☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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.

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~June 6, 2019,~~October 19, 2023, the registrant had ~~99,434,877~~104,888,937 shares of common stock, $1.00 par value per share, outstanding.

The accompanying notes are an integral part of these consolidated financial statements.

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. ~~Parsons Employee Stock Ownership Plan (“ESOP”) is the sole shareholder~~

The preparation of the consolidated financial statements in accordance with 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; ~~valuation of the Company’s fair value of common stock;~~ useful lives of property and equipment and intangible assets; ~~calculation~~valuation of ~~allowance for doubtful accounts;~~goodwill, intangible assets and net assets acquired from business acquisitions; valuation of deferred income tax assets and uncertain tax positions, among others. Please ~~refer to~~see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” and “Note ~~2 –~~ 2—Summary of Significant Accounting Policies” ~~of Notes~~in the notes to ~~Consolidated Financial Statements~~our consolidated financial statements included in the Company’s Form ~~S-1/A filed April 29, 2019,~~10-K for the year ended December 31, 2022, for a discussion of the significant estimates and assumptions affecting our consolidated financial statements. Estimates of costs to complete contracts 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 statement of income.

4.	~~Acquisitions~~

Acquisitions

~~Polaris Alpha~~Sealing Technologies, Inc.

On ~~May 31, 2018,~~August 23, 2023, the Company acquired a ~~100%~~100% ownership interest in ~~Polaris Alpha,~~Sealing Technologies, Inc (“SealingTech”), a ~~privately owned, advanced technology-focused provider of innovative mission solutions~~privately-owned company, for ~~complex defense, intelligence,~~$181.7 million in cash and ~~security customers, as well as other U.S. federal government customers, for $489.1~~up to an additional $25 million ~~paid~~ in ~~cash.~~the event an earn out revenue target is exceeded. The Company borrowed ~~$260~~$175 million under the ~~credit agreement,~~Credit Agreement, as described in “Note 1210 – Debt and Credit ~~Facilities,”~~Facilities”, 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 ~~$6.2~~$3.1 million of acquisition-related expenses in ~~“Indirect,~~“Selling, general and administrative expense” in the consolidated statements of income for the ~~fiscal year~~three and nine months ended ~~December 31, 2018,~~September 30, 2023, including legal fees, consulting fees, and other miscellaneous direct expenses associated with the acquisition. ~~Polaris Alpha enhances~~

The Company has agreed to pay the ~~Company’s artificial intelligence~~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 ~~data analytics expertise with new technologies~~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 within 15 days following the date the earn out statement becomes final and ~~solutions. Customers~~binding on both parties.

The following table summarizes the acquisition date fair value of ~~both companies will benefit from existing, complementary technologies~~the purchase consideration transferred (in thousands):


	Amount
Cash paid at closing	$	181,690
Fair value of contingent consideration to be achieved		3,443
Total purchase price	$	185,133

Changes in the fair value of contingent consideration, when they occur, are recorded in the consolidated statements of income within “Selling, general and ~~increased scale, enabling end-to-end solutions under the shared vision of rapid prototyping and agile development.~~administrative expense”.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed based on the preliminary purchase price allocation as of the date of acquisition (in thousands):

Amount

Cash and cash equivalents

$
7,914

Accounts receivable

29,688

Contract assets

35,229

Prepaid expenses and other current assets

9,295

Property and equipment

9,024

Goodwill

243,471

Intangible assets

199,520

Other noncurrent assets

2,203

Accounts payable

(13,942
)
Accrued expenses and other current liabilities

(26,419
)
Contract liabilities

(3,529
)
Deferred tax liabilities

(2,231
)
Other long-term liabilities

(1,146
)
Net assets acquired

$
489,077


	Amount
Cash and cash equivalents	$	8,133
Accounts receivable		17,889
Contract assets		2,960
Other current assets		1,379
Property and equipment		1,635
Right of use asset		1,288
Deferred tax assets		686
Goodwill		106,241
Intangible assets		59,900
Accounts payable		(15,987	)
Accrued expenses and other current liabilities		(2,377	)
Contract liabilities		(493	)
Short-term lease liabilities		(540	)
Deferred tax liabilities		(330	)
Long-term lease liabilities		(551	)
Net assets acquired	$	179,833

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)
Developed technology

$
84,900

4
Customer relationships

76,000

8
Backlog

34,900

2
Trade name

3,600

1
Leases

$
120

6


	Gross Carrying Amount		Amortization Period
			(in years)
Customer relationships	$	31,400	8
Backlog		18,500	8
Developed technologies		8,000	5
Other		2,000	1 to 3

Amortization expense of ~~$13.7~~$1.5 million related to these intangible assets was recorded for the three and nine months ended ~~March 31, 2019.~~September 30, 2023. The entire value of goodwill ~~of $243.5 million~~ was assigned to the ~~Parsons~~ Federal Solutions reporting unit and represents synergies expected to be realized from this business combination. ~~A portion~~The entire value of goodwill is deductible for tax purposes. ~~The Company is in the process of finalizing the amount.~~

The amount of revenue generated by ~~Polaris Alpha~~SealingTech and included within consolidated revenues is $18.4 million for the three and nine months ended ~~March 31, 2019 is $93.4 million.~~September 30, 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.

The Company is still in the process of finalizing its valuation of the net assets acquired.

Supplemental Pro Forma Information (Unaudited)

Supplemental information ~~on an~~of unaudited pro forma operating results assuming the ~~Polaris Alpha~~SealingTech acquisition had been consummated as of the beginning of fiscal year ~~2018 (December 31, 2017)~~2022 (in thousands) is as follows:

Three Months Ended

March 30, 2018

Pro forma revenue

$
840,487

Pro forma net income

$
10,532


	Three Months Ended				Nine Months Ended
	September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
Pro forma Revenue	$	1,450,376	$	1,154,603	$	4,030,873	$	3,134,609
Pro forma Net Income including noncontrolling interests		66,010		42,820	$	161,544	$	77,218

IPKeys Power Partners

~~The unaudited pro forma supplemental information is based on estimates and assumptions which~~On April 13, 2023, the Company ~~believes are reasonable and reflects the pro forma impact of additional amortization related~~entered into a merger agreement to the fair value of acquired intangible assets, pro forma impact of reflecting acquisition costs, which consisted of legal, advisory and due diligence fees and expenses and the additional pro forma interest expense related to the borrowings under the credit agreement as of the assumed acquisition date. 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.

~~OGSystems~~

~~On January 7, 2019, the Company acquired~~acquire a ~~100%~~100% ownership interest in ~~OGSystems,~~IPKeys Power Partners (“IPKeys”), a ~~privately owned, advanced technology-focused provider of innovative mission solutions~~privately-owned company, for ~~complex defense, intelligence, and security customers, as well as other U.S. federal government customers, for $292.4~~$43.0 million ~~paid~~ in cash. The ~~Company borrowed $110 million under the credit agreement~~merger brings IPKeys' established customer base, expanding Parsons' presence in two rapidly growing end markets: grid modernization and ~~$150 million on~~cyber resiliency for critical infrastructure. Headquartered in Tinton Falls, New Jersey, IPKeys is a ~~short-term loan, as described in “Note 12 – Debt~~trusted provider of enterprise software platform solutions that is actively delivering cyber and ~~Credit Facilities,”~~operational security to ~~partially fund the acquisition.~~ 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 ~~$4.1~~$0.1 million and $0.6 million of acquisition-related expenses in ~~“Indirect,~~“Selling, general and administrative expense” in the consolidated statements of income for the ~~period~~three and nine months ended ~~March 31, 2019,~~September 30, 2023, respectively, including legal fees, consulting fees, and other miscellaneous direct expenses associated with the acquisition. OGSystems enhances the Company’s artificial intelligence and data analytics expertise with new technologies and solutions. Customers of both companies will benefit from existing, complementary technologies and increased scale, enabling end-to-end solutions under the shared vision of rapid prototyping and agile development.


	Amount
Cash and cash equivalents	$	126
Accounts receivable		3,937
Contract assets		834
Other current assets		422
Property and equipment		86
Right of use asset		129
Other noncurrent assets		56
Goodwill		24,126
Intangible assets		23,000
Accounts payable		(541	)
Accrued expenses and other current liabilities		(1,768	)
Contract liabilities		(1,936	)
Deferred tax liabilities		(5,432	)
Net assets acquired	$	43,039

Amount

Cash and cash equivalents

$
5,772

Accounts receivable

9,904

Contract assets

9,747

Prepaid expenses and other current assets

4,307

Property and equipment

4,085

Right of use assets, operating leases

8,826

Goodwill

183,567

Intangible assets

92,300

Other noncurrent assets

10

Accounts payable

(5,450
)
Accrued expenses and other current liabilities

(7,147
)
Contract liabilities

(1,300
)
Short-term lease liabilities, operating leases

(805
)
Income tax payable

(1,469
)
Deferred tax liabilities

(931
)
Long-term lease liabilities, operating leases

(8,021
)
Other long-term liabilities

(1,015
)
Net assets acquired

$
292,380

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

$
57,100

5
Backlog

27,700

3
Trade name

3,800

2
Non compete agreements

2,400

3
Developed technologies

$
1,300

3
(1)

The acquired business is a SaaS commercial business. Backlog for this type of business is included as customer relationships.

~~The Company is still in the process of finalizing its valuation of developed technology acquired.~~

Amortization expense of ~~$5.9~~$0.5 million and $0.9 million related to these intangible assets was recorded for the three and nine months ended ~~March 31, 2019.~~September 30, 2023, respectively. The entire value of goodwill ~~of $183.6 million~~ was assigned to the ~~Parsons Federal~~Critical Infrastructure reporting unit and represents synergies expected to be realized from this business combination. ~~Goodwill~~$1.0 million of ~~$16.0 million~~goodwill is deductible for tax purposes.

The amount of revenue generated by ~~OGSystems since the acquisition~~IPKeys and included within consolidated revenues is $3.5 million and $6.1 million for the three and nine months ended ~~March 31, 2019 is $29.0 million.~~September 30, 2023, respectively. 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 net assets acquired.

Supplemental Pro Forma Information (Unaudited)

Supplemental information ~~on an~~of unaudited pro forma operating results assuming the ~~OGSystems~~IPKeys acquisition had been consummated as of the beginning of fiscal year ~~2018 (December 31, 2017)~~2022 (in thousands) is as follows:


	Three Months Ended				Nine Months Ended
	September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
Pro forma Revenue	$	1,418,571	$	1,137,381	$	3,951,378	$	3,101,246
Pro forma Net Income including noncontrolling interests		60,187		42,907	$	151,917	$	87,427

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, as described in “Note 10 – Debt and Credit Facilities”, 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.

Three Months Ended

March 30, 2018

March 31, 2019

Pro forma revenue

$
782,218

$
906,360

Pro forma net income

$
15,739

$
17,458

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 $4.1 million and $14.0 million related to these intangible assets was recorded for the three and nine months ended September 30, 2023, respectively and $4.9 million and $6.6 million for both the three and nine months ended September 30, 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 revenues was $70.4 million and $91.2 million for the three and nine months ended September 30, 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 ~~supplemental information is based on estimates and assumptions which~~operating results assuming the ~~Company believes are reasonable and reflects the pro forma impact of additional amortization related to the fair value of acquired intangible assets, pro forma impact of reflecting~~Xator acquisition ~~costs, which consisted of legal, advisory and due diligence fees and expenses and the additional pro forma interest expense related to the borrowings under the credit agreement~~had been consummated as of the ~~assumed acquisition date. This supplemental pro forma information has been prepared for comparative purposes and does not purport to be indicative~~beginning of ~~what would have occurred had the acquisition been consummated during the periods for which pro forma information~~fiscal year 2021 (in thousands) is ~~presented.~~as follows:


	Three Months Ended				Nine Months Ended
	September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
Pro forma Revenue	$	1,418,571	$	1,134,370	$	3,948,523	$	3,199,336
Pro forma Net Income including noncontrolling interests		60,374		43,970		154,275		102,859

5.	~~Contracts with Customers~~

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):


	Three Months Ended				Three Months Ended				Nine Months Ended
	March 30, 2018		March 31, 2019		September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
Fixed-Price	$	265,408	$	257,695	$	452,606	$	334,853	$	1,233,712	$	854,835
Time-and-Materials		227,741		255,706		355,689		302,236		998,037		836,881
Cost-Plus		261,530		391,004		610,276		497,281		1,716,774		1,400,444
Total	$	754,679	$	904,405	$	1,418,571	$	1,134,370	$	3,948,523	$	3,092,160

~~Refer to~~See “Note 2018 – Segments Information” for the Company’s revenues by business lines.

Contract Assets and Contract Liabilities

Contract assets and contract liabilities balances at September 30, 2023 and December 31, ~~2018 and March 31, 2019~~2022 were as follows (in thousands):


	September 30, 2023		December 31, 2022		$ change		% change
Contract assets	$	756,630	$	634,033	$	122,597		19.3	%
Contract liabilities		277,249		213,064		64,185		30.1	%
Net contract assets (liabilities) (1)	$	479,381	$	420,969	$	58,412		13.9	%

December 31, 2018

March 31, 2019

$ change

% change

Contract assets

$
515,319

$
571,755

$
56,436

11.0
%
Contract liabilities

208,576

225,017

16,441

7.9
%
Net contract assets (liabilities) (1)

$
306,743

$
346,738

$
39,995

13.0
%
(1)

Total contract retentions included in net contract assets (liabilities) were $73.7 millionas of September 30, 2023, of which $34.7 million are not expected to be paid in the next 12 months. Total contract retentions included in net contract assets (liabilities) were $73.5 millionas of December 31, 2022. Contract assets at September 30, 2023 and December 31, 2022 include $105.6 million and$95.7 million, respectively, related to net claim recovery estimates. For the three and nine months ended September 30, 2023 and September 30, 2022, there were no material losses recognized related to the collectability of claims, unapproved change orders, and requests for equitable adjustment.

~~(1)~~

Total contract retentions included in net contract assets (liabilities) were $89.6 million as of December 31, 2018. Total contract retentions included in net contract assets (liabilities) were $90.0 million as of March 31, 2019, of which $34.8 million are not expected to be paid in the next 12 months. Contract assets at December 31, 2018 and March 31, 2019 include approximately $47.1 million and $49.4 million, respectively, related to unapproved change orders, claims, and requests for equitable adjustment. For the three months ended March 30, 2018 and March 31, 2019, there were no material losses recognized related to the collectability of claims, unapproved change orders, and requests for equitable adjustment.

During the three months ended ~~March~~September 30, ~~2018~~2023 and ~~March 31, 2019,~~September 30, 2022, the Company recognized revenue of ~~approximately $26.3~~$8.9 million and ~~$85.7~~$10.1 million, respectively,and $116.6 million and $91.8 million during the nine months ended September 30, 2023 and September 30, 2022, respectively, that was included in the corresponding contract liability ~~balance~~balances at December ~~30, 2017~~31, 2022 and December 31, ~~2018,~~2021, respectively. ~~The change~~Certain changes in contract assets and contract liabilities ~~was~~consisted of the ~~result of normal business activity and not significantly impacted by other factors, except as follows:~~following:


	September 30, 2023		December 31, 2022
Acquired contract assets	$	2,729	$	25,397
Acquired contract liabilities		2,980		2,080

December 31, 2018

March 31, 2019

Acquired contract assets

$
35,229

$
9,747

Acquired contract liabilities

3,529

1,300

Reversal of provision for contract losses (1)

$
133,180

$
-

~~(1)~~

~~Reversal of provision for contract losses of $133.2 million, of which $55.1 million was recorded as an increase in revenue with the remainder recorded as other income.~~

There was no significant impairment of contract assets recognized during the ~~three~~nine months ended ~~March~~September 30, ~~2018~~2023 and ~~March 31, 2019.~~September 30, 2022.

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:


	Three Months Ended				Nine Months Ended
	September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
Revenue impact, net	$	-	$	-	$	4,748	$	-

During the ~~three~~nine-month period ended September 30, 2023, there was a change in estimate to direct costs of contracts related to a write-down on a contract in the Critical Infrastructure segment. This change in estimate combined with changes to estimates to revenue resulted in a net decrease of $3.1 million to operating income, $2.3 million to net income and $0.02 to diluted earnings per share for the nine months ended ~~March~~September 30, ~~2018~~2023.

Accounts Receivable, net

Accounts receivable, net consisted of the following as of September 30, 2023 and ~~March~~December 31, ~~2019,~~2022 (in thousands):


	2023			2022
Billed	$	587,160		$	502,411
Unbilled		323,592			218,945
Total accounts receivable, gross		910,752			721,356
Allowance for doubtful accounts		(4,011	)		(4,011	)
Total accounts receivable, net	$	906,741		$	717,345

Billed accounts receivable represents amounts billed to clients that have not been collected. Unbilled accounts receivable represents amounts where the Company ~~recognized revenues~~has a present contractual right to bill but an invoice has not been issued to the customer at the period-end date.

The allowance for doubtful accounts was determined based on consideration of ~~$18.7 million~~trends in actual and ~~$4.5 million, respectively,~~forecasted credit quality of ~~unapproved change orders~~clients, including delinquency and ~~claims from changes in transaction price associated with performance obligations~~payment history, type of client, such as a government agency or commercial sector client, and general economic conditions and particular industry conditions that were satisfied or partially satisfied. These amounts represent management’s estimates of additional contract revenues that had been earned and were probable of collection. The amount ultimately realized by the Company cannot currently be determined but could be significantly higher or lower than the estimated amount.may affect a client’s ability to pay.

Transaction Price Allocated to the Remaining Unsatisfied Performance Obligations

The Company’s remaining unsatisfied performance obligations (“RUPO”) as of ~~March 31, 2019~~September 30, 2023 represent a measure of the total dollar value of work to be performed on contracts awarded and ~~in progress.~~in-progress. The Company had ~~$5.3~~$6.2 billion in RUPO as of ~~March 31, 2019.~~September 30, 2023.

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 delivery orders have not been ~~issued for the Federal Solutions segment.~~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 confirmations 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 ~~March 31, 2019~~September 30, 2023 over the following periods (in thousands):


Period RUPO Will Be Satisfied	Within One Year		Within One to Two Years		Thereafter
Federal Solutions	$	1,620,465	$	335,848	$	240,563
Critical Infrastructure		1,893,315		1,076,331		1,011,917
Total	$	3,513,780	$	1,412,179	$	1,252,480

Period RUPO Will Be Satisfied

Within One Year

Within One to
Two Years

Thereafter

Federal solutions

$
982,972

$
577,405

$
324,510

Critical infrastructure

1,560,074

783,585

1,098,715

Total

$
2,543,046

$
1,360,990

$
1,423,225

Leases

6.	~~Leases~~

In February 2016, the FASB issued ASU 2016-02 “Leases (Topic 842)”, which is a new standard related to leases to increase transparency and comparability among organizations by requiring the recognition of right-of-use (“ROU”) assets obtained in exchange for lease liabilities on the balance sheet. Most prominent among the changes in the standard is the recognition of ROU assets and lease liabilities by lessees for those leases classified as operating leases. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases.

The Company elected to adopt the standard, and available practical expedients, effective January 1, 2019. These practical expedients allowed the Company to keep the lease classification assessed under the previous lease accounting standard (ASC 840) without reassessment under the new standard, and allowed all separate lease components, including non-lease components, to be accounted for as a single lease component for all existing leases prior to adoption of the new standard. Furthermore, the Company made an accounting policy election to not recognize a lease liability and ROU asset for leases with lease terms of twelve months or less.

The Company adopted this new standard under the modified retrospective transition approach without adjusting comparative periods in the financial statements, as allowed under Topic 842, and implemented internal controls and key system functionality to enable the preparation of financial information on adoption.

The standard had a material impact on the Company’s consolidated balance sheets but did not have an impact on the consolidated income statements. The most significant impact was the recognition of ROU assets and lease liabilities for operating leases, while accounting for finance leases remained substantially unchanged.

As a result of the adoption, the Company recorded a cumulative-effect adjustment to retained earnings of $52.6 million net of deferred tax asset adjustment of $0.7 million, representing the unamortized portion of a deferred gain previously recorded as a sale-leaseback transaction associated with the sale of an office building in 2011. The Company concluded the transaction resulted in the transfer of control of the office building to the buyer-lessor at market terms and would have qualified as a sale under Topic 842 with gain recognition in the period the sale was recognized.

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.

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, 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.

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 11 nine 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~~after the ~~seventh year. As of March 31, 2019, assets recorded under finance leases were $1.3 million and accumulated depreciation associated with finance leases was $0.2 million.~~ third year.

The components of lease costs for the three and nine months ended ~~March 31, 2019~~September 30, 2023 and September 30, 2022 are as follows (in thousands):


	Three Months Ended						Nine Months Ended
	September 30, 2023			September 30, 2022			September 30, 2023			September 30, 2022
Operating lease cost	$	16,885		$	16,299		$	50,639		$	49,049
Short-term lease cost		2,823			3,858			9,882			10,948
Amortization of right-of-use assets		718			571			1,904			1,721
Interest on lease liabilities		73			24			171			67
Sublease income		(1,186	)		(1,318	)		(3,549	)		(3,321	)
Total lease cost	$	19,313		$	19,434		$	59,047		$	58,464

Three Months Ended

March 31, 2019

Operating lease cost

$
18,285

Short-term lease cost

2,004

Amortization of right-of-use assets

225

Interest on lease liabilities

16

Sublease income

(930
)
Total lease cost

$
19,600

Supplemental cash flow information related to leases for the ~~three~~nine months ended ~~March 31, 2019~~September 30, 2023 and September 30, 2022 is as follows (in thousands):


	Nine Months Ended
	September 30, 2023		September 30, 2022
Operating cash flows for operating leases	$	53,040	$	51,988
Operating cash flows for finance leases		171		67
Financing cash flows from finance leases		1,865		1,580
Right-of-use assets obtained in exchange for new operating lease liabilities		48,430		15,709
Right-of-use assets obtained in exchange for new finance lease liabilities	$	4,470	$	1,156

Three Months Ended

March 31, 2019

Operating cash flows for operating leases

$
18,333

Operating cash flows for financing activities

16

Financing cash flows for finance leases

246

Right-of-use assets operating leases

249,848

Right-of-use assets financing leases

$
1,341

Supplemental balance sheet and other information related to leases as of ~~March~~September 30, 2023 and December 31, ~~2019 is~~2022 are as follows (in thousands):

	Three Months Ended
	March 31, 2019			September 30, 2023			December 31, 2022
Operating Leases:
Right-of-use assets	$	216,484		$	158,400		$	155,090
Lease liabilities:
Current	$	53,029			56,930			59,144
Long-term		181,274			119,281			111,417
Total operating lease liabilities	$	234,303		$	176,211		$	170,561
Finance Leases:
Other noncurrent assets	$	1,341		$	6,559		$	3,965
Accrued expenses and other current liabilities	$	521		$	2,358		$	1,746
Other long-term liabilities	$	798		$	4,198		$	2,246

Weighted Average Remaining Lease Term:
Operating leases	6 years			4.0 years			3.6 years
Finance leases	3 years			3.0 years			2.6 years
Weighted Average Discount Rate:
Operating leases		4.5	%		4.0	%		3.4	%
Finance leases		4.5	%		4.2	%		2.8	%

As of ~~March 31, 2019,~~September 30, 2023, the Company has ~~additional~~no operating leases ~~primarily for office spaces,~~ that have not yet ~~commenced of $6.2 million. These operating leases will commence in 2019 with lease terms of 4 years to 6 years.~~commenced.

The Company performed a qualitative triggering analysis and determined there was no triggering event indicating a potential impairment to the carrying value of its goodwill at September 30, 2023 and concluded there has not been an impairment.

14.

Investments in and March 31, 2019, 78,172,809 shares and 78,138,831 shares of the Company’s stock were held by the ESOP which the Company recorded at their aggregate redemption value of $1.9 billion. During the year ended December 31, 2018 and the three months ended March 31, 2019, the Company did not declare any dividends.

~~The Company also maintains a defined contribution plan (the “401(k) Plan”). Substantially all domestic employees are entitled~~Advances to ~~participate in the 401(k) Plan, subject to certain minimum requirements. The Company’s contribution to the~~

Joint Ventures

~~401(k) Plan for the three months ended March 30, 2018 and March 31, 2019 amounted to $4.7 million and $9.2 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, 2018 and March 31, 2019, the defined benefit pension plan was in a net asset position of $1.7 million and $1.7 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 Variable Interest Entity (“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 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 1210 – Debt and Credit Facilities” that relate to project ventures are ~~approximately $76.8~~$149.9 million and ~~$77.2~~$106.8 million at September 30, 2023 and December 31, ~~2018 and March 31, 2019, respectively.~~2022.

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 (in thousands):


	December 31, 2018		March 31, 2019		September 30, 2023		December 31, 2022
Current assets	$	287,227	$	269,856	$	418,854	$	289,837
Noncurrent assets		2,689		2,285		11,637		9,961
Total assets		289,916		272,141		430,491		299,798
Current liabilities		199,833		209,909		278,168		194,701
Noncurrent liabilities						3,504		3,763
Total liabilities		199,833		209,909		281,672		198,464
Total joint venture equity	$	90,083	$	62,232	$	148,819	$	101,334


	Three Months Ended				Nine Months Ended
	September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
Revenue	$	185,602	$	130,344	$	514,339	$	333,967
Costs		160,423		101,882		445,829		289,485
Net income	$	25,179	$	28,462	$	68,510	$	44,482
Net income attributable to noncontrolling interests	$	12,364	$	14,024	$	33,617	$	21,685

Three Months Ended

March 30, 2018

March 31, 2019

Revenue

$
112,121

$
115,104

Costs

106,166

107,206

Net income

5,955

7,898

Net income attributable to noncontrolling interests

$
3,815

$
3,645

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 (losses) 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~~joint ventures is typically limited to the aggregate of the carrying value of the investment and future funding commitments.

The following represents the financial information of the Company’s unconsolidated joint ventures as presented in their unaudited financial statements (in thousands):


	December 31, 2018		March 31, 2019		September 30, 2023		December 31, 2022
Current assets	$	707,457	$	675,030	$	1,513,825	$	1,610,246
Noncurrent assets		876,385		894,191		481,708		491,658
Total assets		1,583,842		1,569,221		1,995,533		2,101,904
Current liabilities		560,306		487,933		960,276		1,255,297
Noncurrent liabilities		813,269		848,105		503,705		468,056
Total liabilities		1,373,575		1,336,038		1,463,981		1,723,353
Total joint venture equity		210,267		233,183	$	531,552	$	378,551
Investments in and advances to unconsolidated joint ventures	$	63,560	$	67,202	$	164,858	$	107,425


	Three Months Ended					Nine Months Ended
	September 30, 2023		September 30, 2022			September 30, 2023		September 30, 2022
Revenue	$	634,937	$	782,880		$	1,514,561	$	1,762,420
Costs		581,041		774,030			1,474,991		1,711,555
Net income	$	53,896	$	8,850		$	39,570	$	50,865
Equity in (losses) earnings of unconsolidated joint ventures	$	10,262	$	(974	)	$	4,497	$	10,237

Three Months Ended

March 30, 2018

March 31, 2019

Revenue

$
281,078

$
229,466

Costs

253,664

216,780

Net income

27,414

12,686

Equity in earnings of unconsolidated joint ventures

$
11,031

$
10,397

The Company had net contributions to its unconsolidated joint ventures for the three and nine months ended September 30, 2023 of $36.1 million and $50.8 million, respectively and received net distributions from its unconsolidated joint ventures for the three and nine months ended September 30, 2022 of ~~$12.3~~$13.2 million and ~~$8.1~~$21.4 million, respectively.

For the three ended September 30, 2023, the Company recorded adjustments to equity in earnings of unconsolidated joint ventures of $5.1 million and for the nine months ended September 30, 2023 the Company recorded adjustments to equity in losses of unconsolidated joint ventures of $12.4 million on two unconsolidated joint ventures in the Critical Infrastructure segment, one from lower margin change orders in the first quarter offset in the current quarter by higher margin change orders and the other from write-offs in each of the three quarters ended September 30, 2023. For the three months ended ~~March~~September 30, ~~2018~~2023, these adjustments increased operating income by $5.1 million, net income by $3.8 million and ~~March 31, 2019, respectively.~~diluted earnings per share of $0.03 and for the nine months ended September 30, 2023 decreased operating income by $12.4 million, net income by $9.2 million and diluted earnings per share by $0.08.

~~17.~~

~~Related Party Transactions~~

15.

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 three months ended March 30, 2018 and March 31, 2019, revenues included $33.7 million and $33.6 million, respectively,~~Revenues related to services the Company provided to unconsolidated joint ~~ventures.~~ ventures for the three months ended September 30, 2023 and September 30, 2022 were $57.3 million and $60.3 million, respectively and $164.8 million and $160.5 million for the nine months ended September 30, 2023 and September 30, 2022, respectively.

For the three months ended ~~March~~September 30, ~~2018~~2023 and ~~March 31, 2019,~~September 30, 2022, the Company incurred ~~approximately $25.9~~$38.8 million and ~~$27.2~~$42.1 million, respectively, and for the nine months ended September 30, 2023 and September 30, 2022 incurred $118.5 million and $113.8 million, respectively, of reimbursable costs.

Amounts included in the consolidated balance sheets related to services the Company provided to unconsolidated joint ventures isare as follows (in thousands):


	December 31, 2018		March 31, 2019		September 30, 2023		December 31, 2022
Accounts receivable	$	38,742	$	30,263	$	41,043	$	40,795
Contract assets		2,648		3,527		40,032		30,578
Contract liabilities	$	10,861	$	9,603		14,161		14,318

Amounts presented above for prior and comparable periods have been updated to reflect all unconsolidated joint ventures.

~~18.~~

~~Fair Value of Financial Instruments~~

16.

Fair Value Measurements

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 September 30, 2023 and December 31, ~~2018 and March 31, 2019,~~2022, the Company’s financial instruments include cash, cash equivalents, accounts receivable, accounts payable, debt, 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 instrument; and

~~Level 3~~

~~Prices or valuations that require inputs that are both significant to the fair value measurements and unobservable.~~

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 instrument; and

Level 3 - Prices or valuations that require inputs that are both significant to the fair value measurements and unobservable.

The Company's contingent consideration is categorized as Level 3 within the fair value hierarchy. Contingent consideration is recorded within other long-term liabilities in the Company's consolidated balance sheet as of September 30, 2023. Contingent consideration has been recorded at its fair values using the option pricing method prescribed in the earnout valuation guide published by The Appraisal Foundation. We considered 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 was based on the Black Scholes option pricing formula and major assumptions including SealingTech's fiscal year 2024 projected revenue, the revenue discount rate, the revenue volatility, and the Company's credit adjusted discount rate.

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.

~~The following table sets forth assets associated with~~Refer to Notes to Consolidated Financial Statements included in the ~~pension plan in “Note 15 – Retirement and Other Benefit Plans” that are accounted~~Company’s Form 10-K for the year ended December 31, 2022 for a more complete discussion of the various items within the consolidated financial statements measured at fair value ~~by Level within~~and the methods used to determine fair ~~value hierarchy.~~value.

~~Fair value as of December 31, 2018 (in thousands):~~

December 31, 2108

Level 1

Level 2

Level 3

Total

Mutual funds

$
2,539

$
-

$
-

$
2,539

Fixed income

-

10,168

-

10,168

Cash and cash equivalents

361

-

-

361

$
2,900

$
10,168

$
-

$
13,068

17.

Earnings Per Share

~~Fair value as of March 31, 2019 (in thousands):~~

March 31, 2109

Level 1

Level 2

Level 3

Total

Mutual funds

$
2,715

$
-

$
-

$
2,715

Fixed income

-

10,689

-

10,689

Cash and cash equivalents

264

-

-

264

$
2,979

$
10,689

$
-

$
13,667

As described in “Note 15 – Retirement and Other Benefit Plans,” the Company acquired a defined contribution pension plan, a defined benefit pension plan, and supplemental retirement plans. At December 31, 2018 and March 31, 2019, 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 valuation of fixed income securities are generally observable and therefore have been classified as Level 2.

The following table sets forth redeemable common stock associated with the ESOP in as described in “Note 14 – Retirement and Other Benefit Plans” that is accounted for at fair value by Level within the fair value hierarchy.

~~Fair value as of December 31, 2018 (in thousands):~~

December 31, 2108

Level 1

Level 2

Level 3

Total

Redeemable common stock

$
-

$
-

$
1,876,309

$
1,876,309

~~Fair value as of March 31, 2019 (in thousands):~~

March 31, 2109

Level 1

Level 2

Level 3

Total

Redeemable common stock

$
-

$
-

$
1,875,332

$
1,875,332

As described in “Note 15 – Retirement and Other Benefit Plans,” the Company is obligated to redeem eligible participants’ interests in their ESOP accounts for cash upon an employee’s election. All shares held by the ESOP are eventually redeemable in the future for cash at the option of the holder once vesting and eligibility requirements have been met. The Company presents all shares held by the ESOP as temporary equity on the consolidated balance sheets at their redemption value. At December 31, 2018 and March 31, 2019, approximately 78,172,809 shares and 78,138,831 shares, respectively of the Company’s stock were held by the ESOP which the Company recorded at their aggregate redemption values of $1.9 billion. The redemption values are based on a share price established by the ESOP trustee, taking into account, among other things, the advice of a third-party valuation consultant for the ESOP trustee as well as the ESOP trustee’s knowledge of the Company. The share price valuation was determined using a combination of income and market-based methods that utilized unobservable Level 3 inputs, including significant assumptions such as forecasted revenue and operating margins, working capital requirements, and weighted average cost of capital.

The following tables ~~present a reconciliation of~~reconcile the ~~beginning~~denominator and ~~ending balances of the fair value measurements using significant unobservable inputs (Level 3) (in thousands):~~

Balance at December 31, 2018

$
1,876,309

Purchases of treasury stock

(813
)
Share price adjustment

(164
)
Balance at March 31, 2019

$
1,875,332

~~19.~~

~~Earnings Per Share~~

~~Basic~~numerator used to compute basic earnings per ~~common~~ share (“EPS”) to the denominator and numerator used to compute diluted EPS for the three and nine months ended September 30, 2023 and September 30, 2022. Basic EPS is computed using the weighted average number of shares outstanding during the period and income available to shareholders.

Diluted ~~earnings per share (“EPS”)~~EPS is computed similar to basic EPS, except the income available to shareholders is adjusted to add back interest expense, after tax, related to the Convertible Senior Note, and the weighted average number of shares outstanding is ~~increased~~adjusted to ~~include~~reflect the dilutive effects of ~~outstanding stock options~~stock-based awards and ~~other~~shares underlying the Convertible Senior Note.

Convertible Senior Note dilution impact is calculated using the if-converted method. In connection with the offerings of the Notes, the Company entered into a convertible note hedge and warrants (see Note 10 Debt and Credit Facilities); however, the convertible note hedge is not considered when calculating dilutive shares given its impact is anti-dilutive. The impact of the bond hedge would offset the dilutive impact of the shares underlying the Convertible Senior Note. The warrants have a strike price above our average share price during the period and are out of the money and not included in the tables below.

Dilutive potential common shares include, when circumstances require, shares the Company could be obligated to issue from its Convertible Senior Notes and warrants (see Note 10 for further discussion) and stock-based awards. ~~There were no dilutive securities outstanding~~Shares to be provided to the Company from its bond hedge purchased concurrently with the issuance of Convertible Senior Notes are anti-dilutive and are not included in its diluted shares. Anti-dilutive stock-based awards excluded from the calculation of earnings per share for the three months ended ~~March~~September 30, ~~2018~~2023 and ~~March 31, 2019.~~September 30, 2022 were 2,911 and 2,449, respectively and for the nine months ended September 30, 2023 and September 30, 2022 were 3,284 and 11,564, respectively.

The weighted average number of shares used to compute basic and diluted EPS were:


	Three Months Ended				Nine Months Ended
	September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
Basic weighted average number of shares outstanding		104,970,645		103,608,135		104,894,448		103,684,048
Stock-based awards		1,177,894		918,090		1,020,082		746,702
Convertible senior notes		8,916,530		8,916,530		8,916,530		8,916,530
Diluted weighted average number of shares outstanding		115,065,069		113,442,755		114,831,060		113,347,280

The net income available to shareholders to compute basic and diluted EPS were (in thousands):


	Three Months Ended				Nine Months Ended
	September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
Net income attributable to Parsons Corporation	$	47,447	$	29,571		116,241		68,533
Convertible senior notes if-converted method interest adjustment		559		545		1,665		1,627
Diluted net income attributable to Parsons Corporation	$	48,006	$	30,116		117,906		70,160

Share Repurchases

In August 2021, the Company’s Board of Directors authorized a stock repurchase program to repurchase up to $100.0 million of shares of Common stock. Repurchases under this stock repurchase program commenced on August 12, 2021. Any and all shares of Common Stock purchased by the Company pursuant to the program shall be retired upon their acquisition and shall not become treasury shares but instead shall resume the status of authorized but unissued shares of Common Stock. 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.

There were no share repurchases during the three months ended September 30, 2023

Three Months Ended

March 30, 2018

March 31, 2019

Basic weighted average number of shares outstanding

81,846,305

78,161,484

Dilutive common share equivalents

-

-

Diluted weighted average number of shares outstanding

81,846,305

78,161,484

The table below presents information on this repurchase program:


	Three Months Ended				Nine Months Ended
	September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
Total shares repurchased		-		95,413		185,475		522,501
Total shares retired		-		95,413		185,475		522,501
Average price paid per share	$	-	$	41.42	$	43.13	$	37.32

As of September 30, 2023, the Company has $48.3 million remaining under the stock repurchase program.

~~20.~~

~~Segments Information~~

18.

Segment Information

The Company operates in two reportable segments: Federal Solutions and Critical Infrastructure.

The Federal Solutions segment ~~is a high-end services provider~~provides advanced technical solutions to the U.S. government, delivering timely, cost-effective ~~solutions~~hardware, software and services for mission-critical projects. The segment provides advanced technologies, ~~including~~supporting national security missions in cybersecurity,

missile defense, ~~systems,~~ and ~~subsurface munitions detection, as well as~~ military facility modernization, logistics support, ~~chemical weapon~~hazardous material remediation and engineering services.

The Critical Infrastructure segment provides integrated ~~design~~engineering and ~~engineering~~management services for complex physical and digital infrastructure around the globe. The Critical Infrastructure segment is a technology innovator focused on next generation ~~infrastructure.~~digital systems and complex structures. Industry leading capabilities in ~~design~~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”), ~~currently~~ its ~~Chairman~~Chair and 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 evaluates segment operating performance using segment Revenue and segment Adjusted EBITDA attributable to Parsons Corporation.

The following table summarizes business segment revenue for the periods presented (in thousands):


	Three Months Ended				Three Months Ended				Nine Months Ended
	March 30, 2018		March 31, 2019		September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
Federal Solutions revenue	$	291,335	$	422,812	$	780,114	$	620,416	$	2,177,457	$	1,649,601
Critical Infrastructure revenue		463,344		481,593		638,457		513,954		1,771,066		1,442,559
Total revenue	$	754,679	$	904,405	$	1,418,571	$	1,134,370	$	3,948,523	$	3,092,160

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, equity-based compensation, 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. The following table reconciles business segment Adjusted EBITDA attributable to Parsons Corporation to Net Income attributable to Parsons Corporation for the periods presented (in thousands):

Three Months Ended

Adjusted EBITDA attributable to Parsons Corporation

March 30, 2018

March 31, 2019

Federal Solutions

$
20,154

$
38,866

Critical Infrastructure

23,656

25,559

Adjusted EBITDA attributable to Parsons Corporation

43,810

64,425

Adjusted EBITDA attributable to noncontrolling interests

3,920

3,749

Depreciation and amortization

(9,009
)

(30,591
)
Interest expense, net

(3,258
)

(7,815
)
Income tax expense

(5,353
)

(1,886
)
Litigation-related expenses(a)

(2,330
)

-

Amortization of deferred gain resulting from sale-leaseback transactions(b)

1,813

-

Transaction-related costs(c)

(125
)

(9,355
)
Restructuring(d)

-

(2,218
)
HCM software implementation costs(e)

-

(2,912
)
Other(f)

(366
)

(11
)
Net income including noncontrolling interests

29,102

13,386

Net income attributable to noncontrolling interests

3,815

3,645

Net income attributable to Parsons Corporation

$
25,287

$
9,741


	Three Months Ended						Nine Months Ended
Adjusted EBITDA attributable to Parsons Corporation	September 30, 2023			September 30, 2022			September 30, 2023			September 30, 2022
Federal Solutions	$	65,039		$	61,004		$	206,827		$	151,287
Critical Infrastructure		50,188			27,545			95,481			81,020
Adjusted EBITDA attributable to Parsons Corporation		115,227			88,549			302,308			232,307
Adjusted EBITDA attributable to noncontrolling interests		12,606			14,138			34,222			22,042
Depreciation and amortization		(30,154	)		(29,578	)		(87,202	)		(90,668	)
Interest expense, net		(8,120	)		(5,941	)		(20,778	)		(14,168	)
Income tax expense		(15,218	)		(13,792	)		(41,944	)		(27,643	)
Equity-based compensation expense		(9,075	)		(7,125	)		(25,092	)		(15,814	)
Transaction-related costs (a)		(5,493	)		(2,563	)		(9,028	)		(14,486	)
Restructuring expense (b)		-			-			(546	)		(213	)
Other (c)		38			(93	)		(2,082	)		(1,139	)
Net income including noncontrolling interests		59,811			43,595			149,858			90,218
Net income attributable to noncontrolling interests		12,364			14,024			33,617			21,685
Net income attributable to Parsons Corporation	$	47,447		$	29,571		$	116,241		$	68,533

(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 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.

~~(a)~~

Reflects interest expense in “(Interest and other expenses) gain associated with claim on long-term contract” in our results of operations associated with a lawsuit against a joint venture in which the Company is the managing partner. Please see “Note 14 – Commitments and Contingencies” in the Company’s Form S-1/A filed on April 29, 2019, for a description of this matter, which was resolved in favor of the Company on June 13, 2018.

~~(b)~~

~~Reflects recognized deferred gains related to sales-leaseback transactions described in “Note 11 – Sale-Leasebacks.”~~

~~(c)~~

~~Reflects costs incurred in connection with acquisitions, initial public offering, and other non-recurring transaction costs, primarily fees paid for professional services and employee retention.~~

~~(d)~~

~~Reflects costs associated with our corporate restructuring initiatives.~~

~~(e)~~

~~Reflects implementation costs incurred in connection with a new human resources and payroll application.~~

~~(f)~~

Includes a loss from sale of a subsidiary and other individually insignificant items that are non-recurring in nature for the quarter ended March 30, 2018, and a combination of gain/loss related to sale of fixed assets and other individually insignificant items that are non-recurring in nature for the quarter ended March 31, 2019.

Asset information by segment is not a key measure of performance used by the CODM.

The following tables ~~presents~~present revenues and property and equipment, net by geographic area (in thousands):


	Three Months Ended				Three Months Ended				Nine Months Ended
	March 30, 2018		March 31, 2019		September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
Revenue
North America	$	587,307	$	731,030	$	1,166,547	$	944,942	$	3,251,552	$	2,571,741
Middle East		162,406		167,952		247,689		184,680		684,340		504,078
Rest of World		4,966		5,423		4,335		4,748		12,631		16,341
Total Revenue	$	754,679	$	904,405	$	1,418,571	$	1,134,370	$	3,948,523	$	3,092,160

The geographic location of revenue is determined by the location of the ~~customer.~~customer (in thousands):

	Three Months Ended
	December 31, 2018		March 31, 2019		September 30, 2023		December 31, 2022
Property and Equipment, Net
North America	$	86,847	$	92,262	$	92,279	$	91,217
Middle East		5,002		5,036		7,065		4,833
Total Property and Equipment, Net	$	91,849	$	97,298	$	99,344	$	96,050

North America includes revenue ~~includes $540.5 million and $669.2 million of~~in the United States ~~revenue~~ for the three months ended ~~March~~September 30, ~~2018~~2023 and ~~March 31, 2019,~~September 30, 2022 of $1.1 billion and $0.9 billion, respectively and for the nine months ended September 30, 2023 and September 30, 2022 of $3.0 billion and $2.3 billion, respectively.North America property and equipment, net includes ~~$79.9~~$85.2 million and ~~$86.2~~$84.4 million of property and equipment, net in the United States at September 30, 2023 and December 31, ~~2018 and March 31, 2019,~~2022, respectively.

The following table presents revenues by business ~~lines~~units (in thousands):


	Three Months Ended				Nine Months Ended
	September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
Revenue
Defense and Intelligence	$	398,632	$	351,419	$	1,144,320	$	1,037,244
Engineered Systems		381,482		268,997		1,033,137		612,357
Federal Solutions revenues		780,114		620,416		2,177,457		1,649,601
Mobility Solutions		430,011		329,666		1,209,554		924,834
Connected Communities		208,446		184,288		561,512		517,725
Critical Infrastructure revenues		638,457		513,954		1,771,066		1,442,559
Total Revenue	$	1,418,571	$	1,134,370	$	3,948,523	$	3,092,160

Three Months Ended

March 30, 2018

March 31, 2019

Revenue

Cyber & Intelligence

$
44,367

$
76,110

Defense

73,540

134,990

Mission Solutions

74,149

68,090

Engineered Systems

99,279

114,666

Geospatial

-

28,956

Federal Solutions revenues

291,335

422,812

Connect Communities

160,913

156,876

Mobility Solutions

255,679

269,114

Industrial

46,752

55,603

Critical Infrastructure revenues

463,344

481,593

Total Revenue

$
754,679

$
904,405

19.

Subsequent Events

~~21.~~

~~Subsequent Events~~

On ~~April 3, 2019,~~October 31, 2023, the ~~Company’s board~~Company entered into a Membership Interest Purchase Agreement to acquire a 100% ownership interest in I.S. Engineers, LLC, a privately-owned company, for $11.5 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. At the timing of ~~directors declared a cash dividend~~the filing of this Form 10-Q, 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 existing shareholder in the amount of $2.00 per share, or $52.1 million in the aggregate (the “IPO Dividend”). The IPO Dividend was paid on May 10, 2019.~~Company's consolidated financial statements.

On April 15, 2019, the board of directors of the Company declared a common stock dividend in a ratio of two shares of common stock for every one share of common stock presently held by the Company’s stockholder (the “Stock Dividend”). The record date of this common stock dividend, which the Company refers to as the Stock Dividend was May 7, 2019, the day immediately prior to the consummation of the Company’s initial public offering on May 8, 2019, and the payment date of the Stock Dividend was May 8, 2019. Purchasers of the Company’s common stock in the Company’s public offering will not be entitled to receive any portion of the Stock Dividend.

Item 2. 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 Form 10-Q and in conjunction with the Company’s Form ~~S-1/A filed April 29, 2019.~~10-K for the year ended December 31, 2022. 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” in the Company’s Form ~~S-1/A filed April 29, 2019.~~10-K for the year ended December 31, 2022. We undertake no obligation to revise publicly any forward-looking statements. Actual results may differ materially from those contained in any forward-looking statements.

~~Overview~~

PARSONS CORPORATION Enabling a safer, smarter, and more interconnected world. Engineered solutions for complex physical and digital infrastructure challenges SEGMENTS KEY FACTS AND FIGURES Technology-driven solutions for defense and intelligence customers FINANCIAL SNAPSHOT $4B Total Revenue Trailing 12-Months (Q2 2020) $4B Contract Awards Trailing 12-Months (Q2 2020) 75+ Years Of History Federal Solutions 49% Critical Infrastructure 51% Federal Solutions 58% Critical Infrastructure 42% Federal Solutions Critical Infrastructure ~16K Employees 6% Revenue Growth Trailing 12-Months (Q2 2020) 1.0X Book-To-Bill Ratio Trailing 12-Months (Q2 2020) $7.7B Backlog As Of 6/30/2020 PARSONS CORPORATION.

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 ~~in the defense, intelligence and critical infrastructure markets. We provide technical design and engineering services and software~~ to ~~address our customers’ challenges.~~customers worldwide. We have developed significant expertise and differentiated capabilities in key areas of cybersecurity, intelligence, missile defense, ~~military training~~C5ISR, space, transportation, water/wastewater and ~~development, connected communities, physical infrastructure and mobility solutions.~~environmental remediation. By combining our talented team of professionals and advanced technology, we ~~help~~ solve complex technical challenges to enable a safer, smarter, more secure and more ~~interconnected~~connected world.

We operate in two reporting segments, Federal Solutions and Critical Infrastructure. Our Federal Solutions business ~~is a high-end services and technology provider~~provides advanced technical solutions to the U.S. government. Our Critical Infrastructure business provides integrated ~~design~~engineering and ~~engineering~~management services for complex physical and digital infrastructure to state and local governments and large companies.

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 ~~delivery or~~ 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):


	September 30, 2023		September 30, 2022
Awards (year to date)	$	4,748,320	$	3,167,023
Backlog (1)	$	8,815,561	$	8,228,989
Book-to-Bill (year to date)		1.2		1.0

Three Months Ended

March 30, 2018

March 31, 2019

Awards

$
608,314

$
1,221,068

Backlog (1)

$
6,322,334

$
8,553,969

Book-to-Bill

0.81

1.35

(1)

Difference between our backlog of $8.8 billion and our remaining unsatisfied performance obligations, or RUPO, of $6.2 billion, each as of September 30, 2023, 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.

~~(1)~~

Difference between our backlog of $8.6 billion and our remaining unsatisfied performance obligations, or RUPO, of $5.3 billion, each as of March 31, 2019, is due to (i) unissued delivery 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~~year to-date value of new awards for the periods presented below (in thousands):


	Three Months Ended				Three Months Ended				Nine Months Ended
	March 30, 2018		March 31, 2019		September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
Federal Solutions	$	111,441	$	808,540	$	764,531	$	685,599	$	2,642,302	$	1,535,041
Critical Infrastructure		496,873		412,528		670,398		572,657		2,106,018		1,631,982
Total Awards	$	608,314	$	1,221,068	$	1,434,929	$	1,258,256	$	4,748,320	$	3,167,023

The change in new awards from year to year ~~in our Federal Solutions segment~~ is ~~primarily due to significant new awards in our legacy business and from business acquisitions. The change in new awards in our Critical Infrastructure segment was primarily~~generally due to ordinary course ~~fluctuations.~~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 increase in awards for the three months ended September 30, 2023 when compared to the corresponding period last year was primarily driven by significant awards in both our Federal Solutions and Critical Infrastructure segments.

Backlog

We define backlog to include the following two components:

•

Funded—Funded backlog represents ~~the~~future revenue ~~value of~~anticipated from orders for services under existing contracts for which funding is appropriated or otherwise ~~authorized less revenue previously recognized on these contracts.~~

authorized.

•

Unfunded—Unfunded backlog represents ~~the~~future revenue ~~value of~~anticipated from orders for services under existing contracts for which funding has not been appropriated or otherwise ~~authorized less revenue previously recognized on these contracts.~~

authorized.

Backlog includes (i) unissued ~~delivery~~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 ~~below:~~below (in thousands):


	September 30, 2023		September 30, 2022
Federal Solutions:
Funded	$	1,625,475	$	1,448,615
Unfunded		3,565,223		3,656,421
Total Federal Solutions		5,190,698		5,105,036
Critical Infrastructure:
Funded		3,554,754		3,066,325
Unfunded		70,109		57,628
Total Critical Infrastructure		3,624,863		3,123,953
Total Backlog (1)	$	8,815,561	$	8,228,989

March 30, 2018

March 31, 2019

Federal Solutions:

Funded

$
936,467

$
1,681,816

Unfunded

2,224,354

3,429,779

Total Federal Solutions

3,160,821

5,111,595

Critical Infrastructure:

Funded

3,161,513

3,442,374

Unfunded

-

-

Total Critical Infrastructure

3,161,513

3,442,374

Total Backlog (1)

$
6,322,334

$
8,553,969

(1)

Difference between our backlog of $8.8 billion and our RUPO of $6.2 billion, each as of September 30, 2023, 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.

~~(1)~~

Difference between our backlog of $8.6 billion and our RUPO of $5.3 billion, each as of March 31, 2019, is due to (i) unissued delivery 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 and all~~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 ~~$2.5~~$3.5 billion of our funded backlog at ~~March 31, 2019~~September 30, 2023 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~~Risk Relating to Our Business—We may not realize the full value of our backlog, which may result in lower than expected revenue” in the Company’s Form ~~S-1/A filed on April 29, 2019.~~10-K for the year ended December 31, 2022.

The changes in backlog in ~~our~~both the Federal Solutions ~~segment is~~and Critical Infrastructure segments were primarily from ~~business acquisition which contributed $1.3 billion. The change in backlog in our Critical Infrastructure segment was primarily due to~~ ordinary course fluctuations in our ~~business. Our backlog will fluctuate in any given period based on~~business and the ~~volume of awards issued in comparison~~impacts related to the ~~revenue generated from our existing contracts.~~Company’s awards discussed above.

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:


	Three Months Ended				Three Months Ended				Nine Months Ended
	March 30, 2018		March 31, 2019		September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
Federal Solutions		0.38		1.91		1.0		1.1		1.2		0.9
Critical Infrastructure		1.07		0.86		1.1		1.1		1.2		1.1
Overall		0.81		1.35		1.0		1.1		1.2		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 cybersecurity, 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 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~~

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,~~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~~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 uniquely 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

~~Polaris Alpha~~Sealing Technologies, Inc.

On ~~May 31, 2018, we~~August 23, 2023, the Company acquired ~~Polaris Alpha~~a 100% ownership interest in Sealing Technologies, Inc (“SealingTech”), a privately-owned company, for ~~$489.1 million. Polaris Alpha~~$181.7 million and up to an additional $25 million in the event an earn out revenue target is ~~an advanced, technology-focused provider~~exceeded. Headquartered in Maryland, SealingTech expands Parsons’ customer base across the Department of ~~innovative mission solutions for national security,~~Defense and Intelligence Community, and further enhances the company’s capabilities in defensive cyber operations; integrated mission-solutions powered by artificial intelligence (AI) and ~~other U.S. federal customers. The acquisition was funded by cash on-hand~~machine learning (ML); edge computing and ~~borrowings under our Revolving Credit Facility.~~edge access modernization; critical infrastructure protection; and secure data management. The financial results of ~~Polaris Alpha~~SealingTech have been included in our consolidated results of operations from ~~June 1, 2018~~August 23, 2023 onward.

~~OGSystems~~IPKeys Power Partners

On ~~January 7, 2019, we acquired OGSystems~~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 ~~$292.4~~$43.0 million. ~~OGSystems provides geospatial intelligence, big data analytics~~The merger brings IPKeys' established customer base, expanding Parsons' presence in two rapidly growing end markets: grid modernization and ~~threat mitigation~~cyber resiliency for ~~defense~~critical infrastructure. Headquartered in Tinton Falls, New Jersey, IPKeys is a trusted provider of enterprise software platform solutions that is actively delivering cyber and ~~intelligence customers. The acquisition was funded by cash on-hand~~operational security to hundreds of electric, water, and ~~borrowings under our Term Loan and Revolving Credit Facility.~~gas utilities across North America. The financial results of ~~OGSystems~~IPKeys have been included in our consolidated results of operations from ~~January 7, 2019~~April 13, 2023 onward.

~~Seasonality~~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. ~~This pattern~~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 ~~extra tasks~~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.

~~Taxes~~

Historically, the Company has elected to be taxed under the provisions of Subchapter “S” of the Internal Revenue Code for federal tax purposes. As a result, the Company’s income has not been subject to U.S. federal income taxes or state income taxes in those states where the “S” Corporation status is recognized. No provision or liability for federal or state income tax has been provided in the Company’s consolidated financial statements except for those states where the “S” Corporation status is not recognized and for the 1.5% California franchise tax to which the Company are also subject as a California “S” Corporation. The provision for income tax in the historical periods prior to the initial public offering consists of these taxes.

In connection with the initial public offering on May 8, 2019, the Company’s “S” Corporation status terminated and the Company will be treated as a “C” Corporation under Subchapter C of the Internal Revenue Code. The revocation of the Company’s “S” Corporation election will have a material impact on the Company’s results of operations, financial condition and cash flows. The effective income tax rate will increase and net income will decrease since the Company will be subject to both federal and state taxes on our earnings.

Results of Operations

In October 2018, our board of directors approved a change in our annual and quarterly fiscal period ends from the last Friday on or before the calendar year or quarterly month-end to the last day of the calendar year or quarterly month-end. Accordingly, the period end for the first quarters of fiscal 2018 and fiscal 2019 are March 30, 2018 and March 31, 2019, respectively. The number of days in the quarters ended March 30, 2018 and March 31, 2019 were 91 and 90, respectively.Revenue

~~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.

We ~~recognize revenue for work performed under cost-plus, time-and-materials and fixed-price~~enter into the following types of contracts ~~as follows:~~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 ~~nonreimbursable~~non-reimbursable under the terms of the contract. Revenue for cost-plus contracts is generally recognized using the cost-to-cost measure of progress method. Accounting for the sales and profits on performance obligations for which progress is measured using the cost-to-cost method involves the preparation of estimates of: (1) transaction price and (2) total costs at completion, which is equal to the sum of the actual incurred costs to date on the contract and the estimated costs to complete the contract’s statement of work.

•

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. ~~Revenue on time-and-materials contracts is recognized as services are performed and are contractually billable.~~

•

Under fixed-price ~~or FFP~~ contracts, clients pay an agreed fixed-amount negotiated in advance for a specified scope of work. ~~Revenue on FFP contracts is generally recognized using the cost-to-cost measure of progress method.~~

~~Please refer~~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”~~Policies” in the notes to our consolidated financial statements included in the Company’s Form ~~S-1/A filed on April 29, 2019~~10-K for the year ended December 31, 2022 for a ~~further~~ description of our policies on revenue recognition.

The table below presents the percentage of total revenue for each type of contract.


	Three Months Ended		Three Months Ended		Nine Months Ended
	March 30, 2018	March 31, 2019	September 30, 2023	September 30, 2022	September 30, 2023	September 30, 2022
Fixed-price	35.2%	28.5%	31.9%	29.5%	31.2%	27.6%
Time-and-materials	30.2%	28.3%	25.1%	26.6%	25.3%	27.1%
Cost-plus	34.6%	43.2%	43.0%	43.8%	43.5%	45.3%

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.

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 ~~estimate~~estimated cost or transaction price is determined to have an impact on contract profit, we record a positive or negative adjustment to ~~revenue and/or direct cost of contracts.~~revenue.

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 ~~the Company’s~~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 (losses) earnings ~~(loss)~~ of unconsolidated joint ventures. Our revenues included ~~$33.7 million and $33.6 million for the three months ended March 30, 2018 and March 31, 2019, respectively~~amounts related to services we provided to our unconsolidated joint ~~ventures.~~ventures for the three months ended September 30, 2023 and September 30, 2022 of $57.3 million and $60.3 million, respectively, and $164.8 million and $160.5 million for the nine months ended September 30, 2023 and September 30, 2022, respectively.

Operating costs and expenses

Operating costs and expenses primarily include direct costs of contracts and ~~indirect,~~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. Total ESOP contribution expense ~~was $11.2 million and $12.2 million~~ for the three months ended ~~March~~September 30, ~~2018~~2023 and ~~March 31, 2019,~~September 30, 2022 was $14.9 million and $15.4 million, respectively, and for the nine months ended September 30, 2023 and September 30, 2022 was $44.1 million and $42.0 million, respectively and is recorded in “Direct cost of contracts” and ~~“Indirect,~~“Selling, general and administrative expenses.” We expect operating expenses to increase due to our anticipated growth and the incremental costs associated with being a public company. In particular, under our existing compensation plans, we will adjust our compensation expense on a quarterly basis for any change in our share price from the end of the prior quarter. 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 ~~costs,~~and materials (“pass-through costs”), travel expenses and other expenses incurred to perform on contracts.

~~Indirect,~~33

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 and interest and other expense associated with claim on long-term contract.~~net.

Interest income primarily consists of interest earned on U.S. government money market funds.

Interest expense consists of interest expense incurred under our Senior Notes, Convertible Senior Notes, and Credit Agreement.

Other income, net primarily consists of gain or loss on sale of assets, sublease income and transaction gain or loss related to movements in foreign currency exchange rates.

Adjusted EBITDA

The following table sets forth Adjusted EBITDA, Net Income Margin, and Adjusted EBITDA Margin for the three and nine months ended ~~March~~September 30, ~~2018~~2023 and ~~March 31, 2019.~~September 30, 2022.


	Three Months Ended						Nine Months Ended
(U.S. dollars in thousands)	September 30, 2023			September 30, 2022			September 30, 2023			September 30, 2022
Adjusted EBITDA (1)	$	127,833		$	102,687		$	336,530		$	254,349
Net Income Margin (2)		4.2	%		3.8	%		3.8	%		2.9	%
Adjusted EBITDA Margin (3)		9.0	%		9.1	%		8.5	%		8.2	%

Three Months Ended

(U.S. dollars in thousands)

March 30, 2018

March 31, 2019

Adjusted EBITDA (1)

$
47,730

$
68,174

Net Income Margin (2)

3.9
%

1.5
%
Adjusted EBITDA Margin (3)

6.3
%

7.5
%
(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.


	Three Months Ended					Nine Months Ended
	September 30, 2023			September 30, 2022		September 30, 2023		September 30, 2022
Net income attributable to Parsons Corporation	$	47,447		$	29,571	$	116,241	$	68,533
Interest expense, net		8,120			5,941		20,778		14,168
Income tax expense		15,218			13,792		41,944		27,643
Depreciation and amortization		30,154			29,578		87,202		90,668
Net income attributable to noncontrolling interests		12,364			14,024		33,617		21,685
Equity-based compensation		9,075			7,125		25,092		15,814
Transaction-related costs (a)		5,493			2,563		9,028		14,486
Restructuring (b)		-			-		546		213
Other (c)		(38	)		93		2,082		1,139
Adjusted EBITDA	$	127,833		$	102,687	$	336,530	$	254,349

~~(1)~~

~~A reconciliation of net income attributable to Parsons Corporation to Adjusted EBITDA is set forth below (in thousands).~~

(a)

Reflects costs incurred in connection with acquisitions and other non-recurring transaction costs, primarily fees paid for professional services and employee retention.

Three Months Ended

March 30, 2018

March 31, 2019

Net income attributable to Parsons Corporation

$
25,287

$
9,741

Interest expense, net

3,258

7,815

Income tax expense

5,353

1,886

Depreciation and amortization

9,009

30,591

Net income attributable to noncontrolling interests

3,815

3,645

Litigation-related expenses(a)

2,330

-

Amortization of deferred gain resulting from sale-leaseback transactions(b)

(1,813
)

-

Transaction-related costs(c)

125

9,355

Restructuring(d)

-

2,218

HCM software implementation costs(e)

-

2,912

Other(f)

366

11

Adjusted EBITDA

$
47,730

$
68,174

(b)

Reflects costs associated with 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.

~~(a)~~

Reflects interest expense in “(Interest and other expenses) gain associated with claim on long-term contract” in our results of operations associated with a lawsuit against a joint venture in which the Company is the managing partner. Please see “Note 14 – ~~Commitments and Contingencies”~~ ~~in the Company’s Form S-1/A filed on April 29, 2019, for a description of this matter which was resolved in favor of the Company on June 13, 2018.~~

~~(b)~~

~~Reflects recognized deferred gains related to sales-leaseback transactions described in “Note 11- Sale-Leasebacks.”~~

~~(c)~~

~~Reflects costs incurred in connection with acquisitions, initial public offering, and other non-recurring transaction costs, primarily fees paid for professional services and employee retention.~~

~~(d)~~

~~Reflects costs associated with our corporate restructuring initiatives.~~

~~(e)~~

~~Reflects implementation costs incurred in connection with a new human resources and payroll application.~~

~~(f)~~

Includes a loss from sale of a subsidiary and other individually insignificant items that are non-recurring in nature for the quarter ended March 30, 2018 and a combination of gain/loss related to sale of fixed assets and other individually insignificant items that are non-recurring in nature for the quarter ended March 31, 2019.

Adjusted EBITDA is a supplemental measure of our operating performance 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 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 GAAP measure of our financial performance or liquidity and should not be considered as an alternative to net income ~~(loss)~~ as a measure of financial performance or cash flows from operations as measures of liquidity, or any other performance measure derived in accordance with GAAP. We define 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 we do not consider in our evaluation of ongoing operating performance. These other items include, among other things, impairment of goodwill, intangible and other assets, interest and other expenses recognized on litigation matters, ~~amortization of deferred gain resulting from sale-leaseback transactions,~~ expenses

incurred in connection with acquisitions and other non-recurring transaction costs 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 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.

The following table shows Adjusted EBITDA attributable to Parsons Corporation for each of our reportable segments and Adjusted EBITDA attributable to noncontrolling ~~interests~~interests. Please see Segment Results below for a discussion of the factors impacting Adjusted EBITDA (in thousands):


	Three Months Ended				Variance						Three Months Ended				Variance
	March 30, 2018		March 31, 2019		Dollar			Percent			September 30, 2023		September 30, 2022		Dollar			Percent
Federal Solutions Adjusted EBITDA attributable to Parsons Corporation	$	20,154	$	38,866	$	18,712			92.8	%	$	65,039	$	61,004	$	4,035			6.6	%
Critical Infrastructure Adjusted EBITDA attributable to Parsons Corporation		23,656		25,559		1,903			8.0	%		50,188		27,545		22,643			82.2	%
Adjusted EBITDA attributable to noncontrolling interests		3,920		3,749		(171	)		-4.4	%		12,606		14,138		(1,532	)		-10.8	%
Total Adjusted EBITDA	$	47,730	$	68,174	$	20,444			42.8	%	$	127,833	$	102,687	$	25,146			24.5	%

~~(2)~~

~~Net Income Margin is calculated as net income (loss) 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.~~


	Nine Months Ended				Variance
	September 30, 2023		September 30, 2022		Dollar		Percent
Federal Solutions Adjusted EBITDA attributable to Parsons Corporation	$	206,827	$	151,287	$	55,540		36.7	%
Critical Infrastructure Adjusted EBITDA attributable to Parsons Corporation		95,481		81,020		14,461		17.8	%
Adjusted EBITDA attributable to noncontrolling interests		34,222		22,042		12,180		55.3	%
Total Adjusted EBITDA	$	336,530	$	254,349	$	82,181		32.3	%

The following table sets forth our results of operations for the three and nine months ended ~~March~~September 30, ~~2018~~2023 and ~~March 31, 2019~~September 30, 2022 as a percentage of revenue.


	Three Months Ended						Three Months Ended						Nine Months Ended
	March 30, 2018			March 31, 2019			September 30, 2023			September 30, 2022			September 30, 2023			September 30, 2022
Revenues		100	%		100	%		100	%		100	%		100	%		100	%
Direct costs of contracts		79.9	%		79.0	%		79.3	%		76.9	%		78.8	%		77.2	%
Equity in earnings of unconsolidated joint ventures		1.5	%		1.1	%
Indirect, general and administrative expenses		16.4	%		19.6	%
Equity in (losses) earnings of unconsolidated joint ventures								0.7	%		-0.1	%		0.1	%		0.3	%
Selling, general and administrative expenses								15.6	%		17.4	%		16.0	%		18.8	%
Operating income		5.2	%		2.5	%		5.9	%		5.6	%		5.3	%		4.3	%
Interest income		0.1	%		0.1	%		0.0	%		0.0	%		0.0	%		0.0	%
Interest expense		-0.5	%		-0.9	%		-0.6	%		-0.6	%		-0.6	%		-0.5	%
Other income, net		0.2	%		0.0	%		0.0	%		-0.1	%		0.0	%		0.0	%
(Interest and other expense) gain associated with claim on long-term contract		-0.3	%		0.0	%
Total other income (expense)		-0.6	%		-0.9	%		-0.6	%		-0.6	%		-0.5	%		-0.5	%
Income before income tax provision		4.6	%		1.7	%
Income tax provision		-0.7	%		-0.2	%
Income before income tax expense								5.3	%		5.1	%		4.9	%		3.8	%
Income tax benefit (provision)								-1.1	%		-1.2	%		-1.1	%		-0.9	%
Net income including noncontrolling interests		3.9	%		1.5	%		4.2	%		3.8	%		3.8	%		2.9	%
Net income attributable to noncontrolling interests		-0.5	%		-0.4	%		-0.9	%		-1.2	%		-0.9	%		-0.7	%
Net income attributable to Parsons Corporation		3.4	%		1.1	%		3.3	%		2.6	%		2.9	%		2.2	%

Revenue

~~Revenue~~


	Three Months Ended				Variance
(U.S. dollars in thousands)	September 30, 2023		September 30, 2022		Dollar		Percent
Revenue	$	1,418,571	$	1,134,370	$	284,201		25.1	%

Three Months Ended

Variance

(U.S. dollars in thousands)

March 30, 2018

March 31, 2019

Dollar

Percent

Revenue

$
754,679

$
904,405

$
149,726

19.8
%

~~Revenue increased~~The increase in revenue for the three months ended ~~March 31, 2019~~September 30, 2023 when compared to ~~March 30, 2018 primarily~~the corresponding period last year, was due to anincreases in revenue in both our Federal Solutions and Critical Infrastructure segments of $159.7 million and $124.5 million, respectively.


	Nine Months Ended				Variance
(U.S. dollars in thousands)	September 30, 2023		September 30, 2022		Dollar		Percent
Revenue	$	3,948,523	$	3,092,160	$	856,363		27.7	%

The increase in revenue for the nine months ended September 30, 2023 when compared to the corresponding period last year, was due to increases in revenue in both our Federal Solutions ~~segment~~and Critical Infrastructure segments of ~~$131.5~~$527.9 million and ~~from our Critical Infrastructure segment of $18.2 million.~~ $328.5 million, respectively.

See ~~“—Segment~~“Segment Results” below for a further ~~discussion.~~discussion of the changes in the Company's revenue.

Direct costs of contracts


	Three Months Ended				Variance					Three Months Ended				Variance
(U.S. dollars in thousands)	March 30, 2018		March 31, 2019		Dollar		Percent			September 30, 2023		September 30, 2022		Dollar		Percent
Direct costs of contracts	$	602,972	$	714,237	$	111,265		18.5	%	$	1,124,305	$	872,423	$	251,882		28.9	%

~~Direct~~The increase in direct cost of contracts ~~increased~~ for the three months ended ~~March 31, 2019~~September 30, 2023 when compared to ~~March 30, 2018~~the corresponding period last year, was primarily due to an increase of ~~$93.2~~$146.7 million in our Federal Solutions segment and ~~from an increase of $18.1~~$105.2 million in our Critical Infrastructure segment. The increases were primarily due to an an increase in organic business volume in both segments and an increase from business acquisitions in the Federal Solutions segment of $16.2 million.


	Nine Months Ended				Variance
(U.S. dollars in thousands)	September 30, 2023		September 30, 2022		Dollar		Percent
Direct costs of contracts	$	3,109,713	$	2,388,095	$	721,618		30.2	%

The increase in direct cost of contracts for the nine months ended September 30, 2023 when compared to the corresponding period last year, was primarily due to an increase of $446.4 million in our Federal Solutions segment ~~was due primarily from business acquisitions which added $91.3 million. Direct cost of contracts~~and $275.2 million in our Critical Infrastructure ~~segment increased $18.1 million~~segment. The increases were primarily due to an increase in organic business volume ~~under existing contracts.~~in both segments and an increase from business acquisitions of $208.7 million in the Federal Solutions segment.

Equity in (losses) earnings of unconsolidated joint ventures


	Three Months Ended					Variance
(U.S. dollars in thousands)	September 30, 2023		September 30, 2022			Dollar		Percent
Equity in earnings (losses) of unconsolidated joint ventures	$	10,262	$	(974	)	$	11,236		-1153.6	%

The increase in equity in earnings of unconsolidated joint ventures for the three months ended September 30, 2023 compared to the corresponding period last year, was primarily due to earnings on higher margin change orders.


	Three Months Ended				Variance						Nine Months Ended				Variance
(U.S. dollars in thousands)	March 30, 2018		March 31, 2019		Dollar			Percent			September 30, 2023		September 30, 2022		Dollar			Percent
Equity in earnings of unconsolidated joint ventures	$	11,031	$	10,397	$	(634	)		-5.7	%	$	4,497	$	10,237	$	(5,740	)		-56.1	%

~~Equity~~The decrease in equity in earnings of unconsolidated joint ventures ~~decreased~~for the nine months ended September 30, 2023 compared to the corresponding period last year, was primarily due to $15.8 million in write-downs on a joint venture during the nine months ended September 30, 2023 offset in part by the higher margin change orders discussed above.

Selling, general and administrative expenses


	Three Months Ended				Variance
(U.S. dollars in thousands)	September 30, 2023		September 30, 2022		Dollar		Percent
Selling, general and administrative expenses	$	221,188	$	196,960	$	24,228		12.3	%

The increase in SG&A of $24.2 million for the three months ended ~~March 31, 2019~~September 30, 2023 when compared to ~~March 30, 2018 primarily due to timing of~~ the ~~completion of joint ventures and the starting of new joint ventures as part of ordinary course timing fluctuations in our business.~~

~~Indirect, general and administrative expenses~~

Three Months Ended

Variance

(U.S. dollars in thousands)

March 30, 2018

March 31, 2019

Dollar

Percent

Indirect, general and administrative expenses

$
123,847

$
177,519

$
53,672

43.3
%

Indirect, general and administrative expenses (“IG&A”) increased for the three months ended March 31, 2019 when compared to March 30, 2018 primarily due to our Federal Solutions segment, most of which is related to additional expenses of $18.9 million from business acquisitions, $20.4 million from the amortization of intangible assets related to our acquisitions and $9.4 million in acquisition-related expenses. In our Critical Infrastructure segment, expenses increased in-line with the increase in business volume.

~~Total other expense~~

Three Months Ended

Variance

(U.S. dollars in thousands)

March 30,
2018

March 31,
2019

Dollar

Percent

Interest income

$
741

$
477

$
(264
)

-35.6
%
Interest expense

(3,999
)

(8,292
)

(4,293
)

107.4
%
Other income, net

1,152

41

(1,111
)

-96.4
%
Interest and other expense associated with
claim on long-term contract

(2,330
)

-

2,330

-100.0
%
Total other expense

$
(4,436
)

$
(7,774
)

$
(3,338
)

75.2
%

~~The increase in interest expense for the three months ended March 31, 2019 when compared to March 30, 2018 is~~corresponding period last year was primarily due to an increase of $9.2 million related to employee incentive programs, a $4.6 million increase from business acquisitions, a $2.9 million increase in transaction related costs, and a $2.1 million increase related to business development and sales activities.


	Nine Months Ended				Variance
(U.S. dollars in thousands)	September 30, 2023		September 30, 2022		Dollar		Percent
Selling, general and administrative expenses	$	632,393	$	581,969	$	50,424		8.7	%

The increase in SG&A of $50.4 million for the nine months ended September 30, 2023 when compared to the corresponding period last year was primarily due to an increase of $19.9 million related to employee incentive programs, a

$17.4 million increase from business acquisitions, and $13.2 million primarily related to business development and sales activities.

Total other income (expense)

Interest income is related to interest earned on cash balances held. Interest expense is primarily due to debt related to our ~~business acquisitions. The amounts in other~~Delayed Draw Term Loan and Convertible Senior Notes. Other income (expense), net ~~relate~~is primarily related to transaction gains and losses on foreign currency transactions and sublease income.

~~Interest and other~~


	Three Months Ended						Variance
(U.S. dollars in thousands)	September 30, 2023			September 30, 2022			Dollar			Percent
Interest income	$	492		$	382		$	110			28.8	%
Interest expense		(8,612	)		(6,323	)		(2,289	)		36.2	%
Other income (expense), net		(191	)		(685	)		494			-72.1	%
Total other income (expense)	$	(8,311	)	$	(6,626	)	$	(1,685	)		25.4	%

The increase in interest expense ~~associated with claim~~is primarily related to higher interest rates on ~~long-term contract relates~~borrowings under the Company's various credit facilities during the three months ended September 30, 2023 compared to ~~a lawsuit against a joint venture~~interest rates on borrowings under the revolving Credit Agreement during the three months ended September 30, 2022. Also impacting interest expense during the three months ended September 30, 2023 were borrowings made under the revolving Credit Agreement during the three months ended September 30, 2023.


	Nine Months Ended						Variance
(U.S. dollars in thousands)	September 30, 2023			September 30, 2022			Dollar			Percent
Interest income	$	1,591		$	618		$	973			157.4	%
Interest expense		(22,369	)		(14,786	)		(7,583	)		51.3	%
Other income (expense), net		1,666			(304	)		1,970			-648.0	%
Total other income (expense)	$	(19,112	)	$	(14,472	)	$	(4,640	)		32.1	%

The increase in ~~which~~interest expense for the ~~Company~~nine months ended September 30, 2023 is primarily related to the ~~managing partner. Please see “Note 15 –~~ ~~Commitments and Contingencies”~~ ~~in the Company’s Form S-1/A filed on April 29, 2019, for a description of this matter, which was resolved in favor of the Company on June 13, 2018.~~

~~Income tax~~same factors impacting interest expense

Three Months Ended

Variance

(U.S. dollars in thousands)

March 30,
2018

March 31,
2019

Dollar

Percent

Income tax expense

$
5,353

$
1,886

$
(3,467
)

-64.8
%

~~Income tax expense decreased~~ described above for the three months ended ~~March 31, 2019 when compared to March~~September 30, ~~2018 primarily due to a reduction in pre-tax earnings in the foreign jurisdictions in which we operate.~~2023.

~~Historically, the Company recognized income taxes as an “S” Corporation for federal~~Income tax expense


	Three Months Ended				Variance
(U.S. dollars in thousands)	September 30, 2023		September 30, 2022		Dollar		Percent
Income tax expense	$	15,218	$	13,792	$	1,426		10.3	%

The Company’s effective tax rate was 20.3% and ~~state~~24.0% and income tax ~~purposes~~expense was $15.2 million and ~~therefore, with the exception of a limited number of state and local jurisdictions, income has not been subject to income taxes. As a Subchapter “S” corporation the effective tax rates~~$13.8 million for the three months ended ~~March~~September 30, ~~2018~~2023 and ~~March 31, 2019 were 15.54%~~September 30, 2022, respectively. The most significant items contributing to the change in the effective tax rate are tax benefits related to increases in the foreign-derived intangible income (FDII) deduction and ~~12.35%, respectively.~~

~~In connection with~~a change in jurisdictional mix of earnings, partially offset by an increase in foreign withholding taxes. The difference between the Company’s initial public offering on May 8, 2019, we converted to a “C” Corporation. On a pro forma basis, if the Company had been taxed as a “C” Corporation for the three months ended March 30, 2018 and March 31, 2019 the Company’s assumed combinedstatutory U.S. federal ~~state, local and foreign effective~~ income tax rate ~~would have been 33.02%~~of 21.0% and ~~31.29%, respectively~~the effective tax rate for the quarter ended September 30, 2023 is primarily due to benefits related to untaxed income attributable to noncontrolling interests,earnings in lower tax jurisdictions, the FDII deduction, and the federal research tax credit, partially offset by state income taxes and foreign withholding taxes.


	Nine Months Ended				Variance
(U.S. dollars in thousands)	September 30, 2023		September 30, 2022		Dollar		Percent
Income tax expense	$	41,944	$	27,643	$	14,301		51.7	%

The Company’s effective tax rate was 21.9% and 23.5% and income tax expense ~~would have been $11.4~~was $41.9 million and ~~$4.8~~$27.6 million ~~respectively.~~

~~The termination~~ for the ~~“S” Corporation status will be treated as~~nine months ended September 30, 2023 and September 30, 2022, respectively. The most significant items contributing to the change in the effective tax rate are tax benefits related to increases in the FDII deduction and a change in jurisdictional mix of earnings, partially offset by an increase in foreign withholding taxes. The difference between the statutory U.S. federal income tax ~~status for Accounting Standards Codification 740, “Income Taxes”. These rules require that~~rate of 21.0% and the ~~deferred~~effective tax effects of a change in tax status to be recorded to income from continuing operations on the date the “S” Corporation status terminates. The Company is estimating that the effects of the change in tax status based upon our forecasted temporary differencesrate for the ~~year~~nine months ended September 30, 2023 primarily relates to ~~be approximately $55 million~~state income taxes and foreign withholding taxes, partially offset by benefits related to ~~$61 million. This range is subject~~untaxed income

attributable to ~~revision based upon actual results.~~noncontrolling interests,earnings in lower tax jurisdictions, the FDII deduction, and the federal research tax credit.

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. Presented above, inthis Management’s Discussion and Analysis of Financial Condition and Results of Operations, is a discussion of our definition of Adjusted EBITDA, how we use this metric, why we present this metric and the material limitations on the usefulness of this metric. See “Note ~~20—~~18—Segments Information” in the notes to the consolidated financial statements in this Form 10-Q for further discussion regarding our segment Adjusted EBITDA attributable to Parsons Corporation.


	Three Months Ended				Three Months Ended				Nine Months Ended
(U.S. dollars in thousands)	March 30, 2018		March 31, 2019		September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
Federal Solutions Adjusted EBITDA attributable to Parsons Corporation	$	20,154	$	38,866	$	65,039	$	61,004	$	206,827	$	151,287
Critical Infrastructure Adjusted EBITDA attributable to Parsons Corporation		23,656		25,559		50,188		27,545		95,481		81,020
Adjusted EBITDA attributable to noncontrolling interests		3,920		3,749		12,606		14,138		34,222		22,042
Total Adjusted EBITDA	$	47,730	$	68,174	$	127,833	$	102,687	$	336,530	$	254,349

Federal Solutions


	Three Months Ended				Variance					Three Months Ended						Variance
(U.S. dollars in thousands)	March 30, 2018		March 31, 2019		Dollar		Percent			September 30, 2023			September 30, 2022			Dollar			Percent
Revenue	$	291,335	$	422,812	$	131,477		45.1	%	$	780,114		$	620,416		$	159,698			25.7	%
Adjusted EBITDA attributable to Parsons Corporation	$	20,154	$	38,866	$	18,712		92.8	%	$	65,039		$	61,004		$	4,035			6.6	%
Adjusted EBITDA Margin attributable to Parsons Corporation											8.3	%		9.8	%		-1.5	%		-15.2	%

The increase in Federal Solutions revenue for the three months ended September 30, 2023 compared to the corresponding period last year was primarily due to ~~business acquisitions which added $122.4 million. Federal Solutions legacy revenue increased $9.1 million.~~organic growth of 23% driven by growth on new and existing contracts offset by the winding down of a large contract.

The increase in Federal Solutions Adjusted EBITDA attributable to Parsons Corporation for the three months ended September 30, 2023 compared to the corresponding period last year was primarily due to the factors impacting revenue discussed above offset in part by the timing of program milestones and completions, as well as higher projected incentive compensation costs as a result of the company's strong operating performance and growing employee base.


	Nine Months Ended						Variance
(U.S. dollars in thousands)	September 30, 2023			September 30, 2022			Dollar			Percent
Revenue	$	2,177,457		$	1,649,601		$	527,856			32.0	%
Adjusted EBITDA attributable to Parsons Corporation	$	206,827		$	151,287		$	55,540			36.7	%
Adjusted EBITDA Margin attributable to Parsons Corporation		9.5	%		9.2	%		0.3	%		3.6	%

The increase in Federal Solutions revenue for the nine months ended September 30, 2023 compared to the corresponding period last year was primarily due to organic growth of 17%, and increases from business acquisitions of $248.5 million.

The increase in Federal Solutions Adjusted EBITDA attributable to Parsons Corporation for the nine months ended September 30, 2023 compared to the corresponding period last year was primarily due to the factors impacting Adjusted EBITDA discussed above for the three months ended September 30, 2023 and ~~improved profit margins.~~the $20 million of incentive fees on two contracts recognized in the second quarter of 2023.

Critical Infrastructure


	Three Months Ended				Variance					Three Months Ended						Variance
(U.S. dollars in thousands)	March 30, 2018		March 31, 2019		Dollar		Percent			September 30, 2023			September 30, 2022			Dollar			Percent
Revenue	$	463,344	$	481,593	$	18,249		3.9	%	$	638,457		$	513,954		$	124,503			24.2	%
Adjusted EBITDA attributable to Parsons Corporation	$	23,656	$	25,559	$	1,903		8.0	%	$	50,188		$	27,545		$	22,643			82.2	%
Adjusted EBITDA Margin attributable to Parsons Corporation											7.9	%		5.4	%		2.5	%		46.7	%

The increase in Critical Infrastructure revenue for the three months ended September 30, 2023 compared to the corresponding period last year was primarily ~~related~~due to organic revenue growth ~~on existing contracts.~~of 24% driven by volume in both the Middle East and North America.

The increase in Critical Infrastructure Adjusted EBITDA attributable to Parsons Corporation for the three months ended September 30, 2023 compared to the corresponding period last year was primarily due to the increase from organic revenue growth and high margin change orders on an unconsolidated joint venture offset in part by higher projected incentive compensation costs as a ~~reduction~~result of the company's strong operating performance and growing employee base.


	Nine Months Ended						Variance
(U.S. dollars in thousands)	September 30, 2023			September 30, 2022			Dollar			Percent
Revenue	$	1,771,066		$	1,442,559		$	328,507			22.8	%
Adjusted EBITDA attributable to Parsons Corporation	$	95,481		$	81,020		$	14,461			17.8	%
Adjusted EBITDA Margin attributable to Parsons Corporation		5.4	%		5.6	%		-0.2	%		-4.0	%

The increase in ~~IG&A.~~Critical Infrastructure revenue for the nine months ended September 30, 2023 compared to the corresponding period last year was primarily due to organic revenue growth of 22% driven by volume in both the Middle East and North America.

The increase in Critical Infrastructure Adjusted EBITDA attributable to Parsons Corporation for the nine months ended September 30, 2023 compared to the corresponding period last year was primarily due to the increase from organic revenue growth offset in part by a project write-down of $20.7 million, $15.8 million in write-downs on an unconsolidated joint venture, and an increase in selling, general and administrative expenses.

Liquidity and Capital Resources

~~Historically, we have financed~~We finance our operations and capital expenditures ~~and satisfied redemptions of ESOP interests~~ through a combination of internally generated cash from operations, our Senior Notes, Convertible Senior Notes, and ~~from~~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 Credit Agreement.

We40

As of September 30, 2023, 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~~on-hand and our borrowing capacity under our Revolving Credit Facility.

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 contracts.~~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.

Accounts receivable is the principal component of our working capital and is generally driven by revenue growth. Accounts receivable reflects amounts billed to our clients as of each balance sheet date and receivable amounts that are currently due but unbilled. The total amount of our accounts receivable can vary significantly over time but is generally sensitive to revenue levels. Net days sales outstanding, which we refer to as ~~net~~Net DSO, is calculated by dividing

(i) (accounts receivable plus contract assets) less (contract liabilities plus accounts payable) by (ii) average revenue per day (calculated by dividing trailing twelve months revenue by the number of days in that period). ~~In the last few years we have focused~~We focus on collecting outstanding receivables to reduce Net DSO and working capital. Net DSO was 7565 days at ~~March~~September 30, ~~2018~~2023 and 6168 days at ~~March 31, 2019.~~September 30, 2022. The decrease in Net DSO was primarily related to improved collections in both the Federal Solutions and Critical Infrastructure segments during the third quarter of fiscal 2023. Our working capital (current assets less current liabilities) was ~~$482.6~~$621.4 million at September 30, 2023 and $611.7 million at December 31, ~~2018 and $242.3 million at March 31, 2019.~~2022.

Our cash, cash equivalents and restricted cash decreased by ~~$150.7~~$57.1 million to ~~$130.5~~$205.4 million at ~~March 31, 2019~~September 30, 2023 from ~~$281.2~~$262.5 million at ~~March 30, 2018.~~December 31, 2022.

The following table summarizes our sources and uses of cash over the periods presented (in thousands):

	Three Months Ended
	March 30, 2018			March 31, 2019			Nine Months Ended
Net cash used in operating activities	$	(65,433	)	$	(60,108	)
							September 30, 2023			September 30, 2022
Net cash provided by operating activities							$	217,566		$	148,368
Net cash used in investing activities		(8,181	)		(301,059	)		(327,245	)		(402,677	)
Net cash provided by financing activities		6,131			210,623			52,380			60,185
Effect of exchange rate changes		(825	)		(182	)		166			(2,220	)
Net decrease in cash and cash equivalents	$	(68,308	)	$	(150,726	)	$	(57,133	)	$	(196,344	)

Operating Activities

Net cash provided by ~~(used in)~~ operating activities ~~consist~~consists primarily of net income ~~(loss)~~ adjusted for noncash items, such as: equity in ~~earnings (loss)~~losses (earnings) of unconsolidated joint ventures, contributions of treasury stock, depreciation and amortization of property and equipment and intangible assets, and provisions for doubtful ~~accounts, amortization of deferred gains, and impairment charges.~~accounts. 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 ~~used in~~provided by operating activities ~~decreased $5.3 million to $60.1~~increased $69.2 million for the ~~three~~nine months ended ~~March 31, 2019~~September 30, 2023 compared to ~~$65.4 million for~~ the ~~three~~nine months ended ~~March~~September 30, ~~2018.~~2022. The primary driver of the increase in cash flows provided by operating activities was a $74.2 million change in net income including noncontrolling interests after adjusting for non-cash items offset in part by a $11.5 million decrease in cash outflows from our working capital accounts. As discussed above, Net DSO decreased 3 days compared to last year. The net ~~cash used in operating activities is primarily due to a $23.6 million improvement~~decrease in cash ~~flows~~outflows from our working capital accounts ~~and a $4.6 million increase in net income after adjusting for non-cash items. These positive changes in operating cash flows~~ were ~~offset, in part, by a $22.9 million change in~~primarily the ~~use~~result of ~~cash related to other long-term liabilities, primarily related to our insurance reserves. Net DSOs improved from 75 days to 61 days primarily driven by~~timing differences and the increase in business volume.

Pursuant to Internal Revenue Service IR 2023-33, the ~~Company’s revenue from business acquisitions.~~Company qualifies for disaster area taxpayer relief. As such, the Company has deferred $33.0 million of its federal April, June and September 2023 quarterly income tax payments

which were otherwise due prior to or during the quarter ended September 30, 2023. Deferred income tax payments were due and paid by October 16, 2023.

Investing Activities

Net cash used in investing activities consists primarily of cash flows associated with capital expenditures, joint ventures and business acquisitions.

Net cash used in investing activities ~~increased $292.9 million to $301.1~~decreased $75.4 million for the ~~three~~nine months ended ~~March 31, 2019,~~September 30, 2023, when compared to ~~$8.2 for~~ the ~~three~~nine months ended ~~March~~September 30, ~~2018,~~2022. This change was primarily ~~due~~driven by a $163.8 million reduction in payments for acquisitions offset in part by a $68.0 million increase from investments in unconsolidated joint ventures, a $11.1 million increase in capital expenditures (primarily from computer systems and equipment) and a change from return of investments in unconsolidated joint ventures of $9.4 million.

Subsequent to ~~the use of $287.5 million, net of cash acquired, for the acquisition of OGSystems. The Company had no business acquisition activity during~~ the quarter ended ~~March~~September 30, ~~2018.~~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 $11.5 million, subject to certain adjustments. See "Note 19—Subsequent Events" in the notes to our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for a further discussion of this acquisition.

The Company continually evaluates potential business acquisition opportunities. In the event the Company makes a business acquisition, a significant amount of cash may be used to fund the purchase price.

Financing Activities

Net cash provided by financing activities is primarily associated with proceeds from debt, the repayment thereof, and distributions to noncontrolling ~~interests and payments to the ESOP in connection with the redemption of ESOP participants’~~ interests. We spent $0.4 million and $0.8 million for the three months ended March 30, 2018 and March 31, 2019 respectively, in connection with the redemption of ESOP participants’ interests. With a public market for the Company’s common stock, cash will no longer be required for ESOP redemptions following the 180-day lock-up period which ends November 4, 2019.

Net cash provided by financing activities ~~increased $204.5 million to $210.6~~decreased $7.8 million for the ~~three~~nine months ended ~~March 31, 2019 when~~September 30, 2023 compared to ~~$6.1 million for~~ the ~~three~~nine months ended ~~March~~September 30, ~~2018,~~2022. The change in cash flows from financing activities is primarily due to ~~an increase~~

a decrease of $26.2 million from net, borrowing related activities and a $6.8 million change in ~~borrowings under our Credit Agreement of $230.0 million, net of $60.0 million of repayments used primarily to pay for the Company’s business acquisitions. These cash flows provided~~contributions by ~~financing activities were~~noncontrolling interests offset in part by ~~an increase~~a decrease in cash used to repurchase common stock of ~~$24.8~~$11.5 million ~~of distributions, net to noncontrolling interests.~~and from $11.2 million from payments in warrants for the nine months ended September 30, 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 ~~$227.7~~to $311.8 million as of ~~March 31, 2019, including $48.8 million of letters~~September 30, 2023. Letters of credit outstanding under the Credit ~~Agreement.~~Agreement total $43.9 million as of September 30, 2023.

Recent Accounting Pronouncements

See the information set forth in “Note 3—~~Summary of Significant Accounting Policies—Recently Adopted~~New Accounting Pronouncements” in the notes to our consolidated financial ~~statements.~~statements included elsewhere in this Quarterly Report on Form 10-Q.

Off-Balance Sheet Arrangements

As of ~~March 31, 2019,~~September 30, 2023, 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.

Item 3. Quantitative and ~~Qualitative~~Qualitative Disclosures About Market Risk.

Interest Rate Risk

We are exposed to interest rate risks related to ~~both~~ the Company’s Revolving Credit Facility and ~~our~~ Delayed Draw
Term ~~Loan Agreement. Borrowings~~Loan.

As of September 30, 2023, there was $75 million outstanding under the Revolving Credit Facility. Borrowings under the new Credit Facility effective June 2021 bear interest at ~~our option, at~~ either ~~(i)~~ the ~~Base Rate~~Term SOFR rate plus a margin between 1.0% and 1.625%, or a base rate (as defined in the ~~Revolving~~ Credit ~~Facility)~~Agreement) plus ~~an applicable~~a margin ~~or (ii) LIBOR plus an applicable margin.~~ of between 0% and 0.625%, both based

on the leverage ratio of the Company at the end of each quarter.The rates on September 30, 2023 and December 31, 2022 were 6.7% and 5.7%, respectively.

As of ~~December 31, 2018, we had outstanding borrowings under the Revolving Credit Facility of $180.0 million. Based on the $180.0~~September 30, 2023, there was $350.0 million outstanding under the ~~Credit Agreement, an increase or decrease of 100 basis points in~~2022 Delayed Draw Term Loan. Borrowings under the ~~Base Rate and/or LIBOR rates would result in an increase or decrease in annual interest expense of approximately $1.8 million. Borrowing under our~~2022 Delayed Draw Term Loan ~~is comprised of Offshore Rate Loans and Base Rate Loans (each as defined in the Term Loan Agreement), with an initial aggregate principal amount of $150.0 million. The Offshore Rate Loans~~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 ~~per annum~~plus a margin of ~~LIBOR, divided by 1.00 minus the Eurodollar Reserve Percentage, plus 1.25%. The Base Rate Loans~~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 ~~per annum~~ of 0.175% commencing with the ~~sum of (a)~~date that is ninety (90) days after the highest of (1) the administrative agent’s reference rate; (2) the rate equal to 1.50% per annum above the Offshore Rate; and (3) the rate equal to 0.50% per annum above the latest federal funds rate, plus (b) 0.25%. Based on the $150.0 million outstanding principal balance under the Term Loan, an increase or decrease of 100 basis points in the Term Loan’s applicableClosing Date. The interest rate ~~would result in an increase or decrease in annual interest expense of approximately $1.5 million. The Term Loan has a maturity date of January 3, 2020~~at September 30, 2023 and ~~we used the proceeds from the May 8, 2019 initial public offering to pay off the full outstanding balance under the Term Loan.~~December 31, 2022 were 6.6% and 5.6%, 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 4. Controls and Procedures.

Evaluation of Disclosure Control and Procedures

Our management carried out, as of ~~March 31, 2019 ,~~September 30, 2023, 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 ~~March 31, 2019 ,~~September 30, 2023, our disclosure controls and procedures were effective to provide reasonable assurance that material information required to be disclosed by us in reports we file 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.

Changes in Internal Control Over Financial Reporting

~~On January 1, 2019~~During the ~~Company adopted ASU 2016-02, “Leases”. In connection with the adoption, the Company implemented certain changes to our processes, systems, and controls. There~~third quarter of 2023, there were no ~~other~~ changes to our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Consistent with the guidance issued by the Securities and Exchange Commission Staff, management plans to exclude IPKeys, which we acquired on April 13, 2023, and SealingTech. which we acquired on August 23, 2023, from its assessment of internal controls over financial reporting as of December 31, 2023. The total assets and revenue related to SealingTech, a wholly owned subsidiary, are both less than 1% of the related consolidated financial statement amounts as of and for the nine months ended September 30, 2023. The total assets and revenue related to IPKeys, a wholly owned subsidiary, are approximately 1% and 0.2%, respectively of the related consolidated financial statement amounts as of and for the nine months ended September 30, 2023.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

The information required by this Item 1 is included in “Note 1412 – ~~Commitments and~~ Contingencies” included in the Notes to Consolidated Financial Statements appearing under Part I, Item 1 of this ~~Quarterly Report on~~ Form 10-Q which is incorporated herein by reference.

Item 1A. Risk Factors.

There ~~have~~has been ~~no material changes from~~one change to our Risk Factors disclosed in the Company’s Form ~~S-1/A filed on April 29, 2019.~~10-K for the year ended December 31, 2022 with the changes underlined and in italics below:

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 for the three months ended September 30, 2023 was 24.6%. There are risks inherent in doing business internationally, including:

•

imposition of governmental controls and changes in laws, regulations or policies;

•

political and economic instability and turmoil internationally, including countries in the Middle East;

•

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;

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

~~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 $100,000,000 from time to time, commencing on August 12, 2021. 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. As of September 30, 2023, the Company has spent $51.7 million (which includes commissions paid of $27.6 thousand) repurchasing 1,378,941 shares of Common Stock at an average price of $37.49 per share.

There were no share repurchases during the three months ended September 30, 2023.

Item 3. Defaults Upon Senior Securities.

None

Item 4. Mine Safety Disclosures.

Not Applicable

Item 5. Other Information.

~~None~~Insider Trading Relationships and Policies

In conformance with updated SEC regulations, 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.

Resignation of Employee Stock Ownership Plan Auditor

Baker Tilly US, LLP ("Baker Tilly"), has decided that it will no longer perform audits or reviews of SEC Form 11-K fillings. As a result of their discontinuance of this service line, they have elected to not stand for reappointment as auditor of Parsons Employee Stock Ownership Plan Form 11-K. The Company is in the process of selecting an accounting firm to replace Baker Tilly.

Item 6. Exhibits.


Exhibit Number		Description

31.119.1		Parsons Corporation Executive Compensation Clawback Policy

19.2*		Parsons Corporation Dodd-Frank Compliant Compensation Clawback Policy

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.

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.

~~101.INS~~101		~~XBRL Instance Document~~The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, formatted in Inline XBRL: (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.

~~101.SCH~~104		Cover Page Interactive Data File (formatted as inline XBRL ~~Taxonomy Extension Schema Document~~

~~101.CAL~~		~~XBRL Taxonomy Extension Calculation Linkbase Document~~

~~101.DEF~~		~~XBRL Taxonomy Extension Definition Linkbase Document~~

~~101.LAB~~		~~XBRL Taxonomy Extension Label Linkbase Document~~

~~101.PRE~~		~~XBRL Taxonomy Extension Presentation Linkbase Document~~with applicable taxonomy extension information contained in Exhibits 101).

*	~~Filed herewith.~~

~~SIGNATURES~~

* Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	~~Company Name~~Parsons Corporation

Date: ~~June 18, 2019~~November 1, 2023	By:	/s/ ~~George L. Ball~~Matthew M. Ofilos
		~~George L. Ball~~Matthew M. Ofilos
		Chief Financial Officer
		(Principal Financial Officer)

4246


Delaware	95-3232481
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

~~5875 Trinity Parkway #300~~14291 Park Meadow Drive, Suite 100 ~~Centerville,~~ Chantilly, Virginia	~~20120~~20151
(Address of principal executive offices)	(Zip Code)


		September 30, 2023			December 31, 2022
		(Unaudited)
Assets
Current assets:
	Cash and cash equivalents (including $100,478 and $53,193 Cash of consolidated joint ventures)	$	205,406		$	262,539
	Accounts receivable, net (including $293,023 and $217,419 Accounts receivable of consolidated joint ventures, net)		906,741			717,345
	Contract assets (including $12,622 and $11,313 Contract assets of consolidated joint ventures)		756,630			634,033
	Prepaid expenses and other current assets (including $12,731 and $7,913 Prepaid expenses and other current assets of consolidated joint ventures)		146,764			105,866
	Total current assets		2,015,541			1,719,783

	Property and equipment, net (including $3,902 and $2,543 Property and equipment of consolidated joint ventures, net)		99,344			96,050
	Right of use assets, operating leases (including $7,011 and $6,315 Right of use assets, operating leases of consolidated joint ventures)		158,400			155,090
	Goodwill		1,797,330			1,661,850
	Investments in and advances to unconsolidated joint ventures		164,858			107,425
	Intangible assets, net		282,098			254,127
	Deferred tax assets		148,512			137,709
	Other noncurrent assets		66,905			66,108
	Total assets	$	4,732,988		$	4,198,142

Liabilities and Shareholders' Equity
Current liabilities:
	Accounts payable (including $54,668 and $49,078 Accounts payable of consolidated joint ventures)	$	266,345		$	201,428
	Accrued expenses and other current liabilities (including $147,808 and $102,417 Accrued expenses and other current liabilities of consolidated joint ventures)		771,912			630,193
	Contract liabilities (including $72,168 and $40,654 Contract liabilities of consolidated joint ventures)		277,249			213,064
	Short-term lease liabilities, operating leases (including $3,507 and $2,552 Short-term lease liabilities, operating leases of consolidated joint ventures)		56,930			59,144
	Income taxes payable		21,657			4,290
	Total current liabilities		1,394,093			1,108,119

	Long-term employee incentives		19,199			17,375
	Long-term debt		820,366			743,605
	Long-term lease liabilities, operating leases (including $3,504 and $3,763 Long-term lease liabilities, operating leases of consolidated joint ventures)		119,281			111,417
	Deferred tax liabilities		20,448			12,471
	Other long-term liabilities		111,501			109,220
	Total liabilities		2,484,888			2,102,207
Contingencies (Note 12)
Shareholders' equity:
	Common stock, $1 par value; authorized 1,000,000,000 shares; 146,317,493 and 146,132,016 shares issued; 45,136,147 and 40,960,845 public shares outstanding; 59,752,326 and 63,742,151 ESOP shares outstanding		146,318			146,132
	Treasury stock, 41,429,020 shares at cost		(844,936	)		(844,936	)
	Additional paid-in capital		2,729,206			2,717,134
	Retained earnings		158,945			43,089
	Accumulated other comprehensive loss		(16,797	)		(17,849	)
	Total Parsons Corporation shareholders' equity		2,172,736			2,043,570
	Noncontrolling interests		75,364			52,365
	Total shareholders' equity		2,248,100			2,095,935
	Total liabilities and shareholders' equity	$	4,732,988		$	4,198,142

		December 31, 2018			March 31, 2019
Assets
Current assets:
	Cash and cash equivalents (including $73,794 and $42,872 Cash of consolidated joint ventures)	$	280,221		$	121,408
	Restricted cash and investments		974			9,061
	Accounts receivable, net (including $180,325 and $193,597 Accounts receivable of consolidated joint ventures, net)		623,286			651,924
	Contract assets (including $21,270 and $23,964 Contract assets of consolidated joint ventures)		515,319			571,755
	Prepaid expenses and other current assets (including $11,837 and $9,423 Prepaid expenses and other current assets of consolidated joint ventures)		69,007			77,013
	Total current assets		1,488,807			1,431,161

	Property and equipment, net (including $2,561 and $2,507 Property and equipment of consolidated joint ventures, net)		91,849			97,298
	Right of use assets, operating leases		-			216,484
	Goodwill		736,938			921,097
	Investments in and advances to unconsolidated joint ventures		63,560			67,202
	Intangible assets, net		179,519			250,948
	Deferred tax assets		5,680			4,891
	Other noncurrent assets		46,225			43,917
	Total assets	$	2,612,578		$	3,032,998

Liabilities and Shareholder’s Equity
Current liabilities:
	Accounts payable (including $87,914 and $91,505 Accounts payable of consolidated joint ventures)	$	226,345		$	203,684
	Accrued expenses and other current liabilities (including $73,209 and $71,593 Accrued expenses and other current liabilities of consolidated joint ventures)		559,700			547,954
	Contract liabilities (including $38,706 and $46,754 Contract liabilities of consolidated joint ventures)		208,576			225,017
	Short-term lease liabilities, operating leases		-			53,029
	Income taxes payable		11,540			9,415
	Short-term notes payable		-			149,786
	Total current liabilities		1,006,161			1,188,885
	Long-term employee incentives		41,913			29,991
	Deferred gain resulting from sale-leaseback transactions		46,004			-
	Long-term debt		429,164			509,211
	Long-term lease liabilities, operating leases		-			181,274
	Deferred tax liabilities		6,240			7,922
	Other long-term liabilities		127,863			111,023
	Total liabilities		1,657,345			2,028,306
Commitments and contingencies (Note 14)
	Redeemable common stock held by Employee Stock Ownership Plan (ESOP) ,$1 par value; authorized 150,000,000 shares; 125,097,684 shares issued; 78,172,809 and 78,138,831 shares outstanding, recorded at redemption value		1,876,309			1,875,332

Shareholder's equity (deficit):
	Treasury Stock, 46,918,140 and 46,958,853 shares at cost		(957,025	)		(957,838	)
	Retained earnings		12,445			75,771
	Accumulated other comprehensive loss		(22,957	)		(20,401	)
	Total Parsons Corporation shareholder's equity (deficit)		(967,537	)		(902,468	)
	Noncontrolling interests		46,461			31,828
	Total shareholder's equity (deficit)		(921,076	)		(870,640	)
	Total liabilities, redeemable common stock and shareholder's equity (deficit)	$	2,612,578		$	3,032,998


	For the Three Months Ended						For the Three Months Ended						For the Nine Months Ended
	March 30, 2018			March 31, 2019			September 30, 2023			September 30, 2022			September 30, 2023			September 30, 2022
Net income including noncontrolling interests	$	29,102		$	13,386		$	59,811		$	43,595		$	149,858		$	90,218
Other comprehensive (loss) income, net of tax
Other comprehensive income, net of tax
Foreign currency translation adjustment, net of tax		(2,784	)		2,549			(1,929	)		(7,134	)		1,046			(9,643	)
Pension adjustments, net of tax		(19	)		9			(11	)		(68	)		6			(93	)
Comprehensive income including noncontrolling interests, net of tax		26,299			15,944			57,871			36,393			150,910			80,482
Comprehensive income attributable to noncontrolling interests, net of tax		(3,815	)		(3,645	)		(12,361	)		(14,014	)		(33,617	)		(21,673	)
Comprehensive income attributable to Parsons Corporation, net of tax	$	22,484		$	12,299		$	45,510		$	22,379		$	117,293		$	58,809


		For the Three Months Ended							For the Nine Months Ended
		March 30, 2018			March 31, 2019				September 30, 2023			September 30, 2022
Cash flows from operating activities:	Cash flows from operating activities:							Cash flows from operating activities:
	Net income including noncontrolling interests	$	29,102		$	13,386
	Adjustments to reconcile net income to net cash used in operating activities
	Depreciation and amortization		9,009			30,591		Net income including noncontrolling interests	$	149,858		$	90,218
	Amortization of deferred gain		(1,813	)		-		Adjustments to reconcile net income to net cash used in operating activities
	Amortization of debt issue costs		149			244		Depreciation and amortization		87,202		$	90,668
	(Gain) loss on disposal of property and equipment		18			(27	)	Amortization of debt issue costs		2,124		$	1,959
	Provision for doubtful accounts		2,426			(279	)	Loss (gain) on disposal of property and equipment		(27	)	$	(261	)
	Deferred taxes		(138	)		1,486		Provision for doubtful accounts		91		$	(3	)
	Foreign currency transaction gains and losses		(457	)		618		Deferred taxes		(8,205	)	$	(6,334	)
	Equity in earnings of unconsolidated joint ventures		(11,031	)		(10,397	)	Foreign currency transaction gains and losses		1,479		$	3,502
	Return on investments in unconsolidated joint ventures		15,406			10,794		Equity in losses (earnings) of unconsolidated joint ventures		(4,497	)	$	(10,237	)
	Contributions of treasury stock		11,357			12,250		Return on investments in unconsolidated joint ventures		30,328		$	25,626
	Changes in assets and liabilities, net of acquisitions and newly consolidated joint ventures:							Stock-based compensation		23,872		$	14,991
	Accounts receivable		469,720			(17,135	)	Contributions of treasury stock		44,072		$	41,980
	Contract assets		(531,157	)		(46,984	)	Changes in assets and liabilities, net of acquisitions and newly consolidated joint ventures:
	Prepaid expenses and current assets		(27,138	)		(1,424	)	Accounts receivable		(168,964	)	$	(90,913	)
	Accounts payable		(723	)		(28,182	)	Contract assets		(120,414	)	$	(62,861	)
	Accrued expenses and other current liabilities		(44,016	)		(24,023	)	Prepaid expenses and other assets		(40,470	)	$	8,772
	Billings in excess of costs		(152,147	)		-		Accounts payable		48,294		$	(918	)
	Contract liabilities		299,639			14,884		Accrued expenses and other current liabilities		93,263		$	20,220
	Provision for contract losses		(143,666	)		-		Contract liabilities		61,503		$	26,665
	Income taxes		(597	)		(3,645	)	Income taxes		17,395		$	1,160
	Other long-term liabilities		10,624			(12,265	)	Other long-term liabilities		662		$	(5,866	)
	Net cash used in operating activities		(65,433	)		(60,108	)	Net cash provided by operating activities		217,566			148,368
Cash flows from investing activities:	Cash flows from investing activities:							Cash flows from investing activities:
	Capital expenditures		(5,152	)		(11,041	)	Capital expenditures		(30,877	)	$	(19,784	)
	Proceeds from sale of property and equipment		29			135		Proceeds from sale of property and equipment		274		$	573
	Payments for acquisitions, net of cash acquired		-			(287,482	)	Payments for acquisitions, net of cash acquired		(215,497	)	$	(379,272	)
	Investments in unconsolidated joint ventures		(3,058	)		(4,905	)	Investments in unconsolidated joint ventures		(81,598	)	$	(13,637	)
	Return of investments in unconsolidated joint ventures		-			2,234		Return of investments in unconsolidated joint ventures		72		$	9,443
	Net cash used in investing activities		(8,181	)		(301,059	)	Proceeds from sales of investments in unconsolidated joint ventures		381		$	-
								Net cash used in investing activities		(327,245	)		(402,677	)
Cash flows from financing activities:	Cash flows from financing activities:							Cash flows from financing activities:
	Proceeds from borrowings under credit agreement		-			290,000		Proceeds from borrowings		511,500		$	680,900
	Repayments of borrowings under credit agreement		-			(60,000	)	Repayments of borrowings		(436,500	)	$	(579,700	)
	Payments for debt costs and credit agreement		-			(286	)	Payments for debt costs and credit agreement		-		$	(870	)
	Contributions by (distributions to) noncontrolling interests, net		6,497			(18,278	)	Payments for acquired warrants		-		$	(11,243	)
	Purchase of treasury stock		(366	)		(813	)	Contributions by noncontrolling interests		1,537		$	8,299
	Net cash provided by financing activities		6,131			210,623		Distributions to noncontrolling interests		(12,156	)	$	(14,290	)
	Effect of exchange rate changes		(825	)		(182	)	Repurchases of common stock		(8,000	)	$	(19,500	)
	Net increase (decrease) in cash, cash equivalents, and restricted cash		(68,308	)		(150,726	)	Taxes paid on vested stock		(6,941	)	$	(6,135	)
	Cash, cash equivalents and restricted cash							Proceeds from issuance of common stock		2,940		$	2,724
	Beginning of year		446,144			281,195		Net cash provided by financing activities		52,380			60,185
	End of period	$	377,836		$	130,469		Effect of exchange rate changes		166		$	(2,220	)
								Net decrease in cash, cash equivalents, and restricted cash		(57,133	)		(196,344	)
								Cash, cash equivalents and restricted cash:
								Beginning of year		262,539		$	343,883
								End of period	$	205,406		$	147,539


Large accelerated filer	☐☒	Accelerated filer	☐
Non-accelerated filer	☒☐	Smaller reporting company	☐
Emerging growth company	☐


		Page
PART I.	FINANCIAL INFORMATION	1
Item 1.	Financial Statements (Unaudited)	1
	Consolidated Balance Sheets	1
	Consolidated Statements of Income	2
	Consolidated Statements of Comprehensive Income	3
	Consolidated Statements of Cash Flows	4
	Consolidated Statements of ~~Shareholder’s~~Shareholders’ Equity	5
	Notes to Unaudited Consolidated Financial Statements	67
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2728
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3942
Item 4.	Controls and Procedures	3943
PART II.	OTHER INFORMATION	4144
Item 1.	Legal Proceedings	4144
Item 1A.	Risk Factors	4144
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4144
Item 3.	Defaults Upon Senior Securities	4144
Item 4.	Mine Safety Disclosures	4144
Item 5.	Other Information	4145
Item 6.	Exhibits	4145
	Signatures	4246

										Accumulated
	Redeemable									Other			Total
	Common			Treasury			Retained			Comprehensive			Parsons			Noncontrolling
	Stock			Stock			Earnings			Income (Loss)			Deficit			Interests			Total
Balance at December 31, 2018	$	1,876,309		$	(957,025	)	$	12,445		$	(22,957	)	$	(967,537	)	$	46,461		$	(921,076	)
Comprehensive income
Net income								9,741						9,741			3,645			13,386
Foreign currency translation gain											2,547			2,547						2,547
Pension adjustments											9			9						9
ASC 842 transition adjustment								52,608						52,608						52,608
Purchase of treasury stock		(813	)		(813	)		813						-						-
Distributions, net of contributions														-			(18,278	)		(18,278	)
ESOP shares at redemption value		(164	)					164						164						164
Balance at March 31, 2019	$	1,875,332		$	(957,838	)	$	75,771		$	(20,401	)	$	(902,468	)	$	31,828		$	(870,640	)

Balance at December 29, 2017	$	1,855,305		$	(876,372	)	$	(186,035	)	$	(15,003	)	$	(1,077,410	)	$	27,494		$	(1,049,916	)
Comprehensive income
Net income								25,287						25,287			3,815			29,102
Foreign currency translation gain (loss)											(2,781	)		(2,781	)		(3	)		(2,784	)
Pension adjustments											(19	)		(19	)					(19	)
Adoption of ASC 606								(4,735	)					(4,735	)		103			(4,632	)
Purchase of treasury stock		(367	)		(367	)		367						-						-
Contributions, net of distributions														-			6,497			6,497
Balance at March 30, 2018	$	1,854,938		$	(876,738	)	$	(165,116	)	$	(17,803	)	$	(1,059,658	)	$	37,906		$	(1,021,752	)


	Common Stock			Treasury Stock			Additional Paid-in Capital			Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Income (Loss)			Total Parsons Equity			Noncontrolling Interests			Total
Balance at June 30, 2023	$	146,312		$	(844,936	)	$	2,721,402		$	111,513		$	(14,860	)	$	2,119,431		$	71,334		$	2,190,765
Comprehensive income
Net income		-			-			-			47,447			-			47,447			12,364			59,811
Foreign currency translation gain, net		-			-			-			-			(1,926	)		(1,926	)		(3	)		(1,929	)
Pension adjustments, net		-			-			-			-			(11	)		(11	)		-			(11	)
Contributions		-			-			-			-			-			-			1,337			1,337
Distributions		-			-			-			-			-			-			(9,669	)		(9,669	)
Issuance of equity securities, net of retirements		6			-			(90	)		(15	)		-			(99	)		-			(99	)
Repurchases of common stock		-			-			-			-			-			-			-			-
Stock-based compensation		-			-			7,894			-			-			7,894			-			7,894
Balance at September 30, 2023	$	146,318		$	(844,936	)	$	2,729,206		$	158,945		$	(16,797	)	$	2,172,736		$	75,364		$	2,248,100


Balance at June 30, 2022	$	146,174		$	(867,391	)	$	2,676,063		$	(14,565	)	$	(12,100	)	$	1,928,181		$	36,486		$	1,964,667
Comprehensive income
Net income		-			-			-			29,571			-			29,571			14,024			43,595
Foreign currency translation loss, net		-			-			-			-			(7,124	)		(7,124	)		(10	)		(7,134	)
Pension adjustments, net		-			-			-			-			(68	)		(68	)		-			(68	)
Contributions		-			-			-			-			-			-			5,472			5,472
Distributions		-			-			-			-			-			-			(3,946	)		(3,946	)
Issuance of equity securities, net of retirements		9			-			(186	)		2			-			(175	)		-			(175	)
Repurchases of common stock		(95	)		-			(3,857	)		-			-			(3,952	)		-			(3,952	)
Stock-based compensation		-			-			6,633			-			-			6,633			-			6,633
Balance at September 30, 2022	$	146,088		$	(867,391	)	$	2,678,653		$	15,008		$	(19,292	)	$	1,953,066		$	52,026		$	2,005,092

	Amount
Cash and cash equivalents	$	7,914
Accounts receivable		29,688
Contract assets		35,229
Prepaid expenses and other current assets		9,295
Property and equipment		9,024
Goodwill		243,471
Intangible assets		199,520
Other noncurrent assets		2,203
Accounts payable		(13,942	)
Accrued expenses and other current liabilities		(26,419	)
Contract liabilities		(3,529	)
Deferred tax liabilities		(2,231	)
Other long-term liabilities		(1,146	)
Net assets acquired	$	489,077

	Amount
Cash and cash equivalents	$	5,772
Accounts receivable		9,904
Contract assets		9,747
Prepaid expenses and other current assets		4,307
Property and equipment		4,085
Right of use assets, operating leases		8,826
Goodwill		183,567
Intangible assets		92,300
Other noncurrent assets		10
Accounts payable		(5,450	)
Accrued expenses and other current liabilities		(7,147	)
Contract liabilities		(1,300	)
Short-term lease liabilities, operating leases		(805	)
Income tax payable		(1,469	)
Deferred tax liabilities		(931	)
Long-term lease liabilities, operating leases		(8,021	)
Other long-term liabilities		(1,015	)
Net assets acquired	$	292,380

	Operating Leases			Finance Leases
2019	$	47,084		$	427
2020		51,139			510
2021		44,062			353
2022		37,987			113
2023		30,997			-
Thereafter		53,870			-
Total lease payments		265,139			1,403
Less: imputed interest		(30,836	)		(84	)
Total present value of lease liabilities	$	234,303		$	1,319


	Operating Leases			Finance Leases
2023 (remaining)	$	17,404		$	673
2024		58,599			2,518
2025		45,042			2,056
2026		28,876			1,418
2027		16,536			314
Thereafter		24,290			4
Total lease payments		190,747			6,983
Less: imputed interest		(14,536	)		(427	)
Total present value of lease liabilities	$	176,211		$	6,556


	December 31, 2022		Acquisitions		Foreign Exchange		September 30, 2023
Federal Solutions	$	1,591,563	$	110,984	$	-	$	1,702,547
Critical Infrastructure		70,287		24,126		370		94,783
Total	$	1,661,850	$	135,110	$	370	$	1,797,330


	December 31, 2018							March 31, 2019							Weighted Average		September 30, 2023							December 31, 2022							Weighted Average
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Amortization Period (in years)		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Amortization Period (in years)
Backlog	$	80,754	$	(58,295	)	$	22,459	$	108,454	$	(65,636	)	$	42,818		3	$	160,700	$	(71,713	)	$	88,987	$	142,200	$	(45,903	)	$	96,297		4.3
Customer relationships		121,629		(38,974	)		82,655		178,729		(45,839	)		132,890		7		345,620		(174,196	)		171,424		293,730		(146,032	)		147,698		9.0
Leases		670		(561	)		109		670		(566	)		104		5		120		(101	)		19		120		(87	)		33		1.0
Developed technology		87,839		(15,174	)		72,665		89,139		(20,736	)		68,403		4		31,600		(14,145	)		17,455		16,600		(11,560	)		5,040		5.5
Trade name		3,600		(2,100	)		1,500		7,400		(2,992	)		4,408		1		1,200		(267	)		933		5,000		(3,083	)		1,917		1.1
Non compete agreements		-		-			-		2,400		(200	)		2,200		2
Non-compete agreements																		2,150		(1,587	)		563		3,350		(2,074	)		1,276		3.3
In process research and development																		1,800		-			1,800		1,800		-			1,800	n/a
Other intangibles		275		(145	)		130		275		(150	)		125		10		1,175		(258	)		917		275		(209	)		66		3.5
Total intangible assets	$	294,767	$	(115,249	)	$	179,518	$	387,067	$	(136,119	)	$	250,948			$	544,365	$	(262,267	)	$	282,098	$	463,075	$	(208,948	)	$	254,127


	September 30, 2023
2023	$	18,505
2024		45,773
2025		39,599
2026		35,880
2027		34,766
Thereafter		105,775
Total	$	280,298

	March 31, 2019
2019 (remaining)	$	61,883
2020		72,542
2021		68,401
2022		25,808
2023		15,999
Thereafter		6,315
Total	$	250,948


	December 31, 2018			March 31, 2019			Useful lives (years)	September 30, 2023			December 31, 2022			Useful life (years)
Buildings and leasehold improvements	$	54,348		$	61,631		1-15	$	105,192		$	103,071		1-15
Furniture and equipment		81,705			86,174		3-10		88,856			85,088		3-10
Computer systems and equipment		148,255			152,558		3-10		174,215			152,511		3-10
Construction equipment		12,074			11,832		5-7		6,389			5,271		5-7
Construction in progress									15,331			21,952
									389,983			367,893
Accumulated depreciation		(204,533	)		(214,896	)			(290,639	)		(271,843	)
Property and equipment, net	$	91,849		$	97,298			$	99,344		$	96,050

Long-Term:	December 31, 2018			March 31, 2019
Revolving credit facility	$	180,000		$	260,000
Senior notes		250,000			250,000
Debt issuance costs		(836	)		(789	)
Total long-term		429,164			509,211
Short-Term:
Term Loan		-			150,000
Debt issuance costs		-			(214	)
Total Short-Term		-			149,786
Total Debt	$	429,164		$	658,997


	September 30, 2023			December 31, 2022
Long-Term Debt:
Delayed draw term loan	$	350,000		$	350,000
Convertible senior notes		400,000			400,000
Revolving credit facility		75,000			-
Debt issuance costs		(4,634	)		(6,395	)
Total	$	820,366		$	743,605

Tranche	Debt Amount		Maturity Date	Interest Rates
Senior Note, Series A	$	50,000	July 15, 2021		4.44	%
Senior Note, Series B		100,000	July 15, 2024		4.98	%
Senior Note, Series C		60,000	July 15, 2026		5.13	%
Senior Note, Series D	$	40,000	July 15, 2029		5.38	%

December 31, 2108	Level 1		Level 2		Level 3		Total
Mutual funds	$	2,539	$	-	$	-	$	2,539
Fixed income		-		10,168		-		10,168
Cash and cash equivalents		361		-		-		361
	$	2,900	$	10,168	$	-	$	13,068

March 31, 2109	Level 1		Level 2		Level 3		Total
Mutual funds	$	2,715	$	-	$	-	$	2,715
Fixed income		-		10,689		-		10,689
Cash and cash equivalents		264		-		-		264
	$	2,979	$	10,689	$	-	$	13,667

Balance at December 31, 2018	$	1,876,309
Purchases of treasury stock		(813	)
Share price adjustment		(164	)
Balance at March 31, 2019	$	1,875,332

Gross
Carrying
Amount

Amortization
Period

(in years)

Customer relationships (1)

Developed technologies