PARSONS CORP

Previous wording

Difference between our backlog of $8.8 billion and our remaining unsatisfied performance obligations, or RUPO, of $6.7 billion, each as of September 30, 2024, is due to (i) unissued task orders and unexercised option years, to the extent their issuance or exercise is probable, as well as (ii) contract awards, to the extent we believe contract execution and funding is probable.

Current wording

Difference between our backlog of $9.1 billion and our remaining unsatisfied performance obligations, or RUPO, of $6.8 billion, each as of March 31, 2025, 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.

Previous wording

The change in new awards from year to year is primarily due to ordinary course fluctuations in our business. The volume of contract awards can fluctuate in any given period due to win rate and the timing and size of the awards issued by our customers.

Current wording

The change in new awards from year to year is primarily due to ordinary course fluctuations in our business. The volume of contract awards can fluctuate in any given period due to win rate and the timing and size of the awards issued by our customers. The increase in awards for the three months ended March 31, 2025 in our Critical Infrastructure segment when compared to the corresponding period last year was primarily driven by an overall increase in awards in the current period. The decrease in awards for the three months ended March 31, 2025 in our Federal Solutions segment when compared to the corresponding period last year was primarily driven by a delay in the timing of awards of a number of contracts being pursued. The comparable period included significant option period awards from a customer in the Federal Solutions segment.

Previous wording

Difference between our backlog of $8.8 billion and our RUPO of $6.7 billion, each as of September 30, 2024, is due to (i) unissued task orders and unexercised option years, to the extent their issuance or exercise is probable, as well as (ii) contract awards, to the extent we believe contract execution and funding is probable.

Current wording

Difference between our backlog of $9.1 billion and our RUPO of $6.8 billion, each as of March 31, 2025, 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.

Previous wording

We expect to recognize $3.9 billion of our funded backlog at September 30, 2024 as revenues in the following twelve months. However, our U.S. federal government customers may cancel their contracts with us at any time through a termination for convenience or may elect to not exercise option periods under such contracts. In the case of a termination for convenience, we would not receive anticipated future revenues, but would generally be permitted to recover all or a portion of our incurred costs and fees for work performed. See “Risk Factors—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 10-K for the year ended December 31, 2023.

Current wording

We expect to recognize $4.3 billion of our funded backlog at March 31, 2025 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—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 10-K for the year ended December 31, 2024.

Previous wording

On August 16, 2024, the Company acquired a 100% ownership interest in BlackSignal Technologies, LLC, ("BlackSignal") a privately-owned company, for $203.8 million from cash on hand. Headquartered in Chantilly, Virginia, BlackSignal is a next-generation digital signal processing, electronic warfare, and cyber security provider built to counter near peer threats. Parsons believes that the acquisition will expand Parsons' customer base across the Department of Defense and Intelligence Community and significantly strengthen Parsons' positioning within cyber warfare, while adding new capabilities in the counterspace radio frequency domain. The financial results of BlackSignal have been included in our consolidated results of operations from August 16, 2024 onward.

Current wording

On August 16, 2024, the Company acquired a 100% ownership interest in BlackSignal Technologies, LLC, ("BlackSignal") a privately-owned company, for $203.7 million. Headquartered in Chantilly, Virginia, BlackSignal is a next-generation digital signal processing, electronic warfare, and cyber security provider built to counter near peer threats. Parsons believes that the acquisition will expand Parsons' customer base across the Department of Defense and Intelligence Community and significantly strengthen Parsons' positioning within cyber warfare, while adding new capabilities in the counterspace radio frequency domain. The financial results of BlackSignal have been included in our consolidated results of operations from August 16, 2024 onward.

Previous wording

Our recognition of profit on long-term contracts requires the use of assumptions related to transaction price and total cost of completion. Estimates are continually evaluated as work progresses and are revised when necessary. When a change in estimated cost or transaction price is determined to have an impact on contract profit, we record a positive or negative adjustment to the consolidated statement of income.

Current wording

Our recognition of profit on long-term contracts requires the use of assumptions related to transaction price and total cost of completion. Estimates are continually evaluated as work progresses and are revised when necessary. When a change in estimated cost or transaction price is determined to have an impact on contract profit, we record a positive or negative adjustment to revenue.

Previous wording

We conduct a portion of our business through joint ventures or similar partnership arrangements. For the joint ventures we control, we consolidate all the revenues and expenses in our consolidated statements of income (including revenues and expenses attributable to noncontrolling interests). For the joint ventures we do not control, we recognize equity in (losses) earnings of unconsolidated joint ventures. Our revenues included amounts related to services we provided to our unconsolidated joint ventures for the three months ended September 30, 2024 and September 30, 2023 of $47.6 million and $57.3 million, respectively, and $144.9 million and $164.8 million for the nine months ended September 30, 2024 and September 30, 2023, respectively.

Current wording

We conduct a portion of our business through joint ventures or similar partnership arrangements. For the joint ventures we control, we consolidate all the revenues and expenses in our consolidated statements of income (including revenues and expenses attributable to noncontrolling interests). For the joint ventures we do not control, we recognize equity in (losses) earnings of unconsolidated joint ventures. Our revenues included amounts related to services we provided to our unconsolidated joint ventures for the three months ended March 31, 2025 and March 31, 2024 of $45.5 million and $46.8 million, respectively.

Previous wording

Operating costs and expenses primarily include direct costs of contracts and selling, general and administrative expenses. Costs associated with compensation-related expenses for our people and facilities, which includes ESOP contribution expenses, are the most significant component of our operating expenses. Total ESOP contribution expense for the three months ended September 30, 2024 and September 30, 2023 was $13.2 million and $14.9 million, respectively, and $43.4 million and $44.1 million for the nine months ended September 30, 2024 and September 30, 2023, respectively and is recorded in “Direct cost of contracts” and “Selling, general and administrative expenses.”

Current wording

Operating costs and expenses primarily include direct costs of contracts and selling, general and administrative expenses. Costs associated with compensation-related expenses for our people and facilities, which includes ESOP contribution expenses, are the most significant component of our operating expenses. Total ESOP contribution expense for the three months ended March 31, 2025 and March 31, 2024 was $17.8 million and $15.0 million, respectively, and is recorded in “Direct cost of contracts” and “Selling, general and administrative expenses.”

Previous wording

The following table sets forth Adjusted EBITDA, Net Income Margin, and Adjusted EBITDA Margin for the three and nine months ended September 30, 2024 and September 30, 2023.

Current wording

The following table sets forth Adjusted EBITDA, Net Income Margin, and Adjusted EBITDA Margin for the three months ended March 31, 2025 and March 31, 2024.

Previous wording

Net Income Margin is calculated as net income (loss) including noncontrolling interest divided by revenue in the applicable period

Current wording

Net Income Margin is calculated as net income including noncontrolling interest divided by revenue in the applicable period

Previous wording

The following table sets forth our results of operations for the three and nine months ended September 30, 2024 and September 30, 2023 as a percentage of revenue.

Current wording

The following table sets forth our results of operations for the three months ended March 31, 2025 and March 31, 2024 as a percentage of revenue.

Previous wording

Revenue increased $391.5 million for the three months ended September 30, 2024 when compared to the corresponding period last year, due to increases in revenue in both our Federal Solutions and Critical Infrastructure segments of $325.5 million and $66.1 million, respectively.

Current wording

Revenue increased $18.7 million for the three months ended March 31, 2025 when compared to the corresponding period last year, due to an increase in revenue in our Critical Infrastructure segment of $85.7 million, offset by a decrease in revenue in our Federal Solutions Segment of $67.1 million. See “Segment Results” below for a further discussion of the changes in the Company's revenue.

Previous wording

Direct cost of contracts increased $325.5 million for the three months ended September 30, 2024 when compared to the corresponding period last year, primarily due to an increase of $256.1 million in our Federal Solutions segment and $69.4 million in our Critical Infrastructure segment. The increase in direct costs of contracts in both the Federal Solutions and Critical Infrastructure segments was primarily related to increased volume from new and existing contracts.

Current wording

Direct cost of contracts decreased $10.5 million for the three months ended March 31, 2025 when compared to the corresponding period last year, primarily due to a decrease of $62.0 million in our Federal Solutions segment offset by an increase of $51.5 million in our Critical Infrastructure segment. The decrease in direct costs of contracts in the Federal Solutions segment is primarily related to reduced volume from our confidential contract, See “Segment Results” below for a further discussion. The increase in direct costs of contracts in the Critical Infrastructure segment is primarily related to increased volume from new and existing contracts.

Previous wording

Equity in losses of unconsolidated joint ventures for the nine months ended September 30, 2024 was $18.0 million compared to equity in earnings of consolidated joint ventures of $4.5 million for the nine months ended September 30, 2023, resulting in a decrease in equity in earnings of unconsolidated joint ventures of $22.5 million for the nine months ended September 20, 2024. The decrease in equity in earnings of unconsolidated joint ventures was primarily due to write-downs of $37.5 million during the nine months ended September 30, 2024 related to the joint venture discussed above. Equity in earnings of unconsolidated joint ventures for the nine months ended September 30, 2023 included earnings on higher margin change orders which did not reoccur for the nine months ended September 30, 2024. Joint venture volume has decreased year-over-year as we move away from our participation in construction joint ventures.

Current wording

Equity in losses of unconsolidated joint ventures

Previous wording

Interest income is related to interest earned on investments in government money funds. The increase in interest income for the three and nine months ended September 30, 2024 is from higher cash balances held and increased interest rates compared to the corresponding periods last year.

Current wording

Interest income is related to interest earned on investments in government money funds.

Previous wording

Interest expense for the three and nine months ended September 30, 2024 is primarily due to debt related to our Convertible Senior Notes and Delayed Draw Term Loan. The increase in interest expense during the three months ended September 30, 2024 compared to the corresponding periods last year is primarily related to an increase in debt balances. The increase in interest expense for the nine months ended September 30, 2024, compared to the corresponding period last year is primarily related to an increase in debt balances and a $3.2 million charge from the acceleration of the amortization of debt issuance costs associated with the partial repurchase of the 0.25% Convertible Senior Notes due 2025 discussed above.

Current wording

Interest expense is primarily due to debt related to our Delayed Draw Term Loan and Convertible Senior Notes. Interest expense for the three months ended March 31, 2024 includes a $3.2 million charge for the acceleration of the amortization of debt issuance costs associated with the partial repurchase of the 0.25% Convertible Senior Notes due 2025 discussed below. The increase in interest expense during the three months ended March 31, 2025 compared to the corresponding period last year (excluding the $3.2 million charge discussed above) is primarily related to an increase in debt balances.

Previous wording

During the nine months ended September 30, 2024, we paid $495.6 million in cash to repurchase $284.6 million aggregate principal amount of our Convertible Senior Notes due 2025 (the "Repurchase Transaction") concurrently with the offering of 2.625% Convertible Senior Notes due 2029. As a result of the Repurchase Transaction, we incurred a $211.0 million loss on debt extinguishment. The Repurchase Transaction is a partial repurchase of our Convertible Senior Notes due 2025. See“Note 10 – Debt and Credit Facilities,” for a further discussion of this transaction.

Current wording

During the three months ended March 31, 2024, we paid $495.6 million in cash to repurchase $284.6 million aggregate principal amount of our Convertible Senior Notes due 2025 (the "Repurchase Transaction") concurrently with the offering of 2.625% Convertible Senior Notes due 2029. As a result of the Repurchase Transaction, we incurred a $18.4 million loss 1 on debt extinguishment. The Repurchase Transaction is a partial repurchase of our Convertible Senior Notes due 2025. See“Note 10 – Debt and Credit Facilities,” for a further discussion of this transaction.

Previous wording

The amounts in other income (expense), net for the three months ended September 30, 2024 are primarily related to transaction gains and losses on foreign currency transactions and sublease income and for the nine months ended September 30, 2024 are primarily related to transaction gains and losses on foreign currency transactions, sublease income, and a change in the estimated fair value of contingent consideration.

Current wording

The amounts in other income (expense), net are primarily related to transaction gains and losses on foreign currency transactions and sublease income. The comparable period included a $1.8 million change in the estimated fair value of contingent consideration which was settled in the prior fiscal year.

Previous wording

The Company’s effective tax rate was 20.8% and 20.3% and income tax expense was $22.5 million and $15.2 million for the three months ended September 30, 2024 and September 30, 2023, respectively. The increase in tax expense for the three months ended September 30, 2024 compared to the corresponding period last year was due primarily to the tax impact of an increase in pre-tax income, a remeasurement of its U.S. deferred tax assets and liabilities due to a change in state tax rate, a net increase of uncertain tax positions, and an increase in executive compensation subject to Section 162(m), partially offset by the increases in the foreign-derived intangible income (FDII) deduction and equity-based compensation.

Current wording

The Company’s effective tax rate was 18.8% and 19.5% and income tax expense was $19.0 million and $13.3 million for the three months ended March 31, 2025 and March 31, 2024, respectively. The increase in tax expense for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 was due primarily to the tax impact of an increase in pre-tax income, decreases in the foreign-derived intangible income (FDII) deduction and equity-based compensation deductions, partially offset by a change in jurisdictional mix of earnings and an increase in untaxed income attributed to noncontrolling interests.

Previous wording

The increase in Federal Solutions Adjusted EBITDA attributable to Parsons Corporation for the three months ended September 30, 2024 compared to the corresponding period last year was primarily due to the factors impacting revenue discussed above and a reduction in selling general, and administrative expenses as a percentage of revenue for the three months ended September 30, 2024 compared to the corresponding period last year.

Current wording

The decrease in Federal Solutions Adjusted EBITDA attributable to Parsons Corporation for the three months ended March 31, 2025 compared to the corresponding period last year was primarily due the factors impacting revenue discussed above and an increase in SG&A.

Previous wording

The increase in Critical Infrastructure revenue for the three months ended September 30, 2024 compared to the corresponding period last year was primarily related to organic growth of 10%. Organic growth was primarily due to an increase in business volume from existing contracts and ramping up of recent awards offset by the winding down of certain contracts and a write down on a contract of $21.6 million.

Current wording

The increase in Critical Infrastructure revenue for the three months ended March 31, 2025 compared to the corresponding periods last year was primarily related to organic growth of 8% and $31.8 million from business acquisitions. Organic growth was primarily due to an increase in business volume from existing contracts and ramping up of recent awards.

Previous wording

Accounts receivable is the principal component of our working capital and includes billed and unbilled amounts. The total amount of our accounts receivable can vary significantly over time but is generally sensitive to revenue levels. We experience delays in collections from time to time from Middle East customers. Net days sales outstanding, which we refer to as Net DSO, is calculated by dividing (i) (accounts receivable 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). We focus on collecting outstanding receivables to reduce Net DSO and working capital. Net DSO was 51 days at September 30, 2024 down from 65 days at September 30, 2023. Our working capital (current assets less current liabilities) was $905.1 million at September 30, 2024 and $726.6 million at December 31, 2023.

Current wording

Accounts receivable is the principal component of our working capital and includes billed and unbilled amounts. The total amount of our accounts receivable can vary significantly over time but is generally sensitive to revenue levels. We experience delays in collections from time to time from Middle East customers. Net days sales outstanding, which we refer to as Net DSO, is calculated by dividing (i) (accounts receivable 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). We focus on collecting outstanding receivables to reduce Net DSO and working capital. Net DSO was 58 days at March 31, 2025 down from 63 days at March 31, 2024. Our working capital (current assets less current liabilities) was $535.7 million at March 31, 2025 and $546.8 million at December 31, 2024.

Previous wording

Our cash and cash equivalents increased by $285.9 million to $558.8 million at September 30, 2024 from $272.9 million at December 31, 2023.

Current wording

Our cash and cash equivalents decreased by $183.8 million to $269.7 million at March 31, 2025 from $453.5 million at December 31, 2024.

Previous wording

Net cash provided by operating activities consists primarily of net income adjusted for noncash items, such as: equity in losses (earnings) of unconsolidated joint ventures, contributions of treasury stock, depreciation and amortization of property and equipment and intangible assets, and provisions for doubtful 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.

Current wording

Net cash used in operating activities consists primarily of net income adjusted for noncash items, such as: equity in losses (earnings) of unconsolidated joint ventures, contributions of treasury stock, depreciation and amortization of property and equipment and intangible assets, and provisions for doubtful 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.

Previous wording

Net cash provided by operating activities increased $179.3 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The primary driver of the increase in cash flows provided by operating activities was an $172.6 million increase in net income after adjusting for non-cash items and debt extinguishment offset by an increase in cash outflows from our working capital accounts of $30.0 million (primarily from accounts receivable, contract assets, prepaid expenses and other assets, and accounts payable offset by, contract liabilities, income taxes, and accrued expenses and other current liabilities) offset by a $23.3 change in cash used for other long-term liabilities.

Current wording

Net cash used in operating activities decreased $51.6 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. The primary driver of the decrease in cash flows used in operating activities was a $45.6 million decrease in cash outflows from our working capital accounts (primarily from accounts receivable, accounts payable, and contract liabilities offset by contract assets and accrued expenses and other current liabilities).

Previous wording

Net cash used in investing activities increased $17.4 million for the nine months ended September 30, 2024, when compared to the nine months ended September 30, 2023. was primarily related to a $33.8 million increase in investments in unconsolidated joint ventures offset in part by a decrease of $16.6 million in payments for acquisitions, net of cash acquired.

Current wording

Net cash used in investing activities increased $16.1 million for the three months ended March 31, 2025, when compared to the three months ended March 31, 2024. This change was primarily driven by a $31.6 million increase in payments for acquisitions, net of cash acquired offset by a $19.5 million decrease in investments in unconsolidated joint ventures.

Previous wording

Net cash provided by financing activities is primarily associated with proceeds from debt, the repayment thereof, and distributions to noncontrolling interests.

Current wording

Net cash (used in) provided by financing activities is primarily associated with proceeds from debt, the repayment thereof, and distributions to noncontrolling interests.

Previous wording

Net cash provided by financing activities increased $181.6 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The change in cash flows from financing activities is primarily driven by net cash inflows from our convertible bond transactions which generated $287.4 million in cash. See “Note 10 – Debt and Credit Facilities,” for a further discussion of these transactions. This increase was offset in part by net repayments of borrowings under the credit agreement of $75 million.

Current wording

Net cash used in financing activities increased $370.4 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. The change in cash flows (used in) provided by financing activities is primarily driven by net cash inflows from our convertible bond transactions for the three months ended March 31, 2024 of $316.2 million. See “Note 10 – Debt and Credit Facilities,” for a further discussion of these transactions. Also impacting net cash (used in) provided by financing activities were $25.0 million of repurchase of common stock and a $30.8 million change in distributions to noncontrolling interests.

Previous wording

We 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 to $309.1 million as of September 30, 2024. Letters of credit outstanding under the Credit Agreement total $43.0 million as of September 30, 2024.

Current wording

We 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 to $335.6 million as of March 31, 2025. Letters of credit outstanding under the Credit Agreement total $43.0 million as of March 31, 2025.