UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
TO
Commission File Number 001-07782
PARSONS CORPORATION
(Exact name of Registrant as Specified in Its Charter)
Delaware
95-3232481
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
14291 Park Meadow Drive, Suite 100
Chantilly, VA
20151
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: (703) 988-8500
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol(s)
Name of each exchange on which registered
Common Stock, $1 par value
PSN
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth
company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☒
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the
correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the
registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, based on the closing price of the shares of common stock on
The New York Stock Exchange on June 30, 2024, was $8.7 billion.
The number of shares of Registrant’s Common Stock outstanding as of February 11, 2025 was 106,777,126
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Parsons’ 2025 Proxy Statement are incorporated by reference into Part III of this Annual Report on Form 10-K.
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Table of Contents
Page
PART I
Item 1.
Business
1
Item 1A.
Risk Factors
22
Item 1B.
Unresolved Staff Comments
51
Item 1C.
Cybersecurity
51
Item 2.
Properties
52
Item 3.
Legal Proceedings
52
Item 4.
Mine Safety Disclosures
53
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
54
Item 6.
Reserved
56
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
57
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
82
Item 8.
Financial Statements and Supplementary Data
82
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
82
Item 9A.
Controls and Procedures
82
Item 9B.
Other Information
83
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
83
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
84
Item 11.
Executive Compensation
84
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
84
Item 13.
Certain Relationships and Related Transactions, and Director Independence
84
Item 14.
Principal Accounting Fees and Services
84
PART IV
Item 15.
Exhibits, Financial Statement Schedules
85
Item 16
Form 10-K Summary
85
Exhibit Index
86
Signatures
90
Index to Consolidated Financial Statements and Report of Independent Registered Public Accounting Firm
F-1
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This annual report on Form 10-K contains forward-looking statements within the meaning of the federal securities laws, which
statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or
operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may”, “will”,
“should”, “expects”, “plans”, “anticipates”, “could”, “intends”, “target”, “projects”, “contemplates”, “believes”, “estimates”, “predicts”, “potential”
or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions.
Forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results,
performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the
forward-looking statements. We believe that these factors include, but are not limited to, the following:
•
any issue that compromises our relationships with the U.S. federal government or its agencies or other state, local or foreign
governments or agencies;
•
any issues that damage our professional reputation;
•
changes in governmental priorities that shift expenditures away from agencies or programs that we support;
•
our dependence on the award, maintenance and renewal of long-term government contracts, which are subject to the
government’s budgetary approval process;
•
the size of our addressable markets and the amount of government spending on private contractors;
•
failure by us or our employees to obtain and maintain necessary security clearances or certifications;
•
failure to comply with numerous laws and regulations;
•
changes in government procurement, contract or other practices or the adoption by governments of new laws, rules, regulations
and programs in a manner adverse to us;
•
the termination or nonrenewal of our government contracts, particularly our contracts with the U.S. federal government;
•
our ability to compete effectively in the competitive bidding process and delays, contract terminations or cancellations caused by
competitors’ protests of major contract awards received by us;
•
our ability to generate revenue under certain of our contracts;
•
any inability to attract, train or retain employees with the requisite skills, experience and security clearances;
•
the loss of members of senior management or failure to develop new leaders;
•
misconduct or other improper activities from our employees or subcontractors;
•
our ability to realize the full value of our backlog and the timing of our receipt of revenue under contracts included in backlog;
•
changes in the mix of our contracts and our ability to accurately estimate or otherwise recover expenses, time and resources for
our contracts;
•
changes in estimates used in recognizing revenue;
•
internal system or service failures and security breaches;
iii
•
inherent uncertainties and potential adverse developments in legal proceedings, including litigation, audits, reviews and
investigations, which may result in materially adverse judgments, settlements or other unfavorable outcomes; and
•
other risks and factors listed under “Risk Factors” and elsewhere in this report.
We have based the forward-looking statements contained in this report primarily on our current expectations and projections about
future events and trends that we believe may affect our business, financial condition, results of operations, prospects, business strategy and
financial needs. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, assumptions and
other factors described in the section captioned “Risk Factors” and elsewhere in this report. These risks are not exhaustive. Other sections of
this report include additional factors that could adversely impact our business and financial performance. Furthermore, new risks and
uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the
forward-looking statements contained in this report. We cannot assure you that the results, events and circumstances reflected in the
forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described
in the forward-looking statements.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These
statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable
basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have
conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain,
and investors are cautioned not to unduly rely upon these statements.
You should read this report and the documents that we reference in this report and have filed as exhibits to the registration statement
of which this report forms a part with the understanding that our actual future results, levels of activity, performance and achievements may
be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
The forward-looking statements made in this report relate only to events as of the date on which such statements are made. We
undertake no obligation to update any forward-looking statements after the date of this report or to conform such statements to actual results
or revised expectations, except as required by law.
1
PART I
Item 1. Business.
Overview
Parsons is a leading provider of the solutions and services required to support the complex security environment, unprecedented
global infrastructure demand, and a world of digital transformation impacting our customers. For more than 80 years, we have solved our
customers’ most challenging problems and enabled a safer, smarter, more secure, and more connected world thanks to a culture of
innovation, a focus on delivery, and a mission-focused workforce. Across those eight decades, we’ve established ourselves as a leading
provider of integrated solutions and services that solve emerging customer challenges by leveraging our depth of experience and expertise in
the markets where we operate. Today, that legacy of success has never been more true or more important, with Parsons uniquely positioned
to deliver innovative solutions to our customers’ most challenging current and emerging requirements.
We have developed significant expertise and differentiated capabilities in key end markets including cyber and intelligence, space and
missile defense, critical infrastructure protection, transportation, environmental remediation, and urban development. Whether a first-of-a-kind
sustainable, industrial city that runs on 100% renewable energy, security-as-a-service platform that uses advanced analytics and artificial
intelligence/machine learning to defend against critical infrastructure cyber threats (transportation, utility, water, facility and healthcare), or
elimination of emerging contaminants from the environment, we deliver integrated solutions that our customers need and the world demands.
Across those programs, we have developed longstanding relationships with a wide-ranging global customer set that includes U.S. federal
government departments and agencies, the U.S. military, state and local governments, and international clients; all know Parsons as a
trusted partner sought out for our commitment to their success. We’ve further differentiated ourselves with those customers by delivering
solutions through our One Parsons approach, bringing together capabilities from across our markets to provide integrated and unique
offerings that leverage our global experience and in-depth technological expertise in areas of emerging demand such as our application of
artificial intelligence to critical areas including cyber, engineering design, traffic management and counter unmanned aircraft systems.
Organizationally, we operate in two reportable segments, Federal Solutions and Critical Infrastructure, with revenue contribution of
59% and 41%, respectively, and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) contribution of 69% and
31%, respectively, for the year ended December 31, 2024 (“fiscal 2024”). See "Management’s Discussion and Analysis of Financial
Condition and Results of Operations—Segment Results” for further discussion on our segments.
Federal Solutions: Our Federal Solutions segment is an advanced technology provider to the U.S. government, delivering timely,
cost-effective solutions for mission-critical projects. We provide critical technologies, including cyber; missile defense; intelligence; electronic
warfare; space ground systems; space and weapon system resiliency; geospatial intelligence; signals intelligence; environmental
remediation; border security, critical infrastructure protection; counter unmanned air systems; biometrics and biosurveillance. The U.S.
government and its agencies represent substantially all of the revenue of our Federal Solutions segment. These U.S. government agencies
include the Intelligence Community, the Departments of Defense, Energy, Labor, State, Homeland Security, and Commerce, the United
States Postal Service, the National Aeronautics and Space Administration, and the Federal Aviation Administration.
Critical Infrastructure: Our Critical Infrastructure segment provides program management, design and engineering services, and
owners representative support for complex physical and digital infrastructure around the globe. We develop digital solutions focused on next
generation aviation; rail and transit; bridges, roads and highways; and leverage sensors and data to drive smart sustainable infrastructure.
Our capabilities in environmental remediation, water and wastewater treatment systems, and urban development allow us to deliver value to
our customers by employing advanced technologies, improving timelines and decreasing costs while reducing environmental impacts and
improving the quality
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of life. We design and lead the delivery of complex infrastructure projects, leveraging our expertise as a leader in bridges, transportation, and
urban development to support customers in programs that are transforming the global landscape. We serve a wide-ranging global customer
base including federal, state, municipal and industry customers, and private sector infrastructure owners, such as the transportation
authorities for the cities of Los Angeles, San Francisco, New York, and Paris, the state of New Jersey, Amtrak, CSX, Metrolinx (Ontario,
Canada), Southern Nevada Water Authority, the Royal Commission for Riyadh City, Dubai Roads and Transportation Authority, Abu Dhabi
Department of Municipalities and Transport, Qatar Public Works Authority, Saudi Arabia’s Public Investment Fund, and international
developers.
Advances in technology and geopolitical events are dramatically shifting the operating landscape across our markets, with pressing
challenges ranging from confronting increasingly sophisticated cybersecurity threats to upgrading aging infrastructure to reducing
environmental footprint and improving water quality. Our customers are seeking smart technology-enabled solutions leveraging artificial
intelligence to enhance and transform their systems performance and to address these challenges. Parsons’ extensive capabilities enable us
to provide our services, products, and solutions across the national security and critical infrastructure markets, and we are well positioned to
benefit from the trends in these markets. We have capabilities in the following four areas that span our two segments and four business units:
Systems Integration: We provide engineering services and technology for large digital and physical systems with high technical
complexity. We lead projects from concept development through research and design, implementation, testing and verification, ensuring
interoperability of these complex, disparate systems.
Program Management: We provide expertise and technology to advance our customers’ execution of large, complex projects within
their defined, technical, quality, time and cost parameters.
Design Engineering: We provide advanced systems and infrastructure engineering design associated with utility capital projects,
water/wastewater treatment, environmental remediation, ammunition plant upgrades, roads and highways, bridges, rail and transit systems,
and other associated infrastructure. Additionally, we are leveraging digital engineering technology including model-based systems
engineering and digital twins.
Product Development: We develop software and hardware across many domains and mission-specific applications. Our
experienced engineers and developers design, develop, integrate, operate and sustain mission-critical software and hardware products for
intelligence, defense and infrastructure customers.
Our customer relationships, which are based on a long history of successfully delivering complex technical solutions and services, are
key to our success. We are often involved in the early stages of our customers’ planning processes, which allows us to efficiently optimize
our delivery model. These relationships, along with our technical expertise and intellectual property, enable Parsons to successfully provide
solutions that meet our customers’ demanding technical and execution requirements and fulfill our corporate purpose of developing a better
world.
Our Services, Products and Solutions
Within each of our segments, we focus our solutions, products and services on the needs of customers in each of our business units.
Parsons is differentiated by our people, processes, and technology that work together to develop, rapidly prototype and deploy specialized
hardware, software and infrastructure solutions to meet continually evolving customer missions and needs. With a culture driven by agility,
innovation and collaboration, we provide operationally proven capabilities in emerging technical areas, including advanced analytics, artificial
intelligence/machine learning, cyber, electronic warfare, environmental remediation and space systems. We perform systems integration,
product development, program management, and engineering across our segments and business units.
3
In fiscal 2024, we generated revenues of $6.8 billion, net income attributable to Parsons Corporation of $235.1 million and Adjusted
EBITDA of $605.0 million. For a definition of Adjusted EBITDA and reconciliation to net income attributable to Parsons Corporation, see
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
We achieved an overall win rate of 72% in fiscal 2024, 66% in the year ended December 31, 2023 (“fiscal 2023”) and 49% in the year
ended December 31, 2022 (‘fiscal 2022”), which includes strong re-compete win rates of 84% in fiscal 2024 giving us long-term certainty on
key contracts. As of December 31, 2024, our total backlog was $8.9 billion, an increase of 4% from December 31, 2023.
Federal Solutions
Our Federal Solutions business provides integrated solutions, software and hardware products, and engineering design services.
Federal Solutions consists of two business units: Defense & Intelligence (D&I) and Engineered Systems (ES). Our strategy is to deliver
information dominance across all domains.
•
D&I—Our D&I business unit is organized into three related areas: defense, space and engineering services; cyber and national
operations; and high consequence missions. Our customers include the U.S. Department of Defense, the U.S. Intelligence
Community, the Department of Commerce, and the National Aeronautics and Space Administration. D&I is a mission partner for
differentiated technical solutions, products, and services, delivering innovations in cyber, space, missile defense, multi-domain
command and control, intelligence, surveillance and reconnaissance, electromagnetic spectrum dominance, and directed
energy. Our solutions are used to meet national security challenges from space to the tactical edge around the globe. In 2024,
we expanded our footprint across the important INDOPACOM region.
▪
Defense Space and Engineering Services – We provide software, hardware, and technical expertise to clients across a
variety of mission areas, including but not limited to, space, missile systems, and warfighter applications. Our customers span
the U.S. Intelligence Community, including the (Defense Intelligence Agency (DIA), National Geospatial-Intelligence Agency
(NGA), National Reconnaissance Office (NRO)); U.S. Department of Defense (DOD) (military services, Special Operations
Command (SOCOM), Missile Defense Agency (MDA), United States Cyber Command (CYBERCOM); National Oceanic and
Atmospheric Administration (NOAA), and National Aeronautics and Space Administration (NASA).
▪
We provide satellite ground systems support and operations, flight dynamics, data fusion and analytics, platform system
integration, directed energy, joint all-domain operations, and command and control systems.
▪
As an example, our ground systems enable efficient and effective access to space for small satellites on the Polar
Operational Environmental Satellite (POES) and other commercial, national security and small class launch systems.
Importantly, we offer this innovative ground spacecraft operations center on a commercial as-a-service business model.
▪
Representative products include our Command-and-Control Core (C2Core®) mission planning and tasking suite that links
requests, effects and operational guidance in a unified database, and ZEUS® Recovery of Airbase Denied by Ordnance
(RADBO) laser neutralization system offering critical force protection in any operational theater.
▪
We are the prime Technical, Engineering, Advisory and Management Support (TEAMS) Next contractor for the MDA,
where we provide engineering, analysis, and management support for the development of integrated and layered missile
defense systems that defend U.S. and allied forces against ballistic, hypersonic, and cruise missile threats, and advance
the agency’s integrated air and missile defense, command and control, and battle management and communications
missions across all-domain battlespace.
4
▪
Cyber and National Operations – We provide capabilities across the digital landscape, including full-spectrum cyber,
defensive cyber operations, information operations, and analytics. Our customers include the U.S. intelligence community,
U.S. Cyber Command, DOD research laboratories, and military cyber services. The acquisition of Black Signal expands our
offensive solution offerings and our intelligence community customer base.
▪
Cyber solutions and products augment and automate full spectrum cyber operations, including our Automated
Management Solutions (AMS), a software framework that integrates disparate cyber capabilities, tools and infrastructures
into a common system architecture that assists military cyber operators. We develop and maintain enterprise platforms
used by the DOD to perform network analysis and vulnerability assessments for defensive missions.
▪
We conduct vulnerability research and resiliency solutions for existing weapon systems, critical infrastructure and space
systems, while supporting the development and integration of next generation electronic warfare capabilities. We also
develop analysis and anomaly detection tools for radio frequency and airborne communications.
▪
We develop tools and tradecraft to conduct Information Operations across the physical and cyber domains, giving
customers complete situational awareness for force protection and decision making with the information environment.
▪
High-Consequence Missions – We provide capabilities across the digital landscape, electronic warfare, multi-domain
operations, mission support and national to tactical operations. Our customers include the U.S. Intelligence Community, U.S.
Cyber Command, and DOD research laboratories.
▪
Our tools and products are used across a wide variety of electronic warfare operations, including commercial cellular
survey, automated signal identification and characterization using Artificial Intelligence/Machine Learning (AI/ML), signal
modeling and simulation used for radio frequency (RF) ranges and test and evaluation centers using our Threat
Representative Environment (TReX) platform, and integrated RF and cyber solutions to deliver effects from long standoff
distances.
▪
We conduct vulnerability research and provide resiliency solutions for existing weapon systems, critical infrastructure, and
space systems, while supporting the development and integration of next generation electronic warfare capabilities. We
also develop analysis and anomaly detection tools for radio frequency and airborne communications.
•
ES—Our ES business unit focuses on advanced technology services for complex energy and chemical systems, aviation, life
sciences and bio-surveillance systems, environmental remediation, security and protection systems, and associated complex
infrastructure. Representative customers include the Department of State (DOS), Department of Energy (DOE), Defense Threat
Reduction Agency (DTRA), Department of Homeland Security (DHS), U.S. Army Corps of Engineers (USACE), Federal Aviation
Administration (FAA), National Aeronautics and Space Administration (NASA), United States Postal Service (USPS),
Department of Labor (DOL), and Jet Propulsion Laboratory (JPL). Representative offerings include weapons of mass
destruction elimination, munitions destruction; remediation of unexploded ordinances and hazardous, toxic, reactive wastes;
architectural and engineering design; program and construction management; infectious disease control; advanced electronic
security systems; border security; counter-unmanned aircraft systems; and biometrics solutions.
•
Our expertise includes designing and upgrading processing and production facilities such as Army ammunition,
technology deployment in response to pandemic outbreaks, and delivery of solutions addressing resiliency, security and
sustainability, as well as delivery of highly-complex infrastructure in challenging environments and geographies.
•
Representative programs include the National Science Foundation’s Antarctica Infrastructure Modernization for Science,
the FAA Technical Services Contract, the
5
DTRA Cooperative Threat Reduction Integrating Contract, the Department of State Overseas Security Installation
Services, and the Radford Army Munition Plant Energetic Waste Incinerator.
Critical Infrastructure
Our Critical Infrastructure business provides planning, engineering, program management, owners representative and digital solutions
consisting of two business units focused on two major geographies: North America (INF-NA) and Europe, Middle East, and Africa (EMEA).
Our growth strategy includes leveraging our portfolio of sophisticated engineering solutions and technologies for complex physical
infrastructure projects to capture the increasing demand and investment in global infrastructure programs. We are expanding our portfolio in
key emerging growth areas, including intelligent transportation systems, smart mobility, environmental remediation, events management,
urban development and rebuild, and water/wastewater treatment.
•
INF – NA - Our INF – NA business unit provides planning, engineering and management services for complex infrastructure,
including bridges and tunnels, roads and highways, and water and wastewater. Our customer relationships include states (e.g.,
Texas, Florida, California, Colorado, Washington, Illinois, New York, New Jersey and Georgia), cities, and Canadian provinces
and territories (e.g., Ontario, British Columbia, Quebec, Nova Scotia, and Alberta), as well as transportation, water and
wastewater authorities. Our capabilities include technologies in long-span bridges, tunnels, building Information modeling, and
water/wastewater treatment and conveyance.
•
Examples of our design capabilities are our role as the lead designer of the Tacoma Narrows Bridge, the largest twin
tower suspension bridge in the world when it opened, lead designer for the new Goethals Bridge connecting Staten
Island, NY and Elizabeth, NJ, and lead designer for the Federal Way rail extension for Sound Transit in Seattle.
•
For program management, we are the Owner’s Engineer for the Gordie Howe International Bridge between Windsor,
Ontario and Detroit, Michigan, which will have the longest main span of any cable-stayed bridge in North America and
Gateway, the new Hudson River Tunnel. In addition, we are the program manager for the California Delta Water
Conveyance Modernization Project, a multi-billion environmentally compliant water transfer project to improve water
supply sustainability and reliability for human and environmental uses.
•
INF- NA - Our INF-NA business unit also includes intelligent transportation systems, utilities, environmental remediation,
emerging contaminants (including PFAS/PFOS), aviation, rail and transit, and ParsonsX, our enterprise digital transformation
organization. Our customers include state and local governments, Fortune 100 companies, utility companies, smart city
developers, and private sector infrastructure owners, such as the transportation authorities for the cities of Los Angeles and New
York, states and provinces, and rail and transit entities, including Amtrak, CSX, Metrolinx (Ontario Canada), and WMATA.
Technology capabilities include AI/ML, cloud, digital twins, cyber, systems integration, intelligent transportation network
software, vehicle inspection data analytics software, automated people mover, electric vehicle infrastructure, and autonomous
vehicle integration.
•
Parsons provides integrated traffic solutions for arterials, smart intersections, airport landside, ports, and tolling
integrators. An example is our role as provider of Advanced Traffic Management Systems, or ATMS, through our iNET™
platform. Since the first deployment in 2007, iNET® has been delivered to twenty-five state Departments of
Transportation, twenty-four cities, eight county agencies, eight toll agencies, and seven different countries.
•
For aviation, we play a critical role as program manager and lead designer for global airports. We are the program
manager of the environmentally sensitive Diamond Head Extension Program at Honolulu International Airport, the
Houston Airport System, and
6
the Landside Access Modernization Program for Los Angeles International Airport; and were lead designer on the award-
winning Newark Airport Terminal A replacement project known as Terminal 1.
•
Our rail and transit capabilities include systems optimization, communications-based train control, rail system design and
system assurance. We have more than six decades of experience in this market and have supported over 400 rail and
transit customers. Key programs include Honolulu Authority for Rapid Transit, New York MTA Systems and Facility
Engineering Services, and the Bay Area Rapid Transit Communications-Based Train Control. For our bus transit
customers, we provide strategic fleet transition planning, zero-emission bus infrastructure design, and benefit-cost
analysis to achieve net zero goals.
•
EMEA – Our EMEA business unit has a region-wide customer base in Europe, the Middle East and Africa, with a key focus on
the Gulf Cooperation Council (GCC) states. Services provided include multi-disciplinary design, technical, and management
solutions from project conceptualization to urban planning, landscape architecture, sewage treatment and drainage, events
management, engineering and program management, utilizing state-of-the-art digital solutions and embedded sustainability
concepts for enhanced delivery of large-scale and highly complex infrastructure assets. Our client base includes top tier public
authorities and state-owned developers across different markets from city-scale developments to major city-wide infrastructure
schemes.
•
Our extensive planning and design capabilities enable us to lead key infrastructure and development projects, including
Dubai’s Integrated Traffic System design and operation to enable traffic optimization and efficiency, and transportation
infrastructure projects to increase capacity and reduce congestion, Abu Dhabi’s Mid-Island Parkway connecting multiple
islands for future sustainable developments, Green Riyadh landscape and infrastructure design for increased urban green
space, and Denmark’s Banedanmark Rail Signaling Program to enable better centralized traffic control, energy
optimization, and reduced delays.
•
Parsons has a long-standing program management legacy in the Middle East for infrastructure, mega cities, and urban
development. We are part of the consortium Riyadh Metro Transit Consultants responsible for program management of
the Riyadh Metro – the largest metro system under development in the world which successfully opened in 2024. We,
managed successful delivery of the award-winning Abu Dhabi International Airport tripling the size of the previous
terminals, led the Dubai Strategic Sewage Network program to increase capacity and sustainability, managed Lusail City
Development the largest ever city development in Qatar, and provided program management of Riyadh’s King Abdullah
Financial District prime business, hospitality and lifestyle destination.
•
We are members of various collaborative delivery models, including Delivery Partner on the Qiddiya destination city
development near Riyadh and a team member on NEOM The Line sustainable city in Saudi Arabia
•
Parsons is considered a go-to service provider for successful and timely delivery of world events with fixed opening dates,
including UAE’s World Expo 2020 for which Parsons provided site-wide infrastructure, landscape design, and construction
supervision services; and for FIFA World Cup 2022, where services from transportation management planning to vehicle
access strategies and design were provided to manage traffic and build resilient infrastructure for the mega sporting
event.
•
The team maintains a keen focus on innovative practices. As an example, we are integrating cutting-edge AI-driven
design and construction supervision technologies across over 50 major GCC projects, enhancing efficiency and
capabilities and driving much needed innovation in the construction industry.
7
•
Our Smart Solutions Lab provides digital solutions to our clients as an important and integral aspect of our technical
offerings. Within our Advisory Services group, Parsons is providing clients with relevant asset information across the full
range of asset types to enable data driven management decisions and maximize ROI. We help clients optimize their
lifecycle costs with a focus on O&M, including the provision of O&M planning and inspections on various roads including
Dubai’s Shindagha Bridge, modeling the O&M outlook for Dubai Municipality on its major Strategic Sewage Tunnel
Program, managing O&M strategy and implementation for urban development and infrastructure in Abu Dhabi with
attainment of multiple Green Flag awards for parks and green spaces, and setting O&M strategies for optimized asset
operations for mega cities such as Qiddiya, NEOM, as well as Yanbu and Jazan industrial cities.
Our Market Opportunities
Technology revolution and environmental impact is driving a swift pace of change, resulting in ongoing societal transformation,
complicated geopolitical dynamics, a shifting threat landscape, and the globalization of commerce. To address this evolving landscape, our
customers are actively seeking technology-enabled solutions at the speed of relevancy to upgrade and transform assets and operations. The
below trends are key growth drivers in both our Federal Solutions and Critical Infrastructure segments.
Defense Spending Remains a Priority of the U.S. national agenda due to the reemergence of long-term strategic peer competition,
which has been cited in the National Defense Strategy as the primary concern for U.S. national prosperity and security. This reemergence
has resulted in increased global disorder and a security environment, defined by rapid technological change, which may be more complex
than ever before. We believe the U.S. Department of Defense and Intelligence Community will continue to invest in cyber, space, artificial
intelligence, electronic warfare, missile defense, and critical infrastructure protection. In addition, as a result of supporting ongoing war
efforts, ammunition and munitions need to be replenished and the Army ammunition plants must be modernized to support this need.
Cyber is Mission Critical to U.S. National Security and cyber adversaries are increasing in volume and sophistication as global
connectivity and the rise of social media have led to an explosion in the amount of available and exploitable data. Additionally, there has
been an increase in aggressive nation state cyber activity. Attacks by cyber-criminals seeking financial gain are also growing in volume and
sophistication. We believe that the cyber market will continue to grow in response to the nation state threat landscape and the vulnerabilities
inherent in critical infrastructure. Our unique portfolio of Federal Solutions and Critical Infrastructure provides the technical capabilities to
detect and prevent cyberattacks along with the domain knowledge to understand how to secure infrastructure from threats. Additionally, the
United States must remain on the leading edge of cyber operations, platforms and tool development.
Consistent Need for Actionable Intelligence to Support U.S. Priorities is driving a shifting threat landscape that necessitates a
greater need for collaboration and cooperation between intelligence agencies. There is a new demand for joint all-domain command and
control systems that are optimized to function cohesively across a spectrum of domains. This in turn drives a need for sophisticated data
analytics to aggregate data into useful formats in real-time. To respond, we believe the United States intelligence community and Department
of Defense will need continued focus on information sharing and collaboration for improved intelligence accuracy and timeliness
encompassing multiple forms of intelligence collection.
Indo-Pacific is the Department of Defense’s Priority Theater. The United States has an enduring commitment to uphold a free and
open Indo-Pacific region. This has become complicated due to inter-state strategic competition and increasingly complex security
environment. The United States is focused on competing, deterring and winning in this environment to safeguard free and open international
order.
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Global Infrastructure Needs Significant Replacements and Technology-Driven Upgrades. Physical infrastructure is in need of
upgrade throughout the world and there is unprecedented spend. Furthermore, modernized infrastructure is important to recover from
unexpected disasters caused by climate change. The $1.2 trillion United States Infrastructure Investment and Jobs Act (IIJA) has increased
funding for roads and highways, bridges, rail and transit, and aviation. Additionally, there is significant demand in other regions, including
Canada and the Middle East. The Middle East has a planned spend that exceeds $1.5 trillion per the Middle East Economic Digest and
Canada has invested $140 billion through the Investing in Canada Plan launched in 2016 for a 12-year period. In particular, the Saudi Vision
2030 focus is driving major industrial city and urban development projects. Critical infrastructure, specifically transportation infrastructure that
is essential to national economic and security concerns, is also vulnerable to cyber threats. We believe that a focus on safety, security,
sustainability and environmental impacts will continue to drive replacement of aging infrastructure.
Per- and Polyfluoroalkyl Substances (PFAS) Remediation. PFAS are manufactured chemicals that have been used in industry and
consumer products since the 1940s. Scientific studies have shown that exposure to PFAS in the environment may be linked to harmful health
effects in humans and animals. Therefore, there is a need to reduce PFAS in the environment – groundwater, soil, and surface water. The
Environmental Protection Agency has taken actions, including $10 billion of funding to address emerging contaminants in the IIJA, issuing
health advisories and proposing new, legally enforceable Maximum Contaminant Levels for PFAS substances found in drinking water.
Parsons has unique capabilities, expertise, and experience to mitigate PFAS risks and liabilities for federal, state, and commercial
customers.
Urbanization Creates Demand for Smart Cities with Connected Populations. Cities around the globe increasingly demand
connected and more sustainable capabilities, such as sensor networks and communication strategies to connect streetlights, security
cameras, and emergency systems, to provide important real-time information and better serve their citizens and reduce carbon emissions.
Integrated corridor management solutions, intelligent transportation systems, advanced rail systems, and updated telecommunication
networks will keep cities around the world functioning as smart and sustainable cities and serve as engines for economic growth.
Transformation of Legacy Service Delivery Models through Technology and Digital Transformation. Historical capital project
management is changing with the introduction of cloud-connected computer-aided design, automation, big data, machine learning, and other
technologies. The introduction of these new technologies allows industry participants to reimagine existing value chains, address integrated
lifecycle objectives, assure human rights are observed in their supply chains, provide environmentally sensitive and sustainable solutions,
boost productivity, and streamline project management. Industry participants that have the capability to embrace these new technologies to
enhance their capability and service offering to higher value solutions will be well positioned to assist governments and communities in their
transformation.
Change equals opportunity, and Parsons is well-positioned to serve a large array of global customers. Across a broad set of industries,
we provide smart and agile solutions that create the future for our national security and critical infrastructure customers as they adapt to the
rapid changes of a more interconnected and technology-driven world.
Our Competitive Strengths
Proven Track Record
Our proven track record is a result of our strong performance, the dedication of our employees, and our longstanding customer
relationships. We focus on being a company that delivers on its promises, holds integrity at the highest level and successfully assists our
clients as they execute their most complex missions. Driven by our integrated people, processes and technology approach, we have a
reputation for innovation and delivering mission outcomes for our customers’ most important endeavors.
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Our differentiated business model and ability to move up the value chain and win larger programs, has driven high win rates with
strong book-to-bill, leading organic revenue growth, expanded bottom line performance, and low capital requirements. We achieved average
award and incentive fees of 86% in fiscal 2024, 92% in fiscal 2023 and 91% in fiscal 2022. Incentive fees are fees earned for achievement of
certain performance criteria included in our contracts, such as achievement of target completion dates or target costs, and our incentive fees
average is calculated as the actual incentive fees achieved as a percentage of incentive fees expected to be earned in the applicable period.
In addition, we achieved a win rate of 72% in fiscal 2024, 66% in fiscal 2023 and 49% in fiscal 2022. Our re-compete win rate was 84% in
fiscal 2024, 93% in fiscal 2023 and 89% in fiscal 2022. In fiscal 2024, our Federal Solutions revenues increased 33% and our Critical
Infrastructure revenues increased 13% year-over-year. As of December 31, 2024, our backlog was $8.9 billion, an increase of 4% from year
end fiscal 2023.
Long-Term Customer Relationships
We maintain long-term relationships with key government and commercial customers, many of which span over 40 years. For
example, in the Federal Solutions segment, we have been providing support to the Missile Defense Agency for nearly 40 years with over
1,000 personnel embedded with the customer. We have provided services to the Department of Energy (DOE) for over 50 years on a variety
of projects, including work on DOE’s National Nuclear Security Agency program and have provided over 20 years of support to the United
States Space Force and predecessor organizations. In the Critical Infrastructure segment, we have supported the Washington Metropolitan
Area Transit Authority for over 50 years and have served as Program Manager for Yanbu Industrial City for nearly 50 years.
These longstanding relationships give us the insight and customer intimacy to align our research and development investments based
on customer needs and enable high win rates for prime contract positions on the most technically demanding assignments. We believe that
our position as a recognized leader in integrity, innovation, operational efficiency, safety and security, environmental and health, and our
ability to deliver exceptional quality, has resulted in a high level of re-compete wins and has driven substantial customer loyalty. Our six core
markets, including cyber and intelligence, space and missile defense, critical infrastructure protection, transportation, environmental
remediation and urban development require leading-edge technologies and extensive technical know-how, and necessitate consistently
exceptional performance, thus further entrenching us with our key customers and driving our long-term relationships.
Technology Innovation
Technology and our people are our most important assets, together they underpin our ability to consistently deliver for our customers.
Investment in key technological capabilities is core to our business and helps us to stay at the forefront of the evolving trends across our end
markets. To meet the challenges of tomorrow, we are focusing our technology investment in areas including artificial intelligence and
machine learning; digital transformation; space, cyber and electronic warfare; assured position navigation and timing; emerging contaminant
remediation; and quantum computing. The work of our collaborative, highly skilled and dedicated employees has enabled our long track
record of continued innovation and execution on behalf of our customers. Our team of engineers, scientists, programmers and other
specialists include PhDs and certified hackers, and over 4,000 of our skilled workforce hold government security clearances, which provides
a competitive advantage for the highly technical and demanding work we perform. Our dual technical career path and Technical Fellows
program enable retention and development of our strong technical talent.
Leveraging our agile innovation framework and a cadre of seasoned domain experts, solutions architects, and technologists, we seek
customer challenges and lead with innovative solutions to drive growth. Additionally, through our acquisitions, we continue to enhance our
overall capability offerings in innovative ways, providing more robust solutions that meet our customers’ most challenging needs.
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Environmental Sustainability and Resiliency Excellence
Delivering a safer, healthier and more connected world means a focus on environmental sustainability, resilience, conservation and
lifecycle impacts. For Parsons, sustainability is a core value. We provide services to plan, design and support complex sustainable projects
for our customers across the markets we serve, including transportation (aviation, rail and transit, intelligent transportation systems), ports,
buildings, environmental remediation, and water/wastewater treatment.
With over 233 sustainability accreditations, we deliver resilient infrastructure, and sustainable projects that utilize best industry
practices, as well as utilize leading edge technology and tools to provide environmental remediation. We work with customers to achieve and
obtain the highest possible ratings such as the LEED, Envision, Estidama, and others.
We are proud to work with customers, such as the Indiana Finance Authority, on the first bridge and tunnel project to achieve Envision
recognition; and we have obtained LEED certifications of transit and aviation facilities with customers in the United States, United Arab
Emirates, and the Kingdom of Saudi Arabia.
Parsons is focused on the risks and opportunities associated with climate change. In 2024, Parsons elected to disclose information
related to our climate-related governance, risk management and metrics utilizing the Task Force on Climate-Related Financial Disclosures
(TCFD) framework. We conducted climate risk and opportunity workshops with senior leaders representing a cross-section of our
geographies, markets and corporate functions. By releasing annual Environmental, Social and Governance (ESG) disclosures and increasing
our transparency, we received improved ratings from ISS, MSCI, Sustainalytics and S&P Global.
The Corporate Governance and Responsibility Committee of our Board of Directors provides oversight of environmental, social and
governance, including climate-related topics, and the Audit and Risk Committee provides oversight of our enterprise risk management
program, including climate-related risks. Our Chief Executive Officer holds overall executive-level responsibility for these matters.
Scalable and Agile Business Offerings
Our scalable and agile offerings enable us to satisfy robust and evolving customer needs. The demanding environments where we
operate are characterized by a need for high-confidence solutions, widespread application and mission critical outcomes. We pride ourselves
on providing agile technologies through inventive and refined processes that provide quality outcomes to our customers on time sensitive
projects. Our domain knowledge of our customers’ current and emerging requirements enables us to deliver responsive, high-quality
solutions on time and with operational relevance. By having the ability to respond to customers’ requirements with global deployment
capability, we are well positioned to be the preferred contractor for many of our customers’ needs.
Our technologies and platforms are designed to be applicable across end user markets and sub-markets. This approach allows for
scalable solutions that can be quickly and seamlessly integrated into multiple customer applications, regardless of geography or industry,
allowing us to deploy a given service or platform across multiple markets.
World Class Talent
We aim to be the employer of choice for top talent in every market that we serve by fostering a positive culture for employee
engagement; emphasizing health and wellbeing for all employees; and encouraging career development at all levels of the organization. Our
success is measured by our business performance, by the enthusiasm of our employees, and by our commitment to our employees’ growth.
We strive to be a destination employer that attracts, retains and develops our workforce.
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Demonstrated Ability to Identify and Execute Acquisitions to Transform our Business
Strategic acquisitions that augment our technology offerings and capabilities are a key tenet of our growth strategy. We have
completed thirteen strategic acquisitions since 2017. Ten of these acquisitions were within the Federal Solutions business segment, two were
in the Critical Infrastructure segment (I.S. Engineers, LLC, and BCC Engineering, LLC) and the remaining one spanning both segments
(IPKeys Power Partners). Our focus continues to be moving up the value chain with technology differentiation and in particular software. We
seek companies that meet our strict financial criteria and have a similar mission-focused culture. These acquisitions include:
•
BCC Engineering, LLC: Acquired November 1, 2024, at a purchase price of $232.7 million. BCC is a full-service engineering firm
that provides planning, design, and management services for transportation, civil and structural engineering projects in Florida,
Georgia, Texas, South Carolina, and Puerto Rico. This acquisition strengthens Parsons’ position as an infrastructure leader
while expanding the company’s reach in the southeastern United States, an area where the Infrastructure Investment and Jobs
Act (IIJA) provided approximately $100 billion in Federal Highway Administration dollars for fiscal years 2022 through 2026.
•
BlackSignal Technologies, LLC: Acquired August 16, 2024, at a purchase price of $203.7 million. BlackSignal is a next-
generation provider built to counter near peer threats. This acquisition expands Parsons’ customer base across the Department
of Defense and Intelligence Community and significantly strengthens Parsons’ positioning with full-spectrum cyber and
electronic warfare, while adding new capabilities in the counterspace radio frequency domain – markets anticipated to grow
more than 10% annually with double digit margin expectations. BlackSignal uses artificial intelligence and machine learning to
create innovative signal processing techniques that detect and disrupt difficult to access command and control systems and
platforms.
•
I.S. Engineers, LLC: Acquired on October 31, 2023 for a purchase price of $12.2 million. I.S. Engineers is a full-service
consulting engineering firm which specializes in transportation engineering, including roads and highways, and program
management located in Texas. Texas is poised to receive nearly $30 billion in total transportation funding from the Infrastructure
Investment and Jobs Act between 2022 and 2026.
•
Sealing Technologies, Inc.: Acquired on August 23, 2023 for a purchase price of $176.0 million. SealingTech expands Parsons’
customer base across the Department of Defense and Intelligence Communities and further enhances Parsons’ capabilities in
defensive cyber operations; integrated mission-solutions powered by artificial intelligence (AI) and machine learning (ML); edge
computing and edge access modernization; critical infrastructure protection, and secure data management that protects national
security.
•
IPKeys Power Partners, Inc.: Acquired on April 13, 2023 for a total purchase price of $43.0 million. IPKeys enhances Parsons’
critical infrastructure protection capabilities through comprehensive cloud-based cybersecurity, software solutions that operate at
the intersection of information and operational technology (IT and OT), and technologies that will help accelerate the global
clean energy transition. This acquisition expands Parsons’ presence in two rapidly growing end markets: grid modernization and
cyber resiliency for critical infrastructure.
•
Xator Corporation: Acquired on May 31, 2022 at a purchase price of $387.5 million. Xator expands Parsons’ presence within the
U.S. Special Operations Command, the Intelligence Community, Federal Civilian customers, and global critical infrastructure
markets, while providing new customer access at the Department of State. Xator also expands Parsons’ customer base and
brings differentiated technical capabilities in critical infrastructure protection, counter-unmanned aircraft systems (cUAS),
intelligence and cyber solutions, biometrics, and global threat assessment and operations, increasing our addressable market in
both the Federal Solutions and Critical Infrastructure segments.
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•
Echo Ridge LLC: Acquired on July 30, 2021 at a purchase price of $9 million. Echo Ridge adds position, navigation, and timing
devices; modeling simulation, test and measurement tools; and deployable software defined radio products and signal
processing services to Parsons’ space portfolio.
•
BlackHorse Solutions, Inc.: Acquired July 6, 2021 at a purchase price of $205.0 million. Black Horse expands Parsons’
capabilities and products in next-generation military, intelligence, and space operations, specifically in cyber, electronic warfare,
and information dominance. Black Horse’s technology is shaping the future of information dominance and converged military
operations by unifying cyber, electromagnetic warfare, and information operations for the Department of Defense and
Intelligence Community customers. The company also provides autonomous and distributed detection, identification, exploitation
and the defeat of today’s most complex communications.
•
Braxton Science and Technology Group, LLC: Acquired in November 2020 at a purchase price of $310.9 million ($267 million
less the tax asset), Braxton operates at the forefront of satellite operations, ground automation, flight dynamics, and spacecraft
antenna simulation for the U.S. Department of Defense and Intelligence Community. These capabilities position Parsons to
capitalize on the quickly evolving space missions of its national security space customers and address rapid market growth
driven by proliferated low earth orbit constellations, small satellite expansion and space cyber resiliency.
•
QRC® Technologies: Acquired in 2019 at a purchase price of $214.1 million, QRC® Technologies is a disruptive product
company that provides design and development of open-architecture radio-frequency products.
•
OGSystems: Acquired in 2019 at a purchase price of $292.4 million, OGSystems is a disruptive geo-intelligence solutions and
immersive engineering provider that creates technology solutions for the United States intelligence community and the U.S.
Department of Defense. OGSystems’ VIPER Labs and Immersive Engineering techniques serve as the catalysts for deployment
of geospatial systems and software, embedded system threat analytics and cloud engineering solutions. OGSystems’ advanced
hardware solutions include the PeARL family of sensors, combining industry-leading camera and optic lens technologies with
our software solutions, yielding very high resolution 2D and 3D aerial imagery.
•
Polaris Alpha: Acquired in 2018 at a purchase price of $489.1 million, Polaris Alpha is an advanced, technology-focused
provider of innovative mission solutions for national security, intelligence, defense and other U.S. federal customers. With
leading technologies in artificial intelligence/machine learning, cloud computing, command and control and data analytics,
Polaris Alpha has long-term customer relationships and is known as a technology disruptor.
•
Williams Electric. Acquired in 2017 for a purchase price of $26.4 million. Williams Electric provides industrial control system
security, including utility monitoring systems and electronic support systems for customers, including the Army Corps of
Engineers and the Smithsonian Institute.
We maintain a robust acquisition pipeline and are continually evaluating potential opportunities for disciplined growth by acquisition to
further transform our business.
Our Strategy for Growth
Our growth strategy is to create the future of national security and critical infrastructure, while moving up the value chain as a solutions
integrator and software provider. The future is full of possibility, and the defense, intelligence, and critical infrastructure markets are where we
can collectively shape what tomorrow will look like.
In a complex security environment with adversaries challenging on every domain and an economy driven by digital transformation,
Parsons leverages innovative technologies to deliver integrated solutions
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at the speed of relevance. Our global integrated solutions span all domains (sea, land, air, space and cyber), ensuring information
dominance and smart, sustainable infrastructure.
To create the future, we focus on people-first, “get-to-yes”, and having top positions in high-growth, sustainable and profitable markets.
This focus includes hiring, retaining, and developing our employees, continually enhancing and optimizing our core business processes,
resourcing and capitalizing on our high-growth markets and acquiring and integrating companies that possess transformative and disruptive
technologies.
People First
Driven by our people-first and high-purpose culture, we recognize that our people are key to our success in developing and delivering
the technology and solutions to support our customers’ critical missions. Our most important asset is our team of talented employees, over
19,600 as of December 31, 2024, who are committed and passionate experts critical to delivering leading capabilities and whose expertise is
sought by our clients for their most sophisticated applications and challenges. Our employees choose Parsons and stay with us for the
opportunity to collaborate with our customers, deploy our expansive technical resources, rapidly bring bold ideas to market and work on
leading solutions to enable a better world. Our management team has extensive experience executing strategies for delivering profitable
growth and is recognized for operational excellence and leadership integrity. They have strong leadership capabilities in the markets we
serve and the solutions and technology we deliver. Most importantly, we strive to give our employees and managers the best possible
employee experience throughout their careers with Parsons.
We are committed to attracting, retaining, and developing an experienced workforce by having a:
•
Culture of employee engagement at all organizational levels
•
Work environment that promotes training, mentoring, and career development planning
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Differentiated benefits program, including flexible work hours, remote work options, and an employee stock ownership plan
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Dual technical career path that leads to positions as Chief Technology Officer and/or Technical Fellow
•
“Parsons Gives Back” program to support our communities and promote volunteering
•
Global hiring strategy outside of high-employment zones
•
Robust university relations and intern program to help shape the next generation of leaders
•
Internal mobility program that supports employee growth, career development and retention
“Get to Yes”
By “getting to yes”, we enable the delivery of agile, innovative, and transformative solutions to our customers. We seek to enhance and
optimize our core business and improve our financial performance, including revenue growth, margin expansion and positive cash flow, using
the following strategies:
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Developing a company-wide agile framework to enable responsive solutions delivery
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Promoting collaboration and cross-company sharing to drive informed, timely decision making
•
Aligning goals through shared one-company objectives and a focus on timely feedback to ensure opportunities for improvement
are realized and executed
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Using digital transformation to improve our internal processes and deliver an improved customer experience
•
Cross-selling new solutions to our existing customers and existing solutions to new customers
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•
Promoting a culture that enables employees to drive technology and business model innovation
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Streamlining operations and processes to optimize performance delivery and reduce overhead expenditures
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Rigorously managing our working capital to maximize cash flow
•
Committing to being a responsible corporation for Parsons and our customers
Top Positions in High-Growth, Sustainable Markets
We have a balanced portfolio between national security and critical infrastructure and a wide range of end markets. We recognize the
importance of driving business focus and will resource/invest in areas where we believe Parsons can have a top position in markets that are
high-growth, profitable, and enduring. These include cyber and intelligence, space and missile defense, transportation, environmental
remediation, and urban development. We utilize the following strategies, among others, towards achieving this goal:
•
We continuously evaluate and shape our portfolio to divest, exit and de-emphasize lower-performing businesses and markets.
•
We invest in critical, differentiated technology areas, including artificial intelligence, assured position navigation and timing,
PFAS remediation, space cyber/electronic warfare, and product development in areas including defensive cyber, space
command and control, intelligent transportation systems, spectrum operations and biometrics.
•
We seek continuous expansion in our focused high-growth markets:
o
Cyber and Intelligence – Continue our growth momentum by offering end-to-end full spectrum cyber operations including
solutions, tools, operations and platforms for our U.S. Department of Defense and Intelligence Community customers.
o
Space and Mission Defense – Extend our space situational awareness, command and control and enterprise ground
systems and assured position, navigation and timing solutions to our current space customers and to new space, and
geospatial customers in the government and commercial space markets. Support our customer’s integrated air and
missile defense strategy and deployment. Provide thought leadership in evolving areas, including counter hypersonics.
o
Critical Infrastructure Protection – Provide critical infrastructure protection in sectors where we have installed base,
including facilities, health care, transportation, water and energy. Deliver holistic solutions including electronic security
systems, cybersecurity, counter unmanned air systems and biometrics.
o
Transportation – Capitalize on the increased IIJA funding and increased global transportation and infrastructure spending
to further our roads and highways, bridges, rail and transit, and aviation business. Leverage technology to drive smart
infrastructure.
o
Environmental remediation – Leverage our specialized skill and experience with respect to remediating mines and oil
wells and eliminating emerging contaminants. Apply our design capabilities and innovative technologies to modernize,
upgrade and create new water/wastewater treatment systems. Lead elimination of emerging contaminants (PFOS) from
our soil, groundwater and surface water.
o
Urban development – Leverage our program management, urban planning and urban design competencies to develop
new industrial cities and mixed-use developments.
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Mergers and Acquisitions
We continue to pursue the acquisition and integration of high growth, technology driven companies which meet the following criteria:
•
Financial performance goals: >10% top line growth, >10% Adjusted EBITDA margin, and strong cash flow
•
Align to our six focused markets
•
Technology differentiation: fill technology gaps, drive end-to-end solutions, move up the value chain, scale within and across our
businesses and add valuable intellectual property rights
Our objective is to continue to transform our business into an integrated, full life-cycle solutions integrator that delivers scalable
solutions and drives revenue growth, expanded margins, and strong cash flows.
Backlog
We view growth in total backlog as a key measure of our business growth. We define backlog to include the following two components:
•
Funded—Funded backlog represents the revenue value of orders for services under existing contracts for which funding is
appropriated or otherwise authorized less revenue previously recognized on these contracts.
•
Unfunded—Unfunded backlog represents the revenue value of orders for services under existing contracts for which funding
has not been appropriated or otherwise authorized less revenue previously recognized on these contracts. Unfunded backlog
does not include potential task orders expected to be awarded under multiple awards IDIQ contract vehicles, where task orders
are competitively awarded and separately priced.
Backlog includes (i) unissued task orders and unexercised option years, to the extent their issuance or exercise is probable, as well as
(ii) contract awards, to the extent we believe contract execution and funding is probable.
Our backlog includes orders under contracts that can extend for several years. For example, the U.S. Congress generally appropriates
funds for our U.S. federal government customers on a yearly basis, even though their contracts with us may call for performance that is
expected to take a number of years to complete. As a result, our federal contracts typically are only partially funded at any point during their
term. All or some of the work to be performed under the contracts may remain unfunded unless and until the U.S. Congress makes
subsequent appropriations and the procuring agency allocates funding to the contract.
As of December 31, 2024, our total backlog was approximately $8.9 billion, consisting of $5.9 billion of funded backlog and $3.0 billion
of unfunded backlog. We expect to recognize $3.9 billion of our funded backlog as of December 31, 2024 as revenues in the following twelve
months. However, our government customers may cancel their contracts with us at any time through a termination for convenience or may
elect to not exercise option periods under such contracts. In the case of a termination for convenience, we would not receive anticipated
future revenues but would generally be permitted to recover all or a portion of our incurred costs and fees for work performed.
Competition
The industries we operate in consist of a large number of enterprises ranging from small, niche-oriented companies to multi-billion-
dollar corporations that serve many governmental and commercial customers. We compete on the basis of our technical expertise,
technological innovation, our ability to deliver cost-effective multi-faceted solutions and services in a timely manner, our reputation and
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relationships with our customers, qualified and/or security-clearance personnel, and pricing. Our peer group in Federal Solutions are U.S.
federal systems integrators and service providers such as Booz Allen Hamilton, CACI International Inc, Leidos Holdings, Inc., and Science
Applications International Corporation. Our peer group in Critical Infrastructure includes AECOM, Jacobs Solutions Inc., Stantec, Tetra Tech,
Inc., and WSP.
Seasonality
Our results may be affected by variances as a result of weather conditions and contract award seasonality impacts that we experience
across our businesses. The latter issue is typically driven by the U.S. federal government fiscal year-end, September 30. While not certain, it
is not uncommon for U.S. government agencies to award task orders or complete other contract actions in the weeks before the end of the
U.S. federal government fiscal year in order to avoid the loss of unexpended U.S. federal government fiscal year funds. Furthermore, many
U.S. state governments with fiscal years ending on June 30 tend to accelerate spending during their first quarter, when new funding becomes
available. We may continue to experience this seasonality in future periods, and our results of operations may be affected by it.
Human Capital Management
We are committed to enhancing our position as a leading employer in our industry and aim to do this through providing a positive
employee experience. Our culture and reputation as a leading provider of technology-driven solutions in the defense, intelligence and critical
infrastructure markets enables us to recruit and retain some of the best available talent across the globe.
Our professionals are highly educated, with a wide range of technical acumen and in-depth domain knowledge and expertise. Our
culture and values enable us to continue attracting qualified talent, particularly those with security clearances and requisite skills in multiple
areas, including Project Management, Engineering, Software Development, Cyber, Data Analytics, Environmental and Architecture. We have
over 10,300 employees who hold degrees and 3,300 with advanced degrees and professional credentials as of December 31, 2024. Our
experienced teams understand our clients and are comprised of technology subject matter experts and professionals with deep knowledge
and experience.
Engagement
We pulse our workforce annually through an employee engagement survey and the data these surveys provide help us identify areas
where our culture is evolving and key strategic areas where we need to continue to focus our energies to improve employee engagement
and the employee experience. This data is critical in guiding our cultural journey to become a more dynamic, entrepreneurial, and creative
place to work.
This year, we saw some of our highest participation rates among our business groups and functions, with an overall response of 60
percent, which is higher than last year’s overall rate of 54 percent. We are also pleased that our employee engagement score was 80 against
a benchmark of 75, up from 78 in 2023. At the highest level, our results describe an organization with a strong performance-driven and team-
based culture.
Employee Recognition
As a people first organization, we are dedicated to recognizing employee performance and promoting a culture of recognition. We are
immensely proud to maintain a formal employee recognition program that is 100% developed and maintained in-house – a rare
accomplishment in our industry. We approach company culture this way: recognition is a mindset.
The Distinguished Recognition and Incentive Program, affectionately known as the DRIVE Program, recognizes, rewards, and
encourages high-caliber work. The DRIVE program is comprised of nine distinct
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award levels, each with its own criteria, workflow, and rewards – some monetary and some non-monetary. The program is open to all part-
and full-time employees around the globe, and awards can be distributed from supervisor to team or team member, individual contributor to
supervisor, and from peer to peer. That flexibility is what we are most proud of—all employees can recognize someone else or be recognized
themself. In 2024, we are pleased that over 4,500 DRIVE awards were conveyed to our employees with monetary awards totaling over $7.5
million.
Mentoring
Parsons has a robust mentoring program that facilitates several types of pairings, including senior leaders and employees, peer-to-
peer, veterans-to-veterans, and early career professionals with more experienced employees. Employees choose their own mentor and work
closely with them to design a mentoring relationship that is tailored to meet their unique goals. Resources are provided to both mentors and
mentees to ensure a successful and enriching experience for both. Most Parsons’ Vice Presidents and above are available and engaged in
mentoring relationships thus actively fostering a culture of employee growth and development.
Career Development
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Parsons Learning Series – This program is open to all employees and consists of live, virtual one-hour courses across a wide
range of topics appealing to both employees and managers. One or two topics are delivered each month. The live sessions are
held at three separate times on the same day to accommodate our global workforce, and sessions are recorded and made
available following live session dates.
•
Engaged Leadership Program (ELP) – This 4-month, cohort-based program helps people and project managers develop their
management and leadership skills through learning about and then applying new skills on the job. The extended nature of this
program fosters a collaborative environment and builds cross-organizational relationships among participants.
•
Intentional Leadership Program (ILP) – This is a program for senior leaders, Director-level and above. Participants will complete
a facilitated 2-day curriculum designed to strengthen senior leadership skills and help participants intentionally define their own
leadership approach while fostering cross-organizational communication and relationship-building.
•
Fellows Program - recognizes our top technical experts and promotes innovation in solving our customers’ most difficult
technical challenges. It is a collaborative network of over fifty selected motivated and passionate subject matter experts working
to solve technical challenges through either strategic research and development or through the development of long-term
technical policies and best practices. The program defines its success through engagement, mentorship, and retention.
•
Technical Career Path - demonstrates two distinct career progressions for technical employees across our organization: one
that follows a management path, the other that can be followed as an individual contributor. The Technical Career Path coupled
with an integrated competency model and Workday tools such as the Opportunity Graph are resources designed to improve the
quality of manager-employee career discussions and, ultimately, career movement.
Employee Stock Ownership Plan
At December 31, 2024, approximately 6,600 of our employees participated in our Employee Stock Ownership Plan (ESOP) which held
54,117,904 shares at December 31, 2024. Our employees own approximately 40% of the total outstanding shares in the ESOP. In December
2020, the board of directors approved an amendment to the ESOP to provide greater diversification rights to participants. The amendment
provides that, with respect to all diversifications elected or processed after January 1, 2021, the definition of a qualified participant shall mean
a participant who has attained the age of 50 and who
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has completed at least three years of participation in the ESOP and other criteria. Each qualified participant shall generally be permitted to
direct the ESOP as to the diversification of 50% of the value of the eligible vested portion of the participant’s ESOP account. Further, in
January 2021, the board of directors approved an amendment to the ESOP whereby distributions to participants in the Plan were modified as
follows: (1) the threshold amount of an ESOP participant’s balance to be eligible for a single lump sum distribution was increased from
$20,000 or less to $500,000 or less; (2) the threshold balance for a participant to be eligible to receive payment in two annual installments
was increased from $40,000 or less to $750,000 or less; and (3) the threshold balance for a participant to be eligible to receive payment in
three annual installments was increased to greater than $750,000. This change was made to facilitate greater flexibility for certain eligible
participants to receive their balances in fewer installments and to accelerate the increase in publicly traded float for the Company’s common
stock. In April 2022, the board of directors approved an amendment providing for lump sum distributions to participants and removing the
annual installments. Annual diversification elections and five-year vested termination distributions are not impacted by this amendment and
will still occur annually and over installments as outlined in the Plan.
Employee Stock Purchase Plan
At the 2020 Annual Meeting of Parsons’ Shareholders, the shareholders approved the implementation of the Employee Stock
Purchase Plan (ESPP). The ESPP provides an opportunity for eligible employees (as defined in the ESPP) to purchase Parsons’ stock. By
participating in the ESPP, an eligible employee may purchase Parsons’ shares at a 5% discount from the New York Stock Exchange closing
price at the end date for each offering period (June 30th and December 31st of each year). During 2024 and 2023, our employees purchased
approximately 95,984 and 116,650 shares, respectively, of Parsons’ stock.
Stock Repurchase Plan
On August 9, 2021, the board of directors authorized Parsons Corporation to acquire a number of shares of common stock having an
aggregate market value of not greater than $100,000,000 from time to time, commencing on August 12, 2021. In August 2022, the Board
amended the stock repurchase program and authorized executive management to determine an acceptable price for repurchasing such
shares. The Board authorized management to execute any agreements providing for the repurchase of the Company’s stock, subject to such
conditions, on behalf of the company in such lots, blocks or other amounts, from such persons or entities, from such sources, on the open
market, in privately negotiated transactions, or otherwise, on such terms and conditions, from time to time, in accordance with applicable
federal and state regulations. The Board further amended this authorization in February 2024 to restore the repurchase capacity to $100
million and removed the $25 million quarterly cap on such repurchases. At the time of the February 2024 authorization, the Company had
repurchased shares with an aggregated market value (including fees) of $54.7 million. The aggregate market value of shares of Common
Stock the Company is authorized to acquire, from both the August 2021 and February 2024 authorizations, is not greater than $154.7 million.
As of December 31, 2024, the company had repurchased 1,713,481 shares of common stock at an average price per share of $46.51
(including commissions calculated at the average price per share) for a total amount of $79.7 million.
Intellectual Property
Our intellectual property portfolio consists of issued and pending patents as well as trademarks for many of our technologies. In
addition, we maintain a number of trade secrets that we endeavor to protect to ensure their continuing availability to us. Our technical
expertise is vital to our growth strategy, and we believe they are a core competitive advantage. We have 40 registered patents and 19
pending patents in the United States and 5 pending patents internationally. We have 63 registered trademarks and 9
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pending trademark applications in the United States, and 159 trademarks and 18 pending trademark applications internationally. We also
currently offer 45 products for sale to our global customers.
We rely upon a combination of nondisclosure agreements and other contractual arrangements, as well as copyright, trademark, patent,
and trade secret laws to protect our proprietary information. We also enter into proprietary information and intellectual property agreements
with employees, which require them to disclose any inventions created during employment, to convey such rights to inventions to us and to
restrict any disclosure of proprietary information. While protecting trade secrets and proprietary information is important, we are not materially
dependent on maintenance of any specific trade secret or group of trade secrets.
During the normal course of business, we perform research and development and technology consulting services and related products
in support of our customers. Typically, these services do not depend on patent protection. In accordance with applicable law, our government
contracts often provide government agencies certain data rights to our intellectual property. Government agencies may in turn provide to
other contractors (including our competitors) the right to utilize our intellectual property. In addition, in the case of our work as a
subcontractor, our prime contractor may also have certain rights to data, information and products we develop under the subcontract. At the
same time, our government contracts often provide to us the right to utilize intellectual property owned by third parties.
Regulation
Our business is impacted by government procurement, anti-bribery, international trade, environmental, health and safety and other
regulations and requirements. Below is a summary of some of the significant regulations that impact our business.
Government Procurement. The services we provide to the U.S. Government are subject to Federal Acquisition Regulation, or FAR,
Defense Federal Acquisition Regulation, or DFARS, the Truthful Cost and Pricing Data Act, Cost Accounting Standards, or CAS, the
Services Contract Act, the False Claims Act, export controls rules and U.S. Department of Defense security regulations, as well as
government agency policies and many other laws and regulations. These laws and regulations affect how we transact business with our
clients and, in some instances, impose additional costs on our business operations. A violation of specific laws and regulations could lead to
fines, contract termination or suspension of future contracts. Generally, our government clients can also terminate, renegotiate, or modify any
of their contracts with us at their convenience, and many of our government contracts are subject to renewal or extension annually.
On January 31, 2020, the U.S. Department of Defense (DOD) released the Cybersecurity Maturity Model Certification (“CMMC”)
program as a framework to assess and enhance the cybersecurity posture of the Defense Industrial Base (“DIB”), particularly as it relates to
controlled unclassified information (CUI) within the supply chain. CMMC is designed to ensure that contractors providing services to the U.S.
DOD have implemented cybersecurity controls and processes to adequately protect information that resides on DIB systems and networks.
An interim rule was issued on September 29, 2020, to amend the Defense Federal Acquisition Regulation Supplement (DFARS) by adding a
new DFARS clause, 252.204-7021, which specifies CMMC requirements and enables the DOD to verify the protection of the Federal
Contract Information (FCI) and CUI within the unclassified networks of DIB companies. DOD initiated an internal review and ultimately
published draft “Version 2.0” of the CMMC program structure in November 2021.The DOD finalized the CNNC Program rule 32 CFR on
October 15, 2024 and went into effect on December 16, 2024.
The CMMC is codified in two parts. The first, 32 CFR defines the requirements for CMMC and grants C3PAOs (CMMC 3rd Party
Assessment Organizations) the ability to conduct CMMC assessments, and companies now have the ability to have official CMMC
assessments conducted. The second is the 48 CFR. This rule will enforce the CMMC requirements in new and existing contracts and will
allow the DOD to require a specific CMMC level in a solicitation or contract. This rule is currently in the adjudication/comment review process.
The DOD has not yet provided details of timeliness for final
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implementation of this rule. The expectation is for the rule to be completed in mid-to-late 2025. Initially, the DFARS 252.204-7012 clause
required companies to self-attest their compliance with NIST 800-171, but with the implementation of CMMC, companies will be required to
be officially assessed by a C3PAO or DIBCAC (Defense Industrial Base Cybersecurity Assessment Center) depending upon the certification
level pursued.
As part of the Defense Contract Management Agency (DCMA) Joint Surveillance Voluntary Assessment (JSVA) Program, Parsons
procured an authorized C3PAO, that along with the DIBCAC, conducted a High Confidence (CMMC Level 2) Assessment for the Parsons’
FedNet® Secure environment in July 2023. Parsons is currently DFARS/NIST 800-171 compliant, and we anticipate that Parsons will be
CMMC Level 2 certified once the CMMC program goes into effect. All 110 control requirements and 320 control objectives with NIST 800-171
were deemed 100% satisfied as per the DIBCAC’s SPRS entry and official report. Parsons anticipates expanding the CMMC Level 2
certification to additional networks in 2025.
Anti-Bribery and other regulations. We are subject to the U.S. Foreign Corrupt Practices Act and similar anti-bribery laws, which
generally prohibit companies and their intermediaries from making improper payments to foreign government officials for the purpose of
obtaining or retaining business. The U.K. Bribery Act of 2010 prohibits both domestic and international bribery, as well as bribery across both
private and public sectors. In addition, an organization that “fails to prevent bribery” committed by anyone associated with the organization
can be charged under the U.K. Bribery Act unless the organization can establish the defense of having implemented “adequate procedures”
to prevent bribery.
International Trade. We are subject to U.S. export control laws and regulations, including the International Traffic in Arms
Regulations, or ITAR, and the Export Administration Regulations, or EAR, as well as U.S. economic and trade sanctions, including those
administered and enforced by the U.S. Department of Treasury’s Office of Foreign Assets Control, or OFAC. To the extent we export items
and provide services outside of the United States (or to certain parties in the United States), we must do so in compliance with these laws
and regulations. These laws and regulations impose export licensing requirements, and we may not be successful in obtaining necessary
licenses and other authorizations. Further, these laws and regulations restrict our ability to export items or provide services to certain
countries and certain persons, including those that are the target of OFAC sanctions. Noncompliance with these or similar laws could lead to
government investigations, penalties, reputational harm, and other negative consequences, and thereby could adversely affect our business
and financial condition. Further, any change in these laws and regulations, or any shift in the approach to their enforcement or scope, or
change to the countries, persons, or items targeted by such regulations, could potentially result in our decreased ability to export or sell items
or services to existing or potential customers.
Environmental, Health and Safety. We are subject to federal, state and local laws and regulations relating to environmental, health
and safety matters, including, among other things, the handling, transport and disposal of regulated substances and wastes, including
hazardous and radioactive materials; contamination by regulated substances and wastes; the types, quantities and concentration of materials
that can be released into the environment; the acquisition of a permit or other approval before conducting regulated activities; the
maintenance of information about hazardous materials used or produced in operations and provision of such information to employees, state
and local government authorities and the public; and employee health and safety. Our previous ownership and current and previous
operation of real property may subject us to liability pursuant to these laws or regulations. Under the Comprehensive Environmental
Response, Compensation and Liability Act, or CERCLA, and related state laws, certain persons may be liable at sites where or from a
release or threatened release of hazardous substances has occurred or is threatened. These persons can include the current owner or
operator of property where a release or threatened release occurred, any persons who owned or operated the property when the release
occurred, and any persons who disposed of, or arranged for the transportation or disposal of, hazardous substances at a contaminated
property. Liability under CERCLA is strict, retroactive and, under certain circumstances, joint and several, so that any responsible party may
be held liable for the entire cost of investigating and remediating the release of hazardous substances. The Resource Conservation and
Recovery Act, or RCRA, regulates the generation, treatment, storage,
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handling, transportation and disposal of solid waste and requires states to develop programs to ensure the safe disposal of solid waste.
Under RCRA, persons may be liable at sites where the past or present storage, handling, treatment, transportation, or disposal of any solid
or hazardous waste may present an imminent and substantial endangerment to health or the environment. These persons can include the
current owner or operator of property where disposal occurred, any persons who owned or operated the property when the disposal
occurred, and any persons who disposed of, or arranged for the transportation or disposal of, hazardous substances at a contaminated
property. Liability under RCRA is strict and, under certain circumstances, joint and several, so that any responsible party may be held liable
for the entire cost of investigating and remediating the release of hazardous substances. Violations and liabilities with respect to
environmental, health and safety laws and regulations could result in significant administrative, civil, or criminal penalties, remedial clean-ups,
natural resource damages, permit modifications or revocations, operational interruptions or shutdowns and other liabilities. Additionally,
Congress, state legislatures, local governing bodies and federal and state agencies frequently revise environmental laws and regulations,
and any changes could result in more stringent or costly requirements for our operations. Our costs related to complying with environmental,
health and safety laws and regulations have not been material in the past and are not currently material to our total operating costs or cash
flows. However, if we have any violations of, or incur liabilities pursuant to these laws or regulations in the future, our financial condition and
operating results could be adversely affected. In addition, in the unlikely event that we are required to fund remediation of a contaminated
site, the statutory framework might allow us to pursue rights of contribution from other potentially responsible parties.
We maintain a compliance program designed to ensure compliance with the various regulations and requirements applicable to us.
The compliance program, managed by our Chief Ethics and Compliance Counsel and overseen by our Chief Compliance Officer, includes an
annual audit of performance with respect to our codes of ethics and business conduct and the adequacy of our compliance program, among
other initiatives.
Executive Officers
Carey A. Smith, age 61, was appointed Chair of the Board of Directors on January 18, 2022. She became the President and Chief
Executive Officer on July 1, 2021 and was appointed to the board of directors in December 2020. She was initially appointed as President
and Chief Operating Officer in November 2019, Chief Operating Officer in November 2018 and led Parsons’ Federal Solutions business from
November 2016. Before joining Parsons, Ms. Smith served in progressive leadership roles at Honeywell International Inc. (“Honeywell”) from
2011 to 2016, including President of the Defense and Space business unit. In total, Ms. Smith has 39 years of industry experience spanning
the defense, intelligence and infrastructure markets. Ms. Smith serves on the Edison International board of directors, including on the
Compensation and Executive Personnel and Safety and Operations Committees. She is a National Association of Corporate Directors
(NACD) Directorship (NCADD.DC) and Cyber Governance Certified. Ms. Smith received an honorary doctorate degree from Ohio Northern
University, a Master of Science degree in electrical engineering from Syracuse University and a bachelor-of-science in electrical engineering
from Ohio Northern University. She received the GovCon Executive of the Year award in 2023 and Parsons received GovCon Company of
the Year Award in 2024. Ms. Smith was selected to serve on our board of directors because of the perspective and experience that she
brings as our CEO and due to her significant industry and operations experience.
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Matthew Ofilos, age 45, was appointed Chief Financial Officer of Parsons Corporation effective July 25, 2022. Mr. Ofilos previously
served as the Parsons’ executive vice president of finance and brings more than twenty years of finance experience and a proven track
record of delivering profitable growth and building high-performance finance teams to the role. As executive vice president, Mr. Ofilos led the
company’s financial operations, including project controls, financial planning, accounting, treasury, and financial systems. Prior to joining
Parsons in 2021, he led multi-billion-dollar finance organizations, including those for Amazon Web Services (AWS) Worldwide Public Sector
and Strategic Industry businesses. Prior to AWS, he held roles of increasing responsibility at Raytheon, concluding his tenure as CFO for the
Space and Command & Control businesses for the Intelligence, Information and Services segment. Mr. Ofilos holds a Master of Business
Administration from Boston University and a Bachelor of Science from Babson College.
Michael R. Kolloway, age 64, was appointed General Counsel and Corporate Secretary of Parsons Corporation in October 2017 and
later became our Chief Legal Officer in January 2019. Before assuming the role of General Counsel and Corporate Secretary, Mr. Kolloway
served as Deputy General Counsel – Americas from March 2016 through October 2017. Before joining Parsons, Mr. Kolloway served as
Senior Vice President and Assistant General Counsel for Operations and Risk Management at AECOM Technology Corporation, a publicly
traded company. Prior to his tenure at AECOM, Mr. Kolloway was a partner in the Chicago law firm of Rock, Fusco & Garvey, Ltd and a
member of the Federal Trial Bar for the Northern District of Illinois. Mr. Kolloway received his Bachelor of Arts degree from St. Norbert
College, his Juris Doctor from the University of Illinois College of Law and completed the General Counsel Program at the Harvard University
School of Law. Mr. Kolloway served on the Board of Directors for MUSE/IQUE based in Pasadena, California. He is a member of the
Association of Corporate Counsel and the In-House Mentorship Committee for the Charlotte Chapter.
Susan Balaguer, age 55, was appointed as Chief Human Resources Officer of Parsons Corporation effective July 16, 2021. Ms.
Balaguer is responsible for all aspects of the human resources function, including benefits, recruitment, retention, and the employee lifecycle
and employee experience for the company. Ms. Balaguer has over thirty years of extensive experience in global human resources for public
and private companies, and over twelve years of experience with public and private mergers and acquisitions, private equity, and large-scale
business integrations. Before joining Parsons in 2021, she served as the Chief Human Resources Officer at Serco North America and
Engility. She also previously served as the senior vice president of HR operations at CACI and, for over twenty years, she held progressive
HR leadership positions at Raytheon.
Available Information
We file annual, quarterly, and current reports and other information with the Securities and Exchange Commission (SEC). The SEC
maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding registrants that
file electronically with the SEC, including us. You may also access, free of charge, our reports filed with the SEC (for example, our Annual
Report on Form 10-K, our Quarterly Reports on Form 10-Q, and our Current Reports on Form 8-K and any amendments to those forms)
through the “Investors” portion of our website (www.parsons.com). Reports filed with or furnished to the SEC will be available as soon as
reasonably practicable after they are filed with or furnished to the SEC. Our website is included in this Annual Report as an inactive textual
reference only. The information found on our website is not part of this or any other report filed with or furnished to the SEC.
Item 1A. Risk Factors.
You should carefully consider the risks described below and the other information contained in this Annual Report, including our
consolidated financial statements and the related notes, before making an investment decision. Our business, financial condition and results
of operations could be materially and adversely affected by any of these risks or uncertainties. In that case, the trading price of our common
stock could decline, and you may lose all or part of your investment.
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Risk Factors Summary
The following is a summary of the principal risks that could adversely affect our business, operations and financial results.
Risk Relating to Our Business
•
Government spending and priorities could change in a manner that adversely affects our future revenue and limits our growth
prospects.
•
The U.S. federal government and its agencies collectively are our largest single customer and, if our reputation or relationships
with the U.S. federal government were harmed, our future revenues and cash flows would be adversely affected.
•
Our failure to comply with a variety of complex procurement rules and regulations could result in our being liable for penalties,
including termination of our government contracts, disqualification from bidding on future government contracts, and suspension
or debarment from government contracting.
•
A substantial portion of our business is subject to reviews, audits, and cost adjustments by government agencies, which, if
resolved unfavorably to us, could adversely affect our profitability, cash flows or growth prospects.
•
Our government contracts may be terminated by the government counterparty at any time and may contain other provisions
permitting the government to discontinue contract performance, and if lost contracts are not replaced, our operating results may
differ materially and adversely from those anticipated.
•
Our revenue and growth prospects may be harmed if we or our employees are unable to obtain government granted eligibility or
other qualifications, we and they need to perform services for our customers.
•
We may make acquisitions, investments, joint ventures and divestitures in the future that involve numerous risks, which if
realized, may adversely affect our business and our future results.
•
Our acquisitions may not achieve their full intended benefits or may disrupt our plans and operations.
•
We conduct a portion of our work through joint venture entities, some of which we do not have management control over, and
with which we typically have joint and several liability with our joint venture partners.
•
Our earnings and profitability may vary based on the mix of our contracts and may be adversely affected by our failure to
accurately estimate and manage costs, time and resources.
•
We use estimates in recognizing revenues and, if we make changes to estimates used in recognizing revenues, our profitability
may be adversely affected.
•
Systems that we develop, integrate, maintain, or otherwise support could experience security breaches which may damage our
reputation with our clients and hinder future contract win rates.
•
Services we provide and technologies we develop are designed to detect and monitor threats to our clients, the failure of which
may lead to reputational harm or liability against us by our clients or third parties and may subject our staff to potential threats,
risk of loss or harm.
•
Internal system or service failures affecting us or our vendors, including as a result of cyber or other security threats, could
disrupt our business and impair our ability to effectively provide our services to our clients, which could damage our reputation
and have a material adverse effect on our business, financial condition and results of operations.
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•
Our business is subject to numerous legal and regulatory requirements and any violation of these requirements or any
misconduct by our employees, subcontractors, agents, or business partners could harm our business and reputation.
•
Our business is subject the impact of supply chain disruption and inflation risk upon the cost of providing materials and services
to customers and upon the profitability for certain contracts.
•
Our business may be impacted by the imposition of tariffs upon markets in which we conduct business.
•
Goodwill and intangible assets represent a significant amount of our total assets, and any impairment of these assets would
negatively impact our results of operations.
•
We depend on our teaming arrangements and relationships with other contractors and subcontractors. If we are not able to
maintain these relationships, or if these parties fail to satisfy their obligations to us or the customer, our revenues, profitability
and growth prospects could be adversely affected.
•
Many of our contracts require innovative design capabilities, are technologically complex or are dependent upon factors not
wholly within our control. Failure to meet these obligations could adversely affect our business, financial condition or results of
operations.
•
Assertions by third parties of infringement, misappropriation or other violations by us of their intellectual property rights could
result in significant costs and substantially harm our business, financial condition and operation results.
•
We have operations in the Middle East, neighboring regions, and other regions across the globe, and these regions may
experience turmoil, political upheaval and similar crises that may impact our current projects, future business, and financial
stability.
•
We may not realize the full value of our backlog, which may result in lower-than-expected revenue.
•
Many of our field project sites and facilities are inherently dangerous workplaces. Failure to manage our field project sites and
facilities safely could result in environmental disasters, employee deaths or injuries, reduced profitability, the loss of projects or
clients and possible exposure to litigation.
•
The impact of extreme weather events, including floods, hurricanes, droughts, and wildfires, including as a result of climate
change or supply shortages, could have an adverse impact on our business and operations.
•
Our business, results of operations, financial condition, cash flows and stock price can be adversely affected by pandemics,
epidemics, or other public health emergencies, such as the global COVID-19 pandemic and variants thereof. The pandemic
resulted in governments around the world implementing increasingly stringent measures to help control the spread of the virus,
including quarantines, “shelter in place” and “stay at home” orders, travel restrictions, business curtailments, school closures,
and other measures. While many of these restrictions have been removed or reduced, the spread of new variants or viruses
may result in the imposition of additional restrictions. In addition, governments and central banks in several parts of the world
have enacted, or may enact in the future, fiscal and monetary stimulus measures to counteract the impacts of any such
emergency. The extent to which any emergency may impact our business will depend on future developments, which are highly
uncertain and unpredictable, and the resultant financial impact cannot be estimated reasonably at this time but may materially
adversely affect our ability to collect accounts receivables and our business, results of operations, financial condition and cash
flows. Further, the economic impact of such events may cause extreme volatility in financial and other capital markets which
may continue to adversely impact our stock price and our ability to access capital markets. Health emergencies may also have
the effect of heightening many of
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the other risks described in this Annual Report on Form 10-K for the year ended December 31, 2023, such as those relating to
government spending and priorities.
Risk Related to Our Common Stock
•
Your ability to influence corporate matters may be limited because the ESOP beneficially owns a majority of our stock and
therefore our employees, voting the shares allocated to them under the ESOP, or the ESOP Trustee, who will have the right to
vote shares for which no voting instructions are provided by employees, could have substantial control over us.
•
We are a “controlled company” within the meaning of the New York Stock Exchange listing standards and, as a result, qualify for
exemptions from certain corporate governance requirements. You may not have the same protections afforded to stockholders
of companies that are subject to such requirements.
Risks Related to Government Contracts
Government spending and priorities could change in a manner that adversely affects our future revenue and limits our growth
prospects.
We derive, and expect to continue to derive, a significant portion of our revenue from contracts with government entities. As a result,
our business depends upon continued government expenditures on defense, intelligence, civil and engineering programs for which we
provide support, both among foreign governments and at federal, state and local levels domestically. These expenditures have not remained
constant over time. Our business, prospects, financial condition or operating results could be materially harmed, among other causes, by the
following:
•
budgetary constraints, including mandated automatic spending cuts, affecting across-the-board government spending, or
specific agencies in particular, and changes in available funding;
•
a shift in expenditures away from agencies or programs that we support;
•
reduced government outsourcing of functions that we are currently contracted to provide, including as a result of increased
insourcing by various U.S. government agencies due to changes in the definition of “inherently governmental” work, including
proposals to limit contractor access to sensitive or classified information and work assignments;
•
efforts to improve efficiency and reduce costs affecting government programs;
•
changes or delays in government programs that we support or the programs’ requirements;
•
U.S. government shutdowns due to, among other reasons, a failure by elected officials to fund the government, such as the
shutdowns which occurred during government fiscal years 2019 and 2014 and, to a lesser extent, government fiscal year 2018,
and other potential delays in the appropriations process;
•
continuing resolutions (CRs) which are temporary spending bills that allow federal government operations to continue when final
appropriations have not been enacted. CRs generally continue the level of funding from the prior year’s appropriations or the
previously approved CR from the current year;
•
U.S. government agencies awarding contracts on a technically acceptable/lowest cost basis in order to reduce expenditures;
•
delays in the payment of our invoices by government payment offices;
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•
results of elections, including politicians who may have priorities that would reduce spending in areas in which we operate;
•
an inability by the U.S. government to fund its operations as a result of a failure to increase the federal government’s debt
ceiling, a credit downgrade of U.S. government obligations or for any other reason; and
•
changes in the political climate and general economic conditions, including a slowdown of the economy or unstable economic
conditions and responses to conditions, such as emergency spending, that reduce funds available for other government
priorities.
Any disruption in the functioning of government agencies, including as a result of government closures and shutdowns, terrorism, war,
natural disasters, destruction of government facilities, and other potential calamities could have a negative impact on our operations and
cause us to lose revenue or incur additional costs due to, among other things, our inability to deploy our staff to client locations or facilities as
a result of such disruptions.
In particular, with regard to our largest single customer, the U.S. federal government, budget deficits, the national debt and the
prevailing economic condition, and actions taken to address them, could negatively affect the U.S. government expenditures on defense,
intelligence, and civil programs for which we provide support. Two customer sets within the federal government exceeded 20% of Parsons’
revenue during 2024. Parsons was awarded the second option year to continue our contract with a confidential customer through February
2026. However, a related program performed by others has recently been paused, which impacts our ability to complete the scope of our
mission. The long-term continuation of our contract is contingent on the related program restarting. If the project is halted, it would have a
material adverse impact.
Most government contracts are subject to the government’s budgetary approval process. Legislatures typically appropriate funds for a
given program on a year-by-year basis, even though contract performance may take more than one year. In addition, public-supported
financing such as state and local municipal bonds may be only partially raised to support existing infrastructure projects. As a result, at the
beginning of a program, the related contract is only partially funded, and additional funding is normally committed only as appropriations are
made in each fiscal year. These appropriations, and the timing of payment of appropriated amounts, may be influenced by, among other
things, the state of the economy, competing priorities for appropriation, changes in administration or control of legislatures and the timing and
amount of tax receipts and the overall level of government expenditures. Similarly, the impact of an economic downturn on state and local
governments may make it more difficult for them to fund infrastructure projects. If appropriations are not made in subsequent years on our
government contracts, then we will not realize all of our potential revenue and profit from that contract, and we may incur substantial labor
costs without reimbursement.
Government funding with respect to our Critical Infrastructure services fluctuates over time and new or changing government policies
and priorities may affect our Critical Infrastructure business and operations. Government spending for our Critical Infrastructure services may
also depend on factors related to government demand, such as the condition of the existing infrastructure and buildings and the need for new
or expanded infrastructure and buildings. Our government clients may face budget cuts or deficits that prohibit them from funding proposed
and existing Critical Infrastructure projects.
These or other factors could cause our defense, intelligence, infrastructure or civil clients to decrease the number of new government
contracts awarded generally and fail to award us new government contracts, reduce their purchases under our existing government
contracts, exercise their right to terminate our government contracts or not exercise options to renew our government contracts, any of which
could materially and adversely affect our business, financial condition and results of operations.
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The U.S. federal government and its agencies collectively are our largest single customer and, if our reputation or relationships
with the U.S. federal government were harmed, our future revenues and cash flows would be adversely affected.
The U.S. federal government and its agencies, including the military and intelligence community, collectively are our largest customer.
In particular, it represents substantially all of the revenue of our Federal Solutions segment. Approximately 23% and 18% of accounts
receivable as of December 31, 2024 and December 31, 2023, respectively were derived from contracts with the U.S. federal government and
its agencies. Our reputation and relationships with various U.S. government entities and agencies, including the U.S. Department of Defense,
the U.S. Department of State, the Federal Aviation Administration, the United States Intelligence Community, and other federal civilian
customers are key factors in maintaining and growing these revenues and winning new bids for new business. Negative press reports or
publicity, regardless of accuracy, could harm our reputation. If our reputation or relationships with government agencies were to be negatively
affected, or if we are suspended or debarred from contracting with government agencies for any reason, the amount of business with
government and other customers would decrease and our financial condition and results of operations could be adversely affected.
Our failure to comply with a variety of complex procurement rules and regulations could result in our being liable for penalties,
including termination of our government contracts, disqualification from bidding on future government contracts and suspension
or debarment from government contracting.
We must comply with various laws and regulations relating to the formation, administration, and performance of government contracts,
which affect how we do business with our customers and may impose added costs on our business.
Many of our U.S. government contracts contain organizational conflict of interest, or OCI, clauses that may limit our ability to compete
for or perform contracts or other types of services for particular customers. OCI arises when we engage in activities that may make us unable
to render impartial assistance or advice to the U.S. government, impair our objectivity in performing contract work or provide us with an unfair
competitive advantage. Existing OCI, and any OCI that may develop, could preclude our competition for or performance on a significant
project or contract, which could limit our opportunities.
Some U.S. federal and state statutes and regulations provide for automatic debarment based on our actions, such as violations of the
U.S. False Claims Act or the U.S. Foreign Corrupt Practices Act, or FCPA. The suspension or debarment in any particular case may be
limited to the facility, contract or subsidiary involved in the violation or could be applied to our entire enterprise in severe circumstances. Even
a narrow scope suspension or debarment could result in negative publicity that could adversely affect our ability to renew contracts and to
secure new contracts, both with governments and private customers, which could materially and adversely affect our business, financial
condition and results of operations.
Governments may adopt new contract rules and regulations or revise their procurement practices in a manner adverse to us at any
time.
The government-related industries within which we do business continue to experience significant changes to business practices as a
result of an increased focus on affordability, efficiencies and recovery of costs, among other items. Our existing and potential clients are
similarly focused on increasing the productivity of their contractual arrangements. Moreover, government agencies may face restrictions or
pressure regarding the type and amount of services that they may obtain from private contractors. Legislation, regulations and initiatives
dealing with procurement reform, mitigation of potential OCIs, deterrence of fraud, and environmental responsibility or sustainability could
have an adverse effect on us. Moreover, shifts in the buying practices of government agencies, such as increased usage of fixed price
contracts, multiple award contracts and small business set-aside contracts, could have adverse effects on government contractors, including
us. Any of these changes could impair our ability to obtain new
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contracts or contract renewals. Any new contracting requirements or procurement methods could be costly or administratively difficult for us
to implement and could adversely affect our business, financial condition and results of operations.
A substantial portion of our business is subject to reviews, audits and cost adjustments by government agencies, which, if
resolved unfavorably to us, could adversely affect our profitability, cash flows or growth prospects.
Government agencies routinely audit and review a contractor’s performance on government contracts, indirect cost rates and pricing
practices, and compliance with applicable contracting and procurement laws, regulations and standards. They also review the adequacy of
the contractor’s compliance with government standards for its business systems, which are defined as the contractor’s accounting, earned
value management, estimating, materials management, property management and purchasing systems. A finding of significant control
deficiencies in a contractor’s business systems or a finding of noncompliance with U.S. government Cost Accounting Standards, or CAS, can
result in decremented billing rates to U.S. government customers until the control deficiencies are corrected and their remediation is
accepted by the Defense Contract Management Agency. The agencies conducting these audits and reviews have come under increased
scrutiny. As a result, audits and reviews have become more rigorous and the standards to which we are held are being more strictly
interpreted which has increased the likelihood of an audit or review resulting in an adverse outcome.
If a review or investigation by a government agency identifies improper or illegal activities, we may be subject to civil or criminal
penalties or administrative sanctions which could include the termination of contracts, forfeiture of profits, the triggering of price reduction
clauses, suspension of payments, fines, and suspension or debarment from doing business with governmental agencies. We may suffer
harm to our reputation if allegations of impropriety are made against us, which would impair our ability to win new contract awards or receive
contract renewals. Penalties and sanctions are not uncommon in our industries. If we incur a material penalty or administrative sanction or
otherwise suffer harm to our reputation, our profitability, cash position and future prospects could be adversely affected.
Government audits and reviews may conclude that our practices are not consistent with applicable laws and regulations and result in
adjustments to contract costs and mandatory customer refunds. Such adjustments can be applied retroactively, which could result in
significant customer refunds, and those refunds would negatively impact our revenue. Receipt of adverse audit findings or the failure to
obtain an “approved” determination on our various business systems could significantly and adversely affect our business by, among other
things, restricting our ability to bid on new contracts and, for those proposals under evaluation, diminishing our competitive position. A
determination of noncompliance could also result in penalties and sanctions against us, including withholding of payments, suspension of
payments and increased government scrutiny. Increased scrutiny could adversely impact our ability to perform on contracts, affect our ability
to invoice for work performed, delay the receipt of timely payment on contracts, and weaken our ability to compete for new contracts with the
government.
Our government contracts may be terminated by the government counterparty at any time and may contain other provisions
permitting the government to discontinue contract performance, and if lost contracts are not replaced, our operating results may
differ materially and adversely from those anticipated.
Government contracts often contain provisions and are subject to laws and regulations that provide government clients with rights and
remedies not typically found in commercial contracts. These rights and remedies allow government clients, among other things, to:
•
terminate existing contracts, with short notice, for convenience as well as for default;
•
reduce orders under or otherwise modify contracts;
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•
for contracts subject to the Truthful Cost and Pricing statute, reduce the contract price or cost where it was increased because a
contractor or subcontractor furnished cost or pricing data during negotiations that was not complete, accurate and current;
•
for some contracts, (1) demand a refund, make a forward price adjustment or terminate a contract for default if a contractor
provided inaccurate or incomplete data during the contract negotiation process and (2) reduce the contract price under triggering
circumstances, including the revision of price lists or other documents upon which the contract award was predicated;
•
terminate our facility security clearances and thereby prevent us from receiving classified contracts and complete work on
existing contracts;
•
cancel multi-year contracts and related task orders if funds for contract performance for any subsequent year become
unavailable;
•
decline to exercise an option to renew a multi-year contract or issue task orders in connection with indefinite delivery/indefinite
quantity contracts, or IDIQ contracts;
•
claim rights in solutions, systems and technology produced by us, appropriate such work-product for their continued use without
continuing to contract for our services and disclose such work-product to third parties, including other government agencies and
our competitors, which could harm our competitive position;
•
prohibit future procurement awards with a particular agency due to a finding of organizational conflicts of interest based upon
prior related work performed for the agency that would give a contractor an unfair advantage over competing contractors, or the
existence of conflicting roles that might bias a contractor’s judgment;
•
subject the award of contracts to protest by competitors, which may require the contracting federal agency or department to
suspend our performance pending the outcome of the protest and may also result in a requirement to resubmit offers for the
contract or in the termination, reduction or modification of the awarded contract;
•
suspend or debar us from doing business with the applicable government; and
•
control or prohibit the export of our services.
Recent and potential future budget cuts, the impact of sequestration and recent efforts by the Office of Management and Budget to
decrease federal awards for management support services, may cause agencies with which we currently have contracts to terminate, reduce
the number of task orders under or fail to renew such contracts. If a government client were to unexpectedly terminate, cancel, or decline to
exercise an option to renew with respect to one or more of our significant contracts, or suspend or debar us from doing business with such
government, our revenue and operating results would be materially harmed.
Our revenue and growth prospects may be harmed if we or our employees are unable to obtain government granted eligibility or
other qualifications, we and they need to perform services for our customers.
A number of government programs require contractors to have certain kinds of government granted eligibility, such as security
clearance credentials. Depending on the project, eligibility can be difficult and time-consuming to obtain. If we or our employees are unable to
obtain or retain the necessary eligibility, including local ownership requirements, we may not be able to win new business, and our existing
customers could terminate their contracts with us or decide not to renew them. To the extent we cannot obtain or maintain the required
security clearances for our employees working on a particular contract, we may not derive the revenue or profit anticipated from such
contract.
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Risks Related to Our Operations and Markets
Our profitability could suffer if we are not able to timely and effectively utilize our employees or manage our cost structure.
The cost of providing our services, including the degree to which our employees are utilized, affects our profitability. The degree to
which we are able to utilize our employees in a timely manner or at all is affected by a number of factors, including:
•
our ability to transition employees from completed projects to new assignments and to hire, assimilate and deploy new
employees;
•
our ability to forecast demand for our services and to maintain and deploy headcount that is aligned with demand, including
employees with the right mix of skills and experience to support our projects;
•
our employees’ ability to obtain or retain necessary security clearances or required certifications;
•
changes to or delays or cancellations of projects, as a result of governmental budgetary processes or otherwise;
•
our ability to manage attrition;
•
the impact of inflation upon the cost of services and materials provided to customers; and
•
our need to devote time and resources to training, business development, and other non-chargeable activities.
If our employees are under-utilized, our profit margin and profitability could suffer. Additionally, if our employees are over-utilized, it
could have a material adverse effect on employee morale and attrition, which would in turn have a material adverse impact on our business,
financial condition or results of operations.
Our profitability is also affected by the extent to which we are able to effectively manage our overall cost structure for operating
expenses, such as wages and benefits, real estate expenses, overhead and capital and other investment-related expenditures. If we are
unable to effectively manage our costs and expenses and achieve efficiencies, our competitiveness and profitability may be adversely
affected.
Our focus on new growth areas for our business entails risks, including those associated with new relationships, clients, talent
needs, capabilities, service offerings and maintaining our collaborative culture and core values.
We are focused on growing our presence in our addressable markets by enhancing and optimizing our core operations, extending into
opportunity-rich adjacent markets and acquiring and integrating transformative, disruptive technologies. These efforts entail inherent risks
associated with innovation and competition from other participants in those areas, potential failure to help our clients respond to the
challenges they face, our ability to comply with uncertain evolving legal standards applicable to some of our service offerings, including those
in the cybersecurity area, and, with respect to potential international growth, risks associated with operating in foreign jurisdictions, such as
compliance with applicable foreign and U.S. laws and regulations that may impose different and, occasionally, conflicting or contradictory
requirements, and the economic, legal, and political conditions in the foreign jurisdictions in which we operate, as described in additional
detail below. As we attempt to develop new relationships, clients, capabilities, and service offerings, these efforts could harm our results of
operations due to, among other things, a diversion of our focus and resources and actual costs, opportunity costs of pursuing these
opportunities in lieu of others and a failure to reach a profitable return on our investments in new technologies, capabilities, and businesses,
including expenses on research and development investments, and these efforts could ultimately be unsuccessful. Additionally, the
possibility exists that our competitors might develop new capabilities or service offerings that might cause our existing capabilities
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and service offerings to become obsolete. If we fail in our new capabilities development efforts or our capabilities or services fail to achieve
market acceptance more rapidly than our competitors, our ability to procure new contracts could be negatively impacted, which would
negatively impact our results of operations and our financial condition.
In addition, our ability to grow our business by leveraging our operating model to deploy our people efficiently and effectively across
our client base is largely dependent on our ability to maintain our collaborative culture. To the extent that we are unable to maintain our
culture for any reason, including our effort to focus on new growth areas or acquire new businesses with different corporate cultures, we may
be unable to grow our business. Any such failure could have a material adverse effect on our business, financial condition and results of
operations.
With the growth of our U.S. and international operations, we are now providing client services and undertaking business development
efforts in numerous and disparate geographic locations both domestically and internationally. Our ability to effectively serve our clients is
dependent upon our ability to successfully leverage our operating model across all of these and any future locations, maintain effective
management controls over all of our locations to ensure, among other things, compliance with applicable laws, rules and regulations, and
instill our core values in all of our personnel at each of these and any future locations. Any inability to ensure any of the foregoing could have
a material adverse effect on our business, financial condition and results of operations.
We have submitted claims and change orders to clients for work we performed beyond the initial scope of some of our contracts. If
these clients do not approve these claims and change orders, our results of operations could be adversely impacted.
We typically have pending claims and change orders submitted under some of our contracts for payment of work performed beyond
the initial contractual requirements for which we have already recorded revenue. Our client may dispute these change orders and claims, and
we cannot guarantee that such claims will be approved in whole, in part, or at all. Often, these claims and disputes can be the subject of
lengthy arbitration or litigation proceedings, and it is difficult to accurately predict when these claims and disputes will be fully resolved. We
may also renegotiate contracts to address these additional costs. When these types of events occur, we have used working capital in
projects to cover cost overruns. If our claims are not approved or resolved, our revenue may be reduced in future periods.
Many of our contracts require innovative design capabilities, are technologically complex or are dependent upon factors not
wholly within our control. Failure to meet these obligations could adversely affect our business, financial condition or results of
operations.
We design and develop technologically advanced and innovative products and services applied by our customers in a variety of
environments. Problems and delays in development or delivery as a result of issues with respect to design, technology, licensing and patent
rights, labor, learning curve assumptions or materials and components could prevent us from achieving contractual requirements. Our
offerings cannot be tested and proven in all situations and are otherwise subject to unforeseen problems that could negatively affect revenue
and profitability such as problems with governmental inaction, quality and workmanship, delivery of subcontractor components or services,
unplanned degradation of product performance, unavailability of vendor materials and changes in the project scope requested by our clients.
Among the factors that may adversely affect our business, financial condition or results of operations could be unforeseen costs and
expenses not covered by insurance or indemnification from the customer, diversion of management focus in responding to unforeseen
problems, loss of follow-on work, damage to our reputation and repayment to the customer of contract cost and fee payments we previously
received.
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We face aggressive competition that can impact our ability to obtain contracts and may affect our future revenues, profitability and
growth prospects.
We expect that a majority of the business that we seek in the foreseeable future will be awarded through a competitive bidding
process. For example, the U.S. government increasingly relies on IDIQ, GSA Schedule and other multi-award contracts, which has resulted
in greater competition and increased pricing pressure. The competitive bidding process involves substantial costs and a number of risks,
including significant cost and managerial time to prepare bids and proposals for contracts that may not be awarded to us, or that may be
awarded but for which we do not receive meaningful task orders. For contracts awarded to us, we also face the risk of inaccurately estimating
the resources and costs that will be required to fulfill any contract we win. Following contract award, we may encounter significant expense,
delay, contract modifications or even contract loss as a result of our competitors protesting the award of contracts to us in competitive
bidding. Any resulting loss or delay of startup and funding of work under protested contract awards may adversely affect our revenues and/or
profitability. In addition, multi-award contracts require that we make sustained post-award efforts to obtain task orders under the contract. As
a result, we may not be able to obtain these task orders or recognize revenues under these multi award contracts. Our failure to compete
effectively in this procurement environment would adversely affect our business, financial condition and results of operations.
Projects may be awarded based solely upon price, but often take into account other factors, such as technical qualifications, proposed
project team, schedule and past performance on similar projects. We compete with larger companies that have greater name recognition,
financial resources and larger technical staffs and with smaller, more specialized companies that are able to concentrate their resources on
particular areas. Additionally, we may compete with a government’s own capabilities. Technology-focused companies may also develop
products and services that could disrupt our business or compete with our services. To remain competitive, we must consistently provide
superior service, technology and performance on a cost-effective basis to our customers and there is no assurance that we will do so.
Changes in global tax laws or their interpretation could have a material impact on our effective income tax rate.
We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Accordingly, our effective tax rate is impacted by
changes in the mix among earnings in countries with differing tax rates. Due to economic and political conditions, many tax jurisdictions,
including the U.S., have called for comprehensive changes to fiscal and tax policies that could significantly impact how we are taxed on our
domestic and foreign earnings. Such changes, if enacted into law, could increase our effective tax rate and have a material adverse impact
on our financial condition and results of operations. For example, the Organization for Economic Co-Operation and Development continues
to advance proposals for modernizing international tax rules, including the release of global minimum tax standards referred to as the Pillar
Two Model Rules (and also referred to as the Global Anti-Base Erosion (“GloBE” rules). Several jurisdictions in which we operate have
enacted these rules, some of which became effective for the Company’s 2024 fiscal year. The Company has considered the impact of the
GloBE implementation in its provision for income taxes and continues to monitor the impacts of the GloBE rules implementation.
We are also subject regularly to examination by tax authorities. Although we believe that our positions are reasonable, they could be
materially affected by many factors, including the final outcome of tax audits, introduction of new tax legislation or regulations and related
interpretations. We regularly assess the likelihood of an adverse outcome resulting from these examinations to determine the adequacy of
our provision for taxes. There can be no assurance as to the outcome of these examinations. If the ultimate determination of our taxes owed
is for an amount in excess of amounts previously accrued, our financial condition and results operation could be materially affected.
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Risks Related to Acquisitions and Joint Ventures
We may make acquisitions, investments, joint ventures and divestitures in the future that involve numerous risks, which if realized,
may adversely affect our business and our future results.
We may make strategic acquisitions, engage in joint ventures or divest existing businesses, which could cause us to incur unforeseen
expenses and have disruptive effects on our business and may not yield the benefits we expect. Our Credit Agreement imposes limitations
on our ability to make other acquisitions. Subject to those limitations, we may selectively pursue additional strategic acquisitions, investments
and joint ventures in the future. Any future acquisitions, investments and joint ventures may pose many risks that could adversely affect our
reputation, operations or financial results, including:
•
we may not retain key employees (including those with needed security clearances), customers and business partners of an
acquired business in the future;
•
we may fail to successfully integrate acquired businesses, such as failing to successfully integrate information technology and
other control systems relating to the operations of any acquired business;
•
acquisitions normally require a significant investment of time and resources, which may disrupt our business and distract our
management from other important responsibilities;
•
we may not be able to accurately estimate the financial effect of any acquisitions and investments on our business and we may
not realize anticipated revenue opportunities, cost savings, or other synergies or benefits, or acquisitions may not result in
improved operating performance; and
•
we may assume known as well as unknown material liabilities, legal or regulatory risks that were not identified as part of our due
diligence or for which we are unable to receive a purchase price adjustment or reimbursement through indemnification.
If any acquisitions, investments or joint ventures fail, perform poorly or their value is otherwise impaired for any reason, including
contractions in credit markets and global economic conditions, our business, financial condition and results of operations could be adversely
affected.
In addition, we may periodically divest or plan to divest businesses, including businesses that are no longer a part of our ongoing
strategic plan. These divestitures similarly require significant investment of time and resources and may disrupt our business, distract
management from other responsibilities and may result in losses on disposal or continued financial involvement in the divested business,
including through indemnification, guarantee or other financial arrangements, for a period of time following the transaction, which could
adversely affect our business, financial condition or results of operations. When we determine that we would like to divest a business, we
may not be able to divest that business on attractive terms or at all.
We conduct a portion of our work through joint venture entities, some of which we do not have management control over, and with
which we typically have joint and several liability with our joint venture partners.
12% of our revenue during fiscal 2024, 13% of our revenue during fiscal 2023 and 12% of our revenue during fiscal 2022 was derived
from our operations through consolidated joint ventures. In addition, 2.7% of our revenue during fiscal 2024, 3.9% of our revenue during
fiscal 2023 and 5.1% of our revenues in fiscal 2022 related to services we provided to our unconsolidated joint ventures, where control
resides with unaffiliated third parties, and 5.5% of our operating income during fiscal 2024, 16.6% of our operating income during fiscal 2023
and 8.8% of our operating income during fiscal 2022 was derived from equity in our unconsolidated joint ventures. As with most joint venture
arrangements, differences in views among the joint venture participants may result in delayed decisions or disputes. We also cannot control
the actions of our joint venture partners and we typically have joint and several liability with our joint venture partners under the applicable
contracts for joint venture projects. These factors
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could potentially adversely impact the business and operations of a joint venture and, in turn, our business and operations.
Operating through joint ventures in which we are a minority holder results in us having limited control over many decisions made with
respect to projects and internal controls relating to projects. We generally do not have control of these unconsolidated joint ventures. These
joint ventures may not be subject to the same requirements regarding internal controls and internal control over financial reporting that we
follow. As a result, internal control problems may arise with respect to these joint ventures, which could have a material adverse effect on our
business, financial condition and results of operations and could also affect our reputation in the industries we serve.
We participate in joint ventures where we provide guarantees and may be adversely impacted by the failure of such joint venture or
its participants to fulfill their obligations.
We have investments in and commitments to joint ventures with unrelated parties. These joint ventures from time to time may borrow
money to help finance their activities and, in some circumstances, we may be required to provide guarantees of the obligations of our
affiliated entities. As of December 31, 2024, we had $176.7 million of letters of credit and guarantees that relate to joint ventures. If these
entities are not able to honor their obligations under the guarantees, we may be required to expend additional resources or suffer losses,
which could be significant.
Our acquisitions may not achieve their full intended benefits or may disrupt our plans and operations.
We cannot assure you that we will be able to successfully integrate acquired companies with our business or otherwise realize the
expected benefits of our acquisitions. For example, in the last several years we have made four large acquisitions. The combination of
multiple independent businesses will be a complex, costly, and time-consuming process. Our business may be negatively impacted following
acquisitions if we are unable to effectively manage our expanded operations. The integration process will require significant time and focus
from our management team and may divert attention from the day-to-day operations of the combined business. Additionally, consummation
of acquisitions could disrupt our current plans and operations, which could delay the achievement of our strategic objectives.
The expected synergies and operating efficiencies of the acquisitions may not be fully realized, which could result in increased costs
and have a material adverse effect on our business, financial condition and results of operations. In addition, the overall integration of the
businesses may result in material unanticipated problems, expenses, liabilities, competitive responses, loss of customer relationships and
diversion of management’s attention, among other potential adverse consequences. The risks of combining our operations of the businesses
include, among others:
•
we may have underestimated the costs to integrate the information systems of acquired companies with ours;
•
we may face difficulties in integrating employees, integrating different corporate cultures and in attracting and retaining key
personnel; and
•
we may face challenges in keeping existing contracts and customers.
Many of these risks will be outside of our control and any one of them could result in increased costs, decreases in the amount of
expected revenue, and diversion of our management’s time and energy, which could have a material adverse effect on our business,
financial condition and results of operations. In addition, even if our operations are integrated successfully, we may not realize the full
benefits of the acquisitions, including the synergies, operating efficiencies, or sales or growth opportunities that are expected. These benefits
may not be achieved within the anticipated time frame or at all.
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We depend on our teaming arrangements and relationships with other contractors and subcontractors. If we are not able to
maintain these relationships, of if these parties fail to satisfy their obligations to us or the customer, our revenues, profitability and
growth prospects could be adversely affected.
We rely on teaming relationships with other prime contractors and subcontractors in order to submit bids for large procurements or
other opportunities where we believe the combination of services, products, and solutions provided by us and our teammates will help us to
win and perform the contract. Our future revenues and growth prospects could be adversely affected if the other contractors eliminate or
reduce their contract relationships with us, of if our government clients terminate or reduce these other contractors’ programs, do not award
them new contracts or refuse to pay under a contract. Companies that do not have access to government contracts or experience with our
customers may perform services as our subcontractor that we cannot otherwise provide ourselves, and that exposure could enhance such
companies’ prospects of securing a future position as a prime government contractor which could increase competition for future contracts
and impair our ability to win these contracts.
Whenever our subcontractors fail to timely meet their contractual obligations, have regulatory compliance or other problems, our ability
to fulfill our obligations as a prime contractor or higher tier subcontractor may be jeopardized. Subcontractor performance deficiencies under
subcontracts with us as the prime contractor could lead to significant losses in future periods and could result in our termination for default as
the prime contractor even though it was the subcontractor that failed to perform and not our personnel.
Risks Related to Estimates and Accounting
Our earnings and profitability may vary based on the mix of our contracts and may be adversely affected by our failure to
accurately estimate and manage costs, time and resources.
We generate revenue under various types of contracts, which include time-and-materials, cost-plus and fixed-price contracts. Our
earnings and profitability may vary materially depending on changes in the proportionate amount of revenues derived from each type of
contract, the nature of services or solutions provided, as well as the achievement of performance objectives and the stage of performance at
which the right to receive fees, particularly under incentive fee contracts, is finally determined. Cost-plus and time-and-materials contracts
generally have lower profitability than fixed-price contracts. To varying degrees, each of our contract types involves some risk that we could
underestimate the costs and resources necessary to fulfill the contract. Our profitability is adversely affected when we incur costs on cost-
plus and time-and-materials contracts that we cannot bill to our customers. While fixed-price contracts allow us to benefit from cost savings,
these contracts also increase our exposure to the risk of cost overruns.
Revenue derived from fixed-price contracts represented 42% of our total revenue during fiscal 2024, 33% of our total revenue during
fiscal 2023, and 27% of our total revenue during fiscal 2022. When making proposals on fixed-price contracts, we rely heavily on our
estimates of costs, scope and timing for completing the associated projects, as well as assumptions regarding technical issues. In particular,
contracts in our Critical Infrastructure segment are often won in a hard-bid process, in which clients primarily select the lowest price from a
qualified bidder with the understanding that they will not pay above the bid amount, even if we perform work beyond the initial scope of our
contract. In each case, our failure to accurately estimate costs, scope or the resources and technology needed to perform our contracts or to
effectively manage and control our costs during the performance of work could result, and in some instances has resulted, in reduced profits
or in losses. More generally, any increased or unexpected costs or unanticipated delays in connection with the performance of our contracts,
including costs and delays caused by contractual disputes or other factors outside of our control, such as performance failures of our
subcontractors, natural disasters or other force majeure events, could make our contracts less profitable than expected or unprofitable.
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We use estimates in recognizing revenues and, if we make changes to estimates used in recognizing revenues, our profitability
may be adversely affected.
A significant portion of our contract revenues are recognized using the cost-to-cost measure of progress method. This method requires
estimates of total costs at completion or measurement of progress towards completion. Particularly due to the technical nature of the services
being performed and the length of the contracts, this estimation process is complex and involves significant judgment. Adjustments to original
estimates are often required as work progresses, experience is gained and additional information becomes known, even though the scope of
the work required under the contract may not change. Any adjustment as a result of a change in estimate is recognized immediately.
Changes in the underlying assumptions, circumstances or estimates could result in adjustments that may adversely affect our financial
results of operations.
Goodwill and intangible assets represent a significant amount of our total assets and any impairment of these assets would
negatively impact our results of operations.
As of December 31, 2024, we had goodwill and intangible assets of $2.4 billion. Goodwill is tested for impairment annually, or more
often if indicators of potential impairment exist, and intangible assets are tested for impairment whenever events or changes in circumstances
indicate that the carrying value may not be recoverable. Examples of events or changes in circumstances indicating that the carrying value of
goodwill may not be recoverable could include a significant adverse change in legal factors or in the business climate, an adverse action or
assessment by a regulator, unanticipated competition, loss of key contracts, customer relationships, or personnel that affect current and
future operating cash flows of the reporting unit. Any future impairment of goodwill or other intangible assets would have a negative impact
on our profitability and financial results.
Risks Related to Technology Systems
Systems that we develop, integrate, maintain, or otherwise support could experience security breaches which may damage our
reputation with our clients and hinder future contract win rates.
We develop, integrate, maintain, or otherwise support systems and provide services that include managing and protecting information
involved in intelligence, national security and other sensitive or classified government functions. Our systems also store and process
sensitive information for commercial clients. The cyber and security threats that our clients face have grown more frequent and sophisticated.
A security breach in one of these systems could cause serious harm to our business, damage our reputation, and prevent us from being
eligible for further work on sensitive systems for government or commercial clients. Work for non-government and commercial clients
involving the protection of information systems or that store clients’ information could also be harmed due to associated security breaches.
Damage to our reputation or limitations on our eligibility for additional work or any liability resulting from a security breach in one of the
systems we develop, install, maintain, or otherwise support could have a material adverse effect on our business, financial condition and
results of operations.
Services we provide and technologies we develop are designed to detect and monitor threats to our clients, the failure of which
may lead to reputational harm or liability against us by our clients or third parties and may subject our staff to potential threats,
risk of loss or harm.
We help our clients detect, monitor and mitigate threats to their people, information and facilities. These threats may originate from
nation states, terrorist or criminal actors, activist hackers or others who seek to harm our clients. There are many factors, some of which are
beyond our control, which could result in the failure of our products to detect, monitor or mitigate these threats. Successful attacks on our
clients may cause physical or reputational harm to us and our clients, as well as lead to liability claims against us by our clients or third
parties, particularly if such attacks are a result of a failure or perceived failure of our services or technologies. In addition, as a result of our
involvement with some clients or projects, our staff, information and facilities may be targeted by these or other threat actors and may be at
risk for loss, or physical or reputational harm.
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Internal system or service failures affecting us or our vendors, including as a result of cyber or other security threats, could
disrupt our business and impair our ability to effectively provide our services to our clients, which could damage our reputation
and have a material adverse effect on our business, financial condition and results of operations.
We create, implement, and maintain information technology and engineering systems and also use vendors to provide services that
are often critical to our clients’ operations, some of which involve sensitive information and may be conducted in war zones or other
hazardous environments, or include information whose confidentiality is protected by law. As a result, we may be subject to systems or
service failures, not only resulting from our own failures or the failures of third-party service providers, natural disasters, power shortages, or
terrorist attacks, but also from continuous exposure to cyber and other security threats, including computer viruses and malware, attacks by
computer hackers or physical break-ins. There has been an increase in the frequency and sophistication of the cyber and security threats we
face, with attacks ranging from those common to businesses generally to those that are more advanced and persistent, which may target us
because, as a cyber services contractor, we hold classified, controlled unclassified and other sensitive information. As a result, we and our
vendors face a heightened risk of a security breach or disruption resulting from an attack by computer hackers, foreign governments, and
cyber terrorists. While we put in place policies, controls and technologies to help detect and protect against such attacks, we cannot
guarantee that future incidents will not occur, and if an incident does occur, we may not be able to successfully mitigate the impact. We have
been the target of these types of attacks in the past and future attacks are likely to occur. If successful, these types of attacks on our network
or other systems or service failures could have a material adverse effect on our business, financial condition and results of operations, due
to, among other things, the loss of client or proprietary data, interruptions or delays in our clients’ businesses and damage to our reputation.
In addition, the failure or disruption of our systems, communications, vendors, or utilities could cause us to interrupt or suspend our
operations, which could have a material adverse effect on our business, financial condition and results of operations. In addition, if our
employees inadvertently do not adhere to appropriate information security protocols, our protocols are inadequate, or our employees
intentionally avoid these protocols, our or our clients’ sensitive information may be released thereby causing significant negative impacts to
our reputation and exposing us or our clients to liability.
If our or our vendors’ systems, services or other applications have significant defects or errors, are successfully attacked by cyber and
other security threats, suffer delivery delays or otherwise fail to meet our clients’ expectations, we may:
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lose revenue due to adverse client reaction;
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be required to provide additional services to a client at no charge;
•
incur additional costs related to remediation, monitoring and increasing our cybersecurity;
•
lose revenue due to the deployment of internal staff for remediation efforts instead of client assignments;
•
receive negative publicity, which could damage our reputation and adversely affect our ability to attract or retain clients;
•
be unable to successfully market services that are reliant on the creation and maintaining of secure information technology
systems to government and commercial clients;
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suffer claims by clients or impacted third parties for substantial damages, particularly as a result of any successful network or
systems breach and exfiltration of client and/or third-party information; or
•
incur significant costs, including fines from government regulators related to complying with applicable federal or state law,
including laws pertaining to the security and protection of personal information.
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In addition to any costs resulting from contract performance or required corrective action, these failures may result in increased costs
or loss of revenue if they result in clients postponing subsequently scheduled work or canceling or failing to renew contracts.
The costs related to cyber or other security threats or disruptions may not be fully insured or indemnified by other means. Additionally,
some cyber technologies and techniques that we utilize or develop may raise potential liabilities related to legal compliance, intellectual
property and civil liberties, including privacy concerns, which may not be fully insured or indemnified. We may not be able to obtain and
maintain insurance coverage on reasonable terms or in sufficient amounts to cover one or more large claims, or the insurer may disclaim
coverage as to some types of future claims. The successful assertion of any large claim against us could seriously harm our business. Even
if not successful, these claims could result in significant legal and other costs, may be a distraction to our management, and may harm our
client relationships. In some new business areas, we may not be able to obtain sufficient insurance and may decide not to accept or solicit
business in these areas.
As a contractor supporting defense and national security clients, we are also subject to regulatory compliance requirements under the
Federal Acquisition Regulations, the Defense Federal Acquisition Regulation Supplement and other federal regulations requiring that our
networks and information technology systems comply with the security and privacy controls in National Institute of Standards and Technology
Special Publications and similar documents. To the extent that we do not comply with the applicable security and control requirements,
whether imposed by regulation or contract, unauthorized access or disclosure of sensitive information could potentially result in a contract
termination that has a material adverse effect on our business, financial condition and results of operations and reputational harm.
Risk Related to Legal Matters and Insurance
Unavailability or cancellation of third-party insurance coverage would increase our overall risk exposure as well as disrupt the
management of our business operations.
We maintain insurance coverage from third-party insurers as part of our overall risk management strategy and because some of our
contracts require us to maintain specific insurance coverage limits. If any of our third-party insurers fail, suddenly cancel our coverage or
otherwise are unable to provide us with adequate insurance coverage, then our overall risk exposure and our operational expenses would
increase, and the management of our business operations would be disrupted. In addition, there can be no assurance that any of our existing
insurance coverage will be renewable upon the expiration of the coverage period or that future coverage will be affordable at the required
limits.
Adverse judgments or settlements in legal disputes could result in materially adverse monetary damages or injunctive relief and
damage our reputation.
We are subject to, and may become a party to, a variety of litigation or other claims and suits that arise from time to time in the
ordinary course of our business. For example, our performance under U.S. government contracts and compliance with the terms of those
contracts and applicable laws and regulations are subject to continuous audit, review, and investigation by the U.S. government which may
include such investigative techniques as subpoenas or civil investigative demands.
The results of litigation and other legal proceedings, including the claims described under “Business—Legal Proceedings”, are
inherently uncertain and adverse judgments or settlements in some or all of these legal disputes may result in materially adverse monetary
damages or injunctive relief against us. Additionally, our insurance policies may not protect us against potential liability due to various
exclusions in the policies and self-insured retention amounts. Partially or completely uninsured claims, if successful and of significant
magnitude, could have a material adverse effect on our business, financial condition and results of operations. Furthermore, any claims or
litigation, even if fully indemnified or insured, could damage our reputation and make it more difficult to compete effectively or obtain
adequate insurance in the future.
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Our business is subject to numerous legal and regulatory requirements and any violation of these requirements or any misconduct
by our employees, subcontractors, agents or business partners could harm our business and reputation.
In addition to government contract procurement laws and regulations, we are subject to numerous other federal, state and foreign legal
requirements on matters as varied as data privacy and protection, employment and labor relations, immigration, taxation, anti-corruption,
import/export controls, trade restrictions, internal and disclosure control obligations, securities regulation and anti-competition. Compliance
with complex and changing legal requirements is costly, time-consuming and requires significant resources. Violations of one or more of
these requirements in the conduct of our business could result in significant fines and other damages, criminal sanctions against us or our
officers, prohibitions on doing business and damage to our reputation. Violations of these regulations or contractual obligations related to
regulatory compliance in connection with the performance of customer contracts could also result in liability for significant monetary
damages, fines and/or criminal prosecution, unfavorable publicity and other reputational damage, restrictions on our ability to compete for
work and allegations by our customers that we have not performed our contractual obligations.
Misconduct by our employees, subcontractors, agents or business partners could subject us to fines and penalties, restitution or other
damages, loss of security clearance, loss of current and future customer contracts and suspension or debarment from contracting with
federal, state or local government agencies, any of which could adversely affect our business, financial condition and results of operations.
Such misconduct could include fraud or other improper activities such as falsifying time or other records, failure to comply with our policies
and procedures or violations of applicable laws and regulations.
Our services and operations sometimes involve handling or disposing of hazardous substances or dangerous materials, and we
are subject to environmental requirements and risks which could result in significant costs, liabilities and obligations.
Our operations are subject to stringent and complex federal, state and local laws and regulations governing the discharge of materials
into the environment, the health and safety aspects of our operations, or otherwise relating to environmental protection. Some of our services
and operations involve the handling or disposal of hazardous substances or dangerous materials, including explosive, chemical, biological,
radiological or nuclear materials. These activities generally subject us to extensive foreign, federal, state and local environmental protection
and health and safety laws and regulations, which, among other things, require us to incur costs to comply with these regulations and could
impose liability on us for handling or disposing of hazardous substances or dangerous materials. Numerous governmental authorities, such
as the U.S. Environmental Protection Agency, or the EPA, and analogous state agencies, have the power to enforce compliance with these
laws and regulations and the permits issued under them. Such enforcement actions often involve difficult and costly compliance measures or
corrective actions. Furthermore, failure to comply with these environmental protection and health and safety laws and regulations could result
in civil, criminal, regulatory, administrative or contractual sanctions, including fines, penalties or suspension or debarment from contracting
with the U.S. government, and could also result in investigations, the imposition of corrective action or remedial obligations, and the issuance
of orders limiting or prohibiting some or all of our operations. In certain instances, citizen groups also have the ability to bring legal
proceedings against us if we are not in compliance with environmental laws. In addition, claims for damages to persons or property, including
natural resources, may result from the environmental, health and safety impacts of our operations. We, like other businesses, can never
completely eliminate the risk of contamination or injury from certain materials that we use in our business. If we have any violations of, or
incur liabilities pursuant to, these laws or regulations, it may result in a material adverse effect on our business, financial condition or results
of operations.
Certain environmental laws impose strict liability (i.e., no showing of “fault” is required) as well as joint and several liability for costs
required to remediate and restore sites where hazardous substances, hydrocarbons or solid wastes have been stored or released. We may
be required to remediate contaminated properties currently or formerly owned or operated by us or facilities of third parties that
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received waste generated by our operations, regardless of whether such contamination resulted from the conduct of others or from the
consequences of our own actions that were in compliance with all applicable laws at the time those actions were taken.
We have limited, and potentially insufficient, insurance coverage for expenses and losses that may arise in connection with
environmental contamination. Finally, in connection with certain acquisitions, we could acquire, or be required to provide indemnification
against, environmental liabilities that could expose us to material losses.
Our failure to meet contractual schedule requirements, meet a required performance standard, meet our internal contractual
performance projections or otherwise perform adequately on a project could adversely affect our business, financial condition or
results of operations.
Under some of our contracts, we can incur liquidated or other damages if we do not achieve project completion by a scheduled date. In
addition, our costs generally increase from schedule delays and/or could exceed our projections for a particular project. Project performance
can be affected by a number of factors beyond our control, including unavoidable delays from governmental inaction, public opposition,
inability to obtain financing, weather conditions, unavailability of vendor materials, changes in the project scope of services requested by our
clients, industrial accidents, environmental hazards, labor disruptions and other factors. Any defects or errors, or failures to meet our clients’
expectations, in our projects or services could result in claims for damages against us and could adversely affect our reputation. Material
performance problems for existing and future contracts could cause actual results of operations to differ from those anticipated by us and
also could cause us to suffer damage to our reputation within our industries and client base.
Failure to adequately protect, maintain, or enforce our rights in our intellectual property may adversely limit our competitive
position.
We rely upon a combination of nondisclosure agreements and other contractual arrangements, as well as copyright, trademark, patent
and trade secret laws to protect our proprietary information. We also enter into proprietary information and intellectual property agreements
with employees, which require them to disclose any inventions created during employment, to convey such rights to inventions to us, and to
restrict any disclosure of proprietary information. Trade secrets are generally difficult to protect. Although our employees are subject to
confidentiality obligations, this protection may be inadequate to deter or prevent misappropriation of our confidential information and/or the
infringement of our patents and copyrights. Further, we may be unable to detect unauthorized use of our intellectual property or otherwise
take appropriate steps to enforce our rights. Failure to adequately protect, maintain, or enforce our intellectual property rights may adversely
limit our competitive position.
Assertions by third parties of infringement, misappropriation or other violations by us of their intellectual property rights could
result in significant costs and substantially harm our business, financial condition and operation results.
In recent years, there has been significant litigation involving intellectual property rights in technology industries. We may face from
time to time, allegations that we or a supplier or customer have violated the rights of third parties, including patent, trademark, and other
intellectual property rights. If, with respect to any claim against us for violation of third-party intellectual property rights, we are unable to
prevail in the litigation or retain or obtain sufficient rights or develop non-infringing intellectual property or otherwise alter our business
practices on a timely or cost-efficient basis, our business, financial condition or results of operations may be adversely affected.
Any infringement, misappropriation or related claims, whether or not meritorious, are time consuming, divert technical and
management personnel, and are costly to resolve. As a result of any such dispute, we may have to develop non-infringing technology, pay
damages, enter into royalty or licensing agreements, cease utilizing products or services, or take other actions to resolve the claims. These
actions, if required, may be costly or unavailable on terms acceptable to us.
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Risks Related to International Operations
Our operations outside the United States expose us to legal, political and economic risks in different countries as well as currency
exchange rate fluctuations that could harm our business and financial results.
Revenue attributable to our services provided outside of the United States as a percentage of our total revenue was 22.6% in 2024,
24.4% in 2023 and 24.9% in 2022. There are risks inherent in doing business internationally, including:
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imposition of governmental controls and changes in laws, regulations or policies;
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political and economic instability and turmoil internationally, including countries in the Middle East;
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civil unrest, acts of terrorism, force majeure, war, or other armed conflict, including the ongoing war and unrest in Israel, which
has the potential to impact other countries in the Middle East;
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greater physical security risks;
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changes in U.S. and other national government trade policies affecting the markets for our services;
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changes in regulatory practices, tariffs and taxes;
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potential non-compliance with a wide variety of laws and regulations, including anti-corruption, U.S. export controls and
economic and trade sanctions, and anti-boycott laws and similar non-U.S. laws and regulations;
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changes in labor conditions;
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logistical and communication challenges;
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currency exchange rate fluctuations, devaluations and other conversion restrictions; and
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health and safety concerns, including those related to the COVID-19 pandemic, variants and other potential epidemics.
Any of these factors could have a material adverse effect on our business, financial condition or results of operations.
We have operations in the Middle East, neighboring regions, and other regions across the globe, and these regions may
experience turmoil, political upheaval or similar crises that may impact our current projects, future business and financial stability.
We currently have operations in the Middle East, including in Oman, Qatar, Saudi Arabia, and the United Arab Emirates. This part of
the world often has conflicts, such as the current Israel-Hamas situation. Further, we may undertake work in other countries that may
experience turmoil, political upheaval, or other similar crises. This uncertainty may affect our ability to continue our projects in these regions
due to lack of resources, local support, and safety for our workers. If we are unable to finish these projects, it is likely that our finances will be
impacted. Furthermore, we may experience liability regarding our employees and their safety and security in these locations. We also may
incur material costs to maintain the safety of our personnel. Despite these precautions, the safety of our personnel in these locations may
continue to be at risk. Acts of terrorism and threats of armed conflicts in or around various areas in which we operate could limit or disrupt
markets and our operations, including disruptions resulting from the evacuation of personnel, cancellation of contracts, or the loss of key
employees, contractors or assets.
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We operate in many different jurisdictions, and we could be adversely affected by violations of the U.S. Foreign Corrupt Practices
Act and similar worldwide anti-corruption laws.
The FCPA and similar worldwide anti-corruption laws, including the U.K. Bribery Act of 2010, generally prohibit companies and their
intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business. Our internal policies
mandate compliance with these anti-corruption laws, including the requirements to maintain accurate information and internal controls which
may fall within the purview of the FCPA, its books and records provisions or its anti-bribery provisions. We operate in many parts of the world
that have experienced governmental corruption to some degree; and, in some circumstances, strict compliance with anticorruption laws may
conflict with local customs and practices. Despite our training and compliance programs, we cannot be certain that our internal control
policies and procedures always will protect us from reckless or criminal acts committed by our employees or agents. In addition, from time to
time, government investigations of corruption in industries we operate in may affect us and our peers. Violations of these laws, or allegations
of such violations, could disrupt our business and result in a material adverse effect on our business, financial condition or results of
operations.
Risks Related to Debt and Backlog
We may not realize the full value of our backlog, which may result in lower-than-expected revenue.
As of December 31, 2024, our total backlog was $8.9 billion, of which $5.9 billion was funded. Our backlog includes orders under
contracts that can extend for several years. We historically have not realized all of the revenue included in our total backlog, and we may not
realize all of the revenue included in our total backlog in the future. There is a somewhat higher degree of risk in this regard with respect to
unfunded backlog and backlog related to unexercised options years and IDIQ contracts for which task orders have not yet been issued. In
addition, there can be no assurance that our backlog will result in actual revenue in any particular period. This is because the actual receipt,
timing and amount of revenue under contracts included in backlog are subject to various contingencies, including congressional
appropriations, many of which are beyond our control. In particular, delays in the completion of the U.S. government’s budgeting process and
the use of continuing resolutions could adversely affect our ability to timely recognize revenue under our contracts included in backlog.
Furthermore, the actual receipt of revenue from contracts included in backlog may never occur or may be delayed because: a program
schedule could change or the program could be canceled; a contract’s funding or scope could be reduced, modified, delayed or terminated
early, including as a result of a lack of appropriated funds or as a result of cost cutting initiatives and other efforts to reduce government
spending; in the case of funded backlog, the period of performance for the contract has expired; in the case of unfunded backlog, funding
may not be available; in the case of backlog related to unexercised option years, the contract option is not yet exercised or may ever be
exercised; and, in the case of backlog related to IDIQ contracts where task orders have not been issued, no further task orders may be
issued. In addition, headcount growth is the primary means by which we are able to achieve revenue growth. Any inability to hire additional
appropriately qualified personnel or failure to timely and effectively deploy such additional personnel against funded backlog could negatively
affect our ability to grow our revenue. We may also not recognize revenue on funded backlog due to, among other reasons, the tardy
submissions of invoices by our subcontractors and the expiration of the relevant appropriated funding in accordance with a predetermined
expiration date such as the end of the U.S. government’s fiscal year. The amount of our funded backlog is also subject to change, due to,
among other factors: changes in appropriations that reflect changes in government policies or priorities resulting from various military,
political, economic or international developments; changes in the use of government contracting vehicles, and the provisions therein used to
procure our services; and adjustments to the scope of services under, or cancellation of contracts, by the applicable government at any time.
Furthermore, even if our backlog results in revenue, the contracts may not be profitable.
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If we cannot collect our receivables or if payment is delayed, our business may be adversely affected by our inability to generate
cash flow, provide working capital or continue our business operations.
As of December 31, 2024, our accounts receivable, net was $1.1 billion We depend on the timely collection of our receivables to
generate cash flow, provide working capital and continue our business operations. If our customers fail to pay or delay the payment of
invoices for any reason, our business and financial condition may be materially and adversely affected. Our customers have in the past and
may in the future delay or fail to pay invoices for a number of reasons, including lack of appropriated funds, lack of an approved budget or as
a result of audit findings by government regulatory agencies. We also experience longer payment cycles in the Middle East. We cannot
assure you that we will collect all our accounts receivable in excess of our allowance for doubtful accounts in a timely manner, which would
impact our cash flows.
The agreements governing our debt contain a number of restrictive covenants which may limit our ability to finance future
operations, acquisitions or capital needs or engage in other business activities that may be in our interest.
As of December 31, 2024, our total indebtedness was approximately $1.2 billion. Our Credit Agreement and the agreements governing
our Delayed Draw Term Loan and Convertible Notes contain a number of covenants that impose operating and other restrictions on us and
our subsidiaries. Such restrictions affect or will affect, and in many respects limit or prohibit our ability and the ability of our subsidiaries to,
among other things:
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incur additional indebtedness;
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create liens;
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pay dividends and make other distributions in respect of our equity securities;
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redeem our equity securities;
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make loans, advances, investments or other restricted payments;
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sell assets or receivables;
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engage in certain business activities;
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amend our ESOP’s plan documents;
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enter into transactions with affiliates; and
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effect mergers or consolidations.
In addition, our Credit Agreement also requires us to comply with certain financial ratio covenants, including a debt leverage ratio and
an interest charge coverage ratio. Our ability to comply with these ratios may be affected by events beyond our control.
These restrictions could limit our ability to plan for or react to market or economic conditions or meet capital needs or otherwise restrict
our activities or business plans and could adversely affect our ability to finance our operations, acquisitions, investments or strategic alliances
or other capital needs or to engage in other business activities that would be in our interest.
A breach of any of these covenants or our inability to comply with the required financial ratios could result in a default under our debt
instruments. If an event of default occurs, our creditors could elect to:
•
declare all borrowings outstanding, together with accrued and unpaid interest, to be immediately due and payable;
•
require us to apply all of our available cash to repay the borrowings; or
•
prevent us from making debt service payments on some of our borrowings.
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If we were unable to repay or otherwise refinance these borrowings when due, the lenders under our Credit Agreement could demand
payment from subsidiary guarantors, as provided under our Credit Agreement. These guarantors constitute substantially all of our domestic,
wholly owned subsidiaries’ assets.
Prior to our initial public offering, we were 100% owned by the ESOP, which is a retirement plan that is intended to be qualified
under the Internal Revenue Code. If the ESOP failed to meet the requirements of a tax qualified retirement plan, we could be
subject to substantial penalties.
The ESOP is a defined contribution retirement plan subject to the requirements of the Internal Revenue Code (Code) and the
Employment Retirement Income Security Act (ERISA). The ESOP received a determination letter, dated January 31, 2012, from the Internal
Revenue Service (IRS) that it meets the requirements of a tax qualified retirement plan in form, and we endeavor to maintain and administer
the ESOP in compliance with all requirements of the Code and ERISA. However, the rules regarding tax qualified plans, and especially
ESOPs, are complex and change frequently. Accordingly, it is possible that the ESOP may not have been administered in full compliance
with all applicable rules under the Code or ERISA at all times.
If the ESOP were determined not to be in material compliance with the Code or ERISA, then the ESOP could lose its tax qualified
status and we could be subject to substantial penalties under the Code and ERISA which could have a material adverse effect on our
business, financial condition or results of operations. Additionally, loss of the ESOP’s tax-qualified status would adversely impact our prior
treatment as an S Corporation.
Risks Related to our Employees
A failure to attract, train and retain skilled employees and our senior management team would adversely affect our ability to
execute our strategy and may disrupt our operations.
Our business relies heavily upon the expertise and services of our employees. Our continued success depends on our ability to recruit
and retain highly-trained and skilled engineering, technical and professional personnel. Competition for skilled personnel is intense and
competitors aggressively recruit key employees. In addition, many U.S. government programs require contractors to have security
clearances. Depending on the level of required clearance, security clearances can be difficult and time-consuming to obtain and personnel
with security clearances are in great demand. Particularly in highly specialized areas, it has become more difficult to retain employees and
meet all of our needs for employees in a timely manner, which may affect our growth in the current and future fiscal years. Although we
intend to continue to devote significant resources to recruiting, training and retaining qualified employees, we may not be able to attract,
effectively train and retain these employees. Any failure to do so could impair our ability to efficiently perform our contractual obligations,
timely meet our customers’ needs and ultimately win new business, all of which could adversely affect our business, financial condition and
results of operations.
We believe that our success also depends on the continued employment of a highly qualified and experienced senior management
team and that team’s ability to retain existing business and generate new business. The loss of key personnel in critical functions could lead
to lack of business continuity or disruptions in our business until we are able to hire and train replacement personnel.
We may lose one or more members of our senior management team or fail to develop new leaders, which could cause a disruption
in the management of our business.
We believe that the future success of our business and our ability to operate profitably depends on the continued contributions of the
members of our senior management and the continued development of new members of senior management. We rely on our senior
management to generate business and execute programs successfully. In addition, the relationships and reputation that many members of
our senior management team have established and maintain with our clients are important to our business
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and our ability to identify new business opportunities. We do not have any employment agreements providing for a specific term of
employment with any members of our senior management. The loss of any member of our senior management or our failure to continue to
develop new members could impair our ability to identify and secure new contracts, to maintain good client relations, and to otherwise
manage our business, and could have a material adverse effect on our business, financial condition and results of operations.
Negotiations with labor unions and possible work actions could divert management attention and disrupt operations. In addition,
new collective bargaining agreements or amendments to existing agreements could increase our labor costs and operating
expenses.
We are signatory to approximately fourteen active union collective bargaining agreements as of December 31, 2024 and employ more
than 300 employees represented by unions. The outcome of any future negotiations relating to union representation or collective bargaining
agreements for these or other employees in the future may not be favorable to us. We may reach agreements in collective bargaining that
increase our operating expenses and lower our net income as a result of higher wages or benefit expenses. In addition, negotiations with
unions could divert management attention and disrupt operations, which may adversely affect our results of operations. If we are unable to
negotiate acceptable collective bargaining agreements, we may have to address the threat of union-initiated work actions, including strikes.
Depending on the nature of the threat or the type and duration of any work action, these actions could disrupt our operations and adversely
affect our operating results.
Many of our field project sites and facilities are inherently dangerous workplaces. Failure to manage our field project sites and
facilities safely could result in environmental disasters, employee deaths or injuries, reduced profitability, the loss of projects or
clients and possible exposure to litigation.
Our field project sites and facilities, particularly in our Critical Infrastructure business, often put our employees and others in close
proximity with mechanized equipment, moving vehicles, chemical and manufacturing processes, and highly regulated materials. On some
field project sites and in some of our facilities, we may be responsible for safety and, accordingly, we have an obligation to implement
effective safety procedures. If these procedures are not appropriately implemented or are ineffective, our employees could be injured or
killed, and we could be exposed to possible litigation. As a result, our failure to maintain adequate safety standards and equipment could
result in reduced profitability or the loss of projects or clients and could have a material adverse impact on our business, financial condition,
and results of operations.
Risk Related to Our Common Stock
If we are unable to maintain effective internal control over financial reporting in the future, investors may lose confidence in the
accuracy and completeness of our financial reports and the market price of our common stock may be negatively affected.
As a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in
such internal control. The process of designing, implementing and testing the internal control over financial reporting required to comply with
this obligation is time-consuming, costly and complicated. If we identify material weaknesses in our internal control over financial reporting, or
if we are unable to comply in a timely manner with the management certification requirements of Section 404 of the Sarbanes-Oxley Act as to
the effectiveness of our internal control over financial reporting or to assert that our internal control over financial reporting is effective, or if
our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial
reporting, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our common stock
could be negatively affected, and we could become subject to investigations by our stock exchange, the SEC or other regulatory authorities,
which could require additional financial and management resources.
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If our stock price fluctuates, you could lose a significant part of your investment.
The market price of our stock may be influenced by many factors, some of which are beyond our control, including the following:
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the opinions and estimates of any securities analysts who publish research about us;
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announcements by us or our competitors of significant contracts, acquisitions or capital commitments;
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variations in quarterly operating results;
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changes in general economic or market conditions or trends in our industry or the economy as a whole;
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future sales of our common stock; and
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investor perception of us and the industries we operate in.
As a result of these factors, investors in our common stock may not be able to resell their shares at or above the initial purchase price.
These broad market and industry factors may materially reduce the market price of our common stock, regardless of our operating
performance.
In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the
market prices of equity securities of many companies. In the past, stockholders have instituted securities class action litigation following
periods of market volatility. If we were involved in securities litigation, we could incur substantial costs and our resources, and the attention of
management could be diverted from our business.
Our operating results and share price may be volatile, and the market price of our common stock may drop.
Quarterly operating results may fluctuate. In addition, securities markets worldwide have experienced, and are likely to continue to
experience, significant price and volume fluctuations. This market volatility, as well as general economic, market or political conditions, could
subject the market price of our shares to wide price fluctuations regardless of our operating performance. Our operating results and the
trading price of our shares may fluctuate in response to various factors, including:
•
market conditions in the broader stock market;
•
actual or anticipated fluctuations in our quarterly financial and operating results;
•
introduction of new products or services by us or our competitors;
•
changes in our awards, backlog and book-to-bill ratios in a given period;
•
issuance of new or changed securities analysts’ reports or recommendations;
•
results of operations that vary from expectations of securities analysis and investors;
•
guidance, if any, that we provide to the public, any changes in this guidance or our failure to meet this guidance;
•
strategic actions by us or our competitors;
•
announcement by us, our competitors or our acquisition targets;
•
sales, or anticipated sales, of large blocks of our stock;
•
additions or departures of key personnel;
•
regulatory, legal or political developments;
47
•
public response to press releases or other public announcements by us or third parties, including our filings with the SEC;
•
litigation and governmental investigations;
•
seasonality associated with U.S. federal, state, regional and local government funding and spending;
•
changing economic conditions;
•
changes in accounting principles;
•
default under agreements governing our indebtedness;
•
exchange rate fluctuations; and
•
other events or factors, including those from natural disasters, war, actors of terrorism or responses to these events and
pandemics, such as the COVID-19 pandemic.
These and other factors, many of which are beyond our control, may cause our operating results and the market price and demand for
our shares to fluctuate substantially. While we believe that operating results for any particular quarter are not necessarily a meaningful
indication of future results, fluctuations in our quarterly operating results could limit or prevent investors from readily selling their shares and
may otherwise negatively affect the market price and liquidity of our shares. In addition, in the past, when the market price of a stock has
been volatile, holders of that stock have sometimes instituted securities class action litigation against the company that issued the stock. If
any of our stockholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert
the time and attention of our management from our business, which could significantly harm our profitability and reputation.
Sales of outstanding shares of our common stock into the market in the future by the ESOP could cause the market price of our
common stock to drop significantly.
At December 31, 2024, we had 146,656,225 shares of our common stock issued and 106,775,350 outstanding. Of these shares,
54,117,904 shares are owned by the ESOP, 52,657,447 shares are publicly owned, and 39,880,875 shares are Treasury stock. We are party
to a registration rights agreement with the ESOP Trustee, providing the ESOP with certain demand registration rights related to shares held
by the ESOP in the event the ESOP Trustee determines in good faith, in exercising its fiduciary duties under ERISA, that the ESOP is
required to sell its shares, which we believe is only likely to occur if our business, financial condition or results of operations have materially
and adversely deteriorated.
Qualifying ESOP participants have the right to receive distributions of shares of our common stock from the ESOP and can sell
such shares in the market.
As of December 31, 2024, there were 54,117,904 shares of common stock held in the ESOP. Shares held in the ESOP are eligible for
sale in the public market, subject to applicable Rule 144 limitations, vesting restrictions and any applicable market standoff agreements and
lock-up agreements. Participants are generally entitled to distributions from the ESOP only following termination of employment or upon
death and in order to diversify their accounts upon attaining a specified age and completing a specified number of years of service. As
previously noted in the section of Part 1, Item 1 entitled “Employee Stock Ownership Plan”, in December 2020, the board of directors
approved an amendment to the Employee Stock Ownership Plan to provide more flexible diversification rights for participants, and in January
2021, the board of directors approved the modification of the thresholds for distributions to participants in the ESOP effective March 1, 2021.
In April 2022, the board of directors approved an amendment providing for lump sum distributions to participants and removing the annual
48
installments. Annual diversification elections and five-year vested termination distributions are not impacted by this amendment and will still
occur annually and over installments as outlined in the Plan.
ESOP distributions are made in the form of shares of our common stock (other than distributions in respect of fractional shares, which
will be made in cash). Upon receiving a distribution of our common stock from the ESOP, a participant will be able to sell such shares in the
market. As a result, we cannot predict the effect, if any, that these distributions and the corresponding sales of shares by the participants may
have on the market price of our common stock. Distribution of substantial amounts of our common stock to participants may cause the
market price of our common stock to decline.
The issuance of additional stock, not reserved for issuance under our equity incentive plans or otherwise, will dilute all other
stockholdings.
We have an aggregate of 853,343,775 shares of common stock authorized but not outstanding and not reserved for issuance under
our 2021 Plan, under our existing Incentive Plans or otherwise. We may issue all of these shares without any action or approval by our
stockholders. The issuance of additional shares could be dilutive to existing holders. We historically have made annual contributions of our
common stock to the ESOP. We made contributions of 633,033 shares in fiscal 2024, 915,113 shares in fiscal 2023, and 1,188,129 shares in
fiscal 2022 of our common stock to the ESOP and intend to continue to make annual contributions in shares of our common stock to the
ESOP. In fiscal 2024, 2023 and 2022, we made annual contributions to the ESOP in shares of our common stock in the amount of 8% of the
participants’ cash compensation for the applicable year (net of shares forfeited by participants in the applicable year). For future fiscal years,
the annual contribution to the ESOP shall be in amounts as determined by the board of directors.
Your ability to influence corporate matters may be limited because the ESOP beneficially owns a majority of our stock and
therefore our ESOP participants, voting the shares allocated to them under the ESOP, or the ESOP Trustee, who will have the right
to vote shares for which no voting instructions are provided by employees, could have substantial control over us.
Our common stock has one vote per share. The ESOP beneficially owns approximately 51% of our outstanding common stock, 40% of
which is owned by current employees of Parsons Corporation. Under the terms of the ESOP, each participant has the ability to direct the
ESOP Trustee on the voting of the shares allocated to his or her account under the ESOP. However, the ESOP Trustee will vote any shares
that a participant does not direct the voting, or any shares that are held by the ESOP which are not allocated to participants’ accounts. As
such, the ESOP Trustee may be able to exercise a greater influence than otherwise over matters requiring stockholder approval, including
the election of directors and approval of significant corporate transactions.
The purpose of the ESOP is to provide retirement income to employees and their beneficiaries. Accordingly, the interests of the ESOP
and the ESOP participants may be contrary to yours as an outside investor.
ERISA sets forth certain fiduciary requirements that require an ERISA fiduciary, like the ESOP Trustee, to act solely in the interests of
plan participants and their beneficiaries for the purpose of providing retirement benefits. The Department of Labor, which is the agency with
the authority to interpret and enforce the fiduciary sections of ERISA, has indicated in its interpretative guidance that voting is an ERISA
fiduciary act. The ESOP Trustee’s fiduciary duties under ERISA to the ESOP and its participants may cause the ESOP Trustee to override
participants’ voting directions to the extent that following such directions would violate ERISA. In such case, the ESOP Trustee will be able to
exercise voting control over all of the ESOP’s shares. Further, the interests of the minority stockholders may not be aligned with those of the
ESOP as the majority stockholder, because the ESOP Trustee is required under ERISA to act in the best interest of the ESOP participants
and beneficiaries, this may present a conflict.
49
As a result, the concentration of ownership in our company by the ESOP could delay or prevent a change in control of our company or
otherwise discourage a potential acquirer from attempting to obtain control of our company, which in turn could reduce the price of our
common stock.
We are a “controlled company” within the meaning of the New York Stock Exchange listing standards and, as a result, qualify for
exemptions from certain corporate governance requirements. You may not have the same protections afforded to stockholders of
companies that are subject to such requirements.
The ESOP holds common stock representing approximately 51% of the voting power of our common stock as of December 31, 2024.
As a result, we are considered a “controlled company” for the purposes of New York Stock Exchange (“NYSE”) rules and corporate
governance standards. As a controlled company, we are exempt from certain NYSE corporate governance requirements, including those that
would otherwise require our board of directors to have a majority of independent directors and require that we either establish compensation
and nominating and corporate governance board committees, each comprised entirely of independent directors, or otherwise ensure that the
compensation of our executive officers and nominees for directors are determined or recommended to the board of directors by the
independent members of the board of directors. While we intend to have a majority of independent directors, and our compensation and
nominating and corporate governance committees to consist entirely of independent directors, we may decide at a later time to rely on one of
the “controlled company” exemptions. Accordingly, our common stock may not have the same protections afforded to stockholders of
companies that are subject to all of the NYSE corporate governance requirements.
Our ability to raise capital in the future may be limited, which could limit our business plan or adversely affect your investment.
Our business and strategic plans may consume resources faster than we anticipate. In the future, we may need to raise additional
funds through the issuance of new equity securities, debt or a combination of both. However, any decline in the market price of our common
stock could impair our ability to raise capital. Separately, additional financing may not be available on favorable terms, or at all. If adequate
funds are not available on acceptable terms, we may be unable to fund our operations or new investments. If we issue new debt securities,
the debt holders would have rights senior to common stockholders to make claims on our assets, and the terms of any debt could restrict our
operations, including our ability to pay dividends on our common stock. If we issue additional equity securities, existing stockholders will
experience dilution, and the new equity securities could have rights senior to those of our common stock. Because our decision to issue
securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the
amount, timing or nature of our future offerings. Thus, our stockholders bear the risk of our future securities offerings reducing the market
price of our common stock and diluting their interest.
Anti-takeover provisions in our organizational documents could delay a change in management and limit our share price.
Provisions of our certificate of incorporation and bylaws could make it more difficult for a third party to acquire control of us even if such
a change in control would increase the value of our common stock and prevent attempts by our stockholders to replace or remove our
current board of directors or management.
We have a number of anti-takeover devices that could hinder takeover attempts and could reduce the market value of our common
stock or prevent sale at a premium. Our anti-takeover provisions:
•
permit the board of directors to establish the number of directors and fill any vacancies and newly created directorships;
•
provide that our board of directors is classified into three classes with staggered, three-year terms and that directors may only
be removed for cause;
50
•
include blank-check preferred stock, the preference, rights and other terms of which may be set by the board of directors and
could delay or prevent a transaction or a change in control that might involve a premium price for our common stock or
otherwise benefit our stockholders;
•
eliminate the ability of our stockholders to call special meetings of stockholders;
•
specify that special meetings of our stockholders can be called only by our board of directors, or a board committee authorized
with the power to call such meetings;
•
prohibit stockholder action by written consent, which has the effect of requiring all stockholder actions to be taken at a meeting
of our stockholders;
•
provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than
a quorum;
•
prohibit cumulative voting in the election of directors; and
•
establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be
acted upon by stockholders at annual stockholders’ meetings.
In addition, as a Delaware corporation, we are subject to Section 203 of the Delaware General Corporation Law (DGCL). These
provisions may prohibit large stockholders, in particular those owning 15% or more of our outstanding voting stock, from merging or
combining with us for a period of time.
Our certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for
substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial
forum for disputes with us or our directors, officers or employees.
Our certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for the following civil
actions:
•
any derivative action or proceeding brought on our behalf;
•
any action asserting a claim of breach of a fiduciary duty by any of our directors, officers, employees or agents or our
stockholders;
•
any action asserting a claim arising pursuant to any provision of the DGCL or our certificate of incorporation or bylaws or as to
which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware; or
•
any action asserting a claim governed by the internal affairs doctrine.
This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that the stockholder finds favorable
for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers
and other employees. Alternatively, if a court were to find the choice of forum provision contained in our certificate of incorporation to be
inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which
could have a material adverse effect on our business, financial condition or results of operations.
We have no current plans to declare dividends.
We do not currently pay a dividend and have no current plans to declare any cash dividends to holders of our common stock. Any
determination to pay dividends in the future will be at the discretion of our board of directors and will depend upon results of operations,
financial condition, any contractual restrictions, our indebtedness, restrictions imposed by applicable law and other factors our board of
directors deems relevant. Consequently, investors may need to sell all or part of their holdings of our
51
common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment. Investors
seeking cash dividends should not purchase our common stock.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our
stock price and trading volume could decline.
The trading market for our common stock depends, in part, on the research and reports that securities or industry analysts publish
about us or our business. If an analyst who covers us downgrades our common stock or publishes inaccurate or unfavorable research about
our business, our stock price would likely decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us
regularly, demand for our common stock could decrease, which could cause our stock price and trading volume to decline.
Item 1B. Unresolved Staff Comments.
None.
Item 1C. Cybersecurity.
We have developed and implemented a cybersecurity risk management program intended to protect the confidentiality, integrity, and
availability of our critical systems and information. Our cybersecurity risk management program includes a cybersecurity incident response
plan.
We use NIST Cybersecurity Framework and CIS Critical Security Controls as a guide to help us identify, assess, and manage
cybersecurity relevant to our business. We are also structured to CMMC which aligns with DOD/Federal contractor program compliance. This
does not imply that we meet any particular technical standards, specifications, or requirements.
Our cybersecurity risk management program is integrated with our overall enterprise risk management program, and shares
common methodologies, reporting channels and governance processes that apply across the enterprise risk management program to other
legal, compliance, strategic, operational, and financial risk areas. Our cybersecurity risk management program includes the following key
elements:
•
risk assessments designed to help identify material cybersecurity risks to our critical systems, information, services, and our
broader enterprise IT environment;
•
a team comprised of IT security, IT infrastructure, and IT compliance personnel principally responsible for directing (1) our
cybersecurity risk assessment processes; (2) our security processes; and (3) our response to cybersecurity incidents;
•
the use of external cybersecurity service providers, where appropriate, to assess, test or otherwise assist with aspects of our
security processes;
•
cybersecurity awareness training of employees with access to our IT systems;
•
a cybersecurity incident response plan and Security Operations Center to respond to cybersecurity incidents;
•
a third-party risk management process for service providers.
We have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have
materially affected us, including our operations, business strategy, results of operations, or financial condition. We face certain ongoing risks
from cybersecurity threats that,
52
if realized, are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial
conditions, as we have described in the Risk Factors section of this Form 10-K.
Cybersecurity Governance
Our Board considers cybersecurity risk as critical to the enterprise and delegates the cybersecurity risk oversight function to the
Audit and Risk Committee. The Audit and Risk Committee oversees management’s design, implementation, and enforcement of our
cybersecurity risk management program.
Our Chief Security & Risk Officer reports to the Chief Technology Officer and works closely with the Chief Legal Officer to ensure
that all disclosure or reporting requirements are satisfied if an incident were to occur. The Chief Security & Risk Officer leads Parsons’ overall
cybersecurity function and provides quarterly reports to the Audit and Risk Committee on our cybersecurity risks, including briefings on our
cybersecurity risk management program and cybersecurity incidents. The Audit and Risk Committee also receives periodic presentations on
relevant cybersecurity topics as part of the Committee and the Board’s continuing education on topics that impact public companies.
Our Chief Security & Risk Officer supervises efforts to prevent, detect, mitigation and remediate cybersecurity risks and incidents
through various means, which include briefings from internal security personnel; threat intelligence and other information obtained from
governmental, public or private sources, including external cybersecurity service providers; and alerts and reports produced by security tools
deployed in the IT environment. Our Chief Security & Risk Officer is responsible for assessing and managing our material risks from
cybersecurity threats and has primary responsibility for leading our overall cybersecurity risks management program and supervises both our
internal cybersecurity personnel and our external cybersecurity service providers. Our Chief Security & Risk Officer has significant global
experience in managing and leading IT and cybersecurity teams.
Item 2. Properties.
Our headquarters are located in Chantilly, Virginia. As of December 31, 2024, we leased 246 commercial facilities (including our
headquarters) with an aggregate of approximately 2.7 million square feet of space across 38 U.S. states and 15 countries used in connection
with the various services rendered to our customers. Additionally, we operate at several customer-accredited Sensitive Compartmented
Information Facilities, which are highly specialized, secure facilities used to perform classified work for the United States intelligence
community. We also have employees working at customer sites throughout the U.S. and in other countries. We believe our facilities are
adequate for our current and presently foreseeable needs.
Item 3. Legal Proceedings.
Our performance under our contracts and our compliance with the terms of those contracts and applicable laws and regulations are
subject to continuous audit, review and investigation by our customers, including the U.S. federal government. In addition, we are from time
to time involved in legal proceedings and investigations arising in the ordinary course of business, including those relating to employment
matters, relationships with clients and contractors, intellectual property disputes, environmental matters and other business matters. Although
the outcome of any such matter is inherently uncertain and may be materially adverse, based on current information, except as noted below,
we believe there are no pending lawsuits or claims that may have a material adverse effect on our business, financial condition or results of
operations.
In September 2015, a former Parsons employee filed an action in the United States District Court for the Northern District of Alabama
against us as a qui tam relator on behalf of the United States (the “Relator”) alleging violation of the False Claims Act. The plaintiff alleges
that, as a result of these actions, the United States paid in excess of $1 million per month between February and September 2006 that it
should have paid to another contractor, plus $2.9 million to acquire vehicles for the contractor defendant to perform its security services. The
lawsuit sought (i) that we cease and desist from violating the False
53
Claims Act, (ii) monetary damages equal to three times the amount of damages that the United States has sustained because of our alleged
violations, plus a civil penalty of not less than $5,500 and not more than $11,000 for each alleged violation of the False Claims Act, (iii)
monetary damages equal to the maximum amount allowed pursuant to §3730(d) of the False Claims Act, and (iv) Relator’s costs for this
action, including recovery of attorneys’ fees and costs incurred in the lawsuit. The United States government did not intervene in this matter
as it is allowed to do so under the statute. The court heard dispositive motions in 2023, including Parsons’ motion for summary judgment. We
are awaiting the court’s rulings upon such motions, which will determine whether a trial will be necessary for this matter in 2025.
On July 1, 2024, a final judgment was filed with the clerk of the Superior Court of the State of California In and For the County of San
Mateo with an award of damages in the total amount of approximately $102.5 million in favor of Parsons Transportation Group, Inc. and
against Alstom Signaling Operations LLC (Alstom"). This proposed award relates back to a lawsuit Parsons initially filed against the
Peninsula Corridor Joint Powers Board for breach of contract and wrongful termination in February 2017 (which was settled between
Parsons and the Joint Powers Board in 2021) and a cross-complaint filed against Alstom Signaling Operations LLC in November 2017, as
subsequently amended, for breach of contract, negligence and intentional misrepresentation. On September 23, 2024, the Court awarded
pre-judgment interest in the amount of $34.0 million and amended the judgment accordingly to include such interest. Alstom filed a Notice of
Appeal and has posted a bond as required under California law.
At this time, the Company is unable to determine the probability of the outcome of the litigation.
Item 4. Mine Safety Disclosures.
Not Applicable.
54
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Our common stock is listed on the NYSE under the ticker symbol “PSN”.
Dividend Policy
During the years ended December 31, 2024, 2023 and 2022, the Company did not declare any dividends. We currently do not intend
to declare or pay any cash dividends in the foreseeable future. Any determination to pay dividends on our capital stock will be at the
discretion of our board of directors, subject to applicable laws, and will depend on our financial condition, results of operations, capital
requirements, restrictions under our Convertible Senior Notes, or the Delayed Draw Term Loan and Credit Agreement, and other factors that
our board of directors considers relevant.
Shareholders
According to the records of our transfer agent, there were three shareholders of record as of February 11, 2025.
Securities Authorized for Issuance Under Equity Compensation Plans
The following table provides information as of December 31, 2024 regarding compensation plans under which our equity securities are
authorized for issuance.
Plan Category
Number of Securities to be
Issued upon Exercise of
Outstanding Options, Warrants
and Rights
(a)
Weighted-Average Exercise
Price of Outstanding Options,
Warrants and Rights
(b)
Number of Securities Remaining
Available for Future Issuance
under Equity Compensation
Plans (Excluding Securities
Reflected in Column (a))
(c)
Equity compensation plans approved by
security holders (1)
-
-
1,367,785
(2
)
Equity compensation plans not approved
by security holders
1,883,018
(
3
)
-
7,651,085
(4
)
Total
1,883,018
-
9,018,870
(1)
Consists of the 2020 Employee Stock Purchase Plan.
(2)
Amount represents 1,367,785 shares remaining available for future issuance under the 2020 Employee Stock Purchase Plan (of which 47,860 shares were purchased
pursuant to the offering period that ended on December 31, 2024).
(3)
Amount represents the sum of 1,883,018 shares of common stock subject to outstanding RSU and PSU awards under the 2019 Incentive Plan (with PSU awards
reflected at “target” levels),
(4)
Amount represents 7,651,085 shares remaining available for future issuance under the 2019 Incentive Plan.
55
Performance Graph
The following graph compares the cumulative total return, from December 31, 2019 through December 31, 2024, to shareholders of
Parsons Corporation common stock relative to the cumulative total returns of the Russell 2000 Index and the Standard and Poor’s IT
Consulting & Other Services Index. The graph assumes that the value of the initial investment in our common stock and each of the two
indexes was $100 on December 31, 2019, and tracks it through December 31, 2024 (including reinvestment of dividends). The stock
performance included in this graph is not necessarily indicative of future stock price performance.
12/19
12/20
12/21
12/22
12/23
12/24
Parsons Corp.
100.00
88.20
81.52
112.04
151.91
223.47
Russell 2000
100.00
119.96
137.74
109.59
128.14
142.93
S&P Composite 1500 IT Consulting & Other Services
100.00
113.44
156.48
119.55
151.77
172.40
56
Securities Authorized for Issuance Under Equity Compensation Plans
The information required by this item with respect to our equity compensation plans is incorporated by reference to our 2024 Proxy
Statement.
Recent Sales of Unregistered Securities
None.
Issuer Purchases of Equity Securities
On August 9, 2021, the Company’s Board of Directors authorized the Company to acquire a number of shares of Common Stock
having an aggregate market value of not greater than $100 million from time to time, commencing on August 12, 2021. The Board further
amended this authorization in August 2022 to remove the prior expiration date and grant executive leadership the discretion to determine the
price for such share repurchases. The Board further amended this authorization in February 2024 to restore the repurchase capacity to $100
million and removed the $25 million quarterly cap on such repurchases.
At the time of the February 2024 authorization, the Company had repurchased shares with an aggregated market value (including
fees) of $54.7 million. The aggregate market value of shares of Common Stock the Company is authorized to acquire, from both the August
2021 and February 2024 authorizations, is not greater than $154.7 million.
As of December 31, 2024, the Company has spent $79.7 million (which includes commissions paid of $34 thousand) repurchasing
1,713,481 shares of Common Stock at an average price of $46.51 per share.
The following table presents the Company’s purchase of equity securities for the three months ended December 31, 2024.
Period
(a)
Total number of
shares (or units
purchased)
(b)
Average price paid
per share (or unit)
(1)
(c)
Total number of
shares (or units)
purchased as part of
publicly announced
plans or programs
(d)
Maximum number
(or approximate
dollar value) of
shares (or units) that
may yet be
purchased under the
plans programs
October 1 to 31, 2024
- $
-
- $
90,000,219
November 1 to 30, 2024
104,527
95.67
104,527
80,000,351
December 1 to 31, 2024
51,425
97.22
51,425
75,000,926
Total
155,952
96.18
155,952 $
75,000,926
(1)
Includes commissions and calculated at the average price per share
Item 6. Reserved
57
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis is intended to help investors understand our business, financial condition, results of operations,
liquidity and capital resources. You should read this discussion together with our consolidated financial statements and related notes thereto
included elsewhere in this Annual Report on Form 10-K. Certain amounts may not foot due to rounding.
The statements in this discussion regarding industry outlook, our expectations regarding our future performance, liquidity and capital
resources and other non-historical statements in this discussion are forward-looking statements. These forward-looking statements are
subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in “Risk Factors” and “Special
Note Regarding Forward-Looking Statements.” Actual results may differ materially from those contained in any forward-looking statements.
PARSONS CORPORATION Enabling a safer, smarter, and more interconnected world. Federal Solutions Technology-driven solutions for defense and intelligence customers SEGMENTS Critical Infrastructure Engineered solutions for complex physical and digital infrastructure challenges FINANCIAL SNAPSHOT $4B FY 2019 Revenue Critical Infrastructure52% Federal Solutions48% $4.3BFY 2019 Contract Awards Critical Infrastructure41% Federal Solutions59% KEY FACTS AND FIGURES 75Years of History ~ 16KEmployees 11%Revenue Growth (FY 2019) 1.1XTTM Book-to-Bill $8.0BBacklog as of 12/31/2019
z
Overview
We are a leading provider of the integrated solutions and services required in today’s complex security environment and a world of
digital transformation. We deliver innovative technology-driven solutions to customers worldwide. We have developed significant expertise
and differentiated capabilities in key areas of cyber and intelligence, space and missile defense, critical infrastructure protection,
transportation, environmental remediation and urban development. By combining our talented team of professionals and advanced
technology, we solve complex technical challenges to enable a safer, smarter, more secure and more connected world.
58
We operate in two reporting segments, Federal Solutions and Critical Infrastructure. Our Federal Solutions business is an advanced
technology provider to the U.S. government. Our Critical Infrastructure business provides integrated design and engineering services for
complex physical and digital infrastructure around the globe.
Our employees provide services pursuant to contracts that we are awarded by the customer and specific task orders relating to such
contracts. These contracts are often multi-year, which provides us backlog and visibility on our revenues for future periods. Many of our
contracts and task orders are subject to renewal and rebidding at the end of their term, and some are subject to the exercise of contract
options and issuance of task orders by the applicable government entity. In addition to focusing on increasing our revenues through
increased contract awards and backlog, we focus our financial performance on margin expansion and cash flow.
Key Metrics
We manage and assess the performance of our business by evaluating a variety of metrics. The following table sets forth selected key
metrics (in thousands, except Book-to-Bill):
Period Ended
December 31, 2024
December 31, 2023
December 31, 2022
Awards
$
7,039,272 $
5,996,780 $
4,274,721
Backlog (1)
$
8,893,915 $
8,592,271 $
8,179,245
Book-to-Bill
1.0
1.1
1.0
(1)
Difference between our backlog of $8.9 billion and our remaining unsatisfied performance obligations, or RUPO, of $6.7 billion, each
as of December 31, 2024, is due to (i) unissued task orders and unexercised option years, to the extent their issuance or exercise is
probable, as well as (ii) contract awards, to the extent we believe contract execution and funding is probable.
Awards
Awards generally represent the amount of revenue expected to be earned in the future from funded and unfunded contract awards
received during the period. Contract awards include both new and re-compete contracts and task orders. Given that new contract awards
generate growth, we closely track our new awards each year.
The following table summarizes the total value of new awards for the periods presented below (in thousands):
Fiscal Year Ended
December 31, 2024
December 31, 2023
December 31, 2022
Federal Solutions
$
3,880,290 $
3,259,052 $
1,921,123
Critical Infrastructure
3,158,982
2,737,728
2,353,598
Total Awards
$
7,039,272 $
5,996,780 $
4,274,721
The change in new awards from year to year is primarily due to ordinary course fluctuations in our business. The volume of contract
awards can fluctuate in any given period due to win rate and the timing and size of the awards issued by our customers.
The change in new awards in both our Federal Solutions and Critical Infrastructure segments for the year ended December 31, 2024
when compared to the corresponding period last year was primarily due to significant option period awards in our Federal Solutions segment
and three large transportation awards and a mining award in our Critical Infrastructure segment.
59
Backlog
We define backlog to include the following two components:
•
Funded—Funded backlog represents the revenue value of orders for services under existing contracts for which funding is
appropriated or otherwise authorized less revenue previously recognized on these contracts.
•
Unfunded—Unfunded backlog represents the revenue value of orders for services under existing contracts for which funding
has not been appropriated or otherwise authorized less revenue previously recognized on these contracts. Unfunded backlog
does not include potential task orders expected to be awarded under multiple awards IDIQ contract vehicles, where task orders
are competitively awarded and separately priced.
Backlog includes (i) unissued task orders and unexercised option years, to the extent their issuance or exercise is probable, as well as
(ii) contract awards, to the extent we believe contract execution and funding is probable.
The following table summarizes the value of our backlog at the respective dates presented (in thousands):
As of
December 31, 2024
December 31, 2023
December 31, 2022
Federal Solutions:
Funded
$
1,712,627 $
1,454,581 $
1,257,537
Unfunded
2,961,356
3,490,781
3,586,791
Total Federal Solutions
4,673,983
4,945,362
4,844,328
Critical Infrastructure:
Funded
4,167,611
3,578,902
3,280,701
Unfunded
52,321
68,007
54,216
Total Critical Infrastructure
4,219,932
3,646,909
3,334,917
Total Backlog (1)
$
8,893,915 $
8,592,271 $
8,179,245
(1)
Difference between our backlog of $8.9 billion and our RUPO of $6.7 billion, each as of December 31, 2024, is due to (i) unissued task
orders and unexercised option years, to the extent their issuance or exercise is probable, as well as (ii) contract awards, to the extent
we believe contract execution and funding is probable.
Our backlog includes orders under contracts that in some cases extend for several years. For example, the U.S. Congress generally
appropriates funds for our U.S. federal government customers on a yearly basis, even though their contracts with us may call for
performance that is expected to take a number of years to complete. As a result, our federal contracts typically are only partially funded at
any point during their term. All or some of the work to be performed under the contracts may remain unfunded unless and until the U.S.
Congress makes subsequent appropriations and the procuring agency allocates funding to the contract.
We expect to recognize $3.9 billion of our funded backlog at December 31, 2024 as revenues in the following twelve months.
However, our U.S. federal government customers may cancel their contracts with us at any time through a termination for convenience or
may elect to not exercise option periods under such contracts. In the case of a termination for convenience, we would not receive anticipated
future revenues, but would generally be permitted to recover all or a portion of our incurred costs and fees for work performed. See “Risk
Factors—Risks Relating to Our Business—We may not realize the full value of our backlog, which may result in lower than expected
revenue.”
60
The changes in backlog in both the Federal Solutions and Critical Infrastructure segments were primarily from ordinary course
fluctuations in our business and the impacts related to the Company’s awards discussed above. Our backlog will fluctuate in any given period
based on the volume of awards issued and the rate of revenue generated from our existing contracts.
Book-to-Bill
Book-to-bill is the ratio of total awards to total revenue recorded in the same period. Our management believes our book-to-bill ratio is
a useful indicator of our potential future revenue growth in that it measures the rate at which we are generating new awards compared to the
Company’s current revenue. To drive future revenue growth, our goal is for the level of awards in a given period to exceed the revenue
booked. A book-to-bill ratio greater than 1.0 indicates that awards generated in a given period exceeded the revenue recognized in the same
period, while a book-to-bill ratio of less than 1.0 indicates that awards generated in such period were less than the revenue recognized in
such period. The following table sets forth the book-to-bill ratio for the periods presented below:
Fiscal Year Ended
December 31, 2024 December 31, 2023
December 31, 2022
Federal Solutions
1.0
1.1
0.9
Critical Infrastructure
1.2
1.1
1.2
Overall
1.0
1.1
1.0
Factors and Trends Affecting Our Results of Operations
We believe that the financial performance of our business and our future success are dependent upon many factors, including those
highlighted in this section. Our operating performance will depend upon many variables, including the success of our growth strategies and
the timing and size of investments and expenditures that we choose to undertake, as well as market growth and other factors that are not
within our control.
Government Spending
Changes in the relative mix of government spending and areas of spending growth, with shifts in priorities on homeland security,
intelligence, defense-related programs, infrastructure and urbanization, and continued increased spending on technology and innovation,
including cyber, artificial intelligence, connected communities and physical infrastructure, could impact our business and results of
operations. Cost-cutting and efficiency initiatives, current and future budget restrictions, spending cuts and other efforts to reduce
government spending could cause our government customers to reduce or delay funding or invest appropriated funds on a less consistent
basis or not at all, and demand for our solutions or services could diminish. Furthermore, any disruption in the functioning of government
agencies, including as a result of government closures and shutdowns, could have a negative impact on our operations and cause us to lose
revenue or incur additional costs due to, among other things, our inability to deploy our staff to customer locations or facilities as a result of
such disruptions.
Federal Budget Uncertainty
There is uncertainty around the timing, extent, nature and effect of Congressional and other U.S. government actions to address
budgetary constraints, caps on the discretionary budget for defense and non-defense departments and agencies, and the ability of Congress
to determine how to allocate the available budget authority and pass appropriations bills to fund both U.S. government departments and
agencies that are, and those that are not, subject to the caps. Additionally, budget deficits and the growing U.S. national debt increase
pressure on the U.S. government to reduce federal spending across all federal agencies, with uncertainty about the size and timing of those
reductions. Furthermore, delays in the completion of future U.S. government budgets could in the future delay procurement of the federal
61
government services we provide. A reduction in the amount of, or delays, or cancellations of funding for, services that we are contracted to
provide to the U.S. government as a result of any of these impacts or related initiatives, legislation or otherwise could have a material
adverse effect on our business and results of operations.
Regulations
Increased audit, review, investigation and general scrutiny by government agencies of performance under government contracts and
compliance with the terms of those contracts and applicable laws could affect our operating results. Negative publicity and increased scrutiny
of government contractors in general, including us, relating to government expenditures for contractor services and incidents involving the
mishandling of sensitive or classified information, as well as the increasingly complex requirements of the U.S. Department of Defense and
the U.S. intelligence community, including those related to cybersecurity, could impact our ability to perform in the markets we serve.
Competitive Markets
The industries we operate in consist of a large number of enterprises ranging from small, niche-oriented companies to multi-billion-
dollar corporations that serve many government and commercial customers. We compete on the basis of our technical expertise,
technological innovation, our ability to deliver cost-effective multi-faceted services in a timely manner, our reputation and relationships with
our customers, qualified and/or security-clearance personnel, and pricing. We believe that we are well positioned to take advantage of the
markets in which we operate because of our proven track record, long-term customer relationships, technology innovation, scalable and agile
business offerings and world class talent. Our ability to effectively deliver on project engagements and successfully assist our customers
affects our ability to win new contracts and drives our financial performance.
Acquired Operations
BCC Engineering, LLC
On November 1, 2024, the Company acquired a 100% ownership interest in BCC Engineering, LLC ("BCC") a privately owned
company, for $232.7 million. BCC is a full-service engineering firm that provides planning, design, and management services for
transportation, civil and structural engineering projects in Florida, Georgia, Texas, South Carolina, and Puerto Rico. This acquisition
strengthens Parsons’ position as an infrastructure leader while expanding the company’s reach in the southeastern United States. The
financial results of BCC have been included in our consolidated results of operations from October 18, 2024 onward.
BlackSignal Technologies, LLC
On August 16, 2024, the Company acquired a 100% ownership interest in BlackSignal Technologies, LLC, ("BlackSignal") a privately-
owned company, for $203.7 million. Headquartered in Chantilly, Virginia, BlackSignal is a next-generation digital signal processing, electronic
warfare, and cyber security provider built to counter near peer threats. Parsons believes that the acquisition will expand Parsons' customer
base across the Department of Defense and Intelligence Community and significantly strengthen Parsons' positioning within cyber warfare,
while adding new capabilities in the counterspace radio frequency domain. The financial results of BlackSignal have been included in our
consolidated results of operations from August 16, 2024 onward.
I.S. Engineers, LLC
On October 31, 2023, the Company entered into a Membership Interest Purchase Agreement to acquire a 100% ownership interest in
I.S. Engineers, LLC, a privately-owned company, for $12.2 million, subject to certain adjustments. Headquartered in Texas, I.S. Engineers,
LLC provides full-service consulting specializing in transportation engineering, including roads and highways, and program management. The
financial results of I.S. Engineers have been included in our consolidated results of operations from October 31, 2023 onward.
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Sealing Technologies, Inc.
On August 23, 2023, the Company acquired a 100% ownership interest in Sealing Technologies, Inc (“SealingTech”), a privately-
owned company, for $176.0 million and up to an additional $25 million in the event an earn out revenue target is exceeded. Headquartered in
Maryland, SealingTech expands Parsons’ customer base across the Department of Defense and Intelligence Community, and further
enhances the company’s capabilities in defensive cyber operations; integrated mission-solutions powered by artificial intelligence (AI) and
machine learning (ML); edge computing and edge access modernization; critical infrastructure protection; and secure data management. The
financial results of SealingTech have been included in our consolidated results of operations from August 23, 2023 onward.
IPKeys Power Partners
On April 13, 2023, the Company entered into a merger agreement to acquire a 100% ownership interest in IPKeys Power Partners
(“IPKeys”), a privately-owned company, for $43.0 million. The merger brings IPKeys' established customer base, expanding Parsons'
presence in two rapidly growing end markets: grid modernization and cyber resiliency for critical infrastructure. Headquartered in Tinton Falls,
New Jersey, IPKeys is a trusted provider of enterprise software platform solutions that is actively delivering cyber and operational security to
hundreds of electric, water, and gas utilities across North America. The financial results of IPKeys have been included in our consolidated
results of operations from April 13, 2023 onward.
Xator Corporation
On May 31, 2022, the Company acquired Xator Corporation for $387.5 million. This strategic acquisition expands Parsons’ presence
within the U.S. Special Operations Command, the Intelligence Community, Federal Civilian customers, and global critical infrastructure
markets, while providing new customer access at the Department of State. Xator also expands Parsons’ customer base and brings
differentiated technical capabilities in critical infrastructure protection, counter-unmanned aircraft systems (cUAS), intelligence and cyber
solutions, biometrics, and global threat assessment and operations, increasing our addressable market in both the Federal Solutions and
Critical Infrastructure segments. The financial results of Xator have been included in our consolidated results of operations from May 31,
2022 onward.
Seasonality
Our results may be affected by variances as a result of weather conditions and contract award seasonality impacts that we experience
across our businesses. The latter issue is typically driven by the U.S. federal government fiscal year-end, September 30. While not certain, it
is not uncommon for U.S. government agencies to award task orders or complete other contract actions in the weeks before the end of the
U.S. federal government fiscal year in order to avoid the loss of unexpended U.S. federal government fiscal year funds. In addition, we have
also historically experienced higher bid and proposal costs in the months leading up to the U.S. federal government fiscal year-end as we
pursue new contract opportunities expected to be awarded early in the following U.S. federal government fiscal year as a result of funding
appropriated for that U.S. federal government fiscal year. Furthermore, many U.S. state governments with fiscal years ending on June 30
tend to accelerate spending during their first quarter, when new funding becomes available. We may continue to experience this seasonality
in future periods, and our results of operations may be affected by it.
Results of Operations
Revenue
Our revenue consists of both services provided by our employees and pass-through fees from subcontractors and other direct costs.
Our Federal Solutions segment derives revenue primarily from the U.S. federal government and our Critical Infrastructure segment derives
revenue primarily from government and commercial customers.
63
We enter into the following types of contracts with our customers:
•
Under cost-plus contracts, we are reimbursed for allowable or otherwise defined costs incurred, plus a fee. The contracts
may also include incentives for various performance criteria, including quality, timeliness, safety and cost-effectiveness. In
addition, costs are generally subject to review by clients and regulatory audit agencies, and such reviews could result in
costs being disputed as non-reimbursable under the terms of the contract.
•
Under time-and-materials contracts, hourly billing rates are negotiated and charged to clients based on the actual time
spent on a project. In addition, clients reimburse actual out-of-pocket costs for other direct costs and expenses that are
incurred in connection with the performance under the contract.
•
Under fixed-price contracts, clients pay an agreed fixed-amount negotiated in advance for a specified scope of work.
Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and
Estimates” and “Note 2—Summary of Significant Accounting Polices” in the notes to our consolidated financial statements included
elsewhere in this Annual Report on Form 10-K for a description of our policies on revenue recognition applicable to each type of contract.
The table below presents the percentage of total revenue for each type of contract.
Fiscal Year Ended
December 31, 2024
December 31, 2023
December 31, 2022
Fixed-price
42%
33%
27%
Time-and-materials
21%
25%
28%
Cost-plus
37%
42%
45%
The amount of risk and potential reward varies under each type of contract. Under cost-plus contracts, there is limited financial risk,
because we are reimbursed for all allowable costs up to a ceiling. However, profit margins on this type of contract tend to be lower than on
time-and-materials and fixed-price contracts. Under time-and-materials contracts, we are reimbursed for the hours worked using the
predetermined hourly rates for each labor category. In addition, we are typically reimbursed for other direct contract costs and expenses at
cost. We assume financial risk on time-and-materials contracts because our labor costs may exceed the negotiated billing rates. Profit
margins on well-managed time-and-materials contracts tend to be higher than profit margins on cost-plus contracts as long as we are able to
staff those contracts with people who have an appropriate skill set. Under fixed-price contracts, we are required to deliver the objectives
under the contract for a pre-determined price. Compared to time-and-materials and cost-plus contracts, fixed-price contracts generally offer
higher profit margin opportunities because we receive the full benefit of any cost savings, but they also generally involve greater financial risk
because we bear the risk of any cost overruns. In the aggregate, the contract type mix in our revenue for any given period will affect that
period’s profitability. Over time, we have experienced a relatively stable contract mix.
The significant change in the contract mix for the year ended December 31, 2024 compared to the corresponding period last year
relates to increased business volume from a significant fixed price contract in our Federal Solutions segment.
Our recognition of profit on long-term contracts requires the use of assumptions related to transaction price and total cost of
completion. Estimates are continually evaluated as work progresses and are revised when necessary. When a change in estimated cost or
transaction price is determined to have an impact on contract profit, we record a positive or negative adjustment to revenue.
The Company is involved in a significant volume of contracts with the United States federal government and state and local
governments. Approximately 59%, 55%, and 53% of consolidated revenues for the years ended December 31, 2024, December 31, 2023
and December 31, 2022,
64
respectively were derived from contracts with the United States federal government. No other customers represented 10% or more of
consolidated revenues or accounts receivable in any of the periods presented.
Joint Ventures
We conduct a portion of our business through joint ventures or similar partnership arrangements. For the joint ventures we control, we
consolidate all the revenues and expenses in our consolidated statements of income (including revenues and expenses attributable to
noncontrolling interests). For the joint ventures we do not control, we recognize equity in earnings (losses) of unconsolidated joint ventures.
Our revenues included $182.6 million in 2024, $213.8 million in 2023, and $217.4 million in 2022 related to services we provided to our
unconsolidated joint ventures.
Operating costs and expenses
Operating costs and expenses primarily include direct costs of contracts and selling, general and administrative expenses. Costs
associated with compensation-related expenses for our people and facilities, which includes ESOP contribution expenses, are the most
significant component of our operating expenses. In 2024, 2023 and 2022, we made annual contributions to the ESOP in the amount of 8%
of the participants’ cash compensation for the applicable year. Total ESOP contribution expense was $59.8 million for 2024, $58.2 million for
2023, and $54.7 million for fiscal 2022, and is recorded in “Direct cost of contracts” and “Selling, general and administrative expenses.” We
expect operating expenses to increase due to our anticipated growth. However, on a forward-looking basis, we generally expect these costs
to decline as a percentage of our total revenue as we realize the benefits of scale.
Direct costs of contracts consist of direct labor and associated fringe benefits, indirect overhead, subcontractor and materials (“pass-
through costs”), travel expenses and other expenses incurred to perform on contracts.
Selling, general and administrative expenses (“SG&A”) include salaries and wages and fringe benefits of our employees not
performing work directly for customers, facility costs and other costs related to these indirect functions.
Other income and expenses
Other income and expenses primarily consist of interest income, interest expense, and other income, net.
Interest income primarily consists of interest earned on U.S. government money market funds.
Interest expense consists of interest expense incurred under our Convertible Senior Notes, Credit Agreement and Delayed Draw Term
Loan.
Other income, net primarily consists of gain or loss on sale of assets, sublease income. transaction gain or loss related to movements
in foreign currency exchange rates, contingent consideration and convertible debt repurchase loss.
65
Year ended December 31, 2024 compared to year ended December 31, 2023
The following table sets forth our results of operations for fiscal 2024 and fiscal 2023 as a percentage of revenue.
Fiscal Year Ended
December 31, 2024
December 31, 2023
Revenues
100.0 %
100.0 %
Direct costs of contracts
79.2 %
77.8 %
Equity in (losses) earnings of unconsolidated joint ventures
(0.3 )%
(0.9 )%
Selling, general and administrative expenses
14.1 %
16.0 %
Operating income
6.3 %
5.3 %
Interest income
0.2 %
0.0 %
Interest expense
(0.8 )%
(0.6 )%
Convertible debt repurchase loss
(0.3 )%
(— )%
Other income, net
(0.0 )%
0.1 %
Total other income benefit (expense)
(0.9 )%
(0.4 )%
Income before income tax expense
5.4 %
4.9 %
Income tax expense
(1.1 )%
(1.0 )%
Net income including noncontrolling interests
4.3 %
3.8 %
Net income attributable to noncontrolling interests
(0.8 )%
(0.9 )%
Net income attributable to Parsons Corporation
3.5 %
3.0 %
Revenue
Fiscal Year Ended
Variance
(U.S. dollars in thousands)
December 31,
2024
December 31,
2023
Dollar
Percent
Revenue
$
6,750,576 $
5,442,749 $
1,307,827
24.0 %
Revenue for the year ended December 31, 2024 compared to the prior year increased $1.3 billion. Revenue increased in both the
Federal Solutions and Critical Infrastructure segments by $986.4 million and $321.4 million, respectively. See “—Segment Results” below for
further discussion.
Direct costs of contracts
Fiscal Year Ended
Variance
(U.S. dollars in thousands)
December 31, 2024
December 31, 2023
Dollar
Percent
Direct cost of contracts
$
5,344,154 $
4,236,735 $
1,107,419
26.1 %
Direct cost of contracts for the year ended December 31, 2024 compared to the prior year increased $1.1 billion. Direct cost of
contracts increased in both the Federal Solutions and Critical Infrastructure segments by $812.5 million and $294.9 million, respectively. The
increase in direct costs of contracts in both the Federal Solutions and Critical Infrastructure segments was primarily related to increased
volume from new and existing contracts.
Equity in (losses) earnings of unconsolidated joint ventures
Fiscal Year Ended
Variance
(U.S. dollars in thousands)
December 31, 2024
December 31, 2023
Dollar
Percent
Equity in losses of unconsolidated joint ventures
$
(23,361 ) $
(47,751 ) $
24,390
51.1 %
66
Equity in losses of unconsolidated joint ventures for the year ended December 31, 2024 improved by $24.4 million compared to the
prior year. Impacting equity in losses of unconsolidated joint ventures for the year ended December 31, 2024 were write-downs of $51.7
million related to Parsons' participation in a design build joint venture. For the year ended December 31, 2023 the Company had write-downs
of $83.4 million, inclusive of $57.9 million related to the design build joint venture referenced above. Results for the year ended December
31, 2023 also included earnings on higher margin change orders which did not reoccur for the year ended December 31, 2024. Joint venture
volume has decreased year-over-year as we move away from our participation in construction joint ventures.
Selling, general and administrative expenses
Fiscal Year Ended
Variance
(U.S. dollars in thousands)
December 31, 2024
December 31, 2023
Dollar
Percent
Selling, general and administrative expenses
$
954,995 $
869,905 $
85,090
9.8 %
As a percentage of revenue, SG&A decreased by 1.9% to 14.1% for the year ended December 31, 2024 compared to16.0% for the
corresponding period last year.
Total other income (expense)
Fiscal Year Ended
Variance
(U.S. dollars in thousands)
December 31, 2024
December 31, 2023
Dollar
Percent
Interest income
$
11,428 $
2,191 $
9,237
421.6 %
Interest expense
(51,582 )
(31,497 )
(20,085 )
(63.8 )%
Convertible debt repurchase loss
(18,355 )
-
(18,355 )
-
Other income (expense), net
(1,906 )
5,001
(6,907 )
(138.1 )%
Total other income (expense)
$
(60,415 ) $
(24,305 ) $
(36,110 )
(148.6 )%
Interest income is related to interest earned on investments in government money funds. Interest income increased for the year ended
December 31, 2024 compared to the corresponding period last year is due to higher cash balances held and increased interest rates
compared to the corresponding period last year.
Interest expense for the year ended December 31, 2024 is primarily due to debt related to our Convertible Senior Notes and Delayed
Draw Term Loan. The increase in Interest expense for the year ended December 31, 2024 compared to the corresponding period last year is
primarily related to an increase in debt balances and a $3.2 million charge from the acceleration of the amortization of debt issuance costs
associated with the partial repurchase of the 0.25% Convertible Senior Notes due 2025 discussed below.
During the year ended December 31, 2024, we paid $495.6 million in cash to repurchase $284.6 million aggregate principal amount of
our Convertible Senior Notes due 2025 (the "Repurchase Transaction") concurrently with the offering of 2.625% Convertible Senior Notes
due 2029. As a result of the Repurchase Transaction, we incurred an $18.4 convertible debt repurchase loss1. The Repurchase Transaction
is a partial repurchase of our Convertible Senior Notes due 2025. See “Note 11 – Debt and Credit Facilities,” for a further discussion of this
transaction.
1During the first quarter of 2024, prior to the early adoption of ASU 2024-04, the Company recorded a $211.0 million loss on debt extinguishment associated
with the 0.25% Convertible Senior Notes due 2025. Please see "Note 2—Summary of Significant Accounting Policies—New Accounting Pronouncements" for a
discussion of the Company's adoption of ASU 2024-04. As a result of the early adoption, the extinguishment charge was reversed from the
67
Company's consolidated financial statements and a convertible debt repurchase loss was recorded as described above.
The amounts in other income (expense), net, are primarily related to transaction gains and losses on foreign currency transactions,
sublease income, and a change in the fair value of contingent consideration.
Income tax expense
Fiscal Year Ended
Variance
(U.S. dollars in thousands)
December 31, 2024
December 31, 2023
Dollar
Percent
Income tax expense
$
76,986 $
56,138 $
20,848
37.1 %
Income tax expense increased in fiscal 2024 primarily due to an increase in overall pre-tax income, increases in current year foreign
Net Operating Losses (NOLs) subject to valuation allowances and an increase in non-deductible executive compensation subject to Section
162(m), partially offset by increases in the foreign-derived intangible income (FDII) deduction, and increased equity based-compensation
deductions.
Our effective tax rate was 20.9% and 21.3% for the years ended December 31, 2024 and 2023, respectively. The difference between
the statutory U.S. federal income tax rate of 21% and the effective tax rate for the year ended December 31, 2024 primarily relates to state
income taxes, valuation allowance and executive compensations subject to Section 162(m) offset by benefits related to untaxed income
attributable to noncontrolling interests, earnings in lower tax jurisdictions, the FDII deduction, and equity-based compensation.
In 2021 the Organization for Economic Co-operation and Development (OECD) announced an inclusive Framework on Base Erosion
and Profit Shifting (BEPS) including Pillar Two Model Rules defining the global minimum tax, also known as the Global Anti-Base Erosion
(GloBE), which aims to ensure that multinational enterprises (MNEs) pay a 15% minimum level of tax regardless of where the MNE operates.
The OECD released additional administrative guidance in June 2024 and January 2025. Many non-US tax jurisdictions have either recently
enacted legislation to adopt components of the Pillar Two Model Rules beginning in 2024 and/or have announced their plans to enact
legislation in future years. The Company has evaluated the implementation of Pillar Two on its 2024 income tax position based on currently
enacted legislation and has determined there is no material impact. We are continuing to evaluate the potential impact on future periods of
the Pillar Two Framework, pending enactment of legislation by individual countries.
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Year ended December 31, 2023 compared to year ended December 31, 2022
The following table sets forth our results of operations for fiscal 2023 and fiscal 2022 as a percentage of revenue.
Fiscal Year Ended
December 31, 2023
December 31, 2022
Revenues
100.0 %
100.0 %
Direct costs of contracts
77.8 %
77.4 %
Equity in earnings of unconsolidated joint ventures
(0.9 )%
0.4 %
Selling, general and administrative expenses
16.0 %
18.5 %
Operating income
5.3 %
4.4 %
Interest income
0.0 %
0.0 %
Interest expense
(0.6 )%
(0.6 )%
Other income, net
0.1 %
0.1 %
Total other income benefit (expense)
(0.4 )%
(0.5 )%
Income before income tax expense
4.9 %
4.0 %
Income tax expense
(1.0 )%
(0.9 )%
Net income including noncontrolling interests
3.8 %
3.0 %
Net income attributable to noncontrolling interests
(0.9 )%
(0.7 )%
Net income attributable to Parsons Corporation
3.0 %
2.3 %
Revenue
Fiscal Year Ended
Variance
(U.S. dollars in thousands)
December 31,
2023
December 31,
2022
Dollar
Percent
Revenue
$
5,442,749 $
4,195,272 $
1,247,477
29.7 %
Revenue for the year ended December 31, 2023 compared to the prior year increased $1.2 billion. Revenue increased in both the
Federal Solutions and Critical Infrastructure segments by $807.7 million and $439.8 million, respectively. See “—Segment Results” below for
further discussion.
Direct costs of contracts
Fiscal Year Ended
Variance
(U.S. dollars in thousands)
December 31, 2023
December 31, 2022
Dollar
Percent
Direct cost of contracts
$
4,236,735 $
3,248,550 $
988,185
30.4 %
Direct cost of contracts for the year ended December 31, 2023 compared to the prior year increased $988.2 million. Direct cost of
contracts increased in both the Federal Solutions and Critical Infrastructure segments by $672.1 million and $316.1 million, respectively. The
increases were primarily due to an increase in business volume and from business acquisitions offset by a decrease of $37.9 million in the
Critical Infrastructure segment related to a legal matter on a previously completed contract.
Equity in earnings of unconsolidated joint ventures
Fiscal Year Ended
Variance
(U.S. dollars in thousands)
December 31, 2023
December 31, 2022
Dollar
Percent
Equity in (losses) earnings of unconsolidated joint
ventures
$
(47,751 ) $
16,347 $
(64,098 )
(392.1 )%
69
Equity in earnings of unconsolidated joint ventures for the year ended December 31, 2023 decreased by $64.1 million compared to the
prior year. The decrease was primarily related to write-downs on joint ventures of $83.4 million. $57.9 million of the joint venture write-downs
related to Parsons’ participation in a design build joint venture.
Selling, general and administrative expenses
Fiscal Year Ended
Variance
(U.S. dollars in thousands)
December 31, 2023
December 31, 2022
Dollar
Percent
Selling, general and administrative expenses
$
869,905 $
777,403 $
92,502
11.9 %
As a percentage of revenue, SG&A decreased by 2.5% to 16.0% for the year ended December 31, 2023 compared to 18.5% for the
corresponding period last year.
Total other (expense) income
Fiscal Year Ended
Variance
(U.S. dollars in thousands)
December 31, 2023
December 31, 2022
Dollar
Percent
Interest income
$
2,191 $
966 $
1,225
126.8 %
Interest expense
(31,497 )
(23,185 )
(8,312 )
(35.9 )%
Other income (expense), net
5,001
2,775
2,226
80.2 %
Total other income (expense)
$
(24,305 ) $
(19,444 ) $
(4,861 )
(25.0 )%
Interest income is related to interest earned on investments in government money funds. Interest income increased for the year ended
December 31, 2023 compared to the corresponding period last year primarily due to an increase in interest rates compared to the prior year
on investments in government money funds.
Interest expense is primarily due to debt related to our Convertible Senior Notes and Delayed Draw Term Loan. Interest expense
increased for the year ended December 31, 2023 compared to the corresponding period last year primarily due to higher interest rates on
borrowings.
The amounts in other income (expense), net, are primarily related to transaction gains and losses on foreign currency transactions,
sublease income, and a change in the estimated fair value of contingent consideration.
Income tax expense
Fiscal Year Ended
Variance
(U.S. dollars in thousands)
December 31, 2023
December 31, 2022
Dollar
Percent
Income tax expense
$
56,138 $
39,657 $
16,481
41.6 %
Income tax expense increased in fiscal 2023 primarily due to an increase in overall earnings and an increase in foreign withholding
taxes partially offset by increases in the foreign-derived intangible income (FDII) deduction and earnings in lower tax jurisdictions.
Our effective tax rate was 21.3% and 23.9% for the years ended December 31, 2023 and 2022, respectively. The difference between
the statutory U.S. federal income tax rate of 21% and the effective tax rate for the year ended December 31, 2023 primarily relates to state
income taxes, valuation allowance on foreign tax credit carryovers originating from foreign withholding taxes offset in part by
70
benefits related to income attributable to noncontrolling interests, earnings in lower tax jurisdictions, the FDII deduction, and federal business
tax credits.
Effective for tax year 2022, the Tax Cuts and Jobs Act of 2017 eliminated the option to currently deduct research and development
expenditures in the year incurred and requires taxpayers to amortize such expenditures over five years for tax purposes (15 years for foreign
research and development expenditures). This provision resulted in additional cash tax liability for the 2023 tax year of approximately $12
million. To date, there has been no enacted legislation that would change the tax treatment of these research and development expenditures
and the Company continues to capitalize and amortize these expenses in accordance with the law.
Non-GAAP Financial Measures:
(U.S. dollars in thousands)
December 31,
2024
December 31,
2023
December 31,
2022
Other Information:
Adjusted EBITDA (1)
$
604,953
$
464,673
$
352,782
Net Income Margin (2)
4.3 %
3.8 %
3.0 %
Adjusted EBITDA Margin (3)
9.0 %
8.5 %
8.4 %
(1)
A reconciliation of net income attributable to Parsons Corporation to Adjusted EBITDA is set forth below (in thousands).
(2)
Net Income Margin is calculated as net income including noncontrolling interest divided by revenue in the applicable period.
(3)
Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by revenue in the applicable period.
December 31, 2024
December 31,
2023
December 31,
2022
Net income attributable to Parsons Corporation
$
235,053 $
161,149 $
96,664
Interest expense, net
40,154
29,306
22,219
Income tax expense (benefit)
76,986
56,138
39,657
Depreciation and amortization
99,251
119,973
120,501
Net income attributable to noncontrolling interests
55,612
46,766
29,901
Equity-based compensation
61,492
36,151
24,354
Transaction-related costs (a)
17,138
12,013
16,270
Convertible debt repurchase loss
18,355
-
-
Restructuring (b)
-
1,244
213
Other (c)
912
1,933
3,003
Adjusted EBITDA
$
604,953 $
464,673 $
352,782
(a)
Reflects costs incurred in connection with acquisitions, and other non-recurring transaction costs, primarily fees paid for professional services and employee retention.
(b)
Reflects costs associated with and related to our corporate restructuring initiatives.
(c)
Includes a combination of gain/loss related to sale of fixed assets, software implementation costs, and other individually insignificant items that are non-recurring in
nature.
Adjusted EBITDA is a supplemental measure of our operating performance included in this Annual Report on Form 10-K because it is
used by management and our board of directors to assess our financial performance both on a segment and on a consolidated basis. We
discuss Adjusted EBITDA because our management uses this measure for business planning purposes, including to manage the business
against internal projected results of operations and to measure the performance of the business generally. Adjusted EBITDA is frequently
used by analysts, investors and other interested parties to evaluate companies in our industry.
Adjusted EBITDA is not a U.S. GAAP measure of our financial performance or liquidity and should not be considered as an alternative
to net income as a measure of financial performance or cash flows from operations as measures of liquidity, or any other performance
measure derived in accordance with U.S. GAAP. We define Adjusted EBITDA as net income attributable to Parsons Corporation, adjusted to
include net income attributable to noncontrolling interests and to exclude interest expense (net of interest income), provision for income
taxes, depreciation and amortization and certain other items that we do not consider in our evaluation of ongoing operating performance.
These other items include, among other
71
things, impairment of goodwill, intangible and other assets, interest and other expenses recognized on litigation matters, expenses incurred
in connection with acquisitions and other non-recurring transaction costs, equity-based compensation, and expenses related to our corporate
restructuring initiatives. Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or
non-recurring items. Additionally, Adjusted EBITDA is not intended to be a measure of free cash flow for management’s discretionary use, as
it does not reflect tax payments, debt service requirements, capital expenditures and certain other cash costs that may recur in the future,
including, among other things, cash requirements for working capital needs and cash costs to replace assets being depreciated and
amortized. Management compensates for these limitations by relying on our U.S. GAAP results in addition to using Adjusted EBITDA
supplementally. Our measure of Adjusted EBITDA is not necessarily comparable to similarly titled captions of other companies due to
different methods of calculation.
See “Segment Results” below and "Note 20—Segments Information” in the notes to our consolidated financial statements included
elsewhere in this Annual Report on Form 10-K for further discussion regarding our segment Adjusted EBITDA attributable to Parsons
Corporation
Segment Results
We evaluate segment operating performance using segment revenue and segment Adjusted EBITDA attributable to Parsons
Corporation. Adjusted EBITDA attributable to Parsons Corporation is Adjusted EBITDA excluding Adjusted EBITDA attributable to
noncontrolling interests.
The following table shows Adjusted EBITDA attributable to Parsons Corporation for each of our reportable segments and Adjusted
EBITDA attributable to noncontrolling interests:
Fiscal Year Ended
(U.S. dollars in thousands)
December 31, 2024
December 31, 2023 December 31, 2022
Federal Solutions Adjusted EBITDA attributable to Parsons Corporation
$
415,338 $
289,250 $
199,004
Critical Infrastructure Adjusted EBITDA attributable to Parsons Corporation
132,901
127,785
123,385
Adjusted EBITDA attributable to noncontrolling interests
56,714
47,638
30,393
Total Adjusted EBITDA
$
604,953 $
464,673 $
352,782
Year ended December 31, 2024 compared to year ended December 31, 2023
Federal Solutions
The Year Ended
Variance
(U.S. dollars in thousands)
December 31, 2024
December 31, 2023
Dollar
Percent
Revenue
$
4,007,114 $
3,020,701 $
986,413
32.7 %
Adjusted EBITDA attributable to Parsons Corporation
$
415,338 $
289,250 $
126,088
43.6 %
The increase in Federal Solutions revenue for the year ended December 31, 2024 compared to the corresponding period last year was
primarily related to organic growth of 30% and $73.6 million from business acquisitions. Organic growth was primarily due to the ramp up of
recent awards including growth on a significant contract, growth of existing contracts, partially offset by the winding down of certain contracts.
Revenue for the year ended December 31, 2023 included incentive fees on two contracts of approximately $20 million that did not reoccur for
the year ended December 31, 2024.
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The increase in Federal Solutions Adjusted EBITDA attributable to Parsons Corporation for the year ended December 31, 2024
compared to the prior year was primarily due to the factors impacting revenue discussed above.
Critical Infrastructure
The Year Ended
Variance
(U.S. dollars in thousands)
December 31, 2024
December 31, 2023
Dollar
Percent
Revenue
$
2,743,462 $
2,422,048 $
321,414
13.3 %
Adjusted EBITDA attributable to Parsons Corporation
$
132,901 $
127,785 $
5,116
4.0 %
The increase in Critical Infrastructure revenue for the year ended December 31, 2024 compared to the corresponding period last year
was primarily related to organic growth of 12% and $29.9 million from business acquisitions. Organic growth was primarily due to an increase
in business volume from existing contracts and ramping up of recent awards offset by the winding down of certain contracts and contract
write-downs of $44.5 million.
The increase in Critical Infrastructure Adjusted EBITDA attributable to Parsons for the year ended December 31, 2024 compared to
the corresponding period last year was primarily due to the increase in organic revenue. This increase was offset by the contract write-downs
discussed above along with a write-down in equity in losses from unconsolidated joint ventures of $51.7 million compared to write-downs of
$83.4 million for the year ended December 31, 2023. Also impacting Adjusted EBITDA were higher margin change orders on an
unconsolidated joint venture for the year ended December 31, 2023 which did not reoccur for the year ended December 31, 2024.
Year ended December 31, 2023 compared to year ended December 31, 2022
Federal Solutions
The Year Ended
Variance
(U.S. dollars in thousands)
December 31, 2023
December 31, 2022
Dollar
Percent
Revenue
$
3,020,701 $
2,212,987 $
807,714
36.5 %
Adjusted EBITDA attributable to Parsons Corporation
$
289,250 $
199,004 $
90,246
45.3 %
The increase in Federal Solutions revenue for the year ended December 31, 2023 compared to the corresponding period last year was
primarily due to organic growth of 25% and increases from business acquisitions of $264.1 million.
The increase in Federal Solutions Adjusted EBITDA attributable to Parsons Corporation for the year ended December 31, 2023
compared to the prior year was primarily due to the factors impacting revenue discussed above and non-recurring incentive fees of
approximately $20 million. These increases were offset by higher selling general and administrative costs from business acquisitions,
business development and sales activities, and incentive compensation costs as a result of the company's strong operating performance and
growing employee base.
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Critical Infrastructure
The Year Ended
Variance
(U.S. dollars in thousands)
December 31, 2023
December 31, 2022
Dollar
Percent
Revenue
$
2,422,048 $
1,982,285 $
439,763
22.2 %
Adjusted EBITDA attributable to Parsons Corporation
$
127,785 $
123,385 $
4,400
3.6 %
The increase in Critical Infrastructure revenue for the year ended December 31, 2023 compared to the corresponding period last year
was substantially due to organic growth.
The increase in Critical Infrastructure Adjusted EBITDA attributable to Parsons for the year ended December 31, 2023 compared to
the corresponding period last year was primarily due to increases in business volume and a decrease in direct cost of contracts of $38 million
related to a legal matter on a previously completed contract, offset by write-downs on joint ventures discussed above and higher selling
general and administrative costs from business development and sales activities and higher incentive compensation costs as a result of the
company's strong operating performance and growing employee base.
Liquidity and Capital Resources
We currently finance our operations and capital expenditures through a combination of internally generated cash from operations, our
Convertible Senior Notes, Delayed Draw Term Loan and periodic borrowings under our Revolving Credit Facility.
Generally, cash provided by operating activities has been adequate to fund our operations. Due to fluctuations in our cash flows and
growth in our operations, it may be necessary from time to time in the future to borrow under our Credit Agreement to meet cash demands.
Our management regularly monitors certain liquidity measures to monitor performance. We calculate our available liquidity as a sum of cash
and cash equivalents from our consolidated balance sheet plus the amount available and unutilized on our Revolving Credit Facility.
As of December 31, 2024, we believe we have adequate liquidity and capital resources to fund our operations, support our debt
service and support our ongoing acquisition strategy for at least the next twelve months based on the liquidity from cash provided by our
operating activities, cash and cash equivalents on-hand and our borrowing capacity under our Revolving Credit Facility. Management
continually monitors debt maturities to strategically execute optimal terms and ensure appropriate levels of working capital liquidity are
maintained for the company.
Cash Flows
Cash received from customers, either from the payment of invoices for work performed or for advances in excess of revenue
recognized, is our primary source of cash. We generally do not begin work on contracts until funding is appropriated by the customers. Billing
timetables and payment terms on our contracts vary based on a number of factors, including whether the contract type is cost-plus, time-and-
materials, or fixed-price. We generally bill and collect cash more frequently under cost-plus and time-and-materials contracts, as we are
authorized to bill as the costs are incurred or work is performed. In contrast, we may be limited to bill certain fixed-price contracts only when
specified milestones, including deliveries, are achieved. A number of our contracts may provide for performance-based payments, which
allow us to bill and collect cash prior to completing the work.
Billed accounts receivable represents amounts billed to clients that have not been collected. Unbilled accounts receivable represents
amounts where the Company has a present contractual right to bill but an invoice has not been issued to the customer at the period-end
date.
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Accounts receivable is the principal component of our working capital and is generally driven by revenue growth. Accounts receivable
includes billed and unbilled amounts. The total amount of our accounts receivable can vary significantly over time but is generally sensitive to
revenue levels. We experience delays in collections from time to time from Middle East customers. Net days sales outstanding, which we
refer to as net DSO, is calculated by dividing (i) accounts receivable (net of project accruals, billings in excess of revenue and accounts
payable) by (ii) average revenue per day (calculated by dividing trailing twelve months revenue by the number of days in that period). We
focus on collecting outstanding receivables to reduce net DSO and improve working capital. Net DSO was 55 days at December 31, 2024,
down from 59 days at December 31, 2023 and 69 days at December 31, 2022. Our working capital (current assets less current liabilities) was
$546.8 million at December 31, 2024, $726.6 million at December 31, 2023 and $611.7 million at December 31, 2022.
Our cash and cash equivalents increased by $180.6 million to $453.5 million at December 31, 2024 from $272.9 million at December
31, 2023. This compares to an increase in cash and cash equivalents of $10.4 million to $272.9 million at December 31, 2023 from $262.5
million at December 31, 2022.
The following table summarizes our sources and uses of cash over the periods presented (in thousands):
Fiscal Year Ended
December 31, 2024 December 31, 2023 December 31, 2022
Net cash provided by operating activities
$
523,606 $
407,699 $
237,526
Net cash used in investing activities
(556,715 )
(375,970 )
(417,468 )
Net cash (used in) provided by financing activities
218,749
(21,871 )
100,368
Effect of exchange rate changes
(5,035 )
546
(1,770 )
Net increase (decrease) in cash and cash equivalents
$
180,605 $
10,404 $
(81,344 )
Operating Activities
Net cash provided by operating activities consists primarily of net income adjusted for noncash items, such as: equity in (losses)
earnings of unconsolidated joint ventures, contributions of treasury stock, depreciation and amortization of property and equipment and
intangible assets, provisions for doubtful accounts, amortization of deferred gains, and impairment charges. The timing between the
conversion of our billed and unbilled receivables into cash from our customers and disbursements to our employees and vendors is the
primary driver of changes in our working capital. Our operating cash flows are primarily affected by our ability to invoice and collect from our
clients in a timely manner, our ability to manage our vendor payments and the overall profitability of our contracts.
Net cash provided by operating activities increased $115.9 million to $523.6 million during 2024 compared to $407.7 million during
2023. The increase in net cash provided by operating activities is primarily due to a $98.4 million change in net income after adjusting for
non-cash items and convertible debt settlement and from changes in our working capital accounts of $46.4 million (primarily from contract
assets and prepaid expenses and other assets offset by accounts payable, accrued expenses and other current liabilities, and contract
liabilities). These increase were offset by a $29.0 million change in cash used for other long-term liabilities.
Net cash provided by operating activities increased $170.2 million to $407.7 million during 2023 compared to $237.5 million during
2022. The increase in net cash provided by operating activities is primarily due to a $170.1 million change in net income after adjusting for
non-cash items and the 10-day improvement in DSO. This increase was offset, in part, from changes in our working capital accounts of $6.3
million. The changes in the Company's various working capital accounts were driven primarily by the significant increase in business volume
during the year ended December 31, 2023 compared to the corresponding period last year.
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Investing Activities
Net cash used in investing activities consists primarily of cash flows associated with capital expenditures and business acquisitions.
Net cash used in investing activities increased $180.7 million to $556.7 million during 2024 compared to $376.0 million during 2023.
The change was primarily driven by a $206.8 million increase in payments for acquisitions, $14.3 million from investments in unconsolidated
joint ventures, and $8.8 million from capital expenditures offset by a $49.9 million increase in return of investments in unconsolidated joint
ventures.
Net cash used in investing activities decreased $41.5 million to $376.0 million during 2023 compared to $417.5 million during 2022.
The change was primarily driven by a $157.5 million reduction in payments for acquisitions offset in part by a $102.0 million increase in
investments in unconsolidated joint ventures, a $9.8 million increase in capital expenditures (primarily from computer systems and
equipment) and a change from return of investments in unconsolidated joint ventures of $4.4 million.
Financing Activities
Net cash provided by (used in) financing activities is primarily associated with proceeds from debt, the repayment thereof, transactions
related to the Company’s common stock, and contributions by and distributions to noncontrolling interests.
Net cash provided by (used in) financing activities increased by $240.6 million to $218.7 million in 2024 compared to $(21.9) million in
2023. The change in cash flows from financing activities is primarily driven by net cash inflows from our convertible bond transactions which
generated $285.4 million in cash. See “Note 11 – Debt and Credit Facilities,” for a further discussion of these transactions. This increase was
offset in part by distributions to noncontrolling interests of $16.7 million, taxes paid on vested stock of $15.3 million and $14.0 million from
repurchases of common stock.
Net cash provided by (used in) financing activities changed by $122.2 million to $(21.9) million in 2023 compared to $100.4 million in
2022. This change was primarily due to a decrease of $150.0 million from net borrowing related activities and a $7.4 million change in
contributions by noncontrolling interests offset by a decrease in distributions to noncontrolling interests of $11.6 billion, a decrease in cash
used to repurchase common stock of $11.0 million and from $11.2 million of payments in warrants for the year ended December 31, 2022
that did not reoccur in 2023.
Letters of Credit
We also have in place several secondary bank credit lines for issuing letters of credit, principally for foreign contracts, to support
performance and completion guarantees. Letters of credit commitments outstanding under these bank lines aggregated $328.4 million as of
December 31, 2024. Letters of credit outstanding under the Credit Agreement total $43.0 million.
Critical Accounting Policies and Estimates
Our significant accounting policies are described in “Note 2—Summary of Significant Accounting Policies” in the notes to our
consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Management makes estimates and judgments in
preparing our consolidated financial statements. These estimates and judgments affect the reported amounts of certain assets and liabilities
and the revenues and expenses reported for the periods presented in the consolidated financial statements. Although such estimates and
assumptions are based on information available through the date of the issuance of our consolidated financial statements, actual results
could differ significantly from those estimates and assumptions. Our estimates, judgments and assumptions are evaluated periodically and
adjusted accordingly.
We believe that the following items are the most critical accounting policies and estimates that involved significant judgment as we
prepared our financial statements. We consider an accounting policy
76
or estimate to be critical if the policy or estimate requires assumptions to be made that were uncertain at the time they were made and if
changes in these assumptions could have a material impact on our financial condition or results of operations.
Revenue Recognition and Cost Estimation
In our industry, recognition of revenue and profit on long-term contracts requires the use of assumptions and estimates related to total
contract revenue, total cost at completion, and the measurement of progress towards completion. Estimates are continually evaluated as
work progresses and are revised when necessary. When a change in estimate is determined to have an impact on contract revenue or profit,
we record a positive or negative adjustment to the consolidated statements of income.
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. The transaction price of a
contract is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.
To the extent a contract is deemed to have multiple performance obligations, we allocate the transaction price of the contract to each
performance obligation using our best estimate of the standalone selling price of each distinct good or service in the contract. We determine
the relative standalone selling price utilizing observable prices for the sale of the underlying goods or services. Contracts are considered to
have a single performance obligation if the promise to transfer the individual goods or services is not separately identifiable from other
promises in the contracts or is not distinct in the context of the contract, which is mainly because we provide a significant service of
integrating a complex set of tasks and components into a single project or capability. Engineering and construction contracts are generally
accounted for as a single performance obligation, while our engineering and construction supervision contracts are accounted for as two
separate performance obligations. When providing construction supervision services, we are not liable for the construction of the asset, but
have an overall responsibility to oversee, coordinate, measure, and evaluate the quality of construction work and the performance of the
construction contractor on behalf of the customer. Customers are generally billed as we satisfy our performance obligations and payment
terms typically range from 30 to 120 days from the invoice date. Billings under certain fixed-price contracts may be based upon the
achievement of specified milestones, while some arrangements may require advance customer payment. Our contracts generally do not
include a significant financing component.
The transaction price for our contracts may include variable consideration, which includes award and incentive fees, increases to the
transaction price for approved and unpriced change orders, claims, and reductions to transaction price for liquidated damages. We recognize
adjustments in estimated profit on contracts under the cumulative catch-up method. Under this method, the impact of the adjustment on profit
recorded to-date is recognized in the period the adjustment is identified. If at any time the estimate of contract profitability indicates an
anticipated loss on the contract, we recognize the total loss in the quarter it is identified.
Claims revenue is related to amounts in excess of agreed contract price that we seek to collect from clients or others for customer-
caused delays, errors in specifications and designs, contract terminations, change orders that are either in dispute or are unapproved as to
both price and scope, or other causes of unanticipated additional contract costs, including factors outside of our control, where we therefore
believe we are entitled to additional compensation. Claims revenue, when recorded, is only recorded to the extent it is probable that a
significant reversal of cumulative revenue recognized will not occur. We include certain unapproved claims in the transaction price when the
claims are legally enforceable, we consider collection to be probable and believe we can reliably estimate the ultimate value. We continue to
engage in negotiations with our customers on our outstanding claims. However, these claims may be resolved at amounts that differ from our
current estimates, which could result in increases or decreases in future estimated contract profits or losses. Costs related to claims are
recognized when they are incurred.
Change orders, which are a normal and recurring part of our business, are generally not distinct and are accounted for as part of the
existing contract. The effect of a change order that is not distinct on the transaction price and our measure of progress for the performance
obligation to which it relates is
77
recognized on a cumulative catch-up basis. To the extent change orders included in the transaction price are not resolved in our favor, there
could be reductions in, or reversals of previously reported amounts of, revenues and profits, and charges against current earnings. Costs
relating to change orders are recognized when they are incurred.
We recognize revenue for most of our contracts over time as performance obligations are satisfied, as we are continuously transferring
control to the customer. Typically, revenue is recognized over time using an input measure (i.e., costs incurred to date relative to total
estimated costs at completion) to measure progress.
We often enter into contracts in which the amount billed to the customer corresponds directly with the amount of work performed.
These contract types qualify for the “right to invoice” practical expedient method of measuring progress, in which the right to consideration
corresponds directly with the value to the customer of our performance to date. For these contracts, revenue is recognized in the amount that
we have the right to invoice.
Provisions for anticipated losses on contracts, including those arising from disputes and other contingencies, are recorded in the
period such loss becomes known; provisions not ultimately required are released as disputes or contingencies are resolved.
Contract costs include labor and materials, amounts payable to subcontractors, direct overhead costs and equipment expense
(primarily depreciation, fuel, maintenance and repairs). All contract costs are recorded as incurred. Changes to estimated contract costs,
either due to unexpected events or revisions to management’s initial estimates, for a given project are recognized in the period in which they
are determined.
Leases
We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (ROU) assets
and current and long-term operating lease liabilities in the consolidated balance sheets. Finance leases are included in other noncurrent
assets, accrued expenses and other current liabilities and other long-term liabilities in the consolidated balance sheets.
ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make
lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the
present value of lease payments over the lease term. As most of our leases do not provide an implicit interest rate, incremental borrowing
rates are used based on the information available at commencement date in determining the present value of lease payments. The operating
lease ROU asset also includes any lease payments made and excludes lease incentives. Lease terms may include options to extend or
terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for operating lease payments is recognized
on a straight-line basis over the lease term.
We have lease agreements with lease and non-lease components, which are generally accounted for separately. For certain
equipment leases, such as vehicles, we account for the lease and non-lease components as a single lease component. Additionally, for
certain equipment leases, we apply a portfolio approach to effectively account for the operating lease ROU assets and liabilities.
78
We have operating and finance leases for corporate and project office spaces, vehicles, heavy machinery and office equipment. Our
leases have remaining lease terms of one year to eleven years, some of which may include options to extend the leases for up to five years,
and some of which may include options to terminate the leases up to the third year.
Business Combinations
The cost of an acquired company is assigned to the tangible and intangible assets purchased and the liabilities assumed on the basis
of their fair values at the date of acquisition. The determination of fair values of assets acquired and liabilities assumed requires us to make
estimates and use valuation techniques when a market value is not readily available. Any excess of purchase price over the fair value of
tangible and intangible assets acquired and obligations assumed is allocated to goodwill. Goodwill typically represents the value paid for the
assembled workforce and enhancement of our service offerings. Transaction costs associated with business combinations are expensed as
incurred. The determination of fair values of assets acquired and liabilities assumed requires the Company to make estimates and use
valuation techniques when a market value is not readily available. The Company adjusts the preliminary purchase prices allocation, as
necessary, during the measurement period of up to one year after the acquisition closing date as the Company obtains more information as
to facts and circumstances existing at the acquisition date.
Certain business acquisitions include contingent earn-out arrangements, which are generally based on meeting a revenue target. The
fair value of this contingent consideration is included as part of the purchase price of the acquired company on the acquisition date and
recorded at its fair value within other liabilities or other long-term liabilities, as appropriate on the consolidated balance sheets.
We measure our contingent consideration at fair value on a recurring basis using significant unobservable inputs classified within Level
3 of the fair value hierarchy. The fair value of contingent consideration is determined using the option pricing method prescribed in the
earnout valuation guide published by The Appraisal Foundation. We consider three major risks associated with earnout, i.e. risk in the
underlying metric, risk in the earnout structure, and counterparty credit risk. Our valuation model is based on the Black Scholes option pricing
formula and major assumptions including projected revenue, the revenue discount rate, the revenue volatility, and the Company's credit
adjusted discount rate. Subsequent adjustments to these assumptions can cause changes to the measure of contingent consideration.
The Company reassess the estimated fair value of contingent consideration on a quarterly basis with any change in the fair value
recorded to selling, general and administrative expense in the current quarter. The updated fair value could differ materially from the
acquisition date fair value. The amount of contingent consideration ultimately paid that is less than or equal to the liability on the acquisition
date is reflected as cash used in financing activities in our consolidated statements of cash flows. Any amounts paid in excess of the liability
on the acquisition date is reflected as cash used in operating activities in our consolidated statements of cash flows.
Goodwill and Intangible Assets
Goodwill is not amortized but is subject to an annual impairment test. Interim testing for impairment is performed if indicators of
potential impairment exist. For purposes of impairment testing, goodwill is allocated to the applicable reporting units based on the current
reporting structure. When evaluating goodwill for impairment, we may decide to first perform a qualitative assessment, or “step zero”
impairment test, to determine whether it is more likely than not that impairment has occurred. If we do not perform a qualitative assessment,
or if we determine that it is not more likely than not that the fair value of our reporting units exceeds their carrying amounts, we perform a
quantitative assessment and calculate the estimated fair value of the respective reporting unit. If the carrying amount of a reporting unit’s
goodwill exceeds the fair value of that goodwill, an impairment loss is recognized.
Our decision to perform a qualitative impairment assessment in a given year is influenced by a number of factors, including the
significance of the excess of our estimated fair value over carrying value
79
at the last quantitative assessment date, the amount of time in between quantitative fair value assessments, and the date of the applicable
acquisitions, if any.
We perform a goodwill impairment test annually, on October 1st of each year, for each reporting unit that requires certain assumptions
and estimates be made regarding industry economic factors and future profitability. For the years ended December 31, 2024, December 31,
2023 and December 31, 2022, we performed a quantitative analysis for all of our reporting units. It was determined that the fair value of each
of our reporting units substantially exceeded their carrying values. As a result, no goodwill impairments were identified for those periods.
The goodwill impairment test involves determination of the fair value of our reporting units. This process requires significant judgments
and estimates, including assumptions about our strategic plans for operations as well as the interpretation of current economic indicators.
Development of the present value of future cash flow projections includes assumptions and estimates derived from a review of our expected
revenue growth rates, profit margins, business plans, cost of capital and tax rates. We also make certain assumptions about future market
conditions, market prices, interest rates and changes in business strategies. Changes in assumptions or estimates could materially affect the
determination of the fair value of a reporting unit. This could eliminate the excess of fair value over carrying value of a reporting unit entirely
and, in some cases, result in impairment. Such changes in assumptions could be caused by a loss of one or more significant contracts,
reductions in government or commercial client spending, or a decline in the demand for our services due to changing economic conditions. In
the event that we determine that our goodwill is impaired, we would be required to record a non-cash charge that could result in a material
adverse effect on our results of operations or financial position.
We use the Income Approach and Market Approach (Guideline Transaction and Guideline Company Method) to determine the fair
value of reporting units. The Income Approach utilizes the discounted cash flow method, which focuses on the expected cash flow of the
reporting unit. In applying this approach, the cash flow is calculated for a finite period of years. Beyond the finite period, a terminal value is
developed using a sustainable long-term annual growth rate estimate. Then the finite period cash flows and the terminal value are discounted
to present value to arrive at an indication of fair value. We utilized internal financial projections through fiscal 2029. The Market Approach
utilizes market comparable transactions and comparable companies to calculate the estimated fair value. The guideline company approach
focuses on comparing the reporting unit to select reasonably similar (or ”guideline”) publicly traded companies. Under this method, valuation
multiples are derived from the median of the operating data of selected guideline companies and applied to the operating data of the
reporting unit to arrive at an indicative value. In the similar transactions approach, consideration is given to prices paid in recent transactions
that have occurred in the reporting unit's industry or in related industries. For the Federal Solutions reporting unit, only the Guideline
Company Method is used as the Federal Solutions reporting unit has gone through multiple acquisitions during the past two years, thus
making Guideline Transaction Method difficult to apply. For the Critical Infrastructure reporting unit, both the Guideline Transaction Method
and Guideline Company Method are utilized to calculate the estimated fair value. Equal weighing is given to each of the methods used to
estimate the fair value of reporting units. Our last review at October 1, 2024 (i.e., the first day of our fourth quarter in fiscal 2024), indicated
that we had no impairment of goodwill, and all of our reporting units had estimated fair values that were in excess of their carrying values,
including goodwill.
Intangible assets with finite lives arise from business acquisitions and are amortized based on the period over which the contractual or
economic benefit of the intangible assets are expected to be realized or on a straight-line basis over the useful lives of the underlying assets,
ranging from one to ten years. These primarily consist of customer relationships, backlog, and covenants not to compete. We assess the
recoverability of the unamortized balance of our intangible assets when indicators of impairment are present based on expected future
profitability and undiscounted expected cash flows and their contribution to overall operations. Should the review indicate that the carrying
value is not fully recoverable, the excess of the carrying value over the fair value of the intangible assets would be recognized as an
impairment loss.
80
Consolidation of Joint Ventures and Variable Interest Entities
We participate in joint ventures, which include partnerships and partially owned limited liability corporations, to bid, negotiate and
complete specific projects. We are required to consolidate these joint ventures if we hold the majority voting interest or if we meet the criteria
under the consolidation model as described below.
A variable interest entity, or “VIE”, is an entity with one or more of the following characteristics: (a) the total equity investment at risk is
not sufficient to permit the entity to finance its activities without additional financial support; (b) as a group, the holders of the equity
investment at risk lack the ability to make certain decisions, the obligation to absorb expected losses or the right to receive expected residual
returns; or (c) an equity investor has voting rights that are disproportionate to its economic interest and substantially all of the entity’s
activities are on behalf of the investor with disproportionately low voting rights. Our VIEs may be funded through contributions, loans and/or
advances from the joint venture partners or by advances and/or letters of credit provided by clients. Certain VIEs are directly governed,
managed, operated and administered by the joint venture partners. Others have no employees and, although these entities own and hold the
contracts with the clients, the services required by the contracts are typically performed by the joint venture partners or by other
subcontractors.
We are required to perform an analysis to determine whether we are the primary beneficiary of our VIEs. We are deemed to be the
primary beneficiary of a VIE if we have (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic
performance; and (ii) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.
Many of the joint ventures we enter into are deemed to be VIEs because they lack sufficient equity to finance the activities of the joint
venture. We use a qualitative approach to determine if we are the primary beneficiary of the VIE, which considers factors that indicate a party
has the power to direct the activities that most significantly impact the joint venture’s economic performance. In determining whether we are
the primary beneficiary of the VIE, significant assumptions and judgments include the following: (1) identifying the significant activities and
the parties that have the power to direct them; (2) reviewing the governing board composition and participation ratio; (3) determining the
equity, profit and loss ratio; (4) determining the management-sharing ratio; (5) reviewing employment terms, including which joint venture
partner provides the project manager; and (6) reviewing the funding and operating agreements. We analyze each joint venture initially to
determine if it should be consolidated or unconsolidated into our financial statements:
•
A joint venture is consolidated into our financial statements if we are the primary beneficiary of a VIE or hold the majority of
voting interests of a non-VIE (and no significant participative rights are available to the other partners).
•
A joint venture is not consolidated into our financial statements if we are not the primary beneficiary of a VIE, or do not hold the
majority of voting interest of a non-VIE.
We account for our unconsolidated joint ventures using the equity method of accounting. Under this method, we recognize our
proportionate share of the net earnings of these joint ventures as “Equity in earnings (loss) of unconsolidated joint ventures”. Our maximum
exposure to loss as a result of our investments in unconsolidated variable interest entities is typically limited to the aggregate of the carrying
value of the investment and future funding commitments in these entities.
ESOP
Throughout the year, as employee services are rendered, we record compensation expense based on salaries of eligible employees.
Contributions of our common stock to the ESOP are made annually in amounts determined by our board of directors and are held in trust for
the sole benefit of the participants. Shares allocated to a participant’s account are fully vested after three years of credited service, or in the
event(s) of reaching age 65, death or disability while an active employee, whichever occurs first.
81
A participant’s interest in their ESOP account is redeemable upon certain events, including retirement, death, termination due to
permanent disability, a severe financial hardship following termination of employment, certain conflicts of interest following termination of
employment, or the exercise of diversification rights Distributions from the ESOP of participants’ interests are made in our common stock
based on quoted prices of a share of our common stock on the NYSE. A participant will be able to sell such shares of common stock in the
market, subject to any requirements of the federal securities laws.
Equity-Based Compensation
We measure the value of services received from employees and directors in exchange for an equity-based award based on the grant
date fair value. We issue equity-based awards that settle in shares of our common stock. Awards containing performance measures are
adjusted at each reporting period for the number of shares expected to be earned. Compensation cost for performance awards are trued-up
at each reporting period for changes in expected shares pro-rated for the portion of the requisite service period rendered. We recognize
compensation costs for these awards on either a straight-line or accelerated basis over the vesting period of the award in “Selling, general
and administrative expenses” in the consolidated statements of income. For awards that include market conditions, the grant date fair value
is determined using a Monte Carlo simulation.
Self-Insurance
We are self-insured for a portion of our losses and liabilities primarily associated with workers’ compensation, general, professional,
automobile, employee matters, certain medical plans, and project specific liability claims. Losses are accrued based upon our estimates of
the aggregate liability for claims incurred using historical experience and certain actuarial assumptions, as provided by an independent
actuary. The estimate of self-insurance liability includes an estimate of incurred but not reported claims, based on data compiled from
historical experience. Actual losses and related expenses may deviate, perhaps substantially, from the self-insurance liability estimates
reflected in our financial statements.
Recent Accounting Pronouncements
See the information set forth in “Note 2—Summary of Significant Accounting Policies—Recently Adopted Accounting
Pronouncements” in the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Off-Balance Sheet Arrangements
As of December 31, 2024, we have no off-balance sheet arrangements that have or are reasonably likely to have a material current or
future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital
expenditures or capital resources.
Commitments and Contingencies
We are subject to certain claims and assessments that arise in the ordinary course of business. Additionally, Parsons has been named
as a defendant in lawsuits alleging personal injuries as a result of contact with asbestos products at various project sites. We believe that any
significant costs relating to these claims will be reimbursed by applicable insurance and do not expect any of these claims to have a material
adverse effect on our financial condition or results of operations. We record a liability when we believe that it is both probable that a loss has
been incurred and the amount can be reasonably estimated. Management judgment is required to determine the outcome and the estimated
amount of a loss related to such matters. Management believes that there are no claims or assessments outstanding which would materially
affect our consolidated results of operations or our financial position.
82
Item 7A. Qualitative and Quantitative Disclosure About Market Risk
Interest Rate Risk
We are exposed to interest rate risks related to the Company’s Revolving Credit Facility and Delayed Draw Term Loan.
As of December 31, 2024 and December 31, 2023, there were no amounts outstanding under the Revolving Credit Facility.
Borrowings under the Revolving Credit Facility effective June 2021 bear interest at either an adjusted Term SOFR rate plus a margin
between 1.0% and 1.625%, or a base rate (as defined in the Credit Agreement) plus a margin of between 0% and 0.625%, both based on
the leverage ratio of the Company at the end of each quarter.
As of December 31, 2024, there was $350.0 million outstanding under the 2022 Delayed Draw Term Loan. Borrowings under the 2022
Delayed Draw Term Loan Agreement will bear interest at either an adjusted Term SOFR benchmark rate plus a margin between 0.875% and
1.500% or a base rate plus a margin of between 0% and 0.500% and will initially bear interest at the middle of this range. The Company will
pay a ticking fee on unused term loan commitments at a rate of 0.175% commencing with the date that is ninety (90) days after the Closing
Date. The interest rate at December 31, 2024 and December 31, 2023 was 5.6% and 6.6%, respectively.
Foreign Currency Exchange Risk
We are exposed to foreign currency exchange rate risk resulting from our operations outside of the U.S. We limit exposure to foreign
currency fluctuations in most of our contracts through provisions that require client payments in currencies corresponding to the currency in
which costs are incurred. As a result of this natural hedge, we generally do not need to hedge foreign currency cash flows for contract work
performed.
Item 8. Financial Statements and Supplementary Data.
The information required by this item 8 is submitted as a separate section beginning on page F-1 of this Annual Report on Form 10-K
and is incorporated by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management carried out, as of December 31, 2024, with the participation of our Chief Executive Officer and our Chief Financial
Officer, an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, our Chief Executive Officer and Chief
Financial Officer concluded that, as of December 31, 2024, our disclosure controls and procedures were effective to provide reasonable
assurance that information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the SEC rules and forms and that information required to be disclosed by us in
the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
83
Management’s Annual Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining for the Company adequate internal control over financial reporting, as
defined in Rule 13a-15(f) under the Exchange Act. Management, with the participation of its Chair and Chief Executive Officer (principal
executive officer) and Chief Financial Officer (principal financial officer), has assessed the effectiveness of the Company’s internal control
over financial reporting as of December 31, 2024 based on the framework established in “Internal Control—Integrated Framework,” issued by
the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on this assessment, management has
concluded that the Company’s internal control over financial reporting was effective as of December 31, 2024.
The Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP, which audited the Company’s
consolidated financial statements included in this Annual Report on Form 10-K, also audited the effectiveness of our internal control over
financial reporting as of December 31, 2024, as stated in their audit report included in this Annual Report on Form 10-K.
Consistent with the guidance issued by the Securities and Exchange Commission Staff, management has excluded BlackSignal and
BCC from its assessment of internal controls over financial reporting as of December 31, 2024. BlackSignal a wholly owned subsidiary, which
we acquired on August 16, 2024, has total assets and revenue of 4.3% and 0.3%, respectively of the related consolidated financial statement
amounts as of and for the year ended December 31, 2024. BCC a wholly owned subsidiary, which we acquired on November 1, 2024, has
total assets and revenue of 4.8% and 0.3%, respectively of the related consolidated financial statement amounts as of and for the year
ended December 31, 2024.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the
Securities Exchange Act of 1934, that occurred during the quarter ended December 31, 2024 that materially affected, or are reasonably likely
to materially affect, our internal control over financial reporting.
Item 9B. Other Information.
Insider Trading Relationships and Policies
During the fiscal quarter ended December 31, 2024, no director or named executive officer of the Company adopted or terminated a
"Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" (in each case, as defined in Item 408 of Regulation S-K).
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
None
84
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
The Company has adopted amended insider trading policies and procedures governing the purchase, sale and/or other dispositions of
the Company's securities by directors, officers and employees, or the Company itself, that are reasonably designed to promote compliance
with insider trading laws, rules and regulations, and New York Stock Exchange standards.
Information related to our directors will be set forth under the caption “Proposal 1: Election of Directors” of our Proxy Statement for our
Annual Meeting of Stockholders in 2025 (the “2025 Proxy Statement”). Such information is incorporated herein by reference.
Information relating to our Executive Officers is included in Part I of this Annual Report under the caption “Executive Officers.”
Information relating to compliance with Section 16(a) of the Exchange Act will be set forth under the caption “Section 16(a) Beneficial
Ownership Reporting Compliance” of our 2025 Proxy Statement. Such information is incorporated herein by reference.
Information related to our code of ethics will be set forth under the caption “Corporate Governance and General Information
Concerning the Board of Directors and its Committees” of our 2025 Proxy Statement. Such information is incorporated herein by reference.
Information relating to the Audit Committee and Board of Directors determinations concerning whether a member of the Audit
Committee is a “financial expert” as that term is defined under Item 407(d)(5) of Regulation S-K will be set forth under the caption “Corporate
Governance and General Information Concerning the Board of Directors and its Committees” of our 2025 Proxy Statement. Such information
is incorporated herein by reference.
Item 11. Executive Compensation.
Information relating to this item will be set forth under the captions “Compensation Discussion and Analysis,” “Director Compensation,”
“Compensation Committee Interlocks and Insider Participation” and “Compensation Committee Report on Executive Compensation” of our
2025 Proxy Statement. Such information is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Information relating to the security ownership of certain beneficial owners and management will be included in our 2025 Proxy
Statement under the caption “Security Ownership of Certain Beneficial Owners and Management” and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Information relating to this item will be set forth under the captions “Certain Relationships and Related Party Transactions” and
“Corporate Governance and General Information Concerning the Board of Directors and its Committees” of our 2025 Proxy Statement. Such
information is incorporated herein by reference.
Item 14. Principal Accounting Fees and Services.
Information relating to this item will be set forth under the caption “Independent Registered Public Accounting Firm Fees” of our 2025
Proxy Statement. Such information is incorporated herein by reference.
85
PART IV
Item 15. Exhibits, Financial Statement Schedules.
(a)
List the following documents filed as a part of the report:
(1)
The Company’s Consolidated Financial Statements at December 31, 2024 and December 31, 2023 and for each of the
three years in the period ended December 31, 2024, and the notes thereto, together with the report of the independent
auditors on those Consolidated Financial Statements, are hereby filed as part of this report, beginning on page F-1.
(2)
Valuation & Qualifying Accounts for each of the three years in the period ended December 31, 2024 are hereby filed as
part of this report on page F-59.
(3)
See Exhibit Index below.
Item 16. Form 10-K Summary
None.
86
Exhibit Index
Exhibit
Number
Description
3.1#
Amended and Restated Certificate of Incorporation of Parsons Corporation.
3.2#
Amended and Restated Bylaws of Parsons Corporation.
3.3#
Second Amended and Restated Bylaws of Parsons Corporation.
4.1#
Description of Capital Stock of Parsons Corporation.
4.2#
Indenture, dated as of August 20, 2020, between Parsons Corporation and U.S. Bank National Association.
4.3#
Indenture, Dated as of February 26, 2024, between Parsons Corporation and U.S. Bank Trust Company, National
Association.
4.4#
Form of 2.625% Convertible Senior Notes due 2029 (included in Exhibit 4.3).
10.1#
2012 Amendment and Restatement of Parsons Employee Stock Ownership Plan (including all amendments to date), currently
in effect.
10.2#
2019 Amendment and Restatement of Parsons Employee Stock Ownership Plan.
10.3#
First Amendment to the 2019 Amendment and Restatement of Parsons Employee Stock Ownership Plan, effective January 1,
2020
10.4#
Second Amendment to the 2019 Amendment and Restatement of Parsons Employee Stock Ownership Plan, effective May 8,
2019.
10.5#
Parsons Corporation Employee Stock Ownership Trust Agreement, effective as of December 31, 2005.
10.6#+
Parsons Corporation Restricted Award Plan.
10.7#+
Form of Restricted Award Units agreement under the Parsons Corporation Restricted Award Plan.
10.8#+
Parsons Corporation Annual Incentive Plan dated January 1, 2020.
10.9#+
Parsons Corporation Annual Incentive Plan Amended as of October 19, 2020.
10.10#+
Parsons Corporation Annual Incentive Plan Amendment dated January 1, 2021.
10.11#+
Parsons Corporation Shareholder Value Plan.
10.12#+
Parsons Corporation Long Term Growth Plan.
10.13#+
Parsons Corporation Share Value Retirement Plan.
10.14#+
Parsons Corporation Incentive Award Plan.
10.15#+
Form of Restricted Stock Unit Agreement under the Parsons Corporation Incentive Award Plan.
10.16#+
Third Amendment to the 2019 Amendment and Restatement of Parsons Employee Stock Ownership Plan, effective January
1, 2021.
10.17#+
Form of Restricted Stock Unit Agreement under the Parsons Corporation Incentive Award Plan (for Non-Employee Director
Awards commencing in 2020).
10.18#+
Form of Restricted Stock Unit Agreement under the Parsons Corporation Incentive Award Plan (for Non-Employee Director
Fee Deferral Awards commencing in 2020).
10.19#+
Form of Restricted Stock Unit Agreement under the Parsons Corporation Incentive Award Plan (for Non-Employee Director
Awards in 2019).
10.20#+
Parsons Corporation Non-Employee Director Compensation Policy (as amended effective April 21, 2020).
10.21#+
Fee Deferral Plan for Outside Directors of the Parsons Corporation.
10.22#+
Parsons Corporation Employee Stock Purchase Plan.
10.23#+
Parsons Corporation Prospectus to Employee Stock Purchase Plan dated November 1, 2021.
87
10.26#+
Supplemental Executive Retirement Plan dated January 1, 1997.
10.27#+
First Amendment to the SERP effective January 1, 2020.
10.28#+
Change in Control Severance Agreement, dated August 6, 2021, by and between Parsons Corporation and Carey Smith.
10.29#+
Change in Control Severance Agreement, dated August 9, 2021, by and between Parsons Corporation and Charles L.
Harrington.
10.30#+
Change in Control Severance Agreement, dated August 6, 2021, by and between Parsons Corporation and George Ball.
10.31#+
Change in Control Severance Agreement, dated August 6, 2021, by and between Parsons Corporation and Michael Kolloway.
10.32#+
Change in Control Severance Agreement, dated August 6, 2021, by and between Parsons Corporation and David Spille.
10.33#+
Change in Control Severance Agreement, dated October 6, 2021, by and between Parsons Corporation and Matthew Ofilos.
10.34#+
Form of Equity Award Amendment Letter Agreement, dated August 10, 2020, by and between Parsons Corporation and
George L. Ball.
10.35#+
Form of Equity Award Amendment Letter Agreement, dated August 10, 2020, by and between Parsons Corporation and
Charles L. Harrington.
10.36#+
Form of Equity Award Amendment Letter Agreement, dated August 10, 2020, by and between Parsons Corporation and
Carey A. Smith.
10.37#+
Form of Equity Award Amendment Letter Agreement, dated August 10, 2020, by and between Parsons Corporation and
Michael R. Kolloway.
10.38#+
Form of Equity Award Amendment Letter Agreement, dated August 10, 2020, by and between Parsons Corporation and
Debra Fiori.
10.39#+
Form of Performance Stock Unit Award Amendment, dated July 19, 2021, by and between Parsons Corporation and Carey A.
Smith.
10.40#+
Form of Restricted Stock Unit Award Amendment, dated July 19, 2021, by and between Parsons Corporation and Carey A.
Smith.
10.41#+
Form of Performance Stock Unit Award Amendment, dated July 19, 2021, by and between Parsons Corporation and Charles
L. Harrington.
10.42#+
Form of Restricted Stock Unit Award Amendment, dated July 19, 2021, by and between Parsons Corporation and Charles L.
Harrington.
10.43#+
Form of Performance Stock Unit Award Amendment, dated July 19, 2021, by and between Parsons Corporation and George
Ball.
10.44#+
Form of Restricted Stock Unit Award Amendment, dated July 19, 2021, by and between Parsons Corporation and George
Ball.
10.45#+
Form of Performance Stock Unit Award Amendment, dated July 19, 2021, by and between Parsons Corporation and Michael
R. Kolloway.
10.46#+
Form of Restricted Stock Unit Award Amendment, dated July 19, 2021, by and between Parsons Corporation and Michael R.
Kolloway.
10.47#+
Form of Performance Stock Unit Award Amendment, dated July 19, 2021, by and between Parsons Corporation and David
Spille.
10.48#+
Form of Restricted Stock Unit Award Amendment, dated July 19, 2021, by and between Parsons Corporation and David
Spille.
88
10.52#
Fifth Amended and Restated Credit Agreement, dated as of November 15, 2017, by and among Parsons Corporation, the
lenders from time to time party thereto, The Bank of Tokyo-Mitsubishi UFJ, Ltd., as administrative agent, swing line bank and
co-lead arranger, Wells Fargo Bank, National Association, as syndication agent, The Bank of Nova Scotia, JPMorgan Chase
Bank, N.A., Sumitomo Mitsui Banking Corporation and U.S. Bank National Association, as documentation agents, and Wells
Fargo Securities, LLC, as co-lead arranger.
10.53#
First Amendment to the Fifth Amended and Restated Credit Agreement, dated as of January 4, 2019, by and among Parsons
Corporation, the Banks party thereto and MUFG Bank Ltd, as administrative agent.
10.54#
Credit Agreement dated June 25, 2021, among Parsons Corporation, the Guarantors, the Lenders, and Bank of America,
N.A., as Administrative Agent, Swingline Lender, and an L/C Issuer.
10.55#
Term Loan Agreement, dated as of January 4, 2019, among Parsons Corporation, MUFG Union Bank, N.A., as
administrative agent, The Bank of Nova Scotia, as syndication agent, the other financial institutions party thereto and MUFG
Union Bank, N.A. and The Bank of Nova Scotia, as co-lead arrangers.
10.56#
Form of Employee Stockownership Trust Agreement, dated as of June 8, 2020, by and between Parsons Corporation and
Newport Trust Company.
10.57#
Form of Registration Rights Agreement by and between Parsons Corporation and Newport Trust Company.
10.58#
Form of Fifth Amendment to the Parsons Corporation Retirement Savings Plan.
10.59#+
Form of Fourth Amendment to the 2019 Amendment and Restatement of Parsons Employee Stock Ownership Plan, effective
March 1, 2021.
10.60#+
Fourth Amendment to the Parsons Employee Stock Ownership Plan 2019 Amendment and Restatement, effective March 1,
2021.
10.61#+
Form of Indemnification Agreement between Parsons Corporation and certain of its directors and officers.
10.62#+
Form of Transition Agreement, dated February 2022, by and between Parsons Corporation and Charles L. Harrington.
10.63#
Delayed Draw Term Loan Agreement and Form of First Amendment to Credit Agreement.
10.65#+
Seventh Amendment to The Parsons Corporation Retirement Savings Plan (2017 Amendment and Restatement).
10.66#+
Fifth Amendment to The Parsons Employee Stock Ownership Plan 2019 Amendment and Restatement.
10.67#+
Sixth Amendment to The Parsons Employee Stock Ownership Plan 2019 Amendment and Restatement.
10.68#
Form of Confirmations of Base and Additional Call Option Transactions, between Parsons Corporation and Option
Counterparties.
10.69#+
Tenth Amendment To The Parsons Corporation Retirement Savings Plan (2017 Amendment and Restatement).
10.70#+
Seventh Amendment To The Parsons Employee Stock Ownership Plan 2019 Amendment and Restatement.
10.71#+*
Eleventh Amendment To The Parsons Corporation Retirement Savings Plan (2017 Amendment and Restatement)
19.3#
Parsons Corporation Insider Trading Compliance Policy
21.1*
List of Subsidiaries of the Registrant
23.1*
Consent of PricewaterhouseCoopers LLP.
31.1*
Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of
1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
89
31.2*
Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of
1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2*
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
97.1#
Parsons Corporation Executive Compensation Clawback Policy
97.2#
Parsons Corporation Dodd-Frank Compliant Compensation Clawback Policy
101*
The following financial statements from the Company’s Annual Report on Form 10-K for the year ended December 31, 2024,
formatted in Inline XBRL Taxonomy Extension Schema With Embedded Linkbases Document: (i) Consolidated Balance
Sheets, (ii) Consolidated Statements of Earnings, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv)
Consolidated Statements of Stockholders’ Equity, (v) Consolidated Statements of Cash Flows and (vi) Notes to Consolidated
Financial Statements, tagged as blocks of text and including detailed tags.
104*
Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in
Exhibits 101).
*
Filed herewith.
#
Previously filed.
+
Indicates a management contract or compensatory plan or arrangement.
90
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly
caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Parsons Corporation
Date: February 19, 2025
By:
/s/ Carey A. Smith
Carey A. Smith
Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following
persons on behalf of the Registrant in the capacities and on the dates indicated.
Name
Title
Date
/s/ Carey A. Smith
Chief Executive Officer and Director
February 19, 2025
Carey A. Smith
(Principal Executive Officer)
/s/ Matthew M. Ofilos
Chief Financial Officer
February 19, 2025
Matthew M. Ofilos
(Principal Financial and Accounting Officer)
/s/ George L. Ball
Director
February 19, 2025
George L. Ball
/s/ Mark K. Holdsworth
Director
February 19, 2025
Mark K. Holdsworth
/s/ Steven F. Leer
Director
February 19, 2025
Steven F. Leer
/s/ Letitia A. Long
Director
February 19, 2025
Letitia A. Long
/s/ Ellen M. Lord
Director
February 19, 2025
Ellen M. Lord
/s/ Darren W. McDew
Director
February 19, 2025
Darren W. McDew
/s/ Harry T. McMahon
Director
February 19, 2025
Harry T. McMahon
/s/ M. Christian Mitchell
Director
February 19, 2025
M. Christian Mitchell
/s/ Suzanne M. Vautrinot
Director
February 19, 2025
Suzanne M. Vautrinot
/s/ David C. Wajsgras
Director
February 19, 2025
David C. Wajsgras
F-1
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (PCAOB ID 238)
F-2
Consolidated Balance Sheets as of December 31, 2024 and December 31, 2023
F-5
Consolidated Statements of Income for the Years ended December 31, 2024, December 31, 2023
and December 31, 2022
F-6
Consolidated Statements of Comprehensive Income for the Years ended December 31, 2024, December 31, 2023 and December 31,
2022
F-7
Consolidated Statements of Changes in Shareholders’ Equity for the Years ended December 31, 2024, December 31, 2023 and
December 31, 2022
F-8
Consolidated Statements of Cash Flows for the Years ended December 31, 2024,
December 31, 2023 and December 31, 2022
F-9
Notes to Consolidated Financial Statements
F-10
F-2
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Parsons Corporation
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Parsons Corporation and its subsidiaries (the “Company”) as of
December 31, 2024 and 2023, and the related consolidated statements of income, of comprehensive income, of changes in shareholders’
equity and of cash flows for each of the three years in the period ended December 31, 2024, including the related notes and schedule of
valuation and qualifying accounts for each of the three years in the period ended December 31, 2024 appearing under Item 15(a)(2)
(collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial
reporting as of December 31, 2024 based on criteria established in Internal Control - Integrated Framework(2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the
Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period
ended December 31, 2024 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion,
the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on
criteria established in Internal Control - Integrated Framework(2013) issued by the COSO.
Change in Accounting Principle
As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for debt with
conversion and other options in 2024.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual
Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s
consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or
fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the
consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits
also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the
design and operating effectiveness of internal control based on the assessed risk. Our audits also included
F-3
performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis
for our opinions.
As described in Management’s Annual Report on Internal Control over Financial Reporting, management has excluded BlackSignal
Technologies, LLC (“BlackSignal”) and BCC Engineering, LLC (“BCC”) from its assessment of internal controls over financial reporting as of
December 31, 2024, because they were acquired by the Company in purchase business combinations during 2024. We have also excluded
BlackSignal and BCC from our audit of internal control over financial reporting. BlackSignal and BCC are wholly-owned subsidiaries whose
total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting represent
approximately 4.3% and 4.8%, of total assets, respectively and approximately 0.3% and 0.3% of total revenues, respectively, of the related
consolidated financial statement amounts as of and for the year ended December 31, 2024.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that
was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to
the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of
critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by
communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to
which it relates.
Revenue Recognition – Determination of Estimated Contract Cost and Variable Consideration Related to Estimated Claims Revenue for
Fixed-Price Contracts Recognized Over Time
As described in Notes 2 and 4 to the consolidated financial statements, revenue is derived from long-term contracts with customers whereby
the Company provides planning, design, engineering, technical, and construction and program management services. The Company enters
into cost-plus, time-and-materials, and fixed-price contracts with its customers. Fixed-price contract revenue recognized was $2.8 billion for
the year ended December 31, 2024, which accounts for approximately 42% of the Company’s consolidated revenue. Fixed-price contract
revenue is recognized over time using an input measure (i.e., costs incurred to date relative to total estimated costs at completion) to
measure progress. Under the cost-to-cost measure of progress method, the extent of progress towards completion is measured based on the
ratio of total costs incurred-to-date to the total estimated costs at completion of the performance obligation. Revenues, including estimated
fees or profits, are recorded proportionally as costs are
F-4
incurred. Management includes variable consideration, such as claims revenue, in the estimated transaction price to the extent it is probable
that a significant reversal of cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration
is resolved. Contract costs consist of direct costs on contracts, including labor and materials, amounts payable to subcontractors, direct
overhead costs and equipment expense (primarily depreciation, fuel, maintenance and repairs). Changes to estimated contract costs, either
due to unexpected events or revisions to management’s initial estimates, for a given project are recognized in the period in which they are
determined. Recognition of profit on long-term contracts requires the use of assumptions and estimates related to total contract revenue and
in particular estimated claims revenue, total estimated cost at completion, and the measurement of progress towards completion.
Management’s estimates are continually evaluated as work progresses and are revised when necessary.
The principal considerations for our determination that performing procedures relating to revenue recognition, specifically the determination
of estimated contract cost and variable consideration related to estimated claims revenue for fixed-price contracts recognized over time is a
critical audit matter are (i) the significant judgment by management in determining the estimated contract cost and variable consideration
related to estimated claims revenue for fixed-price contracts recognized over time; (ii) a high degree of auditor judgment, subjectivity, and
effort in performing procedures and evaluating audit evidence for the estimated contract cost and variable consideration related to
estimated claims revenue for fixed-price contracts recognized over time.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the
consolidated financial statements. These procedures included testing the effectiveness of controls relating to the revenue recognition
process, including controls over the determination of estimated contract cost and variable consideration related to estimated claims revenue
for fixed-price contracts recognized over time. These procedures also included, among others, for a selection of fixed-price contracts (i)
evaluating and testing management’s process for determining the estimated contract cost and variable consideration related to estimated
claims revenue, which included reading contracts and other documents related to the estimates, and testing of underlying incurred and
estimated contract costs; (ii) assessing management’s ability to reasonably estimate total contract costs by performing a comparison of the
actual estimated contract cost as compared with prior period estimates, including evaluating the timely identification of circumstances that
may warrant a modification to the estimated contract cost; and (iii) evaluating estimated claims revenue by inquiry with external legal counsel
regarding the underlying claim and agreeing estimated claims revenue to documents related to those estimates.
/s/ PricewaterhouseCoopers LLP
Los Angeles, California
February 19, 2025
We have served as the Company’s auditor since at least 1969. We have not been able to determine the specific year we began serving as
auditor of the Company.
F-5
PARSONS CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except shares and par value)
December 31, 2024
December 31, 2023
Assets
Current assets:
Cash and cash equivalents (including $202,121 and $128,761 Cash of consolidated joint ventures)
$
453,548 $
272,943
Accounts receivable, net (including $294,700 and $274,846 Accounts receivable of consolidated joint ventures, net)
1,100,396
915,638
Contract assets (including $7,906 and $11,096 Contract assets of consolidated joint ventures)
741,504
757,515
Prepaid expenses and other current assets (including $14,723 and $11,929 Prepaid expenses and other current
assets of consolidated joint ventures)
166,952
191,430
Total current assets
2,462,400
2,137,526
Property and equipment, net (including $2,971 and $3,274 Property and equipment of consolidated joint ventures,
net)
111,575
98,957
Right of use assets, operating leases (including $5,726 and $9,885 Right of use assets, operating leases of
consolidated joint ventures)
153,048
159,211
Goodwill
2,082,680
1,792,665
Investments in and advances to unconsolidated joint ventures
138,759
128,204
Intangible assets, net
349,937
275,566
Deferred tax assets
133,450
140,162
Other noncurrent assets
56,113
71,770
Total assets
$
5,487,962 $
4,804,061
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable (including $28,214 and $49,234 Accounts payable of consolidated joint ventures)
$
207,589 $
242,821
Accrued expenses and other current liabilities (including $198,797 and $145,040 Accrued expenses and other
current liabilities of consolidated joint ventures)
894,425
801,423
Contract liabilities (including $66,144 and $61,234 Contract liabilities of consolidated joint ventures)
289,799
301,107
Short-term lease liabilities, operating leases (including $3,522 and $4,753 Short-term lease liabilities, operating
leases of consolidated joint ventures)
52,725
58,556
Income taxes payable
7,701
6,977
Short-term debt
463,405
-
Total current liabilities
1,915,644
1,410,884
Long-term employee incentives
31,818
22,924
Long-term debt
784,096
745,963
Long-term lease liabilities, operating leases (including $2,203 and $5,132 Long-term lease liabilities, operating
leases of consolidated joint ventures)
114,386
117,505
Deferred tax liabilities
11,043
9,775
Other long-term liabilities
96,486
120,295
Total liabilities
2,953,473
2,427,346
Contingencies (Note 12)
Shareholders' equity:
Common stock, $1 par value; authorized 1,000,000,000 shares; 146,656,225 and 146,341,363 shares issued;
52,657,447 and 45,960,122 public shares outstanding; 54,117,904 and 59,879,857 ESOP shares outstanding
146,655
146,341
Treasury stock, 39,880,875 shares at cost
(815,282 )
(827,311 )
Additional paid-in capital
2,684,829
2,779,365
Retained earnings
426,781
203,724
Accumulated other comprehensive loss
(26,594 )
(14,908 )
Total Parsons Corporation shareholders' equity
2,416,389
2,287,211
Noncontrolling interests
118,100
89,504
Total shareholders' equity
2,534,489
2,376,715
Total liabilities and shareholders' equity
5,487,962
4,804,061
The accompanying notes are an integral part of these consolidated financial statements.
F-6
PARSONS CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
Years Ended December 31, 2024, December 31, 2023 and December 31, 2022
(in thousands, except for per share data)
2024
2023
2022
Revenue
$
6,750,576 $
5,442,749 $
4,195,272
Direct cost of contracts
5,344,154
4,236,735
3,248,550
Equity in (losses) earnings of unconsolidated joint ventures
(23,361 )
(47,751 )
16,347
Selling, general and administrative expenses
954,995
869,905
777,403
Operating income
428,066
288,358
185,666
Interest income
11,428
2,191
966
Interest expense
(51,582 )
(31,497 )
(23,185 )
Convertible debt repurchase loss
(18,355 )
—
—
Other income (expense), net
(1,906 )
5,001
2,775
Total other (expense) income
(60,415 )
(24,305 )
(19,444 )
Income before income tax expense
367,651
264,053
166,222
Income tax expense
(76,986 )
(56,138 )
(39,657 )
Net income including noncontrolling interests
290,665
207,915
126,565
Net income attributable to noncontrolling interests
(55,612 )
(46,766 )
(29,901 )
Net income attributable to Parsons Corporation
$
235,053 $
161,149 $
96,664
Earnings per share:
Basic earnings per share
$
2.21 $
1.53 $
0.93
Diluted earnings per share
$
2.12 $
1.42 $
0.87
The accompanying notes are an integral part of these consolidated financial statements.
F-7
PARSONS CORPORATION AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
Years Ended December 31, 2024, December 31, 2023 and December 31, 2022
(in thousands)
2024
2023
2022
Net income including noncontrolling interests
$
290,665 $
207,915 $
126,565
Other comprehensive income (loss), net of tax
Foreign currency translation adjustment, net of tax
(11,546 )
2,375
(7,752 )
Pension adjustments, net of tax
(131 )
568
(547 )
Comprehensive income including noncontrolling
interests, net of tax
278,988
210,858
118,266
Comprehensive income attributable to noncontrolling interests, net of tax
(55,621 )
(46,768 )
(29,883 )
Comprehensive income attributable to Parsons
Corporation, net of tax
$
223,367 $
164,090 $
88,383
The accompanying notes are an integral part of these consolidated financial statements.
F-8
PARSONS CORPORATION AND SUBSIDIARIES
Consolidated Statements of Changes in Shareholders’ Equity
Years Ended December 31, 2024, December 31, 2023 and December 31, 2022
(in thousands)
Commo
n
Stock
Treasury
Stock
Additional
Paid-in
Capital
Retained
Earnings
(Accumulate
d
Deficit)
Accumulated
Other
Comprehensiv
e
(Loss) Income
Total
Parsons
Equity
Noncontrolling
Interests
Total
Balances at December 31, 2021
$
146,27
7 $
(867,391 ) $
2,684,979 $
(53,529 ) $
(9,568 ) $
1,900,768 $
36,344 $
1,937,112
Comprehensive income
Net income
—
—
—
96,664
—
96,664
29,901
126,565
Foreign currency
translation gain
—
—
—
—
(7,734 )
(7,734 )
(18 )
(7,752 )
Pension adjustments, net
—
—
—
—
(547 )
(547 )
—
(547 )
Contributions of treasury
stock to ESOP
—
22,455
31,346
—
—
53,801
—
53,801
Contributions
—
—
—
—
—
—
10,266
10,266
Distributions
—
—
—
—
—
—
(24,128 )
(24,128 )
Issuance of equity securities,
net of retirements
429
—
(773 )
(46 )
—
(390 )
—
(390 )
Repurchases of common stock
(574 )
—
(21,426 )
—
—
(22,000 )
—
(22,000 )
Stock-based compensation
—
—
23,008
—
—
23,008
—
23,008
Balances at December 31, 2022
$
146,13
2 $
(844,936 ) $
2,717,134 $
43,089 $
(17,849 ) $
2,043,570 $
52,365 $
2,095,935
Comprehensive income
Net income
—
—
—
161,149
—
161,149
46,766
207,915
Foreign currency
translation loss, net
—
—
—
—
2,373
2,373
2
2,375
Pension adjustments, net
—
—
—
—
568
568
—
568
Contributions of treasury
stock to ESOP
—
17,625
39,804
—
—
57,429
—
57,429
Contributions
—
—
—
—
—
—
2,867
2,867
Distributions
—
—
—
—
—
—
(12,496 )
(12,496 )
Issuance of equity securities,
net of retirement
442
—
(1,171 )
(514 )
—
(1,243 )
—
(1,243 )
Repurchase of common
stock
(233 )
—
(10,767 )
—
—
(11,000 )
—
(11,000 )
Stock-based compensation
—
—
34,365
—
—
34,365
—
34,365
Balances at December 31, 2023
$
146,34
1 $
(827,311 ) $
2,779,365 $
203,724 $
(14,908 ) $
2,287,211 $
89,504 $
2,376,715
Comprehensive income
Net income
—
—
—
235,053
—
235,053
55,612
290,665
Foreign currency
translation gain, net
—
—
—
—
(11,555 )
(11,555 )
9
(11,546 )
Pension adjustments, net
—
—
—
—
(131 )
(131 )
—
(131 )
Contributions of treasury
stock to ESOP
—
12,029
46,199
—
—
58,228
—
58,228
Contributions
—
—
—
—
—
—
2,174
2,174
Distributions
—
—
—
—
—
—
(29,199 )
(29,199 )
Capped call transactions
—
—
(66,121 )
—
—
(66,121 )
—
(66,121 )
Repurchase of warrants
—
—
(104,952 )
—
—
(104,952 )
—
(104,952 )
Bond hedge termination
—
—
149,308
—
—
149,308
—
149,308
Convertible debt inducement
—
—
(147,105 )
—
—
(147,105 )
—
(147,105 )
Issuance of equity securities,
net of retirement
601
—
(3,235 )
(11,996 )
—
(14,630 )
—
(14,630 )
Repurchases of common stock
(287 )
—
(24,712 )
—
—
(24,999 )
—
(24,999 )
Stock-based compensation
—
—
56,082
—
—
56,082
—
56,082
Balances at December 31, 2024
$
146,65
5 $
(815,282 ) $
2,684,829 $
426,781 $
(26,594 ) $
2,416,389 $
118,100 $
2,534,489
The accompanying notes are an integral part of these consolidated financial statements.
F-9
PARSONS CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years Ended December 31, 2024, December 31, 2023 and December 31, 2022
(in thousands)
2024
2023
2022
Cash flows from operating activities
Net income including noncontrolling interests
$
290,665 $
207,915 $
126,565
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization
99,251
119,973
120,501
Amortization of debt issue costs
7,799
2,842
3,029
Loss (gain) on disposal of property and equipment
948
206
(164 )
Convertible debt repurchase loss
18,355
—
—
Provision for doubtful accounts
—
32
57
Deferred taxes
6,101
(8,914 )
(844 )
Foreign currency transaction gains and losses
6,919
(330 )
1,973
Equity in losses (earnings) of unconsolidated joint ventures
23,361
47,751
(16,347 )
Return on investments in unconsolidated joint ventures
40,162
48,970
28,417
Stock-based compensation
56,082
34,365
23,008
Contributions of treasury stock
59,778
58,172
54,659
Changes in assets and liabilities, net of acquisitions and newly consolidated joint ventures
Accounts receivable
(163,139 )
(176,181 )
(117,318 )
Contract assets
31,881
(119,898 )
(32,032 )
Prepaid expenses and other assets
35,830
(95,415 )
(1,405 )
Accounts payable
(42,686 )
24,497
(717 )
Accrued expenses and other current liabilities
79,984
163,440
3,879
Contract liabilities
(11,325 )
84,439
41,306
Income taxes
(341 )
2,886
(3,649 )
Other long-term liabilities
(16,019 )
12,949
6,608
Net cash provided by operating activities
523,606
407,699
237,526
Cash flows from investing activities
Capital expenditures
(49,213 )
(40,396 )
(30,593 )
Proceeds from sale of property and equipment
179
546
771
Payments for acquisitions, net of cash acquired
(428,710 )
(221,937 )
(379,467 )
Investments in unconsolidated joint ventures
(133,921 )
(119,582 )
(17,622 )
Return of investments in unconsolidated joint ventures
54,950
5,018
9,443
Proceeds from sales of investments in unconsolidated joint ventures
—
381
—
Net cash used in investing activities
(556,715 )
(375,970 )
(417,468 )
Cash flows from financing activities
Proceeds from borrowings under credit agreement
153,200
620,900
969,700
Proceeds from delayed draw term loan
—
—
350,000
Repayments of borrowings under credit agreement
(153,200 )
(620,900 )
(969,700 )
Repayment of private placement debt
—
—
(200,000 )
Payments for acquired warrants
—
—
(11,243 )
Proceeds from issuance of convertible notes due 2029
800,000
—
—
Repurchases of convertible notes due 2025
(497,613 )
—
—
Payments for debt issuance costs
(19,185 )
—
(862 )
Contributions by noncontrolling interests
2,174
2,867
10,266
Distributions to noncontrolling interests
(29,199 )
(12,496 )
(24,128 )
Repurchases of common stock
(25,000 )
(11,000 )
(22,000 )
Taxes paid on vested stock
(22,560 )
(7,301 )
(7,042 )
Capped call transactions
(88,400 )
—
—
Bond hedge termination
195,549
—
—
Redemption of warrants
(104,952 )
—
—
Proceeds from issuance of common stock
7,935
6,059
5,377
Net cash provided by (used in) financing activities
218,749
(21,871 )
100,368
Effect of exchange rate changes
(5,035 )
546
(1,770 )
Net increase (decrease) in cash, cash equivalents and restricted cash
180,605
10,404
(81,344 )
Cash, cash equivalents and restricted cash
Beginning of year
272,943
262,539
343,883
End of year
$
453,548 $
272,943 $
262,539
Cash paid during the year for
Interest
$
34,440 $
30,273 $
20,819
Income taxes (net of refunds)
$
65,274 $
74,133 $
32,175
The accompanying notes are an integral part of these consolidated financial statements.
F-10
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
1.
Description of Operations
Organization
Parsons Corporation, a Delaware corporation, and its subsidiaries (collectively, the “Company”) provide sophisticated design,
engineering and technical services, and smart and agile software to the United States federal government and Critical Infrastructure
customers worldwide. The Company performs work in various foreign countries through local subsidiaries, joint ventures and foreign offices
maintained to carry out specific projects.
2.
Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted
in the United States of America (“U.S. GAAP”) and include the accounts of Parsons Corporation and its subsidiaries and affiliates which it
controls. Interests in joint ventures that are controlled by the Company, or for which the Company is otherwise deemed to be the primary
beneficiary, are consolidated. For joint ventures in which the Company does not have a controlling interest, but exerts significant influence,
the Company applies the equity method of accounting. Intercompany accounts and transactions are eliminated in consolidation. Certain
amounts may not foot due to rounding.
Use of Estimates
The preparation of the consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual amounts could differ from those estimates. The Company’s most significant
estimates and judgments involve revenue recognition with respect to the determination of the costs to complete contracts and transaction
price; determination of self-insurance reserves; useful lives of property and equipment and intangible assets; valuation of deferred income tax
assets and uncertain tax positions, among others.
ESOP
The Company maintains a non-leveraged ESOP for eligible employees, for which the Company contributes shares of its own stock to
the ESOP trust each year. Throughout the year, as employee services are rendered, the Company records compensation expense based on
salaries of eligible employees. At each reporting period, the shares held within the ESOP or committed to be contributed to the ESOP are
adjusted to their redemption value through an offsetting charge or credit to retained earnings.
Treasury Stock
The Company records treasury stock purchases under the cost method whereby the entire cost of the acquired stock is recorded as
treasury stock. The Company records the reissuance of treasury stock using the first-in, first-out method of accounting. Contributions of
633,033 shares, 915,113 shares, and 1,188,129 shares of common stock were made to the ESOP in 2024, 2023 and 2022, respectively.
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-11
Share Repurchases
During the third quarter of 2021, the Company’s Board of Directors authorized the Company to acquire a number of shares of
Common Stock having an aggregate market value of not greater than $100,000,000 from time to time. The Board further amended this
authorization in February 2024 to restore the repurchase capacity to $100 million and removed the $25 million quarterly cap on such
repurchases.
At the time of the February 2024 authorization, the Company had repurchased shares with an aggregated market value (including
fees) of $54.7 million. The aggregate market value of shares of Common Stock the Company is authorized to acquire is now not greater than
$154.7 million.
Repurchased shares of common stock are retired and included in “Repurchases of common stock” in cash flows from financing
activities in the Consolidated Statements of Cash Flows.
Earnings per Share
Basic earnings per common share (“EPS”) is calculated by dividing Net income by the weighted average number of common shares
outstanding during the year. Diluted earnings per common share is calculated using the if-converted method by dividing adjusted net income
by adjusted weighted average outstanding shares, assuming conversion of all potentially dilutive securities. Upon contribution to the ESOP,
the shares become outstanding and are included within the earnings per share computations.
Revenue Recognition
In accordance with Account Standard Update ("ASC") 606 - Revenue From Contracts With Customers, the Company follows the five-
step process in ASC 606 to recognize revenue:
1.
Identify the contract
2.
Identify performance obligations
3.
Determine the transaction price
4.
Allocate the transaction price
5.
Recognize revenue
Contracts—Revenue is derived from long-term contracts with customers whereby the Company provides planning, design,
engineering, technical, and construction and program management services. The Company has contracts with the United States federal
government that contain provisions requiring compliance with the United States Federal Acquisition Regulation (“FAR”) and the United States
Cost Accounting Standards (“CAS”). These regulations are generally applicable to all of the Company’s federal government contracts and
are partially or fully incorporated in some local and state agency contracts. Most of the Company’s federal government contracts are subject
to termination at the convenience of the client. These contracts typically provide for reimbursement of costs incurred and payment of fees
earned through the date of such termination.
The Company enters into the following types of contracts with its customers:
Cost-Plus—Under cost-plus contracts, the Company is reimbursed for allowable or otherwise defined costs incurred, plus a fee. The
contracts may also include incentives for various performance criteria, including quality, timeliness, safety and cost-effectiveness. In addition,
costs are generally subject to review by clients and regulatory audit agencies, and such reviews could result in costs being disputed as non-
reimbursable under the terms of the contract.
Time-and-Materials—Under time-and-materials contracts, hourly billing rates are negotiated and charged to clients based on the actual
time spent on a project. In certain cases, these contracts may be
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-12
subject to maximum contract values. In addition, clients reimburse actual out-of-pocket costs for materials and other direct incidental
expenditures that are incurred in connection with the performance under the contract.
Fixed-Price—The Company enters into two types of fixed-price contracts: firm fixed-price (“FFP”) and fixed-price per unit (“FPPU”).
Under FFP contracts, clients pay an agreed fixed-amount negotiated in advance for a specified scope of work.
Contract Costs—Contract costs consist of direct costs on contracts, including labor and materials, amounts payable to subcontractors,
direct overhead costs and equipment expense (primarily depreciation, fuel, maintenance and repairs). All contract costs are recorded as
incurred. Changes to estimated contract costs, either due to unexpected events or revisions to management’s initial estimates, for a given
project are recognized in the period in which they are determined. Pre-contract costs are expensed as incurred unless they are expected to
be recovered from the client, generate or enhance resources that will be used in satisfying performance obligations in the future and directly
relate to an existing or anticipated contract. Costs to mobilize equipment and labor to a job site, prior to substantive work beginning
(“mobilization costs”) are capitalized as incurred and amortized over the expected duration of the contract. Additionally, the Company may
incur incremental costs to obtain certain contracts, such as selling and market costs, bid and proposal costs, sales commissions, and legal
fees, certain of which can be capitalized if they are recoverable under the contract. Capitalized contract costs are included in other current
assets on the consolidated balance sheets and were not material as of December 31, 2024 and December 31, 2023.
Performance Obligations—A performance obligation is a promise in a contract to transfer a distinct good or service to the customer
and is the unit of account in ASC 606. The transaction price of a contract is allocated to each distinct performance obligation and recognized
as revenue when, or as, the performance obligation is satisfied. To the extent a contract is deemed to have multiple performance obligations,
the Company allocates the transaction price of the contract to each performance obligation using our best estimate of the standalone selling
price of each distinct good or service in the contract. The Company determines the relative standalone selling price utilizing observable
prices for the sale of the underlying goods or services. Contracts are considered to have a single performance obligation if the promise to
transfer the individual goods or services is not separately identifiable from other promises in the contracts or is not distinct in the context of
the contract, which is mainly because the Company provides a significant service of integrating a complex set of tasks and components into
a single project or capability. Engineering and construction contracts are generally accounted for as a single performance obligation while our
engineering and construction supervision contracts are accounted for as two separate performance obligations. When providing construction
supervision services, the Company is not liable for the construction of the asset, but has an overall responsibility to oversee, coordinate,
measure, and evaluate the quality of construction work and the performance of the construction contractor on behalf of the customer.
Customers are generally billed as the Company satisfies its performance obligations and payment terms typically range from 30 to 120 days
from the invoice date. Billings under certain fixed-price contracts may be based upon the achievement of specified milestones, while some
arrangements may require advance customer payment. The Company’s contracts generally do not include a significant financing component.
Variable Consideration—The transaction price for the Company’s contracts may include variable consideration, which includes
increases to transaction price for approved and unpriced change orders, claims and incentives, and reductions to transaction price for
liquidated damages. Change orders, claims and incentives are generally not distinct from the existing contract due to the significant
integration service provided in the context of the contract and are accounted for as a modification of the existing contract and performance
obligation. The Company estimates variable consideration for a performance obligation utilizing one of the two prescribed methods,
depending on which method better predicts the amount of consideration to which the Company will be entitled (or the amount the Company
expects to incur in the case of liquidated damages). Such methods are: (a) the expected value method, whereby the amount of variable
consideration to be recognized represents the sum of probability weighted amounts in
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-13
a range of possible consideration amounts, and (b) the most likely amount method, whereby the amount of variable consideration to be
recognized represents the single most likely amount in a range of possible consideration amounts. When applying these methods, the
Company considers all information that is reasonably available, including historical, current and estimates of future performance. The
expected value method is utilized in situations where a contract contains a large number of possible outcomes, while the most likely amount
method is utilized in situations where a contract has only two possible outcomes.
The Company includes variable consideration in the estimated transaction price to the extent it is probable that a significant reversal of
cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is resolved. The Company’s
estimates of variable consideration and determination of whether to include estimated amounts in transaction price are based largely on an
assessment of anticipated performance and all information (historical, current and forecasted) that is reasonably available. The effect of
variable consideration on the transaction price of a performance obligation is recognized as an adjustment to revenue on a cumulative catch-
up basis.
Change Orders—Change orders, which are a normal and recurring part of business, may include changes in specifications or design,
manner of performance, facilities, equipment, materials, sites and period of completion of the work. The Company or customer may initiate
change orders. Most change orders are not distinct from the existing contract and are accounted for as part of that existing contract. The
effect of a change order on the transaction price and measure of progress for the performance obligation to which it relates is recognized as
an adjustment to revenues (either as an increase in or a reduction of revenues) on a cumulative catch-up basis. Revenues from unpriced
change orders are recognized to the extent of the amounts the Company expects to recover, consistent with the variable consideration policy
discussed above. If it is probable that a reversal of revenues will occur, the costs attributable to change orders are treated as contract costs
without incremental revenues. To the extent change orders included in the price are not resolved in the Company’s favor, there could be
reductions in, or reversals of previously reported amounts of, revenues and profits, and charges against current earnings, which could be
material.
Claims Revenue—Claims revenue are amounts in excess of agreed contract prices that the Company seeks to collect from clients or
others for customer-caused delays, errors in specifications and designs, contract terminations, change orders that are in dispute, or other
causes of unanticipated additional contract costs, including factors outside of our control, and therefore the Company believes it is entitled to
additional compensation. Claims revenue, when recorded, is only recorded to the extent it is probable that a significant reversal of cumulative
revenue recognized will not occur. The Company includes certain claims in the transaction price when the claims are legally enforceable, the
Company considers collection to be probable and believes it can reliably estimate the ultimate value. The Company continues to engage in
negotiations with its customers on outstanding claims. However, these claims may be resolved at amounts that differ from current estimates,
which could result in increases or decreases in future estimated contract profits or losses.
Warranties—In most cases, contracts include assurance-type warranties that the Company’s performance is free from material defect
and consistent with the specifications of the Company’s contracts, which do not give rise to a separate performance obligation. To the extent
the warranty terms provide the customer with an additional service, such as extended maintenance services, such warranty is accounted for
as a separate performance obligation.
Revenue recognized over time—The Company’s performance obligations are generally satisfied over time as work progresses
because of continuous transfer of control to the customer and the Company has the right to bill the customer as costs are incurred. Typically,
revenue is recognized over time using an input measure (i.e. costs incurred to date relative to total estimated costs at completion) to
measure progress. The Company generally uses the cost-to-cost measure of progress method because it best depicts the transfer of control
to the customer which occurs as the Company incurs costs on its contracts. Under the cost-to-cost measure of progress method, the extent
of progress towards completion is
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-14
measured based on the ratio of total costs incurred to-date to the total estimated costs at completion of the performance obligation.
Revenues, including estimated fees or profits, are recorded proportionally as costs are incurred. Any expected losses on construction-type
contracts in progress are charged to earnings, in total, in the period the losses are identified. The Company recognizes adjustments in
estimated profit on contracts under the cumulative catch-up method. Under this method, the impact of the adjustment on profit recorded to
date is recognized in the period the adjustment is identified. Revenue and profit in future periods of contract performance is recognized using
the adjusted estimate. If at any time the estimate of contract profitability indicates an anticipated loss on the contract, the Company
recognizes the total loss in the period it is identified.
Right to invoice practical expedient—For performance obligations satisfied over time where the Company has a right to consideration
from a customer in an amount that corresponds directly with the value of the Company’s performance to-date, the Company recognizes
revenue in the amount to which it has a right to invoice. For the Company’s reimbursable services contracts, revenue is recognized using the
right to invoice practical expedient, or on a cost-to-cost measure of progress method. The Company will select the method that best
represents progress on a project.
Revenue recognized at a point in time—For performance obligations satisfied at a point in time, revenue is recognized when the
services are performed, control is transferred, and the performance obligation is complete. The Company recognizes revenue at a point in
time for vehicle inspection services. Revenue related to the inspection service is recognized for each vehicle inspection at the point the
Company has completed the inspection.
In the Company’s industry, recognition of profit on long-term contracts requires the use of assumptions and estimates related to total
contract revenue and in particular estimated claims revenue, total estimated cost at completion, and the measurement of progress towards
completion. Estimates are continually evaluated as work progresses and are revised when necessary. When a change in estimate is
determined to have an impact on contract profit, the Company records a positive or negative adjustment to the consolidated statements of
income.
Cash Equivalents
The Company considers all highly liquid investments with original maturities of less than three months to be cash equivalents. Cash
equivalent investments are carried at cost, which approximates fair value, and consist primarily of United States Treasuries, time deposits,
and other forms of short-term fixed income investments.
Restricted Cash and Investments
Restricted cash and investments held in trust accounts represent collateral for certain incentive programs.
Accounts Receivable, Net
Accounts receivable includes billed and unbilled amounts and are recognized in the period when the Company’s rights to receive
consideration are unconditional.
The Company establishes an allowance for doubtful accounts based on consideration of trends in actual and forecasted credit quality
of clients, including delinquency and payment history, type of client, such as a government agency or commercial sector client, and general
economic conditions and particular industry conditions that may affect a client’s ability to pay. Past due receivable balances are written off
when internal collection efforts have been unsuccessful in collecting the amounts due.
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-15
Contract Assets and Contract Liabilities
Projects with performance obligations recognized over time that have revenue recognized to-date in excess of cumulative billings and
unbilled accounts receivable are reported on our consolidated balance sheets as “Contract assets”. Contract retentions, included in contract
assets, represent amounts withheld by clients, in accordance with underlying contract terms, until certain conditions are met or the project is
completed. The operating cycle for certain long-term contracts may extend beyond one year, and, accordingly, collection of retainage on
those contracts may extend beyond one year. Contract assets are reclassified to accounts receivable when the right to consideration
becomes unconditional.
Contract liabilities on uncompleted contracts represent the excess of cash collected from clients and billings to clients on contracts in
advance of work performed over the amount of revenue recognized and provisions for losses. The majority of these amounts are expected to
be earned within 12 months and are classified as current liabilities.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of cash and cash
equivalents and accounts receivables. The Company’s cash is primarily held with major banks and financial institutions throughout the world.
At times, cash balances may be in excess of the amount insured.
The Company is involved in a significant volume of contracts with the United States federal government and state and local
governments. Approximately 59%, 55%, and 53% of consolidated revenues for the years ended December 31, 2024, December 31, 2023
and December 31, 2022, respectively, and approximately 23% and 18% of accounts receivable as of December 31, 2024 and December 31,
2023, respectively were derived from contracts with the United States federal government. No other customers represented 10% or more of
consolidated revenues or accounts receivable in any of the periods presented. Two customer sets within the United States federal
government represent over 20% of total Company revenue for the year ended December 31, 2024.
In order to mitigate the credit risk associated with customers, the Company performs periodic credit evaluations of its customers’
financial condition.
Property and Equipment
Property and equipment are stated at cost and are shown net of accumulated depreciation. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets. Depreciation of leasehold improvements is computed using the straight-line
method over the shorter of their estimated useful lives or the remaining term of the lease.
The cost of assets retired or otherwise disposed of and the related accumulated depreciation are eliminated from the accounts, and
any gain or loss thereon is included in net income. Expenditures for maintenance and repairs are expensed as incurred. Property and
equipment are reviewed for impairment when events or circumstances change that indicate they may not be recoverable. Impairment losses
are recognized when estimated future cash flows expected to result from the use of the assets and their eventual disposition are less than
their carrying amount, in which case the asset is written down to its fair value.
Leases
The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease ROU assets and
current and long-term operating lease liabilities in the consolidated balance sheets. Finance leases are included in other noncurrent assets,
accrued expenses and other current liabilities and other long-term liabilities in the consolidated balance sheets.
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-16
ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent our obligation
to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on
the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, incremental
borrowing rates are used based on the information available at commencement date in determining the present value of lease payments.
The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Lease terms may include options to
extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for operating lease payments is
recognized on a straight-line basis over the lease term.
We have lease agreements with lease and non-lease components where the lease consideration is allocated between the components
based on relative standalone prices. For real property leases, allocations of lease consideration between lease and non-lease components
are immaterial. For certain equipment leases, such as vehicles, we account for the lease and non-lease components as a single lease
component. Additionally, for certain equipment leases, we apply a portfolio approach to effectively account for the operating lease ROU
assets and liabilities.
Equity-Based Compensation
The Company measures the value of services received from employees and directors in exchange for an equity-based award based
on the grant date fair value. The Company issues equity-based awards that settle in shares of the Company’s common stock. Awards
containing performance measures are adjusted at each reporting period for the number of shares expected to be earned. Compensation cost
for performance awards are trued-up at each reporting period for the number of shares expected to be earned pro-rated for the portion of the
requisite service period rendered. The Company recognizes compensation costs for these awards on either a straight-line or accelerated
basis over the vesting period of the award in selling, general and administrative expense in the consolidated statements of income. For
awards that include market conditions, the grant date fair value is determined using a Monte Carlo simulation.
Business Combinations
The Company accounts for business combinations using the acquisition method, under which the purchase price of an acquired
company is allocated to the tangible and intangible assets acquired and the liabilities assumed on the basis of their fair values at the date of
acquisition. Any excess of purchase price over the fair value of tangible and intangible assets acquired and liabilities assumed is allocated to
goodwill. The determination of fair values of assets acquired and liabilities assumed requires the Company to make estimates and use
valuation techniques when a market value is not readily available.
In determining the fair value of acquired intangible assets from our business acquisitions, the Company uses the multi-period excess
earnings method to value customer relationships and backlog and values developed technologies using the relief-from royalty method. The
Company’s determination of the fair value of the intangible assets acquired involves the use of significant estimates and assumptions related
to discount rates, revenue growth rates, projected margins, and customer revenue attrition rates.
Certain business acquisitions include contingent consideration. Contingent consideration is recorded at its fair value, using a Black-
Scholes model, within other liabilities or other long-term liabilities, as appropriate. The fair value of contingent consideration involves the use
of significant estimates and assumptions related to risks associated with earnout, i.e. risk in the underlying metric, risk in the earnout
structure, counterparty credit risk, projected revenue, the revenue discount rate, the revenue volatility, and the Company's credit adjusted
discount rate. Subsequent adjustments to these assumptions can cause changes to the measure of contingent consideration.
The Company adjusts the preliminary purchase price allocation, as necessary, during the measurement period of up to one year after
the acquisition closing date as the Company obtains more
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-17
information as to facts and circumstances existing at the acquisition date. Acquisition-related costs are recognized separate from the
acquisition and are expensed as incurred.
Consolidation of Joint Ventures and Variable Interest Entities
The Company participates in joint ventures, which include partnerships and partially owned limited liability corporations, to bid,
negotiate and complete specific projects. The Company is required to consolidate these joint ventures if it holds the majority voting interest or
if the joint venture is determined to be a variable interest entity (“VIE”) for which the Company is the primary beneficiary, as described below.
A VIE is an entity with one or more of the following characteristics: (a) the total equity investment at risk is not sufficient to permit the
entity to finance its activities without additional financial support; (b) as a group, the holders of the equity investment at risk lack the ability to
make certain decisions, the obligation to absorb expected losses or the right to receive expected residual returns; or (c) an equity investor
has voting rights that are disproportionate to its economic interest and substantially all of the entity’s activities are on behalf of the investor
with disproportionately low voting rights. The Company’s VIEs may be funded through contributions, loans and/or advances from the joint
venture partners or by advances and/or letters of credit provided by clients. Certain VIEs are directly governed, managed, operated and
administered by the joint venture partners. Others have no employees and, although these entities own and hold the contracts with the
clients, the services required by the contracts are typically performed by the joint venture partners or by other subcontractors.
The Company is considered the primary beneficiary and required to consolidate a VIE if it has the power to direct the activities that
most significantly impact that VIE’s economic performance, and the obligation to absorb losses or the right to receive benefits of that VIE that
could potentially be significant to the VIE. In determining whether the Company is the primary beneficiary, significant assumptions and
judgments include the following: (1) identifying the significant activities and the parties that have the power to direct them; (2) reviewing the
governing board composition and participation ratio; (3) determining the equity, profit and loss ratio; (4) determining the management-sharing
ratio; (5) reviewing employment terms; and (6) reviewing the funding and operating agreements. Examples of significant activities currently
being performed by the Company’s significant consolidated and unconsolidated joint ventures include engineering and design services;
management consulting services; procurement and construction services; program management; construction management; and operations
and maintenance services. If the Company determines that the power to direct the significant activities is shared by two or more joint venture
parties, then there is no primary beneficiary and no party consolidates the VIE. In making the shared-power determination, the Company
analyzes the key contractual terms, governance, related party and de facto agency as they are defined in the accounting standard, and other
arrangements.
Goodwill
The Company performs a goodwill impairment test annually, on October 1st of each year and additionally, performs a quarterly
qualitative assessment to address whether a triggering event has occurred that would require an impairment test in the interim period.
For purposes of impairment testing, goodwill is allocated to the applicable reporting units based on the current reporting structure.
Reporting units are operating segments or components of operating segments where discrete financial information is available and segment
management regularly reviews the operating results. When evaluating goodwill for impairment, the Company may decide to first perform a
qualitative assessment, or “step zero” impairment test, to determine whether it is more likely than not that impairment has occurred. If the
Company does not perform a qualitative assessment, or if the Company determines that it is not more likely than not that the fair value of its
reporting units exceeds their carrying amounts, the Company performs a quantitative assessment and calculates the estimated
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-18
fair value of the respective reporting unit. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in
the amount the carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.
The Company’s decision to perform a qualitative impairment assessment in a given year is influenced by a number of factors, including
the significance of the excess of the Company’s estimated fair value over carrying value at the last quantitative assessment date, the amount
of time in between quantitative fair value assessments, and the date of its acquisitions, if any.
Intangible Assets
Intangible assets with finite lives arise from business acquisitions and are amortized based on the period over which the contractual or
economic benefit of the intangible assets are expected to be realized or on a straight-line basis over the useful lives of the underlying assets,
ranging from one to sixteen years. These primarily consist of customer relationships, developed technology, backlog, and covenants not to
compete. When indicators of a potential impairment exist, the Company assesses the recoverability of the unamortized balance of its
intangible assets by first comparing undiscounted expected cash flows associated with the asset, or the asset group they are part of, to its
carrying value. Should the review indicate that the carrying value is not fully recoverable, the excess of the carrying value over the fair value
of the intangible assets would be recognized as an impairment loss.
Income Taxes
Income taxes are accounted for under the asset and liability method. This approach requires the recognition of deferred tax liabilities
and assets to reflect the tax effects of temporary differences between the financial statement carrying amounts and tax basis of the
Company’s assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to be in effect when the
asset or liability is recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the
period that includes the enactment date. Deferred tax assets are evaluated for future realization and valuation allowances are established
when, in our opinion, it is more likely than not that all or some portion of the asset will not be realized.
The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained on
examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements on
a particular tax position are measured based on the largest benefit that is greater than 50 percent likely of being realized. The amount of
unrecognized tax benefits (“UTB”) is adjusted as appropriate for changes in facts and circumstances, such as significant amendments to
existing tax law, new regulations or interpretations by the taxing authorities, new information obtained during a tax examination, or resolution
of an examination. The Company recognizes both accrued interest and penalties, where appropriate, related to UTBs in income tax expense.
Foreign Currency Translation
The Company’s reporting currency is the U.S. Dollar. The functional currency of the Company’s foreign entities is typically the currency
of the primary environment in which they operate. For foreign entities whose functional currency is not the U.S. dollar, the assets and
liabilities are translated based on exchange rates in effect at the balance sheet date, while the income and expense accounts are translated
using the average exchange rates during the period. Translation gains or losses, net of income tax effects, are reflected in accumulated other
comprehensive income on the consolidated balance sheets. Transaction gains and losses due to movements in exchange rates between the
functional currency and the currency in which a foreign currency transaction is denominated are recognized as “Other income (expense), net”
in the Company’s consolidated statements of income.
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-19
Self-Insurance
The Company typically utilizes third-party insurance subject to varying retention levels or self-insurance. The Company is self-insured
for a portion of the losses and liabilities primarily associated with workers’ compensation, general, professional, automobile, employee
matters, certain medical plans, and project-specific liability claims. Losses are accrued based upon the Company’s estimates of the
aggregate liability for claims incurred using historical experience and certain actuarial assumptions, as provided by an independent actuary.
The estimate of self-insurance liability includes an estimate of incurred but not reported claims, based on data compiled from historical
experience.
New Accounting Pronouncements
In the fourth quarter of 2024, The Financial Accounting Standards Board ("FASB") Issued Accounting Standards Update (“ASU”) 2024-
04, "Debt—Debt with Conversion and Other Options (Subtopic 470-20)" ("ASU 2024-04"). ASU 2024-04 improves the relevance and
consistency in application of the induced conversion guidance in Subtopic 470-20, Debt–Debt with Conversion and Other Options. The
amendments in ASU 2024-04 clarify the requirements for determining whether certain settlements of convertible debt instruments should be
accounted for as an induced conversion. Under the amendments, to account for a settlement of a convertible debt instrument as an induced
conversion, an inducement offer is required to provide the debt holder with, at a minimum, the consideration (in form and amount) issuable
under the conversion privileges provided in the terms of the instrument. The amendments in this Update are effective for all entities for
annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early
adoption is permitted for all entities that have adopted the amendments in ASU 2020-06. The Company adopted ASU 2020-06 in the first
quarter of 2021. The Company has elected to early adopt ASU 2024-04 as of January 1, 2024 on a prospective basis. The adoption of this
ASU had a material impact on the Company's consolidated financial statements.
In the first quarter of 2024, the Company took an extinguishment charge related to the partial repurchase of Convertible Senior Notes
due 2025. This repurchase was recorded in the Company's financial statements as a loss on debt extinguishment according to the applicable
guidance prior to ASU 2024-04. With the early adoption of ASU 2024-04, the Company reassessed the accounting conclusion of the first
quarter 2024 partial repurchase of Convertible Senior Notes due 2025 and concluded the partial repurchase is subject to inducement
accounting under ASU 2024-04.
Under inducement accounting, the difference in the fair value of the securities issuable pursuant to conversion privileges compared to
the fair value of the consideration paid on the date of the acceptance of the inducement offer is recorded to inducement expense. The
difference in the consideration paid to note holders, less inducement expenses, less the fair value of the notes repurchased is charged to
equity.
For the year ended December 31, 2024, the Company reversed the loss on extinguishment of debt for the partial repurchase of the
Convertible Senior Notes due 2025 and recorded the repurchase transaction as an induced conversion. This change from extinguishment to
inducement accounting resulted in the Company (i.) reversing the $211.0 million loss and the related $49.9 million tax benefit on
extinguishment of debt, recorded in Q1 2024, (ii.) recording a $18.4 million convertible debt repurchase loss, (iii.) the difference between the
extinguishment loss and inducement expense of $192.6 million recorded to equity, and (iv.) the related tax benefit of $45.6 million recorded
to equity. See "Note 11—Debt and Credit Facilities" for a further discussion of the first quarter 2024 extinguishment accounting and
subsequent change to inducement accounting. Also see "Note 21—Quarterly Information" for the quarterly financial statement impacts
related to this accounting change.
In the fourth quarter of 2024, The FASB Issued ASU 2024-03 "Income Statement—Reporting Comprehensive Income—Expense
Disaggregation Disclosures (Subtopic 220-40)" (ASU 2024-03"). ASU 2024-03 requires disclosure, in the notes to financial statements, of
specified information about certain costs and expenses. ASU 2024-03 is effective for annual reporting periods beginning after December 15,
2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The adoption of this ASU will not have a
material impact on the Company's consolidated financial statements.
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-20
In the fourth quarter of 2023, The FASB Issued Accounting Standards Update (“ASU”) 2023-09, "Income Taxes (Topic 740)" ("ASU
2023-09"). ASU 2023-09 enhances the transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023-09
addresses investor requests for more transparency about income tax information through improvements to income tax disclosures primarily
related to the rate reconciliation and income taxes paid information. ASU 2023-09 also includes certain other amendments to improve the
effectiveness of income tax disclosures. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. Early adoption is
permitted. The adoption of this ASU will not have a material impact on the Company's consolidated financial statements.
In the fourth quarter of 2023, The FASB Issued ASU 2023-07, "Segment Reporting (Topic 280)". ASU 2023-07 introduces enhanced
disclosures about significant segment expenses along with other enhanced segment disclosures. ASU 2023-07 is effective for fiscal years
beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted.
The adoption of this ASU did not have a material impact on the Company's consolidated financial statements.
During July 2023, the FASB Issued ASU 2023-03. ASU 2023-03 incorporates, into certain accounting standards, amendments to SEC
paragraphs pursuant to SEC Staff Accounting Bulletin No. 120, SEC Staff Announcement at the March 24, 2022 EITF meeting, and Staff
Accounting Bulletin Topic 6.B, Accounting Series Release 280—General Revisions of Regulation S-X: Income or Loss Applicable to
Common Stock. These rules are effective immediately. The adoption of this ASU will not have a material impact on the Company's
consolidated financial statements.
In the first quarter of 2022, the Company early adopted ASU 2021-08, “Business Combinations (Topic 805) ("ASU 2021-08"):
Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”. The new guidance requires that the approach of
ASC 606, Revenue from Contracts with Customers, should be used to measure an acquired revenue contract in a business combination.
This guidance is to be applied (1) retrospectively to all business combinations for which the acquisition date occurs on or after the beginning
of the fiscal year that includes the interim period of early application and (2) prospectively to all business combinations that occur on or after
the date of initial application. The early adoption of ASU 2021-08 did not have a material impact on the Company's consolidated financial
statements.
3.
Acquisitions
BCC Engineering, LLC
On November 1, 2024, the Company acquired a 100% ownership interest in BCC Engineering, LLC ("BCC") a privately owned
company, for $232.7 million from cash on hand. BCC is a full-service engineering firm that provides planning, design, and management
services for transportation, civil and structural engineering projects in Florida, Georgia, Texas, South Carolina, and Puerto Rico. This
acquisition strengthens Parsons’ position as an infrastructure leader while expanding the company’s reach in the southeastern United States.
In connection with this acquisition, the Company recognized $4.2 million of acquisition-related expenses in “Selling, general and
administrative expense” in the consolidated statements of income for the year ended December 31, 2024, including legal fees, consulting
fees, and other miscellaneous direct expenses associated with the acquisition.
The following table summarizes the acquisition date fair value of the purchase consideration transferred (in thousands):
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-21
Amount
Cash and cash equivalents
$
2,839
Accounts receivable
24,142
Contract assets
16,649
Prepaid expenses and other current assets
2,483
Right of use assets, operating leases
9,438
Property and Equipment
1,586
Other noncurrent assets
1,743
Goodwill
174,532
Intangible assets
32,400
Accounts payable
(8,668 )
Accrued expenses and other current liabilities
(7,236 )
Contract liabilities
(4,446 )
Short-term lease liabilities, operating leases
(1,977 )
Deferred income taxes
(2,203 )
Long-term lease liabilities, operating leases
(7,462 )
Other long-term liabilities
(1,155 )
Net assets acquired
$
232,665
Of the total purchase price, the following values were preliminarily assigned to intangible assets (in thousands, except for years):
Gross
Carrying
Amount
Amortization
Period
(in years)
Customer relationships
$
6,500
4
Backlog
23,400
4
Non-compete agreements
1,700
3
Other
$
800
1
Amortization expense of $1.5 million related to these intangible assets was recorded for the year ended December 31, 2024. The
entire value of goodwill was assigned to the Critical Infrastructure reporting unit and represents synergies expected to be realized from this
business combination. $45.8 million of goodwill is deductible for tax purposes.
The amount of revenue generated by BCC and included within consolidated revenue is $20.3 million for the year ended December 31,
2024. The Company has determined that the presentation of net income from the date of acquisition is impracticable due to the integration of
general corporate functions upon acquisition.
The Company is still in the process of finalizing its valuation of the assets and liabilities acquired.
Supplemental Pro Forma Information (Unaudited)
Supplemental information of unaudited pro forma operating results assuming the BCC acquisition had been consummated as of the
beginning of fiscal year 2023 (in thousands) is as follows:
2024
2023
(unaudited)
(unaudited)
Pro forma Revenue
$
6,838,190
$
5,537,090
Pro forma Net Income including noncontrolling interests
286,948
189,200
The unaudited pro forma supplemental information is based on estimates and assumptions which the Company believes are
reasonable and reflects the pro forma impact of additional amortization related to the fair value of acquired intangible assets, and the pro
forma impact of reflecting acquisition costs, which consisted of legal, advisory and due diligence fees and expenses. This supplemental pro
forma information has been prepared for comparative purposes and does not purport to be indicative of what
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-22
would have occurred had the acquisition been consummated during the periods for which pro forma information is presented.
BlackSignal Technologies, LLC.
On August 16, 2024, the Company acquired a 100% ownership interest in BlackSignal Technologies, LLC, ("BlackSignal") a privately-
owned company, for $203.7 million from cash on hand. Headquartered in Chantilly, Virginia, BlackSignal is a next-generation digital signal
processing, electronic warfare, and cyber security provider built to counter near peer threats. Parsons believes that the acquisition will
expand Parsons' customer base across the Department of Defense and Intelligence Community and significantly strengthen Parsons'
positioning within cyber warfare, while adding new capabilities in the counterspace radio frequency domain. In connection with this
acquisition, the Company recognized $2.5 million of acquisition-related expenses in “Selling, general and administrative expense” in the
consolidated statements of income for the year ended December 31, 2024, including legal fees, consulting fees, and other miscellaneous
direct expenses associated with the acquisition.
The following table summarizes the acquisition date fair value of the purchase consideration transferred (in thousands):
Amount
Cash and cash equivalents
$
4,917
Accounts receivable
5,171
Contract assets
3,209
Prepaid expenses and other current assets
447
Right of use assets, operating leases
5,370
Property and Equipment
997
Goodwill
119,663
Intangible assets
97,600
Other assets
145
Accounts payable
(951 )
Accrued expenses and other current liabilities
(4,999 )
Short-term lease liabilities, operating leases
(800 )
Deferred income taxes
(22,461 )
Long-term lease liabilities, operating leases
(4,570 )
Net assets acquired
$
203,738
Of the total purchase price, the following values were preliminarily assigned to intangible assets (in thousands, except for years):
Gross
Carrying
Amount
Amortization
Period
(in years)
Customer relationships
$
73,900
14
Backlog
11,700
3
Developed technologies
5,200
5
Non-compete agreements
6,100
3
Other
$
700
1
Amortization expense of $4.3 million related to these intangible assets was recorded for the year ended December 31, 2024. The
entire value of goodwill was assigned to the Federal Solutions reporting unit and represents synergies expected to be realized from this
business combination. $15.7 million of goodwill is deductible for tax purposes.
The amount of revenue generated by BlackSignal and included within consolidated revenue is $22.7 million for the year ended
December 31, 2024. The Company has determined that the presentation of net
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-23
income from the date of acquisition is impracticable due to the integration of general corporate functions upon acquisition.
Supplemental Pro Forma Information (Unaudited)
Supplemental information of unaudited pro forma operating results assuming the BlackSignal acquisition had been consummated as of
the beginning of fiscal year 2023 (in thousands) is as follows:
2024
2023
(unaudited)
(unaudited)
Pro forma Revenue
$
6,782,552
$
5,481,036
Pro forma Net Income including noncontrolling interests
283,900
185,954
The unaudited pro forma supplemental information is based on estimates and assumptions which the Company believes are
reasonable and reflects the pro forma impact of additional amortization related to the fair value of acquired intangible assets, and the pro
forma impact of reflecting acquisition costs, which consisted of legal, advisory and due diligence fees and expenses. This supplemental pro
forma information has been prepared for comparative purposes and does not purport to be indicative of what would have occurred had the
acquisition been consummated during the periods for which pro forma information is presented.
I.S. Engineers, LLC
On October 31, 2023, the Company entered into a Membership Interest Purchase Agreement to acquire a 100% ownership interest in
I.S. Engineers, LLC (“I.S. Engineers”), a privately-owned company, for $12.2 million in cash. Headquartered in Texas, I.S. Engineers
provides full service consulting specializing in transportation engineering, including roads and highways, and program management. The
acquisition was entirely funded by cash on-hand. In connection with this acquisition, the Company recognized $0.3 million of acquisition
related “Selling, general and administrative expense” in the consolidated statements of income for the year ended December 31, 2023,
including legal fees, consulting fees, and other miscellaneous direct expenses associated with the acquisition. The Company allocated the
purchase price to the appropriate classes of tangible assets and liabilities and assigned the excess of $11.9 million entirely to goodwill. The
entire value of goodwill was assigned to the Critical Infrastructure reporting unit and represents synergies expected to be realized from this
business combination. No goodwill is deductible for income tax purposes.
Sealing Technologies, Inc.
On August 23, 2023, the Company acquired a 100% ownership interest in Sealing Technologies, Inc (“SealingTech”), a privately-
owned company, for $176.0 million in cash and up to an additional $25 million in the event an earn out revenue target is exceeded. The
Company borrowed $175 million under the Credit Agreement to partially fund the acquisition. Headquartered in Maryland, SealingTech
expands Parsons’ customer base across the Department of Defense and Intelligence Community, and further enhances the company’s
capabilities in defensive cyber operations; integrated mission-solutions powered by artificial intelligence (AI) and machine learning (ML); edge
computing and edge access modernization; critical infrastructure protection; and secure data management. In connection with this
acquisition, the Company recognized $3.3 million of acquisition-related expenses in “Selling, general and administrative expense” in the
consolidated statements of income for the year ended December 31, 2023, including legal fees, consulting fees, and other miscellaneous
direct expenses associated with the acquisition.
The Company agreed to pay the selling shareholders up to an additional $25 million in the event an earn out revenue target of $110
million is exceeded during the fiscal year ended December 31, 2024. The earn out payment due and payable by the Company to the selling
shareholders shall be equal to (i) five-tenths (0.5), multiplied by (ii) the difference of (A) the actual earn out revenue minus (B) the earn out
revenue target; provided, however, that in no event shall the earn out payment exceed $25 million. In the event that the earn out revenue is
less than or equal to the earn out revenue target, the earn out payment shall be zero. The earn out payment, if any, shall be paid by the
Company to the selling shareholders
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-24
within 15 days following the date the earn out statement becomes final and binding on both parties. The fair value of the earn out (contingent
consideration in the table below) was calculated using a Black-Scholes model. See "Note 2—Summary of Significant Accounting Policies"
and "Note 18—Fair Value" for further information on how the fair value of contingent consideration is determined.
The following table summarizes the acquisition date fair value of the purchase consideration transferred (in thousands):
Amount
Cash paid at closing
$
176,028
Fair value of contingent consideration to be achieved
3,231
Total purchase price
$
179,259
The estimated fair value of the SealingTech contingent consideration as of December 31, 2024 and December 31, 2023 was zero and
$2.3 million, respectively. The change in fair value to zero resulted in recording a $2.3 million gain to "other income (expense), net" in the
consolidated financial statements.
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed based on the purchase price
allocation as of the date of acquisition (in thousands):
Amount
Cash and cash equivalents
$
8,133
Accounts receivable
17,889
Contract assets
2,946
Prepaid expenses and other current assets
1,379
Property and equipment
2,025
Right of use assets, operating leases
1,836
Deferred tax assets
357
Goodwill
90,593
Intangible assets
75,000
Accounts payable
(15,987 )
Accrued expenses and other current liabilities
(2,408 )
Contract liabilities
(668 )
Short-term lease liabilities, operating leases
(418 )
Long-term lease liabilities, operating leases
(1,418 )
Net assets acquired
$
179,259
Of the total purchase price, the following values were preliminarily assigned to intangible assets (in thousands, except for years):
Gross
Carrying
Amount
Amortization
Period
(in years)
Customer relationships
$
40,000
14
Backlog
26,000
3
Developed technologies
8,000
3
Other
$
1,000
1
Amortization expense of $12.9 million and $7.0 million related to these intangible assets was recorded for the years ended December
31, 2024 and December 31, 2023, respectively. The entire value of goodwill was assigned to the Federal Solutions reporting unit and
represents synergies expected to be realized from this business combination. The entire value of goodwill is deductible for tax purposes.
The amount of revenue generated by SealingTech and included within consolidated revenue is $34.1 million for the year December
31, 2023. The Company has determined that the presentation of net
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-25
income from the date of acquisition is impracticable due to the integration of general corporate functions upon acquisition.
Supplemental Pro Forma Information (Unaudited)
Supplemental information of unaudited pro forma operating results assuming the SealingTech acquisition had been consummated as
of the beginning of fiscal year 2022 (in thousands) is as follows:
2023
2022
(unaudited)
(unaudited)
Pro forma Revenue
$
5,525,099
$
4,262,525
Pro forma Net Income including noncontrolling interests
216,157
107,937
The unaudited pro forma supplemental information is based on estimates and assumptions which the Company believes are
reasonable and reflects the pro forma impact of additional amortization related to the fair value of acquired intangible assets, and the pro
forma impact of reflecting acquisition costs, which consisted of legal, advisory and due diligence fees and expenses. This supplemental pro
forma information has been prepared for comparative purposes and does not purport to be indicative of what would have occurred had the
acquisition been consummated during the periods for which pro forma information is presented.
IPKeys Power Partners
On April 13, 2023, the Company entered into a merger agreement to acquire a 100% ownership interest in IPKeys Power Partners
(“IPKeys”), a privately-owned company, for $43.0 million in cash. The merger brings IPKeys' established customer base, expanding Parsons'
presence in two rapidly growing end markets: grid modernization and cyber resiliency for critical infrastructure. Headquartered in Tinton Falls,
New Jersey, IPKeys is a trusted provider of enterprise software platform solutions that is actively delivering cyber and operational security to
hundreds of electric, water, and gas utilities across North America. The acquisition was entirely funded by cash on-hand. In connection with
this acquisition, the Company recognized $0.6 million of acquisition-related expenses in “Selling, general and administrative expense” in the
consolidated statements of income for the year ended December 31, 2023, respectively, including legal fees, consulting fees, and other
miscellaneous direct expenses associated with the acquisition.
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed based on the purchase price
allocation as of the date of acquisition (in thousands):
Amount
Cash and cash equivalents
$
126
Accounts receivable
3,937
Contract assets
834
Prepaid expenses and other current assets
455
Property and equipment
86
Right of use assets, operating leases
1,105
Other noncurrent assets
152
Goodwill
22,407
Intangible assets
23,000
Accounts payable
(541 )
Accrued expenses and other current liabilities
(1,768 )
Contract liabilities
(1,936 )
Short-term lease liabilities, operating leases
(343 )
Deferred tax liabilities
(3,713 )
Long-term lease liabilities, operating leases
(762 )
Net assets acquired
$
43,039
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-26
Of the total purchase price, the following values were assigned to intangible assets (in thousands, except for years):
Gross
Carrying
Amount
Amortization
Period
(in years)
Customer relationships (1)
$
15,900
16
Developed technologies
7,000
11
Other
$
100
1
(1) The acquired business is a SaaS commercial business. Backlog for this type of business is included as customer relationships.
Amortization expense of $1.6 million and $1.4 million related to these intangible assets was recorded for the years ended December
31, 2024 and December 31, 2023, respectively. The entire value of goodwill was assigned to the Critical Infrastructure reporting unit and
represents synergies expected to be realized from this business combination. $0.9 million of goodwill is deductible for tax purposes.
The amount of revenue generated by IPKeys and included within consolidated revenue is $9.3 million for the year ended December
31, 2023. The Company has determined that the presentation of net income from the date of acquisition is impracticable due to the
integration of general corporate functions upon acquisition.
Supplemental Pro Forma Information (Unaudited)
Supplemental information of unaudited pro forma operating results assuming the IPKeys acquisition had been consummated as of the
beginning of fiscal year 2022 (in thousands) is as follows:
2023
2022
(unaudited)
(unaudited)
Pro forma Revenue
$
5,445,604
$
4,207,967
Pro forma Net Income including noncontrolling interests
209,773
123,257
The unaudited pro forma supplemental information is based on estimates and assumptions which the Company believes are
reasonable and reflects the pro forma impact of additional amortization related to the fair value of acquired intangible assets, and the pro
forma impact of reflecting acquisition costs, which consisted of legal, advisory and due diligence fees and expenses. This supplemental pro
forma information has been prepared for comparative purposes and does not purport to be indicative of what would have occurred had the
acquisition been consummated during the periods for which pro forma information is presented.
Xator Corporation
On May 31, 2022, the Company acquired a 100% ownership interest in Xator Corporation (“Xator”), a privately-owned company, for
$387.5 million in cash. The Company borrowed $300 million under the Credit Agreement to partially fund the acquisition. Xator expands
Parsons’ customer base and brings differentiated technical capabilities in critical infrastructure protection, counter-unmanned aircraft systems
(cUAS), intelligence and cyber solutions, biometrics, and global threat assessment and operations. In connection with this acquisition, the
Company recognized $7.7 million of acquisition-related expenses in “Selling, general and administrative expense” in the consolidated
statements of income for the year ended December 31, 2022, including legal fees, consulting fees, and other miscellaneous direct expenses
associated with the acquisition.
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-27
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed based on the purchase price
allocation as of the date of acquisition (in thousands):
Amount
Cash and cash equivalents
$
8,935
Accounts receivable
7,393
Contract assets
24,332
Prepaid expenses and other current assets
3,615
Property and equipment
1,699
Right of use assets, operating leases
7,517
Goodwill
257,934
Investments in and advances to unconsolidated joint ventures
698
Intangible assets
123,500
Other noncurrent assets
9,156
Accounts payable
(6,626 )
Accrued expenses and other current liabilities
(31,309 )
Contract liabilities
(2,631 )
Short-term lease liabilities, operating leases
(2,371 )
Long-term lease liabilities, operating leases
(5,146 )
Other long-term liabilities
(9,156 )
Net assets acquired
$
387,540
Of the total purchase price, the following values were assigned to intangible assets (in thousands, except for years):
Gross
Carrying
Amount
Amortization
Period
(in years)
Customer relationships
$
37,000
15
Backlog
81,000
6
Trade name
4,000
1
Developed technologies
1,000
3
Non-compete agreements
$
500
3
Amortization expense of $16.5 million, $18.1 million and $11.9 million related to these intangible assets was recorded for the year
ended December 31, 2024, December 31, 2023, and December 31, 2022, respectively. The entire value of goodwill was assigned to the
Federal Solutions reporting unit and represents synergies expected to be realized from this business combination. Goodwill in its entirety is
deductible for tax purposes.
The amount of revenue generated by Xator and included within consolidated revenue is $157.8 million for the year ended December
31, 2022. The Company has determined that the presentation of net income from the date of acquisition is impracticable due to the
integration of general corporate functions upon acquisition.
Supplemental Pro Forma Information (Unaudited)
Supplemental information of unaudited pro forma operating results assuming the Xator acquisition had been consummated as of the
beginning of fiscal year 2021 (in thousands) is as follows:
2022
2021
(unaudited)
(unaudited)
Pro forma Revenue
$
4,302,448
$
3,949,562
Pro forma Net Income including noncontrolling interests
139,901
91,770
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-28
The unaudited pro forma supplemental information is based on estimates and assumptions which the Company believes are
reasonable and reflects the pro forma impact of additional amortization related to the fair value of acquired intangible assets, and the pro
forma impact of reflecting acquisition costs, which consisted of legal, advisory and due diligence fees and expenses. This supplemental pro
forma information has been prepared for comparative purposes and does not purport to be indicative of what would have occurred had the
acquisition been consummated during the periods for which pro forma information is presented. From the year ended December 31, 2022 the
results of the acquisition have been included in full year results.
4.
Contracts with Customers
Disaggregation of Revenue
The Company’s contracts contain both fixed price and cost reimbursable components. Contract types are based on the component
that represents the majority of the contract. The following table presents revenue disaggregated by contract type (in thousands):
December 31,
2024
December 31,
2023
December 31,
2022
Fixed-price
$
2,844,719 $
1,810,499 $
1,138,482
Time-and-Materials
1,419,168
1,352,871
1,166,548
Cost-plus
2,486,689
2,279,379
1,890,242
Total
$
6,750,576 $
5,442,749 $
4,195,272
Refer to “Note 20—Segments Information” for the Company’s revenues by business lines.
Contract Assets and Contract Liabilities
Contract assets and contract liabilities balances at December 31, 2024 and December 31, 2023 were as follows (in thousands):
December 31, 2024 December 31, 2023
$ change
% change
Contract assets
$
741,504 $
757,515 $
(16,011 )
-2.1 %
Contract liabilities
289,799
301,107
(11,308 )
-3.8 %
Net contract assets (liabilities)
$
451,705 $
456,408 $
(4,703 )
-1.0 %
(1)
Total contract retentions included in net contract assets (liabilities) were $89.8 million as of December 31, 2024, of which $35.9 million
are not expected to be paid in 2025. Total contract retentions included in net contract assets (liabilities) were $73.8 million as of
December 31, 2023. Contract assets at December 31, 2024 and December 31, 2023 include approximately $70.7 million and $109.5
million, respectively, related to net claim recovery estimates. For the year ended December 31, 2024 there was a $21.6 million loss
recognized related to the collectability of claims. For the year ended December 31, 2023, there were no material losses recognized
related to the collectability of claims.
During the years ended December 31, 2024 and December 31, 2023, the Company recognized revenue of approximately $190.3
million and $126.0 million, respectively, that was included in the corresponding contract liability balance at December 31, 2023 and
December 31, 2022, respectively. Certain changes in contract assets and contract liabilities consisted of the following:
December 31, 2024
December 31, 2023
Acquired contract assets
$
19,858 $
2,715
Acquired contract liabilities
4,446
3,155
(1)
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-29
There was no significant impairment of contract assets recognized during the years ended December 31, 2024 and December 31,
2023.
Revisions in estimates, such as changes in estimated claims or incentives, related to performance obligations partially satisfied in
previous periods that individually had an impact of $5 million or more on revenue resulted in the following changes in revenue.
2024
2023
2022
Revenue impact, net
$
(55,952 ) $
5,428 $
-
Certain financial statement impacts from revisions in estimates were as follows (in thousands):
December 31, 2024
December 31, 2023
December 31, 2022
Operating income (loss)
$
(62,298 ) $
35,297 $
—
Net income (loss)
(47,651 )
26,261
—
Diluted earnings (loss) per share
$
(0.42 ) $
0.23 $
-
The amounts for 2024, in the table above, include the impact from a contract in the Critical Infrastructure segment related to a change
in estimate increasing direct costs of contracts by $6.3 million.
The amounts for 2023, in the table above, include the impact from contracts in the Critical Infrastructure segment related to a change
in estimate increasing direct costs of contracts by $8.0 million related to net write-downs and a decrease in direct costs of contracts of $37.9
million related to a legal matter.
These impacts do not include the operating income impacts disclosed below in "Note 16— Investments in and Advances to Joint
Ventures."
Accounts Receivable, Net
Accounts receivable, net consisted of the following as of December 31, 2024 and December 31, 2023 (in thousands):
2024
2023
Billed
$
712,046 $
646,375
Unbilled
392,236
273,215
Total accounts receivable, gross
1,104,282
919,590
Allowance for doubtful accounts
(3,886 )
(3,952 )
Total accounts receivable, net
$
1,100,396 $
915,638
Billed accounts receivable represents amounts billed to clients that have not been collected. Unbilled accounts receivable represents
amounts where the Company has a present contractual right to bill but an invoice has not been issued to the customer at the period-end
date. Receivables from contracts with the U.S. federal government and its agencies were 23% and 18% as of December 31, 2024 and
December 31, 2023, respectively.
The allowance for doubtful accounts was determined based on consideration of trends in actual and forecasted credit quality of clients,
including delinquency and payment history, type of client, such as a government agency or commercial sector client, and general economic
conditions and particular industry conditions that may affect a client’s ability to pay.
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-30
Transaction Price Allocated to the Remaining Unsatisfied Performance Obligations
The Company’s remaining unsatisfied performance obligations (“RUPO”) as of December 31, 2024 represent a measure of the total
dollar value of work to be performed on contracts awarded and in progress. The Company had $6.7 billion in RUPO as of December 31,
2024.
RUPO will increase with awards of new contracts and decrease as the Company performs work and recognizes revenue on existing
contracts. Projects are included within RUPO at such time the project is awarded and agreement on contract terms has been reached. The
difference between RUPO and backlog relates to unexercised option years that are included within backlog and the value of Indefinite
Delivery/Indefinite Quantity (“IDIQ”) contracts included in backlog for which task orders have not been issued.
RUPO is comprised of: (a) original transaction price, (b) change orders for which written confirmations from our customers have been
received, (c) pending change orders for which the Company expects to receive confirmatrions in the ordinary course of business, and (d)
claim amounts that the Company has made against customers for which it has determined that it has a legal basis under existing contractual
arrangements and a significant reversal of revenue is not probable, less revenue recognized to-date.
The Company expects to satisfy its RUPO as of December 31, 2024 over the following periods (in thousands):
Period RUPO Will Be Satisfied
Within One Year
Within One to
Two Years
Thereafter
Federal Solutions
$
1,815,751 $
439,216 $
142,994
Critical Infrastructure
2,062,055
1,099,765
1,174,217
Total
$
3,877,806 $
1,538,981 $
1,317,211
5.
Leases
The Company has operating and finance leases for corporate and project office spaces, vehicles, heavy machinery and office
equipment. Our leases have remaining lease terms of one year to eleven years, some of which may include options to extend the leases for
up to five years, and some of which may include options to terminate the leases after the third year.
The components of lease costs for the years ended December 31, 2024 and December 31, 2023 are as follows (in thousands):
2024
2023
Operating lease cost
$
64,858 $
67,181
Short-term lease cost
17,114
13,782
Amortization of right-of-use assets
3,549
2,699
Interest on lease liabilities
434
273
Sublease income
(4,289 )
(4,718 )
Total lease cost
$
81,666 $
79,217
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-31
Supplemental cash flow information related to leases for the years ended December 31, 2024 and December 31, 2023 is as follows (in
thousands):
2024
2023
Operating cash flows for operating leases
$
67,696 $
71,432
Operating cash flows for finance leases
434
273
Financing cash flows for finance leases
3,376
2,618
Right-of-use assets obtained in exchange for new
operating lease liabilities
36,583
62,856
Right-of-use assets obtained in exchange for new
finance lease liabilities
$
4,220 $
6,456
Supplemental balance sheet and other information related to leases as of December 31, 2024 and December 31, 2023 is as follows (in
thousands):
2024
2023
Operating Leases:
Right-of-use assets
$
153,048 $
159,211
Lease liabilities:
Current
$
52,725 $
58,556
Long-term
114,386
117,505
Total operating lease liabilities
$
167,111 $
176,061
Finance Leases:
Other noncurrent assets
$
9,864 $
7,779
Accrued expenses and other current liabilities
$
3,645 $
2,682
Other long-term liabilities
$
6,441 $
5,129
Weighted Average Remaining Lease Term:
Operating leases
3.9 Years
3.9 Years
Finance leases
2.8 Years
3.1 years
Weighted Average Discount Rate:
Operating leases
4.5 %
4.2 %
Finance leases
5.0 %
4.6 %
As of December 31, 2024, the Company has no additional operating leases that have not yet commenced.
A maturity analysis of the future undiscounted cash flows associated with the Company’s operating and finance lease liabilities as of
December 31, 2024 is as follows (in thousands):
Operating
Leases
Finance
Leases
2025
$
59,839 $
4,217
2026
42,669
3,492
2027
29,744
2,236
2028
24,383
933
2029
18,341
92
Thereafter
7,682
-
Total lease payments
182,658
10,970
Less: imputed interest
(15,547 )
(884 )
Total present value of lease liabilities
$
167,111 $
10,086
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-32
Rental expense for the years ended December 31, 2024, December 31, 2023 and December 31, 2022 was $82.0 million, $81.0 million
and $81.0 million, respectively, and is recorded in “Selling, general and administrative expenses” in the consolidated statements of income.
6.
Employee Stock Purchase and Equity-Based Compensation Plans
Equity Compensation Plan Information
The following table provides information as of December 31, 2024 regarding compensation plans under which our equity securities are
authorized for issuance.
Plan Category
Number of Securities to be
Issued upon Exercise of
Outstanding Options, Warrants
and Rights
(a)
Weighted-Average Exercise
Price of Outstanding Options,
Warrants and Rights
(b)
Number of Securities Remaining
Available for Future Issuance
under Equity Compensation
Plans (Excluding Securities
Reflected in Column (a))
(c)
Equity compensation plans approved by
security holders (1)
-
-
1,367,785
(2
)
Equity compensation plans not approved
by security holders
1,883,018
(
3
)
-
7,651,085
(4
)
Total
1,883,018
-
9,018,870
(1)
Consists of the 2020 Employee Stock Purchase Plan.
(2)
Amount represents 1,367,785 shares remaining available for future issuance under the 2020 Employee Stock Purchase Plan (of which 47,860 shares were purchased
pursuant to the offering period that ended on December 31, 2024).
(3)
Amount represents the sum of 1,883,018 shares of common stock subject to outstanding RSU and PSU awards under the 2019 Incentive Plan (with PSU awards
reflected at “target” levels),
(4)
Amount represents 7,651,085 shares remaining available for future issuance under the 2019 Incentive Plan.
Employee Stock Purchase Plan
The Parsons Corporation Employee Stock Purchase Plan (“ESPP”) was adopted effective March 1, 2020. Under the ESPP, eligible
employees who elect to participate are granted the right to purchase shares of Parsons common stock at a discount of 5% of the market
value on the last trading day of the offering period.
The following table presents stock issuance activity for the years ended December 31, 2024 and December 31, 2023 (in thousands):
2024
2023
Purchase price paid for shares sold
$
7,935 $
6,059
Number of shares sold
96
117
The average purchase price for the year ended December 31, 2024 and December 31, 2023 was $82.66 and $51.94 per share,
respectively.
Equity-Based Compensation Plans
The Company issues stock-based awards through the Incentive Award Plan. The compensation expense for these awards is recorded
in “Selling, general and administrative expenses” in the Company’s consolidated financial statements.
Stock-based compensation expense was $52.6 million, $27.5 million, and $20.0 million for the years ended December 31, 2024,
December 31, 2023 and December 31, 2022, respectively, net of recognized
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-33
tax benefits of $8.9 million, $8.6 million, and $4.4 million for 2024, 2023 and 2022, respectively. The tax benefit realized related to awards
vested during 2024, 2023, and 2022 was $12.0 million, $4.3 million, and $2.7 million, respectively. We recognize forfeitures as they occur.
At December 31, 2024, the amount of compensation cost relating to non-vested awards not yet recognized in the consolidated
financial statements is $51.3 million. The majority of these unrecognized compensation costs will be recognized by the third quarter of fiscal
2026.
Restricted Stock Units
Restricted Stock Units awards are issued under the Incentive Award Plan and are settled by the issuance of the Company’s common
stock. Outstanding awards have been granted based on either service or service and performance conditions. Awards vest over three-year
periods, either annually or cliff. Expense is recognized on an accelerated basis for awards with service conditions only and on a straight-line
basis for awards that include performance conditions. Expense recognition of awards with performance criteria are subject to the probability
of meeting the performance conditions and adjusted for the number of shares expected to be earned. Compensation cost for awards with
performance conditions are trued-up at each reporting period for changes in the expected shares pro-rated for the portion of the requisite
service period rendered.
The following table presents the number of shares of restricted stock units granted (at target shares for awards with performance
conditions) for the years ended December 31, 2024, December 31, 2023 and December 31, 2022:
December 31,
2024
December 31,
2023
December 31,
2022
Restricted Stock Units (service condition)
346,483
616,337
666,184
Restricted Stock Units (service and performance condition)
296,513
452,179
402,436
The number of units granted for awards with performance conditions in the above table is based on performance at the target amount.
The number of shares ultimately issued, which could be greater or less than target, will be based on achieving specific performance
conditions related to the awards. During the years ended December 31, 2024 and December 31, 2023, certain restricted stock unit grants
with performance conditions vested with performance different from the target share amounts. As a result, 99,280 and 97,551 additional
shares, respectively were granted and vested.
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-34
The following table presents the number and weighted average grant-date fair value of restricted stock units (at target shares for
awards with performance conditions) for the years ended December 31, 2024, December 31, 2023 and December 31, 2022:
Number of Units
Weighted Average Grant-
Date Fair Value
Outstanding at December 31, 2021
1,359,243
$
36.75
Granted
1,068,620
37.42
Vested
(497,200 )
35.86
Forfeited
(309,508 )
36.28
Outstanding at December 31, 2022
1,621,155
37.49
Granted
1,068,516
48.96
Vested
(372,962 )
37.56
Forfeited
(223,373 )
39.90
Outstanding at December 31, 2023
2,093,336
43.11
Granted
642,996
79.71
Vested
(697,956 )
37.83
Forfeited
(155,358 )
45.33
Outstanding at December 31, 2024
1,883,018
$
57.35
For the year ended December 31, 2024, 778,167 shares of restricted stock units were issued, and 272,284 shares of common stock
related to employee statutory income tax withholding were retired. For the year ended December 31, 2023, 484,988 shares of restricted
stock units were issued, and 159,281 shares of common stock related to employee statutory income tax withholding were retired. For the
year ended December 31, 2022, 458,952 shares of restricted stock units were issued, and 160,212 shares of common stock related to
employee statutory income tax withholding were retired.
The following table presents the number of shares of restricted stock outstanding (at target shares for awards with performance
conditions) at December 31, 2024, December 31, 2023 and December 31, 2022:
December 31,
2024
December 31,
2023
December 31,
2022
Restricted Stock Units (service condition)
911,908
1,085,203
817,278
Restricted Stock Units (service and performance condition)
971,110
1,008,133
803,877
7.
Goodwill
The following table summarizes the changes in the carrying value of goodwill by reporting segment for the years ended December 31,
2024 and December 31, 2023 (in thousands):
December 31,
2023
Acquisitions
Foreign
Exchange
December 31,
2024
Federal Solutions
$
1,686,901 $
119,663 $
- $
1,806,564
Critical Infrastructure
105,764
174,585
(4,233 )
276,116
Total
$
1,792,665 $
294,248 $
(4,233 ) $
2,082,680
December 31,
2022
Acquisitions
Foreign
Exchange
December 31,
2023
Federal Solutions
$
1,591,563 $
95,338 $
- $
1,686,901
Critical Infrastructure
70,287
34,261
1,216
105,764
Total
$
1,661,850 $
129,599 $
1,216 $
1,792,665
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-35
For the years ended December 31, 2024 and December 31, 2023, the Company performed a quantitative impairment analysis for all
reporting units. It was determined that the fair value of all reporting units exceeded their carrying values. No goodwill impairments were
identified for the three years ended December 31, 2024, December 31, 2023 and December 31, 2022.
8.
Intangible Assets
The gross amount and accumulated amortization of acquired identifiable intangible assets included in “Intangible assets, net” on the
consolidated balance sheets were as follows (in thousands except for years):
December 31, 2024
December 31, 2023
Weighted
Average
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Amortization
Period
(in years)
Backlog
$
142,100 $
(51,322 ) $
90,778 $
130,000 $
(45,964 ) $
84,036
4.5
Customer relationships
372,930
(139,568 )
233,362
297,120
(124,194 )
172,926
11.6
Leases
-
-
-
120
(106 )
14
-
Developed technology
23,200
(7,458 )
15,742
31,600
(15,823 )
15,777
4.6
Trade name
1,500
(367 )
1,133
1,000
(417 )
583
1.0
Non-compete agreements
8,300
(1,203 )
7,097
1,500
(1,097 )
403
3.0
In process research and development
1,800
-
1,800
1,800
-
1,800
n/a
Other intangibles
25
-
25
375
(348 )
27
n/a
Total intangible assets
$
549,855 $
(199,918 ) $
349,937 $
463,515 $
(187,949 ) $
275,566
The aggregate amortization expense of intangible assets was $55.6 million, $76.6 million, and $78.2 million for the years ended
December 31, 2024, December 31, 2023 and December 31, 2022, respectively.
Estimated amortization expense in each of the next five years and beyond is as follows (in thousands):
December 31, 2024
2025
$
64,871
2026
57,313
2027
50,759
2028
36,871
2029
22,659
Thereafter
115,639
Total
$
348,112
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-36
9.
Property and Equipment, Net
Property and equipment consisted of the following at December 31, 2024 and December 31, 2023 (in thousands):
December 31, 2024
December 31, 2023
Useful life
(years)
Buildings and leasehold improvements
$
103,945 $
102,372
1-15
Furniture and equipment
84,720
84,244
3-10
Computer systems and equipment
172,437
168,926
3-10
Construction equipment
6,463
6,173
5-7
Construction in progress
30,342
21,030
397,907
382,745
Accumulated depreciation
(286,332 )
(283,788 )
Property and equipment, net
$
111,575 $
98,957
Depreciation expense of $37.4 million, $39.1 million, and $39.0 million was recorded for the years ended December 31, 2024,
December 31, 2023 and December 31, 2022, respectively.
10.
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following at December 31, 2024 and December 31, 2023 (in
thousands):
2024
2023
Salaries and wages
$
119,122 $
102,779
Employee benefits
371,435
342,707
Self-insurance liability
17,723
24,193
Project cost accruals
307,200
254,070
Other accrued expenses
78,945
77,674
Total accrued expenses and other current liabilities
$
894,425 $
801,423
11.
Debt and Credit Facilities
Debt consisted of the following at December 31, 2024 and December 31, 2023 (in thousands):
December 31, 2024
December 31, 2023
Short-Term Debt:
Delayed draw term loan
$
350,000 $
-
Convertible senior notes due 2025
113,405
-
Total Short-Term Debt
463,405
-
Long-Term Debt:
Delayed draw term loan
-
350,000
Convertible senior notes due 2025
-
400,000
Convertible senior notes due 2029
800,000
-
Revolving credit facility
-
-
Debt issuance costs
(15,904 )
(4,037 )
Total Long-Term Debt
784,096
745,963
Total Debt
$
1,247,501 $
745,963
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-37
Delayed Draw Term Loan
In September 2022, the Company entered into a $350 million unsecured Delayed Draw Term Loan with an increase option of up to
$150 million (the “2022 Delayed Draw Term Loan”). The 2022 Delayed Draw Term Loan may be borrowed in a single draw during the period
from and including the Closing Date to the earlier to occur of (a) the date of termination of the 2022 Delayed Draw Term Loan by the
Company pursuant to the terms of the 2022 Delayed Draw Term Loan Agreement and (b) six (6) months following the Closing Date.
Proceeds of the 2022 Delayed Draw Term Loan Agreement may be used (a) to pay off in full, or partially payoff, the Company’s existing
Senior Notes, (b) to prepay revolving loans outstanding under the Revolving Credit Agreement (as defined below), or (c) for working capital,
capital expenditures and other lawful corporate purposes. The Company drew $350.0 million from the 2022 Delayed Draw Term Loan in
November 2022. The Company incurred $0.9 million of debt issuance costs in connection with the delayed draw term loan as of December
31, 2022. These costs are presented as a direct deduction from the debt on the face of the balance sheet. Interest expense related to the
Delayed Draw Term Loan was $23.1million, $22.4 million and $3.3 million for the years ended December 31, 2024, December 31, 2023 and
December 31, 2022 respectively. The amortization of debt issuance costs and interest expense is recorded in “Interest expense” on the
consolidated statements of income. As of December 31, 2024 and December 31, 2023, there was $350.0 million outstanding under the
Delayed Draw Term Loan.
The 2022 Delayed Draw Term Loan has a three-year maturity and permits the Company to borrow in U.S. dollars. The 2022 Delayed
Draw Term Loan does not require any amortization payments by the Company. Depending on the Company’s consolidated leverage ratio (or
debt rating after such time as the Company has such rating), borrowings under the 2022 Delayed Draw Term Loan Agreement will bear
interest at either an adjusted Term SOFR benchmark rate plus a margin between 0.875% and 1.500% or a base rate plus a margin of
between 0% and 0.500% and will initially bear interest at the middle of this range. The Company will pay a ticking fee on unused term loan
commitments at a rate of 0.175% commencing with the date that is ninety (90) days after the Closing Date. Amounts outstanding under the
2022 Delayed Draw Term Loan Agreement may be prepaid at the option of the Company without premium or penalty, subject to customary
breakage fees in connection with the prepayment of benchmark rate loans. The interest rates on December 31, 2024 and December 31,
2023 were 5.6% and 6.6%, respectively.
Convertible Senior Notes due 2025
In August 2020, the Company issued an aggregate $400.0 million of 0.25% Convertible Senior Notes due 2025, including the exercise
of a $50.0 million initial purchasers’ option. The Company received proceeds from the issuance and sale of the Convertible Senior Notes of
$389.7 million, net of $10.3 million of transaction fees and other third-party offering expenses. The Convertible Senior Notes accrue interest
at a rate of 0.25% per annum, payable semi-annually on February 15 and August 15 of each year beginning on February 15, 2021, and will
mature on August 15, 2025, unless earlier repurchased, redeemed or converted.
The Convertible Senior Notes are the Company’s senior unsecured obligations and will rank senior in right of payment to any of the
Company’s indebtedness that is expressly subordinated in right of payment to the Notes; equal in right of payment to any of the Company’s
unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of the Company’s secured indebtedness, to
the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including
trade payables) of the Company’s subsidiaries.
Each $1,000 of principal of the Notes will initially be convertible into 22.2913 shares of our common stock, which is equivalent to an
initial conversion price of $44.86 per share, subject to adjustment upon the occurrence of specified events. On or after March 15, 2025 until
the close of business on the second scheduled trading day immediately preceding the maturity date of the Convertible Senior Notes, holders
may convert all or a portion of their Convertible Senior Notes, regardless of the conditions below.
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-38
Prior to the close of business on the business day immediately preceding March 15, 2025, the Notes will be convertible at the option of
the holders thereof only under the following circumstances:
•
during any calendar quarter commencing after the calendar quarter ending on December 31, 2020, if the last reported sale price
of the Company’s common stock for at least 20 trading days, whether or not consecutive, during a period of 30 consecutive
trading days ending on, and including the last trading day of the immediately preceding calendar quarter, is greater than or equal
to 130% of the conversion price on each applicable trading day;
•
during the five business day period after any five consecutive trading day period in which, for each trading day of that period, the
trading price per $1,000 principal amount of Convertible Senior Notes for such trading day was less than 98% of the product of
the last reported sale price of the Company’s common stock and the conversion rate on each such trading day;
•
if the Company calls such Convertible Senior Notes for redemption; or
•
upon the occurrence of specified corporate events described in the Indenture.
The Company may redeem all or any portion of the Convertible Senior Notes for cash, at its option, on or after August 21, 2023 and
before the 51st scheduled trading day immediately before the maturity date at a redemption price equal to 100% of the principal amount of
the Notes to be redeemed, plus accrued and unpaid interest, but only if the last reported sale price per share of the Company’s common
stock exceeds 130% of the conversion price for a specified period of time. In addition, calling any Convertible Senior Note for redemption will
constitute a Make-Whole Fundamental Change with respect to that Convertible Senior Note, in which case the conversion rate applicable to
the conversion of that Convertible Senior Note will be increased in certain circumstances if it is converted after it is called for redemption.
Upon the occurrence of a fundamental change prior to the maturity date of the Convertible Senior Notes, holders of the Convertible
Senior Notes may require the Company to repurchase all or a portion of the Convertible Senior Notes for cash at a price equal to 100% of the
principal amount of the Convertible Senior Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental
change repurchase date.
Upon conversion, the Company may settle the Convertible Senior Notes for cash, shares of the Company’s common stock, or a
combination thereof, at the Company’s option. If the Company satisfies its conversion obligation solely in cash or through payment and
delivery of a combination of cash and shares of the Company’s common stock, the amount of cash and shares of common stock due upon
conversion will be based on a daily conversion value calculated on a proportionate basis for each trading day in a 50-trading day observation
period.
The Company recognized interest expense of $3.9 million, $3.1 million and $3.0 million for the years ended December 31, 2024.
December 31, 2023 and December 31, 2022, respectively. As of December 31, 2024 and December 31, 2023 the net carrying value of the
Convertible Senior Notes due 2025 were $113.4 million and $396.5 million, respectively.
See the discussion of the partial repurchase of Convertible Senior Notes due 2025 and the unwind of the related note hedge and
warrants below.
Note Hedge and Warrant - Convertible Senior Notes due 2025
In connection with the sale of the Convertible Senior Notes, the Company purchased a bond hedge designed to mitigate the potential
dilution from the conversion of the Convertible Senior Notes. Under the five-year term of the bond hedge, upon a conversion of the bonds,
the Company will receive the number of shares of common stock equal to the remaining common stock deliverable upon conversion of the
Convertible Senior Notes if the conversion value exceeds the principal amount of the Notes. The
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-39
aggregate number of shares that the Company could be obligated to issue upon conversion of the Convertible Senior Notes is approximately
8.9 million shares. The cost of the convertible note hedge transactions was $55.0 million.
The cost of the convertible note hedge was partially offset by the Company’s sale of warrants to acquire approximately 8.9 million
shares of the Company’s common stock. The warrants were initially exercisable at a price of at least $66.46 per share and are subject to
customary adjustments upon the occurrence of certain events, such as the payment of dividends. The Company received $13.8 million in
cash proceeds from the sales of these warrants.
The bond hedge and warrant transactions effectively increased the conversion price associated with the Convertible Senior Notes
during the term of these transactions from 35%, or $44.86, to 100%, or $66.46, at their issuance, thereby reducing the dilutive economic
effect to shareholders upon actual conversion.
The bond hedges and warrants are indexed to, and potentially settled in, shares of the Company’s common stock. The net cost of
$41.2 million for the purchase of the bond hedges and sale of the warrants was recorded as a reduction to additional paid-in capital in the
consolidated balance sheets.
At issuance, the Company recorded a deferred tax liability of $16.2 million related to the Convertible Senior Notes debt discount and
the capitalized debt issuance costs. The Company also recorded a deferred tax asset of $16.5 million related to the convertible note hedge
transactions and the tax basis of the capitalized debt issuance costs through additional paid-in capital. The deferred tax liability and deferred
tax asset were included net in “Deferred tax assets” on the consolidated balance sheets. Upon adoption of ASU 2020-06, the Company
reversed the deferred tax liability of $13.9 million that the Company had recorded at issuance related to the Convertible Senior Note debt
discount and recorded an additional deferred tax liability of $0.4 million related to the capitalized debt issuance costs. In addition, the
Company recorded a $0.9 million adjustment to the deferred tax asset through retained earnings related to the tax effect of book accretion
recorded in 2020 and reversed upon adoption.
Convertible Senior Notes due 2029
In February 2024, the Company issued an aggregate $800.0 million of 2.625% Convertible Senior Notes due 2029 (the “2029
Convertible Notes”), including the exercise of a $100.0 million initial purchasers’ option in full. The Company received proceeds from the
issuance and sale of the 2029 Convertible Notes of $781.1 million, net of $18.9 million of transaction fees and other third-party offering
expenses. The 2029 Convertible Notes accrue interest at a rate of 2.625% per annum, payable semi-annually on March 1 and September 1
of each year beginning on September 1, 2024, and will mature on March 1, 2029, unless earlier repurchased, redeemed or converted.
The 2029 Convertible Notes are the Company’s senior unsecured obligations and will rank senior in right of payment to any of the
Company’s indebtedness that is expressly subordinated in right of payment to the 2029 Convertible Notes; equal in right of payment to any of
the Company’s unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of the Company’s secured
indebtedness, including borrowings under the Company’s revolving credit facility and delayed draw term loan credit facility, to the extent of
the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables)
of the Company’s subsidiaries.
Each $1,000 of principal of the 2029 Convertible Notes will initially be convertible into 10.6256 shares of our common stock, which is
equivalent to an initial conversion price of approximately $94.11 per share, subject to adjustment upon the occurrence of specified events.
On or after October 1, 2028 until the close of business on the second scheduled trading day immediately preceding the maturity date of the
2029 Convertible Notes, holders may convert all or a portion of their 2029 Convertible Notes, regardless of the conditions below.
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-40
Prior to the close of business on the business day immediately preceding October 1, 2028, the 2029 Convertible Notes will be
convertible at the option of the holders thereof only under the following circumstances:
•
during any calendar quarter commencing after the calendar quarter ending on June 30, 2024, if the last reported sale price
of the Company’s common stock for at least 20 trading days, whether or not consecutive, during a period of 30 consecutive
trading days ending on, and including the last trading day of the immediately preceding calendar quarter, is greater than or
equal to 130% of the conversion price on each applicable trading day;
•
during the five business day period after any ten consecutive trading day period in which, for each trading day of that
period, the trading price per $1,000 principal amount of 2029 Convertible Notes for such trading day was less than 98% of
the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading
day;
•
if the Company calls such 2029 Convertible Notes for redemption; or
•
upon the occurrence of specified corporate events described in the Indenture.
The Company may redeem all or any portion of the 2029 Convertible Notes for cash, at its option, on or after March 8, 2027 and
before the 51st scheduled trading day immediately before the maturity date at a redemption price equal to 100% of the principal amount of
the 2029 Convertible Notes to be redeemed, plus accrued and unpaid interest, but only if the last reported sale price per share of the
Company’s common stock exceeds 130% of the conversion price for a specified period of time. In addition, calling any 2029 Convertible
Notes for redemption will constitute a Make-Whole Fundamental Change with respect to that 2029 Convertible Note, in which case the
conversion rate applicable to the conversion of that 2029 Convertible Notes will be increased in certain circumstances if it is converted after it
is called for redemption.
Upon the occurrence of a fundamental change prior to the maturity date of the 2029 Convertible Notes, holders of the 2029
Convertible Notes may require the Company to repurchase all or a portion of the 2029 Convertible Notes for cash at a price equal to 100% of
the principal amount of the 2029 Convertible Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the
fundamental change repurchase date.
Upon conversion, the Company will settle the principal amount of the 2029 Convertible Notes converted in cash and will settle the
remainder of the consideration owed upon conversion in cash, shares of the Company’s common stock, or a combination thereof, at the
Company’s option, with such amount of cash and, if applicable, shares of common stock due upon conversion based on a daily conversion
value calculated on a proportionate basis for each trading day in a 50-trading day observation period.
The Company recognized interest expense with respect to the 2029 Convertible Notes of $21.3 million for the year ended December
31, 2024. As of December 31, 2024, the net carrying value of the 2029 Convertible Notes due 2029 was $784.3 million.
Capped Call Transactions - Convertible Senior Notes due 2029
In February 2024, in connection with the offering of the 2029 Convertible Notes, the Company entered into capped call transactions
(the “Capped Call Transactions”) with certain financial institutions. The Capped Call Transactions are expected generally to reduce the
potential dilution to the Company’s common stock upon any conversion of the Convertible Senior Notes due 2029 and/or offset any cash
payments the Company is required to make in excess of the principal amount of any converted
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-41
Convertible Senior Notes due 2029, as the case may be. If, however, the market price per share of the Company’s common stock, as
measured under the terms of the Capped Call Transactions, exceeds the cap price of the Capped Call Transactions, there would
nevertheless be dilution and/or there would not be an offset of such cash payments, in each case, to the extent that such market price
exceeds the cap price of the Capped Call Transactions.
The cap price of the Capped Call Transactions is initially $131.7575 per share, which represents a premium of 75% over the last
reported sale price of the Company’s common stock of $75.29 per share on the New York Stock Exchange on February 21, 2024, and is
subject to certain adjustments under the terms of the Capped Call Transactions. The cost of $88.4 million for the Capped Call Transactions
was recorded as a reduction to additional paid-in capital in the consolidated balance sheets.
At issuance, the Company recorded a deferred tax asset of $22.3 million related to the Capped Call Transactions costs through
additional paid-in capital. The deferred tax asset was included in Deferred tax assets in the consolidated balance sheets.
Convertible Senior Notes due 2025 Partial Repurchase and Note Hedge and Warrants Partial Unwind
In connection with the issuance of the Convertible Senior Notes due 2029, during the first quarter of 2024, we used $391.8 million of
the net proceeds to purchase approximately $228.1 million aggregate principal amount of our Convertible Senior Notes due 2025
concurrently with the offering in separate and individually negotiated transactions. In addition, we used $103.8 million to settle the repurchase
of approximately $56.5 million aggregate principal amount of our Convertible Senior Notes due 2025 in a separately negotiated transaction
that settled in March 2024. We also received approximately $90.6 million in cash from the note hedge counterparties for the partial
termination of the existing bond hedge relating to the Convertible Senior Notes due 2025 repurchased, net of our obligations to the
counterparties in connection with the partial termination of the related warrant transactions. The tax effect of $46.2 million from the partial
unwind of the existing bond hedge was recognized as a reduction in additional paid-in capital in the consolidated balance sheets. The
income tax payable was included in Income taxes payable in the consolidated balance sheets.
The partial repurchase, during the year ended December 31, 2024, resulted in a $18.4 million repurchase loss1 and a $3.2 million
charge to interest expense for the acceleration of the amortization of debt issuance costs associated with the 0.25% Convertible Senior
Notes due 2025. The tax effect of the repurchase loss, excluding the interest expense, was recognized as a discrete event during the year
with a tax benefit of $4.3 million recognized in the income statement.
1During the first quarter of 2024, prior to the early adoption of ASU 2024-04, the Company recorded a $211.0 million loss on debt extinguishment
associated with the 0.25% Convertible Senior Notes due 2025. The tax effect of the debt extinguishment, excluding the interest expense, was
recognized as a discrete event to the quarter giving rise to an increase in the effective tax rate and tax benefit of $49.9 million recognized in the
income statement. Please see "Note 2—Summary of Significant Accounting Policies—New Accounting Pronouncements" for a discussion of the
Company's adoption of ASU 2024-04. The extinguishment charge and related income tax impacts were reversed from the Company's consolidated
financial statements and recorded as a convertible debt repurchase loss as described above.
Revolving Credit Facility
In June 2021, the Company entered into a $650 million unsecured revolving credit facility (the “Credit Agreement”). The Company
incurred $1.9 million of costs in connection with this Credit Agreement. The 2021 Credit Agreement replaced an existing Fifth Amended and
Restated Credit Agreement dated as of November 15, 2017. Under the new agreement, the Company’s revolving credit facility was
increased from $550 million to $650 million. The credit facility has a five-year maturity, which may be extended up to two times for periods
determined by the Company and the applicable extending lenders, and permits the Company to borrow in U.S. dollars, certain specified
foreign currencies, and
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-42
each other currency that may be approved in accordance with the 2021 Facility. The borrowings under the Credit Agreement bear interest at
either a eurocurrency rate plus a margin between 1.0% and 1.625% or a base rate (as defined in the Credit Agreement) plus a margin of
between 0% and 0.625%. The rates on December 31, 2024 and December 31, 2023 were 5.7% and 6.7%, respectively. Borrowings under
this Credit Agreement are guaranteed by certain Company operating subsidiaries. Letters of credit commitments outstanding under this
agreement aggregated approximately $43.0 million and $43.8 million at December 31, 2024 and December 31, 2023, respectively, which
reduced borrowing limits available to the Company. Interest expense related to the Credit Agreement was $0.7 million, $3.9 million and $4.3
million, for the years ended December 31, 2024, December 31, 2023 and December 31, 2022, respectively. There were no loan amounts
outstanding under the Credit Agreement at December 31, 2024 and December 31, 2023.
The Credit Agreement includes various covenants, including restrictions on indebtedness, liens, acquisitions, investments or
dispositions, payment of dividends and maintenance of certain financial ratios and conditions. The Company was in compliance with these
covenants at December 31, 2024 and December 31, 2023.
Letters of Credit
The Company also has in place several secondary bank credit lines for issuing letters of credit, principally for foreign contracts, to
support performance and completion guarantees. Letters of credit commitments outstanding under these bank lines aggregated
approximately $328.4 million and $320.7 million at December 31, 2024 and December 31, 2023, respectively.
12.
Other Long-term Liabilities
Other long-term liabilities consisted of the following at December 31, 2024 and December 31, 2023 (in thousands):
2024
2023
Self-insurance liability
$
58,878 $
81,795
Reserve for uncertain tax positions
22,985
22,815
Finance lease obligations
6,441
5,129
Other long-term liabilities
8,182
10,556
Total other long-term liabilities
$
96,486 $
120,295
Refer to “Note 13—Income Taxes” for further discussion of the Company’s reconciliation of the beginning and ending balances of
uncertain tax positions.
13.
Income Taxes
The following table presents the components of our income from operations before income taxes (in thousands):
2024
2023
2022
United States earnings
$
256,210 $
179,522 $
77,110
Foreign earnings
111,441
84,531
89,112
$
367,651 $
264,053 $
166,222
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-43
The income tax expense (benefit) attributable to income from operations for the years ended December 31, 2024, December 31, 2023,
and December 31, 2022 consists of the following (in thousands):
2024
2023
2022
Current
Federal
$
37,713 $
37,699 $
21,323
State
13,441
13,340
9,946
Foreign
19,731
14,013
9,232
Total current income tax expense
70,885
65,052
40,501
Deferred
Federal
1,397
(5,974 )
(2,902 )
State
3,941
(590 )
(623 )
Foreign
763
(2,350 )
2,681
Total deferred tax benefit
6,101
(8,914 )
(844 )
Total income tax expense
$
76,986 $
56,138 $
39,657
Income tax expense (benefit) was different from the amount computed by applying the United States federal statutory rate to pre-tax
income from continuing operations as a result of the following (in thousands):
2024
2023
2022
Income before income tax expense
$ 367,651
$ 264,053
$ 166,222
Tax at federal statutory tax rate
77,207
21.0 %
55,451
21.0 %
34,907
21.0 %
State taxes, net of federal tax benefit
11,852
3.2 %
9,807
3.7 %
7,530
4.5 %
Change in valuation allowance
11,111
3.0 %
5,773
2.2 %
1,363
0.8 %
Change in uncertain tax positions
3,584
1.0 %
3,530
1.3 %
1,688
1.0 %
Foreign tax rate differential
(6,078 )
-1.7 %
(6,258 )
-2.4 %
(1,787 )
-1.1 %
Tax cost of foreign operations, net of credits
1,842
0.5 %
3,085
1.2 %
777
0.5 %
Foreign-derived intangible income deduction
(14,794 )
-4.0 %
(4,736 )
-1.8 %
(76 )
0.0 %
Noncontrolling interests
(11,679 )
-3.2 %
(9,821 )
-3.7 %
(6,279 )
-3.8 %
Federal business credits
(2,932 )
-0.8 %
(2,731 )
-1.0 %
(1,926 )
-1.2 %
Executive compensation
7,351
2.0 %
1,636
0.6 %
1,921
1.2 %
Equity compensation
(7,170 )
-2.0 %
(158 )
-0.1 %
10
0.0 %
Other, net
6,692
1.8 %
560
0.2 %
1,529
0.9 %
Total income tax expense
$
76,986
20.9 % $
56,138
21.3 % $
39,657
23.9 %
The effective tax rate in 2024 decreased to 20.9% from 21.3% in 2023. The change in the effective tax rate was due primarily to tax
benefits related to increases in the foreign-derived intangible income (FDII) deduction and increased equity-based compensation deductions,
partially offset by an increase in valuation allowance on NOLs and non-deductible executive compensation subject to Section 162(m).
The effective tax rate in 2023 decreased to 21.3% from 23.9% in 2022. The change in the effective tax rate was due primarily to tax
benefits related to increases in the foreign-derived intangible income (FDII) deduction and a change in jurisdictional mix of earnings, partially
offset by an increase in valuation allowance on foreign tax credits originating from foreign withholding taxes.
The effective tax rate for the year ended December 31, 2024 differs from the federal statutory tax rate of 21% primarily due to state
income taxes, valuation allowance and executive compensation subject to Section 162(m), offset by benefits related to untaxed income
attributable to noncontrolling interests, earnings in lower tax jurisdictions, the FDII deduction, and equity-based compensation deductions.
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-44
The effective tax rate for the year ended December 31, 2023 differs from the federal statutory tax rate primarily due to state income
taxes, valuation allowance on foreign tax credit carryovers originating from foreign taxes, partially offset by benefits related to untaxed
income attributable to noncontrolling interests, earnings in lower tax jurisdictions, the FDII deduction, and federal business tax credits.
The effective tax rate for the year ended December 31, 2022 differs from the federal statutory tax rate primarily due to state income
taxes and a recorded valuation allowance on foreign tax credit carryovers, partially offset by benefits related to income attributable to
noncontrolling interests, earnings in lower tax jurisdictions and federal business tax credits.
The components of deferred tax assets and liabilities consist of the following at December 31, 2024 and December 31, 2023 (in
thousands):
2024
2023
Deferred tax assets
Project and non-project reserves
$
23,184 $
23,555
Employee compensation and benefits
76,944
69,726
Revenue and cost recognition
46,250
37,616
Insurance accruals
12,424
14,081
Net operating losses
17,640
8,663
Lease liabilities
42,572
44,626
Tax credit carryforwards
35,845
31,727
Other
17,432
3,285
Total deferred tax assets
272,291
233,279
Valuation allowance
(45,318 )
(34,779 )
Total deferred tax assets
226,973
198,500
Deferred tax liabilities
Intangible assets
(57,361 )
(18,783 )
Right-of-use assets
(38,605 )
(40,131 )
Profit remittance tax
(6,842 )
(5,822 )
Other
(1,758 )
(3,378 )
Total deferred tax liabilities
(104,566 )
(68,114 )
Net deferred tax asset
$
122,407 $
130,386
The Company is not asserting that any of the earnings of the foreign subsidiaries will be permanently reinvested. Therefore, the
Company has recorded a deferred tax liability for the undistributed earnings net of applicable foreign tax credits.
The Company assesses the realizability of its deferred tax assets each reporting period through an analysis of potential sources of
taxable income, including prior year taxable income available to absorb carryback of tax losses, reversals of existing taxable temporary
differences, tax planning strategies, and forecasts of taxable income. The Company considers all negative and positive evidence, including
the weight of the evidence, to determine if a valuation allowance against deferred tax assets is required. A valuation allowance is recorded
against deferred tax assets to reflect the amount of deferred tax assets that is determined to be more-likely-than-not to be realized.
As of December 31, 2024, and December 31, 2023, the Company’s valuation allowance against deferred tax assets was $45.3 million
and $34.8 million, respectively. The Company has recorded a valuation allowance against certain tax attributes that the Company has
determined are not more-likely-than-not to be realized, including certain foreign net operating loss carryforwards, foreign tax credit
carryforwards, and capital loss carryforwards. From December 31, 2023 to December 31, 2024, the Company’s valuation allowance
increased by $10.5 million. This increase relates to deferred tax assets recorded for net operating loss carryforwards and foreign tax credit
carryforwards. The valuation allowance is recorded because the Company does not expect to have sufficient taxable income and
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-45
foreign source income to utilize the net operating loss carryforwards and the foreign tax credit carryforwards before they expire.
As of December 31, 2024, the Company has Net Operating Losses ("NOLs") of $1.7 million, $20.3 million, and $74.2 million for U.S.
Federal, U.S. states and foreign jurisdictions, respectively. The utilization of the U.S. federal and U.S. state NOLs are subject to certain
annual limitations. Of these NOL amounts, $1.7 million, $8.0 million and $12.9 million in U.S. Federal, U.S. states and foreign jurisdictions,
respectively, do not expire. The remaining amounts of NOLs in U.S. states and in foreign jurisdictions will expire if not used between 2025
and 2045.
As of December 31, 2024, the Company has foreign tax credit carryforwards of $33.5 million. The Company has provided a valuation
allowance of $33.5 million as the Company considers it is not more likely than not that these credits will be realized. These foreign tax credits
start expiring in the year 2029.
A reconciliation of the beginning and ending balances of unrecognized tax benefits is as follows (in thousands):
2024
2023
2022
Beginning of year
$
25,497 $
22,798 $
21,181
Increases—current year tax positions
1,058
3,220
4,666
Increases—prior year tax positions
7,488
2,458
2,254
Decreases—prior year tax positions
(1,826 )
(1,589 )
(3,537 )
Settlements
(1,334 )
(1,026 )
(1,447 )
Lapse of statute of limitations
(1,345 )
(364 )
(319 )
End of year
$
29,538 $
25,497 $
22,798
At December 31, 2024, and December 31, 2023, there are $28.6 million and $25.1 million of unrecognized tax benefits that if
recognized would affect the Company’s effective tax rate.
The Company recognizes interest and penalties related to unrecognized tax benefits as part of its income tax expense. During the
years ended December 31, 2024, December 31, 2023, and December 31, 2022, the Company recognized approximately $1 million, $0.5
million, and $0.7 million in interest and penalties, respectively, in the consolidated statements of income. The total amount of interest and
penalties accrued in the consolidated balance sheets was $5.6 million, $4.6 million, and $4.1 million as of December 31, 2024, December 31,
2023, and December 31, 2022, respectively.
The Company conducts business globally and, as a result, the Company or one or more of its subsidiaries files income tax returns in
the U.S. federal jurisdiction, various U.S. states, and foreign jurisdictions. The Company is subject to examination by tax authorities in several
jurisdictions, including jurisdictions where the Company has significant activities, such as Canada, Qatar, Saudi Arabia and the United
States. As of December 31, 2024, the Company’s U.S. federal income tax returns for tax years 2021 and forward remain subject to
examination. U.S. states and foreign income tax returns remain subject to examination based on varying local statutes of limitations.
The Company estimates that, within 12 months, it may decrease its uncertain tax positions by approximately $7.2 million as a result of
concluding various tax audits and closing tax years.
Although the Company believes its reserves for its tax positions are reasonable, the final outcome of tax audits could be significantly
different, both favorably and unfavorably. It is reasonably possible that these audits may conclude in the next 12 months and that the
unrecognized tax benefits the Company has recorded in relation to these tax years may change compared to the liabilities recorded for these
periods. However, it is not currently possible to estimate the amount, if any, of such change.
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-46
14.
Contingencies
The Company is subject to certain lawsuits, claims and assessments that arise in the ordinary course of business. Additionally, the
Company has been named as a defendant in lawsuits alleging personal injuries as a result of contact with asbestos products at various
project sites. Management believes that any significant costs relating to these claims will be reimbursed by applicable insurance and,
although there can be no assurance that these matters will be resolved favorably, management believes that the ultimate resolution of any of
these claims will not have a material adverse effect on our consolidated financial position, results of operations, or cash flows. A liability is
recorded when it is both probable that a loss has been incurred and the amount of loss or range of loss can be reasonably estimated. When
using a range of loss estimate, the Company records the liability using the low end of the range unless some amount within the range of loss
appears at that time to be a better estimate than any other amount in the range. The Company records a corresponding receivable for costs
covered under its insurance policies. Management judgment is required to determine the outcome and the estimated amount of a loss related
to such matters. Management believes that there are no claims or assessments outstanding which would materially affect the consolidated
results of operations or the Company’s financial position.
In September 2015, a former Parsons employee filed an action in the United States District Court for the Northern District of Alabama
against us as a qui tam relator on behalf of the United States (the “Relator”) alleging violation of the False Claims Act. The plaintiff alleges
that, as a result of these actions, the United States paid in excess of $1 million per month between February and September 2006 that it
should have paid to another contractor, plus $2.9 million to acquire vehicles for the contractor defendant to perform its security services. The
lawsuit sought (i) that we cease and desist from violating the False Claims Act, (ii) monetary damages equal to three times the amount of
damages that the United States has sustained because of our alleged violations, plus a civil penalty of not less than $5,500 and not more
than $11,000 for each alleged violation of the False Claims Act, (iii) monetary damages equal to the maximum amount allowed pursuant to
§3730(d) of the False Claims Act, and (iv) Relator’s costs for this action, including recovery of attorneys’ fees and costs incurred in the
lawsuit. The United States government did not intervene in this matter as it is allowed to do so under the statute. The court heard dispositive
motions in 2023, including Parsons’ motion for summary judgment. We are awaiting the court’s rulings upon such motions, which will
determine whether a trial will be necessary for this matter in 2025.
On July 1, 2024, a final judgment was filed with the clerk of the Superior Court of the State of California In and For the County of San
Mateo with an award of damages in the total amount of approximately $102.5 million in favor of Parsons Transportation Group, Inc. and
against Alstom Signaling Operations LLC (Alstom"). This proposed award relates back to a lawsuit Parsons initially filed against the
Peninsula Corridor Joint Powers Board for breach of contract and wrongful termination in February 2017 (which was settled between
Parsons and the Joint Powers Board in 2021) and a cross-complaint filed against Alstom Signaling Operations LLC in November 2017, as
subsequently amended, for breach of contract, negligence and intentional misrepresentation. On September 23, 2024, the Court awarded
pre-judgment interest in the amount of $34.0 million and amended the judgment accordingly to include such interest. Alstom filed a Notice of
Appeal and has posted a bond as required under California law.
At this time, the Company is unable to determine the probability of the outcome of the litigation.
Federal government contracts are subject to audits, which are performed for the most part by the Defense Contract Audit Agency
(“DCAA”). Audits by the DCAA and other agencies consist of reviews of our overhead rates, operating systems and cost proposals to ensure
that we account for such costs in accordance with the Federal Acquisition Regulations (“FAR”). If the DCAA determines we have not
accounted for such costs in accordance with the FAR, the DCAA may disallow these costs. The disallowance of such costs may result in a
reduction of revenue and additional liability for the Company. Historically, the Company has not experienced any material disallowed costs as
a result of government audits. However, the Company can provide no assurance that the DCAA or other government audits will
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-47
not result in material disallowances for incurred costs in the future. All audits of costs incurred on work performed through 2014 have been
closed, and years thereafter remain open. All of Parsons operating systems have been deemed adequate by the U.S. federal government.
Although there can be no assurance that these matters will be resolved favorably, management believes that their ultimate resolution
will not have a material adverse impact on the Company’s consolidated financial position, results of operations, or cash flows.
15.
Retirement and Other Benefit Plans
The Company’s principal retirement benefit plan is the ESOP, a stock bonus plan, established in 1975 to cover eligible employees of
the Company and certain affiliated companies. Contributions of treasury stock to ESOP are made annually in amounts determined by the
Company’s board of directors and are held in trust for the sole benefit of the participants. Shares allocated to a participant’s account are fully
vested after three years of credited service, or in the event(s) of reaching age 65, death or disability while an active employee of the
Company. As of December 31, 2024, the total shares of the Company’s common stock outstanding were 106,775,350, of which 54,117,903
were held by the ESOP. As of December 31, 2023, the total shares of the Company’s common stock outstanding were 105,839,978, of which
59,879,857 were held by the ESOP.
A participant’s interest in their ESOP account is redeemable upon certain events, including retirement, death, termination due to
permanent disability, a severe financial hardship following termination of employment, certain conflicts of interest following termination of
employment, or the exercise of diversification rights. Distributions from the ESOP of participants’ interests are made in the Company’s
common stock based on quoted prices of a share of the Company’s common stock on the NYSE. A participant will be able to sell such
shares of common stock in the market, subject to any requirements of the federal securities laws.
Total ESOP contribution expense was approximately $59.8 million, $58.2 million and $54.7 million for the years ended December 31,
2024, December 31, 2023 and December 31, 2022, respectively, and is recorded in “Direct costs of contracts” and “Selling, general and
administrative expense” in the consolidated statements of income.
The Company also maintains a defined contribution plan (the “401(k) Plan”). Substantially all domestic employees are entitled to
participate in the 401(k) Plan, subject to certain minimum requirements. The Company’s contributions to the 401(k) Plan for the years ended
December 31, 2024, December 31, 2023 and December 31, 2022 amounted to $37.7 million, $35.4 million, and $30.2 million, respectively.
As part of an acquisition in 2014, the Company acquired a defined contribution pension plan, a defined benefit pension plan, and
supplemental retirement plan. For the defined contribution pension plan, the Company contributes a base amount plus an additional amount
based upon a predetermined formula. At December 31, 2024 and December 31, 2023, the defined benefit pension plan was in a net asset
position of $1.3 million and $1.4 million, respectively, which is recorded in “Other noncurrent assets” on the consolidated balance sheets.
16. Investments in and Advances to Joint Ventures
The Company participates in joint ventures to bid, negotiate and complete specific projects. The Company is required to consolidate
these joint ventures if it holds the majority voting interest or if the Company meets the criteria under the consolidation model, as described
below.
The Company performs an analysis to determine whether its variable interests give the Company a controlling financial interest in a
VIE for which the Company is the primary beneficiary and should, therefore, be consolidated. Such analysis requires the Company to assess
whether it has the power to
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-48
direct the activities of the VIE and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the
VIE.
The Company analyzed all of its joint ventures and classified them into two groups: (1) joint ventures that must be consolidated
because they are either not VIEs and the Company holds the majority voting interest, or because they are VIEs and the Company is the
primary beneficiary; and (2) joint ventures that do not need to be consolidated because they are either not VIEs and the Company holds a
minority voting interest, or because they are VIEs and the Company is not the primary beneficiary.
Many of the Company’s joint venture agreements provide for capital calls to fund operations, as necessary; however, such funding is
infrequent and is not anticipated to be material.
Letters of credit outstanding described in ‘Note 11—Debt and Credit Facilities” that relate to project ventures are approximately $176.7
million and $147.7 million at December 31, 2024 and December 31, 2023, respectively.
In the table below, aggregated financial information relating to the Company’s joint ventures is provided because their nature, risk and
reward characteristics are similar. None of the Company’s current joint ventures that meet the characteristics of a VIE are individually
significant to the consolidated financial statements.
Consolidated Joint Ventures
The following represents financial information for consolidated joint ventures included in the consolidated financial statements as of
and for the years ended December 31, 2024, December 31, 2023 and December 31, 2022 (in thousands):
2024
2023
Current assets
$
519,450 $
426,633
Noncurrent assets
9,841
14,295
Total assets
529,291
440,928
Current liabilities
296,774
260,286
Noncurrent liabilities
2,203
5,132
Total liabilities
298,977
265,418
Total joint venture equity
$
230,314 $
175,510
2024
2023
2022
Revenue
$
788,702 $
708,391 $
483,888
Costs
676,258
613,186
422,559
Net income
$
112,444 $
95,205 $
61,329
Net income attributable to noncontrolling interests
$
55,612 $
46,766 $
29,901
The assets of the consolidated joint ventures are restricted for use only by the particular joint venture and are not available for the
Company’s general operations.
Unconsolidated Joint Ventures
The Company accounts for its unconsolidated joint ventures using the equity method of accounting. Under this method, the Company
recognizes its proportionate share of the net earnings of these joint ventures as “Equity in earnings (loss) of unconsolidated joint ventures” in
the consolidated statements of income. The Company’s maximum exposure to loss as a result of its investments in unconsolidated VIEs is
typically limited to the aggregate of the carrying value of the investment and future funding commitments.
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-49
The following represents the financial information of the Company’s unconsolidated joint ventures as presented in their unaudited
financial statements as of and for the years ended December 31, 2024, December 31, 2023 and December 31, 2022 (in thousands):
2024
2023
Current assets
$
1,477,950 $
1,607,953
Noncurrent assets
431,476
483,693
Total assets
1,909,426
2,091,646
Current liabilities
947,072
1,057,113
Noncurrent liabilities
469,808
518,647
Total liabilities
1,416,880
1,575,760
Total joint venture equity
$
492,546 $
515,886
Investments in and advances to unconsolidated joint
ventures
$
138,759 $
128,204
2024
2023
2022
Revenue
$
2,118,799 $
2,313,420 $
2,406,407
Costs
2,108,768
2,310,114
2,325,472
Net income
$
10,031 $
3,306 $
80,935
Equity in (losses) earnings of unconsolidated joint ventures
$
(23,361 ) $
(47,751 ) $
16,347
The Company had net contributions to its unconsolidated joint ventures of $38.8 million and $65.2 million for the years ended
December 31, 2024 and December 31, 2023, respectively and received net distributions from its unconsolidated joint ventures of $20.2
million for the year ended December 31, 2022.
The following table presents certain financial statement impacts from changes in estimates on unconsolidated joint ventures in the
Critical Infrastructure segment.
2024
2023
2022
Operating loss
$
(51,715 ) $
(83,398 ) $
(13,817 )
Net loss
(44,682 )
(61,842 )
(10,335 )
Diluted loss per share
$
(0.40 ) $
(0.54 ) $
(0.09 )
17.
Related Party Transactions
The Company often provides services to unconsolidated joint ventures and revenues include amounts related to recovering overhead
costs for these services. For the years ended December 31, 2024, December 31, 2023 and December 31, 2022, revenues included $182.6
million, $213.8 million, and $217.4 million, respectively, related to services the Company provided to unconsolidated joint ventures. For the
years ended December 31, 2024, December 31, 2023 and December 31, 2022, the Company incurred approximately $143.2 million, $153.7
million and $157.6 million, respectively, of reimbursable costs. Amounts included in the consolidated balance sheets related to services the
Company provided to unconsolidated joint ventures are as follows (in thousands):
2024
2023
Accounts receivable
$
38,443 $
38,898
Contract assets
11,540
38,009
Contract liabilities
10,776
15,287
Amounts presented above for comparable periods have been updated to reflect all unconsolidated joint ventures.
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-50
18.
Fair Value
The authoritative guidance on fair value measurement defines fair value as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the measurement date (referred to as an “exit price”). At December
31, 2024 and December 31, 2023 the Company’s financial instruments include cash, cash equivalents, accounts receivable, accounts
payable, and other liabilities. The fair values of these financial instruments approximate their carrying values due to their short-term
maturities.
Investments measured at fair value are based on one or more of the following three valuation techniques:
•
Market approach—Prices and other relevant information generated by market transactions involving identical or comparable
assets or liabilities;
•
Cost approach—Amount that would be required to replace the service capacity of an asset (i.e., replacement cost); and
•
Income approach—Techniques to convert future amounts to a single present amount based on market expectations (including
present value techniques, option-pricing models and lattice models).
In addition, the guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair
value. The hierarchy gives the highest priority to unadjusted quoted market prices in active markets for identical assets and liabilities (Level 1
measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are:
Level 1
Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets and
liabilities;
Level 2
Pricing inputs that include quoted prices for similar assets and liabilities in active markets and inputs that are observable
for the asset or liability, either directly or indirectly, for substantially the full term of the derivative instrument; and
Level 3
Prices or valuations that require inputs that are both significant to the fair value measurements and unobservable.
The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of
future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market
participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a
different fair value measurement at the reporting date.
Financial assets and liabilities measured at fair value on a recurring basis are as follows:
Fair value as of December 31, 2024 (in thousands):
Level 1
Level 2
Level 3
Total
Assets related to defined contribution plan
Mutual funds
$
875 $
— $
— $
875
Fixed income
—
6,627
—
6,627
Cash and cash equivalents
349
—
—
349
Total assets at fair value
$
1,224 $
6,627 $
— $
7,851
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-51
Fair value as of December 31, 2023 (in thousands):
Level 1
Level 2
Level 3
Total
Assets related to defined contribution plan
Mutual funds
$
1,840 $
— $
—
1,840
Fixed income
—
6,568
—
6,568
Cash and cash equivalents
355
—
—
355
Total assets at fair value
$
2,195 $
6,568
— $
8,763
Contingent consideration
Earnout liability
$
- $
- $
2,300 $
2,300
Total liabilities at fair value
$
- $
- $
2,300 $
2,300
As described in “Note 15—Retirement and Other Benefits Plans”, the Company acquired a defined contribution pension plan, a
defined benefit pension plan, and supplemental retirement plans. At December 31, 2024 and December 31, 2023, the Company measured
the mutual funds held within the defined benefit pension plan at fair value using unadjusted quoted prices in active markets that are
accessible for identical assets. The Company measured the fixed income securities using market bid and ask prices. The inputs that are
significant to the valuation of fixed income securities are generally observable, and therefore have been classified as Level 2.
In determining the fair value of acquired intangible assets from our business acquisitions, the Company uses the multi-period excess
earnings method to value customer relationships and backlog and values developed technologies using the relief-from royalty method. These
valuation methods use significant unobservable inputs classified within Level 3 of the fair value hierarchy. See "Note 2—Summary of
Significant Accounting Policies."
We measure contingent consideration at fair value on a recurring basis using significant unobservable inputs classified within Level 3
of the fair value hierarchy. See "Note 2—Summary of Significant Accounting Policies" and "Note 3—Acquisitions" for further information.
With respect to equity-based compensation, for restricted stock units containing service conditions or service and performance
conditions, the grant date fair value is based on the closing stock price of a share of the Company’s common stock on the NYSE on the grant
date. For awards that include market conditions, the grant date fair value is determined using a Monte Carlo simulation.
The carrying values and estimated fair values of our financial instruments that are not required to be recorded at fair value in our
consolidated balance sheets, on the basis of Level 1 inputs for the Company's convertible notes and Level 2 inputs for the delayed draw term
loan, were as follows (in thousands):
December 31, 2024
December 31, 2023
Carrying Value
Fair Value
Carrying Value
Fair Value
Liabilities:
Convertible senior notes due 2025
$
113,405 $
233,206 $
400,000 $
568,000
Convertible senior notes due 2029
800,000
939,280
-
-
Delayed draw term loan
350,000
350,000
350,000
350,000
Total
$
1,263,405 $
1,522,486 $
750,000 $
918,000
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-52
19.
Earnings Per Share
Basic earnings per share (“EPS”) is computed using the weighted average number of shares outstanding during the period and income
available to shareholders. Diluted EPS includes additional common shares that would have been outstanding if potential common shares
with a dilutive effect had been issued using the if-converted method for Convertible Debt and the treasury stock method for all other
instruments.
Under the treasury stock method, the weighted average number of shares outstanding is adjusted to reflect the dilutive effects of
stock-based awards and shares underlying the warrants related to the convertible senior notes due 2025.
Under the if-converted method:
1.
Convertible Senior Notes due 2025:
a.
Income available to shareholders is adjusted to add back interest expense, after tax (unless antidilutive).
b.
Weighted average number of shares outstanding is adjusted to include the shares underlying the convertible debt (unless
antidilutive).
c.
Shares underlying the bond hedge (unless antidilutive).
2.
Convertible Senior Notes due 2029:
a.
Interest has been excluded from the numerator and no shares have been included in the denominator of diluted EPS, as
the principal amount of convertible debt will be settled in cash with any excess conversion value settled in cash or shares
of common stock.
b.
Excludes shares underlying the capped call as the shares are antidilutive.
The following table reconciles the numerator and denominator used to compute basic and diluted EPS for the years ended December
31, 2024, December 31, 2023, and December 31, 2022 (in thousands):
2024
2023
2022
Numerator for Basic and Diluted EPS:
Net income attributable to Parsons Corporation - basic
$
235,053 $
161,149 $
96,664
Convertible senior notes if-converted method interest adjustment
2,932
2,291
2,176
Net income attributable to Parsons Corporation - diluted
$
237,985 $
163,440 $
98,840
Denominator for Basic and Diluted EPS:
Basic weighted average number of shares outstanding
106,274
104,992
103,758
Dilutive effect of stock-based awards
1,778
1,173
808
Dilutive effect of warrants
494
—
—
Dilutive effect of convertible senior notes
3,628
8,917
8,917
Diluted weighted average number of shares outstanding
112,174
115,082
113,483
Earnings per share:
Basic
$
2.21 $
1.53 $
0.93
Diluted
$
2.12 $
1.42 $
0.87
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-53
Anti-dilutive stock-based awards excluded from the calculation of earnings per share for the years ended December 31, 2024,
December 31, 2023, and December 31, 2022 were 4,562, 5,423, and 15,113, respectively.
Share Repurchases
On August 9, 2021, the Company’s Board of Directors authorized the Company to acquire a number of shares of Common Stock
having an aggregate market value of not greater than $100 million from time to time, commencing on August 12, 2021. The Board further
amended this authorization in August 2022 to remove the prior expiration date and grant executive leadership the discretion to determine the
price for such share repurchases. The Board further amended this authorization in February 2024 to restore the repurchase capacity to $100
million and removed the $25 million quarterly cap on such repurchases.
At the time of the February 2024 authorization, the Company had repurchased shares with an aggregated market value (including
fees) of $54.7 million. The aggregate market value of shares of Common Stock the Company is authorized to acquire, from both the August
2021 and February 2024 authorizations, is not greater than $154.7 million.
As of December 31, 2024, the Company has $75 million remaining under the stock repurchase program.
Repurchased shares of common stock are retired and included in “Repurchases of common stock” in cash flows from financing
activities in the Consolidated Statements of Cash Flows. The primary purpose of the Company’s share repurchase program is to reduce the
dilutive effect of shares issued under the Company’s ESOP and other stock benefit plans. The timing, amount and manner of share
repurchases may depend upon market conditions and economic circumstances, availability of investment opportunities, the availability and
costs of financing, the market price of the Company's common stock, other uses of capital and other factors.
The following table summarizes the repurchase activity under the stock repurchase program.
2024
2023
Total shares repurchased
287,005
233,010
Total shares retired
287,005
233,010
Average price paid per share
$
87.10 $
47.21
20.
Segments Information
The Company operates in two reportable segments: Federal Solutions and Critical Infrastructure.
The Federal Solutions segment provides advanced technical solutions to the U.S. government, delivering timely, cost-effective
hardware, software and services for mission-critical projects. The segment provides advanced technologies, supporting national security
missions in cyber operations, missile defense, and military facility modernization, logistics support, hazardous material remediation and
engineering services.
The Critical Infrastructure segment provides integrated engineering and management services for complex physical and digital
infrastructure around the globe. The Critical Infrastructure segment is a technology innovator focused on next generation digital systems and
complex structures. Industry leading capabilities in engineering and project management allow the Company to deliver significant value to
customers by employing cutting-edge technologies, improving timelines and reducing costs.
The Company defines its reportable segments based on the way the chief operating decision maker (“CODM”), its Chief Executive
Officer, evaluates the performance of each segment and manages the operations of the Company for purposes of allocating resources
among the segments. The CODM
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-54
evaluates segment operating performance using segment Revenue, segment direct cost of contracts, segment Selling, General and
Administrative expense and segment Adjusted EBITDA attributable to Parsons Corporation.
The Company defines Adjusted EBITDA attributable to Parsons Corporation as Adjusted EBITDA excluding Adjusted EBITDA
attributable to noncontrolling interests. The Company defines Adjusted EBITDA as net income (loss) attributable to Parsons Corporation,
adjusted to include net income (loss) attributable to noncontrolling interests and to exclude interest expense (net of interest income),
provision for income taxes, depreciation and amortization and certain other items that are not considered in the evaluation of ongoing
operating performance. These other items include net income (loss) attributable to noncontrolling interests, asset impairment charges,
income and expense recognized on litigation matters, expenses incurred in connection with acquisitions and other non-recurring transaction
costs and expenses related to our prior restructuring.
Adjusted EBITDA is the measure of our operating performance used by the CODM to assess our segments’ financial performance.
The CODM uses Adjusted EBITDA for business planning purposes, including to manage our segments against internal projected results of
operations and measure the performance of our segments generally.
The following tables present segment information provided to the CODM, as of each fiscal year presented, along with a reconciliation
of segment adjusted EBITDA attributable to Parsons Corporation to net income attributable to Parsons Corporation for the periods presented
(in thousands):
Twelve Months Ended December 31, 2024
Federal
Solutions
Critical
Infrastructure
Total
Revenue
$
4,007,114 $
2,743,462 $
6,750,576
Direct cost of contracts
(3,187,829 )
(2,156,325 )
(5,344,154 )
Selling, general and administrative expenses (a)
(157,442 )
(146,744 )
(304,186 )
Equity in earnings (losses) of unconsolidated joint ventures
3,254
(26,615 )
(23,361 )
Other segment items (b)
(249,759 )
(280,877 )
(530,636 )
Adjusted EBITDA attributable to Parsons Corporation
$
415,338 $
132,901
548,239
Reconciliation: Segment Adjusted EBITDA to Net Income Attributable
to Parsons Corporation
Adjusted EBITDA attributable to non-controlling interests
56,714
Depreciation and amortization
(99,251 )
Interest expense, net
(40,154 )
Income tax expense
(76,986 )
Equity-based compensation expense
(61,492 )
Convertible debt repurchase loss
(18,355 )
Transaction related costs (c)
(17,138 )
Other (e)
(912 )
Net income including noncontrolling interests
290,665
Net income attributable to noncontrolling interests
(55,612 )
Net income attributable to Parsons Corporation
$
235,053
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-55
Twelve Months Ended December 31, 2023
Federal
Solutions
Critical
Infrastructure
Total
Revenue
$
3,020,701 $
2,422,048 $
5,442,749
Direct cost of contracts
(2,375,350 )
(1,861,385 )
(4,236,735 )
Selling, general and administrative expenses (a)
(129,507 )
(129,747 )
(259,254 )
Equity in earnings (losses) of unconsolidated joint ventures
4,190
(51,941 )
(47,751 )
Other segment items (b)
(230,784 )
(251,190 )
(481,974 )
Adjusted EBITDA attributable to Parsons Corporation
289,250
127,785
417,035
Reconciliation: Segment Adjusted EBITDA to Net Income Attributable
to Parsons Corporation
Adjusted EBITDA attributable to non-controlling interests
47,638
Depreciation and amortization
(119,973 )
Interest expense, net
(29,306 )
Income tax expense
(56,138 )
Equity-based compensation expense
(36,151 )
Transaction related costs (c)
(12,013 )
Restructuring expense (d)
(1,244 )
Other (e)
(1,933 )
Net income including noncontrolling interests
207,915
Net income attributable to noncontrolling interests
(46,766 )
Net income attributable to Parsons Corporation
$
161,149
Twelve Months Ended December 31, 2022
Federal
Solutions
Critical
Infrastructure
Total
Revenue
$
2,212,987 $
1,982,285 $
4,195,272
Direct cost of contracts
(1,703,297 )
(1,545,253 )
(3,248,550 )
Selling, general and administrative expenses (a)
(117,759 )
(110,468 )
(228,227 )
Equity in earnings of unconsolidated joint ventures
3,677
12,670
16,347
Other segment items (b)
(196,604 )
(215,849 )
(412,453 )
Adjusted EBITDA attributable to Parsons Corporation
199,004
123,385
322,389
Reconciliation: Segment Adjusted EBITDA to Net Income Attributable
to Parsons Corporation
Adjusted EBITDA attributable to non-controlling interests
30,393
Depreciation and amortization
(120,501 )
Interest expense, net
(22,219 )
Income tax expense
(39,657 )
Equity-based compensation expense
(24,354 )
Transaction related costs (c)
(16,270 )
Restructuring expense (d)
(213 )
Other (e)
(3,003 )
Net income including noncontrolling interests
126,565
Net income attributable to noncontrolling interests
(29,901 )
Net income attributable to Parsons Corporation
$
96,664
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-56
(a)
The amount of selling, general and administrative expenses (“SG&A”) is total SG&A excluding allocations.
(b)
The amount of other segment items is the difference between segment revenue less direct cost of contracts, segment SG&A
expenses, equity in earnings (losses) of unconsolidated joint ventures, and Adjusted EBITDA attributable to Parsons Corporation.
Other segment items primarily include:
i.
Corporate and shared segment SG&A (excluding Adjusted EBITDA items)
ii.
Noncontrolling interests attributable to operating income and other income/expense
iii.
Bad debt expense
iv.
Sublease income
v.
Foreign currency gain/loss, and
vi.
Certain other income/expense items
(c)
Reflects costs incurred in connection with acquisitions, and other non-recurring transaction costs, primarily fees paid for professional
services and employee retention.
(d)
Reflects costs associated with and related to our corporate restructuring initiatives.
(e)
Includes a combination of gain/loss related to sale of fixed assets, software implementation costs, and other individually insignificant
items that are non-recurring in nature.
Asset information by segment is not a key measure of performance used by the CODM.
The following table presents revenues and property and equipment, net by geographic area (in thousands):
2024
2023
2022
Revenues:
North America
$
5,677,933 $
4,481,492 $
3,463,128
Middle East
1,052,509
943,175
710,830
Rest of World
20,134
18,082
21,314
Total revenues
$
6,750,576 $
5,442,749 $
4,195,272
Property and equipment, net
North America
$
101,044 $
91,766 $
91,217
Middle East
10,531
7,191
4,833
Total property and equipment, net
$
111,575 $
98,957 $
96,050
North America revenue includes $5.2 billion, $4.1 billion and $3.2 billion of United States revenue for the years ended December 31,
2024, December 31, 2023 and December 31, 2022, respectively. North America property and equipment, net includes $94.0 million, $83.9
million and $84.4 million of property and equipment, net in the United States at December 31, 2024, December 31, 2023 and December 31,
2022, respectively.
The geographic location of revenue is determined by the location of the customer.
The following table presents revenues by business lines (in thousands):
2024
2023
2022
Revenue:
Defense & Intelligence
$
1,772,481 $
1,539,968 $
1,368,779
Engineered Systems
2,234,633
1,480,733
844,208
Federal Solutions revenues
4,007,114
3,020,701
2,212,987
Infrastructure – North America
1,683,664
1,472,768
1,265,376
Infrastructure – Europe, Middle East and Africa
1,059,798
949,280
716,909
Critical Infrastructure revenues
2,743,462
2,422,048
1,982,285
Total revenues
$
6,750,576 $
5,442,749 $
4,195,272
PARSONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2024, December 31, 2023 and December 31, 2022
F-57
Effective June 1, 2022, the Company made changes to its Federal Solutions business units by transferring a portion of legacy Defense
and Intelligence business unit to the Engineered Systems business unit. Effective October 1, 2023, the Company reorganized its Critical
Infrastructure business units from Mobility Solutions and Connected Communities to Infrastructure – North America and Infrastructure –
Europe, Middle East and Africa. The prior year information in the table above has been reclassified to conform to the business unit changes.
21.
Quarterly Information - Unaudited
The following table presents selected quarterly financial information (in thousands except per share data).
Quarter Ended
March 31, 2024
December 31, 2024
Federal Solutions revenue
$
909,608
$
1,003,323
Critical Infrastructure revenue
626,068
730,994
Total revenue
1,535,676
1,734,317
Operating income
101,844
99,812
Convertible debt repurchase loss (1)
(18,355 )
-
Income tax expense (1)
(13,324 )
(18,729 )
Net income attributable to Parsons Corporation (1)
39,750
54,180
Earnings per share:
Basic
$
0.37
$
0.51
Diluted (2)
$
0.37
$
0.49
1 Presents the revised quarterly financial data resulting from the adoption of Accounting Standards Update (“ASU”) 2024-04 as of January 1, 2024 on
a prospective basis. As a result of the adoption of ASU 2024-04, the Company reversed a loss on extinguishment of debt for the partial repurchase of the
Convertible Senior Notes due 2025 and recorded the repurchase transaction as an induced conversion. This change from extinguishment to inducement
accounting resulted in the Company (i.) reversing the $211.0 million loss and the related $49.9 million tax benefit on extinguishment of debt, recorded in Q1
2024, (ii.) recording a $18.4 million convertible debt repurchase loss, (iii.) the difference between the extinguishment loss and inducement expense of $192.6
million recorded to equity, and (iv.) the related tax benefit of $45.6 million recorded to equity. See "Note 2—Summary of Significant Accounting Polices—
New Accounting Pronouncements" for a further discussion of the first quarter 2024 extinguishment accounting and subsequent change to inducement
accounting.
2 Diluted earnings per share prior to the adoption of ASU 2024-04 did not include certain adjustments as their inclusion would have been antidilutive.
Subsequent to the adoption of ASU 2024-04 these adjustments are no longer antidilutive. Dilutive adjustments include if converted interest of $2.8 million,
1.5 million shares related to stock based awards and 6.8 million shares related to convertible senior notes. Inclusion of these dilution adjustments resulted in
dilutive net income attributable to Parsons Corporation of $42.5 million and total diluted shares of 114.4 million for the quarter ended March 31, 2024.
22.
Subsequent Events
After the year ended December 31, 2024, the Company entered into a merger agreement to acquire a 100% ownership interest in TRS
Group, Inc. ("TRS") for approximately $36 million from cash on hand. Headquartered in Indianapolis, Indiana, TRS is an environmental
solutions firm that specializes in remediation technology. At the time of the filing of this Form 10-K, the Company has just started the process
of obtaining the relevant data to make the required acquisition related disclosures. This acquisition is not material to the Company's
consolidated financial statements.
F-58
PARSONS CORPORATION AND SUBSIDIARIES
Schedule II—Valuation and Qualifying Accounts
(in thousands)
Balance at
beginning
of period
Additions
Deductions
Other and
foreign
exchange impact
Balance at
end of period
2024
Allowance for doubtful accounts
$
3,952 $
- $
(66 ) $
- $
3,886
Valuation allowance on deferred tax assets
34,779
11,452
(328 )
(585 )
45,318
2023
Allowance for doubtful accounts
4,011 $
- $
(59 ) $
-
3,952
Valuation allowance on deferred tax assets
28,705
8,209
(2,437 )
302
34,779
2022
Allowance for doubtful accounts
3,955
59
(3 )
-
4,011
Valuation allowance on deferred tax assets
$
27,348
3,656
(2,180 )
(119 ) $
28,705
Exhibit 10.71
ELEVENTH AMENDMENT TO THE
PARSONS CORPORATION RETIREMENT SAVINGS PLAN
(2017 AMENDMENT AND RESTATEMENT)
The Parsons Corporation Retirement Savings Plan (2017 Amendment and Restatement), as previously amended (the “Plan”) is hereby
amended as follows:
1.
Section 2.14.2.8 is hereby amended to read as follows:
2.14.2.8. for periods prior to June 1, 2022, an Employee of Parsons Government Support Services who is
performing services for a Participating Company under a public contract subject to the Davis-Bacon Act, the
Service Contract Act, or any other federal, state or municipal prevailing wage law.
* * *
Exhibit 10.71
IN WITNESS WHEREOF, this instrument of amendment is executed this 21 day of October, 2024.
PARSONS CORPORATION
By:
Name:
Title:
_________________________________
Exhibit 21.1
LIST OF SUBSIDIARIES OF THE REGISTRANT
Subsidiary
Registered Jurisdiction
3D/International, Inc.
Texas
Amplus Corporation
BCC Engineering Acquisition Corporation
BCC Engineering Holding Corporation
BCC Engineering, LLC
Black Signal Technologies, LLC
Virginia
Delaware
Delaware
Florida
Delaware
Blackhorse, A Parsons Company
Blue Ridge Envisioneering, Inc.
Delaware
Virginia
Bonifica S.P.A.
Italy
Braxton Science & Technology Group, LLC
Colorado
Braxton Technologies, LLC
Colorado
Bright Star For Engineering Services LLC
Iraq, Republic of
CMX Technologies LLC
Delaware
Command Engineering International Limited
Cromulence LLC
Ontario
Florida
De Leuw, Cather International Limited
Delaware
Delcan Corporation
Illinois
Delcan Technologies, Inc.
Diqqat Al /hilool for Engineering and Technical Services, Project Management and
Electronic Equipment Supply LLC
Georgia
Iraq
DZSP 21 LLC
Delaware
Echo Ridge, LLC
Virginia
Emerett, LLC
Engineering Financing Services, LLC
Colorado
Delaware
First Defense Services Pte. Ltd.
Singapore
Fourth Dimension Engineering LLC
Heath & Lineback Engineers, Inc.
Delaware
Georgia
Holding S.r.L.
I.S. Engineers, L.L.C.
Italy
Texas
Ingenicomm, LLC
Virginia
IPKeys Power Partners, Inc.
Delaware
Marigold Infrastructure Partners Inc.
Alberta
NDP, LLC
New Millenium Engineering, Inc.
Colorado
Florida
OGSystems, LLC
Paragon Communications Solutions LlC
Virginia
Virginia
PARCAN, Inc.
Delaware
Exhibit 21.1
Parmetek, S.A. De C.V.
Mexico
Parsons 401Hot GP Inc.
Ontario
Parsons 401Hot Limited Partnership
Ontario
Parsons Architectural Services Inc.
Alberta
Parsons Architectural Services of Illinois Inc.
Illinois
Parsons Architecture of Florida Inc.
Florida
Parsons Architecture of New Jersey P.C.
New Jersey
Parsons Canada Holdings, LLC
Delaware
Parsons Construction Craft Services Inc.
Texas
Parsons Construction Group Inc.
Delaware
Parsons Constructors & Fabricators Inc.
Delaware
Parsons Constructors Inc.
Delaware
Parsons Corporation
Delaware
Parsons Delcan Inc.
Delaware
Parsons do Brasil Construcoes Ltda.
Brazil
Parsons Engineering Inc. of Michigan
Michigan
Parsons Engineering Limited
Cork
Parsons Engineering of New York, Inc.
New York
Parsons Engineering Science International, Inc.
Delaware
Parsons Engineering Science, Inc.
California
Parsons Engineering Services L.L.C.
Dubai
Parsons Enterprises, Inc.
Delaware
Parsons Environment & Infrastructure Group Inc.
Delaware
Parsons Europe Holdings B.V.
Netherlands
Parsons Federal Construction Inc.
California
Parsons Global Services, Ltd.
Cayman Islands (B.W.I.)
Parsons Government Services Inc.
Nevada
Parsons Government Services International Inc.
Delaware
Exhibit 21.1
Parsons Government Support Services Inc.
Parsons Group France SAS
Texas
France
Parsons Group International Limited
United Kingdom
Parsons Inc.
Federally Chartered (Canada)
Parsons Infrastructure & Technology Group Inc. of Ohio
Ohio
Parsons Infrastructure & Technology Group of Illinois P.C.
Illinois
Parsons Infrastructure & Technology Group of Michigan Inc.
Nevada
Parsons Infrastructure & Technology Group of New York Inc.
New York
Parsons Inspection & Maintenance Corporation
Delaware
Parsons International & Company LLC
Sultanate of Oman
Parsons International Limited
Nevada
Parsons International Limited
Delaware
Parsons International Limited (L.L.C.), a Limited Liability Company
Egypt, Arab Republic of
Parsons Main of New York, Inc.
New York
Parsons Middle East Corporation
Nevada
Parsons Middle East Ltd.
Delaware
Parsons MIP Inc.
Alberta
Parsons of North Carolina Inc.
North Carolina
Parsons of Puerto Rico Professional Engineers, P.S.C.
Puerto Rico
Parsons Overseas Company
Nevada
Parsons Overseas Limited Inc.
Delaware
Parsons PATCO Inc.
Delaware
Parsons Professional Corporation
District of Columbia
Parsons Professional Services Inc.
Ontario
Parsons Project Services, Inc.
California
Parsons RCI Inc.
Parsons Regional Headquarters Company
Washington
Saudi Arabia
Exhibit 21.1
Parsons Savannah Construction Company
South Carolina
Parsons Savannah Services Company
Delaware
Parsons Secure Solutions Inc.
Virginia
Parsons Services Company
Texas
Parsons SGTP GP Holdings Inc.
Federally Chartered
Parsons Technical Services Inc.
Delaware
Parsons Technical Services International Inc.
Texas
Parsons Transportation Architectural Services LLC
Delaware
Parsons Transportation Group Inc.
Illinois
Parsons Transportation Group Inc. of Michigan
Michigan
Parsons Transportation Group Inc. of Virginia
Virginia
Parsons Transportation Group of New York, Inc.
New York
Parsons Transportation Group, Professional Corporation
District of Columbia
Parsons Water & Infrastructure Inc.
Delaware
Parsons-Versar LLC
Delaware
Partnership for Temporary Housing LLC
Delaware
Polaris Alpha Advanced Systems, Inc.
Virginia
Polaris Alpha Cyber and Sigint, LLC
Delaware
Polaris Alpha Cyber Technologies, LLC
Delaware
Polaris Alpha, LLC
Delaware
PTSI Managed Services Inc.
California
QRC, LLC
Virginia
RMP Infrastructure Holdings Inc.
Federally Chartered
S&P Geology Services P.C.
New York
Sage Management Enterprise, LLC
Saudi Arabian Parsons for Engineering Consulting Company (Professional Limited
Liability Company)
Maryland
Saudi Arabia
Saudi Arabian Parsons Limited
Saudi Arabia
Exhibit 21.1
Sealing Technologies, LLC
Maryland
SGTP Highway Bypass GP Inc.
Saskatchewan
SGTP Highway Bypass Limited Partnership
Saskatchewan
Silver Palm Technologies, LLC
Solidyn Solutions, LLC
Maryland
Delaware
Space Ground System Solutions, Inc.
Florida
SPW 2020 LLC
Virginia
Steinman Boynton Gronquist & Birdsall
New York
Steinman Inc.
New York
T.J. Cross Engineers, Inc.
California
Tailored Engineering Deployments, LLC
Maryland
TCG International Group Ltd.
Virginia
The Ralph M. Parsons Company
Nevada
TSM LLC
Tennessee
Vaxcom Services LLC
Delaware
West Corridor Developers General Partnership
Alberta
Williams Electric Co., Inc.
Florida
Xator AFG LLC
Delaware
Xator LLC
Florida
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-234626 and 333-231387) of
Parsons Corporation of our report dated February 19, 2025 relating to the financial statements and financial statement schedule and the
effectiveness of internal control over financial reporting, which appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
Los Angeles, California
February 19, 2025
Exhibit 31.1
CERTIFICATION PURSUANT TO
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Carey A. Smith, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Parsons Corporation;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to
the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this
report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
(d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the
equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information;
and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: February 19, 2025
By:
/s/ Carey A. Smith
Carey A. Smith
Chief Executive Officer
Exhibit 31.2
CERTIFICATION PURSUANT TO
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Matthew M. Ofilos, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Parsons Corporation;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to
the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this
report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
(d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the
equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information;
and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: February 19, 2025
By:
/s/ Matthew M. Ofilos
Matthew M. Ofilos
Chief Financial Officer
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Parsons Corporation (the “Company”) on Form 10-K for the period ending December 31, 2024
as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Carey A. Smith, Chief Executive Officer of the
Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of
the Company.
Date: February 19, 2025
By:
/s/ Carey A. Smith
Carey A. Smith
Chief Executive Officer
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Parsons Corporation (the “Company”) on Form 10-K for the period ending December 31, 2024
as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Matthew M. Ofilos, Chief Financial Officer of the
Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of
the Company.
Date: February 19, 2025
By:
/s/ Matthew M. Ofilos
Matthew M. Ofilos
Chief Financial Officer