What changed in this filing

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Item 9A. Controls and Procedures

2025-02-19 compared with 2024-02-14 · 515 added, 348 removed, 1337 unchanged (39% of the section changed)

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The Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP, which audited the Company’s consolidated financial statements included in this Annual Report on Form 10-K, also audited the effectiveness of our internal control over financial reporting as of December 31, 2024, as stated in their audit report included in this Annual Report on Form 10-K.

Consistent with the guidance issued by the Securities and Exchange Commission Staff, management has excluded 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.

Consistent with the guidance issued by the Securities and Exchange Commission Staff, management has excluded BlackSignal and BCC from its assessment of internal controls over financial reporting as of December 31, 2024.

BlackSignal a wholly owned subsidiary, which we acquired on August 16, 2024, has total assets and revenue of 4.3% and 0.3%, respectively of the related consolidated financial statement amounts as of and for the year ended December 31, 2024.

BCC a wholly owned subsidiary, which we acquired on November 1, 2024, has total assets and revenue of 4.8% and 0.3%, respectively of the related consolidated financial statement amounts as of and for the year ended December 31, 2024.

Changes in Internal Control Over Financial Reporting

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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, 2024, no director or named executive officer of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" (in each case, as defined in Item 408 of Regulation S-K).

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Directors, Executive Off icers and Corporate Governance.

The Company has adopted amended insider trading policies and procedures governing the purchase, sale and/or other dispositions of the Company's securities by directors, officers and employees, or the Company itself, that are reasonably designed to promote compliance with insider trading laws, rules and regulations, and New York Stock Exchange standards.

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

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Bank National Association.

Indenture, Dated as of February 26, 2024, between Parsons Corporation and U.S.

Bank Trust Company, National Association.

Form of 2.625% Convertible Senior Notes due 2029 (included in Exhibit 4.3).

2012 Amendment and Restatement of Parsons Employee Stock Ownership Plan (including all amendments to date), currently in effect .

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

Form of Confirmations of Base and Additional Call Option Transactions, between Parsons Corporation and Option Counterparties.

Tenth Amendment To The Parsons Corporation Retirement Savings Plan (2017 Amendment and Restatement).

Seventh Amendment To The Parsons Employee Stock Ownership Plan 2019 Amendment and Restatement.

Eleventh Amendment To The Parsons Corporation Retirement Savings Plan (2017 Amendment and Restatement)

Parsons Corporation Insider Trading Compliance Policy

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February 19, 2025

February 14, 2024

/s/ Letitia A.

February 19, 2025

/s/ Darren W.

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Consolidated Statements of Comprehensive Income for the Years ended December 31, 2024, December 31, 2023 and December 31, 2022

Consolidated Statements of Changes in Shareholders’ Equity (Deficit) for the Years ended December 31, 2023, December 31, 2022 and December 31, 2021

Consolidated Statements of Changes in Shareholders’ Equity for the Years ended December 31, 2024, December 31, 2023 and December 31, 2022

Consolidated Statements of Cash Flows for the Years ended December 31, 2024,

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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, 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 have audited the accompanying consolidated balance sheets of Parsons Corporation and its subsidiaries (the “Company”) as of December 31, 2024 and 2023, and the related consolidated statements of income, of comprehensive income, of changes in shareholders’ equity and of cash flows for each of the three years in the period ended December 31, 2024, including the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended December 31, 2024 appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of December 31, 2024 based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

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Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Changes in Accounting Principles

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for convertible instruments and contracts in an entity’s own equity in 2021.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for debt with conversion and other options in 2024.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the Management's Annual Report on Internal Control over Financial Reporting appearing under Item 9A.

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 9A.

Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits.

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

As described in Management’s Annual Report on Internal Control over Financial Reporting, management has excluded 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.

As described in Management’s Annual Report on Internal Control over Financial Reporting, management has excluded BlackSignal Technologies, LLC (“BlackSignal”) and BCC Engineering, LLC (“BCC”) from its assessment of internal controls over financial reporting as of December 31, 2024, because they were acquired by the Company in purchase business combinations during 2024.

We have also excluded BlackSignal and BCC from our audit of internal control over financial reporting.

BlackSignal and BCC are wholly-owned subsidiaries whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting represent approximately 4.3% and 4.8%, of total assets, respectively and approximately 0.3% and 0.3% of total revenues, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2024.

Definition and Limitations of Internal Control over Financial Reporting

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Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition – Determination of Estimated Contract Cost and Variable Consideration Related to Estimated Claims Revenue for Fixed-Price Contracts Recognized Over Time

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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 $1.8 billion for the year ended December 31, 2023, which accounts for approximately 33% of the Company’s

consolidated revenue.

Fixed-price contract revenue recognized was $2.8 billion for the year ended December 31, 2024, which accounts for approximately 42% of the Company’s consolidated revenue.

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

Under the cost-to-cost measure of progress method, the extent of progress towards completion is measured based on the ratio of total costs incurred-to-date to the total estimated costs at completion of the performance obligation.

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

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

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.

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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 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.

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;

(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 margins;

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 acquired.

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 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 the multi-period excess earnings methods.

/s/ PricewaterhouseCoopers LLP

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We have served as the Company’s auditor since at least 1969.

We have not been able to determine the specific year we began serving as the auditor of the Company.

We have not been able to determine the specific year we began serving as auditor of the Company.

Parsons Corporation and Subsidiaries

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Income taxes payable

Short-term debt

Total current liabilities

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Interest expense

Convertible debt repurchase loss

Other income (expense), net

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Parsons Corporation and Subsidiaries

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

Consolidated Statements of Changes i n Shareholders’ Equity

Years Ended December 31, 2024, December 31, 2023 and December 31, 2022

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stock to ESOP

Adoption of ASU 2020-06

Contributions

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Distributions

Capped call transactions

Repurchase of warrants

Bond hedge termination

Convertible debt inducement

Issuance of equity securities,

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Loss (gain) on disposal of property and equipment

Convertible debt repurchase loss

Provision for doubtful accounts

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Contributions of treasury stock

Changes in assets and liabilities, net of acquisitions and newly consolidated joint

Changes in assets and liabilities, net of acquisitions and newly consolidated joint ventures

Accounts receivable

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Cash flows from financing activities

Proceeds from borrowings

Proceeds from borrowings under credit agreement

Proceeds from delayed draw term loan

Repayments of borrowings

Repayments of borrowings under credit agreement

Repayment of private placement debt

Payments for debt costs and credit agreement

Payments for acquired warrants

Proceeds from issuance of convertible notes due 2029

Repurchases of convertible notes due 2025

Payments for debt issuance costs

Contributions by noncontrolling interests

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Taxes paid on vested stock

Capped call transactions

Bond hedge termination

Redemption of warrants

Proceeds from issuance of common stock

Net cash (used in) provided by financing activities

Net cash provided by (used in) financing activities

Effect of exchange rate changes

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Throughout the year, as employee services are rendered, the Company records compensation expense based on salaries of eligible employees.

At each reporting period, the shares held within the ESOP or committed to be contributed to the ESOP are adjusted to their redemption value through an offsetting charge or credit to retained earnings/accumulated deficit.

Treasury Stock

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

The Board further amended this authorization in February 2024 to restore the repurchase capacity to $ 100 million and removed the $ 25 million quarterly cap on such repurchases.

At the time of the February 2024 authorization, the Company had repurchased shares with an aggregated market value (including fees) of $ 54.7 million.

The aggregate market value of shares of Common Stock the Company is authorized to acquire is now not greater than $ 154.7 million.

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

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Revenue Recognition

In accordance with ASC 606, the Company follows the five-step process in ASC 606 to recognize revenue:

In accordance with Account Standard Update ("ASC") 606 - Revenue From Contracts With Customers , the Company follows the five-step process in ASC 606 to recognize revenue:

Identify the contract

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Time-and-Materials—Under time-and-materials contracts, hourly billing rates are negotiated and charged to clients based on the actual time spent on a project.

In certain cases, these contracts may be subject to maximum contract values.

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

In certain cases, these contracts may be

PARSONS CORPORATION AND SUBSIDIARIES

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December 31, 2024, December 31, 2023 and December 31, 2022

subject to maximum contract values.

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

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

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Such methods are:

(a) the expected value method, whereby the amount of variable consideration to be recognized represents the sum of probability weighted amounts in a range of possible consideration amounts, and (b) the most likely amount method, whereby the amount of variable consideration to be recognized represents the single most likely amount in a range of possible consideration amounts.

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

(a) the expected value method, whereby the amount of variable consideration to be recognized represents the sum of probability weighted amounts in

PARSONS CORPORATION AND SUBSIDIARIES

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December 31, 2024, December 31, 2023 and December 31, 2022

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.

a range of possible consideration amounts, and (b) the most likely amount method, whereby the amount of variable consideration to be recognized represents the single most likely amount in a range of possible consideration amounts.

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

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

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

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The Company generally uses the cost-to-cost measure of progress method because it best depicts the transfer of control to the customer which occurs as the Company incurs costs on its contracts.

Under the cost-to-cost measure of progress method, the extent of progress towards completion is measured based on the ratio of total costs incurred to-date to the total estimated costs at completion of the performance obligation.

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

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

The Company recognizes adjustments in

Under the cost-to-cost measure of progress method, the extent of progress towards completion is

PARSONS CORPORATION AND SUBSIDIARIES

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December 31, 2024, December 31, 2023 and December 31, 2022

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

measured based on the ratio of total costs incurred to-date to the total estimated costs at completion of the performance obligation.

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

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

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

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

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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

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December 31, 2024, December 31, 2023 and December 31, 2022

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

Two customer sets within the United States federal government represent over 20% of total Company revenue for the year ended December 31, 2024.

In order to mitigate the credit risk associated with customers, the Company performs periodic credit evaluations of its customers’ financial condition.

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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

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December 31, 2024, December 31, 2023 and December 31, 2022

determining the present value of lease payments.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

As most of the Company’s leases do not provide an implicit rate, incremental borrowing rates are used based on the information available at commencement date in determining the present value of lease payments.

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

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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.

The Company adjusts the preliminary purchase price allocation, as necessary, during the measurement period of up to one year after the acquisition closing date as the Company obtains more

PARSONS CORPORATION AND SUBSIDIARIES

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December 31, 2024, December 31, 2023 and December 31, 2022

information as to facts and circumstances existing at the acquisition date.

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

Consolidation of Joint Ventures and Variable Interest Entities

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When evaluating goodwill for impairment, the Company may decide to first perform a qualitative assessment, or “step zero” impairment test, to determine whether it is more likely than not that impairment has occurred.

If the Company does not perform a qualitative assessment, or if the Company determines that it is not more likely than not that the fair value of its reporting units exceeds their carrying amounts, the Company performs a quantitative assessment and calculates the estimated fair value of the respective reporting unit.

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

PARSONS CORPORATION AND SUBSIDIARIES

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December 31, 2024, December 31, 2023 and December 31, 2022

fair value of the respective reporting unit.

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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Transaction gains and losses due to movements in exchange rates between the functional currency and the currency in which a foreign currency transaction is denominated are recognized as “Other income (expense), net” in the Company’s consolidated statements of income.

Self-Insurance

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

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

PARSONS CORPORATION AND SUBSIDIARIES

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December 31, 2024, December 31, 2023 and December 31, 2022

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

Self-Insurance

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

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

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

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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").

In the fourth quarter of 2024, The Financial Accounting Standards Board ("FASB") Issued Accounting Standards Update (“ASU”) 2024-04, "Debt—Debt with Conversion and Other Options (Subtopic 470-20)" ("ASU 2024-04").

ASU 2024-04 improves the relevance and consistency in application of the induced conversion guidance in Subtopic 470-20, Debt– Debt with Conversion and Other Options .

The amendments in ASU 2024-04 clarify the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion.

Under the amendments, to account for a settlement of a convertible debt instrument as an induced conversion, an inducement offer is required to provide the debt holder with, at a minimum, the consideration (in form and amount) issuable under the conversion privileges provided in the terms of the instrument.

The amendments in this Update are effective for all entities for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods.

Early adoption is permitted for all entities that have adopted the amendments in ASU 2020-06.

The Company adopted ASU 2020-06 in the first quarter of 2021.

The Company has elected to early adopt ASU 2024-04 as of January 1, 2024 on a prospective basis.

The adoption of this ASU had a material impact on the Company's consolidated financial statements.

In the first quarter of 2024, the Company took an extinguishment charge related to the partial repurchase of Convertible Senior Notes due 2025.

This repurchase was recorded in the Company's financial statements as a loss on debt extinguishment according to the applicable guidance prior to ASU 2024-04.

With the early adoption of ASU 2024-04, the Company reassessed the accounting conclusion of the first quarter 2024 partial repurchase of Convertible Senior Notes due 2025 and concluded the partial repurchase is subject to inducement accounting under ASU 2024-04.

Under inducement accounting, the difference in the fair value of the securities issuable pursuant to conversion privileges compared to the fair value of the consideration paid on the date of the acceptance of the inducement offer is recorded to inducement expense.

The difference in the consideration paid to note holders, less inducement expenses, less the fair value of the notes repurchased is charged to equity.

For the year ended December 31, 2024, the Company reversed the loss on extinguishment of debt for the partial repurchase of the Convertible Senior Notes due 2025 and recorded the repurchase transaction as an induced conversion.

This change from extinguishment to inducement accounting resulted in the Company (i.) reversing the $ 211.0 million loss and the related $ 49.9 million tax benefit on extinguishment of debt, recorded in Q1 2024, (ii.) recording a $ 18.4 million convertible debt repurchase loss , (iii.) the difference between the extinguishment loss and inducement expense of $ 192.6 million recorded to equity, and (iv.) the related tax benefit of $ 45.6 million recorded to equity.

See "Note 11—D ebt and Credit Facilities" for a further discussion of the first quarter 2024 extinguishment accounting and subsequent change to inducement accounting.

Also see "Note 21—Quarterly Information " for the quarterly financial statement impacts related to this accounting change.

In the fourth quarter of 2024, The FASB Issued ASU 2024-03 "Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40)" (ASU 2024-03").

ASU 2024-03 requires disclosure, in the notes to financial statements, of specified information about certain costs and expenses.

ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027.

Early adoption is permitted.

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

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2024, December 31, 2023 and December 31, 2022

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

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

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Early adoption is permitted.

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

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

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

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Early adoption is permitted.

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

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

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

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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.

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

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

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 Company's consolidated balance sheet.

BCC Engineering, LLC

On November 1, 2024, the Company acquired a 100 % ownership interest in BCC Engineering, LLC ("BCC") a privately owned company, for $ 232.7 million from cash on hand.

BCC is a full-service engineering firm that provides planning, design, and management services for transportation, civil and structural engineering projects in Florida, Georgia, Texas, South Carolina, and Puerto Rico.

This acquisition strengthens Parsons’ position as an infrastructure leader while expanding the company’s reach in the southeastern United States.

In connection with this acquisition, the Company recognized $ 4.2 million of acquisition-related expenses in “Selling, general and administrative expense” in the consolidated statements of income for the year ended December 31, 2024, including legal fees, consulting fees, and other miscellaneous direct expenses associated with the acquisition.

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

PARSONS CORPORATION AND SUBSIDIARIES

1 unchanged sentence

December 31, 2024, December 31, 2023 and December 31, 2022

Cash and cash equivalents

Accounts receivable

Contract assets

Prepaid expenses and other current assets

Right of use assets, operating leases

Property and Equipment

Other noncurrent assets

Intangible assets

Accounts payable

Accrued expenses and other current liabilities

Contract liabilities

Short-term lease liabilities, operating leases

Deferred income taxes

Long-term lease liabilities, operating leases

Other long-term liabilities

Net assets acquired

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

Customer relationships

Non-compete agreements

Amortization expense of $ 1.5 million related to these intangible assets was recorded for the year ended December 31, 2024.

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

$ 45.8 million of goodwill is deductible for tax purposes.

The amount of revenue generated by BCC and included within consolidated revenue is $ 20.3 million for the year ended December 31, 2024.

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

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

Supplemental Pro Forma Information (Unaudited)

Supplemental information of unaudited pro forma operating results assuming the BCC acquisition had been consummated as of the beginning of fiscal year 2023 (in thousands) is as follows:

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, and the pro forma impact of reflecting acquisition costs, which consisted of legal, advisory and due diligence fees and expenses.

This supplemental pro forma information has been prepared for comparative purposes and does not purport to be indicative of what

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2024, December 31, 2023 and December 31, 2022

would have occurred had the acquisition been consummated during the periods for which pro forma information is presented.

BlackSignal Technologies, LLC.

On August 16, 2024, the Company acquired a 100 % ownership interest in BlackSignal Technologies, LLC, ("BlackSignal") a privately-owned company, for $ 203.7 million from cash on hand.

Headquartered in Chantilly, Virginia, BlackSignal is a next-generation digital signal processing, electronic warfare, and cyber security provider built to counter near peer threats.

Parsons believes that the acquisition will expand Parsons' customer base across the Department of Defense and Intelligence Community and significantly strengthen Parsons' positioning within cyber warfare, while adding new capabilities in the counterspace radio frequency domain.

In connection with this acquisition, the Company recognized $ 2.5 million of acquisition-related expenses in “Selling, general and administrative expense” in the consolidated statements of income for the year ended December 31, 2024, including legal fees, consulting fees, and other miscellaneous direct expenses associated with the acquisition.

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

Cash and cash equivalents

Accounts receivable

Contract assets

Prepaid expenses and other current assets

Right of use assets, operating leases

Property and Equipment

Intangible assets

Accounts payable

Accrued expenses and other current liabilities

Short-term lease liabilities, operating leases

Deferred income taxes

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

Non-compete agreements

Amortization expense of $ 4.3 million related to these intangible assets was recorded for the year ended December 31, 2024.

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

$ 15.7 million of goodwill is deductible for tax purposes.

The amount of revenue generated by BlackSignal and included within consolidated revenue is $ 22.7 million for the year ended December 31, 2024.

The Company has determined that the presentation of net

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2024, December 31, 2023 and December 31, 2022

income from the date of acquisition is impracticable due to the integration of general corporate functions upon acquisition.

Supplemental Pro Forma Information (Unaudited)

Supplemental information of unaudited pro forma operating results assuming the BlackSignal acquisition had been consummated as of the beginning of fiscal year 2023 (in thousands) is as follows:

Pro forma Revenue

Pro forma Net Income including noncontrolling interests

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.

Engineers, LLC

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

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

Engineers, LLC (“I.S.

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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 $ 176.0 million in cash and up to an additional $ 25 million in the event an earn out revenue target is exceeded.

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

The Company borrowed $ 175 million under the Credit Agreement to partially fund the acquisition.

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

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

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

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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 earn out payment, if any, shall be paid by the Company to the selling shareholders

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2024, December 31, 2023 and December 31, 2022

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.

See "Note 2— Summary of Significant Accounting Policies" and "Note 18—Fair Value " for further information on how the fair value of contingent consideration is determined.

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

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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):

The estimated fair value of the SealingTech contingent consideration as of December 31, 2024 and December 31, 2023 was zero and $ 2.3 million, respectively.

The change in fair value to zero resulted in recording a $ 2.3 million gain to "other income (expense), net" in the consolidated financial statements.

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

Cash and cash equivalents

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Developed technologies

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

Amortization expense of $ 12.9 million and $ 7.0 million related to these intangible assets was recorded for the years ended December 31, 2024 and December 31, 2023, respectively.

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

The entire value of goodwill is deductible for tax purposes.

The amount of revenue generated by SealingTech and included within consolidated revenue is $ 34.1 million for the year 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.

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

The Company has determined that the presentation of net

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2024, December 31, 2023 and December 31, 2022

income from the date of acquisition is impracticable due to the integration of general corporate functions upon acquisition.

Supplemental Pro Forma Information (Unaudited)

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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

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

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

Cash and cash equivalents

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Net assets acquired

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2024, December 31, 2023 and December 31, 2022

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

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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.

Amortization expense of $ 1.6 million and $ 1.4 million related to these intangible assets was recorded for the years ended December 31, 2024 and December 31, 2023, respectively.

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

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On May 31, 2022, the Company acquired a 100 % ownership interest in Xator Corporation (“Xator”), a privately-owned company, for $ 387.5 million in cash.

The Company borrowed $ 300 million under the Credit Agreement, as described in “Note 11 – Debt and Credit Facilities ”, to partially fund the acquisition.

The Company borrowed $ 300 million under the Credit Agreement to partially fund the acquisition.

Xator expands Parsons’ customer base and brings differentiated technical capabilities in critical infrastructure protection, counter-unmanned aircraft systems (cUAS), intelligence and cyber solutions, biometrics, and global threat assessment and operations.

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December 31, 2024, December 31, 2023 and December 31, 2022

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

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Non-compete agreements

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.

Amortization expense of $ 16.5 million, $ 18.1 million and $ 11.9 million related to these intangible assets was recorded for the year ended December 31, 2024, December 31, 2023, and December 31, 2022, respectively.

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

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

BlackHorse Solutions, Inc.

On July 6, 2021, the Company acquired a 100 % ownership interest in BlackHorse Solutions, Inc (“BlackHorse”), a privately-owned company, for $ 205.0 million paid in cash.

BlackHorse expands Parsons’ capabilities and products in next-generation military, intelligence, and space operations, specifically in cyber electronic warfare and information dominance.

The acquisition was entirely funded by cash on-hand.

In connection with this acquisition, the Company recognized $ 3.1 million of acquisition-related expenses in “Selling, general and administrative expense” in the consolidated statements of income for the year ended December 31, 2021, including legal fees, consulting fees, and other miscellaneous direct expenses associated with the acquisition.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed 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

Other long-term 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

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.

The entire value of goodwill of $ 143.1 million was assigned to the Federal Solutions reporting unit and represents synergies expected to be realized from this business combination.

Goodwill of $ 10.6 million is deductible for tax purposes.

The amount of revenue generated by BlackHorse and included within consolidated revenues was $ 35.3 million for the year ended December 31, 2021.

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 on an unaudited pro forma basis, as if the acquisition closed as of the beginning of the fiscal year ended December 31, 2020 as follows (in thousands):

Pro forma Revenue

Pro forma Net Income including noncontrolling interests

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

Echo Ridge LLC

On July 30, 2021, the Company acquired a 100 % ownership interest in Echo Ridge LLC (“Echo Ridge”), a privately-owned company, for $ 9.0 million in cash.

Echo Ridge adds position, navigation, and timing devices;

modeling, simulation, test, and measurement tools;

and deployable software defined radio products and signal processing services to Parsons’ space portfolio.

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, 2021, 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 $ 7.2 million entirely to goodwill.

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

Goodwill in its entirety is deductible for tax purposes.

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

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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

Contracts with Customers

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Contract assets at December 31, 2024 and December 31, 2023 include approximately $ 70.7 million and $ 109.5 million, respectively, related to net claim recovery estimates.

For the 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.

For the year ended December 31, 2024 there was a $ 21.6 million loss recognized related to the collectability of claims.

For the year ended December 31, 2023 , there were no material losses recognized related to the collectability of claims.

During the years ended December 31, 2024 and December 31, 2023, the Company recognized revenue of approximately $ 190.3 million and $ 126.0 million, respectively, that was included in the corresponding contract liability balance at December 31, 2023 and December 31, 2022 , respectively.

4 unchanged sentences

Acquired contract liabilities

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2024, December 31, 2023 and December 31, 2022

There was no significant impairment of contract assets recognized during the years ended December 31, 2024 and December 31, 2023.

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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, 2024

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Diluted earnings (loss) per share

The amounts for 2024, in the table above, include the impact from a contract in the Critical Infrastructure segment related to a change in estimate increasing direct costs of contracts by $ 6.3 million.

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

10 unchanged sentences

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

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2024, December 31, 2023 and December 31, 2022

Transaction Price Allocated to the Remaining Unsatisfied Performance Obligations

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RUPO is comprised of:

(a) original transaction price, (b) change orders for which written confirmations from our customers have been received, (c) pending change orders for which the Company expects to receive confirmations in the ordinary course of business, and (d) claim amounts that the Company has made against customers for which it has determined that it has a legal basis under existing contractual arrangements and a significant reversal of revenue is not probable, less revenue recognized to-date.

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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

(a) original transaction price, (b) change orders for which written confirmations from our customers have been received, (c) pending change orders for which the Company expects to receive confirmatrions in the ordinary course of business, and (d) claim amounts that the Company has made against customers for which it has determined that it has a legal basis under existing contractual arrangements and a significant reversal of revenue is not probable, less revenue recognized to-date.

The Company expects to satisfy its RUPO as of December 31, 2024 over the following periods (in thousands):

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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 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 .

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

The components of lease costs for the years ended December 31, 2024 and December 31, 2023 are as follows (in thousands):

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Total lease cost

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2024, December 31, 2023 and December 31, 2022

Supplemental cash flow information related to leases for the years ended December 31, 2024 and December 31, 2023 is as follows (in thousands):

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finance lease liabilities

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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

Supplemental balance sheet and other information related to leases as of December 31, 2024 and December 31, 2023 is as follows (in thousands):

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Total present value of lease liabilities

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

1 unchanged sentence

December 31, 2024, December 31, 2023 and December 31, 2022

Rental expense for the years ended December 31, 2024, December 31, 2023 and December 31, 2022 was $ 82.0 million , $ 81.0 million and $ 81.0 million , respectively, and is recorded in “Selling, general and administrative expenses” in the consolidated statements of income.

Employee Stock Purchase and Equity-Based Compensation Plans

21 unchanged sentences

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

Stock-based compensation expense was $ 27.5 million, $ 20.0 million, and $ 16.8 million for the years ended December 31, 2023, December 31, 2022 and December 31, 2021 , respectively, net of recognized tax benefits of $ 8.6 million, $ 4.4 million, and $ 2.8 million for 2023, 2022 and 2021, respectively.

The tax benefit realized related to awards vested during 2023, 2022, and 2021 was $ 4.3 million, $ 2.7 million, and $ 6.3 million, respectively.

We recognize forfeitures as they occur.

Stock-based compensation expense was $ 52.6 million, $ 27.5 million, and $ 20.0 million for the years ended December 31, 2024, December 31, 2023 and December 31, 2022 , respectively, net of recognized

PARSONS CORPORATION AND SUBSIDIARIES

1 unchanged sentence

December 31, 2024, December 31, 2023 and December 31, 2022

tax benefits of $ 8.9 million, $ 8.6 million, and $ 4.4 million for 2024, 2023 and 2022, respectively.

The tax benefit realized related to awards vested during 2024, 2023, and 2022 was $ 12.0 million, $ 4.3 million, and $ 2.7 million, respectively.

We recognize forfeitures as they occur.

At December 31, 2024 , the amount of compensation cost relating to non-vested awards not yet recognized in the consolidated financial statements is $ 51.3 million.

The majority of these unrecognized compensation costs will be recognized by the 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

Long-Term Growth

Restricted Award Units

The majority of these unrecognized compensation costs will be recognized by the third quarter of fiscal 2026.

Restricted Stock Units

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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.

During the years ended December 31, 2024 and December 31, 2023, certain restricted stock unit grants with performance conditions vested with performance different from the target share amounts.

As a result, 99,280 and 97,551 additional shares, respectively were granted and vested.

PARSONS CORPORATION AND SUBSIDIARIES

65 unchanged sentences

December 31, 2023

Short-Term Debt:

Delayed draw term loan

Convertible senior notes due 2025

Total Short-Term Debt

Long-Term Debt:

Delayed draw term loan

Convertible senior notes

Convertible senior notes due 2025

Convertible senior notes due 2029

Revolving credit facility

Debt issuance costs

Revolving Credit Facility

In June 2021 , the Company entered into a $ 650 million unsecured revolving credit facility (the “Credit Agreement”).

The Company incurred $ 1.9 million of costs in connection with this Credit Agreement.

The 2021 Credit Agreement replaced an existing Fifth Amended and Restated Credit Agreement dated as of November 15, 2017.

Under the new agreement, the Company’s revolving credit facility was increased from $ 550 million to $ 650 million.

The credit facility has a five-year maturity, which may be extended up to two times for periods determined by the Company and the applicable extending lenders, and permits the Company to borrow in U.S.

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

The borrowings under

Total Long-Term Debt

PARSONS CORPORATION AND SUBSIDIARIES

1 unchanged sentence

December 31, 2024, December 31, 2023 and December 31, 2022

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.

Borrowings under this Credit Agreement are guaranteed by certain Company operating subsidiaries.

Letters of credit commitments outstanding under this agreement aggregated approximately $ 43.8 million and $ 44.5 million at December 31, 2023 and December 31, 2022 , respectively, which reduced borrowing limits available to the Company.

Interest expense related to the Credit Agreement was $ 3.9 million, $ 4.3 million and $ 0.7 million, for the years ended December 31, 2023, December 31, 2022 and December 31, 2021 , respectively.

There were no loan amounts outstanding under the Credit Agreement at December 31, 2023 and December 31, 2022.

The Credit Agreement includes various covenants, including restrictions on indebtedness, liens, acquisitions, investments or dispositions, payment of dividends and maintenance of certain financial ratios and conditions.

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

Convertible Senior Notes

Delayed Draw Term Loan

In September 2022 , the Company entered into a $ 350 million unsecured Delayed Draw Term Loan with an increase option of up to $ 150 million (the “2022 Delayed Draw Term Loan”).

The 2022 Delayed Draw Term Loan may be borrowed in a single draw during the period from and including the Closing Date to the earlier to occur of (a) the date of termination of the 2022 Delayed Draw Term Loan by the Company pursuant to the terms of the 2022 Delayed Draw Term Loan Agreement and (b) six (6) months following the Closing Date.

Proceeds of the 2022 Delayed Draw Term Loan Agreement may be used (a) to pay off in full, or partially payoff, the Company’s existing Senior Notes, (b) to prepay revolving loans outstanding under the Revolving Credit Agreement (as defined below), or (c) for working capital, capital expenditures and other lawful corporate purposes.

The Company drew $ 350.0 million from the 2022 Delayed Draw Term Loan in November 2022.

The Company incurred $ 0.9 million of debt issuance costs in connection with the delayed draw term loan as of December 31, 2022.

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

Interest expense related to the Delayed Draw Term Loan was $ 23.1 million, $ 22.4 million and $ 3.3 million for the years ended December 31, 2024, December 31, 2023 and December 31, 2022 respectively.

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

As of December 31, 2024 and December 31, 2023 , there was $ 350.0 million outstanding under the Delayed Draw Term Loan.

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

The 2022 Delayed Draw Term Loan does not require any amortization payments by the Company.

Depending on the Company’s consolidated leverage ratio (or debt rating after such time as the Company has such rating), borrowings under the 2022 Delayed Draw Term Loan Agreement will bear interest at either an adjusted Term SOFR benchmark rate plus a margin between 0.875 % and 1.500 % or a base rate plus a margin of between 0 % and 0.500 % and will initially bear interest at the middle of this range.

The Company will pay a ticking fee on unused term loan commitments at a rate of 0.175 % commencing with the date that is ninety (90) days after the Closing Date.

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

The interest rates on December 31, 2024 and December 31, 2023 were 5.6 % and 6.6 %, respectively.

Convertible Senior Notes due 2025

In August 2020, the Company issued an aggregate $ 400.0 million of 0.25 % Convertible Senior Notes due 2025, including the exercise of a $ 50.0 million initial purchasers’ option.

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On or after March 15, 2025 until the close of business on the second scheduled trading day immediately preceding the maturity date of the Convertible Senior Notes, holders may convert all or a portion of their Convertible Senior Notes, regardless of the conditions below.

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2024, December 31, 2023 and December 31, 2022

Prior to the close of business on the business day immediately preceding March 15, 2025, the Notes will be convertible at the option of the holders thereof only under the following circumstances:

3 unchanged sentences

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

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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

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.

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If the Company satisfies its conversion obligation solely in cash or through payment and delivery of a combination of cash and shares of the Company’s common stock, the amount of cash and shares of common stock due upon conversion will be based on a daily conversion value calculated on a proportionate basis for each trading day in a 50-trading day observation period.

Under existing GAAP at the time of issuance during 2020, convertible debt instruments that may be settled in cash on conversion were required to be separated into liability and equity components in a manner that reflects the issuer’s non-convertible debt borrowing rate.

The carrying amount of the liability component was based on the fair value of a similar instrument that does not contain an equity conversion option.

The carrying amount allocated to the equity component, which was recognized as a debt discount, represents the difference between the proceeds from the issuance of the notes and the fair value of the liability component of the notes.

Based on this debt-to-equity ratio, debt issuance costs are then allocated to the liability and equity components in a similar manner.

Accordingly, at issuance the Company allocated $ 336.1 million to the debt liability and $ 53.6 million to additional paid-in capital.

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 $ 3.1 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.

In the first quarter of 2021, the Company early adopted ASU 2020-06.

The Company used the modified retrospective method which resulted in a reduction in non-cash interest expense and reclassification of the equity component of the convertible senior notes of $ 55.0 million and equity component of the debt issuance costs of $ 1.4 million to liabilities on the consolidated balance sheet.

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

In September 2022 , the Company entered into a $ 350 million unsecured Delayed Draw Term Loan with an increase option of up to $ 150 million (the “2022 Delayed Draw Term Loan”).

The Company drew $ 350.0 million from the 2022 Delayed Draw Term Loan in November 2022.

The Company incurred $ 0.9 million of debt issuance costs in connection with the delayed draw term loan as of December 31, 2022.

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

Interest expense related to the Delayed Draw Term Loan was $ 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, 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.

The 2022 Delayed Draw Term Loan does not require any amortization payments by the Company.

The Company will pay a ticking fee on unused term loan commitments at a rate of 0.175 % commencing with the date that is ninety (90) days after the Closing Date.

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

Letters of Credit

The Company also has in place several secondary bank credit lines for issuing letters of credit, principally for foreign contracts, to support performance and completion guarantees.

Letters of credit commitments outstanding under these bank lines aggregated approximately $ 320.7 million and $ 222.5 million at December 31, 2023 and December 31, 2022, respectively.

Convertible Note Hedge and Warrant

The Company recognized interest expense of $ 3.9 million, $ 3.1 million and $ 3.0 million for the years ended December 31, 2024.

December 31, 2023 and December 31, 2022, respectively.

As of December 31, 2024 and December 31, 2023 the net carrying value of the Convertible Senior Notes due 2025 were $ 113.4 million and $ 396.5 million, respectively.

See the discussion of the partial repurchase of Convertible Senior Notes due 2025 and the unwind of the related note hedge and warrants below.

Note Hedge and Warrant - Convertible Senior Notes due 2025

In connection with the sale of the Convertible Senior Notes, the Company purchased a bond hedge designed to mitigate the potential dilution from the conversion of the Convertible Senior Notes.

Under the five-year term of the bond hedge, upon a conversion of the bonds, the Company will receive the number of shares of common stock equal to the remaining common stock deliverable upon conversion of the Convertible Senior Notes if the conversion value exceeds the principal amount of the Notes.

The aggregate number of shares that the Company could be obligated to issue upon conversion of the Convertible Senior Notes is approximately 8.9 million shares.

The cost of the convertible note hedge transactions was $ 55.0 million.

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

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

PARSONS CORPORATION AND SUBSIDIARIES

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December 31, 2024, December 31, 2023 and December 31, 2022

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

aggregate number of shares that the Company could be obligated to issue upon conversion of the Convertible Senior Notes is approximately 8.9 million shares.

The cost of the convertible note hedge transactions was $ 55.0 million.

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

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

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

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

Convertible Senior Notes due 2029

In February 2024, the Company issued an aggregate $ 800.0 million of 2.625 % Convertible Senior Notes due 2029 (the “2029 Convertible Notes”), including the exercise of a $ 100.0 million initial purchasers’ option in full.

The Company received proceeds from the issuance and sale of the 2029 Convertible Notes of $ 781.1 million, net of $ 18.9 million of transaction fees and other third-party offering expenses.

The 2029 Convertible Notes accrue interest at a rate of 2.625 % per annum, payable semi-annually on March 1 and September 1 of each year beginning on September 1, 2024 , and will mature on March 1, 2029 , unless earlier repurchased, redeemed or converted.

The 2029 Convertible Notes are the Company’s senior unsecured obligations and will rank senior in right of payment to any of the Company’s indebtedness that is expressly subordinated in right of payment to the 2029 Convertible Notes;

equal in right of payment to any of the Company’s unsecured indebtedness that is not so subordinated;

effectively junior in right of payment to any of the Company’s secured indebtedness, including borrowings under the Company’s revolving credit facility and delayed draw term loan credit facility, to the extent of the value of the assets securing such indebtedness;

and structurally junior to all indebtedness and other liabilities (including trade payables) of the Company’s subsidiaries.

Each $ 1,000 of principal of the 2029 Convertible Notes will initially be convertible into 10.6256 shares of our common stock, which is equivalent to an initial conversion price of approximately $ 94.11 per share, subject to adjustment upon the occurrence of specified events.

On or after October 1, 2028 until the close of business on the second scheduled trading day immediately preceding the maturity date of the 2029 Convertible Notes, holders may convert all or a portion of their 2029 Convertible Notes, regardless of the conditions below.

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2024, December 31, 2023 and December 31, 2022

Prior to the close of business on the business day immediately preceding October 1, 2028, the 2029 Convertible Notes will be convertible at the option of the holders thereof only under the following circumstances:

• during any calendar quarter commencing after the calendar quarter ending on June 30, 2024, if the last reported sale price of the Company’s common stock for at least 20 trading days, whether or not consecutive, during a period of 30 consecutive trading days ending on, and including the last trading day of the immediately preceding calendar quarter, is greater than or equal to 130 % of the conversion price on each applicable trading day;

• during the five business day period after any ten consecutive trading day period in which, for each trading day of that period, the trading price per $ 1,000 principal amount of 2029 Convertible Notes for such trading day was less than 98 % of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day;

• if the Company calls such 2029 Convertible Notes for redemption;

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

The Company may redeem all or any portion of the 2029 Convertible Notes for cash, at its option, on or after March 8, 2027 and before the 51 st scheduled trading day immediately before the maturity date at a redemption price equal to 100 % of the principal amount of the 2029 Convertible Notes to be redeemed, plus accrued and unpaid interest, but only if the last reported sale price per share of the Company’s common stock exceeds 130 % of the conversion price for a specified period of time.

In addition, calling any 2029 Convertible Notes for redemption will constitute a Make-Whole Fundamental Change with respect to that 2029 Convertible Note, in which case the conversion rate applicable to the conversion of that 2029 Convertible Notes will be increased in certain circumstances if it is converted after it is called for redemption.

Upon the occurrence of a fundamental change prior to the maturity date of the 2029 Convertible Notes, holders of the 2029 Convertible Notes may require the Company to repurchase all or a portion of the 2029 Convertible Notes for cash at a price equal to 100 % of the principal amount of the 2029 Convertible Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

Upon conversion, the Company will settle the principal amount of the 2029 Convertible Notes converted in cash and will settle the remainder of the consideration owed upon conversion in cash, shares of the Company’s common stock, or a combination thereof, at the Company’s option, with such amount of cash and, if applicable, shares of common stock due upon conversion based on a daily conversion value calculated on a proportionate basis for each trading day in a 50-trading day observation period.

The Company recognized interest expense with respect to the 2029 Convertible Notes of $ 21.3 million for the year ended December 31, 2024.

As of December 31, 2024 , the net carrying value of the 2029 Convertible Notes due 2029 was $ 784.3 million.

Capped Call Transactions - Convertible Senior Notes due 2029

In February 2024, in connection with the offering of the 2029 Convertible Notes, the Company entered into capped call transactions (the “Capped Call Transactions”) with certain financial institutions.

The Capped Call Transactions are expected generally to reduce the potential dilution to the Company’s common stock upon any conversion of the Convertible Senior Notes due 2029 and/or offset any cash payments the Company is required to make in excess of the principal amount of any converted

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2024, December 31, 2023 and December 31, 2022

Convertible Senior Notes due 2029, as the case may be.

If, however, the market price per share of the Company’s common stock, as measured under the terms of the Capped Call Transactions, exceeds the cap price of the Capped Call Transactions, there would nevertheless be dilution and/or there would not be an offset of such cash payments, in each case, to the extent that such market price exceeds the cap price of the Capped Call Transactions.

The cap price of the Capped Call Transactions is initially $ 131.7575 per share, which represents a premium of 75 % over the last reported sale price of the Company’s common stock of $ 75.29 per share on the New York Stock Exchange on February 21, 2024, and is subject to certain adjustments under the terms of the Capped Call Transactions.

The cost of $ 88.4 million for the Capped Call Transactions was recorded as a reduction to additional paid-in capital in the consolidated balance sheets.

At issuance, the Company recorded a deferred tax asset of $ 22.3 million related to the Capped Call Transactions costs through additional paid-in capital.

The deferred tax asset was included in Deferred tax assets in the consolidated balance sheets.

Convertible Senior Notes due 2025 Partial Repurchase and Note Hedge and Warrants Partial Unwind

In connection with the issuance of the Convertible Senior Notes due 2029, during the first quarter of 2024, we used $ 391.8 million of the net proceeds to purchase approximately $ 228.1 million aggregate principal amount of our Convertible Senior Notes due 2025 concurrently with the offering in separate and individually negotiated transactions.

In addition, we used $ 103.8 million to settle the repurchase of approximately $ 56.5 million aggregate principal amount of our Convertible Senior Notes due 2025 in a separately negotiated transaction that settled in March 2024.

We also received approximately $ 90.6 million in cash from the note hedge counterparties for the partial termination of the existing bond hedge relating to the Convertible Senior Notes due 2025 repurchased, net of our obligations to the counterparties in connection with the partial termination of the related warrant transactions.

The tax effect of $ 46.2 million from the partial unwind of the existing bond hedge was recognized as a reduction in additional paid-in capital in the consolidated balance sheets.

The income tax payable was included in Income taxes payable in the consolidated balance sheets.

The partial repurchase, during the year ended December 31, 2024 , resulted in a $ 18.4 million repurchase loss 1 and a $ 3.2 million charge to interest expense for the acceleration of the amortization of debt issuance costs associated with the 0.25 % Convertible Senior Notes due 2025.

The tax effect of the repurchase loss, excluding the interest expense, was recognized as a discrete event during the year with a tax benefit of $ 4.3 million recognized in the income statement.

1 During the first quarter of 2024, prior to the early adoption of ASU 2024-04, the Company recorded a $ 211.0 million loss on debt extinguishment associated with the 0.25 % Convertible Senior Notes due 2025.

The tax effect of the debt extinguishment, excluding the interest expense, was recognized as a discrete event to the quarter giving rise to an increase in the effective tax rate and tax benefit of $ 49.9 million recognized in the income statement.

Please see "Note 2—Summary of Significant Accounting Policies—New Accounting Pronouncements" for a discussion of the Company's adoption of ASU 2024-04.

The extinguishment charge and related income tax impacts were reversed from the Company's consolidated financial statements and recorded as a convertible debt repurchase loss as described above.

Revolving Credit Facility

In June 2021 , the Company entered into a $ 650 million unsecured revolving credit facility (the “Credit Agreement”).

The Company incurred $ 1.9 million of costs in connection with this Credit Agreement.

The 2021 Credit Agreement replaced an existing Fifth Amended and Restated Credit Agreement dated as of November 15, 2017.

Under the new agreement, the Company’s revolving credit facility was increased from $ 550 million to $ 650 million.

dollars, certain specified foreign currencies, and

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2024, December 31, 2023 and December 31, 2022

each other currency that may be approved in accordance with the 2021 Facility.

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

The rates on December 31, 2024 and December 31, 2023 were 5.7 % and 6.7 %, respectively.

Borrowings under this Credit Agreement are guaranteed by certain Company operating subsidiaries.

Letters of credit commitments outstanding under this agreement aggregated approximately $ 43.0 million and $ 43.8 million at December 31, 2024 and December 31, 2023 , respectively, which reduced borrowing limits available to the Company.

Interest expense related to the Credit Agreement was $ 0.7 million, $ 3.9 million and $ 4.3 million, for the years ended December 31, 2024, December 31, 2023 and December 31, 2022 , respectively.

There were no loan amounts outstanding under the Credit Agreement at December 31, 2024 and December 31, 2023.

The Company was in compliance with these covenants at December 31, 2024 and December 31, 2023.

Letters of Credit

The Company also has in place several secondary bank credit lines for issuing letters of credit, principally for foreign contracts, to support performance and completion guarantees.

Letters of credit commitments outstanding under these bank lines aggregated approximately $ 328.4 million and $ 320.7 million at December 31, 2024 and December 31, 2023 , respectively.

Other Long-term Liabilities

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

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

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

United States earnings

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December 31, 2024, December 31, 2023 and December 31, 2022

The income tax expense (benefit) attributable to income from continuing operations for the years ended December 31, 2023, December 31, 2022, and December 31, 2021 consists of the following (in thousands):

The income tax expense (benefit) attributable to income from operations for the years ended December 31, 2024, December 31, 2023, and December 31, 2022 consists of the following (in thousands):

Total current income tax expense

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Tax cost of foreign operations, net of credits

Foreign-Derived Intangible Income

Foreign-derived intangible income deduction

Noncontrolling interests

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Executive compensation

Equity compensation

Total income tax expense

The effective tax rate in 2024 decreased to 20.9 % from 21.3 % in 2023.

The change in the effective tax rate was due primarily to tax benefits related to increases in the foreign-derived intangible income (FDII) deduction and increased equity-based compensation deductions, partially offset by an increase in valuation allowance on NOLs and non-deductible executive compensation subject to Section 162(m).

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

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

The effective tax rate 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

The effective tax rate for the year ended December 31, 2024 differs from the federal statutory tax rate of 21 % primarily due to state income taxes, valuation allowance and executive compensation subject to Section 162(m), offset by benefits related to untaxed income attributable to noncontrolling interests, earnings in lower tax jurisdictions, the FDII deduction, and equity-based compensation deductions.

PARSONS CORPORATION AND SUBSIDIARIES

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December 31, 2024, December 31, 2023 and December 31, 2022

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, 2023 differs from the federal statutory tax rate primarily due to state income taxes, valuation allowance on foreign tax credit carryovers originating from foreign taxes, partially offset by benefits related to untaxed income attributable to noncontrolling interests, earnings in lower tax jurisdictions, the FDII deduction, and federal business tax credits.

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

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

The components of deferred tax assets and liabilities consist of the following at December 31, 2024 and December 31, 2023 (in thousands):

Deferred tax assets

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Net deferred tax asset

The Company is not asserting that any of the earnings of the foreign subsidiaries will be permanently reinvested.

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

The Company assesses the realizability of its deferred tax assets each reporting period through an analysis of potential sources of taxable income, including prior year taxable income available to absorb carryback of tax losses, reversals of existing taxable temporary differences, tax planning strategies, and forecasts of taxable income.

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A valuation allowance is recorded against deferred tax assets to reflect the amount of deferred tax assets that is determined to be more-likely-than-not to be realized.

The Company is not asserting that any of the earnings of the foreign subsidiaries will be permanently reinvested.

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

As of December 31, 2024, and December 31, 2023, the Company’s valuation allowance against deferred tax assets was $ 45.3 million and $ 34.8 million, respectively.

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From December 31, 2023 to December 31, 2024, the Company’s valuation allowance increased by $ 10.5 million.

This increase relates to deferred tax assets recorded for 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

This increase relates to deferred tax assets recorded for net operating loss carryforwards and foreign tax credit carryforwards.

The valuation allowance is recorded because the Company does not expect to have sufficient taxable income and

PARSONS CORPORATION AND SUBSIDIARIES

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December 31, 2024, December 31, 2023 and December 31, 2022

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.

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

As of December 31, 2024, the Company has Net Operating Losses ("NOLs") of $ 1.7 million, $ 20.3 million, and $ 74.2 million for U.S.

Federal, U.S.

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During the years ended December 31, 2024, December 31, 2023, and December 31, 2022, the Company recognized approximately $ 1 million, $ 0.5 million, and $ 0.7 million in interest and penalties, respectively, in the consolidated statements of income.

The total amount of interest and penalties accrued in the consolidated balance sheets was $ 4.6 million, $ 4.1 million, and $ 3.5 million at December 31, 2023, December 31, 2022, and December 31, 2021, respectively.

The Company conducts business globally and, as a result, the Company or one or more of its subsidiaries file income tax returns in the U.S.

The total amount of interest and penalties accrued in the consolidated balance sheets was $ 5.6 million, $ 4.6 million, and $ 4.1 million as of December 31, 2024, December 31, 2023, and December 31, 2022, respectively.

The Company conducts business globally and, as a result, the Company or one or more of its subsidiaries files income tax returns in the U.S.

federal jurisdiction, various U.S.

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We are awaiting the court’s rulings upon such motions, which will determine whether a trial will be necessary for this matter in 2025.

On 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).

On July 1, 2024, a final judgment was filed with the clerk of the Superior Court of the State of California In and For the County of San Mateo with an award of damages in the total amount of approximately $ 102.5 million in favor of Parsons Transportation Group, Inc.

and against Alstom Signaling Operations LLC (Alstom").

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

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.

On September 23, 2024, the Court awarded pre-judgment interest in the amount of $ 34.0 million and amended the judgment accordingly to include such interest.

Alstom filed a Notice of Appeal and has posted a bond as required under California law.

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

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

Audits by the DCAA and other agencies consist of reviews of our overhead rates, operating systems and cost proposals to ensure that we account for such costs in accordance with the Cost Accounting Standards (“CAS”).

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

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

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

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

However, the Company can provide no assurance that the DCAA or other government audits will

PARSONS CORPORATION AND SUBSIDIARIES

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December 31, 2024, December 31, 2023 and December 31, 2022

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

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

However, the Company can provide no assurance that the DCAA or other government audits will not result in material disallowances for incurred costs in the future.

not result in material disallowances for incurred costs in the future.

All audits of costs incurred on work performed through 2014 have been closed, and years thereafter remain open.

All of Parsons operating systems have been deemed adequate by the U.S.

federal government.

Although there can be no assurance that these matters will be resolved favorably, management believes that their ultimate resolution will not have a material adverse impact on the Company’s consolidated financial position, results of operations, or cash flows.

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The Company is required to consolidate these joint ventures if it holds the majority voting interest or if the Company meets the criteria under the consolidation model, as described below.

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

Such analysis requires the Company to assess whether it has the power to

PARSONS CORPORATION AND SUBSIDIARIES

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December 31, 2024, December 31, 2023 and December 31, 2022

Such analysis requires the Company to assess whether it has the power to direct the activities of the VIE and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.

direct the activities of the VIE and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.

The Company analyzed all of its joint ventures and classified them into two groups:

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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

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

PARSONS CORPORATION AND SUBSIDIARIES

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December 31, 2024, December 31, 2023 and December 31, 2022

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, 2024, December 31, 2023 and December 31, 2022 (in thousands):

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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

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For the years ended December 31, 2024, December 31, 2023 and December 31, 2022, revenues included $ 182.6 million , $ 213.8 million, and $ 217.4 million, respectively, related to services the Company provided to unconsolidated joint ventures.

For the years ended December 31, 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

For the years ended December 31, 2024, December 31, 2023 and December 31, 2022, the Company incurred approximately $ 143.2 million , $ 153.7 million and $ 157.6 million, respectively, of reimbursable costs.

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

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

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2024, December 31, 2023 and December 31, 2022

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”).

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Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

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

Fair value as of December 31, 2024 (in thousands):

Assets related to defined contribution plan

Cash and cash equivalents

Total assets at fair value

PARSONS CORPORATION AND SUBSIDIARIES

1 unchanged sentence

December 31, 2024, December 31, 2023 and December 31, 2022

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

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

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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.

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

Earnings Per Share

The tables below reconcile the denominator and numerator used to compute basic earnings per share (“EPS”) to the denominator and numerator used to compute diluted EPS for the years ended December 31, 2023, December 31, 2022 and December 31, 2021.

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

The carrying values and estimated fair values of our financial instruments that are not required to be recorded at fair value in our consolidated balance sheets, on the basis of Level 1 inputs for the Company's convertible notes and Level 2 inputs for the delayed draw term loan, were as follows (in thousands):

December 31, 2024

December 31, 2023

Carrying Value

Convertible senior notes due 2025

Convertible senior notes due 2029

Delayed draw term loan

PARSONS CORPORATION AND SUBSIDIARIES

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December 31, 2024, December 31, 2023 and December 31, 2022

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.

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 );

however, the convertible note hedge is not considered when calculating dilutive shares given its impact is anti-dilutive.

The impact of the bond hedge would offset the dilutive impact of the shares underlying the Convertible Senior Note.

The warrants have a strike price above our average share price during the period and are out of the money and not included in the tables below.

Dilutive potential common shares include, when circumstances require, shares the Company could be obligated to issue from its Convertible Senior Notes and warrants (see Note 11 - Debt and Credit Facilities for further discussion) and stock-based awards.

Shares to be provided to the Company from its bond hedge purchased concurrently with the issuance of Convertible Senior Notes are anti-dilutive and are not included in its diluted shares.

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

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):

Earnings Per Share

Basic earnings per share (“EPS”) is computed using the weighted average number of shares outstanding during the period and income available to shareholders.

Diluted EPS includes additional common shares that would have been outstanding if potential common shares with a dilutive effect had been issued using the if-converted method for Convertible Debt and the treasury stock method for all other instruments.

Under the treasury stock method, the weighted average number of shares outstanding is adjusted to reflect the dilutive effects of stock-based awards and shares underlying the warrants related to the convertible senior notes due 2025.

Under the if-converted method:

Convertible Senior Notes due 2025:

Income available to shareholders is adjusted to add back interest expense, after tax (unless antidilutive).

Weighted average number of shares outstanding is adjusted to include the shares underlying the convertible debt (unless antidilutive).

Shares underlying the bond hedge (unless antidilutive).

Convertible Senior Notes due 2029:

Interest has been excluded from the numerator and no shares have been included in the denominator of diluted EPS, as the principal amount of convertible debt will be settled in cash with any excess conversion value settled in cash or shares of common stock.

Excludes shares underlying the capped call as the shares are antidilutive.

The following table reconciles the numerator and denominator used to compute basic and diluted EPS for the years ended December 31, 2024, December 31, 2023, and December 31, 2022 (in thousands):

Numerator for Basic and Diluted EPS:

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Dilutive effect of stock-based awards

Dilutive effect of warrants

Dilutive effect of convertible senior notes

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Earnings per share:

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2024, December 31, 2023 and December 31, 2022

Anti-dilutive stock-based awards excluded from the calculation of earnings per share for the years ended December 31, 2024, December 31, 2023, and December 31, 2022 were 4,562 , 5,423 , and 15,113 , respectively.

Share Repurchases

On August 9, 2021, the Company’s Board of Directors authorized the Company to acquire a number of shares of Common Stock having an aggregate market value of not greater than $ 100,000,000 from time to time, commencing on August 12, 2021 .

On August 9, 2021, the Company’s Board of Directors authorized the Company to acquire a number of shares of Common Stock having an aggregate market value of not greater than $ 100 million from time to time, commencing on August 12, 2021 .

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

The Board further amended this authorization in February 2024 to restore the repurchase capacity to $ 100 million and removed the $ 25 million quarterly cap on such repurchases.

At the time of the February 2024 authorization, the Company had repurchased shares with an aggregated market value (including fees) of $ 54.7 million.

The aggregate market value of shares of Common Stock the Company is authorized to acquire, from both the August 2021 and February 2024 authorizations, is not greater than $ 154.7 million.

As of December 31, 2024 , the Company has $ 75 million remaining under the stock repurchase program.

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

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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.

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Average price paid per share

As of December 31, 2023 , the Company has $ 45.3 million remaining under the stock repurchase program.

Segments Information

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government, delivering timely, cost-effective hardware, software and services for mission-critical projects.

The segment provides advanced technologies, supporting national security missions in cybersecurity, missile defense, and military facility modernization, logistics support, hazardous material remediation and engineering services.

The segment provides advanced technologies, supporting national security missions in cyber operations, missile defense, and military facility modernization, logistics support, hazardous material remediation and engineering services.

The Critical Infrastructure segment provides integrated engineering and management services for complex physical and digital infrastructure around the globe.

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

Federal Solutions

Critical Infrastructure

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

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December 31, 2024, December 31, 2023 and December 31, 2022

evaluates segment operating performance using segment Revenue, segment direct cost of contracts, segment Selling, General and Administrative expense and segment Adjusted EBITDA attributable to Parsons Corporation.

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

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These other items include net income (loss) attributable to noncontrolling interests, asset impairment charges, income and expense recognized on litigation matters, expenses incurred in connection with acquisitions and other non-recurring transaction costs and expenses related to our prior restructuring.

The following table summarizes business segment Adjusted EBITDA and a reconciliation to net income attributable to Parsons Corporation for the periods presented (in thousands):

Adjusted EBITDA is the measure of our operating performance used by the CODM to assess our segments’ financial performance.

The CODM uses Adjusted EBITDA for business planning purposes, including to manage our segments against internal projected results of operations and measure the performance of our segments generally.

The following tables present segment information provided to the CODM, as of each fiscal year presented, along with a reconciliation of segment adjusted EBITDA attributable to Parsons Corporation to net income attributable to Parsons Corporation for the periods presented (in thousands):

Twelve Months Ended December 31, 2024

Infrastructure

Direct cost of contracts

Selling, general and administrative expenses (a)

Equity in earnings (losses) of unconsolidated joint ventures

Other segment items (b)

Adjusted EBITDA attributable to Parsons Corporation

Federal Solutions

Critical Infrastructure

Adjusted EBITDA attributable to Parsons

Adjusted EBITDA attributable to noncontrolling

Reconciliation:

Segment Adjusted EBITDA to Net Income Attributable to Parsons Corporation

Adjusted EBITDA attributable to non-controlling interests

Depreciation and amortization

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Equity-based compensation expense

Transaction-related costs (a)

Restructuring expense (b)

Net income including noncontrolling

Convertible debt repurchase loss

Transaction related costs (c)

Net income including noncontrolling interests

Net income attributable to noncontrolling interests

Net income attributable to Parsons

(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.

Net income attributable to Parsons Corporation

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2024, December 31, 2023 and December 31, 2022

Twelve Months Ended December 31, 2023

Infrastructure

Direct cost of contracts

Selling, general and administrative expenses (a)

Equity in earnings (losses) of unconsolidated joint ventures

Other segment items (b)

Adjusted EBITDA attributable to Parsons Corporation

Reconciliation:

Segment Adjusted EBITDA to Net Income Attributable to Parsons Corporation

Adjusted EBITDA attributable to non-controlling interests

Depreciation and amortization

Interest expense, net

Income tax expense

Equity-based compensation expense

Transaction related costs (c)

Restructuring expense (d)

Net income including noncontrolling interests

Net income attributable to noncontrolling interests

Net income attributable to Parsons Corporation

Twelve Months Ended December 31, 2022

Infrastructure

Direct cost of contracts

Selling, general and administrative expenses (a)

Equity in earnings of unconsolidated joint ventures

Other segment items (b)

Adjusted EBITDA attributable to Parsons Corporation

Reconciliation:

Segment Adjusted EBITDA to Net Income Attributable to Parsons Corporation

Adjusted EBITDA attributable to non-controlling interests

Depreciation and amortization

Interest expense, net

Income tax expense

Equity-based compensation expense

Transaction related costs (c)

Restructuring expense (d)

Net income including noncontrolling interests

Net income attributable to noncontrolling interests

Net income attributable to Parsons Corporation

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2024, December 31, 2023 and December 31, 2022

(a) The amount of selling, general and administrative expenses (“SG&A”) is total SG&A excluding allocations.

(b) The amount of other segment items is the difference between segment revenue less direct cost of contracts, segment SG&A expenses, equity in earnings (losses) of unconsolidated joint ventures, and Adjusted EBITDA attributable to Parsons Corporation.

Other segment items primarily include:

Corporate and shared segment SG&A (excluding Adjusted EBITDA items)

Noncontrolling interests attributable to operating income and other income/expense

Bad debt expense

Sublease income

Foreign currency gain/loss, and

Certain other income/expense items

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

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

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

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

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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 $ 5.2 billion, $ 4.1 billion and $ 3.2 billion of United States revenue for the years ended December 31, 2024, December 31, 2023 and December 31, 2022, respectively.

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Total revenues

PARSONS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2024, December 31, 2023 and December 31, 2022

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.

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

Quarterly Information - Unaudited

The following table presents selected quarterly financial information (in thousands except per share data).

Quarter Ended

March 31, 2024

December 31, 2024

Federal Solutions revenue

Critical Infrastructure revenue

Total revenue

Operating income

Convertible debt repurchase loss (1)

Income tax expense (1)

Net income attributable to Parsons Corporation (1)

Earnings per share:

1 Presents the revised quarterly financial data resulting from the adoption of Accounting Standards Update (“ASU”) 2024-04 as of January 1, 2024 on a prospective basis.

As a result of the adoption of ASU 2024-04 , the Company reversed a loss on extinguishment of debt for the partial repurchase of the Convertible Senior Notes due 2025 and recorded the repurchase transaction as an induced conversion.

This change from extinguishment to inducement accounting resulted in the Company (i.) reversing the $ 211.0 million loss and the related $ 49.9 million tax benefit on extinguishment of debt, recorded in Q1 2024, (ii.) recording a $ 18.4 million convertible debt repurchase loss, (iii.) the difference between the extinguishment loss and inducement expense of $ 192.6 million recorded to equity, and (iv.) the related tax benefit of $ 45.6 million recorded to equity.

See "Note 2—Summary of Significant Accounting Polices—New Accounting Pronouncements " for a further discussion of the first quarter 2024 extinguishment accounting and subsequent change to inducement accounting.

2 Diluted earnings per share prior to the adoption of ASU 2024-04 did not include certain adjustments as their inclusion would have been antidilutive.

Subsequent to the adoption of ASU 2024-04 these adjustments are no longer antidilutive.

Dilutive adjustments include if converted interest of $ 2.8 million, 1.5 million shares related to stock based awards and 6.8 million shares related to convertible senior notes.

Inclusion of these dilution adjustments resulted in dilutive net income attributable to Parsons Corporation of $ 42.5 million and total diluted shares of 114.4 million for the quarter ended March 31, 2024.

Subsequent Events

After the year ended December 31, 2024, the Company entered into a merger agreement to acquire a 100 % ownership interest in TRS Group, Inc.

("TRS") for approximately $ 36 million from cash on hand.

Headquartered in Indianapolis, Indiana, TRS is an environmental solutions firm that specializes in remediation technology.

At the time of the filing of this Form 10-K, the Company has just started the process of obtaining the relevant data to make the required acquisition related disclosures.

This acquisition is not material to the Company's consolidated financial statements.

PARSONS CORPORATION AND SUBSIDIARIES

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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