What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-02-11 compared with 2025-02-19 · 135 added, 113 removed, 625 unchanged (28% of the section changed)

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The volume of contract awards can fluctuate in any given period due to win rate and the timing and size of the awards issued by our customers.

The change in new awards in both our Federal Solutions and Critical Infrastructure segments for the year ended December 31, 2024 when compared to the corresponding period last year was primarily due to significant option period awards in our Federal Solutions segment and three large transportation awards and a mining award in our Critical Infrastructure segment.

The change in new awards in our Critical Infrastructure segment for the year ended December 31, 2025 when compared to the corresponding period last year was primarily due to an overall increase in awards in the current year.

The decrease in awards for the year ended December 31, 2025 in our Federal Solutions segment when compared to the corresponding period last year was primarily driven by a delay

in the timing of awards of a number of contracts being pursued.

Awards in the Federal Solutions segment for the year ended December 31, 2024 included $1.5 billion from the confidential contract compared to $293 million for the year ended December 31, 2025.

We define backlog to include the following two components:

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federal government customers may cancel their contracts with us at any time through a termination for convenience or may elect to not exercise option periods under such contracts.

In the case of a termination for convenience, we would not receive anticipated future revenues, but would generally be permitted to recover all or a portion of our incurred costs and fees for work performed.

In the case of a termination for convenience, we would not receive anticipated

future revenues, but would generally be permitted to recover all or a portion of our incurred costs and fees for work performed.

See “Risk Factors—Risks Relating to Our Business—We may not realize the full value of our backlog, which may result in lower than expected revenue.”

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government actions to address budgetary constraints, caps on the discretionary budget for defense and non-defense departments and agencies, and the ability of Congress to determine how to allocate the available budget authority and pass appropriations bills to fund both U.S.

government departments and agencies that are, and those that are not, subject to the caps.

government departments and

agencies that are, and those that are not, subject to the caps.

Additionally, budget deficits and the growing U.S.

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Furthermore, delays in the completion of future U.S.

government budgets could in the future delay procurement of the federal

government services we provide.

government budgets could in the future delay procurement of the federal government services we provide.

A reduction in the amount of, or delays, or cancellations of funding for, services that we are contracted to provide to the U.S.

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Negative publicity and increased scrutiny of government contractors in general, including us, relating to government expenditures for contractor services and incidents involving the mishandling of sensitive or classified information, as well as the increasingly complex requirements of the U.S.

Department of Defense and the U.S.

Department of War and the U.S.

intelligence community, including those related to cybersecurity, could impact our ability to perform in the markets we serve.

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Acquired Operations

Applied Sciences Consulting, Inc.

On October 1, 2025, the Company acquired a 100% ownership interest in Applied Sciences Consulting, Inc.

("ASC"), a privately owned company, for $28.1 million from cash on hand.

ASC specializes in water and stormwater solutions for cities, counties, and water management districts across the state of Florida.

ASC enhances our ability to partner with Florida communities on delivering innovative solutions for their resiliency challenges, while expanding those capabilities to new and existing clients around the world.

The financial results of ASC have been included in our consolidated results of operations from October 1, 2025 onward.

Chesapeake Technology International, Corp

On June 30, 2025, the Company acquired a 100% ownership interest in Chesapeake Technology International, Corp ("CTI"), a privately owned company, for $91.5 million from cash on hand.

CTI brings extensive capabilities as an all-domain technology solutions provider, powered by cutting-edge products that enhance the warfighters’ ability to sense, evaluate and deliver effects within the invisible battlespaces.

CTI enhances our mission-ready solutions for the Department of War.

The financial results of CTI have been included in our consolidated results of operations from June 30, 2025 onward.

TRS Group, Inc.

On January 31, 2025, the Company acquired a 100% ownership interest in TRS Group, Inc.

("TRS") a privately owned company, for $36.6 million from cash on hand (of which $3.8 million will be paid in July 2026).

TRS is an environmental solutions firm that specializes in remediation technology.

The financial

results of TRS have been included in our consolidated results of operations from January 31, 2025 onward.

BCC Engin eering, LLC

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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.

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

The financial results of BlackSignal have been included in our consolidated results of operations from August 16, 2024 onward.

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On August 23, 2023, the Company acquired a 100% ownership interest in Sealing Technologies, Inc (“SealingTech”), a privately-owned company, for $176.0 million and up to an additional $25 million in the event an earn out revenue target is exceeded.

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

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

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

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The financial results of IPKeys have been included in our consolidated results of operations from April 13, 2023 onward.

Xator Corporation

On May 31, 2022, the Company acquired Xator Corporation for $387.5 million.

This strategic acquisition expands Parsons’ presence within the U.S.

Special Operations Command, the Intelligence Community, Federal Civilian customers, and global critical infrastructure markets, while providing new customer access at the Department of State.

Xator also expands Parsons’ customer base and brings differentiated technical capabilities in critical infrastructure protection, counter-unmanned aircraft systems (cUAS), intelligence and cyber solutions, biometrics, and global threat assessment and operations, increasing our addressable market in both the Federal Solutions and Critical Infrastructure segments.

The financial results of Xator have been included in our consolidated results of operations from May 31, 2022 onward.

Our results may be affected by variances as a result of weather conditions and contract award seasonality impacts that we experience across our businesses.

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While not certain, it is not uncommon for U.S.

government agencies to award task orders or complete other contract actions in the weeks before the end of the U.S.

government agencies to award task orders or complete other contract actions in the weeks before the

end of the U.S.

federal government fiscal year in order to avoid the loss of unexpended U.S.

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Under fixed-price contracts, we are required to deliver the objectives under the contract for a pre-determined price.

Compared to time-and-materials and cost-plus contracts, fixed-price contracts generally offer higher profit margin opportunities because we receive the full benefit of any cost savings, but they also generally involve greater financial risk because we bear the risk of any cost overruns.

time-and-materials and cost-plus contracts, fixed-price contracts generally offer higher profit margin opportunities because we receive the full benefit of any cost savings, but they also generally involve greater financial risk because we bear the risk of any cost overruns.

In the aggregate, the contract type mix in our revenue for any given period will affect that period’s profitability.

Over time, we have experienced a relatively stable contract mix.

The significant change in the contract mix for the year ended December 31, 2024 compared to the corresponding period last year relates to increased business volume from a significant fixed price contract in our Federal Solutions segment.

The significant change in the contract mix for the year ended December 31, 2025 compared to the corresponding period last year relates to decreased business volume from a fixed price contract from a confidential contract in our Federal Solutions segment.

Our recognition of profit on long-term contracts requires the use of assumptions related to transaction price and total cost of completion.

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

Approximately 59%, 55%, and 53% of consolidated revenues for the years ended December 31, 2024, December 31, 2023 and December 31, 2022,

respectively were derived from contracts with the United States federal government.

Approximately 51%, 59%, and 55% of consolidated revenues for the years ended December 31, 2025, December 31, 2024 and December 31, 2023, respectively were derived from contracts with the United States federal government.

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

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government money market funds.

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

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

Other income, net primarily consists of gain or loss on sale of assets, sublease income.

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December 31, 2024

Revenue for the year ended December 31, 2024 compared to the prior year increased $1.3 billion.

Revenue increased in both the Federal Solutions and Critical Infrastructure segments by $986.4 million and $321.4 million, respectively.

See “—Segment Results” below for further discussion.

The decrease in revenue of $386.3 million for the year ended December 31, 2025 when compared to the prior year was due to a decrease of in revenue in our Federal Solutions segment of $786.3 million offset by an increase in revenue in our Critical Infrastructure segment of $400.0 million.

See “—Segment Results” below for a further discussion.

Direct costs of contracts

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Direct cost of contracts

Direct cost of contracts for the year ended December 31, 2024 compared to the prior year increased $1.1 billion.

Direct cost of contracts increased in both the Federal Solutions and Critical Infrastructure segments by $812.5 million and $294.9 million, respectively.

The increase in direct costs of contracts in both the Federal Solutions and Critical Infrastructure segments was primarily related to increased volume from new and existing contracts.

Direct cost of contracts decreased $411.4 million for the year ended December 31, 2025 compared to the prior year, due to a decrease of $657.3 million in our Federal Solutions segment offset by an increase of $245.8 million in our Critical Infrastructure segment.

The decrease in direct costs of contracts in the Federal Solutions segment is primarily related to reduced volume from our confidential contract, See “Segment Results” below for a further discussion.

The increase in direct costs of contracts in the Critical Infrastructure segment is primarily related to increased volume from new and existing contracts.

Equity in (losses) earnings of unconsolidated joint ventures

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December 31, 2024

Equity in losses of unconsolidated joint ventures

Equity in losses of unconsolidated joint ventures for the year ended December 31, 2024 improved by $24.4 million compared to the prior year.

Impacting equity in losses of unconsolidated joint ventures for the year ended December 31, 2024 were write-downs of $51.7 million related to Parsons' participation in a design build joint venture.

For the year ended December 31, 2023 the Company had write-downs of $83.4 million, inclusive of $57.9 million related to the design build joint venture referenced above.

Results for the year ended December 31, 2023 also included earnings on higher margin change orders which did not reoccur for the year ended December 31, 2024.

Joint venture volume has decreased year-over-year as we move away from our participation in construction joint ventures.

Equity in earnings of unconsolidated joint ventures

Equity in losses of unconsolidated joint ventures for the year ended December 31, 2025 improved by $25.9 million compared to the prior year which included significant write-downs on certain joint ventures.

The Company is winding down its participation in construction joint ventures.

Selling, general and administrative expenses

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Selling, general and administrative expenses

As a percentage of revenue, SG&A decreased by 1.9% to 14.1% for the year ended December 31, 2024 compared to16.0% for the corresponding period last year.

As a percentage of revenue, SG&A increased by 1.9% to 16.0% for the year ended December 31, 2025 compared to 14.1% for the corresponding period last year.

The increase in SG&A was primarily due to an increase in segment level SG&A, in particular from business acquisitions, increased investments in bid and proposal activity, critical hires in support of our strong pipeline, and large strategic pursuits aligned to the Trump administration’s priorities.

Partially offsetting these increases in SG&A was a decrease in incentive compensation and equity compensation costs.

Partially driving the increase in SG&A as a percent of revenue, was the decrease in business volume in the Federal Solutions segment discussed below.

Total other income (expense)

Fiscal Year Ended

Twelve Months Ended

dollars in thousands)

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

Interest income increased for the year ended December 31, 2024 compared to the corresponding period last year is due to higher cash balances held and increased interest rates compared to the corresponding period last year.

Interest expense for the year ended December 31, 2024 is primarily due to debt related to our Convertible Senior Notes and Delayed Draw Term Loan.

The increase in Interest expense for the year ended December 31, 2024 compared to the corresponding period last year is primarily related to an increase in debt balances and a $3.2 million charge from the acceleration of the amortization of debt issuance costs associated with the partial repurchase of the 0.25% Convertible Senior Notes due 2025 discussed below.

Interest expense for the year ended December 31, 2025 is primarily due to debt related to our Convertible Senior Notes and Term Loan.

Interest expense for the year ended December 31, 2024

included a $3.2 million charge related to the March 2024 partial repurchase of the Company's Convertible Senior Notes due 2025 (discussed in more detail below).

During the year ended December 31, 2024, we paid $495.6 million in cash to repurchase $284.6 million aggregate principal amount of our Convertible Senior Notes due 2025 (the "Repurchase Transaction") concurrently with the offering of 2.625% Convertible Senior Notes due 2029.

As a result of the Repurchase Transaction, we incurred an $18.4 convertible debt repurchase loss 1 .

As a result of the Repurchase Transaction, we incurred a $18.4 million loss on debt extinguishment.

The Repurchase Transaction is a partial repurchase of our Convertible Senior Notes due 2025.

See “Note 11 – Debt and Credit Facilities,” for a further discussion of this transaction .

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.

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

As a result of the early adoption, the extinguishment charge was reversed from the

Company's consolidated financial statements and a convertible debt repurchase loss was recorded as described above.

The amounts in other income (expense), net, are primarily related to transaction gains and losses on foreign currency transactions, sublease income, and a change in the fair value of contingent consideration.

The amounts in other income (expense), net are primarily related to transaction gains and losses on foreign currency transactions and sublease income, and changes in the fair value of contingent consideration.

Other income (expense), net included a net foreign currency gain of $5.5 million for the year ended December 31, 2025 compared to a net foreign currency loss of $6.9 million for the year ended December 31, 2024 for a net foreign currency gain of $12.4 million.

Income tax expense

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Income tax expense

Income tax expense increased in fiscal 2024 primarily due to an increase in overall pre-tax income, increases in current year foreign Net Operating Losses (NOLs) subject to valuation allowances and an increase in non-deductible executive compensation subject to Section 162(m), partially offset by increases in the foreign-derived intangible income (FDII) deduction, and increased equity based-compensation deductions.

Income tax expense decreased in fiscal 2025 primarily due to a change in the jurisdictional mix of earnings, decreases in the change of valuation allowance on NOLs and nondeductible executive compensation subject to Section 162(m), an increase in untaxed income attributed to noncontrolling interests, and an increase in business tax credits, partially offset by decreases in the foreign-derived intangible income (FDII) deduction and windfall equity-based compensation deduction.

Our effective tax rate was 19.3% and 20.9% for the years ended December 31, 2025 and 2024, respectively.

The difference between the statutory U.S.

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

In 2021 the Organization for Economic Co-operation and Development (OECD) announced an inclusive Framework on Base Erosion and Profit Shifting (BEPS) including Pillar Two Model Rules defining the global minimum tax, also known as the Global Anti-Base Erosion (GloBE), which aims to ensure that multinational enterprises (MNEs) pay a 15% minimum level of tax regardless of where the MNE operates.

The OECD released additional administrative guidance in June 2024 and January 2025.

Many non-US tax jurisdictions have either recently enacted legislation to adopt components of the Pillar Two Model Rules beginning in 2024 and/or have announced their plans to enact legislation in future years.

The Company has evaluated the implementation of Pillar Two on its 2024 income tax position based on currently enacted legislation and has determined there is no material impact.

We are continuing to evaluate the potential impact on future periods of the Pillar Two Framework, pending enactment of legislation by individual countries.

federal income tax rate of 21% and the effective tax rate for the year ended December 31, 2025 primarily relates to state income taxes, valuation allowances and executive compensation subject to Section 162(m), offset by benefits related to untaxed income attributable to noncontrolling interests, earnings subject to lower tax in foreign jurisdictions, and federal business tax credits.

The Company continues to evaluate the implementation of the Organization for Economic Co-operation and Development’s (OECD) Global Anti-Base Erosion (GloBE) rules, which aim to ensure that multinational enterprises (MNEs) pay a 15% minimum level of tax regardless of where the MNE operates.

The Company has evaluated the impact of enacted GloBE rules on its 2025 income tax position and has determined there is no material impact on the Company’s income tax provision.

Year ended December 31, 2024 compared to year ended December 31, 2023

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Direct costs of contracts

Equity in earnings of unconsolidated joint ventures

Equity in (losses) earnings of unconsolidated joint ventures

Selling, general and administrative expenses

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Interest expense

Convertible debt repurchase loss

Other income, net

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Direct cost of contracts

Direct cost of contracts for the year ended December 31, 2023 compared to the prior year increased $988.2 million.

Direct cost of contracts for the year ended December 31, 2024 compared to the prior year increased $1.1 billion.

Direct cost of contracts increased in both the Federal Solutions and Critical Infrastructure segments by $812.5 million and $294.9 million, respectively.

The increases were primarily due to an increase in business volume and from business acquisitions offset by a decrease of $37.9 million in the Critical Infrastructure segment related to a legal matter on a previously completed contract.

The increase in direct costs of contracts in both the Federal Solutions and Critical Infrastructure segments was primarily related to increased volume from new and existing contracts.

Equity in earnings of unconsolidated joint ventures

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December 31, 2023

Equity in (losses) earnings of unconsolidated joint ventures

Equity in earnings of unconsolidated joint ventures for the year ended December 31, 2023 decreased by $64.1 million compared to the prior year.

The decrease was primarily related to write-downs on joint ventures of $83.4 million.

$57.9 million of the joint venture write-downs related to Parsons’ participation in a design build joint venture.

Equity in earnings of unconsolidated joint ventures

Equity in losses of unconsolidated joint ventures for the year ended December 31, 2024 improved by $24.4 million compared to the prior year.

Impacting equity in losses of unconsolidated joint ventures for the year ended December 31, 2024 were write-downs of $51.7 million related to Parsons' participation in a design build joint venture.

For the year ended December 31, 2023 the Company had write-downs of $83.4 million, inclusive of $57.9 million related to the design build joint venture referenced above.

Results for the year ended December 31, 2023 also included earnings on higher margin change orders which did not reoccur for the year ended December 31, 2024.

Joint venture volume has decreased year-over-year as we move away from our participation in construction joint ventures.

Selling, general and administrative expenses

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Interest expense

Convertible debt repurchase loss

Other income (expense), net

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

Interest income increased for the year ended December 31, 2023 compared to the corresponding period last year primarily due to an increase in interest rates compared to the prior year on investments in government money funds.

Interest expense is primarily due to debt related to our Convertible Senior Notes and Delayed Draw Term Loan.

Interest expense increased for the year ended December 31, 2023 compared to the corresponding period last year primarily due to higher interest rates on borrowings.

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

Interest expense for the year ended December 31, 2024 is primarily due to debt related to our Convertible Senior Notes and Delayed Draw Term Loan.

As a result of the Repurchase Transaction, we incurred an $18.4 convertible debt repurchase loss.

The Repurchase Transaction is a partial repurchase of our Convertible Senior Notes due 2025.

See “Note 11 – Debt and Credit Facilities,” for a further discussion of this transaction.

Income tax expense

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Income tax expense

Income tax expense increased in fiscal 2023 primarily due to an increase in overall earnings and an increase in foreign withholding taxes partially offset by increases in the foreign-derived intangible income (FDII) deduction and earnings in lower tax jurisdictions.

Our effective tax rate was 20.9% and 21.3% for the years ended December 31, 2024 and 2023, respectively.

The difference between the statutory U.S.

federal income tax rate of 21% and the effective tax rate for the year ended December 31, 2023 primarily relates to state income taxes, valuation allowance on foreign tax credit carryovers originating from foreign withholding taxes offset in part by

benefits related to income attributable to noncontrolling interests, earnings in lower tax jurisdictions, the FDII deduction, and federal business tax credits.

Effective for tax year 2022, the Tax Cuts and Jobs Act of 2017 eliminated the option to currently deduct research and development expenditures in the year incurred and requires taxpayers to amortize such expenditures over five years for tax purposes (15 years for foreign research and development expenditures).

This provision resulted in additional cash tax liability for the 2023 tax year of approximately $12 million.

To date, there has been no enacted legislation that would change the tax treatment of these research and development expenditures and the Company continues to capitalize and amortize these expenses in accordance with the law.

Non-GAAP Financial Measures:

Fiscal Year Ended

dollars in thousands)

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Interest expense, net

Income tax expense (benefit)

Income tax expense

Depreciation and amortization

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Adjusted EBITDA is a supplemental measure of our operating performance included in this Annual Report on Form 10-K because it is used by management and our board of directors to assess our financial performance both on a segment and on a consolidated basis.

We discuss Adjusted EBITDA because our management uses this measure for business planning purposes, including to manage the business against internal projected results of operations and to measure the performance of the business generally.

Adjusted EBITDA is frequently used by analysts, investors and other interested parties to evaluate companies in our industry.

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We define Adjusted EBITDA as net income attributable to Parsons Corporation, adjusted to include net income attributable to noncontrolling interests and to exclude interest expense (net of interest income), provision for income taxes, depreciation and amortization and certain other items that we do not consider in our evaluation of ongoing operating performance.

These other items include, among other

things, impairment of goodwill, intangible and other assets, interest and other expenses recognized on litigation matters, expenses incurred in connection with acquisitions and other non-recurring transaction costs, equity-based compensation, and expenses related to our corporate restructuring initiatives.

These other items include, among other things, impairment of goodwill, intangible and other assets, interest and other expenses recognized on litigation matters, expenses incurred in connection with acquisitions and other non-recurring transaction costs, equity-based compensation, and expenses related to our corporate restructuring initiatives.

Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.

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Adjusted EBITDA attributable to Parsons Corporation

The increase in Federal Solutions revenue for the year ended December 31, 2024 compared to the corresponding period last year was primarily related to organic growth of 30% and $73.6 million from business acquisitions.

Organic growth was primarily due to the ramp up of recent awards including growth on a significant contract, growth of existing contracts, partially offset by the winding down of certain contracts.

Revenue for the year ended December 31, 2023 included incentive fees on two contracts of approximately $20 million that did not reoccur for the year ended December 31, 2024.

The increase in Federal Solutions Adjusted EBITDA attributable to Parsons Corporation for the year ended December 31, 2024 compared to the prior year was primarily due to the factors impacting revenue discussed above.

The decrease in Federal Solutions revenue for the year ended December 31, 2025 compared to the corresponding period last year was primarily driven by our confidential contract operating at a reduced volume as a result of the Department of State reorganization issued May 29, 2025.

This decrease was offset by the recognition of incentive fees, growth on existing contracts, and the ramp-up of new task orders.

The decrease in Federal Solutions Adjusted EBITDA attributable to Parsons Corporation for the year ended December 31, 2025 compared to the prior year was primarily due to the factors impacting revenue discussed above and an increase in SG&A including investments made in key personnel and bid and proposal activity on strategic pursuits.

Critical Infrastructure

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The increase in Critical Infrastructure revenue for the year ended December 31, 2025 compared to the corresponding period last year was primarily related to organic growth of 10% and $113.9 million from business acquisitions.

Organic growth was primarily due to an increase in business volume from existing contracts and ramping up of recent awards offset by the winding down of certain contracts and contract write-downs of $44.5 million.

The increase in Critical Infrastructure Adjusted EBITDA attributable to Parsons for the year ended December 31, 2024 compared to the corresponding period last year was primarily due to the increase in organic revenue.

This increase was offset by the contract write-downs discussed above along with a write-down in equity in losses from unconsolidated joint ventures of $51.7 million compared to write-downs of $83.4 million for the year ended December 31, 2023.

Also impacting Adjusted EBITDA were higher margin change orders on an unconsolidated joint venture for the year ended December 31, 2023 which did not reoccur for the year ended December 31, 2024.

Organic growth was primarily due to an increase in business volume from existing contracts and ramping up of recent awards.

The increase in Critical Infrastructure Adjusted EBITDA attributable to Parsons for the year ended December 31, 2025 compared to the corresponding period last year was primarily due to the revenue impacts discussed above, recent business acquisitions, and improvement in equity in earnings (losses) from unconsolidated joint ventures.

These increases in Adjusted EBITDA, were partially offset by an increase in SG&A.

Year ended December 31, 2024 compared to year ended December 31, 2023

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Adjusted EBITDA attributable to Parsons Corporation

The increase in Federal Solutions revenue for the year ended December 31, 2023 compared to the corresponding period last year was primarily due to organic growth of 25% and increases from business acquisitions of $264.1 million.

The increase in Federal Solutions Adjusted EBITDA attributable to Parsons Corporation for the year ended December 31, 2023 compared to the prior year was primarily due to the factors impacting revenue discussed above and non-recurring incentive fees of approximately $20 million.

These increases were offset by higher selling general and administrative costs from business acquisitions, business development and sales activities, and incentive compensation costs as a result of the company's strong operating performance and growing employee base.

Organic growth was primarily due to the ramp up of recent awards including growth on a significant contract, growth of existing contracts, partially offset by the winding down of certain contracts.

Revenue for the year ended December 31, 2023 included incentive fees on two contracts of approximately $20 million that did not reoccur for the year ended December 31, 2024.

Critical Infrastructure

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Adjusted EBITDA attributable to Parsons Corporation

The increase in Critical Infrastructure revenue for the year ended December 31, 2023 compared to the corresponding period last year was substantially due to organic growth.

The increase in Critical Infrastructure Adjusted EBITDA attributable to Parsons for the year ended December 31, 2023 compared to the corresponding period last year was primarily due to increases in business volume and a decrease in direct cost of contracts of $38 million related to a legal matter on a previously completed contract, offset by write-downs on joint ventures discussed above and higher selling general and administrative costs from business development and sales activities and higher incentive compensation costs as a result of the company's strong operating performance and growing employee base.

The increase in Critical Infrastructure revenue for the year ended December 31, 2024 compared to the corresponding period last year was primarily related to organic growth of 12% and $29.9 million from business acquisitions.

Also impacting Adjusted EBITDA were higher margin change orders on an unconsolidated joint venture for the year ended December 31, 2023 which did not reoccur for the year ended December 31, 2024.

Liquidity and Capital Resources

We currently finance our operations and capital expenditures through a combination of internally generated cash from operations, our Convertible Senior Notes, Delayed Draw Term Loan and periodic borrowings under our Revolving Credit Facility.

We currently finance our operations and capital expenditures through a combination of internally generated cash from operations, our Convertible Senior Notes, Term Loan and periodic borrowings under our Revolving Credit Facility.

Generally, cash provided by operating activities has been adequate to fund our operations.

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We focus on collecting outstanding receivables to reduce net DSO and improve working capital.

Net DSO was 55 days at December 31, 2024, down from 59 days at December 31, 2023 and 69 days at December 31, 2022.

Our working capital (current assets less current liabilities) was $546.8 million at December 31, 2024, $726.6 million at December 31, 2023 and $611.7 million at December 31, 2022.

Net DSO was 67 days at December 31, 2025, up from 55 days at December 31, 2024 and 59 days at December 31, 2023.

Our working capital (current assets less current liabilities) was $1.2 billion at December 31, 2025, $546.8 million at December 31, 2024 and $726.6 million at December 31, 2023.

Our cash and cash equivalents increased by $12.8 million to $466.4 million at December 31, 2025 from $453.5 million at December 31, 2024.

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Our operating cash flows are primarily affected by our ability to invoice and collect from our clients in a timely manner, our ability to manage our vendor payments and the overall profitability of our contracts.

Net cash provided by operating activities decreased $45.2 million to $478.4 million during 2025 compared to $523.6 million during 2024.

The decrease in net cash provided by operating activities is primarily due to changes in our working capital accounts of $66.9 million (primarily from contract assets and prepaid expenses, accrued expenses and other current liabilities, and other assets offset by accounts payable, and contract liabilities).

This decrease was offset by a $15.9 million change in net income after adjusting for non-cash items and convertible debt settlement and by a $5.8 million change in cash used for other long-term liabilities.

Net cash provided by operating activities increased $115.9 million to $523.6 million during 2024 compared to $407.7 million during 2023.

The increase in net cash provided by operating activities is primarily due to a $98.4 million change in net income after adjusting for non-cash items and convertible debt settlement and from changes in our working capital accounts of $46.4 million (primarily from contract assets and prepaid expenses and other assets offset by accounts payable, accrued expenses and other current liabilities, and contract liabilities).

current liabilities, and contract liabilities).

These increase were offset by a $29.0 million change in cash used for other long-term liabilities.

Net cash provided by operating activities increased $170.2 million to $407.7 million during 2023 compared to $237.5 million during 2022.

The increase in net cash provided by operating activities is primarily due to a $170.1 million change in net income after adjusting for non-cash items and the 10-day improvement in DSO.

This increase was offset, in part, from changes in our working capital accounts of $6.3 million.

The changes in the Company's various working capital accounts were driven primarily by the significant increase in business volume during the year ended December 31, 2023 compared to the corresponding period last year.

Investing Activities

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

Net cash used in investing activities increased $180.7 million to $556.7 million during 2024 compared to $376.0 million during 2023.

The change was primarily driven by a $206.8 million increase in payments for acquisitions, $14.3 million from investments in unconsolidated joint ventures, and $8.8 million from capital expenditures offset by a $49.9 million increase in return of investments in unconsolidated joint ventures.

Net cash used in investing activities decreased $301.1 million to $255.6 million during 2025 compared to $556.7 million during 2024.

The change was primarily driven by a $157.5 million reduction in payments for acquisitions offset in part by a $102.0 million increase in investments in unconsolidated joint ventures, a $9.8 million increase in capital expenditures (primarily from computer systems and equipment) and a change from return of investments in unconsolidated joint ventures of $4.4 million.

The change was primarily driven by a $283.6 million decrease in payments for acquisitions and a $50.3 million reduction in investments in unconsolidated joint ventures offset by an increase of $18.8 million in capital expenditures and $14.7 million in return of investments in unconsolidated joint ventures.

The increase in capital expenditures is primarily due to facilities related investments.

Net cash used in investing activities increased $180.7 million to $556.7 million during 2024 compared to $376.0 million during 2023.

Financing Activities

Net cash provided by (used in) financing activities is primarily associated with proceeds from debt, the repayment thereof, transactions related to the Company’s common stock, and contributions by and distributions to noncontrolling interests.

Net cash used in financing activities changed by $432.8 million to $214.1 million used in 2025 compared to $218.7 million provided by in 2024.

The change in cash flows provided by (used in) financing activities is primarily driven by net cash inflows from our convertible bond transactions of $302.4 million for the year ended December 31, 2024.

See “Note 11 – Debt and Credit Facilities,” for a further discussion of these transactions and proceeds from the term loan of $100 million.

Offsetting cash provided by financing activities were $125.0 million of repurchase of common stock and a $34.1 million change in distributions to noncontrolling interests.

During the year ended December 31, 2025, the Company paid $113.4 million to holders of the remaining balance of the Company's Convertible Senior Notes due 2025 that matured on August 15, 2025.

Net cash provided by (used in) financing activities increased by $240.6 million to $218.7 million in 2024 compared to $(21.9) million in 2023.

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This increase was offset in part by distributions to noncontrolling interests of $16.7 million, taxes paid on vested stock of $15.3 million and $14.0 million from repurchases of common stock.

Net cash provided by (used in) financing activities changed by $122.2 million to $(21.9) million in 2023 compared to $100.4 million in 2022.

This change was primarily due to a decrease of $150.0 million from net borrowing related activities and a $7.4 million change in contributions by noncontrolling interests offset by a decrease in distributions to noncontrolling interests of $11.6 billion, a decrease in cash used to repurchase common stock of $11.0 million and from $11.2 million of payments in warrants for the year ended December 31, 2022 that did not reoccur in 2023.

In January 2026, the company spent approximately $340 million to acquire Altamira Technologies Corporation.

The Company drew down $350 million from the revolving credit facility to partially fund the acquisition and for working capital needs.

The company expects to pay back the outstanding balance under the revolving credit facility in February 2026 from working capital.

Letters of Credit

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We believe that the following items are the most critical accounting policies and estimates that involved significant judgment as we prepared our financial statements.

We consider an accounting policy

or estimate to be critical if the policy or estimate requires assumptions to be made that were uncertain at the time they were made and if changes in these assumptions could have a material impact on our financial condition or results of operations.

We consider an accounting policy or estimate to be critical if the policy or estimate requires assumptions to be made that were uncertain at the time they were made and if changes in these assumptions could have a material impact on our financial condition or results of operations.

Revenue Recognition and Cost Estimation

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Change orders, which are a normal and recurring part of our business, are generally not distinct and are accounted for as part of the existing contract.

The effect of a change order that is not distinct on the transaction price and our measure of progress for the performance obligation to which it relates is

recognized on a cumulative catch-up basis.

The effect of a change order that is not distinct on the transaction price and our measure of progress for the performance obligation to which it relates is recognized on a cumulative catch-up basis.

To the extent change orders included in the transaction price are not resolved in our favor, there could be reductions in, or reversals of previously reported amounts of, revenues and profits, and charges against current earnings.

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

Lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

Lease terms may include options to extend or terminate the lease when it is reasonably

certain that we will exercise that option.

Lease expense for operating lease payments is recognized on a straight-line basis over the lease term.

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We have operating and finance leases for corporate and project office spaces, vehicles, heavy machinery and office equipment.

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

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

Business Combinations

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For purposes of impairment testing, goodwill is allocated to the applicable reporting units based on the current reporting structure.

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

When evaluating goodwill for impairment, we may decide to first perform a qualitative assessment, or “step zero”

impairment test, to determine whether it is more likely than not that impairment has occurred.

If we do not perform a qualitative assessment, or if we determine that it is not more likely than not that the fair value of our reporting units exceeds their carrying amounts, we perform a quantitative assessment and calculate the estimated fair value of the respective reporting unit.

If the carrying amount of a reporting unit’s goodwill exceeds the fair value of that goodwill, an impairment loss is recognized.

at the last quantitative assessment date, the amount of time in between quantitative fair value assessments, and the date of the applicable acquisitions, if any.

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

We perform a goodwill impairment test annually, on October 1 st of each year, for each reporting unit that requires certain assumptions and estimates be made regarding industry economic factors and future profitability.

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Our last review at October 1, 2025 (i.e., the first day of our fourth quarter in fiscal 2025), indicated that we had no impairment of goodwill, and all of our reporting units had estimated fair values that were in excess of their carrying values, including goodwill.

Intangible assets with finite lives arise from business acquisitions and are amortized based on the period over which the contractual or economic benefit of the intangible assets are expected to be realized or on a straight-line basis over the useful lives of the underlying assets, ranging from one to ten years.

or on a straight-line basis over the useful lives of the underlying assets, ranging from one to ten years.

These primarily consist of customer relationships, backlog, and covenants not to compete.

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We are subject to certain claims and assessments that arise in the ordinary course of business.

Additionally, Parsons has been named as a defendant in lawsuits alleging personal injuries as a result of contact with asbestos products at various project sites.

Additionally, Parsons has been named as a defendant in lawsuits alleging personal injuries as a result of

contact with asbestos products at various project sites.

We believe that any significant costs relating to these claims will be reimbursed by applicable insurance and do not expect any of these claims to have a material adverse effect on our financial condition or results of operations.

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Interest Rate Risk

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

We are exposed to interest rate risks related to the Company’s Revolving Credit Facility and Term Loan.

As of December 31, 2025 and December 31, 2024, there were no amounts outstanding under the Revolving Credit Facility.

Borrowings under the Revolving Credit Facility effective June 2025 bear interest at either an adjusted Term SOFR rate plus a margin between 1.0% and 1.625%, or a base rate (as defined in the Credit Agreement) plus a margin of between 0% and 0.625%, both based on the leverage ratio of the Company at the end of each quarter.

As of December 31, 2024, there was $350.0 million outstanding under the 2022 Delayed Draw Term Loan.

Borrowings under the 2022 Delayed Draw Term Loan Agreement will bear interest at either an adjusted Term SOFR benchmark rate plus a margin between 0.875% and 1.500% or a base rate plus a margin of between 0% and 0.500% and will initially bear interest at the middle of this range.

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

The interest rate at December 31, 2024 and December 31, 2023 was 5.6% and 6.6%, respectively.

As of December 31, 2025, there was $450.0 million outstanding under the Term Loan Agreement.

Borrowings under the Term Loan Agreement effective June 2025 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 interest rate at December 31, 2025 and December 31, 2024 was 4.8% and 5.6% (prior facility), respectively.

See “Note 11 – Debt and Credit Facilities,” for a further discussion of the Company's debt.

Foreign Currency Exchange Risk

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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 7. Management’s Discussion and Analysis