Good morning, everyone, and welcome to Parsons 2023 Investor Day. I'm Dave Spille, Senior Vice President of Investor Relations for Parsons, and it's my pleasure to welcome you here today and kick off this event. I wanna sincerely thank every one of you for being here today and for all the people online as well. I know it's a lot out of your busy schedules, but we certainly appreciate the support and all you do for us. Obviously, we're really excited to be here today and share with you all the incredible work that we're doing across the company. In terms of the agenda, we'll begin today's session with Carey Smith, Chair, President, and CEO, and she'll provide an overview of our strategic vision and investment thesis.
We'll have a panel discussion with the presidents of each of our four business units, and then Matt Ofilos, our CFO, will provide a financial overview of Parsons. Carey and Matt will actually do a live Q&A session, and that will actually conclude the formal portion of the day. We'll also have a couple technology demos outside the back of the room, so beyond the glass doors, after we finish up the Q&A, please grab some lunch and eat, and go to the back of the room and check out what we have. We're gonna show you some of our space capabilities, as well as what we're doing in the PFAS market. I should also mention that today's presentations will be archived on the investor relations section of our website.
I need to remind you that any statements we make today could be considered forward-looking statements under applicable law. Please refer to the safe harbor language at the beginning of the presentation and incorporate that into any transcript or replay of the event. Before we begin and bring Carey up to the stage, I'm excited to share a short video with you that provides an overview of how Parsons is creating the future of national security and global infrastructure, as told through the voices of our own employees. Again, thank you all so much for being here today. Appreciate the support and hope you enjoy the event, and have a great day. Thank you.
Good morning. Welcome to Parsons Corporation Investor Day. Thanks, everybody, for taking the time to join us. It's hard for me to believe that it's been nearly four years since we completed our IPO. Our company's undergone significant evolution since that point in time. Today, I could not be more proud of our 17,000 employees that are working around the globe in support of our customers' critical missions, advancing critical infrastructure and advancing national security. I'm very proud of our company. I'm proud of our people. I'm proud of our leadership team, as you will hear throughout the day. I would say, most importantly, I'm extremely excited about our bright future. We are in six growth markets that are all simultaneously growing. We'll spend some time talking about those. We're very well positioned for 2023 and beyond.
I wanna spend a minute and tell you about that evolution that's occurred since May 2019. We completed the IPO. Over the next year and a half, two years, we decided to shape our portfolio. Specifically on critical infrastructure, we exited pure construction work, we got back to what is our core roots. That's design engineering, program management capabilities, and owners' engineer or engineering rep for the customer. What we did on the federal side was continue to make acquisitions. We have now bought over nine companies, counting the company that we announced yesterday, within the last five years. What we've done with that portfolio is migrated it to be a portfolio that can position to outpace near-peer threats. Today, we have a different management team, we have a different Wall Street philosophy, we also have a synergistic and differentiated portfolio.
When I took over as CEO in July of 2021, I revamped the executive leadership team. In fact, only myself and our General Counsel, Mike Kolloway, were on the executive leadership team at that time. I hired and promoted leaders from internal that I had a lot of confidence in, and I brought in some new people from the outside. This was an important pivotal point in changing the company's trajectory for the future. In addition, I also brought in a new Wall Street philosophy, which was to make sure we established measured guidance that we would outperform. Fast-forward, as you look at the second half of 2021, and you look throughout 2022, Parsons has consistently delivered results. In fact, we were the industry leader in organic growth in 2022 at 9%.
We were one of the top leaders in growth in both of our segments, with 12% in critical infrastructure and 6% organic growth in federal. As we look forward to the future now, I wanna talk a little bit about 2023 and beyond. Parsons is focused on creating the future of national security and critical infrastructure. We like to call that Imagine Next. Imagine that we will be the integrated delivery partner for the new city called NEOM The Line, a city being built from the sand next to the Red Sea in Saudi Arabia. This is gonna be a city that's as high as the Empire State Building and as long as Long Island. It's gonna be a city that is 100% run on renewables. It's gonna be a city that has no cars, no carbon emissions.
We're excited to be on the ground floor of that project. Imagine Next. Imagine how we will use digital twin technology to apply it to one of the world's busiest airports to be able to improve asset operations and improve visualization. Imagine Next. Imagine how we're using artificial intelligence technology to find bugs, rogue parts, tampering on a printed circuit board and prevent foreign exploits. Imagine Next. Imagine how we're doing identity management so that if somebody improperly tries to enter our embassies and consulates around the world, that we're able to stop them within minutes from doing that. Imagine Next how we're able to provide operationally efficient access to space and commercialize space ground operations. This is the future for our customers. This is the future for Parsons. I want to talk about why invest in Parsons. There's 6 reasons.
First, we have an experienced, committed management team that delivers results. We had 9% organic growth. We also had two beaten races throughout 2022, and we're gonna committed to the targets that we're gonna show you today for 2023 and beyond. Second, we have a people-first culture and a mission focus that attracts what we call destination employees. People come to Parsons. People stay at Parsons. Again, that's reflected in our organic growth we've had. When you look year-over-year from 2021 to 2022, our hiring improved 42% in a difficult labor market. We increased retention at the same time. The third reason, all six end markets are growing simultaneously.
I don't think I've been in a leadership role where I've seen this, and it's so fortunate, and we're really excited about our market position because we have strong differentiated positions in each of those six areas, and we've won business throughout 2022 in each of those areas. The fourth reason, we have a distinguished national security portfolio positioned to outpace near-peer threats. We are the number one technical advisor for the Missile Defense Agency, a customer that we've supported for over 40 years. We are the number one provider of electronic security systems for the Department of State and the Army, and in the top three for the Air Force, and very strong with the Intelligence Community as well. We are in the very top of offensive cybersecurity providers. This is what I would call an elite portfolio on the federal side.
Reason 5, unprecedented global infrastructure spend. I call this a once in a lifetime opportunity. For us, it's not just the U.S. $1.2 trillion that we're looking at, or $550 billion of new funds that's gonna last between six and eight years, but it's also in Canada, the bill that was passed in 2016, CAD 140 billion, CAD 70 billion in new funds, and it's also in the Middle East, where there's $1.5 trillion of funds, 65%-70% of that is new. A customer that we've served for 6 decades. What does all this mean? It means that we have a favorable financial outlook for Parsons. We also have a proven effective capital deployment strategy. We have a very low net debt leverage ratio of 1.36.
We've been able to continue to make acquisitions as the one that we announced yesterday. What's our growth strategy? First and foremost, we've been investing in moving up the value chain. Moving up the value chain to where we can bid and win larger contracts that are more profitable. Specifically, going from a company that four years ago might have been considered as one more services and staff augmentation to one now that is concentrated in software and integrated solutions. You might be wondering, what is an integrated solution? I'll share a few examples. On the federal side, an integrated solution means our VIPER system, which is Vessel Incapacitating Power Effect Radiation. A lot of words. What does that mean? It's a high-power microwave system that will stop non-lethal, or stop vessels that are non-compliant non-lethally in high speed states.
That system's being used today. It's gonna be deployed for the Coast Guard, but it can also be deployed for the Department of Defense. Think about a high-powered directed energy solution. I'll give you an example of an integrated solution in our critical infrastructure market, I'll refer to our rail and transit system program. An example there is a communications-based train control system. We were one of the leaders in bringing ultra-wideband technology to the United States. That's a system that you can pinpoint with accuracy a train's position. Another example within rail and transit is positive train control, which is a system that was put in place to help improve safety, to stop and slow trains and potentially prevent head-on-head collisions of trains. Second, I would say is, or be the build back better, build back smarter pioneer.
If we look at IIJA, that's defined as build back better, and that's great if we build back better, but we're only gonna be able to build back better if we do it the right way. Doing it the right way means how are we gonna apply digital technologies to our infrastructure, an area that Parsons is uniquely positioned because we have a technology arm in addition to our infrastructure arm. If you think about digital engineering framework, digital twin capabilities, how do I leverage artificial intelligence in the infrastructure world? How do I leverage cybersecurity in the infrastructure world? How do I apply virtual reality? This is where our acquisition of IPKeys fits in. IPKeys is a platform that provides cyber capability as well as capabilities for critical infrastructure, specifically utility companies. It's a scalable platform.
The company is about 50% services, 50% products, but sells to hundreds of customers, provides Parsons a great opportunity to take our whole portfolio to that new customer suite. Again, build back smarter. How do we think about building infrastructure that'll last 100 years, not 30 years? Leverage our unique portfolio. We are different as Parsons. We love our portfolio because we understand how an airport works. We understand how a rail and transit system works. More importantly, we know how to protect those systems. We can bring the physical security capability. We can bring the resiliency. We can bring the cyber capability. If you think about areas like utilities or transportation or facilities or water, those are the sectors that Parsons is gonna play in. The reason that we select those sectors is because, A, we have installed base there.
We know the customers. We know how it works. B, they're the highest threat-driven, and C, they're the highest regulatory-driven. That means it's the highest barrier to entry. They're the toughest problems to solve. If you noticed in the president's budget request, critical infrastructure is becoming increasingly important and also out of the Russia-Ukraine conflict. Finally, we'll continue to be a preferred acquirer and integrator of selective and accretive assets. We're keeping that bar high. We look at companies that are growing greater than 10% and also have greater than 10% EBITDA margin. We are looking at companies on both the federal and the critical infrastructure side. Although our first eight acquisitions in the last five years were on the federal side, yesterday was our first acquisition in critical infrastructure since 2014. Very high bar.
We want technology differentiation, we want companies that are gonna continue to move us up that value chain. Another way I'd say that we're unique is the way that we acquire companies. We like to do it preemptively. We don't like to go through an auction process. We prefer to get companies that we know the culture will fit, and it'll be a great marriage once they we're together. On the integration side, we're also unique. We adopt those companies' best practices, and we're willing to change Parsons accordingly. A great example, when we acquired Polaris Alpha, they had a terrific employee recognition program. We thought it was better than ours. We adopted their program, and we do that with each and every acquisition. We keep the leadership team. If there's good leaders, they stay with Parsons. 25% of my executive leadership team came from acquisitions.
Speaking of the leadership team, here they are. I encourage you to get to know them because most of them are here with me today. I couldn't be happier with this group that's been put together. Leadership starts at the top. We all believe that. We come from a very broad variety of backgrounds, and we have a lot of collective collaborative discussions. At the end of the day, we all deliver results, and we're very committed to that. We're driven by a higher value purpose, and that's the missions that we serve for enhancing critical infrastructure and protecting national security. We also have a very unique culture at Parsons. Across the world, 70,000 employees based in 23 countries, 50 states. A highly cleared workforce, 20% or 25% in total at the Parsons level.
Within our federal group, that's 60%, and these are high clearances. They're think about mostly top secret, compartmentalized type of clearances doing the toughest, most complex missions. We have a military veteran workforce that's 20% of our U.S. population. Most importantly, what I'm proud of there, 90% retention rate of those military veterans. 50% of our employees have advanced degrees. You're probably wondering, what makes Parsons a destination employer? What's so attractive about coming and staying at Parsons? I would say, first, it's that mission. Where do you have a chance to Imagine Next? Where do you have a chance to design an integrated era missile defense system that's gonna protect not just our homeland, but also assist NATO and also assist Guam?
Think about how we're gonna protect against intercontinental ballistic missiles, cruise missiles, and hypersonic missiles at the same time. Where do you have a company that you can go work on emerging contaminants? The announcement that just came out of the White House yesterday, you can investigate and remediate PFOS, PFAS contaminants from our water system, making everybody's lives better. Where do you have a company that you can design cities of the future, transportation of the future, particularly in a post-COVID environment, where we're reinventing what we thought we knew? We're adding digital technology because everybody got very comfortable with digital during COVID. This is why people come to Parsons. They have the opportunity to work on these critical missions. Our culture. Our culture is one of agility, it's innovativeness, it's collaborative, and it's technology disruptive.
We don't think about things the way they exist today. We think about the could be and the clean sheet of paper approach, because that's what our customers need right now in both of our business segments. Some of our initiatives that we put in place from a human resources perspective, we have a dual career ladder, and this is intentional. We want our technical people to stay with Parsons and be able to reach the highest echelons of the corporation. They go up to our chief technology officer position, which I elevated to be on the executive leadership team. We also have technical fellows, 57 of them across our company. In fact, one of them is here today, Dan Griffiths, who I encourage you to speak to on PFOS, PFAS afterwards.
We have a Work From Anywhere program, so that if people wanna work remotely, that's fine as long as they can do so by contract. If they wanna be hybrid, that's fine, or if they're an old-timer like me, they can go in the office, and that's fine too. We're very flexible. We have flexible work schedules. One thing that I think is really different with us is our redeployment opportunities. People can work anywhere in the world. They don't even have to move. We have engineer works from anywhere, so somebody could work in the United States and be working on that exciting NEOM line project in the Middle East. If they wanna move to the Middle East, that's fine too, and they can take that opportunity.
We have people that have moved from one sector to another sector to corporate and all throughout the company. The reason that's important is it keeps them at Parsons. They don't have to worry about where their next job's coming from. They get to go try something else. Imagine Next. How do you think about the future, and how do you think about it from a clean sheet of paper? It is really important because if you don't do that, you're always gonna stumble back on what we've done before, and you're gonna be trying to upgrade what we've done before. It's critically important to say, what if? What could be? Our mission, also, we understand that we have to get technologies that are delivered at operational relevance. It's not just enough to sit and be a research house and develop innovative technologies.
They have to get deployed. That's where the size and culture of our company's important. We have the breadth and depth of a large company. We have that agility and entrepreneurship of a small business. We can get customers those solutions immediately that they need to accomplish their mission. I talked about our six core markets. You can see those listed on the bottom. I'll go into those in more detail. Some of those markets, like cyber and critical infrastructure protection, span the entire Parsons enterprise. They apply to each of our four business units. Once again, we've one significant business in each of these market areas. They're all simultaneously growing, they are all enduring markets, and they're all profitable markets.
Spend a few minutes and tell you about each of the segments and what's in our portfolio and what we do, and the presidents will also discuss that a little bit further on their panel. I'll start with cyber. In cyber, we're involved in every facet of the multi-domain battle space with both offensive and defensive capabilities. We have the capability of covertly gathering data online to be able to perform reconnaissance missions. We process data packages at very high rates. We perform reverse engineering and vulnerability research all the way from tearing down a missile system to see how it works down to computer and network levels, one of our key specialty areas. We protect critical infrastructure. Again, very unique because of our portfolio. We have converged capabilities.
How do you converge cyber, electronic warfare, and information operations to fight an information war, which is what we're gonna be facing in the future with near-peer threats? This area is important because of the near-peer threats and because of protecting national security. Next is space and missile defense. Missile Defense Agency, our long-term customer for 40 years. We understand every facet of their mission. We're side by side with them as their lead technical advisor, putting together integrated air and missile defense systems. We've secured our repeat for the next seven years under a $2.24 billion contract, and we're looking forward to supporting their critical missions, which are 3: defending the homeland, defending Guam, and providing hypersonic defense. In the space area, we've been involved in 200 space missions over the last 20 years, and those support government, international, and commercial customers.
We've carved out specialty areas in space because you can't do all of space. Where we've decided to focus is on launch integration. How do we get small satellites up at a point that's critical right now for the Space Force and the Space Development Agency? We do the launch and manifest of those satellites. We have Alex Gross, who's in the hall, who would be happy to talk to you about the launch manifest program as well as our other space activities. We perform ground systems work. We've been doing ground systems for a long time. One thing I wanna highlight on the ground systems is that clean sheet of paper, Imagine Next approach. We've come up with commercial ground operation center, which can be sold on an as-a-service basis, and we have three government customers that have signed up.
We're pulling the government into what I think is a very operationally efficient, affordable model. They don't have to buy the infrastructure. They don't have to maintain the infrastructure. They don't have to pay for it when they're not using it. We do that for them, and I think this is a leading way of the future. Space and missile defense, one other area, assured position, navigation, and timing. How do you get location information when GPS goes down? We have a unique small system that an Army soldier can use to pick that up. We call it the PEAT, appropriately named. Why is space and missile defense important? Again, near-peer threats. Space is becoming contested, more congested. It's a war-fighting domain. We have to make sure we maintain space dominance for the United States and also missile defense dominance. Transportation.
We're involved in intelligent transportation systems, specifically the Intelligent Network, or iNET, program, one of the most globally deployed advanced traffic management systems in the world. Aviation. We're involved. We've done over 400 aviation projects, all the way from the Middle East, where we're currently doing the Abu Dhabi expansion projects to ones here closer at home, where we're the program manager at BWI and also Houston. We're involved in rail and transit projects, over 450 worldwide, including the largest metro system in the world. We do both program management as well as systems work, as I mentioned, the communications-based train control, positive train control programs. We build bridges, one of the leaders in long-span bridges. In fact, I'll show you the Goethals Bridge coming up close to home. That was Parsons project. We do roads and highways.
We've done over 10,000 miles of roads and highways across 6 continents. Why is transportation important? It's important to improve all of our quality of lives. I would also say as transportation becomes smarter and there's sensors and there's data, you need a company that knows how to secure that transportation, and that's Parsons. Let me talk about critical infrastructure protection. Electronic security systems are basically access control systems, physical surveillance systems or intrusion detection systems. I mentioned that we're one of the leaders with Department of Defense, Department of State, and the Intelligence Community. Identity and biometrics.
We have a system that basically, if somebody's trying to enter an embassy or a consulate and you show them your iPhone or your Android, we've built a gateway that ties back to all the databases, so within minutes, you can tell if that person is allowed to enter or not. Counter-unmanned aerial systems. We provide capabilities for all groups 1 to 5, and we take a system of systems approach. What that means is we're product agnostic, so we don't have to be the ones providing the RF or the electro-optic. We'll buy the best product out there, but we'll put it together to make sure that we have the best system that exists. We're the number 1 provider for the Department of State. Biosurveillance capabilities. We're very involved in areas of research and development such as infectious disease control.
Again, on the leading edge, and we have platforms that can do situational awareness, data analysis of things going on in the biosurveillance world. This is becoming increasingly important. Again, you read about it every single day, was reflected in the president's budget, and it will continue to be part of our future. We've got to make sure that we protect the sectors that are important. Environmental remediation. We do mine reclamation. Currently responsible for 2 of the largest mine projects in the world. They're abandoned mines up in northern Canada, Giant Mine and Faro Mine. Each of those projects, over $2 billion, one's for 20 years, one's for 12 years. We're involved in mine or water wastewater treatment systems. We provide quality water for Las Vegas. The next time you're in the city, think about Parsons when you drink the water. PFAS remediation, I mentioned.
One thing I want to mention about PFAS, we currently do investigations and remedial treatments. We have a treatability facility that we've had up in Syracuse, New York, with unique water filtration technologies. We're a leader as you look at soil and groundwater, you look at large concentration streams, or you look at solid masses. More importantly, we have four patents in that area. We've been involved in that area since 2009. That legislation that was published yesterday was very important to start setting minimal levels for PFAS. We also have a patent pending, which is pretty neat. It's basically how do you remediate subsurface soil and groundwater, so you're basically remediating PFAS at a subsurface level. Please do stop and talk to Dan.
This is an exciting area when you're looking at a market that's going to be $100 billion-$140 billion over the next 30 years. Oil plugging and abandonment. Again, we have a patent pending to stop methane from leaking from abandoned oil wells. Why is environmental remediation important to everybody? It's our quality of life. It's what we it's important, not just for here for us, but around the world. Urban development, we're involved in building the next generation cities I mentioned in Saudi Arabia. We're also involved in building the biggest entertainment city in Saudi Arabia as the integrated delivery partner. We won 5 of 5 giga projects in Saudi Arabia. Beyond Saudi Arabia, we're heavily involved in areas in the UAE as well as Qatar. We were involved in the World Cup. We were involved in the Expo.
Parsons has a deep roots there. We're well branded. We have a strong reputation, well-respected. That's important as we look at some of these developing countries. From a macro environment perspective at the enterprise level, global threats and global priorities are driving growth within Parsons. I talked about digital transformation. It's affecting everywhere on both sides, federal and critical infrastructure, climate change, clean energy, electrification, cybersecurity. We have cyberattacks on critical infrastructure. We have cyberattacks in space, and Parsons is covering those domains. On the federal side of the house, the strategy has shifted from one that was counterterrorism to one that's focused on the near-peer threats. We've spent the last several years through our organic investment and acquisitions, building an elite federal company to outpace near-peer threats. Research and development budgets are at all-time highs. FY 2023 was $140 billion.
When you look at that, you look at the areas of investment. You have cyber, you have space, you have directed energy, you have artificial intelligence. These are the Parsons technologies. We have shifting global requirements, and I'll talk here about INDOPACOM. There's $9.1 billion for the Pacific Deterrence Initiative that is in the president's budget request. Parsons has been in the INDOPACOM region for decades. We provide infrastructure capabilities on Guam. We provide missile defense, homeland defense of Guam. We provide infrastructure capabilities on Kwajalein, and we have cyber and intelligence capabilities at our office based in Hawaii. Critical infrastructure. I had already talked about the global infrastructure demand in all three of our areas, United States, Canada, and the Middle East simultaneously. There's demographic shifts like what we're seeing in the Middle East, so one of the things we're involved in there is mixed-use development.
How do you create basically a, from a concept or a master plan, an area that has residential, industrial, recreational, cultural all together? And social and equitable infrastructure growth. Transportation, environmental remediation, we need to make sure that's all done social and equitably. Again, Parsons growth is really driven by having the right portfolio within the right markets. I love this chart because it shows why these portfolios are together and why we're synergistic. Cyber and critical infrastructure protection span federal and span critical infrastructure. You might be surprised when you're looking at transportation. Why is that in federal? Because we have the FAA contract. Our federal team supports the FAA, our critical infrastructure team supports the airports, and we have a one aviation focus across Parsons. The same is true in environmental remediation.
We do PFOS, PFAS for industrial customers on the critical infrastructure side of the house, but we provide that same capability at military installations on the federal side of the house. In technologies, artificial intelligence, cybersecurity, cloud computing, those are enablers regardless which segment you're looking at. The macro environment looks good. The compound annual growth rates look good in each of our market, ranging from 5%-12%. We do have a strong macro environment backdrop. Against that backdrop, as I get into our growth targets, we're planning on mid-single digits for Parsons. We will continue our Wall Street approach of putting out measured guidance, which we strived out perform. Our portfolio, roughly 50/50 between critical infrastructure and federal. You can see in each of our end markets, we have at least a 10% position, with exception of critical infrastructure protection.
The only reason that's at 8 is because most of that came in through our Xator acquisition, which we did earlier this year, which was our largest acquisition since IPO. We're strong, and we're differentiated in every market. We have a global footprint, 75% being in the U.S., 25% outside the U.S. We like to prime our contracts because when we prime, we typically win. If you look at our overall win rates, last year was 49% in 2022. Year prior was 56%. Year before that was 46%. We know how to win as a company. That's why we like to prime. Our portfolio margins, 55% of our portfolio is fixed price, time, and material, allowing for higher returns and higher margin. Milestone awards. I mentioned we'd won business in every one of these markets throughout 2022.
Let me start with cyber. We had won two large single award contracts a couple years ago. One is called CCMS or Combat Command Mission Support for $590 million. One is called C5ISR Exercise Operations Information Services, $618 million. Our goal has been to drive task orders to these contracts to drive revenue, and that's exactly what we did and why we had strong organic revenue within federal. We've exercised the options on those contracts. Space and missile defense. I talked about our 2.24 engineering win that we won June of 2021. We also won our facilities where you compete this year for over $100 billion. The space ops number might look a little smaller than the others, but I mentioned that's an emerging market.
That is getting the government to buy ground space operations as a service, a different buying model for the government. We're delighted that 3 of our customers have signed on to that. Transportation. Riyadh Metro program, one of the world's largest metros. We're the program manager. We won the follow-on phase. FAA, we continue to get a lot of work from the FAA. We do the facilities work for the FAA. That contract, $233 million, but $50 million of that came from infrastructure bill funding. You won't just see infrastructure bill funding affecting critical infrastructure on the side of the house, but it also comes in through our federal. Under critical infrastructure protection, technical security is the work that we provide for electronic security systems for Department of Defense, Department of State, and Intelligence Community is below. That's Xator.
We couldn't be happier with the Xator acquisition driving very strong growth across our federal business. Environmental remediation, Giant Mine, we booked $270 million out of that $2 billion program. That's why the asterisk is there. In the year prior, we won the Faro mine for $2 billion, and again, we only booked a little over $200 million on that job as well. Emerging contaminants. We've won 6 jobs, 4 within federal, 2 within critical infrastructure, including a large job for the Army Corps of Engineers at Baltimore out of our federal group. This is PFAS. Urban development. Most of that work, again, is in the Middle East. Future Cities refers to the NEOM Line program. We've only booked the first phase of that contract. We were selected as the integrated delivery partner. That work is gonna run for 10-15 years.
Likewise, under entertainment, recreation, our largest job is in Saudi Arabia again, where we won the world's largest entertainment city. We've only booked the first phase of that contract. Global infrastructure spending, very exciting. I talked about Canada. They passed their bill in 2016. We're already off and running on that. Middle East, we have 5 of 5 giga projects, $1.5 trillion spend. Many of those projects have moved to the left as part of Saudi Vision 2030 to be able to diversify away from oil, as part of the UAE Projects of the 50 to be able to diversify into tourism. We're seeing things move fast there. You look at the United States infrastructure bill, which is mapped on the left of the chart.
We expect to be on the incline the latter part of this year, this data comes from CBO, continuing to increase in 2024 with a peak somewhere around the 2026 timeframe. We are very pleased that we've seen projects move left within the U.S. We've also seen state and local investment. Capital deployment. Left-hand side of the chart, you can see we've applied most of our capital for M&A, with Xator being our second-largest acquisition we ever made and our largest since IPO, and then our first acquisition of the year yesterday with IPKeys. We're gonna continue to keep our CapEx at about 1% of revenue. When you look to the right side of the chart, you can expect to see the same going forward as far as future capital deployment. Our plan is continue to do M&A, but we're gonna be very selective.
We've passed on 100 acquisitions this year. 100. We're evaluating companies every day, every week, but that bar is high to get the companies that are gonna be part of Parsons. Share repurchases. We're expecting to do about $20 million a year. So far, we are authorized by the board up to $100 million. We have repurchased $44 million, and out of that, $22 million was in 2022. At the end of the day, we wanna maintain our net debt leverage ratio between 1 and 2.5x . We also invest in technology. I wanna hit on 4 of the areas we invest in. The first is one we call securing connected ecosystem.
You can think about on the critical infrastructure side, that would be a project like an intelligent intersection, or on the federal side of the house, that would be about controlling a constellation in space. It's how do we connect assets to key users and decision-makers. The second area is precision sensing and effects. Precision sensing means you can't counter a threat that you can't see. Effects means how are we gonna make sure that we hold off the adversary from obtaining any advantage while keeping our advantage and our friendly, unimpeded access? Where is it we invest in here include signals collection, signals intelligence, directed energy type of systems, alternative GPS systems. Digitalization and autonomy affecting every part of our life. We invest in both sides of the house because digital technology is what's gonna transform the future.
In environmental improvement, our primary areas are PFAS, PFOS, and mine reclamation and the oil plugging and abandonment. ESG is a business enabler for Parsons, not just because of what we do in our communities, which is very important to our 17,000 people who've donated over 20,000 of volunteer hours throughout 2022. It's also important because it is half of the Parsons portfolio. Greater than $2 billion of our portfolio directly affects social, environment, and equity for the lives of our people. As a company, we set greenhouse gas emission goals. Once we achieve those goals, we raise the bar higher. We've established targets from 2021 to 2031 and also set in place a net zero commitment for 2050. We're reducing and optimizing facility space. We started that before COVID, obviously accelerated it post-COVID.
We have a goal of $10 million reduction over the next three years in cost. Under social, 40% of every dollar goes to a diverse supplier from Parsons. That's at the Parsons level. I talked about our volunteers. We're proud of all the time our employees donate. We, as a company, have a philanthropy program where every month we donate to a certain cause. For example, our most recent was donating to FIRST. It's a global robotics organization where we're helping those young people Imagine Next. Under governance, 14 years consecutively as one of the world's most ethical companies. We're proud of that because we do work all over the world. It's important that we always have the top in ethics. From a diversity perspective, about half of our board of directors and half of our executive leadership team are diverse.
We believe diversity drives better business results. We've shown that. Finally, our incentive compensation is tied to ESG, specifically around diversity and gender goals. Our three year growth targets. We are planning on 4%-6% revenue growth. That does not include future M&A. It does include $110 million of Xator. That does not include IPKeys or anything that we do going forward. We have 20-30 basis points per year of margin expansion, 20 for 2023, 20 for 2024, 30 for 2025. We're committed to 100% free cash flow convergence. We plan to do an average of two acquisitions per year. Our executive leadership team delivered in 2022. We look forward to delivering on these commitments in 2023 and beyond.
In summary, I'm very proud of the group that we have on board. I'm proud of our company, I'm proud of our people, and I'm proud of the missions we support. We're in 6 simultaneous and growing markets, very well aligned to macro environment trends. We've positioned our portfolio intentionally over the years to be in the position that we are in for the future. We are ready to face the near-peer threats with our elite federal portfolio. We're ready to build infrastructure around the world, United States, Canada, and Middle East. We have a favorable financial outlook and a strong capital deployment strategy. I wanna say, what makes me go to work every day is passion. I've been in the business 37 years. I spent most of my career on the national security side and started doing infrastructure when I joined Parsons about six years ago.
We have passion in our company. Everybody is mission-focused. We come to work because of that mission, but we also come to work because of that culture. One thing you will see with our team is that collaboration. We like to play hard, we like to have fun, and it's just the best culture and the best place that I've ever had the privilege of working with the best people I've had the privilege of working with. Think about Parsons, think about right portfolio, right team, right place, right time. Imagine Next. I wanna thank everybody for coming today. Next up, we have our presidents' panel, and they're gonna talk about how they're gonna deploy the strategy and goals that I've just outlined. Thank you.
Good morning. I'm Jason Yaley. I'm Chief Communications Officer at Parsons. It's my pleasure to moderate this next panel. This panel was designed to dive into the markets and the people who make all of the topics Carey covered possible. While we have about 45 minutes for this session, we won't do live Q&A here. All of the business unit presidents available here will be available during the demos afterwards, as well as the breaks. It truly is a pleasure to share the stage with these four leaders. I'm proud to call them colleagues, partners, and friends. With me here on the stage today is Mark Fialkowski, our President of our Mobility Solutions business unit, Paul Decker, President of Defense & Intelligence, Jon Moretta, President of Engineered Systems, and Peter Torrellas, President of Connected Communities.
To kick off this session, we'll go down the line by asking each of them to share a little bit more about themselves and their business units. Mark, why don't you kick us off?
Sure. Thanks, Jason. Proud to say I've worked for Parsons for 29 years. It's been a fun ride. I started in the Chicago office as a traffic and transportation engineer, studying highway operations. Say, if you built a new interchange, how would that affect the freeway flows? If you built a new rail line, what kind of ridership could you attract? I did quite a few environmental impact statements, environmental assessments, so kind of a broad range at starting out. I then worked my way up to project manager. I was in business development for 3.5 years, which was a great career step for me. I also ran operations for the infrastructure group, and for the past, now, 15 years or so, I've been in increasingly responsible project and loss roles, so more on the business side of the business.
When we look at Mobility Solutions, you know, it's really a civil engineering arm of Parsons. We do all sorts of highway bridge work, water, wastewater, tunnels, also the urban development, really, how do you develop the infrastructure for a new city? I think one of the great things about our business and about our company is the projects that we work on and the projects that we deliver have long-lasting benefits for the communities, for the residents and the businesses in the region. I'll give you an example of a job I worked on years ago in the island of Sumatra in Indonesia. It was a disaster relief job, and we partnered with Jon's group on the federal side on behalf of the U.S. government and delivered a new road and new bridges that were destroyed by the Asian tsunami.
It was terrible to see the destruction, it was also heartening to see what Parsons delivered in terms of that new road, new structures. Allowed people to rebuild their lives, businesses to come back into the area. That's really one of the reasons I like to come to work, is because we do have those long-lasting benefits. Look at where we operate, really coast to coast in the U.S. Canada, now we can say coast to coast. We just opened a Halifax office, that's growing quickly. Then the Middle East. It's really the Gulf Cooperation Council countries. We worked there continuously since 1976. Look at our main operations are in the Kingdom of Saudi Arabia, in Abu Dhabi, Dubai, and Qatar.
Now, the scale of the projects that we do there is just amazing, and we'll get into that in a little bit too. You know, we look at what do we do within our markets. Well, really, we can take a project from concept all the way through completion. An example of that is the Ohio River Bridges job. Two new bridges over the Ohio River in Louisville, Kentucky. When we started on the job, it was just two lines on a map, new bridge here, new bridge there. Over 15 years, we worked on the concept planning, we worked on the environmental documentation, historic resource mitigation, oversaw the design, then oversaw the whole program and the construction for the client. Over that 15-year period, we took it from concept to completion.
Again, another, I think, great thing about our business is you can visualize it, and then you get done with the project and it's there. You know, I could go on and on about the business, but I just wanna close by saying, appreciate working with these guys. It's a really great team, a great executive leadership team, collaborative and really the best that I've been a part of in my 30 years in the business.
Great. Thanks, Mark. Paul, what about you?
Thanks, Jason. Good morning, everyone. I'm Paul Decker. I lead our Defense & Intelligence business. I'm actually one of those individuals that came to Parsons through acquisition. I came to Parsons a little over nine years ago through the acquisition of Secure Mission Solutions. This is a full spectrum cyber operations company. Really helped us advance our capabilities in that area. You wouldn't know it by my hair, but I'm actually a veteran of the United States Marine Corps. It's really, you know, through my time in the Marine Corps, developed servant leadership. Through that servant leadership, I've carried that throughout my career, along with building high performance teams, much like the team that we have in Defense & Intelligence. It's a really critically important work that we do. A little bit about background.
In addition to the Marine Corps, after I left the Marine Corps, I spent some time at DARPA. After DARPA, I supported U.S. Cyber Command for over a decade, well over a decade, as well as the predecessor organizations and a handful of different Intelligence Community clients. Cybersecurity engineer by training, by education, is really been a big part of my background. Let me tell you a little bit about Defense & Intelligence. I'd be remiss if I didn't give a shout-out to the 3,200 employees that support our business and the critical missions that they serve. Thank you for everything that they do. Last year, we delivered $1.4 billion, really broken across three major, three major buckets.
First part of that bucket is really centered around cyber operations, electronic warfare, and information operations. This is the really unique bespoke work that we've been doing in support of the government, both DoD and Intelligence Community for 20, 30+ years. Another part of that effort has really been around what I would say, defensive cyber operations. It's platform resiliency, critical infrastructure, space systems, weapon systems, ensuring the resiliency and survivability of those systems for our customers. Second part of that revenue stream really showed up with our missile defense work. As Carey mentioned, we've been supporting the Missile Defense Agency for over 40 years.
It is one of our long-term customers, very important customers, where we are the lead system engineer and integrator for that organization, as well as we provide the facility lifecycle management of that of the organization. The last part of the revenue really came from our space solutions as well as hardware and software integration. You'll hear a little bit later today from Alex and others, this is around launch manifesting space situational awareness, domain situational awareness, as well as our space ops, which we really believe is gonna be very disruptive in the market, and we're pretty excited about our position there. I'm super excited to be part of this leadership team that you see up here.
I'm also excited because we're at a point in time where we're being asked to develop, integrate, and deliver full-spectrum cyber capabilities that are really gonna transform the battle space. It's a really important time that we're at today.
Thanks, Paul. Jon, how about you?
Great stuff, Paul. Good morning, and thank you all for being here. I appreciate it. My name's Jon Moretta. I have the honor of leading our Engineered Systems business unit in the federal segment. A little bit about myself. I'm a chemical engineer by education, but over nearly a 40-year career, I've had the opportunity to hold many different roles along the way and also work for several of Parsons' competitors. With that perspective, I can tell you I couldn't be happier than I am to be at Parsons. It's really a great company. We have a fantastic leadership team, very collaborative, aligned, and we have amazing employees. We're all really focused on the same thing. We're supporting our customers' critical missions, we are growing the company, we're also making Parsons a destination employer, a great place to work.
I've been at Parsons for seven years. The first six I got to spend on the critical infrastructure side of the house. What I'm really pleased to see now is the momentum that we're gaining in bringing everything that Parsons can do and bear to all of our clients. We call that one Parsons solutioning. It's really exciting times there. A little bit about the business unit. We're 3,300 folks strong and generated $845 million in revenue. I also wanna recognize my team, my leadership team, and all the amazing employees in the business unit are really the ones who are delivering our success, and they're doing a great job at it. You saw that video as we came up on stage, Challenge Accepted, and that really is what we embody within Engineered Systems.
We take on extremely complex projects and very challenging and sometimes harsh locations, like Antarctica is one, and we focus on delivery excellence. When you think about what we actually do, Carey talked about infrastructure and also critical infrastructure protection, and that's really the essence of Engineered Systems. We help our clients build infrastructure, and we help them protect the infrastructure and protect people. The build side of Engineered Systems has really been our foundation for many years, and it will continue to be that going forward. That includes everything from master planning, engineering, design, program management, and construction management. The protection side is really where we're focused for additive growth, and our recent acquisition of Xator is a great example where we bolstered our capability in that regard.
I do wanna comment that I'm really pleased with how the integration of Xator has been going. It's been eight or nine months since we closed. The culture is a great fit. We've seen very high retention. They're outperforming their financials, right out of the gate, they had some phenomenal wins, and I expect that's gonna keep continuing. The last thing I'll mention that we do is environmental work for our clients. We provide world-class solutions to the most challenging problems that they have. We work very closely with Peter's business unit in that regard. Top of the list is PFAS today, you're gonna hear more about that as we go, I also encourage you to talk to Dan Griffiths after we get out into the area out there.
In a nutshell, Engineered Systems, the takeaway for this group, what do we do? Just think we build, and we protect infrastructure.
Thanks, Jon. Peter, you wanna close us out?
Thanks, Jason. Peter Torrellas here. I lead our Connected Communities business unit. You wanna think of Connected Communities essentially as the digital house of our critical infrastructure business. That's where we house a lot of incredible end markets. That's 2,500 folks strong across the world. A lot of our work is in North America. We also have a European operations based in Paris, and we support the business in the Middle East, specifically in Dubai and Saudi Arabia. It's really a phenomenal team. The end markets that we serve are also incredible, and they're also growing. We're in rail, aviation, traffic. We also have a business in mining reclamation. We have a business in emerging contaminants, and we also have an exciting business called Parsons X.
It's really where we house the digital enterprise transformation of Parsons. That's a lot of exciting portfolios that we have there. Personally, my journey with infrastructure began probably about 20 years ago right here in the city. As a kid who grew up on the city, I got to work on the train system. For those of you who ride the subway, the countdown clock that tell you when the next train is coming, that was my first project where I got a chance to have the intersection of technology and innovation and infrastructure come to play.
As a kid growing up in the city, the only way you knew when the next train's coming is when you'd lean over the platform and look down, and if you could see the light, you'd have a sense, or maybe you'd hear the rumbling. Just to get a chance to transform infrastructure was incredibly exciting for me.
I'm the new kid on the block, I joined Parsons around 18 months ago. That really had a lot to do with Carey's vision. I came from almost 20 years at another global powerhouse. Having that conversation with Carey and hearing her vision about what she wanted to do with the company, how she wanted to transform, and the incredible roots that the company had, both as in my business, having hundreds of software developers, as well as thousands of people who work on construction and project management and engineering across a lot of asset classes, I thought it was just a spectacular opportunity and also a chance to be on a world-class team. We have a lot of fun together.
We do a lot of business together. It's just a great team to be a part of. Also the incredible work that our people do that my leadership team does, as exemplified by, you know, we use artificial intelligence to help people get through the Bay Bridge and help traffic flow better, help people get to work. We work on digital twins for major airports, as Carey mentioned. We also do other great stuff. You know, in L.A., we're doing work that supports workforce development and economic development. We're helping to create jobs, we're helping to provide that infrastructure. That's inspiring for our folks. Thank you, Jason.
Thanks, Peter. Mark, maybe we'll kick it off with you. We heard a lot this morning about the demand for global infrastructure.
Mm-hmm.
If you can give us a sense of how that demand is shaping the future for your team, and how will that drive your growth over the next few years?
Sure. Thanks, Jason. This is the best infrastructure funding environment I've seen in 30 years in the business, that really covers all our geographies. I'll start in the Middle East. I was just there twice over the last six weeks or so, it's really amazing how that market took off in 2022. Our team delivered, had a great year there, we're really starting to see a lot of big projects move forward that have been talked about for a long time. Those projects are driven by the visions of the different countries to diversify their economies away from just oil and gas. For example, Saudi Vision 2030, Dubai 2040, Abu Dhabi Projects to the 50, Qatar National Vision 2030. They all lay out frameworks to diversify into more entertainment, residential, industrial, financial.
Now we're seeing all these different big projects that support that diversification of the economy come forward. That's really exciting. You know, you still see the infrastructure work that we traditionally do, but it's really being, I think, almost superseded by this whole vision of how do we diversify the economy? How do we provide opportunities for our people? How do we improve people's lives? There's a big ESG component to a lot of them as well. For example, King Salman Park in Riyadh will be the largest urban park in the world, five times larger than Central Park here. It's almost hard to get your head around some of that with a program manager there. Look to the U.S., $550 billion in new money from IIJA. That's certainly historic.
I never thought we'd see numbers that large, it's not enough. Look at the American Society of Civil Engineers estimates that it would take $2.6 trillion to upgrade all U.S. infrastructure to a B grade. There's still a big gap there. We are seeing states and local governments step up to fill that gap. They now have certainty at the federal level. They know they're gonna get that funding. They can move forward with bigger projects that have been on the books for a while that maybe they didn't feel confident they could fund. A good example of that state and local support is 8 states have raised their gas tax in 2022 alone. We're starting to see that whole funding pool start to expand, and that's moving those projects forward.
Canada passed the Invest in Canada plan in 2016. That was $140 billion U.S.D in new money, or in total money, $70 billion new. The first phases were more on the kind of stimulus side, maybe smaller projects. Now we're really starting to see larger projects roll out for procurement, especially in the public transit side with Peter's group, also clean air and water, trade and transport in Northern and Indigenous communities. That market is also very strong as well. It's an exciting time to be in the infrastructure market. Very busy time, but it's great to see and, you know, that we have the support, and that support's gonna last for years to come.
Thanks, Mark. Peter and Jon, maybe on that same line, how is this global demand for infrastructure shaping your business? What is it past IIJA that is also going to shape the growth for your teams over the next few years? Peter, why don't you kick us off?
Yeah, that's a great question. We love growth. I think from an IIJA perspective, we see a lot of the benefits that Mark sees. There's co-benefits for us in rail and aviation, we see the natural uplift in our core markets. What we also like about IIJA is also it's investing in our future. We have wins around fleet electrification and EV. That's exciting for us. We have a business around grid modernization. That's also exciting for us. We see a lot of adjacencies being invested too. If you look past IIJA, the first thing that comes to mind is climate action. We see a lot of, you know, focus and resourcing of projects related to climate action. Actually, I was just at Giant Mine, which was recently announced, and Carey mentioned. I got to see the northern lights.
Never seen that before.
Mm-hmm.
That was exciting. You could see the focus on making sure that that mine was reclamated and remediated. That focus is also driving materiality in terms of our revenue. I would say, the third area, and probably the most exciting area long term, is our digital work, right? Our Parsons X growth has been double-digit last year. We see a strong pace to continue to grow. What's exciting about that growth is it affects all of us. A recently announced partnership that we had with Microsoft is because within critical infrastructure, we have a digital twin that's based on Azure and leverages Microsoft capabilities, but Parsons also has a business within space that also leverages those technologies and capabilities. We're growing our ecosystem. We're leveraging the technology across all of our businesses.
The new business models, as Carey talked about, as a service. Those are things that we're doing together and that allows us to scale it, and so that's incredibly exciting for us.
Thanks, Peter. Jon, what about you?
Yeah. Yeah, thank you. I'm gonna talk about my response in two parts. One is what is driving, I'd say, near-term, shorter-term growth, and then we're looking at for longer term. In the near and short term, really it's the same kinda drivers that Peter and Mark talked about. It's this unprecedented amount of funding that's flowing to all of our clients to support their critical missions. I'd say we're very proud to partner with our clients to address those missions. We're very well-positioned in the federal business unit that I run, in that we have long-term relationships with clients, we have long-term contracts, and the money is flowing to the federal side of the house, I think, a little bit quicker.
Yeah.
We're already seeing that money come in. For example, with our FAA contract, we had $50 million of infrastructure fund income in 2022. We expect that to continue and grow even more going forward. We've won work around PFAS and clean energy development as well. It's not just the infrastructure bill that we're seeing that funding flow. We've been a long-term partner with the U.S. Postal Service, and they just had $107 billion of funding, and we're there already helping them plan and then implement their infrastructure modernization across the entire U.S. facilities, including we're working with Peter's organization on their plans to electrify their fleet. A lot of exciting things with them. The third area I'll touch on is Department of Defense funding.
Over $800 billion of funding this year in support of our national defense and security. We're out, as you know, on Kwajalein Atoll. We're just finishing up a large job there, but there's a lot more work that's gonna follow. We're already on island, and we're well-positioned to win that work going forward, so that's exciting. Closer to home, we just finished up detailed engineering on the Radford Army Ammunition Plant. It's called an energetic waste incinerator project, and that's a technology that's being installed to do close destruction of waste munitions and replace an open burn system that they had previously. Those are the kinda things that are driving the shorter-term growth over the next several years. Longer term, we're focused on where do we see high-growth markets, and we're investing in those.
I'll mention just a couple of those as examples. From an organic growth standpoint, we've been focused on developing biosurveillance, biothreat reduction, and life sciences capabilities. We've also been investing in developing PFAS remediation capability. From an acquisition standpoint, I mentioned Xator previously, they bring us really 3 core capabilities in significant markets and high-growth markets. One is the technical security area, and that is where we're already number 1 provider of electronic security and surveillance for the Army and Department of State. Second is biometrics and identity management, where they bring to us world-class technology, both software and hardware platforms. The third is counter unmanned aerial systems. In that space, we're the number 1 solutions provider for Department of State.
You know, it's just some really great things short term that are gonna lift the business, and then longer term, we're positioning for out through 2030 and beyond. That's where we're going.
Thanks, Jon. Paul, maybe picking up on that, Jon talked a lot about the growth in the federal sector that he's seeing. Obviously, we know a significant amount of the growth that we'll see in the federal sector also comes in that national security market. Can you give us a sense of how you see the threat environment and how we're positioned for growth inside of that environment?
Absolutely, Jason. I mean, the threat environment, it's evolved, and it's gonna continue to evolve. You know, as you heard from Jon and Peter, I mean, you know, there's such a significant emphasis on Indo-Pac as a region. There's such a significant emphasis on Ukraine in, you know, European defense initiatives. Those really play well for our national security business, 'cause those are the areas that we've been in. When you look back, about five or six years ago, our customers, I mean, they made a strategic pivot. They pivoted from counterterrorism operation, counterinsurgency operations, they pivoted to near peer. You could say it went back a little longer, let's just say five to six years ago.
We were smartly aligned as a business, through our acquisitions to be able to catch and carry that pivot. Really over the course of 21 through 22 and the performance that we saw, you know, we were asked to develop exquisite capabilities, integratable capabilities, from developing, integrating them, and delivering those capabilities to support both DOD as well as Intelligence Community missions. We saw a significant uplift across defense of the homeland. When we look at defense of the homeland, specifically around defense of Guam, it's about bringing added capabilities within those theaters, not only from a missile defense standpoint, but also from a cyber intelligence and resiliency standpoint.
The other part I would say that from a threat environment that I'd focus on is, you know, when you think about the pivot, you know, the thesis behind the near peer threat and why we acquired BlackHorse Solutions was it really provided very, very unique and bespoke capabilities within cyber, electronic warfare, and information operations, and these are all core investment areas. We've been delivering capability in support of PDI, we've been delivering capability in support of European defense initiatives, and we're gonna continue to see that growth as we move forward. I'd say the last part that really addresses the threat environment is when you think about the commercialization of space, proliferated LEO, you know, Space Development Agency is gonna launch hundreds of satellites over the next three to five years.
We're really in a unique situation where we have a space operations, space-as-a-service offering, our ability to do the launch manifesting, as well as the space situational awareness. I think it creates some really unique growth opportunities for our business.
Yeah, let's maybe actually stay on this idea of the growth, and let's talk about the future for it. We know specifically for you and Jon especially, that our ability to continue to grow is rooted in those future award values, the book-to-bill and other growth drivers. Maybe Paul, can you talk to those areas and the significant opportunities you're seeing in the future?
Yeah, absolutely, Jason. I mean, growth, as you're gonna hear from the other BU presidents, is top of mind. It's everyone's focus within the business and it's gonna continue to be a focus within Defense & Intelligence. I'd say there's three macro drivers that we're focused on. You know, you got geopolitical turmoil in Indo-PAC, you got the war in Ukraine. I kinda talked about how we're addressing that, being able to develop an integratable capability within those theater of operations. The other macro driver is cyber incidents. The pace of cyber incidents is not gonna change, right? What's being outpaced is there just isn't enough response.
This is an opportunity to take the offensive cyber capabilities that we have within our business that we've acquired, as well as the heritage capabilities, the defensive cyber operations capabilities from the platform resiliency, analysis, access and analysis work that we do for DoD as well as Intelligence Community customers, and that's really gonna continue to be a core trajectory. I'd say the last piece really is the space race, right? There's a commercial space race. The government is continuing to work to catch up. There's a lot more adaptability in there. You know, with our space operations as a service model, it really is gonna become a disruptive capability within that space.
You know, when I, when I look at Defense and Intelligence, you know, back in 2020, you know, you think COVID, the pandemic, acquisitions were slowing down. You know, it took a lot of time to get RFPs back out on the street. What we did as an organization, we focused on those SATOC contracts that Carey mentioned, Combat Command Mission Support, C5ISR exercises, operations, intelligence support. We knew that the dollars had to show up somewhere. When there was a delay in acquisitions, we focused on driving task orders onto those vehicles, and we saw tremendous growth over the last year and a half. The other part is, you know, that's really core to the business. You know, we've had an unbelievable success rate.
We've won 100% of our recompetes, and we're gonna continue to march forward as we go through the rest of this year. As I look at our executable pipeline, you know, we have about 200+ growth within our awaiting notice of award, and we have about a 25% qualified pipeline that we intend to pursue over the next two years.
Got it.
So.
Jon, how about you?
Great. This is a great topic and can't reinforce enough what Paul said about our focus on growth. It's top priority, revenue growth and also margin growth and expansion. I mentioned the drivers for the Engineered Systems business unit being infrastructure and critical infrastructure protection, and the funding is just enormous. Rather than talk more about those drivers, I think I'm gonna focus a little bit more on how we're capturing our share and growing within that opportunity space. Really, it's about what we've done strategically investing in our business development team and growing our pipeline, and we've built an amazing business development team that's delivering. We're focused on winning our recompetes, adding new clients and contracts, and then also in our operations area, growing on contract as well. We've just had great success.
In 2022, we achieved a 90% recompete win rate. The largest of that was a $160 million contract with Department of Energy. We've also done really well adding new clients and new contracts. One example there is Xator won a $100 million classified security and protection contract in the latter part of 2022. We've also won seats on some very large multiple award task orders with ceilings that range from $675 million all the way up to $10 billion. What's more important about those, because that doesn't win you work, is you gotta win the task orders, and we're already heavily engaged in bidding task orders, and some of those are very large, well over $100 million.
Just, really a great job by our business development team working closely with operations, and we're seeing that success take place. We have in our awardable pipeline for this year, four times more than we had this time last year. That's just a reflection of what a great job the team's been doing there. On top of that, we'll be continually looking for acquisition for accretive revenue and margin growth. That's where we're focused.
Thanks, Jon.
Mm-hmm.
Mark and Peter, maybe similar for you on that way forward. We heard a lot earlier about margin expansion opportunities.
Mm-hmm.
Maybe you can share a few of those details of what you're doing to drive margin expansion planning over the next few years. Mark, maybe you kick us off.
Sure. We've looked at this a lot of different ways. It's top of mind for me and my team, and we've developed a multi-pronged plan. We're implementing the plan, and I'll touch on a few of the items within that plan. First of all, it all starts with people. People drive our success. We've got an outstanding team. I appreciate all that they do. We just need a bigger team, right? It's really recruiting, development, retention worldwide. We're growing our headcount, we need to continue to do that. Improve program execution. We can always do better in that area in terms of efficiency and quality. Good example is we've rolled out 50 new design automation tools for our teams. That will help them do their job quicker and also with higher quality. Continued overhead control.
We need to continue to grow our revenue faster than our overhead. On sales side, you know, we're differentiated. We need to hold our ground on pricing, which we're doing, and we've got a couple examples. We won two new jobs where we were second in price. We won another job where we were third in price. Because of that differentiation, because of the strong market, because we deliver, we can hold our ground on pricing. We're also seeing more sole source awards, particularly in the Middle East, where clients are coming to Parsons, they have a lot of work to do, they're under pressure, they know that we're gonna deliver, and they come right to us for that. I'd say, finally, acquisitions. We're looking at multiple acquisitions, creative in margins.
I think as we look at all those pieces together, we're gonna roll out that plan, work the plan, and improve the margins on the bottom line.
Great. Thanks, Mark. Peter, what about you?
Yeah. Thanks, Jason. When it comes to margin expansion, in our business, there's two lenses through which we look at the work that we're doing. The first lens is operationally. Like Mark, we get to benefit from being in a great market where we get to be really disciplined about what we're bidding on. We're bidding on work, and that work is coming in at higher margins. I would say, over the last 12 months since we've really focused on this, we've seen some, you know, around 50 basis point improvements, and we still see some headroom to continue to improve there. The other area that's really important for our business is our legacy programs.
We are really hyper-focused on making sure that we close those, and we saw some success last year by achieving substantial completion on one of those programs. That's also going to be kind of a head down focus for us operationally. The other lens through which we look at margin expansion is strategically. The first thing I'll say there is inorganic growth is going to play a strong role in margin expansion for our business. I think the agreement that we announced yesterday is an indication that actually the entire leadership team is supporting critical infrastructure, taking a much stronger posture in terms of our inorganic growth strategy, and now we have materiality to that. Then last, but certainly not least, is really, as I mentioned before, our digital strategy.
You know, through the pandemic, one of the things that happened for our clients is digital transformation was accelerated. They just started doubling down, tripling down on leveraging innovation and technology in order to drive outcomes within infrastructure across all of the asset classes. Why that's important is because if you look at the value chain across all of our end markets, the digital part and the solutions and the services around those solutions is by far the deepest profit pool within the value chain. If you have growth along that spectrum and you can combine those deep profit pools and capture and create value and add that to the core portfolio, then you see materiality in terms of margin expansion over the long term, and that's incredibly exciting for us as well.
I would say the most exciting part of that is that's also something that we do together, right? When we talk about those services and that enterprise strategy, there are situations where, as Jon mentioned, we're leveraging the digital twin I mentioned to support U.S.PS, or we're actually leveraging artificial intelligence through an acquisition in Polaris Alpha in Paul's business that we were able to use to differentiate ourselves for a traffic customer. Within Parsons X, we have engineers and focus on the next cognitive city from a digital perspective, supporting Mark's team on the line program. Those are the things that we get super excited about, and we think they're gonna add some serious, I think the basis points that Carey talked about to the bottom line.
Let's talk a little bit more about people. You know, we heard all about the war for talent throughout the news, and you heard Carey talk a lot about how we're a people-first company. I think all of us would agree, and any of our leadership teams would agree that it's really the professionals we work with every day that underpin all the successes everyone's gonna hear about throughout this morning. Let's talk about what that means. Peter, you came to Parsons pretty recently, as you said after decades at another global powerhouse. Mark, you've been here for almost 3 decades. Maybe as we begin to close this out, Peter, if you can talk to us, why do people come to Parsons? Then Mark, why do people stay at Parsons?
Peter, why don't you kick us off?
Yeah. I can tell you why I came. I think that's a good place to start. As I told you about the story of working on the train system, we do the work that we do because it's really important, right? It makes a difference in the world. There's community benefit to us. Parsons is a culture and a family of folks who are all mission-focused. They're all purpose-driven leaders. All of these leaders that you see here and everyone on our leadership team actually wants to make the world a little bit better every day. That's true of my senior leadership team, and it's true of all of the people that I've met at Parsons, and that's incredible.
If you combine that with the fact that we can actually be agile, we can actually take smart risks, and we're doing digital and bringing and creating value for our customers in a way that we believe no one else is today, that's incredibly compelling for folks who are doing stuff that adds benefit to the community and doing it in a way that is moving the industry forward. Last, but certainly not least, we're winning. We're growing. Our business is doing really well. People like working for companies and teams that are winning.
Mm-hmm.
If you add that all up, it gets people excited about coming to work every day, and that's our focus.
Mark, what about you? Why do people stay with Parsons?
I'd say it's really comes down to people, culture, and opportunities, and I'll combine the people and culture piece together. They're kind of hand in hand. You know, like Peter said, it's, you know, it's about the team, right? We all wanna be part of a winning team. It's also what's the culture of that team? What kind of dynamics do you have on that team? I'm really proud of our team and the fact that we all have each other's backs. We're all pulling in the same direction. We're all helping each other be successful. We recognize our employees, we support our employees, and I really think that, you know, makes a big difference in terms of wanting to stick with a company. Opportunity is big too, right? In people's careers, they wanna get those opportunities, and we're a worldwide leader in work sharing.
That's great because it helps balance out workloads for the management team, but it really benefits our employees too. You're not just beholden to one client or just gonna work in one region. You can work anywhere all over the world, right? You can learn from the best experts. You can switch to different types of projects. We'll often see, as I go around to different offices, you know, you ask people, "What are you working on?" They'll say, "Oh, I'm working on this job in Manitoba, and we're doing a little bit of work in Doha as well." It's like, well, you're in the New York City office, but that's cool, right? That's people appreciate that because it really diversifies, you know, their whole background. It also helps them learn every day, keeps the job exciting. They're not just doing the same thing.
It really comes down to the people, culture, and the opportunities for employees in terms of why people stick around and why I stuck around.
Got it. Let's stay on that idea of culture. Maybe for Jon and Paul, let's go even further on culture itself inside of Parsons. Jon, maybe you can take on what is the culture inside of Parsons? What does it mean inside of your own team, and how does that drive collaboration across this leadership team? For Paul, maybe to close us out, we heard a lot about mission focus early on in the day. Can you share what that mission-focused approach means inside of Parsons and then inside of the DNI business unit? Jon, maybe you first on culture.
Sure. Sure. I love talking about our culture because it is so strong. It's one of the things that really just makes me energized about coming to work every day, and it's really across the entire organization and within my business unit as well. There's just an excitement, energy in the air. People wanna work for us. You mentioned the winning team. I mean, that's really what we are. I think there's three primary drivers. One is the type of work that we do. It's extremely challenging work, and it's very rewarding work and in the impact that it achieves, so it attracts the best and brightest people. Then secondly, our leadership focus is really strong on recognizing, rewarding our employees and giving them career opportunities for growth and development.
I'm actually an example of that, where Carey moved me from critical infrastructure to run this federal business unit and learn a whole new side of the business, which was great. The third thing I'll mention is our set of core values, and they're foundational to Parsons in everything that we do. We really walk the talk. It's not just air. One example there is this is our 14th consecutive year of winning the Most Ethical Company in the world award from Ethisphere, and that's really important to me and the folks up here and all of our employees. These core values are foundational, and it gives our employees something to believe in. Super strong culture.
Paul, what about you on culture and mission focus?
Yeah. Thanks, Jason. Culture is everything.
Mm-hmm.
You know, as they say, culture will eat strategy for breakfast. Maybe it's lunch or dinner.
Mm-hmm.
It will absolutely eat, strategy. When you look at Defense and Intelligence, I mean, the business that I'm running is the acquisitions that we did, less Xator and our most recent acquisition. You think about those cultures that were part of those organizations and bringing that together, so critically important, and it's really easy when it's, when you think about, like, the common theme around Defense and Intelligence is mission orientation.
Mm-hmm.
It directly ties to mission focus. It directly ties to the national security missions that we are supporting, doing meaningful work that is directly impacting national security and supporting defense priorities. That's really, really critically important. It's critically important for us to get right, not only for our employees, for our customers, and the missions that they support. I'm really proud to say I think we've gotten it right within Parsons. When I look at this collective leadership team and just how well we collaborate and we communicate with each other, we bounce ideas off. When you look at a, you know, when you look at an enterprise culture of agility, innovation, technology, and we take example, our PALADIN Lab, where, you know, we're demonstrating, we're experimenting technology to envision the next city of the future.
Mm-hmm.
Up in PALADIN. That was the DoD lab that we created for a DoD customer. Now we've been able to really cross between DoD and our Connected Communities customers. So it's that, it's the technology, it's the innovation that really brings this business together.
Mm-hmm.
Super excited to be part of that, and it really permeates throughout the rest of the enterprise.
Thanks, Paul, and then thank all of you for your insights as well. Thank you all for joining us for this panel, and thank you as well for joining us for our Investor Day 2023 here at the New York Stock Exchange. We will take a short break, followed by Matt Ofilos, our CFO, providing a financial presentation. Thank you.
All right. Good work.
Good morning, and thank you, everybody, for being here today, both online and in the room. Really excited to be here. My name is Matt Ofilos. I joined Parsons about 18 months ago. I started after 20 years in a with a tier one defense company and two years with a cloud technology company. Really what brought me to Parsons was, you know, we're small enough to be innovative and, you know, entrepreneurial, but we're also big enough to be disruptive and actually drive change, and we can all control that change, which is a great idea. I'm really excited to be here. I wanted to start off with some major themes across the across the financial metrics. When it comes to awards, we have really low recompetes. 2023 revenue is less than 5% from recompetes. 2024 is under 10%.
We get through the next 2 months and hopefully secure a couple of recompetes, those numbers will continue to come down. We have significant unbooked ceiling values. We have $8 billion of contracts that were awarded to Parsons that we just have not booked yet or have not been awarded or have not booked because we're waiting for that option year to come along. As long as we continue to execute, staff those programs, retain those people, and bring the task orders to contracts, that work will come to Parsons. We also have really strong win rates. Over the past three years, we've reported between 40%-50% win rates on new work. We're in really great shape. It's a really strong backlog.
Low recompetes gives us the opportunity to continue to chase new business and have long, sustainable revenue for the company. From a revenue perspective, we have significant tailwinds. You heard the team talk about the tailwinds with the global infrastructure, also our federal solutions is closely aligned to the National Defense Strategy. We're in really great shape from a revenue perspective. We need to continue to grow and through hiring. Our business is mainly labor, so our HR team coming in. Last year, we had 40% increase in gross hires compared to the prior year. If we can continue on that cadence and use the momentum from 2022, we'll continue to outperform. On an adjusted EBITDA and margin basis, we have opportunity to expand margin, and I'll talk a lot about that in the next few slides.
Our margin expansion is gonna come from a few places. One is we're wrapping up a couple of these legacy programs. One will wrap up at the latter half of this year, probably Q3, the second one will wrap up in 2024. As we complete those, we expect some more stability in the margin side. On top of that, we have accretive growth programs. We've seen real strong growth within 2022 with programs within the core that I'll talk to you about as well. As we continue to grow and expand on these programs, a lot of the programs that Mark and others talked about, you'll see the margins continue to come up. Finally, we have operational leverage. In 2022, we had a 200 basis points improvement from an SG&A as a percentage of revenue.
As we grow, we're not necessarily spending more. We're spending efficiently, and we're gonna grow efficiently. On cash flow, we continue to generate solid cash flow. The company as a whole is doing very well. We have opportunity to improve, though. As we saw at the last end of 2022, we had a couple large payments that slipped into 2023, and that allowed us to guide to a 109% cash conversion for 2023. Overall, the cash conversion is very consistent and repeatable, and we feel like there's opportunity to continue to improve both DSO and working capital balances. The balance sheet is in great shape. I really couldn't be more excited given some of the turmoil going on right now. As I mentioned, our cash conversion is quite strong and, you know, we have really low leverage.
Carey mentioned, you know, we're down below 1.4 at the end of the year, and we, and so we'll continue to be able to invest in order to grow the company both organic and inorganic. Looking back at 2022, we really had a phenomenal year. Just under 15% total revenue growth to just under $4.2 billion. 9% of that was organic. Again, across the board, the most exciting part for me was the four gentlemen you saw up here before. Each and every one of them had growth last year. That's a great place for the company to be. On an adjusted EBITDA basis, I thought it was important to break out the two major components.
We had 14% growth on EBITDA, if you look at the two major components, equity and earnings is our participation on joint ventures where we are minority. We had almost $21 million in decline year-over-year on equity and earnings. That was made up of two major pieces. One was $6 million of work that we're intentionally departing from. Carey mentioned earlier about de-risking the portfolio. About $6 million of equity earnings came down because of the lower volume on those programs. The other $13 million, and George and I talked about it early in 2022, was change orders on existing contracts. That really just deferred the timing on the profit recognition further to the right. Again, performance-wise, the things we're doing well.
Most importantly, what I really wanted to get across here is if you look at the core performance, meaning the business that Parsons controlled, our core adjusted EBITDA grew 23% compared to the 15% revenue growth. We grew the core performance by 50 basis points. We had a really great year last year on the things that were within our control. As we expect equity and earnings to kind of stabilize in the mid-twenties, we'll start to see that recovery in 2023. On cash flow from ops, we had just a bit under 16% growth year-over-year to $240 million worth of cash flow from ops. Again, real great, the company continued to do well. However, we saw opportunity to do even better, and we expect to improve over time.
We're reiterating our 2023 guidance. We have just under 7% guidance at the midpoint on the revenue side, with a 9% high and 4% low. If we talk about kind of what the bulls and the bears are within there, of course, our business is all around hiring and retention. We really got to continue to do what we're doing, bring work to our existing contracts, hire and retain, and that will trend us up above the midpoint. On adjusted EBITDA basis, you can see 9% growth and first, 20 basis points of margin expansion. I mentioned earlier the equity and earnings would recover into the mid-20s. We see about $8 million of expansion there, but additional expansion within the core as well.
If we talk about the bulls and the bears on the EBITDA side, we have to minimize impacts on our programs, as we've talked about, continue to have operating leverage and rapid growth within the higher margin programs. Cash flow from ops is projected to grow 26% to $300 million for 2023. Feel really good about the cash flow. We have line of sight to this $300 million. We're gonna continue to focus on this. You know, at the end of 2022, we had some challenges around receipts, but we have, you know, we're communicating closely with customers and making sure that we're all aligned on in terms of getting through the process.
Again, the $300 million equates to 109% cash conversion, feel really good about continuing to deliver a strong cash flow. Now if we look at longer term, Carey mentioned this earlier, we're looking at between 4%-6% revenue growth over the three-year period through 2025. From a tailwinds perspective, we have global infrastructure spend that is greater than we've ever seen in our lives. That's a great place for us to be. Our capabilities are closely aligned to our near-peer threats. As Paul mentioned, you know, we're transitioning from this global war on terror to our near-peer threats. Our portfolio is directly aligned with that. We're well-positioned to capture as much of the budget as possible.
We have to maintain our strong hiring and retention, with our $8.2 billion worth of backlog, plus the $8 billion of unbooked business, we have real opportunity to beat or exceed this, the midpoint of this guide. When I look at headwinds, of course, the challenges are competition for labor. Since we've never seen an infrastructure market this strong, we are a little bit conservative around, hey, you know, is it gonna be more difficult to hire? I would say our HR team is in a wonderful place because they've been used to this on the federal side, you know, hiring folks with high-level clearances and things, so I'm confident that we'll be able to do the right things within infrastructure as well. The unknowns that we're all dealing with from an inflation and budget uncertainty perspective.
On an adjusted EBITDA basis, we're expecting to grow to $445 million through 2025, which is about 8% at the midpoint. That 8% represents 9.1% margin for 2025. We feel really good about the opportunity to continue to expand margin. Some of the tailwinds and headwinds are consistent, legacy program completions we talked about. Demand being greater than supply. We're in a great place. Mark talked about programs where we're able to bid higher margins, maybe not be low price, technically acceptable, and we're still winning these jobs. We're in a great place in order to expand margins. We have accretive programs that we're growing on today, things that were awarded in the last 12-18 months, and we have operational leverage, as I mentioned.
From a headwinds perspective, obviously concern around continued competition for labor. We did see, you know, labor expense come in higher than we expected in 2022, but it was well within our manageable, within our ability to manage. We have the unknown in inflation and U.S. budget uncertainty that we're tracking as well. I thought this was an important walk for us to go through because, again, we've talked a lot about margin expansion, but this is really how we're going to deliver that. I talked a lot about this, but in 2021, we delivered about an 8.5% margin rate. In 2022, we had a 50 basis point hit on equity and earnings. We invested in our MEA business, which was incredibly valuable.
We spent about $6 million early in the year last year to hire folks ahead of contract award. As Carey and Mark Fialkowski mentioned, we got on 5 out of the 5 giga projects. We're in a great position there, and we're going to recover that through these growth programs. Importantly, as I mentioned before, we had the core operations of the company expanded 50 basis points in order for us to deliver 8.4% margin in 2022. How are we going to get from the 8.4 to the 9.1? In 2023, the majority of our recovery is going to come from equity and earnings. We see about a 20 basis point improvement there when it goes from $16 million-$24 million. We're going to continue to drive on the core operations as well.
However, the majority of the impact is gonna come from equity and earnings. Beyond 2023, we see our accretive growth. We see these programs that are gonna ramp over the next couple of years. We see IIJA peaking in 2026. We see RAMP in 2024 and beyond. We see accretive growth and continued operational leverage. Additionally, we have another 10 basis points of margin expansion, which we feel comfortable that will get us to the 9.1%. Operating cash flow and conversion. We do expect continued cash conversion greater than 100%. At the midpoint, we're projecting 14% growth over the three-year period to $350 million.
We expect we'll have project completions with milestone payments. We expect continued growth in the federal business with really strong DSO will also help our cash flow conversion. From a headwinds perspective, MEA, to be fair, is a little bit less predictable. We're working closely with the customer to make sure we have strong communication and that we're working through the challenges with them to make sure we minimize the net investment for us. The U.S. budget uncertainty, of course, is another challenge for us that we're watching. From a balance sheet perspective, I love this chart because if you look at the timing on these acquisitions and you'd see the small spike in our net debt leverage ratios. I'll pick an Xator as an example.
We spent $400 million last year and our net debt leverage grew to 2x . Within six months, we were down to just under 1.4. Again, the real strong cash flow generation allows us to continue doing what we're doing through on an inorganic basis. We'll continue to have strategic M&A, and we'll continue our share repurchase program. We have short-term capital. We're in a pretty great place where we don't have any near-term debt maturities, which is a great place for the company to be. Over $800 million worth of free cash flow expected over the three year period. Additionally, we have a very competitive with our convert and the term loan that we closed. We have an effective interest rate of 3.75%.
We feel like that's a really great place for us to be to continue down the strategy that we've been doing. We talk a lot of with folks in the room about our ESOP. ESOP, when we went public, represented about 80% of the outstanding shares. At the end of 2022, that was down to just over 60%. We've done a great job of getting shares to the market and increasing the flow, which is exactly what we wanted to do. Average daily trading volume is up about 11% from our prior or from the IPO time. Our relaxed distribution rules really allowed folks to get those shares to the market, which is what we wanted. ESOP continued, for those that are eligible for the ESOP, it continues to be a differentiator for us and a retention tool.
We think it's an important part of our execution. As Carey mentioned, we have three year growth targets that are 4%-6% on the revenue side, 20 to 30 basis points of margin expansion per year, with 30 basis points in 2025, and free cash flow conversion consistently over 100%. We anticipate continuing to do acquisitions with M&A somewhere around 1 to 2 acquisitions per year, and feel really great about the overall strategy of the business. To wrap up, back to the overall investment thesis, we have a really great experienced management team. We have a people-first culture that both attracts and retains talent. All six of our end markets are growing, so we're in a really great place as a company. Our national security portfolio is directly aligned with where the customers are headed.
Our critical infrastructure spend is going as gangbusters. We feel great about that as well. All that equates to a really favorable financial outlook for the company over the next several years. With that, it's a great time to be a part of Parsons, and I'm really excited to be here. With that, I'll invite Carey up for some Q&A.
Thanks again, everybody. We're gonna jump into the Q&A session. Before we go to the audience, I got a couple questions before the event and during the break on the recent IPKeys acquisition. Before we go into the questions, I thought I'd just open up. Carey, do you mind elaborating on the IPKeys acquisition and the valuation you paid for it?
Sure. The valuation, I'll start there, was in line with what we've done in the past, between 11-13. On the IPKeys acquisition, several reasons we're excited about it. First, half the business is services, half the business is products. When you look at the customers, they have hundreds of customers, and you think about the outreach opportunity that that presents. It's basically selling scalable software, and now we have access to all those customers with the broader Parsons portfolio. They basically have 4 products. They have 2 within the cyber space, 2 within the utility space. The products are focused on basically cyber monitoring of both the operational technology and the informational technology environment. Also focused on compliance to standards such as NIST or FERC and NERC standards for the energy sector.
On the energy side, one of the product lines that we're really excited about is the distributed energy response management system. If you think about going forward, we're gonna be adding electrification, we're gonna be adding renewable energies. The demand load for those utility companies is gonna be changing, and this is a product that basically helps manage that demand load. They also have a product that's for metering and operations. They sell to our customers and beyond. They sell predominantly to energy customers, facility customers, such as in the federal segment, as well as water customers. This is a great opportunity for Parsons, a scalable opportunity in terms of the products they provide.
Great, thank you. Anybody in the audience, ask a question.
Hi, Noah Poponak from Jefferies. I mean, if we think about the 4%-6% CAGR revenue target and the 70 basis points of margin expansion off the 2022 base, how should we think about that split between FS and CI and the growth leaders and margin expansion?
Yeah. Thank you, Scott. If you look on an organic level, federal is about 3% on the top line, and critical infrastructure is between 5%-6%.
On the margin side, Scott, you know, I think At the end of 2022, our federal business ran just over 9%. We feel pretty comfortable that there's maybe 10 or 20 basis points within federal that we can expand. Structurally, that business is pretty limited in terms of, you know, how high the margins can go because a lot of development work, a lot of prototype-type work and cost-plus environment. We think the majority of the expansion on the margin side will come from critical infrastructure.
Just on that revenue CAGR, it's 4%-6%. Your addressable markets are all kinda outgrowing that. Just what are the puts and takes there?
Yeah, great question. First, we are faced with two headwinds in the Engineered Systems business. We had that salt waste processing facility program that completed. That was about $20 million because it wrapped up in the first quarter. Then Kwajalein peak last year, that was about another $67 million. We are overcoming that within those numbers. I also wanna just reiterate again that we do give measured guidance and our goal is to always outperform as we did in 2022.
Scott, I know we talked about this, but with the business being mainly labor, you know, this labor market is gonna be a challenging one, as we all know, and we're gonna continue to hire. As soon as our HR team can continue to deliver like they did in 2022, we'll be able to beat race, hopefully.
Anybody else? Tobey.
Thanks. Tobey Sommer with Truist. With win rates, were you quoted over the last several years? Are you bidding enough?
Yeah, it's a great question, Toby. I would say in some areas, I think we're gonna be expanding. Jon mentioned for Engineered Systems as a great example, how much his pipeline has expanded. I would say we're definitely gonna continue to bid and win more and focus on that. With the markets the way we are, we need to, and we do have strong win rates across the board. Re-competes have consistently been above 90% and 40%-50% overall.
Yeah, Tobey, I'd add, you know, I think if I think back to the couple years in 2022, our focus was definitely investing in HR, recruiting, and attraction of talent. In 2023, there's a real opportunity to spend more money on BD and capture. I think that's definitely a shift in terms of our internal investment.
Thanks. Within Saudi Arabia and the critical infrastructure exposure you have there, we don't often hear in the industry, moving to the left. I was wondering if you could frame the arc of the opportunity there, and if it's possible to look out multiple years, is there a year that or a range of years that you would expect that opportunity to crest, so to speak?
Within Middle East and over $1 trillion of the $1.5 trillion is in Saudi Arabia, they definitely have moved programs to the left. The Saudi Vision 2030 was announced that started to get accelerated as oil prices increased, and they wanted to move the gigaprojects forward. We were fortunate, obviously, to land on five of the gigaprojects. We are being conservative in our bookings, a lot of that does fall kind of into this unbooked that we have. We've only booked the first phase. We wanna make sure first that we're hiring, we're ramped, and we're delivering for the customer. That's our predominant focus because we do believe we have strong growth potential provided we do that.
Okay. And last question for me. Could you give a little more color on the as-a-service model that you described for ground-based ops? What is the growth opportunity, margin opportunity and competitive environment look like in that arena? Is there a different area that's sort of a what's next for the as-a-service model?
Yes, a great question. Today, we have 3 customers. NOAA has signed up, DARPA has signed up, and the Air Force has signed up, specifically its Air Force Research Laboratory. We believe, this is the model that can be adopted across Department of Defense and even into the Intelligence Community. We need to get to a comfort level 'cause it's a different buying pattern for them that they can come in and they can use this infrastructure. For any of you going to Space Symposium that wanna come visit our facility over in Colorado Springs, we'd love to show you how we're flying those satellites 'cause it is quite fascinating. I think it's more of a comfort level on how quickly we can scale.
I'm not aware of anybody else that has sold on this basis, so we're kind of pleased that we've been a forerunner in this. Margin perspective, it would be higher margin 'cause you're selling as a service.
Okay. Anybody else?
Hey there. This is Louis.
Louis.
Louis from William Blair. Sticking to the Middle East topic, Matt, I think you mentioned how it's Saudi Vision 2030 and Dubai 2040, and those timeframes are very long in duration. Currently, I think, at least according to your 10-K, you do roughly $700 million in revenue from the broader Middle East region. I was wondering if you could provide a, like, more long-term outlook in terms of what is the market potential and also, what is the visibility in terms of the Middle East? It seems that there was a dip in 2021, so should the Middle East revenue be lumpy or is there like a clear line of sight since you are on, I think, five different projects there?
Yeah, I'll start with that. The Middle East spend at $1.5 trillion is expected to last over about a 10-15-year horizon. We do have pretty good line of sight because if you look at the three countries that we're involved in, Saudi Arabia has laid out all of its priority programs under the Saudi Vision 2030. For example, NEOM, the Line, there's supposed to be 90 million people living there by 2030. If you look at the entertainment city being built right outside of Riyadh, they're supposed to have Six Flags amusement park up and running in 2023, 2024. We have pretty detailed schedules that we can follow. The same applies for the UAE as well as Qatar, so we have good line of sight. On Saudi, I also wanna emphasize something folks may not be aware of.
We've been there for 50 years. We are seen as a Saudi company. At Saudi Arabia Parsons Limited, it's a 50/50 joint venture with a Saudi partner.
That's great.
Yeah. I think, you know, from my perspective, I do expect the revenue to be more stable in the Middle East. Carey can probably talk about the delivery part, but we're really in a program management role in a lot of cases. We are kind of like an LOE for the life of the contract versus kind of a delivery for a three-year period that comes to a completion. I do suspect it'll be stable growth and kind of a plateau through between now and 2030.
Great. In that role as a program manager, do you have the capability to expand your services? Just because we have seen so many presentations about what you can do for environmental remediation. We've seen what you can do for smart transportation and all across the critical infrastructure realm. It seems Parsons can do a lot more than just product management, not to belittle product management. It's obviously, you know, very critical, but is there an opportunity to just expand what you can do?
There certainly is. You're giving our sales speech back which is helpful. That's exactly it, Louis. Once we get our feet on the ground, we have so many more capabilities.
Cyber, too.
NEOM, for.
Yes.
ample, security for NEOM, cybersecurity, physical security, environmental work. Yes, we can bring quite a bit more to the table, and we look forward to having those opportunities.
Sounds good. Thanks.
Yeah. Louis, one thing I would add, too, is I was over in the Middle East at the end of January, and one of the highlights for me, it was unexpected, was as I sat down, there was a guy next to me from Xator that I didn't know was gonna be there, and there was another guy from Peter's team. Again, it kind of, across the portfolio, people are able to, once we're on this NEOM the Line contract or some of these other contracts, we can bring the Parsons capabilities to your point. Great opportunity.
Yep.
Great. Thank you.
Andrew?
Hi. Yeah. Andrew Wittmann from Baird.
Yeah.
I guess I just had a question on, the unknowable in some ways, the budget ceiling or the debt ceiling and the federal budget that is coming into question this summer or maybe early this fall. I was hoping you could give us some context by maybe addressing this in 2 ways. First starting out with, assuming that maybe, like, the defense part of the budget isn't cut and continues to grow as it is suggested in the President's budget, could you talk about your civilian exposure? How much of your federal government is civilian exposed, where maybe, isn't as protected as the defense side?
Maybe if you could talk about some of the context from the 2012 sequestration and how that impacted Parsons' business then, and if, it's the same or changed in terms of the character of the business today?
On the first part, I'd say we've had debt ceiling increases 20 times since 2001. I'm quite optimistic that the parties will get together and then we'll have resolution there. The same can be said for continuing resolutions as you look at that. You know, there's been 47 of those since FY 2010 to FY 2022. We're pretty used to dealing with that. When I look at the president budget request for 2024, I'm pretty excited. You might say, well, DoD was in there at 3.2%. Yes, that's without add-ons which have happened over the last two years. In addition, cybersecurity, which is a key area for us, is growing at 21% up to $13.5 billion.
When we look at where we play in the DoD budget, that's where the budget's growing because of how we've positioned our portfolio. As far as other exposure, if I look at Department of State, a critical area for our Xator group under Engineered Systems, they're in the budget at 11.2%. If I look at Health and Human Services, again under Engineered Systems, they're in the budget for 11.5%. Department of Transportation, that affects our critical infrastructure group and Engineered Systems, +6.7% on top of IIJA. When we looked at the budget, I actually let me add on to that. Areas that are highlighted in the budget is spend and PFAS, and the White House just came out with the announcement yesterday setting the minimum standard levels.
We're starting to see that move forward in the legislation. Space, cybersecurity. There's rail safety and infrastructure. There's FAA work and FAA modernization. We were very pleased with the budget in total. We think it directly aligns to our capability. Sequestration last time, I don't believe affected the company a whole lot, but I wanna get back with specifics since I wasn't at the company at the time. I think it was predominantly one contract that we had.
Thank you.
Thanks.
Byron?
Sure. Byron Callan, Capital Alpha Partners. Couple of questions, Carey. On headcount, you've been running around $250,000 in revenues per person. Can you increase that through better product mix? That's one question.
Yep. In response to that, the answer is absolutely yes. That's why we're looking at areas like as a service to sell. Also, we do have space products we didn't talk about today, but we do quite a bit of, like, scheduling, resource optimization. We sell those on a commercial basis. That was a large part of the reason IP Keys was attractive to us because 50% of that is products and it's directly scalable. Yes.
Okay.
One thing I'd add, Byron, is in the Middle East, our cost per head is a little bit lower than the rest of the company. If that grows at an outpace, but yeah, to Carey's point, absolutely opportunity.
Okay, good. On Critical Solutions, you talked about one of the headwinds being labor or hiring people. You know, you think of traditional civil engineering, it sounds like this is going to be more technology people you're looking for, I just wonder if that changes given what we've seen with layoffs recently at big tech companies, the Silicon Valley Bank ripples and how that might increase the pool of available labor that you're looking at.
Our hiring, again, has been very strong. If you look, 2021 to 2022, up 42%. In fact, I'd say it's been very strong since we brought on a new HR team the second half of 2021 until today, and we're continuing that momentum as we go into 2023. The skills that we predominantly hire in critical infrastructure, critical infrastructure a little easier bar to hire than, for example, our Defense & Intelligence business because of the clearances. It would be program management predominantly when you look in the Middle East. Then within the U.S., a lot of design engineering people. Tech companies we get some people from, but I wouldn't say that's our major pool.
Okay, last question. This is a little further afield, but Ukraine and how Ukraine might fit into your thinking from a defense standpoint, but also even from a critical infrastructure standpoint. There's gonna be a rebuilding of that country at some point. Is it something you think about, either from sopping up global engineering capacity or from your own opportunity set?
Terrific question, and absolutely yes. I've been fortunate. I've had the opportunity to meet with the ambassador from Ukraine recently, also met with the Secretary of Commerce, and we're in deep discussions in several areas. I would say demining is the, their most important objective right now because they're really going into the agricultural season, and they've got to get that explosive ordinance removed. We also have an emulation system that we've delivered to Ukraine that's basically a radar, an RF emulation system out of our defense portfolio, so that's another area that we're looking at. We have a biometrics capability where they've bought the first few kits, so it's our system that we're using for Department of State. They need to use it to track prisoners of war, to identify various Russians. We see additional kits being deployed as we look there.
The big opportunity will be the reconstruction. I would say before the reconstruction starts, one thing we've been in discussion with is master planning. Because for them to be able to enter into a long-term reconstruction that'll take, you know, a decade or more, you need a master plan, a concept, and so we've put some ideas forth in that regard. Then the other area would be energy solutions. That's a big need. We're in deep discussions.
Great. I'll go to the online question real quick. I'm sorry. We got a couple online here. Out of your 6 markets, where do you see the most potential?
Well, first, I'll say again, I couldn't be happier with the six markets we have when you look at 5%-12% growth rate across those. If I had to pick your favorite children, I guess I would say, transportation has the highest growth rate projected at 12%. Critical infrastructure protection is also very strong at 9% as well as environmental remediation at 9%. Right. Okay. Go ahead.
Hi, Bert Subin with Stifel. Thanks for the question. Carey, during the group moderated session, you talked about the pipeline expanding pretty significantly in the federal solutions side, yet you noted the organic growth expectation there is, you know, a bit more modest at maybe 3% over the next few years. Can you just sort of tie that together? You know, we have RDT&E growing double digits this year, that you're heavily exposed to that. Pipeline's expanding. Seems like there's a lot of opportunity there. You know, how should we think about the upside on that 3% number?
Great question. Our pipeline is up. It's up $42 billion at the end of the fourth quarter, that's several billion over what it was at the end of third quarter. Our awaiting notice of award is also up, so we're up to $9 billion over $7 billion, which means we're submitting more, we just need to get them pushed in the funnel out. As I mentioned on the quarterly earnings call, we had a couple of awards that had slipped from fourth quarter into first quarter. We are fortunate that we've seen a couple of awards in the first quarter that we anticipated. I'm optimistic that we're gonna start seeing those awards push through. I think it's really just caution on, you know, the government has been light on contracting officers. There was some slowdown in the industry in total.
It's being cautious and making sure that they're getting those awards out.
Then a question for you, Matt, on the margin side, you gave, you know, a good walkthrough with that waterfall chart. How should we think about when critical infrastructure ultimately sort of gets in line with your peer group? Your peers tend to earn, you know, something closer to 10+% margins there. You guys have a couple points to close that gap, but you're talking about sort of 20-30 basis points of annual expansion. Is there a possibility for that to expand more just as that gets in line with the peer group?
Yeah, good question, Bert. I would tell you that, as I mentioned, the majority of the margin expansion over the next three years will be in critical infrastructure. If you think of the 20%-30% being 40%-60%, on the critical infrastructure side, we had about a 7.7% margin wrapping up 2022. We're really optimistic that we're gonna start to see that come up. Peter talked about some of the as-a-service work we're doing there. Mark talked a lot about the, you know, the pricing premiums that we've been able to attract within our pursuits. We're optimistic that we'll see critical infrastructure north of 9% within the period, and we're also optimistic we're gonna continue to push.
Great.
Thanks. Matt, the $390 at the high end of the 2025 cash from ops range, based on the P&L guidance, that would be a pretty high conversion rate. Are there drivers you're looking for outside of the business segments, to drive cash flow?
I mentioned it probably in the comments, but we do have some milestones coming up. We've got a little bit in that we've programs that we've completed kind of beginning of this year and going into the beginning of next year. It's really just kind of the timing on wrapping up some of those programs, but some pretty good milestones as we wrap up to the tune of $40 million-$50 million.
Okay. You referred to last year spending, nearly $400 million on acquisitions. You've spent something close to that, you know, most of the last half decade or so. Is that a reasonable, you know, given what the pipeline looks like and where the balance sheet is that kind of a reasonable amount to expect you to spend on M&A the next few years through the pipeline?
Well, I would say, first historically, kind of our sweet spot has been companies in the revenue range of about $50 million-$300 million annual revenue. We don't put an amount down. What's important for us is 'cause that's not really what matters. It's really about how we move up the value chain, and it's finding those right companies that have the solutions integration and the software capacity, or in our critical infrastructure, we're also looking to expand in certain geographic locations, specific states. For us, it's about buying the right assets that we know will fit culturally with the company that are moving in accordance with our strategy.
I think when I, when I look at it, you know, generically over on average, we wanna use the free cash flow, excluding share buybacks and capital toward M&A. I think that average will probably play out over a longer period. 4 or $400 was probably on the higher end than on average.
Makes sense. Thank you.
Great. Thanks.
Great.
I'll go to another question online. It says, "You've experienced a lot of growth in the Middle East. Do you have other geographical expansion plans?
We're fortunate with our portfolio right now. As we talk about a lot as an executive leadership team, we need to focus and deliver. When you're in six growing markets and you're in all the right geographies, the objective is how do you capitalize on that opportunity? It takes time. I've done a lot of international work over my career. It takes a lot of time, it takes a lot of money to get set up in new geographies. We're fortunate we don't need to do that. Having said that, INDOPACOM for us, where we do have a strong presence in Guam and Kwajalein as well as in Hawaii, we see as ramping up over the short duration with the China-Taiwan conflict.
Hi, Elaine, from Seaport Global. Thank you for taking the time. Just quick follow-up from Louis' question on Middle East. Middle East does see very strong growth, growing over 25% in the past year or so. Should we expect that to accelerate or moderate kind of going forward into 2023 and beyond?
Yeah, Elaine, I would say we still expect growth. They run through some areas, like if you look at holidays coming up, Ramadan and Eid, where we're not gonna see as much. I would say there's a little bit of seasonality in that, but those programs are still on the incline. We're the integrated project delivery partner for those. I do expect we're still gonna continue to see that increase.
Got it. Kinda like with that moderating slightly, but CI being the faster growth business segment within Parsons, so what are some levers that you're pulling on the CI side to kind of drive that continued growth? Thank you.
On the CI side, what's important for us is, let me start with the U.S. infrastructure bill, $550 billion of new funds, $284 billion of that is transportation. If you look at other areas in the U.S. infrastructure bill, we talked about electrification. That's big for us, both in federal as well as CI. Again, substantial funding for that. Broadband is an area as well where we've seen some recent activity and awards. PFAS, PFOS is a growing area for us. I would say those are the focus within the United States, as well as aviation and rail and transit. Within Canada, we're mostly focused on rail and transit as a large growth area for us. Within the Middle East, it would be the urban development.
Great. Another online question. Given all your markets are growing, how do you prioritize investments in your business?
Yeah, it's a great question. Investment's been something we've spent quite a bit of time on. When I joined the company back in 2016, we actually didn't have a research and development budget. That was one of the first things we did, is put that in place, because if you're gonna be an elite federal contractor, you have to invest. That's why I wanted to spend a couple of minutes this morning talking about technology and where we've been making those investments. We've increased that budget about 20 times over the four years. I mean, we've really skyrocketed that up to make sure that we stay at that elite position. We also look at what are the emerging markets. It's really about...
I'll go back to kind of the four block chart that says you have parts of your portfolio that are sort of your cash cow. They're gonna be good, or they're gonna be stable, they're gonna be core operations. You have other parts of your portfolio that can have outstanding growth or kind of those new emerging markets, where you're at the forefront of those. I'd put PFAS, PFOS as an example there. I would put the oil well abandon and plugging there and the methane biofilter work that we're doing and the patent in that area. National security. You know, we pick the parts of the market where we're gonna be the top position. It's looking at how we can strengthen offensive and defensive cyber, how we can carve out the niche areas in space, like the operations as a service, like space domain awareness.
It's those parts in the market where we know that we can accelerate, we can be the top of the market, and we can be technologically differentiated.
Great. Another online here. What is the trajectory of your growth and margin expansion? Is it linear or back-end loaded?
Yeah, I can take that one. It's pretty linear. Of course, there's gonna be some small anomalies, but I would treat it as linear. We do expect, you know, about the same amount of revenue growth and margin expansion on a yearly basis. We talked about 20 basis points in 2023 and 2024, and then 30 in 2025. For the most part, it's gonna be linear versus... Our goal, of course, is to have stability and consistent delivery.
Great. What gets you to the high end and the low end of your ranges?
Matt covered a lot of that, but I would say on the high end, it's continuing to do what we've been doing, which is successfully winning business and maintaining those high competitive win rates, making sure that we continue the hiring momentum that we've had since the middle of 2021. We're quite delighted about that. Making sure that we keep our retention very strong, which has been improving, and we're quite excited about that as well. On the low end, it's really the cautionary around what we can't control. It's inflation, it's budget uncertainty. Will something happen with the labor market? Really it's focused on what we've been doing and continue to deliver.
Another one here is, how are you able to do such a good job of attracting and retaining talent?
Yeah. I tried to hit on a lot of that in our presentation. I think the presidents also did a great job, and it's interesting hearing, in fact, between Peter and Mark, somebody that's relatively new to the company and somebody that's been at the company for decades. I think it goes back to mission and culture. We come to work because we're passionate about what we do and passionate about delivering for our customers. We have this great culture at Parsons, and I don't think you can find that because we're not a tier one type of company and we're not a small business, but we have this breadth and depth of capabilities that people can come in, they can work on these very exciting projects anywhere in the world. They can move up in their career and have great career opportunities. We're very agile.
We attract people that are kind of the entrepreneurs that like that fast-moving space and getting solutions out there to the customers, 'cause we're a different type of company.
Great. Has the infrastructure bill begun to positively impact your revenue, if not materially yet, when do you expect it to have a meaningful impact?
We have started to see infrastructure funds. We got $50 million for our FAA program, and there's additional that will come through that because there's $5 billion planned for FAA in the facilities area that's in the infrastructure bill. We've also gotten some infrastructure funds on both federal rail and transit programs, as well as state and local rail and transit programs. From a planning perspective, we see that starting on the incline later in 2023, 2024, with the peak in 2026. I would just reiterate how well aligned our portfolio is. Transportation, electrification, broadband capabilities, environmental remediation capabilities. We are very excited about the growth and the prospects that we're gonna see over the next couple of years.
Great. One more here. Why do you win or lose in the market?
This is, it's technical. We rarely lose on cost, and the reason is because of where we play in our market spaces. Mark talked about, I'd say his, if any, in the past, has been more cost competitive, but now we're winning, and we're not low cost. It's because we have unique solutions, and we've positioned ourself at such a place in the market that we're technologically differentiated. The key for us is getting ahead of customers' emerging problems, understanding them, being able to put the solution response in that they need. Ideally, I'll take a program like ViperX. To me, that's exciting. When you have a program where you can basically stop a non-compliant vessel using directed energy in a non-lethal way, and that program starts out as basically a study task order.
We're now completed CDR, and we're looking at kind of a full program to support the Coast Guard and other Department of Defense initiatives. That's how we like to play. Get in the front door, shape the market, develop the solution, and then see that solution go into a program of record.
Great. Anything from the audience? I'll go here online. With the significant growth you're experiencing in the Middle East, can you convert free cash flow at 100% or higher?
Yeah, that's a great question for whoever asked it. Yeah, obviously the Middle East is our challenge area. As I mentioned, I think during the conversation, it's never a risk of whether we're going to get paid. We're delivering consistently. The customers are very happy with us. It's really just timing. It's very difficult. Carey talked a little bit about holidays. Sometimes their holidays line up to our fiscal closes, which isn't ideal, you know, I'd say the leadership team, every time Mark goes over, Carey goes over or I go over, we have a list of, "Hey, here's the critical receipts within the quarter that we need to collect on." We've gone through flow diagrams as, "Hey, where are our bottlenecks? You know, is it on our side? What can we do better?
What can the customer do better?" As there's transitions from treasury to a different part of the customer. We're optimistic, Dave, that, you know, we can continue to drive down working capital balances despite the strong growth and hopefully maintain or reduce TSL.
I think that, you know, given that we've been over there for decades, as Matt said, it really is a timing issue. We do always get paid. They're in a position now, too, that Western companies are contributing quite a bit, and they want the Western companies to be there to help support their growth. I think we'll get better aligned.
Yeah. When we talk to some of the customers, the importance, you know, we tell them how important cash flow is for public companies in the U.S., of course, and around the world. It's, you know, a little bit of an education for them as well.
Great. Another one here. What are your major recompetes coming up between now and 2025?
We really only have one that I'd say is material to the business. We've talked about that in the past. That would be our FAA contract. That bid's already been submitted. I think evaluation is near complete. We've performed for that customer for over two decades, very successfully, very high outstanding past performance. We have very strong recompete win rates. We look forward to receiving that award, hopefully, it will be awarded by second quarter.
Great. Another one here is, it looks like you have an active M&A program, but are there opportunities for divestitures?
We're always looking at shaping the portfolio. Matt and I both spend quite a bit of time on that. We are fortunate, again, just given our market position, there's nothing material that we see that we would wanna divest. There's bits we do around the edges, but there is nothing material. We feel we have top positions, strong positions, differentiated positions in all six of our core end markets.
Great. Can you elaborate on your executive compensation plans? Are they aligned with shareholder interests?
Yeah. Our executive compensation plans, both the short term and the long term, are aligned with shareholder interests, so they're predominantly around financials, also, total shareholder return. We do have a component that is tied to diversity, equity, and inclusion, specifically around gender and racial.
Okay, another one here. Are you having any issues with protests, especially on larger programs, and is there risk of larger programs just getting delayed and pushed out?
There's always protests, which is unfortunate. It's one thing I wish that we could change. We have about $300 million currently that is held up in protests. The majority of that is in federal. We don't tend to see protests on the critical infrastructure side, except in rare instances. Fortunately, that business tends to move forward a little bit predictable. Generally, you will see these closed within months, but we do have the occasional ones. We have one right now within Engineered Systems that's gone on for over a year. We've won it probably three or four times. It would be new workforce. Yes, protests are something that we continually have to deal with.
Okay, great. Tobey.
Tobey Sommer, Truist again. Thank you. I wanted to follow up on that protest. What do the customers think about this, and is there a low-hanging obvious change, just to keep it simple, like one change that could change behavior?
We talk about this a lot. I'm the chair for the Professional Services Council. This is always an agenda item for us on how do we help the government fix this. What do the customers think about it? They don't like it. Are there mistakes made in the system? Sometimes. The part that is difficult are when there are what I will call frivolous protests of companies who are trying to hang on to work or there's a new program that was material for them and they protest that. I think what has to happen personally is the industry associations have to help the government and come up with a new system and perhaps, you know, companies, if they submit a protest that's deemed frivolous, they would have to pay the protest expense or something like that to resolve it.
Having been in the industry for 37 years, I'm hoping it gets fixed sometime in my career, but it's a pretty tough challenge.
Okay. It looks like we have time for a couple more here. What are the margins in each of your markets, and what markets will drive your margin expansion?
Yes. As Matt Ofilos mentioned, critical infrastructure overall has the most potential for expansion. When you look at our contract mix, three-quarters of that portfolio is fixed price, time, and material, so that's where we have the most opportunity. Whereas two-thirds of our federal portfolio is cost reimbursable. Having said that, I would say all the critical infrastructure areas we see margin expansion potential, but also within Defense and Intelligence areas where we're in selective positions such as cyber and space, we see opportunity.
Great. Brent?
Carey, you talked about contracting officers earlier and the impact that's had. If we look at the Treasury outlay data, that's actually become more favorable, and you're seeing money move through. It sounds like your rhetoric was more that, you know, there's still bottlenecks there. Are you seeing any improvement, and sort of what's your expectation as we go through 2023?
We have seen some improvement and, you know, I'm hoping before we get to this year's budget appropriation cycle that people will want to award the money. We've seen a little bit of improvement in those programs that I mentioned that got delayed in fourth quarter, have since been awarded. I do expect to see progress, and the outlays are a good sign.
Burt, I know we talked about this, but we do still have $9 billion in awaiting award, which for a $4 billion company is pretty significant and more than 2x what our kind of normal run would be over the last few years. We just think there's still some opportunity for improvement.
Great. Byron?
Byron Callan, Capital Alpha Partners. What's next with PFAS and what do you guys do different than some of the competitors in that market?
Yeah. PFOS, PFAS, I will ask you to talk to Dan Griffiths, who's our expert, I'll give you the high-level version. We've been involved since 2009, kind of at the inception of it. We have a water treatment laboratory up in Syracuse, New York, that we use to test various filtration technologies, that's helped us as well. We have 4 patents that have already been approved. We have a patent pending, which I'll talk about in just a minute. If you look at it, we look at all 3 streams, it would be soil and groundwater, it would be large concentration waste streams, and it would be large volumes of solid mass.
The patent that we have pending would remediate at the subsurface level, and it's gonna be a first of a kind patent to get out there. What we're excited about, I would say, is we're one of the leaders in this. It's a growing market with $100 billion-$140 billion potential. We intend to stay on the forefront of it. It is one of our major investment areas in the company.
That's great. That's a good segue into the demos. Just really wanted to thank everybody here. Super nice of you guys to be here. Definitely appreciate it. Please don't hesitate to reach out to me or any of the executives here. We'll go to the demos now, but we do have lunch, so please grab some food, check out the PFAS demo as well as the space capabilities. Again, thank you very much and thanks to the people online as well. Again, we appreciate all your support. Have a good day.