Have they resolved how they manage this last piece of the mission or not? What are your expectations there? And how is the program trending so far in terms of like volumes versus last year and how that compares to your expectations for the full year?

Yeah. So, as a reminder, January 20, President Trump signed an executive order, it was 14169, which mandated a reevaluation of the United States foreign assistance program. And so, it paused some obligations and disbursements for a 90 day period to review the programs to see whether the aid spending still aligns with U.S. interest. On April 17, they announced that the foreign assistance review was going to be extended by an additional 30 days or until mid-May. We're not sure if that will complete on time or if it will receive a further extension. So, as of today, our contract continues. It is at a reduced run rate. For the first quarter, we were at about an 80% run rate and it wasn't our contract that's been paused. But to your point, it's a related contract that's been paused. If we receive any material positive or negative information in mid-May or later, we'll make sure to update you as needed.

Thank you so much.

Thank you.

And our next question comes from Tobey Sommer with Truist. Your line is open.

Thank you. Carey, I appreciate the illustrative examples for the new budget alignment. I'm curious, if there's been anything on the other side of the ledger relative to DOGE or perhaps civil agency activities where investors broadly seem to think there's the most risk that activities could be diminished going forward?

No, Tobey, we've seen 2 contracts. They were in South Africa that were canceled, it was less than $3 million annually. That's really been it. I would say on the DOGE side, for us, our engagement has been rather positive. The example I'll use is Federal Aviation Administration, the DOGE team has come in to see how we can accelerate the aviation modernization efforts to improve aviation safety. So at this point, because we don't do work with the agencies like IRS, Veterans Affairs, USAID, Department of Education, Department of Agriculture, all the ones that have been impacted by DOGE and we're also not an IT consulting firm. We don't appear in the top 100 when you run consulting firms. We don't anticipate an impact there.

I'm curious, do you think that there will be material and tangible change towards fixed price contracting and if so, what kind of change in order of magnitude may result?

Yeah. So I would say, first, we -- our business is 60% fixed price time and material, 40% cost reimbursable. If you look at critical infrastructure, we're about 75% fixed price time material, 25% cost reimbursable. Whereas on federal, we're about 45% fixed price time material, 55% reimbursable. So net-net, we are very used to working in a fixed price type of environment. We have not yet seen any contracts shifted, we have talked with our customers on areas that we feel they could go to a fixed price model, where it's work that we've been doing for a long time, and we'd be comfortable working in a fixed price environment. But at this point, we have not yet seen that movement. I think their priority has really been on the various agencies and also the consulting.

And then, if I could just ask a last question on the M&A front, what are your expectations for the balance of the year? And do you have -- are you seeing more or less opportunities in any -- on either side of the business?

Yeah. So, we expect to do two to three acquisitions this year. We obviously already acquired TRS Group, so that's one. We have a robust pipeline still both within Federal and within Critical Infrastructure. It would be great if we can do 1 acquisition in each this year. But I'd say the pipeline continues. Critical Infrastructure, probably a little more robust. Some federal companies are kind of uncertain on whether to go to market right now. Given that we do our deals preemptively though, on the federal side, these are generally companies we've been courting for quite a while that want to be with Parsons.

Thank you.

Thanks.

Thanks, Tobey.

[Operator Instructions] Our next question will come from Sheila Kahyaoglu with Jefferies. Your line is open.

Good morning, Carey, Matt, both.

Good morning, Sheila.

I want to focus on the revenues. I'm sorry, I'm going to have to ask you so many questions on this confidential program and how we think about it. So maybe broader actually. On Slide 13, you point to a sequential increase in Q2, but it still implies sales are about flattish year-over-year or down low single organic. So when we think about the first half, second half dynamics. What drives that second half inflection? And maybe more broadly, you're targeting 15% organic growth for the full year, I think. How do we think about that ramp-up?

Yeah. So excluding the confidential contract, we're targeting 18% total growth, 15% organic to your point. First, I'll start with Critical Infrastructure. We've had 18 consecutive quarters greater than 1.0 book-to-bill. We've won our largest contracts in the United States over the last 18 months to 24 months in the company's history. In the Middle East, we're involved in pretty much every major program going on in Saudi Arabia, and I mentioned double-digit growth in all three of our major countries. So a lot of ramp-up is going to occur on the work that we've already won. Within federal business, our cyber area, probably I'd highlight, in particular, in our GSA contract has experienced tremendous ramp. And then we've also obviously just awarded a brand new cyber contract that we're going to expect to ramp. We've been driving work over to our ceiling contracts. So if you recall, we have $12 billion of awarded, not booked, that's work that's been awarded to Parsons that we haven't reflected in bookings or backlog. Out of that, about half is ceiling contracts. So we've done a great job of driving new and continuing work over to those contracts. And then once again, the reconciliation will help as soon as that starts to take place, which could be as early if they really get it signed by July, we could start to see programs moving forward as early as August.

Got it. Thank you so much. And then maybe one on just the FS margins then being at 9%. The confidential contract, I think, is accretive. So just how do we think about the path to get back to 9% or sorry, how do we get to the high 9% range back again?

Yeah, Sheila. I would say, our goal for this year was mid-9s for the federal business. There's a couple of contributing factors. Obviously, as you noted, the fixed price volume from the confidential contract coming down, puts a little bit of pressure on. But we've also, as Carey mentioned, ramped up quickly on that GSA Fed some work that is, of course, cost type. So a faster ramp in cost type. If you look year-over-year, our cost type within Federal has gone from 45% to 55%, so a pretty substantial shift in mix on the federal side. Overall, federal business is performing quite well. No real charges or anything like that. It's really just kind of the mix of work that we're executing on. For the total year, we are expecting about 9.5%. So you will see a ramp as kind of the confidential contract comes back in. And as we see kind of stabilization on the cost type and new fixed price work and acquisitions have a bigger impact. So overall, we're happy with that 9.5%-ish based on the portfolio and the strong growth on cost side.

Thank you so much.

Thanks, Sheila.

Thank you.

And our next question comes from Gautam Khanna with TD Securities. Your line is open.

Hey, thanks. Good morning, guys.

Good morning.

Good morning.

Just to clarify, I wanted to ask again about DOGE. So have you guys had extensive dialogue with the DOGE liaisons at some of your customers? And literally, the result is only a couple of contracts of de-minimis values that have been removed or is this still an ongoing dialogue so that we could actually see something more substantial in terms of negative impact a quarter or two from now. What's your best guess on that?

Well, so first, it's my understanding that DOGE met with consulting firms, and I mentioned earlier, we're not a consulting firm. So we have not had discussions in that regard. The only area really that we've had discussions are on how to accelerate the FAA modernization, which has received $15 billion in the reconciliation bill that we spent over three years. And so we were very pleased. Our team was engaged through our customer on how can we help accelerate that initiative. So our discussions have been positive.

Yes. So Gautam, just as an example, on the FAA, we talked a lot about accelerating permitting and different approvals that are required and kind of, how quickly we can get capability to the end users. And so that's kind of been the majority of the discussions around DOGE to-date.

Okay. And there was some discussion early in the quarter from the new administration on stopping offensive cyber operations against Russia and what have you. And I know you guys are involved in some of that type of activity, and there was no discernible impact from some of those initiatives on the business?

Yes. We don't expect offensive cyber capabilities to be stopped. We continue to support our customers in that area and have been continuing to receive new awards.

Got you. And just on the confidential contract with respect to guidance, I think just to be clear, the midpoint assumes what you assumed at the beginning of the year, right, that it will get to whatever rate you anticipated it to get to, which is still down year-over-year. I want to make sure that -- and then -- is that right?

Yeah. That's correct. Our 2025 guidance is aligned with the negotiated value of our option year two contract.

Which is down from 2024.

And given that Q1 seemed to be underrunning that rate, is there -- it's first -- like in May or whenever, if they go ahead and say, let's turn it back on at full rate. Is there enough time to catch that under that underrun level from Q1 up in the year? And if not, if you could just quantify what is that delta?

Yes. We believe there is. And again, we've been running at 80% run rate, but there would be after that May date on continuation of the contract, we would anticipate a surge to meet the mission requirements.

Yes. So Gautam, we're tracking kind of demand signal and funding, and both of those have remained constant.

Okay. And last one for me. It sounds like bookings since the quarter end also seemed pretty upbeat. I'm just curious, what are you seeing broadly in terms of procurement pace, pace of adjudications in the second calendar quarter? And do you expect a big flush in the third calendar quarter of the year as we typically have.

Yes. So I'd say procurement has been on track. We look at the volume of proposals we submit. If you look last year, we submitted about $13 billion in proposals Q1, we were over $3 billion in proposals. So we're on kind of that same pace. Yeah. I would say that at the end of the third quarter, there usually is a big flush and we're using our current IDIQ vehicles between now and then as well to drive work to those.

And do you expect Q2 to be pretty strong with respect to the contract awards given what you have outstanding?

We're estimating over 1.0 for every quarter.

Great. Thank you, guys. I appreciate it.

Thanks.

[Operator Instructions] And the next question comes from Josh Sullivan with The Benchmark Company. Your line is open.

Hi. Good morning.

Good morning, Josh.

Just going to keep it to one here. Just given the dynamics around DOGE, various programs being curtailed, buyouts being offered, what are you seeing on the hiring front for cleared personnel? Are you better positioned to hire and access more of your backlog going forward?

Yeah. So let me start with retention, which has been great. We have our best attention since 2020. Very pleased with that. And I'd say people are kind of happy with the company in the direction we're going, so they're staying. From a hiring perspective, we've been doing a very good job also. We obviously would not be able to achieve the organic growth rates that we have over the last two years or the projected 15% organic growth rate without the confidential contract this year without getting that necessary hiring. So I'd say we're doing pretty well. There's actually more federal workers available, and so we are looking at hiring cleared federal workforce.

Thank you for the time.

Thank you.

And our next question will come from Alex Dwyer with KeyBanc Capital Markets. Your line is open.

Hey, thanks. Thanks for taking my question. Good morning.

Good morning, Alex.

Hey. So I think last quarter, you had mentioned a $54 billion pipeline. And several hundred million dollars and some $500 million awards. Apologies if I missed it, but did you provide an update on this today and how it trended in the first quarter? And I guess -- should we think of your 68% win rate as you pursue this pipeline? Should we expect this to sustain or should we ultimately expect this to come back down to defense industry averages?

Yeah. So our pipeline is $55 billion this quarter, and we have about 114 opportunities greater than $100 million, 19 opportunities greater than $500 million, so very robust pipeline. We're pleased with the win rates we've been achieving. It's roughly about 100% on our recompetes and 60% on our competitive. We kind of plan to about 40% to 45%, but I would say the team has done a great job of being able to win not just recompetes but also a competitive business. So we'll keep our same playbook.

Got it. Okay. And I appreciate the 2% recompete exposure comment for this year. But I guess as we're thinking about next year, I think the confidential contract was supposed to be rebid in February, but did that get exercised early in the rebid or is that really the only major contract as we think about 2026 recompete or are there any other larger ones we should be thinking about?

That's really the only major one that we would be looking at for 2026 and we'd be estimating somewhere around the 10%.

So Alex, the period of performance on this option year two that we're executing under right now goes February '25 to February '26.

Okay. Thank you.

Thanks.

Thanks.

That is all the time that we have for questions. I would now like to turn the call back over to Dave Spille for closing remarks.

Thank you for joining us this morning. If you have any questions, please don't hesitate to give me a call. We look forward to speaking with many of you over the coming weeks. And with that, we'll end today's call. Have a great day.