Q1 2024 Parsons Corp Earnings Call

Participants

Dave Spille; SVP, IR; Parsons Corp

Carey Smith; CEO; Parsons Corp

Matthew Ofilos; Chief Financial Officer; Parsons Corp

Tobey Sommer; Analyst; Truist Securities

Sheila Kahyaoglu; Analyst; Jefferies & Co.

Bert Subin; Analyst; Stifel

Andrew Wittmann; Analyst; Robert W. Baird

Alex Dwyer; Analyst; KeyBanc

Mariana Perez Mora; Analyst; Bank of America Merrill Lynch

Josh Sullivan; Analyst; The Benchmark Company

Louie DiPalma; Analyst; William Blair

Presentation

Operator

Good day, and thank you for standing by, and welcome to the First Quarter 2024 Parsons Corporation earnings conference call. (Operator Instructions) Please be advised that today's conference is being recorded. I would now like to hand the conference over to Dave Spille, Senior Vice President of Investor Relations. Please go ahead.

Dave Spille

Thank you. Good morning, and thank you for joining us today to discuss our first quarter 2024 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, Chairman, President and CEO; and Matt Ofilos, as 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 increased 2020 for guidance. We then we'll close with a question and answer session.
Management may also make forward-looking statements during the call regarding future events, anticipated future trends in 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, 2023 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 non-GAAP measures during this call, and we remind you that these non-GAAP financial measures are not a substitute for the comparable GAAP measures, and I will turn the call over to Carey.

Carey Smith

Thank you, Dave. Good morning, and welcome to Parsons First Quarter 2024 earnings call. We had a great start to 2020 for the reporting record financial results and fiscal year 2022 and 2023 for the first quarter of 2020 for our momentum continued with record quarterly results for revenue, adjusted EBITDA, adjusted EBITDA margin, contract awards and total backlog.
Our ability to leverage our strong balance sheet to invest in software and integrated solutions as well as to acquire companies with differentiated technologies is enabling Parsons to move up the value chain and win larger and more profitable contracts. Our team continues to perform at a high level, and our persistent focus on our six growing end markets is enabling us to capitalize on the tailwinds that are positively impacting both our Federal Solutions and Critical Infrastructure segments.
During the first quarter, we generated over $1.5 billion in revenue for the first time in our company's history and delivered organic revenue growth of 29%. So this is now the fourth consecutive quarter where organic growth exceeded 20%, making us an industry growth later and both our Federal Solutions and Critical Infrastructure segments. These strong results included double-digit total revenue growth across all four business units and major geographies. We also achieved quarterly records for adjusted EBITDA and contract awards.
Adjusted EBITDA grew 56% and contract awards increased 51% year over year. Total backlog also grew 8% to a record $9 billion , and we exceeded our cash flow expectations for the quarter. Our momentum is driven by our ability to deliver on our customers' missions whenever a new contracts, grow revenue on existing contracts, achieved strong win rates, efficiently manage costs and operate effectively and our two well funded and growing segments.
As a result of the first quarter performance, we are increasing our 2024 our guidance ranges for all financial metrics, which Matt will discuss on a few minutes.
During the first quarter, we achieved a book-to-bill ratio of 1.4 times on an enterprise basis, which included three contract wins over $100 million each. Parsons continues to win large strategic contracts across both segments, supporting national security priorities and unprecedented global infrastructure spend.
In our Federal Solutions segment, we continue to pursue contracts that focus on near-peer threats and require solutions that are driven by our exclusive is cyber space, missile defense, electronic warfare and information operations capabilities and critical infrastructure. We're pursuing projects that require high end design program management expertise and build on our legacy of delivering innovative solutions for complex infrastructure projects.
We are also aligned to geographic locations that receive high levels of global infrastructure funding. Strategic first quarter wins in our Critical Infrastructure segment include our selection by the Gateway Development Commission as the delivery partner on the $16 billion Hudson tunnel project, which we plan to book our portion of this contract in the second quarter of 2024, This milestone project is supported by the bipartisan infrastructure investment and Jobs Act and is slated to received nearly $12 billion in federal funding for largest investment for a mass transit project.
And modernized Parsons has won three of the largest North America transportation wins in our company's history. The Hudson River Tunnel, JFK International Airport Road base and New York Bay Bridge projects.
Parsons also won two significant contracts in Saudi Arabia during the first quarter, there was a new $87 million or three year contract. This project is for the development of a luxury mountain tourism destination and real estate development customers who by the Public Investment Fund of Saudi Arabia. The second award was $53 million contract for program management or free odds road network following a record in 2023 of 33% organic growth. Parsons continues to win work in the Middle East.
As a result of our strong trusted partner reputation. We expect continued double-digit growth in the Middle East in 2024 given our first quarter performance. Current backlog of work in our large pipeline of bid opportunities.
Strategic first quarter wins within our Federal Solutions segment include the option period awards totaling $970 million with a confidential customer. Also Parsons was selected by the United States Department of Labor to assist with planning management and oversight of that Job Corps facilities program. We are the sole authority on $115 million contract, of which we booked $46 million. Parsons has performed project management on this contract since 2013.
In addition, Parsons was one of two companies awarded obsession on an IDIQ contract by the National Nuclear Security Administration Office of Nuclear smuggling detection and deterrents. This $1 billion ceiling value contract to deploy global counter nuclear smuggling systems, reference events, new work for the company, and we were already awarded to task orders for $13 million. This strategic win is an important progression of our decades long legacy of serving local and national non-proliferation security missions .
In addition to the Department of Energy, we have supported customers, including the Defense Threat Reduction Agency Transportation Security Administration and the calorie weapons of mass destruction office and similar missions. We were awarded a $63 million firm fixed price contract by the United States Air Force lifecycle management center, of which we booked $44 million.
The scope is for a directed energy laser system. There's already neutralized more than 4,000 unexploited Ordnance and allows for there precise detonation of sub munitions cluster and general purpose bombs landmines, an artillery shells. This is the first round based laser system and production and has been deployed in Iraq, Afghanistan, and the Indo Pacific region where it demonstrated 100% effectiveness.
Finally, we were awarded a one-year based contract by the National Oceanic and Atmospheric Administration for system integration and cloud management services for their traffic coordination system for space. This contract is valued at $27 million, of which we booked the base value of $16 million. Under this contract, we will provide space situational awareness and space traffic coordination services to private and civil space operators.
We were able to win this strategic contract by leveraging the expertise, all of our space team that has supported the Department of Defense for nearly two decades. We are now providing space situational awareness solutions for both commercial and Department of Defense customers, and we are well positioned to pursue future global opportunities.
In addition to our contract wins, the Environmental Protection Agency recently issued the first national drinking water standards or protect communities from exposure to harmful PFS or forever chemicals. Epa estimates that 6% to 10% of the United States public drinking water systems will have to take action and to comply with these new and more restaurants includes $1 billion of newly available funding and as part of a $9 billion are investment from the bipartisan infrastructure bill to help communities to eliminate PFS and emerging contaminants from their drinking water.
Although the market in very early stages, we believe that PFS Mittal, Acacia and offers us significant future growth opportunity for a Parsons since we have the ability to investigate remediated tree and provide more monitoring and support services for our customers. We have already completed nearly 2000 and PFS investigations for industrial, commercial and federal clients. And we've designed and built and installed over 7,000 PFS point inventory treatment systems.
We also designed built and continue to operate three full scale treatment plants to remove PFS from drinking and wastewater . We estimate PFS is a $40 billion addressable market for Parsons, and we expect annual spending to grow into the next decade. We continue our 80-year history of cultivating our responsible enterprise. We are proud that we were named one of the world's most ethical companies by Ethisphere for the 15th consecutive year.
We also were recognized for delivering project excellence on three major infrastructure programs and honored for our diverse the equity and inclusion efforts and for being a Military Friendly Employer, the company's Newark, Liberty International Airport Terminal, a joint venture project was named the world's best new airport terminal by the global airport evaluation firms.
Skytrax for this project is just one of three North American airport terminals to receive a five-star rating from Skytrax.
Additionally, the two and five to 70 North design build project for which Parsons served as primary consultant, was selected as one of the American public work Association's 2024 transportation projects of the year. Finally, the American Council of engineering companies of New York recognized persons with the Empire award for the East Side Access project for his significant contributions to the growth, prosperity and better manner that community.
These recognitions reiterate Parsons commitment to successfully delivering on our customers' missions. In summary, we're executing on our strategy and delivering on our customers' missions as we continue to post record results and strong growth rates across all key financial metrics. Parsons has the right team and the right portfolio at a time when all of our end markets are growing between 5% and 12%.
Our team has consistently delivering double-digit growth across all four business units and major geographies. Our concerted effort to increase margins drove significant expansion this quarter. In addition, our cash flow and strong balance sheet are enabling us to continue to invest in technology and our employees to further differentiate our portfolio and explain the accretive acquisitions across both segments. This enabling us to win a significant amount of business as contract awards grew more than 50% this quarter.
As we look to the future, we have ample tailwinds in both segments and Federal Solutions. Near-peer threats are driving demand for our cyber space. Missile defense, electronic warfare information operations and critical infrastructure protection capabilities complement the unprecedented infrastructure spending across our global portfolio.
Our significant financial visibility is supported by base market tailwinds and by having less than 5% of our revenue up for recompete in 2025 and less than having a record total backlog of $9 billion, of which 61% is funded. Having $14 billion of contract wins that have not yet been included in our contract awards or backlog and having a $56 billion pipeline of opportunities to pursue.
Before I turn the call over to Matt, I wanted to thank and recognize the outstanding work of our talented employees for a decade. They have work to make our world safer, smarter, more sustainable and more secure.
With that, I'll turn the call over to Matt to provide more details on our first quarter financial results and our increased fiscal year 2020 and four guidance. Matt.

Matthew Ofilos

Thank you, Carey. This carrier indicated our momentum continued through the first quarter of 2024 and was highlighted by record results for total revenue, adjusted EBITDA, adjusted EBITDA margin, contract awards and total backlog. We're pleased with our double-digit growth across all business units. Our Q1 margin performance also put us on our way to a 40 basis point goal for the year.
Turning to our results. First quarter revenue of $1.5 billion increased 31% from the prior year period and was up 29% on an organic basis. Organic growth was driven by the continued ramp up on recent contract awards and execution on our backlog programs. SG&A expenses for the quarter were 14.4% of total revenue compared to 17% in the prior year period.
As we intentionally focused on efficient growth across the portfolio, we are realizing savings in areas to include facilities expenses while continuing to invest in oncology, new business capture and hiring retention initiatives. Adjusted EBITDA of $141 million increased $51 million or 56% and adjusted margin expanded 150 basis points to 9.2% from the prior year period. These increases were driven primarily by increased volume on the margin accretive contracts and the deliberate focus on cost management and controls.
I'll turn now to our operating segments. Starting first with Federal Solutions were first quarter revenue increased by $275 million or 43% from the first quarter of 2023. This increase was driven by organic growth of 41% and the contribution from pursuing tuck-in acquisitions. Organic growth was driven primarily by the ramp-up of recent contract wins and growth on existing contracts to include strengthen our spot cyber portfolios. Federal Solutions.
Adjusted EBITDA increased by $36 million or 65% from the first quarter of 2023, and adjusted EBITDA margin increased 130 basis points to 10.2%. The increase was driven primarily by increased volume on accretive contracts, effective cost controls and a favorable adjustment related to the achievement of program milestones.
Moving now to our Critical Infrastructure segment's first quarter revenue increased by $87 million or 16% from the first quarter of 2023. This increase was driven by organic growth of 15% and a nominal amount of revenue contribution from acquisitions. Organic growth was driven by higher volume in our Middle East and North America infrastructure. The portfolios critical infrastructure adjusted EBITDA increased by $14 million or 42% from the first quarter of 2023.
Adjusted EBITDA margin increased 140 basis points to 7.7%. The adjusted EBITDA increases were driven about higher volume on accretive programs and improved operating performance.
Next, I'll discuss cash flow and balance sheet metrics. During the first quarter 2024 weeks, some $63 million of operating cash, which was better than planned compared to prior year. The greater cash consumption was the result of timing of receipts. Additionally, there was higher incentive compensation given the company's strong fiscal year 2023 operating performance and increased employee base during the quarter. That DSO declined by 60 to 63 days.
Capital expenditures totaled $9 million continues controlled and remains in line with our planned spend of less than 1% of annual revenue while continuing to invest in strategic areas like classified facilities and Space Technology.
Turning to bookings. First quarter contract award activity increased 51% year over year to a record $2.1 billion for a book-to-bill ratio of 1.4 times. On a trailing 12-month basis, contract awards increased 41% and our book-to-bill ratio was 1.2 times. In our Critical Infrastructure segment, we achieved a quarterly book-to-bill ratio of 1.3 times in Q1. On a trailing 12-month basis, it was 1.1 times. This marks our 14th consecutive quarter with a book-to-bill ratio of one point or greater.
On a trailing 12-month basis, our book-to-bill ratio was 1.1 times. We remain optimistic that global infrastructure investment will continue to drive demand and new business flow into the future. Our Federal Solutions. Book-to-bill ratio for the quarter was 1.4 times and 1.2 times on a trailing 12-month basis.
We ended the first quarter with record backlog of $9 billion of $664 million or 14% from the prior year period. During the first quarter, we took advantage of positive market conditions and successfully issued $800 million of 2029 convertible senior notes to retire a portion of our $400 million convertible notes due in 2025. As a result, we were able to obtain an attractive interest rate of two and five base, which provides enhanced free cash flow to continue. Our demonstrated capital deployment strategy.
In addition, we entered into hedging transactions as part of this offering that protect shareholders from dilution of their share price of $131.76. We use the net proceeds from our new convertible note to repurchase approximately $285 million of our prior $400 million convertible notes, and we expect to address the remaining knows at or before their August 2025 maturity.
We intend to use the remainder of the net proceeds from the new offering for general corporate purposes, potential acquisitions into funds, working capital related to the Company's growth, thanks to strong investor demand for this offering. We achieved beneficial terms for the Company from a well-timed and efficiently execute a transaction. The transaction, capitalize on the strength of Parsons business performance and balance sheet to achieve two key objectives.
First to raise capital at the lowest all-in cost available to Parsons, and second, to minimize potential deal listen to our current shareholders by retiring the existing convertible and issuing a new convertible at a higher share price.
The transaction resulted in a $214 million pretax charge to our GAAP net income and impacted GAAP EPS by $1.50 per share. Excluding this impact, GAAP EPS would have been $0.49 per share, has charges primarily due to the strength of the stock price increasing to a level above the conversion price of our original vertical bond. These GAAP charges have been excluded from our adjusted EBITDA and EPS calculations.
Our balance sheet remains strong as we ended the first quarter with a net debt leverage ratio of 1.6 times compared to 1.4 times at the end of the first quarter of 2023 will continue to effectively use the strength of our balance sheet to make additional internal investments and accretive acquisitions that support our long-term growth objectives.
Now let's turn to our guidance. We are increasing all of our 2024 guidance ranges to reflect our record first quarter results . Recent large contract wins and option awards positive end market exposure in our favorable outlook for the remainder of the year. For 2024, we are increasing our revenue range by approximately $350 million to $6.1 billion to $6.4 billion represents total revenue growth of 15% at the midpoint and 14% on an organic basis, which is approximately double the growth rates of our prior guidance.
Additionally, we are increasing our adjusted EBITDA range. We now expect adjusted EBITDA to be between $535 million and $575 million, which represents 19% growth at the midpoint of the range and continues to exceed revenue growth. Margin at the midpoint of our increased revenue and adjusted EBITDA ranges remains at 8.9%, which is 40 basis points above our fiscal 2023 results.
We're also increasing our cash flow guidance for the $140 million, the midpoint of guidance range. We expect free cash flow conversion to be approximately 100% of adjusted net income. Other key assumptions in connection with our 2024 guidance are outlined on slide 11. In today's PowerPoint presentation located on our Investor Relations website.
In summary, we had a very strong start to the year with great top and bottom line results, and we exceeded our cash flow expectations. We also completed a successful financing transactions and are confident in our ability to achieve our increased 2020 for guidance ranges.
With that, I'll turn the call back to Carey.

Carey Smith

Thank you, Matt. In closing, I'm very pleased with our start to 2024. We delivered record results for revenue, adjusted EBITDA, adjusted EBITDA margin, contract awards and total backlog. We also achieved 29% organic revenue growth, which was driven by strong growth across all four business units and major geography base, giving us the confidence to raise all of our guidance metrics.
Looking forward, I'm excited about our business given the ample tailwinds that we have in both segments. Our strong backlog and pipeline, low grade to peak levels and robust balance sheet that will enable us to continue to invest in the business and make accretive acquisitions additions to drive future revenue growth and margin expansion. With that, we will now open the line for questions.

Question and Answer Session

Operator

(Operator Instructions) Tobey Sommer, Truist Securities.

Tobey Sommer

Thank you. The first question that comes to mind is how does do you think Parsons seems which seems to be the systematically how your win rate for new Federal Solutions contracts since certainly is an industry norm because the rate of organic growth with the companies posted, as you know, almost seems or other worldly for this industry?

Carey Smith

Yes. Thank you, Toby, and good morning. So we're very pleased with our ramp win rate of 78% so far within the quarter. And this is up from our win rate last year of 66% in the prior year of 49%. I would say a couple of things.
First is I think all four business units are really hitting on all cylinders. We've made a conscious effort to strategically position ourselves in six markets on their all markets are growing, and we're fortunately winning business across all six of those markets.
We've also had the strategy of moving up the solutions value chain and both through internal investment as well as through M&A, being able to bid and win larger, more strategic to more profitable jobs. And I think as a testament to that, we had 15 wins last year were greater than $100 million starting off this quarter with three of wins greater than $100 million.
So again, I would say it again, both segments, all four business units are really hitting on all cylinders . We have the right team, the right profile at the right time.

Operator

Sheila Kahyaoglu, Jefferies.

Sheila Kahyaoglu

Good morning, guys, and great quarter. Thanks, Joel. And then I wanted to maybe start out with FST. know like 0.1% organic growth. I don't think I've ever seen that for a defense contractor. So maybe you could give us a little bit more detail on what drove that. You mentioned fiber in your prepared remarks that I believe on. So if you could give us some sense outlined there and how we could see that growth continue through the year here?

Carey Smith

Yes. So the federal growth was very strong at 41%. And also we had a ceiling Tech acquisition that was included in our tailwind of recent wins. It did include our cyber portfolio, some of the contracts we've had like our CDS contract, CCMS., both venture. Those have all seen growth. We also won some work with a confidential customer. And fortunately, that contract was able to ramp up very quickly.

Sheila Kahyaoglu

Okay. And then if I could ask about the three turns, the contracts discriminatory from Han Hudson River 10 on JFK and Newark and carry, you gave those a shout out. So how do we think about the scope of those and the dollar amount on an annual basis and the duration?

Carey Smith

Yes. So let me start with of JFK. JFK was $830 million contract for us. And basically our stock will be upfront. So it's going to be over the first three years. And you'll be happy. I know we will improve the roadways. We're going to make it much easier to get in and out of JFK Airport, which I know we're all looking forward to on the next one, I say.
So Newark Bay Bridge, which is basically we were selected by New Jersey Turnpike Authority is the final designer to replace the vintage of Robert Kelcy, Alico of Bridge, which was called the Newark Bay Bridge . And so on that one on your going to see that a period of Perform since basically over about a five-year period, delighted to be the designer to do that NewBridge. And this basically built upon our bridge reputation where we've designed and built over 4,000 bridges around the world . So significant strategic win for us.
The last one I'll say on probably the one that we're most proud of is the gateway program, the largest mass transit investment on in the U.S. Some recent history. There's going to be, as I mentioned on the call, $16 billion of funds going into this, and we will be the project money manager for it. So the Hudson tunnel project, where we're going to be improving the capacity of the reliability and resiliency for commuter and intercity rail transit in this line served 800,000 daily passengers from DCs in New York, New Jersey and New England really critical project for the region and area.
And we're just delighted to be a partner and supporting the gateway Development Commission is or integrated delivery partner.

Operator

Bert Subin, Stifel.

Bert Subin

Hey, good morning. I wanted to ask maybe first question for you, Matt. If we think about the margin set up, I think the sort of past you talked about at Investor Day, it was sort of sequential improvement over a three-year period and critical infrastructure. And you know, what we're seeing is it seems like that's on track, but Federal Solutions as sort of stepped up from that 9%or low 9% range. What should we expect? Is there an opportunity for Federal Solutions margins to remain ele vated? Or were there some one-time things that keep that in that double-digit range?

Matthew Ofilos

Yes, good question. But I would say when you think about federal, you've heard Terry and I talked previously that we're pretty we're pretty happy with where federal sits from a margin perspective kind of low to mid nines. I will say you'll probably see a little bit of a shift to a little bit more fixed price this quarte r. And so that's an intentional goals trying to drive additional fixed price to help drive margin. So we did see so we could see some additional help on the federal margins.
But to your point, our long-term goal is to get the Critical Infrastructure business trending toward double digits. And that's kind of just the slowdown which we get there. But yes, absolutely. The within Q1, we had federal middle smaller pickup in their release to some contract completions . But all in all, again, really happy with the the EBITDA performance within the quarter puts us well on our way to the 40 basis points of improvement year over year.

Bert Subin

Just a clarification there, Matt, on the critical infrastructure side, I mean, I think you have one more project that's wrapping up second half. Should we expect that the margin as a little bit of a hockey stick as we get later in the year? Or do you expect it to be more sort of progress in of sequentially improving at a slower rate?

Matthew Ofilos

Yes, it's improving at a slower rate. That's the program specifically is kind of out. It's not necessarily loss. It's kind of breakeven. So you'll start to see some improvement. But certainly but to your point, we're really excited. We wrapped up one of the two challenge programs in Q1. And then the second one is due to wrap up late Q3, early Q4. So really and on track and integrate, please?

Carey Smith

Yes, data that I'll just I'll highlight. Just how are you going to highlight that? Sorry, I think we have done that one project about $20 million to write down last year. So that will eventually become a tailwind for us when that project has wrapped up in the third quarter. We're excited the product programs, our 92% done. We've completed all the key technical hurdles to show the system works. So it's just a matter of finishing it up for our customer.

Bert Subin

Got it. And just one follow up on the Middle East. There's been some noise I think, earlier this year, just around Neon getting scaled back from the 105 mile initial plan to 1.5 miles. I assume that initial plan was probably never viewed as too realistic of a timeframe. But as you think about that and I'm just curious what impact you've seen in the region. It seemed like in the quarter were flat sequentially on a seasonal basis is still pretty good when you're talking double digit growth. So is it having any impact? Do you expect any sort of acceleration of the region?

Carey Smith

Yes. So name was actually rephased in 2023. We had both this into our plan on that line is still going to be 105 miles long. But what they've changed as the duration that basically they're going to do a mile and a half by 2030. But the scope is still the same, again from Monroe overall perspective as the program manager, we will be on from the start to the finish this project. So it doesn't necessarily impact our work.
Just to highlight overall in the range. I know we've been in the Middle East region for 60 years. We've been in Saudi Arabia for 50 years. We have a 50-50 partnership with Saudi company. So we're kind of seeing as Saudi and the work that we do, and that's why they trust us with their most critical projects.
Saudi Vision 2030 was set up to transform the company country and diversify away from oil. So how do you look at doing things different from an eco nomic basis? So social basis in our cultural basis, and we're involved in nearly every major projects going on in Saudi, including me on the line, earmarks have gone to be the world's largest Entertainment City dair y or the restoration of Saudi's history, King Salmon Park, which can be four to five times size, Central Park, King, Abdullah financial district city.
That's going to be driven and led by a lot renewables. I mean, in addition, the underlying 100% renewable city than our most recent win, all should all of which is going to be a new luxury tourism destination. So when you look at our Middle East growth results for the quarter of 19% is still substantial, and we continue to win a lot of work there.

Operator

Andrew Wittmann, Baird.

Andrew Wittmann

Great. Good morning and thank you for taking my questions. Matt, maybe for you. I just wanted to understand a little bit more about the updated outlook here. I mean, what are you just kind of look at you don't guide quarterly, but when I look at your results versu s consensus in the guidance range to kind of feels like most of the raise was due to our performance in the quarter rather than a change of outlook for the rest of the year.
But I thought I would have you kind of on offer some thoughts on how you're thinking about the remaining of the year this quarter versus how you saw last quarter. Maybe if you could just quantify for us, but the pickup in the federal segment grew. Can just understand how much will help that was in the quarter.

Matthew Ofilos

Yes, happy to do that. And I think the way the way we looked at it as of Q1 was up about in the ballpark from plans. The first half of that happened in Q1. So think about $50 million to $60 million per quarter through the end of the year. From Q2 to Q4, we are expecting 10%-ish growth in both segments, plus or minus a point, depending on which segment you're looking at. But all in all, really happy with the performance in Q1, a good proportion of the page to come in federal to your point.
So I think that the $350 million lift is about half of it was Q1. And then the red as spreads Q2 to Q4.

Andrew Wittmann

Within the size of the pickup of a milestone payment.

Matthew Ofilos

Those are just under $5 million, or $4.5 million.

Andrew Wittmann

Got it. And then thank you for the contracts that you give us. You gave us the contract scope that's been awarded, but not in backlog, soldier total pipeline. Sometimes you guys talk also about the amount of awards that you've submitted that are waiting noticed. Just kind of curious if you have an update on that once you can just from a bid process is converting into awards?

Carey Smith

Sure. So to start with the pipeline, we have a right now, $56 billion pipeline within their $117 million -- or 117 programs that are greater than $100 million in value. The award and not booked, as you mentioned, is $14 billion, and that's comprised of basically half of it is option years on contracts that we've been awarded. The other half is awarded sailing as a single award departments.
So we do expect about 50% that to convert within the next three years. Awaiting notice of award amount is $4.5 billion within the $4.5 billion or 11 awards greater than $100 million. And again, just very pleased with the start to the year with 78% win rate.

Operator

Alex Dwyer, KeyBanc.

Alex Dwyer

Hi, good morning and thanks for taking my questions. So I just wanted to expand on the $56 billion pipeline, which I think slightly down from last quarter. It's not just a function of all the wins you've had in the quarter with 1.4 book to bill and then the pipeline, how does that split between the six business units? Is there like one or two of those that are driving a bigger share of the pipeline are one or two that are smaller? So any thoughts on that would be helpful.

Carey Smith

Sure. So the pipeline is very close to what it was last quarter. I t hink it's within $2 billion. And the pipeline is really driven by to your point when we did win some of the significant work that was previously in the pipeline on, but it's still above our largest pipeline that we've ever had in our company's history.
Most of the pipeline tends to be compete? Yes, I'd say it's more slanted towards federal because we have a little more line of sight longer term and the federal business. So if you look at all four of the business units, though, are heavily represented within the pipeline and again, all for the business units are delivering and winning.

Alex Dwyer

Thank you. Can I ask about the acquisition strategy for this year? How many deals would you expect to close on this year? Could there be larger smaller? And maybe if you're seeing any heightened competition for acquisitions this year versus last year?

Carey Smith

Yes. So we plan to acquire two or three companies this year, we're going to continue to be very selective. Last year, we passed on over 100 company. So we regularly are looking at companies, but they have to meet our strict financial criteria of growing greater than 10% on the top line. And having pillar bring greater than 10% EBITDA margin.
Our plan is on still device for capabilities were not buying for scale. We think we've shown we don't need to buy for scale. We've been able to move up the value chain and bid and win larger jobs through capabilities and technology differentiation. So when you look on the federal side, we're going to continue to look at companies that have cyberspace, electronic warfare and information operator.
And when you look on the critical infrastructure side, we're going to focus on our Tier one stage, which are really Texas, Florida, California, New York and New Jersey. Even though we do business in all 50 states, those are the ones that will receive their predominant amount of the infrastructure investment and Jobs Act funding. As far as a heightened competition at this point, I'd say it's still pretty similar to what we saw last year.
There's an expectation, I know on by a lot of the bankers that the number of deals just going to go up in 2020 before. But I would say, as of first quarter, we haven't seen a significant change. We're going to continue to pay on our valuation, which has been around the 10 to 13 times range.

Operator

(Operator Instructions) Mariana Perez Mora, Bank of America.

Mariana Perez Mora

Good morning, everyone. Carey, you mention you're growing this fast because you have the right team, the right profile the right time. And I could argue you're already looking at the right place to expose yourself to the critical the infrastructure bill. But how do you think about organic or inorganic skills capabilities that you have to development to continue to be with these profiles and be able to continue to capture these type of growth?

Carey Smith

So I would say a couple of points in that regard. First is it's important to hire, retain and develop the best talent. So we are a company that focuses on people. First, we pride ourselves on having a differentiated culture where people can come in and be fully engaged in the business were not a huge company. So we still have kind of that agility and entrepreneur as some of a small business.
But yes, we have the breadth and depth like a large company to be able to win new programs. I would say we also invest in research and development to make sure we're on the leading edge. Two great examples of research and development projects I touch upon would be artificial intelligence and pieces.
Within artificial intelligence. We're applying artificial intelligence across our entire portfolio. We use that as an enabler in areas like camera, unmanned air systems, how do you identify, detect and track and unmanned vehicle that's coming in. We used in areas like cyber security, twofold, they are one.
How do you detect and adversaries next move? And another example would be if you're looking at our printed circuit board, how do you determine if it's been tampered with on their critical infrastructure side, we're applying artificial intelligence to areas like energy. You have distributed energy res ource management system. As you start to add renewables, how is your load going to change? How are your payment terms going to change relative to that? We also use it for cyber compliance for energy and water sectors and then where you're seeing for predictability on traffic flow.
So I'd say artificial intelligence is a critical enabler for the business. The other areas piece that we expect the PFS s market, as I mentioned, to be a $40 billion addressable market for Parsons. We've already completed the 2,000 investigations, 7,000 point of use entries for households. We've also done over 71 projects to remove off. We are still forming film, which is basically the film that is on facilities for Department of Defense assay.
So we see that as a very robust marketplace. But I'd say it all comes back to having the right people to deliver their customers' missions as we move up the value chain and both of our segments.

Mariana Perez Mora

Thank you. And as a follow-up to the PFS addressable market, how largest defense today, how should we think about the growth over the next decade as you reach the $40 billion at Target and like the market and help our margins on those developments?

Carey Smith

Yes. So currently, our environmental remediation portfolio is about 12% of Parsons revenue. And if you look at growth of PFS over the next update, I would say work, but at the very early stage s. So we've done all these and the hub of its guidance for the minimum contaminant levels and people you're going to have the city's companies. We're going to have start moving forward with remediation. There's also the language, for example, in the NDA that the FDA is going to have to remediate it cites the margins are accretive to our business unit margins.

Matthew Ofilos

That's a more and especially when we get out to the remediation phase, obviously, in the early phases, when it's more studies, it's more kind of T&M. But when we get onto applying IP in the longer term remediation, the margins are accretive even more accretive.

Operator

Josh Sullivan, The Benchmark Company.

Josh Sullivan

Good morning. Will address on the on the labor availability questions. Can you just give us some perspective just on inflation, regional access retention?

Carey Smith

Sure. So we've been able to hire and retain people, and that's obviously what's been driving our organic growth. Our hiring goals to achieve our midpoint of revenue this year are about the same as what we delivered last year. And we haven't seen much of a change in terms of the labor market.
Our retention continues to be better than industry benchmarks and both of our segments from an inflation perspective, I would say it's going to be pretty similar to last year. And what we saw not much of a difference and because on many of our contracts, 44% on the federal side are reimbursable, we do get a large part of that reimburse.
And then on their critical infrastructure side, most of those projects, if you exclude the mine jobs, tend to have shorter duration. So we don't have significant inflation from a regional perspective, are easiest area at a higher remains the Middle East because we recruit from over 40 countries around the w orld. So I think that will continue and probably our next Asia would be critical infrastructure or in general, across North America, the hardest area to hire and recruit and retain is federal the people that have the clearances. So that is where we put a lot of focus.
I think we've done several things very well there, including REN, robust into term program where we bring in hundreds of interns, we start to get their clearances, had a very early stage. We also we have a unique ability compared to our peers where we have our commercial business. So we can start people working in our commercial business, getting cleared and have a move over.
But I think, again, it goes back to our culture. And when you look at our company, we're very mission focus, whether it's national security or infrastructure, but we've been very unique culture. And that's what our true Maxim retained to people at Parsons closer to one that you please.

Operator

(Operator Instructions) Noah Levitts, William Blair.

Louie DiPalma

Carey and Dave, good morning. This is Louis DiPalma. All right. On the federal side, how much of the elevated demand do you view as being driven by the various geopolitical conflicts around the world? And are you seeing specific work for cyber missile defense and electronic warfare associated with Ukraine, Israel and on the specific missions? Or is it more along the lines of every day projects that you're seeing the elevated demand for?

Carey Smith

Yes. Thanks, Louis, for the questions. I would say on the confidential work that we're doing is related to a global requirement. And so yes, that would tie to international demand talking more broadly about international and total Parsons currently is in 30 countries around the world. And if I look specifically at you, Ukraine, the opportunities that we have there today, we're doing Radeon RX emulators.
We also were recently awarded in Air Base air defense task order to provide integrated air and missile defense system across some of the NATO countries. And then we're working for the Defense Threat Reduction Agency on the eastern flank. So that includes areas like you, Ukraine, Poland, Baltics, and we're seeing a higher demand there.
The AutoNation includes the mining environmental remediation to be able to get people back to live in Ukraine and then the ultimate the rebuild of Ukraine talked about on the Middle East conflict. I would say that we are engaged to support with cyber and electronic for a fair bit to be able to counter threats and be able to protect our troops and the personnel on the region. And then the other regions I'd like to mention is of Endo Paycom, which where we see significant opportunity.
The FY25 budget at $9.9 billion for the Pacific to turn some initiatives. This was up 8.8% from the applied to for budget. Parsons has been in Guam for 30 years, providing support for public works. We're doing defense of Walmart for the Missile Defense Agency, and we have a contract to assess munitions explosive materials for hazardous removal also in support of the Missile Defense Agency.
And we built there our field and we're currently building housing units and looking at other opportunities across tha t region. And then in Hawaii, we have about 130 people that support critical cyber and intelligence missions internationally and all the regions I just mentioned other capabilities that person's provides includes border security, counter unmanned air systems, electronic security systems, cyber and electronic warfare. And then another thing that has come up as a result of the conflict is the shortage of munitions and ammunitions.
So under the Army modernization plan, there's $4.5 billion put there or to modernize the Army ammunition facilities. And we're heavily involved in both Houston and Radford for modernization.

Louie DiPalma

Thanks, Carey. Obvious you out on a kind of exposure to these conflicts. And on the other side of the business, you've answered your question about the three New York, New Jersey mega projects. But as it relates to the infrastructure, Bill funding, are there many others have these types of mega projects across the United States in the pipeline that are up for bid right now ?

Carey Smith

Yes, fluid, what we're seeing are bigger projects, and we're seeing the projects come to fruition. Once the bill was passed in November 2021, the state and local also started to put up their funding because they knew the federal funding was secure . So we've seen a lot of projects move forwar d. I think that's reflected in our 14th consecutive of quarters of greater than 1.0 book-to-bill growth. And I would say at those Tier one U.S. states that I mentioned, specifically Texas there several on greater than $100 million range to $100 million to $500 million projects coming up there.
Los Angeles. As worried about, you know, they have to host the Olympics coming up as well as the World Cup. And then the New York New Jersey area continues to modernize after receiving a significant amount of funds. Amen, Florida would be the final one where we've seen it on both transportation opportunities as well as water wastewater.
It's nice to see the funds flowing and more importantly, the projects move going forward. We don't expect that the peak until about the 27 timeframe. And then we expect a tail after that. It's like six to eight years. And there's already talk about how do we keep the infrastructure going. So maybe an infrastructure bill to is there on many.

Louie DiPalma

Is there much demand in the pipeline for for bridge infrastructure? They were the incident close by you in Baltimore, and there's been a lot of studies recently about just deteriorating bridges in aging and process picture. Do you see a role for parcels that play there in terms of the design of a new, more resilient bridges?

Carey Smith

We do and we can play one of two roles. We can play a program management role, which we've done and we can play a design rule on the Baltimore bridged, by the way, the key bridge. There's going to be an Industry Day held this week on that opportunity. But yes, we are seeing an opportunity bridges in the last report published by AST. were rated very poor. And so they both need to be upgraded, better maintained . And then in some cases what we're seeing, you know, in the New York New Jersey area rebuilt.

Operator

That's all the time we have for questions. I'd like to turn it back to Dave Stille for closing remarks.

Dave Spille

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 seeing many of you over the coming weeks. And with that, we'll end today's call have great day.

Operator

This concludes today's conference calls. Thank you for participating. You may now disconnect.