What changed in this filing

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Item 9A. Controls and Procedures

2024-02-14 compared with 2023-02-17 · 449 added, 390 removed, 1236 unchanged (40% of the section changed)

8 unchanged sentences

The Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP, which audited the Company’s consolidated financial statements included in this Annual Report on Form 10-K, also audited the effectiveness of our internal control over financial reporting as of December 31, 2023, as stated in their audit report included in this Annual Report on Form 10-K.

Consistent with the guidance issued by the Securities and Exchange Commission Staff, management has excluded Xator Corporation, which we acquired on May 31, 2022, from its evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2022.

The total assets and revenue related to Xator, a wholly owned subsidiary, are approximately 1% and 4%, respectively, of the related consolidated financial statement amounts as of the end for the fiscal year ended December 31, 2022.

Consistent with the guidance issued by the Securities and Exchange Commission Staff, management has excluded IPKeys, which we acquired on April 13, 2023, SealingTech which we acquired on August 23, 2023, and I.S.

Engineers, which we acquired on October 31, 2023 from its assessment of internal controls over financial reporting as of December 31, 2023.

The total assets and revenue related to SealingTech and I.S.

Engineers, both wholly owned subsidiaries, are both less than 1% of the related consolidated financial statement amounts as of and for the year ended December 31, 2023.

The total assets and revenue related to IPKeys, a wholly owned subsidiary, are both 1.1% of the related consolidated financial statement amounts as of and for the year ended December 31, 2023.

Changes in Internal Control Over Financial Reporting

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Other Information.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Directors, Executive Officers and Corporate Governance.

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.

During the fiscal quarter ended December 31, 2023, no director or named executive officer of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" (in each case, as defined in Item 408 of Regulation S-K).

Disclosur e Regarding Foreign Jurisdictions that Prevent Inspections.

Directors, Executive Off icers and Corporate Governance.

Information related to our directors will be set forth under the caption “Proposal 1:

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Such information is incorporated herein by reference.

Executive Compensation.

Executiv e Compensation.

Information relating to this item will be set forth under the captions “Compensation Discussion and Analysis,” “Director Compensation,” “Compensation Committee Interlocks and Insider Participation” and “Compensation Committee Report on Executive Compensation” of our 2024 Proxy Statement.

Such information is incorporated herein by reference.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Security Ownership of Certain Beneficial Own ers and Management and Related Stockholder Matters.

Information relating to the security ownership of certain beneficial owners and management will be included in our 2024 Proxy Statement under the caption “Security Ownership of Certain Beneficial Owners and Management” and is incorporated herein by reference.

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Such information is incorporated herein by reference.

Principal Accounting Fees and Services.

Principal Accoun ting Fees and Services.

Information relating to this item will be set forth under the caption “Independent Registered Public Accounting Firm Fees” of our 2024 Proxy Statement.

Such information is incorporated herein by reference.

Exhibits, Financial Statement Schedules.

List the following documents filed as a part of the report:

Exhibits, Financi al Statement Schedules.

(a) List the following documents filed as a part of the report:

(1) The Company’s Consolidated Financial Statements at December 31, 2023 and December 31, 2022 and for each of the three years in the period ended December 31, 2023, and the notes thereto, together with the report of the independent auditors on those Consolidated Financial Statements, are hereby filed as part of this report, beginning on page F-1.

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Parsons Corporation Prospectus to Employee Stock Purchase Plan dated November 1, 2021.

Parsons Corporation Employee Stock Purchase Plan Special Offering Period dated November 1, 2021.

Parsons Corporation Employee Stock Purchase Plan List of Participating Companies.

Supplemental Executive Retirement Plan dated January 1, 1997 .

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Form of Restricted Stock Unit Award Amendment, dated July 19, 2021, by and between Parsons Corporation and David Spille.

Note Purchase Agreement, dated as of May 9, 2014, among Parsons Corporation and the purchasers party thereto, and the forms of Senior Notes .

Subsidiary Guaranty, dated as of July 1, 2014, by each of Parsons Constructors Inc., Parsons Engineering of New York, Inc., Parsons Environment & Infrastructure Group Inc., Parsons Government Services Inc., Parsons Government Services International Inc., Parsons International Limited, Parsons Technical Services Inc., Parsons Transportation Group Inc., Parsons Water & Infrastructure Inc., PTSI Managed Services Inc., Parsons RCI Inc.

and each entity that may from time to time become a Guarantor thereunder .

First Amendment to the Note Purchase Agreement, dated as of August 10, 2018, by and between Parsons Corporation and the purchasers party thereto .

Fifth Amended and Restated Credit Agreement, dated as of November 15, 2017, by and among Parsons Corporation, the lenders from time to time party thereto, The Bank of Tokyo-Mitsubishi UFJ, Ltd., as administrative agent, swing line bank and co-lead arranger, Wells Fargo Bank, National Association, as syndication agent, The Bank of Nova Scotia, JPMorgan Chase Bank, N.A., Sumitomo Mitsui Banking Corporation and U.S.

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Delayed Draw Term Loan Agreement and Form of First Amendment to Credit Agreement.

Xator Purchase Agreement.

Seventh Amendment to The Parsons Corporation Retirement Savings Plan (2017 Amendment and Restatement).

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Sixth Amendment to The Parsons Employee Stock Ownership Plan 2019 Amendment and Restatement.

Parsons Corporation Insider Trading Compliance Policy

List of Subsidiaries of the Registrant

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Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

The following financial statements from the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, formatted in Inline XBRL:

Parsons Corporation Executive Compensation Clawback Policy

Parsons Corporation Dodd-Frank Compliant Compensation Clawback Policy

The following financial statements from the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, formatted in Inline XBRL Taxonomy Extension Schema With Embedded Linkbases Document:

(i) Consolidated Balance Sheets, (ii) Consolidated Statements of Earnings, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statements of Stockholders’ Equity, (v) Consolidated Statements of Cash Flows and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.

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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized .

Parsons Corporation

February 14, 2024

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February 14, 2024

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

INDEX TO CONSOLID ATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm (PCAOB ID 238 )

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Notes to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

Re port of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Parsons Corporation

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Parsons Corporation and its subsidiaries (the “Company”) as of December 31, 2022 and 2021 , and the related consolidated statements of income, of comprehensive income, of changes in redeemable common stock and shareholders’ equity (deficit) and of cash flows for each of the three years in the period ended December 31, 2022 , including the related notes and financial statement schedule listed in the index appearing under Item 15(a)(2) (collectively referred to as the “ consolidated financial statements”).

We have audited the accompanying consolidated balance sheets of Parsons Corporation and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of income, of comprehensive income, of changes in shareholders’ equity (deficit) and of cash flows for each of the three years in the period ended December 31, 2023, including the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended December 31, 2023 appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

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federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits i n accordance with the standards of the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

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We believe that our audits provide a reasonable basis for our opinions.

As described in Management’s Report on Internal Control over Financial Reporting, management has excluded Xator Corporation (“Xator”) from its assessment of internal control over financial reporting as of December 31, 2022, because it was acquired by the Company in a purchase business combination during 2022.

We have also excluded Xator from our audit of internal control over financial reporting.

Xator is a wholly-owned subsidiary whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting represent 1% and less than 4%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2022.

As described in Management’s Annual Report on Internal Control over Financial Reporting, management has excluded IPKeys Power Partner (“IPKeys”), Sealing Technologies, Inc.

("Sealing Tech”), and I.S.

Engineers, LLC (“I.S.

Engineers”) from its assessment of internal control over financial reporting as of December 31, 2023, because they were acquired by the Company in purchase business combinations during 2023.

We have also excluded IPKeys, Sealing Tech, and I.S.

Engineers from our audit of internal control over financial reporting.

Sealing Tech and I.S.

Engineers are both wholly-owned subsidiaries whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting are both less than 1% of the related consolidated financial statement amounts as of and for the year ended December 31, 2023.

IPKeys is a wholly-owned subsidiary whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting are both 1.1% of the related consolidated financial statement amounts as of and for the year ended December 31, 2023.

Definition and Limitations of Internal Control over Financial Reporting

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The Company enters into cost-plus, time-and-materials, and fixed-price contracts with its customers.

Fixed-price contract revenue recognized was $1.1 billion for the year ended December 31, 2022, which accounts for approximately 27% of the Company’s total consolidated revenue.

Fixed-price contract revenue recognized was $1.8 billion for the year ended December 31, 2023, which accounts for approximately 33% of the Company’s

consolidated revenue.

Fixed-price contract revenue is recognized over time using an input measure (i.e., costs incurred to date relative to total estimated costs at completion) to measure progress.

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Revenues, including estimated fees or profits, are recorded proportionally as costs are incurred.

Management includes variable consideration, such as claims revenue, in the estimated transaction price to

the extent it is probable that a significant reversal of cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is resolved.

Management includes variable consideration, such as claims revenue, in the estimated transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is resolved.

Contract costs consist of direct costs on contracts, including labor and materials, amounts payable to subcontractors, direct overhead costs and equipment expense (primarily depreciation, fuel, maintenance and repairs).

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Management’s estimates are continually evaluated as work progresses and are revised when necessary.

The principal considerations for our determination that performing procedures relating to revenue recognition, specifically the determination of estimated contract cost and variable consideration related to estimated claims revenue for fixed-price contracts recognized over time is a critical audit matter are (i) the significant judgment by management in determining the estimated contract cost and variable consideration related to estimated claims revenue for fixed-price contracts;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence for the estimated contract cost and variable consideration related to estimated claims revenue for fixed-price contracts recognized over time.

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and (iii) evaluating estimated claims revenue by inquiry with external legal counsel regarding the underlying claim and agreeing estimated claims revenue to documents related to those estimates.

Acquisition of Xator Corporation - V aluation of the C ustomer R elationships Int angible Asset

As described in Notes 2 and 3 to the consolidated financial statements, on May 31, 2022, the Company acquired a 100% ownership interest in Xator Corporation (Xator) for $388.3 million which resulted in $123.5 million of intangible assets being recorded, of which $37 million related to a customer relationships intangible asset.

Acquisition of Sealing Technologies, Inc.

- Valuation of the Customer Relationships

As described in Notes 2 and 3 to the consolidated financial statements, on August 23, 2023, the Company acquired a 100% ownership interest in Sealing Technologies, Inc.

(Sealing Tech) for $179.3 million.

Of the acquired intangible assets, $40.0 million of customer relationships was recorded.

Management accounts for business combinations using the acquisition method, under which the purchase price of an acquired company is allocated to the tangible and intangible assets acquired and the liabilities assumed on the basis of their fair values at the date of acquisition.

The determination of fair values of assets acquired and liabilities assumed requires management to make estimates and use valuation techniques when a market value is not readily available.

Management’s determination of the fair value of the intangible assets acquired involved the use of significant estimates and assumptions related to revenue growth rates and projected EBITDA margins.

The principal considerations for our determination that performing procedures relating to the valuation of the customer relationships intangible asset acquired in the acquisition of Xator is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the customer relationships intangible asset acquired;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to the revenue growth rates and projected EBITDA margins;

In determining the fair value of acquired intangible assets, management uses the multi-period excess earnings method to value

customer relationships.

Management’s determination of the fair value of the intangible assets acquired involved the use of significant estimates and assumptions related to discount rates, revenue growth rates, projected margins, and customer revenue attrition rates.

The principal considerations for our determination that performing procedures relating to the valuation of the customer relationships acquired in the acquisition of Sealing Tech is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the customer relationships acquired;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to acquisition accounting, including controls over the significant assumptions used in management’s valuation of the customer relationships intangible asset.

These procedures also included, among others (i) reading the purchase agreement;

(ii) testing management’s process for developing the fair value estimate of the customer relationships intangible asset;

(iii) evaluating the appropriateness of the valuation technique;

(iv) testing the completeness and accuracy of the underlying data used in the valuation technique;

and (v) evaluating the reasonableness of significant assumptions related to the revenue growth rates and projected EBITDA margins.

Evaluating the reasonableness of management’s significant assumptions related to the revenue growth rates and projected EBITDA margins involved considering (i) the current and past performance of the acquired business;

(ii) testing management’s process for developing the fair value estimate of the customer relationships acquired;

(iii) evaluating the appropriateness of the multi-period excess earnings method used by management;

(iv) testing the completeness and accuracy of the underlying data used in the multi-period excess earnings method;

and (v) evaluating the reasonableness of significant assumptions used by management related to the revenue growth rates and projected margins.

Evaluating the reasonableness of management’s assumptions related to the revenue growth rates and projected margins involved considering (i) the current and past performance of the acquired business;

(ii) the consistency with external market and industry data;

and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the appropriateness of management’s valuation technique.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the appropriateness of the multi-period excess earnings methods.

/s/ PricewaterhouseCoopers LLP

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Parsons Corporation and Subsidiaries

Consolidated Balance Sheets

Consolidated B alance Sheets

(in thousands, except shares and par value)

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Cash and cash equivalents (including $ 128,761 and $ 53,193 Cash of consolidated joint ventures)

Restricted cash and investments

Accounts receivable, net (including $ 274,846 and $ 217,419 Accounts receivable of consolidated joint ventures, net)

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Property and equipment, net (including $ 3,274 and $ 2,543 Property and equipment of consolidated joint ventures, net)

Right of use assets, operating leases

Right of use assets, operating leases (including $ 9,885 and $ 6,315 Right of use assets, operating leases of consolidated joint ventures)

Investments in and advances to unconsolidated joint ventures

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Contract liabilities (including $ 61,234 and $ 40,654 Contract liabilities of consolidated joint ventures)

Short-term lease liabilities, operating leases

Short-term lease liabilities, operating leases (including $ 4,753 and $ 2,552 Short-term lease liabilities, operating leases of consolidated joint ventures)

Income taxes payable

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Long-term debt

Long-term lease liabilities, operating leases

Long-term lease liabilities, operating leases (including $ 5,132 and $ 3,763 Long-term lease liabilities, operating leases of consolidated joint ventures)

Deferred tax liabilities

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Additional paid-in capital

Retained earnings (accumulated deficit)

Retained earnings

Accumulated other comprehensive loss

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Parsons Corporation and Subsidiaries

Consolidated Statements of Income

Consolidated Stat ements of Income

Years Ended December 31, 2023, December 31, 2022 and December 31, 2021

1 unchanged sentence

Direct cost of contracts

Equity in earnings of unconsolidated joint ventures

Equity in (losses) earnings of unconsolidated joint ventures

Selling, general and administrative expenses

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Parsons Corporation and Subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity (Deficit)

Consolidated Statements of Changes i n Shareholders’ Equity (Deficit)

Years Ended December 31, 2023, December 31, 2022 and December 31, 2021

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(Loss) Income

Parsons Equity (Deficit)

Parsons Equity

Noncontrolling

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translation gain

Pension adjustments

Adoption of ASU 2016-13

Pension adjustments, net

Contributions of treasury

stock to ESOP

Adoption of ASU 2020-06

Contributions

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net of retirements

Equity component value of

convertible note issuance

Purchase of convertible note

Sale of common stock

Repurchases of common stock

Stock-based compensation

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Foreign currency

translation gain (loss), net

Pension adjustments,

translation loss, net

Pension adjustments, net

Contributions of treasury

stock to ESOP

Adoption of ASU 2020-06

Contributions

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Foreign currency

translation gain (loss), net

Pension adjustments,

translation gain, net

Pension adjustments, net

Contributions of treasury

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Parsons Corporation and Subsidiaries

Consolidated Statements of Cash Flows

Consolidated Statem ents of Cash Flows

Years Ended December 31, 2023, December 31, 2022 and December 31, 2021

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Amortization of debt issue costs

Amortization of convertible notes discount

(Gain) loss on disposal of property and equipment

Loss (gain) on disposal of property and equipment

Provision for doubtful accounts

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Foreign currency transaction gains and losses

Equity in earnings of unconsolidated joint ventures

Equity in losses (earnings) of unconsolidated joint ventures

Return on investments in unconsolidated joint ventures

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Payments for debt costs and credit agreement

Proceeds from issuance of convertible notes

Payments for acquired warrants

Payments for purchase of bond hedges

Proceeds from issuance of warrants

Transaction costs paid in connection with convertible notes issuance

Contributions by noncontrolling interests

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Proceeds from issuance of common stock

Net cash provided by (used in) financing activities

Net cash (used in) provided by financing activities

Effect of exchange rate changes

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Intercompany accounts and transactions are eliminated in consolidation.

Certain amounts may not foot due to rounding.

Use of Estimates

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Contributions of 915,113 shares, 1,188,129 shares, and 1,631,477 shares of common stock were made to the ESOP in 2023, 2022 and 2021, respectively.

Share Repurchases

During the third quarter of 2021, the Company’s Board of Directors authorized the Company to acquire a number of shares of Common Stock having an aggregate market value of not greater than $ 100,000,000 from time to time.

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.

PARSONS CORPORATION AND SUBSIDIARIES

1 unchanged sentence

December 31, 2023, December 31, 2022 and December 31, 2021

Share Repurchases

Repurchased shares of common stock are retired and included in “Repurchases of common stock” in cash flows from financing activities in the Consolidated Statements of Cash Flows.

Earnings per Share

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In addition, clients reimburse actual out-of-pocket costs for materials and other direct incidental expenditures that are incurred in connection with the performance under the contract.

Fixed-Price—The Company enters into two types of fixed-price contracts:

firm fixed-price (“FFP”) and fixed-price per unit (“FPPU”).

Under FFP contracts, clients pay an agreed fixed-amount negotiated in advance for a specified scope of work.

PARSONS CORPORATION AND SUBSIDIARIES

1 unchanged sentence

December 31, 2023, December 31, 2022 and December 31, 2021

Fixed-Price—The Company enters into two types of fixed-price contracts:

firm fixed-price (“FFP”) and fixed-price per unit (“FPPU”).

Under FFP contracts, clients pay an agreed fixed-amount negotiated in advance for a specified scope of work.

Contract Costs —Contract costs consist of direct costs on contracts, including labor and materials, amounts payable to subcontractors, direct overhead costs and equipment expense (primarily depreciation, fuel, maintenance and repairs).

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When applying these methods, the Company considers all information that is reasonably available, including historical, current and estimates of future performance.

The expected value method is utilized in situations where a contract contains a large number of possible outcomes, while the most likely amount method is utilized in situations where a contract has only two possible outcomes.

PARSONS CORPORATION AND SUBSIDIARIES

1 unchanged sentence

December 31, 2023, December 31, 2022 and December 31, 2021

value method is utilized in situations where a contract contains a large number of possible outcomes, while the most likely amount method is utilized in situations where a contract has only two possible outcomes.

The Company includes variable consideration in the estimated transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is resolved.

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Any expected losses on construction-type contracts in progress are charged to earnings, in total, in the period the losses are identified.

The Company recognizes adjustments in estimated profit on contracts under the cumulative catch-up method.

Under this method, the impact of the adjustment on profit recorded to date is recognized in the period the adjustment is identified.

Revenue and profit in future periods of contract performance is recognized using the adjusted estimate.

The Company recognizes adjustments in

PARSONS CORPORATION AND SUBSIDIARIES

1 unchanged sentence

December 31, 2023, December 31, 2022 and December 31, 2021

time the estimate of contract profitability indicates an anticipated loss on the contract, the Company recognizes the total loss in the period it is identified.

estimated profit on contracts under the cumulative catch-up method.

Under this method, the impact of the adjustment on profit recorded to date is recognized in the period the adjustment is identified.

Revenue and profit in future periods of contract performance is recognized using the adjusted estimate.

If at any time the estimate of contract profitability indicates an anticipated loss on the contract, the Company recognizes the total loss in the period it is identified.

Right to invoice practical expedient —For performance obligations satisfied over time where the Company has a right to consideration from a customer in an amount that corresponds directly with the value of the Company’s performance to-date, the Company recognizes revenue in the amount to which it has a right to invoice.

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Past due receivable balances are written off when internal collection efforts have been unsuccessful in collecting the amounts due.

Contract Assets and Contract Liabilities

Projects with performance obligations recognized over time that have revenue recognized to-date in excess of cumulative billings and unbilled accounts receivable are reported on our consolidated balance sheets as “Contract assets”.

Contract retentions, included in contract assets, represent amounts withheld by clients, in accordance with underlying contract terms, until certain conditions are met or the project is

PARSONS CORPORATION AND SUBSIDIARIES

1 unchanged sentence

December 31, 2023, December 31, 2022 and December 31, 2021

Contract Assets and Contract Liabilities

Contract retentions, included in contract assets, represent amounts withheld by clients, in accordance with underlying contract terms, until certain conditions are met or the project is completed.

The operating cycle for certain long-term contracts may extend beyond one year, and, accordingly, collection of retainage on those contracts may extend beyond one year.

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The Company is involved in a significant volume of contracts with the United States federal government and state and local governments.

Approximately 53 %, 52 %, and 49 % of consolidated revenues for the years ended December 31, 2022, December 31, 2021 and December 31, 2020, respectively, and approximately 17 % of accounts receivable as of both December 31, 2022 and December 31, 2021, were derived from contracts with the United States federal government.

Approximately 55 %, 53 %, and 52 % of consolidated revenues for the years ended December 31, 2023, December 31, 2022 and December 31, 2021, respectively, and approximately 18 % and 17 % of accounts receivable as of December 31, 2023 and December 31, 2022,respectively were derived from contracts with the United States federal government.

No other customers represented 10% or more of consolidated revenues or accounts receivable in any of the periods presented.

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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

PARSONS CORPORATION AND SUBSIDIARIES

1 unchanged sentence

December 31, 2023, December 31, 2022 and December 31, 2021

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.

determining the present value of lease payments.

The operating lease ROU asset also includes any lease payments made and excludes lease incentives.

11 unchanged sentences

The Company recognizes compensation costs for these awards on either a straight-line or accelerated basis over the vesting period of the award in selling, general and administrative expense in the consolidated statements of income.

For awards that include market conditions, the grant date fair value is determined using a Monte Carlo simulation.

Business Combinations

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The determination of fair values of assets acquired and liabilities assumed requires the Company to make estimates and use valuation techniques when a market value is not readily available.

In determining the fair value of acquired intangible assets from our business acquisitions, the Company uses the multi-period excess earnings method to value customer relationships and backlog and values developed technologies using the relief-from royalty method.

The Company’s determination of the fair value of the intangible assets acquired involves the use of significant estimates and assumptions related to discount rates, revenue growth rates, projected margins, and customer revenue attrition rates.

Certain business acquisitions include contingent consideration.

Contingent consideration is recorded at its fair value, using a Black-Scholes model, within other liabilities or other long-term liabilities, as appropriate.

The fair value of contingent consideration involves the use of significant estimates and assumptions related to risks associated with earnout, i.e.

risk in the underlying metric, risk in the earnout structure, counterparty credit risk, projected revenue, the revenue discount rate, the revenue volatility, and the Company's credit adjusted discount rate.

Subsequent adjustments to these assumptions can cause changes to the measure of contingent consideration.

The Company adjusts the preliminary purchase price allocation, as necessary, during the measurement period of up to one year after the acquisition closing date as the Company obtains more information as to facts and circumstances existing at the acquisition date.

Acquisition-related costs are recognized separate from the acquisition and are expensed as incurred.

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2023, December 31, 2022 and December 31, 2021

Consolidation of Joint Ventures and Variable Interest Entities

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(a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional financial support;

(b) as a group, the holders of the equity investment at risk lack the ability to make certain decisions, the obligation

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2022, December 31, 2021 and December 31, 2020

to absorb expected losses or the right to receive expected residual returns;

(b) as a group, the holders of the equity investment at risk lack the ability to make certain decisions, the obligation to absorb expected losses or the right to receive expected residual returns;

or (c) an equity investor has voting rights that are disproportionate to its economic interest and substantially all of the entity’s activities are on behalf of the investor with disproportionately low voting rights.

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If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in the amount the carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2023, December 31, 2022 and December 31, 2021

The Company’s decision to perform a qualitative impairment assessment in a given year is influenced by a number of factors, including the significance of the excess of the Company’s estimated fair value over carrying value at the last quantitative assessment date, the amount of time in between quantitative fair value assessments, and the date of its acquisitions, if any.

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Should the review indicate that the carrying value is not fully recoverable, the excess of the carrying value over the fair value of the intangible assets would be recognized as an impairment loss.

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2022, December 31, 2021 and December 31, 2020

Income taxes are accounted for under the asset and liability method.

This approach requires the recognition of deferred tax liabilities and assets to reflect the tax effects of temporary differences between the financial statement carrying amounts and tax bases of the Company’s assets and liabilities.

Deferred tax assets and liabilities are measured using enacted tax rates expected to be in effect when the asset or liability is recovered or settled.

14 unchanged sentences

The Company typically utilizes third-party insurance subject to varying retention levels or self-insurance.

The Company is self-insured for a portion of the losses and liabilities primarily associated with workers’ compensation, general, professional, automobile, employee matters, certain medical plans, and project-specific liability claims.

The Company is self-insured for a portion of the losses and liabilities primarily associated with

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2023, December 31, 2022 and December 31, 2021

workers’ compensation, general, professional, automobile, employee matters, certain medical plans, and project-specific liability claims.

Losses are accrued based upon the Company’s estimates of the aggregate liability for claims incurred using historical experience and certain actuarial assumptions, as provided by an independent actuary.

The estimate of self-insurance liability includes an estimate of incurred but not reported claims, based on data compiled from historical experience.

Recently Adopted Accounting Pronouncements

In the first quarter of 2022, the Company early adopted ASU No.

2021-08, “Business Combinations (Topic 805):

New Accounting Pronouncements

In the fourth quarter of 2023, The Financial Accounting Standards Board ("FASB") Issued Accounting Standards Update (“ASU”) 2023-09, "Income Taxes (Topic 740)" ("ASU 2023-09").

ASU 2023-09 enhances the transparency and decision usefulness of income tax disclosures.

The amendments in ASU 2023-09 addresses investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information.

ASU 2023-09 also includes certain other amendments to improve the effectiveness of income tax disclosures.

ASU 2023-09 is effective for fiscal years beginning after December 15, 2024 .

Early adoption is permitted.

The adoption of this ASU will no t have a material impact on the Company's consolidated financial statements.

In the fourth quarter of 2023, The FASB Issued ASU 2023-07, "Segment Reporting (Topic 280)".

ASU 2023-07 introduces enhanced disclosures about significant segment expenses along with other enhanced segment disclosures.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 .

Early adoption is permitted.

The adoption of this ASU will no t have a material impact on the Company's consolidated financial statements.

During July 2023, the FASB Issued ASU 2023-03.

ASU 2023-03 incorporates, into certain accounting standards, amendments to SEC paragraphs pursuant to SEC Staff Accounting Bulletin No.

120, SEC Staff Announcement at the March 24, 2022 EITF meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280—General Revisions of Regulation S-X:

Income or Loss Applicable to Common Stock.

These rules are effective immediately.

The adoption of this ASU will not have a material impact on the Company's consolidated financial statements.

In the first quarter of 2022 , the Company early adopted ASU 2021-08, “Business Combinations (Topic 805) ("ASU 2021-08"):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”.

The new guidance requires that the approach of ASC 606, Revenue from Contracts with Customers, should be used to measure an acquired revenue contract in a business combination.

This guidance is to be applied (1) retrospectively to all business combinations for which the acquisition date occurs on or after

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2022, December 31, 2021 and December 31, 2020

the beginning of the fiscal year that includes the interim period of early application and (2) prospectively to all business combinations that occur on or after the date of initial application.

The early adoption of ASU 2021-08 did not have a material impact on the consolidated financial statements.

In the first quarter of 2021, the Company early adopted Accounting Standards Update (“ASU”) ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU2020-06)”.

This guidance is to be applied (1) retrospectively to all business combinations for which the acquisition date occurs on or after the beginning of the fiscal year that includes the interim period of early application and (2) prospectively to all business combinations that occur on or after the date of initial application.

The early adoption of ASU 2021-08 did no t have a material impact on the Company's consolidated financial statements.

In the first quarter of 2021 , the Company early adopted ASU 2020-06, "Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40)" (“ASU 2020-06").

The update simplified the accounting for convertible debt instruments and convertible preferred stock by reducing the number of accounting models and limiting the number of embedded conversion features separately recognized from the primary contract.

2 unchanged sentences

Early adoption was permitted, but no earlier than fiscal years beginning after December 15, 2020.

The Company adopted ASU 2020-06 in the first quarter of 2021 using the modified retrospective method which resulted in a reduction in non-cash interest expense and reclassification of the equity portion of the Convertible Senior Notes to “Long-term debt” on the consolidated balance sheet.

In June 2016, the FASB issued ASU 2016-13, “ Measurement of Credit Losses on Financial Instruments ,” and issued subsequent amendments to the initial guidance within ASU 2019-04 and ASU 2019-05.

The amendments in ASU 2016-13 replace the incurred loss impairment methodology in current practice with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to estimate credit losses.

ASU 2016-13 and its amendments are effective for interim and annual reporting periods beginning after December 15, 2019 .

The Company adopted this ASU in the first quarter of 2020, and it did not have a material impact on its financial statements.

In December 2019, the FASB issued ASU No.

2019-12, “ Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes (“ASU 2019-12”)” .

ASU 2019-12 was issued as a means to reduce the complexity of accounting for income taxes for those entities that fall within the scope of the accounting standard.

The guidance is applied using a prospective method, excluding amendments related to franchise taxes, which should be applied on either a retrospective basis for all periods presented or a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption.

ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, with early adoption permitted.

The Company adopted this ASU in the first quarter of 2021, and it did not have a material impact on its financial statements.

In August 2020, the FASB issued ASU 2020-06, “ Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40) ”.

The update simplifies the accounting for convertible debt instruments and convertible preferred stock by reducing the number of accounting models and limiting the number of embedded conversion features separately recognized from the primary contract.

The guidance also includes targeted improvements to the disclosures for convertible instruments and earnings per share.

ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020.

The Company early adopted this ASU in the first quarter of 2021 using the modified retrospective method which resulted in a reduction in non-cash interest expense and reclassification of the equity portion of the Convertible Senior Notes to “Long-term debt” on the consolidated balance sheet.

PARSONS CORPORATION AND SUBSIDIARIES

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December 31, 2023, December 31, 2022 and December 31, 2021

Engineers, LLC

On October 31, 2023, the Company entered into a Membership Interest Purchase Agreement to acquired a 100 % ownership interest in I.S.

Engineers, LLC (“I.S.

Engineers”), a privately-owned company, for $ 12.2 million in cash.

Headquartered in Texas, I.S.

Engineers provides full service consulting specializing in transportation engineering, including roads and highways, and program management.

The acquisition was entirely funded by cash on-hand.

In connection with this acquisition, the Company recognized $ 0.3 million of acquisition related “Selling, general and administrative expense” in the consolidated statements of income for the year ended December 31, 2023, including legal fees, consulting fees, and other miscellaneous direct expenses associated with the acquisition.

The Company allocated the purchase price to the appropriate classes of tangible assets and liabilities and assigned the excess of $ 11.9 million entirely to goodwill.

The entire value of goodwill was assigned to the Critical Infrastructure reporting unit and represents synergies expected to be realized from this business combination.

No goodwill is deductible for income tax purposes.

The amount of revenue generated by I.S.

Engineers and included within consolidated revenues for 2023 is $ 1.0 million.

Sealing Technologies, Inc.

On August 23, 2023, the Company acquired a 100 % ownership interest in Sealing Technologies, Inc (“SealingTech”), a privately-owned company, for $ 179.3 million in cash and up to an additional $ 25 million in the event an earn out revenue target is exceeded.

The Company borrowed $ 175 million under the Credit Agreement, as described in “Note 11 – Debt and Credit Facilities ”, to fund the acquisition.

Headquartered in Maryland, SealingTech expands Parsons’ customer base across the Department of Defense and Intelligence Community, and further enhances the company’s capabilities in defensive cyber operations;

integrated mission-solutions powered by artificial intelligence (AI) and machine learning (ML);

edge computing and edge access modernization;

critical infrastructure protection;

and secure data management.

In connection with this acquisition, the Company recognized $ 3.3 million of acquisition-related expenses in “Selling, general and administrative expense” in the consolidated statements of income for the year ended December 31, 2023, including legal fees, consulting fees, and other miscellaneous direct expenses associated with the acquisition.

The Company has agreed to pay the selling shareholders up to an additional $ 25 million in the event an earn out revenue target of $ 110 million is exceeded during the fiscal year ended December 31, 2024.

The earn out payment due and payable by the Company to the selling shareholders shall be equal to (i) five-tenths ( 0.5 ), multiplied by (ii) the difference of (A) the actual earn out revenue minus (B) the earn out revenue target;

provided, however, that in no event shall the earn out payment exceed $ 25 million.

In the event that the earn out revenue is less than or equal to the earn out revenue target, the earn out payment shall be zero .

The earn out payment, if any, shall be paid by the Company to the selling shareholders within 15 days following the date the earn out statement becomes final and binding on both parties.

The fair value of the earn out (contingent consideration in the table below) was calculated using a Black-Scholes model.

See "Note 2— Summary of Significant Accounting Policies" for further information on how the fair value of contingent consideration is determined.

The following table summarizes the acquisition date fair value of the purchase consideration transferred (in thousands):

Cash paid at closing

Fair value of contingent consideration to be achieved

Total purchase price

The estimated fair value of the SealingTech contingent consideration as of December 31, 2023 is $ 2.3 million, a $ 0.9 million decrease from the quarter ended September 30, 2023.

The change in the

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2023, December 31, 2022 and December 31, 2021

estimated fair value was recorded to "other income (expense), net" in the consolidated financial statements.

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

Cash and cash equivalents

Accounts receivable

Contract assets

Prepaid expenses and other current assets

Property and equipment

Right of use assets, operating leases

Deferred tax assets

Intangible assets

Accounts payable

Accrued expenses and other current liabilities

Contract liabilities

Short-term lease liabilities, operating leases

Long-term lease liabilities, operating leases

Net assets acquired

Of the total purchase price, the following values were preliminarily assigned to intangible assets (in thousands, except for years):

Customer relationships

Developed technologies

Amortization expense of $ 7.0 million related to these intangible assets was recorded for the year ended December 31, 2023.

The entire value of goodwill was assigned to the Federal Solutions reporting unit and represents synergies expected to be realized from this business combination.

The entire value of goodwill is deductible for tax purposes.

The amount of revenue generated by SealingTech and included within consolidated revenue is $ 34.1 million for the year ended December 31, 2023.

The Company has determined that the presentation of net income from the date of acquisition is impracticable due to the integration of general corporate functions upon acquisition.

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

Supplemental Pro Forma Information (Unaudited)

Supplemental information of unaudited pro forma operating results assuming the SealingTech acquisition had been consummated as of the beginning of fiscal year 2022 (in thousands) is as follows:

Pro forma Revenue

Pro forma Net Income including noncontrolling interests

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2023, December 31, 2022 and December 31, 2021

The unaudited pro forma supplemental information is based on estimates and assumptions which the Company believes are reasonable and reflects the pro forma impact of additional amortization related to the fair value of acquired intangible assets, and the pro forma impact of reflecting acquisition costs, which consisted of legal, advisory and due diligence fees and expenses.

This supplemental pro forma information has been prepared for comparative purposes and does not purport to be indicative of what would have occurred had the acquisition been consummated during the periods for which pro forma information is presented.

IPKeys Power Partners

On April 13, 2023, the Company entered into a merger agreement to acquire a 100 % ownership interest in IPKeys Power Partners (“IPKeys”), a privately-owned company, for $ 43.0 million in cash.

The merger brings IPKeys' established customer base, expanding Parsons' presence in two rapidly growing end markets:

grid modernization and cyber resiliency for critical infrastructure.

Headquartered in Tinton Falls, New Jersey, IPKeys is a trusted provider of enterprise software platform solutions that is actively delivering cyber and operational security to hundreds of electric, water, and gas utilities across North America.

The acquisition was entirely funded by cash on-hand.

In connection with this acquisition, the Company recognized $ 0.6 million of acquisition-related expenses in “Selling, general and administrative expense” in the consolidated statements of income for the year ended December 31, 2023, respectively, including legal fees, consulting fees, and other miscellaneous direct expenses associated with the acquisition.

Cash and cash equivalents

Accounts receivable

Contract assets

Prepaid expenses and other current assets

Property and equipment

Right of use assets, operating leases

Other noncurrent assets

Intangible assets

Accounts payable

Accrued expenses and other current liabilities

Contract liabilities

Short-term lease liabilities, operating leases

Deferred tax liabilities

Long-term lease liabilities, operating leases

Net assets acquired

Of the total purchase price, the following values were assigned to intangible assets (in thousands, except for years):

Customer relationships (1)

Developed technologies

(1) The acquired business is a SaaS commercial business.

Backlog for this type of business is included as customer relationships.

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2023, December 31, 2022 and December 31, 2021

Amortization expense of $ 1.4 million related to these intangible assets was recorded for the year ended December 31, 2023.

The entire value of goodwill was assigned to the Critical Infrastructure reporting unit and represents synergies expected to be realized from this business combination.

$ 0.9 million of goodwill is deductible for tax purposes.

The amount of revenue generated by IPKeys and included within consolidated revenue is $ 9.3 million for the year ended December 31, 2023.

The Company has determined that the presentation of net income from the date of acquisition is impracticable due to the integration of general corporate functions upon acquisition.

Supplemental Pro Forma Information (Unaudited)

Supplemental information of unaudited pro forma operating results assuming the IPKeys acquisition had been consummated as of the beginning of fiscal year 2022 (in thousands) is as follows:

Pro forma Revenue

Pro forma Net Income including noncontrolling interests

Xator Corporation

3 unchanged sentences

In connection with this acquisition, the Company recognized $ 7.7 million of acquisition-related expenses in “Selling, general and administrative expense” in the consolidated statements of income for the year ended December 31, 2022, including legal fees, consulting fees, and other miscellaneous direct expenses associated with the acquisition.

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2023, December 31, 2022 and December 31, 2021

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Net assets acquired

Of the total purchase price, the following values were preliminarily assigned to intangible assets (in thousands, except for years):

Of the total purchase price, the following values were assigned to intangible assets (in thousands, except for years):

Customer relationships

1 unchanged sentence

Non-compete agreements

Amortization expense of $ 11.9 million related to these intangible assets was recorded for the year ended December 31, 2022.

Amortization expense of $ 18.1 million and $ 11.9 million related to these intangible assets was recorded for the year ended December 31, 2023 and December 31, 2022, respectively.

The entire value of goodwill was assigned to the Federal Solutions reporting unit and represents synergies expected to be realized from this business combination.

Goodwill in its entirety is deductible for tax purposes.

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2022, December 31, 2021 and December 31, 2020

The amount of revenue generated by Xator and included within consolidated revenues is $ 157.8 million for the year ended December 31, 2022.

The amount of revenue generated by Xator and included within consolidated revenue is $ 157.8 million for the year ended December 31, 2022.

The Company has determined that the presentation of net income from the date of acquisition is impracticable due to the integration of general corporate functions upon acquisition.

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

Supplemental Pro Forma Information (Unaudited)

2 unchanged sentences

Pro forma Net Income including noncontrolling interests

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2023, December 31, 2022 and December 31, 2021

From the year ended December 31, 2022 the results of the acquisition have been included in full year results.

BlackHorse Solutions, Inc.

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Net assets acquired

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2022, December 31, 2021 and December 31, 2020

Of the total purchase price, the following values were assigned to intangible assets (in thousands, except for years):

2 unchanged sentences

Non-compete agreements

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2023, December 31, 2022 and December 31, 2021

Amortization expense of $ 14.0 million and $ 5.4 million related to these intangible assets was recorded for the year ended December 31, 2022 and December 31, 2021, respectively.

9 unchanged sentences

From the year ended December 31, 2021 the results of the acquisition have been included in full year results.

Echo Ridge LLC

8 unchanged sentences

Goodwill in its entirety is deductible for tax purposes.

The amount of revenue generated by Echo Ridge and included within consolidated revenues for 2021 is $ 2.9 million.

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2022, December 31, 2021 and December 31, 2020

Braxton Science & Technology Group

On November 19, 2020 the Company acquired a 100 % ownership interest in Braxton Science & Technology Group (“Braxton”), a privately-owned company, for $ 310.9 million in cash.

Braxton operates at the forefront of satellite operations, ground system automation, flight dynamics, and spacecraft and antenna simulation for the U.S.

Department of Defense and Intelligence Community.

The acquisition was entirely funded by cash on hand in August 2020, as described in “Note 11— Debt and Credit Facilities” .

In connection with this acquisition, the Company recognized $ 5.5 million of acquisition-related expense in “Selling, general and administrative expense” in the consolidated statements of income for the year ended December 31, 2020, including legal fees, consulting fees, and other miscellaneous direct expenses associated with the acquisition.

Braxton allows Parsons to capitalize on the quickly evolving space missions of its national security space customers and address rapid market growth driven by proliferated low earth orbit constellations, small satellite expansion, and space cyber resiliency.

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):

Cash and cash equivalents

Accounts receivable

Contract assets

Prepaid expenses and other current assets

Property and equipment

Right of use assets, operating leases

Intangible assets

Accounts payable

Accrued expenses and other current liabilities

Contract liabilities

Short-term lease liabilities, operating leases

Long-term lease liabilities, operating leases

Deferred tax liabilities

Net assets acquired

Of the total purchase price, the following values were assigned to intangible assets (in thousands, except for years):

Customer relationships

Developed technologies

Non-compete agreements

Amortization expense of $ 16.1 million and $ 16.2 million related to these intangible assets was recorded for the years ended December 31, 2022 and December 31, 2021, 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 of $ 200.5 million is deductible for tax purposes.

The amount of revenue generated by Braxton and included within consolidated revenues for 2020 is $ 10.1 million.

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 amount of revenue generated by Echo Ridge and included within consolidated revenues for 2021 was $ 2.9 million.

PARSONS CORPORATION AND SUBSIDIARIES

1 unchanged sentence

December 31, 2023, December 31, 2022 and December 31, 2021

Supplemental Pro Forma Information (Unaudited)

Supplemental information of unaudited pro forma operating results assuming the Braxton acquisition had been consummated as of the beginning of 2019 (in thousands) is as follows:

Pro forma Revenue

Pro forma Net Income including noncontrolling interests

The unaudited pro forma supplemental information is based on estimates and assumptions which the Company believes are reasonable and reflects the pro forma impact of additional amortization related to the fair value of acquired intangible assets, the pro forma impact of reflecting acquisition costs, which consisted of legal, advisory and due diligence fees and expenses.

Contracts with Customers

14 unchanged sentences

Total contract retentions included in net contract assets (liabilities) were $ 73.5 million as of December 31, 2022.

Contract assets at December 31, 2022 and December 31, 2021 include approximately $ 127.9 million and $ 98.6 million, respectively, related to unapproved change orders, claims, and requests for equitable adjustment.

For the years ended December 31, 2022 and December 31, 2021, no material losses were recognized related to the collectability of claims, unapproved change orders, and requests for equitable adjustment.

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2022, December 31, 2021 and December 31, 2020

Contract assets at December 31, 2023 and December 31, 2022 include approximately $ 109.5 million and $ 127.9 million, respectively, related to net claim recovery estimates.

For the years ended December 31, 2023 and December 31, 2022 , there were no material losses recognized related to the collectability of claims, unapproved change orders, and requests for equitable adjustment.

During the years ended December 31, 2023 and December 31, 2022, the Company recognized revenue of approximately $ 126.0 million and $ 94.1 million, respectively, that was included in the corresponding contract liability balance at December 31, 2022 and December 31, 2021 , respectively.

7 unchanged sentences

Revenue impact, net

Certain financial statement impacts from revisions in estimates were as follows (in thousands):

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2023, December 31, 2022 and December 31, 2021

December 31, 2023

December 31, 2022

December 31, 2021

Operating income (loss)

Net income (loss)

Diluted earnings (loss) per share

The amounts for 2023, in the table above, include the impact from contracts in the Critical Infrastructure segment related to a change in estimate increasing direct costs of contracts by $ 8.0 million related to net write-downs and a decrease in direct costs of contracts of $ 37.9 million related to a legal matter.

These impacts do not include the operating income impacts disclosed below in "Note 16—Investments in and Advances to Joint Ventures.

Accounts Receivable, Net

5 unchanged sentences

Unbilled accounts receivable represents amounts where the Company has a present contractual right to bill but an invoice has not been issued to the customer at the period-end date.

Receivables from contracts with the U.S.

federal government and its agencies were 18 % and 17 % as of December 31, 2023 and December 31, 2022, respectively.

The allowance for doubtful accounts was determined based on consideration of trends in actual and forecasted credit quality of clients, including delinquency and payment history, type of client, such as a government agency or commercial sector client, and general economic conditions and particular industry conditions that may affect a client’s ability to pay.

2 unchanged sentences

The Company had $ 6.4 billion in RUPO as of December 31, 2023.

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2022, December 31, 2021 and December 31, 2020

RUPO will increase with awards of new contracts and decrease as the Company performs work and recognizes revenue on existing contracts.

3 unchanged sentences

(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.

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2023, December 31, 2022 and December 31, 2021

The Company expects to satisfy its RUPO as of December 31, 2023 over the following periods (in thousands):

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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 seven years , some of which may include options to extend the leases for up to five years , and some of which may include options to terminate the leases after the third year .

Our leases have remaining lease terms of one year to eight years , some of which may include options to extend the leases for up to five years , and some of which may include options to terminate the leases after the third year .

The components of lease costs for the years ended December 31, 2023 and December 31, 2022 are as follows (in thousands):

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Operating cash flows for operating leases

Operating cash flows for financing activities

Operating cash flows for finance leases

Financing cash flows for finance leases

27 unchanged sentences

Rental expense for the years ended December 31, 2023, December 31, 2022 and December 31, 2021 was $ 81.0 million , $ 81.0 million and $ 73.1 million , respectively, and is recorded in “Selling, general and administrative expenses” in the consolidated statements of income.

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2023, December 31, 2022 and December 31, 2021

Employee Stock Purchase and Equity-Based Compensation Plans

Equity Compensation Plan Information

The following table provides information as of December 31, 2023 regarding compensation plans under which our equity securities are authorized for issuance.

Plan Category

Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights

Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights

Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in Column (a))

Equity compensation plans approved by security holders (1)

Equity compensation plans not approved by security holders

(1) Consists of the 2020 Employee Stock Purchase Plan.

(2) Amount represents 1,463,790 shares remaining available for future issuance under the 2020 Employee Stock Purchase Plan (of which 52,364 shares were purchased pursuant to the offering period that ended on December 31, 2023).

(3) Amount represents the sum of 2,093,336 shares of common stock subject to outstanding RSU and PSU awards under the 2019 Incentive Plan (with PSU awards reflected at “target” levels),

(4) Amount represents 8,238,003 shares remaining available for future issuance under the 2019 Incentive Plan.

Employee Stock Purchase Plan

1 unchanged sentence

Under the ESPP, eligible employees who elect to participate are granted the right to purchase shares of Parsons common stock at a discount of 5 % of the market value on the last trading day of the offering period.

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2022, December 31, 2021 and December 31, 2020

The following table presents stock issuance activity for the years ended December 31, 2023 and December 31, 2022 (in thousands):

4 unchanged sentences

The Company issues stock-based awards through the Incentive Award Plan.

Prior to the adoption of the Incentive Award Plan on April 15, 2019, the Company issued awards under the Shareholder Value Plan, Long-Term Growth Plan and Restricted Award Plan.

Through these plans the Company may issue stock options (including incentive and non-qualified stock options), stock appreciation rights, restricted stock, restricted stock units, an “other” stock or cash-based awards, or a dividend equivalent award.

The compensation expense for these awards is recorded in “Selling, general and administrative expenses” in the Company’s consolidated financial statements.

2 unchanged sentences

We recognize forfeitures as they occur.

With the adoption of the Incentive Award Plan on April 15, 2019, the Company has discontinued issuing awards under the Shareholder Value Plan, Long-Term Growth Plan and Restricted Award Plan.

Outstanding awards granted out of the discontinued plans will continue to vest and will settle in cash.

At December 31, 2022, the amount of compensation cost relating to non-vested awards not yet recognized in the consolidated financial statements is $ 28.1 million.

The majority of these unrecognized compensation costs will be recognized by the third quarter of fiscal 2024.

The fair value of a share of the Company’s common stock is based on quoted prices on the NYSE.

Stock Appreciation Rights

Stock Appreciation Rights (“SARs”) were issued under the Shareholder Value Plan (“SVP”).

Outstanding awards provide a cash incentive based on the increase in the Company’s share price over a three-year period, multiplied by a number of phantom share units.

If at the end of a performance cycle the Company’s share price has not increased, then no award payment will be made.

The awards issued under the SVP are time-vested cash-settled SARs.

The SARs vest at the end of three years and expense is recognized on an accelerated basis over the vesting period.

The grant date fair value of the award is determined by using the Black-Scholes option-pricing model.

SARs are remeasured, using the Black-Scholes option-pricing model, to an updated fair value at each reporting period until the award is settled.

The fair value of the grant on the vesting date is determined based on the 60-trading day weighted average closing price of the Company’s common stock on the NYSE.

Compensation cost is trued-up at each reporting period for changes in fair value pro-rated for the portion of the requisite service period rendered.

The final SVP grant vested on December 31, 2020 based on the 60-trading day weighted average closing price of the Company’s common stock on the NYSE.

PARSONS CORPORATION AND SUBSIDIARIES

1 unchanged sentence

December 31, 2023, December 31, 2022 and December 31, 2021

The following table presents the number of SARs granted, vested, and forfeited for the year ended December 31, 2020:

Number of Units

Weighted Average Grant-Date Fair Value

Unvested at December 31, 2019

Unvested at December 31, 2020

Long-Term Growth Units

Long-Term Growth Units awards were issued under the Long-Term Growth Plan.

Outstanding awards provide a cash incentive based on performance conditions.

The grant date fair value of the award is based on fair value of the Company’s common stock on the grant day.

These awards vest at the end of three years and expense is recognized on an accelerated basis over the vesting period subject to the probability of meeting the performance requirements and adjusted for the number of shares expected to be earned.

Awards are remeasured to an updated fair value at each reporting period until the award is settled.

The updated fair value is based on the 60-trading day weighted average closing price of the Company’s common stock on the NYSE on the last day of the reporting period.

Compensation cost is trued-up at each reporting period for changes in fair value and expected shares pro-rated for the portion of the requisite service period rendered.

The final long-term growth units grant vested during the year ended December 31, 2020.

The following table presents the number of Long-Term Growth Units granted, vested, and forfeited (at target shares) for the year ended December 31, 2020:

Number of Units

Weighted Average Grant-Date Fair Value

Unvested at December 31, 2019

Unvested at December 31, 2020

Restricted Award Units

Restricted Award Units awards were issued under the Restricted Award Plan.

Outstanding awards provide a cash incentive based on the fair value of the Company’s common stock on the vesting date.

The grant date fair value of the award is based on the fair value of the Company’s common stock on the grant date.

These awards vest and expense is recognized on an accelerated basis over the respective vesting periods.

Awards are remeasured to an updated fair value at each reporting period until the award is settled.

The updated fair value is based on the 60-trading day weighted average closing price of the Company’s common stock on the NYSE on the last day of the reporting period.

Compensation cost is trued-up at each reporting period for changes in fair value pro-rated for the portion of the requisite service period rendered.

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2022, December 31, 2021 and December 31, 2020

The final restricted award units grant vested during the year ended December 31, 2021.

The following table presents the number of Restricted Award Units granted, vested, and forfeited for the years ended December 31, 2021 and December 31, 2020:

Number of Units

Weighted Average Grant-Date Fair Value

Unvested at December 31, 2019

Unvested at December 31, 2020

Unvested at December 31, 2021

The following table presents the amount paid for cash settled awards, by award type, for the years ended December 31, 2021 and December 31, 2020 (in thousands) (there were no awards outstanding as of the year ended December 31, 2021):

At December 31, 2023 , the amount of compensation cost relating to non-vested awards not yet recognized in the consolidated financial statements is $ 43.4 million.

The majority of these unrecognized compensation costs will be recognized by the fourth quarter of fiscal 2025.

Prior to the adoption of the Incentive Award Plan on April 15, 2019, the Company issued awards under the Shareholder Value Plan, Long-Term Growth Plan and Restricted Award Plan.

With the adoption of the Incentive Award Plan, the Company discontinued issuing awards under the Shareholder Value Plan, Long-Term Growth Plan and Restricted Award Plan.

Awards granted out of the discontinued plans settled in cash.

The following table presents the final amount paid for cash settled awards through the discontinued Shareholder Value Plan, Long-Term Growth Plan and Restricted Award Plan, by award type, for the year ended December 31, 2021 (there were no awards outstanding as of the year ended December 31, 2021):

Stock Appreciation Rights

4 unchanged sentences

Outstanding awards have been granted based on either service or service and performance conditions.

The fair value of the award is based on the closing price of the Company’s common stock on the grant date.

Awards vest over three-year periods, either annually or cliff.

5 unchanged sentences

Restricted Stock Units (service and performance condition)

The number of units granted for awards with performance conditions in the above table is based on performance against the target amount.

The number of units granted for awards with performance conditions in the above table is based on performance at the target amount.

The number of shares ultimately issued, which could be greater or less than target, will be based on achieving specific performance conditions related to the awards.

During the year ended December 31, 2023, certain restricted stock unit grants with performance conditions vested with performance different from the target share amounts.

As a result, 97,551 additional shares were granted and vested.

PARSONS CORPORATION AND SUBSIDIARIES

35 unchanged sentences

Total intangible assets

The prior year presentation has been corrected to reflect the removal of fully amortized intangible assets resulting in reductions to gross carrying amount and accumulated amortization of $ 159 million.

The aggregate amortization expense of intangible assets was $ 76.6 million , $ 78.2 million, and $ 103.2 million for the years ended December 31, 2023, December 31, 2022 and December 31, 2021, respectively.

28 unchanged sentences

December 31, 2022

Long-Term Debt:

Delayed draw term loan

2 unchanged sentences

Debt issuance costs

Total long-term

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2022, December 31, 2021 and December 31, 2020

Revolving Credit Facility

5 unchanged sentences

dollars, certain specified foreign currencies, and each other currency that may be approved in accordance with the 2021 Facility.

The borrowings under the Credit Agreement bear interest at either a eurocurrency rate plus a margin between 1.0 % and 1.625 % or a base rate (as defined in the Credit Agreement) plus a margin of between 0 % and 0.625 %.

The borrowings under

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2023, December 31, 2022 and December 31, 2021

the Credit Agreement bear interest at either a eurocurrency rate plus a margin between 1.0 % and 1.625 % or a base rate (as defined in the Credit Agreement) plus a margin of between 0 % and 0.625 %.

The rates on December 31, 2023 and December 31, 2022 were 6.7 % and 5.7 %, respectively.

5 unchanged sentences

The Company was in compliance with these covenants at December 31, 2023 and December 31, 2022.

Private Placement

On July 1, 2014, the Company finalized a private placement whereby the Company raised an aggregate amount of $ 250.0 million in debt as follows (in thousands):

Maturity Date

Interest Rate

Senior Note, Series A

July 15, 2021

Senior Note, Series B

July 15, 2024

Senior Note, Series C

July 15, 2026

Senior Note, Series D

July 15, 2029

The Company incurred approximately $ 1.1 million of debt issuance costs in connection with the private placement.

On August 10, 2018, the Company finalized an amended and restated intercreditor agreement related to this private placement to more closely align certain covenants and definitions with the terms under the 2017 amended and restated Credit Agreement and incurred approximately $ 0.5 million of additional issuance costs.

These costs were presented as a direct deduction from the debt on the face of the balance sheet.

Interest expense related to the Senior Notes was $ 8.5 million $ 11.6 million and $ 12.4 million for the years ended December 31, 2022, December 31, 2021 and December 31, 2020, respectively.

The amortization of debt issuance costs and interest expense is recorded in “Interest expense” on the consolidated statements of income.

The Company paid the $ 50 million Series A tranche of the Senior Notes as scheduled in July 2021.

The Company made interest payments related to the Senior Notes of approximately $ 13.1 million during the year ended December 31, 2022, and $ 12.4 million during the years ended December 31, 2021 and December 31, 2020.

Interest payable of approximately $ 4.7 million was recorded in “Accrued expenses and other current liabilities” on the consolidated balance sheets at December 31, 2021 related to the Senior Notes.

The Company repaid all outstanding Senior Notes in October 2022.

In connection with the prepayment, the Company incurred $ 2.1 million of interest expense associated with a make-whole amount and remaining unamortized debt issuance costs.

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2022, December 31, 2021 and December 31, 2020

Convertible Senior Notes

13 unchanged sentences

• upon the occurrence of specified corporate events described in the Indenture.

The Company may redeem all or any portion of the Convertible Senior Notes for cash, at its option, on or after August 21, 2023 and before the 51 st scheduled trading day immediately before the maturity date at a redemption price equal to 100 % of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, but only if the last reported sale price per share of the Company’s common stock exceeds 130 % of the conversion price for a specified period of time.

In addition, calling any Convertible Senior Note for redemption will constitute a Make-Whole Fundamental Change with respect to that Convertible Senior Note, in which case the conversion rate applicable to the conversion of that Convertible Senior Note will be increased in certain circumstances if it is converted after it is called for redemption.

PARSONS CORPORATION AND SUBSIDIARIES

1 unchanged sentence

December 31, 2023, December 31, 2022 and December 31, 2021

Upon the occurrence of a fundamental change prior to the maturity date of the Convertible Senior Notes, holders of the Convertible Senior Notes may require the Company to repurchase all or a portion of the Convertible Senior Notes for cash at a price equal to 100 % of the principal amount of the Convertible Senior Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

7 unchanged sentences

The difference between the principal amount of the Convertible Senior Notes and the liability component, inclusive of issuance costs, represents the debt discount, which the Company amortized to interest expense over the term of the Convertible Senior Notes using an effective interest rate of 3.25 %.

The Company recognized interest expense of $ 3.0 million for the years ended December 31, 2022 and December 31, 2021, respectively.

The Company recognized interest expense of $ 3.1 million and $ 3.0 million for the years ended December 31, 2023 and December 31, 2022, respectively.

As of December 31, 2023 and December 31, 2022 the carrying value of the Notes was $ 400.0 million, respectively.

2 unchanged sentences

The Company also adjusted the carrying amount of the convertible senior notes to what it would have been if the Company had applied ASU 2020-06 from the inception of the Notes and recorded the offset of the carrying amount adjustment of $ 3.7 million in retained earnings on January 1, 2021.

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2023, December 31, 2022 and December 31, 2021

Delayed Draw Term Loan

5 unchanged sentences

These costs are presented as a direct deduction from the debt on the face of the balance sheet.

Interest expense related to the Delayed Draw Term Loan was $ 3.3 million for the year ended December 31, 2022.

Interest expense related to the Delayed Draw Term Loan was $ 22.4 million and $ 3.3 million for the years ended December 31, 2023 and December 31, 2022, respectively.

The amortization of debt issuance costs and interest expense is recorded in “Interest expense” on the consolidated statements of income.

As of December 31, 2022, there was $ 350.0 million outstanding under the Delayed Draw Term Loan.

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2022, December 31, 2021 and December 31, 2020

As of December 31, 2023 and December 31, 2022 , there was $ 350.0 million outstanding under the Delayed Draw Term Loan.

The 2022 Delayed Draw Term Loan has a three-year maturity and permits the Company to borrow in U.S.

3 unchanged sentences

Amounts outstanding under the 2022 Delayed Draw Term Loan Agreement may be prepaid at the option of the Company without premium or penalty, subject to customary breakage fees in connection with the prepayment of benchmark rate loans.

The interest rates on December 31, 2023 and December 31, 2022 were 6.6 % and 5.6 %, respectively.

Letters of Credit

7 unchanged sentences

The cost of the convertible note hedge was partially offset by the Company’s sale of warrants to acquire approximately 8.9 million shares of the Company’s common stock.

The warrants were initially exercisable at a price of at least $ 66.46 per share and are subject to customary adjustments upon the occurrence of certain events, such as the payment of dividends.

The warrants were initially exercisable at a price of at least $ 66.46 per share and are subject to customary adjustments upon the

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2023, December 31, 2022 and December 31, 2021

occurrence of certain events, such as the payment of dividends.

The Company received $ 13.8 million in cash proceeds from the sales of these warrants.

7 unchanged sentences

In addition, the Company recorded a $ 0.9 million adjustment to the deferred tax asset through retained earnings related to the tax effect of book accretion recorded in 2020 and reversed upon adoption.

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2022, December 31, 2021 and December 31, 2020

Other Long-term Liabilities

6 unchanged sentences

Refer to “Note 13— Income Taxes ” for further discussion of the Company’s reconciliation of the beginning and ending balances of uncertain tax positions.

On August 9, 2022 President Biden signed the Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act into law, which includes an advanced manufacturing investment tax credit, among other provisions.

On August 16, 2022 President Biden signed the Inflation Reduction Act (the IRA) into law, which includes implementation of a new alternative minimum tax, an excise tax on stock buybacks, and tax incentives for energy and climate initiatives, among other provisions.

Based on the Company’s review, these new laws do not result in a material change to the Company’s income tax provision for 2022.

On November 18, 2022, the U.S.

Treasury Department and IRS (collectively, “Treasury”) released proposed regulations that provide additional guidance relating to the foreign tax credit (“FTC”).

The 2022 Proposed Regulations include guidance with respect to the reattribution asset rule for purposes of allocating and apportioning foreign taxes, the cost recovery requirement, and the attribution rule for withholding taxes on royalty payments.

These Proposed Regulations would, if finalized, supplement and revise Final Regulations that were published on January 4, 2022.

The Company has assessed the impact of the January 4, 2022, Final Regulations and has included the impact in its provision for income taxes.

The Company does not expect any material impact to its consolidated financial statements from the issuance of the Proposed Regulations.

The following table presents the components of our income from continuing operations before income taxes (in thousands):

6 unchanged sentences

Total current income tax expense

Total deferred tax expense (benefit)

Total deferred tax benefit

Total income tax expense

3 unchanged sentences

State taxes, net of federal tax benefit

Change in tax status

Change in valuation allowance

2 unchanged sentences

Tax cost of foreign operations, net of credits

Transaction costs

Foreign-Derived Intangible Income

Noncontrolling interests

2 unchanged sentences

Total income tax expense

The effective tax rate in 2022 increased to 23.9 % from 21.0% in 2021.

The change in the effective tax rate was due primarily to a net increase of uncertain tax positions during 2022, an income tax benefit recognized in 2021 for foreign tax credits which did not reoccur in 2022, partially offset by a decrease in withholding taxes, a benefit from a change in jurisdictional mix of earnings, and a tax expense recognized in 2021 related to a nonrecurring write down of a foreign tax receivable.

The effective tax rate in 2023 decreased to 21.3 % from 23.9 % in 2022.

The change in the effective tax rate was due primarily to an increase in untaxed income attributable to noncontrolling interests, foreign tax credits utilized on the 2020 federal return, a change in jurisdictional earnings, and a release of uncertain tax positions, partially offset by a write down of a foreign tax receivable and an increase in executive compensation subject to IRC Section 162(m) limitations .

The effective tax rate for the year ended December 31, 2022 differs from the federal statutory tax rate primarily due to state income taxes and a recorded valuation allowance on foreign tax credit

The change in the effective tax rate was due primarily to tax benefits related to increases in the foreign-derived intangible income (FDII) deduction and a change in jurisdictional mix of earnings, partially offset by an increase in valuation allowance on foreign tax credits originating from foreign withholding taxes.

The effective tax rate in 2022 increased to 23.9 % from 21.0 % in 2021.

The change in the effective tax rate was due primarily to a net increase of uncertain tax positions during 2022, an income tax benefit recognized in 2021 for foreign tax credits which did not reoccur in 2022, partially offset by a decrease in valuation allowance on foreign tax credit carryovers originating from foreign withholding taxes, a benefit from a change in jurisdictional mix of earnings, and a tax expense recognized in 2021 related to a nonrecurring write down of a foreign tax receivable.

The effective tax rate for the year ended December 31, 2023 differs from the federal statutory tax rate primarily due to state income taxes, valuation allowance on foreign tax credit carryovers originating from foreign withholding taxes partially offset by benefits related to untaxed income attributable to

PARSONS CORPORATION AND SUBSIDIARIES

1 unchanged sentence

December 31, 2023, December 31, 2022 and December 31, 2021

carryovers, partially offset by benefits related to income attributable to noncontrolling interests, earnings in lower tax jurisdictions and federal business tax credits.

The effective tax rate for the year ended December 31, 2021 differs from the federal statutory tax rate primarily due to state income taxes, a recorded valuation allowance on foreign tax credit carryovers, a write down of a foreign tax receivable, and an increase in executive compensation subject to IRC Section 162(m) limitations , partially offset by benefits related to untaxed income attributable to noncontrolling interests, release of uncertain tax positions, and federal business tax credits .

noncontrolling interests, earnings in lower tax jurisdictions, the FDII deduction, and federal business tax credits.

The effective tax rate for the year ended December 31, 2022 differs from the federal statutory tax rate primarily due to state income taxes and a recorded valuation allowance on foreign tax credit carryovers, partially offset by benefits related to income attributable to noncontrolling interests, earnings in lower tax jurisdictions and federal business tax credits.

The components of deferred tax assets and liabilities consists of the following at December 31, 2023 and December 31, 2022 (in thousands):

13 unchanged sentences

Right-of-use assets

Profit remittance tax

Total deferred tax liabilities

5 unchanged sentences

Therefore, the Company has recorded a deferred tax liability for the undistributed earnings net of applicable foreign tax credits.

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminated the option to currently deduct research and development expenditures in the year incurred and requires taxpayers to amortize such expenditures over five years for tax purposes.

This provision resulted in additional cash tax liability for the 2022 tax year of approximately $ 16 million.

Correspondingly, our deferred tax asset for revenue and cost recognition increased by approximately $ 16 million to reflect future amortization deductions of the capitalized expenses.

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2022, December 31, 2021 and December 31, 2020

As of December 31, 2023, and December 31, 2022, the Company’s valuation allowance against deferred tax assets was $ 34.8 million and $ 28.7 million, respectively.

2 unchanged sentences

This increase relates to deferred tax assets recorded for foreign tax credit carryforwards, offset in part by a decrease related to net operating loss carryforwards.

The valuation allowance is recorded because the Company does not expect to have sufficient taxable income and foreign source income to support the net operating loss carryforwards and the foreign tax credit carryforwards before they expire.

The valuation allowance is recorded because the Company does not expect to have

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2023, December 31, 2022 and December 31, 2021

sufficient taxable income and foreign source income to support the net operating loss carryforwards and the foreign tax credit carryforwards before they expire.

As of December 31, 2023, the Company has NOLs of $ 1.6 million, $ 30.5 million, and $ 30.8 million for U.S.

25 unchanged sentences

states, and foreign jurisdictions.

The Company is subject to examination by tax authorities in several jurisdictions, including major jurisdictions such as Canada, Qatar, Saudi Arabia and the United States.

The Company is subject to examination by tax authorities in several jurisdictions, including jurisdictions where the Company has significant activities, such as Canada, Qatar, Saudi Arabia and the United States.

As of December 31, 2023, the Company’s U.S.

1 unchanged sentence

states and foreign income tax returns remain subject to examination based on varying local statutes of limitations.

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2022, December 31, 2021 and December 31, 2020

The Company estimates that, within 12 months, it may decrease its uncertain tax positions by approximately $ 5.5 million as a result of concluding various tax audits and closing tax years.

2 unchanged sentences

However, it is not currently possible to estimate the amount, if any, of such change.

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2023, December 31, 2022 and December 31, 2021

Contingencies

11 unchanged sentences

The United States government did not intervene in this matter as it is allowed to do so under the statute.

The parties are concluding discovery and we anticipate that the court will hear dispositive and/or pre-trial motions in early or mid-2023.

Depending upon the court’s rulings upon such motions, a trial may be scheduled in 2023.

At this time, the Company is unable to determine the probability of the outcome of the litigation or determine a potential range of loss, if any.

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2022, December 31, 2021 and December 31, 2020

The court heard dispositive motions in 2023, including Parsons’ motion for summary judgment.

We are awaiting the court’s rulings upon such motions, which will determine whether a trial will be necessary for this matter in 2024.

On November 28, 2023, a Proposed Statement of Decision was filed with the clerk of the Superior Court of the State of California In and For the County of San Mateo proposing an award of damages in the total amount of approximately $ 102.5 million in favor of Parsons Transportation Group, Inc.

and against Alstom Signaling Operations LLC (Alstom") (including approximately $ 62.5 million relating to claims assigned to Parsons pursuant to a prior settlement with the Peninsula Corridor Joint Powers Board and approximately $ 40 million attributable to Parsons’ contractual and indemnification claims).

This proposed award relates back to a lawsuit Parsons initially filed against the Peninsula Corridor Joint Powers Board for breach of contract and wrongful termination in February 2017 (which was settled between Parsons and the Joint Powers Board in 2021) and a cross-complaint filed against Alstom Signaling Operations LLC in November 2017, as subsequently amended, for breach of contract, negligence and intentional misrepresentation.

Alstom filed objections to the Proposed Statement of Decision, and Parsons has filed its responses to the objections.

It is anticipated that the court will enter a final decision in the first quarter of 2024.

At this time, the Company is unable to determine the probability of the outcome of the litigation.

Federal government contracts are subject to audits, which are performed for the most part by the Defense Contract Audit Agency (“DCAA”).

1 unchanged sentence

If the DCAA determines we have not accounted for such costs in accordance with the CAS, the DCAA may disallow these costs.

The disallowance of such costs may result in a reduction of revenue and additional liability for the Company.

The disallowance of

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2023, December 31, 2022 and December 31, 2021

such costs may result in a reduction of revenue and additional liability for the Company.

Historically, the Company has not experienced any material disallowed costs as a result of government audits.

18 unchanged sentences

At December 31, 2023 and December 31, 2022, the defined benefit pension plan was in a net asset position of $ 1.4 million and $ 1.8 million, respectively, which is recorded in “Other noncurrent assets” on the consolidated balance sheets.

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2022, December 31, 2021 and December 31, 2020

Investments in and Advances to Joint Ventures

1 unchanged sentence

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.

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2023, December 31, 2022 and December 31, 2021

The Company performs an analysis to determine whether its variable interests give the Company a controlling financial interest in a VIE for which the Company is the primary beneficiary and should, therefore, be consolidated.

13 unchanged sentences

Current liabilities

Noncurrent liabilities

Total liabilities

2 unchanged sentences

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.

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2022, December 31, 2021 and December 31, 2020

Unconsolidated Joint Ventures

1 unchanged sentence

Under this method, the Company recognizes its proportionate share of the net earnings of these joint ventures as “Equity in earnings (loss) of unconsolidated joint ventures” in the consolidated statements of income.

The Company’s maximum exposure to loss as a result of its investments in unconsolidated VIEs is typically limited to the aggregate of the carrying value of the investment and future funding commitments.

The following represents the financial information of the Company’s unconsolidated joint ventures as presented in their unaudited financial statements as of and for the years ended December 31, 2022 and December 31, 2021 (in thousands):

The Company’s maximum exposure to loss as a result of its investments in unconsolidated VIEs

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2023, December 31, 2022 and December 31, 2021

is typically limited to the aggregate of the carrying value of the investment and future funding commitments.

Current assets

5 unchanged sentences

Investments in and advances to unconsolidated joint

Equity in earnings of unconsolidated joint ventures

The Company received net distribution from its unconsolidated joint ventures of $ 20.2 million and $ 30.5 million for the years ended December 31, 2022 and December 31, 2020, respectively, and had net contributions to its unconsolidated joint ventures of $ 13.2 million for the year ended December 31, 2021.

For the years ended December 31, 2022, December 31, 2021 and December 31, 2020, the Company recorded a $ 13.8 million, $ 15.6 million and $ 15.5 million write-down, respectively, on an unconsolidated joint venture in the Critical Infrastructure segment as a result of changes in estimates made by the managing partner.

For the year ended December 31, 2022, this write-down decreased operating and net income by $ 13.8 million and $ 10.3 million, respectively, and decreased diluted earnings per share by $ 0.09 .

For the year ended December 31, 2021, this write-down decreased operating and net income by $ 15.6 million and $ 11.6 million, respectively, and decreased diluted earnings per share by $ 0.10 .

For the year ended December 31, 2020, this write-down decreased operating and net income by $ 15.5 million and $ 11.5 million, respectively, and decreased diluted earnings per share by $ 0.11 .

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2022, December 31, 2021 and December 31, 2020

Equity in (losses) earnings of unconsolidated joint ventures

The Company had net contributions to its unconsolidated joint ventures of $ 65.2 million and $ 13.2 million for the years ended December 31, 2023 and December 31, 2021 , respectively and received net distributions from its unconsolidated joint ventures of $ 20.2 million for the year ended December 31, 2022.

The following table presents certain financial statement impacts from changes in estimates on unconsolidated joint ventures in the Critical Infrastructure segment.

December 31, 2023

December 31, 2022

December 31, 2021

Operating loss

Diluted loss per share

Related Party Transactions

1 unchanged sentence

For the years ended December 31, 2023, December 31, 2022 and December 31, 2021, revenues included $ 213.8 million , $ 217.4 million, and $ 204.7 million, respectively, related to services the Company provided to unconsolidated joint ventures.

For the years ended December 31, 2022, December 31, 2021 and December 31, 2020, the Company incurred approximately $ 156.0 million, $ 155.5 million and $ 133.8 million, respectively, of reimbursable costs.

For the years ended December 31, 2023, December 31, 2022 and December 31, 2021, the Company incurred approximately $ 153.7 million , $ 157.6 million and $ 155.5 million, respectively, of reimbursable

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2023, December 31, 2022 and December 31, 2021

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

2 unchanged sentences

Contract liabilities

Fair Value of Financial Instruments

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

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”).

16 unchanged sentences

December 31, 2023, December 31, 2022 and December 31, 2021

The following table sets forth assets associated with the pension plan in “Note 15— Retirement and Other Benefits Plans ” that are accounted for at fair value by Level within the fair value hierarchy.

Financial assets and liabilities measured at fair value on a recurring basis are as follows:

Fair value as of December 31, 2023 (in thousands):

Assets related to defined contribution plan

Cash and cash equivalents

Total assets at fair value

Contingent consideration

Earnout liability

Total liabilities at fair value

Fair value as of December 31, 2022 (in thousands):

Assets related to defined contribution plan

Cash and cash equivalents

Total assets at fair value

As described in “Note 15— Retirement and Other Benefits Plans ”, the Company acquired a defined contribution pension plan, a defined benefit pension plan, and supplemental retirement plans.

2 unchanged sentences

The inputs that are significant to the valuation of fixed income securities are generally observable, and therefore have been classified as Level 2.

With respect to equity-based compensation, we estimate the fair value of cash settled awards based on the 60-trading day weighted average closing price of the Company’s common stock on the NYSE at the end of each reporting period and on the vesting date.

For restricted stock units containing service conditions or service and performance conditions, fair value is based on the closing stock price of a share of the Company’s common stock on the NYSE on the grant date.

These valuation methods use significant unobservable inputs classified within Level 3 of the fair value hierarchy.

See "Note 2— Summary of Significant Accounting Policies."

We measure contingent consideration at fair value on a recurring basis using significant unobservable inputs classified within Level 3 of the fair value hierarchy.

See "Note 2— Summary of Significant Accounting Policies" and "Note 3— Acquisitions" for further information.

With respect to equity-based compensation, for restricted stock units containing service conditions or service and performance conditions, the grant date fair value is based on the closing stock price of a share of the Company’s common stock on the NYSE on the grant date.

For awards that include market conditions, the grant date fair value is determined using a Monte Carlo simulation.

Earnings Per Share

1 unchanged sentence

Basic EPS is computed using the weighted average number of shares outstanding during the period and income available to shareholders.

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2023, December 31, 2022 and December 31, 2021

Diluted 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 adjusted to reflect the dilutive effects of stock-based awards and shares underlying the Convertible Senior Note.

Convertible Senior Note dilution impact is calculated using the if-converted method which was required upon adoption of ASU 2020-06.

As a result, the Company elected to adopt the if-converted method during the third quarter of 2020.

Convertible Senior Note dilution impact is calculated using the if-converted method.

In connection with the offerings of our note, the Company entered into a convertible note hedge and warrants (see Note 11 - Debt and Credit Facilities );

5 unchanged sentences

Anti-dilutive stock-based awards excluded from the calculation of earnings per share for the years ended December 31, 2023, December 31, 2022, and December 31, 2021 were 5,423 , 15,113 , and 11,986 , respectively.

In addition, the convertible senior notes were anti-dilutive and excluded for 2020.

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2022, December 31, 2021 and December 31, 2020

The weighted average number of shares used to compute basic and diluted EPS were (in thousands):

The following table reconciles the numerator and denominator used to compute basic EPS and the numerator and denominator used to computed diluted EPS (in thousands):

Numerator for Basic and Diluted EPS:

Net income attributable to Parsons Corporation - basic

Convertible senior notes if-converted method interest adjustment

Net income attributable to Parsons Corporation - diluted

Denominator for Basic and Diluted EPS:

Basic weighted average number of shares outstanding

Stock-based awards

Convertible senior notes

Dilutive effect of stock-based awards

Dilutive effect of convertible senior notes

Diluted weighted average number of shares outstanding

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

Net income attributable to Parsons Corporation

Convertible senior notes if-converted method interest adjustment

Diluted net income attributable to Parsons Corporation

Earnings per share:

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.

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 .

The Board further amended this authorization in August 2022 to remove the prior expiration date and grant executive leadership the discretion to determine the price for such share repurchases.

Repurchased shares of common stock are retired and included in “Repurchases of common stock” in cash flows from financing activities in the Consolidated Statements of Cash Flows.

The primary purpose of the Company’s share repurchase program is to reduce the dilutive effect of shares issued under the Company’s ESOP and other stock benefit plans.

The timing, amount and manner of share repurchases may depend upon market conditions and economic circumstances, availability of investment opportunities, the availability and costs of financing, the market price of the Company's common stock, other uses of capital and other factors.

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2023, December 31, 2022 and December 31, 2021

The following table summarizes the repurchase activity under the stock repurchase program.

11 unchanged sentences

The Critical Infrastructure segment is a technology innovator focused on next generation digital systems and complex structures.

Industry leading

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2022, December 31, 2021 and December 31, 2020

capabilities in engineering and project management allow the Company to deliver significant value to customers by employing cutting-edge technologies, improving timelines and reducing costs.

The Company defines its reportable segments based on the way the chief operating decision maker (“CODM”), currently its Chief Executive Officer, evaluates the performance of each segment and manages the operations of the Company for purposes of allocating resources among the segments.

Industry leading capabilities in engineering and project management allow the Company to deliver significant value to customers by employing cutting-edge technologies, improving timelines and reducing costs.

The Company defines its reportable segments based on the way the chief operating decision maker (“CODM”), its Chief Executive Officer, evaluates the performance of each segment and manages the operations of the Company for purposes of allocating resources among the segments.

The CODM evaluates segment operating performance using segment Revenue and segment Adjusted EBITDA attributable to Parsons Corporation.

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

The following tables summarize business segment information for the periods presented (in thousands):

Federal Solutions

1 unchanged sentence

Total revenues

Equity in (losses) earnings of unconsolidated joint ventures:

Federal Solutions

Critical Infrastructure

Total equity in (losses) earnings of unconsolidated joint ventures

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2023, December 31, 2022 and December 31, 2021

The Company defines Adjusted EBITDA attributable to Parsons Corporation as Adjusted EBITDA excluding Adjusted EBITDA attributable to noncontrolling interests.

9 unchanged sentences

Interest expense, net

Income tax (expense) benefit

Equity-based compensation

Income tax expense

Equity-based compensation expense

Transaction-related costs (a)

Restructuring (b)

Restructuring expense (b)

Net income including noncontrolling

1 unchanged sentence

Net income attributable to Parsons

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

Reflects costs associated with and related to our corporate restructuring initiatives.

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2022, December 31, 2021 and December 31, 2020

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

(b) Reflects costs associated with and related to our corporate restructuring initiatives.

(c) Includes a combination of gain/loss related to sale of fixed assets, software implementation costs, and other individually insignificant items that are non-recurring in nature.

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

6 unchanged sentences

Total property and equipment, net

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2023, December 31, 2022 and December 31, 2021

North America revenue includes $ 4.1 billion, $ 3.2 billion and $ 2.7 billion of United States revenue for the years ended December 31, 2023, December 31, 2022 and December 31, 2021, respectively.

1 unchanged sentence

The geographic location of revenue is determined by the location of the customer.

The prior reporting of revenue by geographic location has been conformed to the current presentation.

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

2 unchanged sentences

Federal Solutions revenues

Mobility Solutions

Connected Communities

Infrastructure – North America

Infrastructure – Europe, Middle East and Africa

Critical Infrastructure revenues

Total revenues

Effective July 1, 2021, the Company made changes to its Federal Solutions business units by consolidating Space & Geospatial Solutions, Cyber & Intelligence, and Missile Defense & C5ISR into a new Defense and Intelligence business unit.

Effective January 1, 2022, the Company made changes to its Critical Infrastructure business units by transferring a portion of legacy Mobility Solutions to the Connected Communities business unit.

Effective June 1, 2022, the Company made changes to its Federal Solutions business units by transferring a portion of legacy Defense and Intelligence business unit to the Engineered Systems business unit.

The prior year information in the table above has been reclassified to conform to the business line changes.

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2022, December 31, 2021 and December 31, 2020

Effective October 1, 2023, the Company reorganized its Critical Infrastructure business units from Mobility Solutions and Connected Communities to Infrastructure – North America and Infrastructure – Europe, Middle East and Africa.

The prior year information in the table above has been reclassified to conform to the business unit changes.

Subsequent Events

1 unchanged sentence

Schedule II—Valuation and Qualifying Accounts

(in thousands)

Other and foreign

8 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures