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What changed in PARSONS CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of PARSONS CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+420 added−390 removedSource: 10-K (2024-02-14) vs 10-K (2023-02-17)

Top changes in PARSONS CORP's 2023 10-K

420 paragraphs added · 390 removed · 325 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

119 edited+45 added−25 removed92 unchanged
Biggest changeOur ground support equipment is enabling efficient and effective access to space for small satellites on commercial, national security and small class launch systems. ▪ Representative products include our Command and Control Core (C2Core®) mission planning and tasking suite that links requests, effects and operational guidance in a unified database, and ZEUS® Recovery of Airbase Denied by Ordnance (RADBO) laser neutralization system offering critical force protection in any operational theater. • Engineering and Technical Services – We provide science, engineering, and technical services to a variety of government customers, including missile defense, space and all military service branches.
Biggest changeOur ground support equipment is enabling efficient and effective access to space for small satellites on commercial, national security and small class launch systems. ▪ Representative products include our Command-and-Control Core (C2Core®) mission planning and tasking suite that links requests, effects and operational guidance in a unified database, and ZEUS® Recovery of Airbase Denied by Ordnance (RADBO) laser neutralization system offering critical force protection in any operational theater. ▪ We are the prime Technical, Engineering, Advisory and Management Support (TEAMS) Next contractor for the MDA, where we provide engineering, analysis, and management support for the development of integrated and layered missile defense systems that defend U.S. and allied forces against ballistic, hypersonic, and cruise missile threats, and 3 advance the agency’s integrated air and missile defense, command and control, and battle management and communications missions across all-domain battlespace. ▪ Cyber and National Operations – We provide capabilities across the digital landscape, including full-spectrum cyber, information operations, and analytics.
Deliver holistic solutions including electronic security systems, cybersecurity, counter unmanned air systems and biometrics. o Transportation – Capitalize on the increased funding in the IIJA and increased global transportation and infrastructure spending to further our roads and highways, bridges, rail and transit, and aviation business. Capitalize on broadband and environmental spend in areas where Parsons is differentiated.
Deliver holistic solutions including electronic security systems, cybersecurity, counter unmanned air systems and biometrics. o Transportation – Capitalize on the increased IIJA funding and increased global transportation and infrastructure spending to further our roads and highways, bridges, rail and transit, and aviation business. Capitalize on broadband and environmental spend in areas where Parsons is differentiated.
We are committed to attracting, retaining, and developing a diverse and inclusive workforce by having a: • Culture of employee engagement at all organizational levels • Work environment that promotes training, mentoring, and career development planning • Differentiated benefits, including flexible work hours, remote work options, and an employee stock ownership plan • Dual technical career path that leads to positions as Chief Technology Officer and/or Technical Fellow • Diversity, Equity and Inclusion (DEI) program • “Parsons Gives Back” program to support our communities and promote volunteering • Hiring strategy outside of high-employment zones • Robust university relations and intern program to help shape the next generation of leaders and promote diversity • Internal mobility program that supports employee growth, career development and retention “Get to Yes” By “getting to yes”, we enable the delivery of agile, innovative, and transformative solutions to our customers.
We are committed to attracting, retaining, and developing a diverse and inclusive workforce by having a: • Culture of employee engagement at all organizational levels • Work environment that promotes training, mentoring, and career development planning • Differentiated benefits program, including flexible work hours, remote work options, and an employee stock ownership plan • Dual technical career path that leads to positions as Chief Technology Officer and/or Technical Fellow • Diversity, Equity and Inclusion (DEI) program • “Parsons Gives Back” program to support our communities and promote volunteering • Global hiring strategy outside of high-employment zones • Robust university relations and intern program to help shape the next generation of leaders and promote diversity • Internal mobility program that supports employee growth, career development and retention “Get to Yes” By “getting to yes”, we enable the delivery of agile, innovative, and transformative solutions to our customers.
Every benefit that collaboration among the Fellows offers is expressed by the idea that the individual is brilliant, but a group of brilliant individuals acting as one can be more powerful and enable Parsons to accomplish even more in our quest to deliver a better world. • Technical Career Path - demonstrates two distinct career progressions for technical employees across our organization: one that follows a management path, the other that can be followed as an individual contributor.
Every benefit that collaboration among the Fellows offers is expressed by the idea that the individual is brilliant, but a group of brilliant individuals acting as one can be more powerful and enable Parsons to accomplish even more in our quest to deliver a better world. 17 • Technical Career Path - demonstrates two distinct career progressions for technical employees across our organization: one that follows a management path, the other that can be followed as an individual contributor.
We have capabilities in the following four areas that span our two segments and four business units: Systems Integration: We provide engineering services and technology for large digital and physical systems with high technical complexity. We lead projects from concept development through design, implementation, testing and verification, ensuring interoperability of these complex, disparate systems.
We have capabilities in the following four areas that span our two segments and four business units: Systems Integration: We provide engineering services and technology for large digital and physical systems with high technical complexity. We lead projects from concept development through research and design, implementation, testing and verification, ensuring interoperability of these complex, disparate systems.
Our goal is to help create a safer, healthier, more sustainable, more connected and more secure world. 11 In a complex security environment with adversaries challenging on every domain and an economy driven by digital transformation, Parsons leverages innovative technologies to deliver integrated solutions at the speed of relevance.
Our goal is to help create a safer, healthier, more sustainable, more connected and more secure world. In a complex security environment with adversaries challenging on every domain and an economy driven by digital transformation, Parsons leverages innovative technologies to deliver integrated solutions at the speed of relevance.
Kolloway served as Deputy General Counsel – Americas from March 2016 through October 2017. Before joining Parsons, Mr. Kolloway served as Senior Vice President and Assistant General Counsel for Operations and Risk Management at AECOM Technology Corporation, a publicly traded company. Prior to his tenure at AECOM, Mr.
Kolloway served as Deputy General Counsel – Americas from March 2016 through October 2017. Before joining Parsons, Mr. Kolloway served as Senior Vice President and Assistant General Counsel for Operations and Risk Management at AECOM 21 Technology Corporation, a publicly traded company. Prior to his tenure at AECOM, Mr.
We compete on the basis of our technical expertise, technological innovation, our ability to deliver cost-effective multi-faceted services in a timely manner, our reputation and relationships with our customers, qualified and/or security-clearance personnel, and pricing.
We compete on the basis of our technical expertise, technological innovation, our ability to deliver cost-effective multi-faceted solutions and services in a timely manner, our reputation and relationships with our customers, qualified and/or security-clearance personnel, and pricing.
Violations and liabilities with respect to environmental, health and safety laws and regulations could result in significant administrative, civil, or criminal penalties, remedial clean-ups, natural resource damages, permit 19 modifications or revocations, operational interruptions or shutdowns and other liabilities.
Violations and liabilities with respect to environmental, health and safety laws and regulations could result in significant administrative, civil, or criminal penalties, remedial clean-ups, natural resource damages, permit modifications or revocations, operational interruptions or shutdowns and other liabilities.
The Corporate Governance and Responsibility Committee of our Board of Directors provides oversight of environmental, social and governance (ESG), including climate-related topics, and the Audit and Risk Committee provides oversight of our enterprise risk management program, including climate-related risks. Our Chief Executive Officer holds overall 2 executive-level responsibility for ESG.
The Corporate Governance and Responsibility Committee of our Board of Directors provides oversight of environmental, social and governance (ESG), including climate-related topics, and the Audit and Risk Committee provides oversight of our enterprise risk management program, including climate-related risks. Our Chief Executive Officer holds overall executive-level responsibility for ESG.
Kolloway was a partner in the Chicago law firm of Rock, Fusco & Garvey, Ltd and a member of the Federal Trial Bar for 20 the Northern District of Illinois. Mr. Kolloway received his Bachelor of Arts degree from St.
Kolloway was a partner in the Chicago law firm of Rock, Fusco & Garvey, Ltd and a member of the Federal Trial Bar for the Northern District of Illinois. Mr. Kolloway received his Bachelor of Arts degree from St.
Liability under RCRA is strict and, under certain circumstances, joint and several, so that any responsible party may be held liable for the entire cost of investigating and remediating the release of hazardous substances.
Liability under RCRA is strict and, under certain circumstances, joint and several, so that any responsible party may be held liable 20 for the entire cost of investigating and remediating the release of hazardous substances.
Our main competitors in Critical Infrastructure include AECOM, Jacobs Solutions Inc., Stantec, Tetra Tech, Inc., and WSP. 14 Seasonality Our results may be affected by variances as a result of weather conditions and contract award seasonality impacts that we experience across our businesses. The latter issue is typically driven by the U.S. federal government fiscal year-end, September 30.
Our main competitors in Critical Infrastructure include AECOM, Jacobs Solutions Inc., Stantec, Tetra Tech, Inc., and WSP. 15 Seasonality Our results may be affected by variances as a result of weather conditions and contract award seasonality impacts that we experience across our businesses. The latter issue is typically driven by the U.S. federal government fiscal year-end, September 30.
Aging physical infrastructure is strained by the swift pace of technological change combined with heightened new expectations for sustainability and environmental impact. Furthermore, modernized infrastructure is important to recover from unexpected disasters caused by climate change. The $1.2 trillion United States Infrastructure Investment and Jobs Act (IJJA) has increased funding for roads and highways, bridges, rail and transit, and aviation.
Aging physical infrastructure is strained by the swift pace of technological change combined with heightened new expectations for sustainability and environmental impact. Furthermore, modernized infrastructure is important to recover from unexpected disasters caused by climate change. The $1.2 trillion United States Infrastructure Investment and Jobs Act (IIJA) has increased funding for roads and highways, bridges, rail and transit, and aviation.
Ofilos holds a Master of Business Administration from Boston University and a Bachelor of Science from Babson College. Michael R. Kolloway was appointed General Counsel and Corporate Secretary of Parsons Corporation in October 2017 and later became our Chief Legal Officer in January 2019. Before assuming the role of General Counsel and Corporate Secretary, Mr.
Ofilos holds a Master of Business Administration from Boston University and a Bachelor of Science from Babson College. Michael R. Kolloway, age 63, was appointed General Counsel and Corporate Secretary of Parsons Corporation in October 2017 and later became our Chief Legal Officer in January 2019. Before assuming the role of General Counsel and Corporate Secretary, Mr.
She also previously served as the senior vice president of HR operations at CACI and, for over twenty years, she held progressive HR leadership positions at Raytheon. Ms. Balaguer is an executive sponsor for the Diversity, Equity and Inclusion Council and sits on the Mid Atlantic Organizational Development Executive Roundtable. Charles L.
She also previously served as the senior vice president of HR operations at CACI and, for over twenty years, she held progressive HR leadership positions at Raytheon. Ms. Balaguer is an executive sponsor for the Diversity, Equity and Inclusion Council and sits on the Mid Atlantic Organizational Development Executive Roundtable.
We have provided services to the Department of Energy for over 50 years on a variety of projects, including work on DOE’s Loan Guarantee Program that funds renewable and clean energy projects, and have over 20 years of support with the United States Space Force customers.
We have provided services to the Department of Energy (DOE) for over 50 years on a variety of projects, including work on DOE’s Loan Guarantee Program that funds renewable and clean energy projects, and have provided over 20 years of support to the United States Space Force customers.
Susan Balaguer was appointed as Chief Human Resources Officer of Parsons Corporation effective July 16, 2021. Ms. Balaguer is responsible for all aspects of the human resources function, including benefits, recruitment, retention, and the employee lifecycle and employee experience for the company. Ms.
Susan Balaguer, age 54, was appointed as Chief Human Resources Officer of Parsons Corporation effective July 16, 2021. Ms. Balaguer is responsible for all aspects of the human resources function, including benefits, recruitment, retention, and the employee lifecycle and employee experience for the company. Ms.
They possess diverse leadership capabilities in the markets we serve and the solutions and technology we deliver. Most importantly, we strive to give our employees and managers the best possible employee experience throughout their careers with Parsons.
They have diverse leadership capabilities in the markets we serve and the solutions and technology we deliver. Most importantly, we strive to give our employees and managers the best possible employee experience throughout their careers with Parsons.
Our solutions are used to meet national security challenges from space to the tactical edge around the globe. • Mission Solutions – We provide software, hardware and technical expertise to clients across a variety of mission areas, including, but not limited to, space, missile systems, and warfighter applications.
Our solutions are used to meet national security challenges from space to the tactical edge around the globe. ▪ Defense Space and Engineering Services – We provide software, hardware, and technical expertise to clients across a variety of mission areas, including but not limited to, space, missile systems, and warfighter applications.
It is a collaborative network of over forty selected motivated and passionate subject matter experts working to solve technical challenges through either strategic research and development or through the development of long-term technical policies and best practices. The program defines its success through engagement, mentorship, 16 and retention.
It is a collaborative network of over fifty selected motivated and passionate subject matter experts working to solve technical challenges through either strategic research and development or through the development of long-term technical policies and best practices. The program defines its success through engagement, mentorship, and retention.
We pride ourselves on providing agile technologies through inventive and refined processes that provide quality outcomes to our customers on time sensitive projects. Our domain knowledge of our customers’ current and emerging requirements enables us to deliver responsive, high-quality solutions on time.
We pride ourselves on providing agile technologies through inventive and refined processes that provide quality outcomes to our customers on time sensitive projects. Our domain knowledge of our customers’ current and emerging requirements enables us to deliver responsive, high-quality solutions on time and with operational relevance.
We are often involved in the early stages of our customers’ planning and permitting processes, which allows us to efficiently optimize our service delivery model. These relationships, along with our technical expertise and intellectual property, allow us to successfully deliver solutions that meet our customers’ demanding technical and execution requirements and fulfill our corporate purpose of developing a better world.
We are often involved in the early stages of our customers’ planning processes, which allows us to efficiently optimize our service delivery model. These relationships, along with our technical expertise and intellectual property, enable Parsons to successfully deliver solutions that meet our customers’ demanding technical and execution requirements and fulfill our corporate purpose of developing a better world.
We expect to recognize $3.1 billion of our funded backlog as of December 31, 2022 as revenues in the following twelve months. However, our 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.
We expect to recognize $3.8 billion of our funded backlog as of December 31, 2023 as revenues in the following twelve months. However, our 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.
This data is critical in guiding our cultural journey to become a more dynamic, entrepreneurial, and creative place to work. 15 This year, we saw some of our highest participation rates among our business groups and functions in years, with an overall response of 48 percent, which is higher than last year’s overall rate of 40 percent.
This data is critical in guiding our cultural journey to become a more dynamic, entrepreneurial, and creative place to work. This year, we saw some of our highest participation rates among our business groups and functions, with an overall response of 54 percent, which is higher than last year’s overall rate of 48 percent.
Our customers include state and local governments, Fortune 100 companies, smart city developers, and private sector infrastructure owners, such as the transportation authorities for the cities of Los Angeles, New York and Paris, the states or provinces of Georgia, Ontario and Texas and rail and transit entities, including AMTRAK, CSX, Metrolinx (Ontario Canada), and the WMATA.
Our customers include state and local governments, Fortune 100 companies, smart city developers, and private sector infrastructure owners, such as the transportation authorities for the cities of Los Angeles and New York, states and provinces, and rail and transit entities, including AMTRAK, CSX, Metrolinx (Ontario Canada), and WMATA.
In 2021, the Compensation and Management Development Committee of the Parsons’ Board of Directors approved a special three-month offering period for eligible employees of BlackHorse Solutions and its eligible subsidiary companies. During 2022 and 2021, our employees purchased approximately 131,000 and 161,000 shares, respectively, of Parsons’ stock.
In 2021, the Compensation and Management Development Committee of the Parsons’ Board of Directors approved a special three-month offering period for eligible employees of BlackHorse Solutions and its eligible subsidiary companies. During 2023 and 2022, our employees purchased approximately 116,650 and 131,000 shares, respectively, of Parsons’ stock.
All or some of the work to be performed under the contracts may remain unfunded unless and until the U.S. Congress makes subsequent appropriations and the procuring agency allocates funding to the contract. As of December 31, 2022, our total backlog was approximately $8.2 billion, consisting of $4.5 billion of funded backlog and $3.6 billion of unfunded backlog.
All or some of the work to be performed under the contracts may remain unfunded unless and until the U.S. Congress makes subsequent appropriations and the procuring agency allocates funding to the contract. As of December 31, 2023, our total backlog was approximately $8.6 billion, consisting of $5.0 billion of funded backlog and $3.6 billion of unfunded backlog.
Cities around the globe increasingly demand new more sustainable capabilities, such as sensor networks and communication strategies to connect streetlights, security cameras and emergency systems, to provide important real-time information and better serve their citizens and reduce carbon emissions.
Cities around the globe increasingly demand connected and more sustainable capabilities, such as sensor networks and communication strategies to connect streetlights, security cameras' and emergency systems, to provide important real-time information and better serve their citizens and reduce carbon emissions.
With over 233 sustainability accreditations, we deliver resilient infrastructure, green building and renewable energy programs and projects that utilize best industry practices, as well as utilize leading edge technology and tools to provide environmental remediation. We work with customers to achieve and obtain the highest possible ratings within the LEED, Envision, Estidama, and other ratings worldwide.
With over 233 sustainability accreditations, we deliver resilient infrastructure, green building and renewable energy programs and projects that utilize best industry practices, as well as utilize leading edge technology and tools to provide environmental remediation. We work with customers to achieve and obtain the highest possible ratings such as the LEED, Envision, Estidama, and others.
By having the ability to respond to customers’ requirements with global deployment capability, we are well positioned to be a single-source contractor for many of our customers’ needs. Our technologies and platforms are designed to be applicable across end user markets and sub-markets.
By having the ability to respond to customers’ requirements with global deployment capability, we are well positioned to be the preferred contractor for many of our customers’ needs. Our technologies and platforms are designed to be applicable across end user markets and sub-markets.
We provide critical technologies, including cybersecurity; missile defense technical solutions; C5ISR; space launch and ground systems; space and weapon system resiliency; geospatial intelligence; signals intelligence; nuclear and chemical waste remediation; border security, critical infrastructure protection; counter unmanned air systems; and biometrics and biosurveillance. The U.S. government and its agencies represent substantially all of the revenue of our Federal Solutions segment.
We provide critical technologies, including cybersecurity; missile defense; intelligence; space launch and ground systems; space and weapon system resiliency; geospatial intelligence; signals intelligence; environmental remediation; border security, critical infrastructure protection; counter unmanned air systems; biometrics and biosurveillance. The U.S. government and its agencies represent substantially all of the revenue of our Federal Solutions segment.
Smith was appointed Chairwoman of the Board of Directors on January 18, 2022, effective April 14, 2022. She became the President and Chief Executive Officer on July 1, 2021 and was appointed to the board of directors in December 2020.
Smith, age 60, was appointed Chair of the Board of Directors on January 18, 2022, effective April 14, 2022. She became the President and Chief Executive Officer on July 1, 2021 and was appointed to the board of directors in December 2020.
In addition, we maintain a number of trade secrets that we endeavor to protect to ensure their continuing availability to us. Our technical expertise is vital to our growth strategy, and we believe they are a core competitive advantage. We have 37 registered patents and 15 pending patents in the United States and 4 pending patents internationally.
In addition, we maintain a number of trade secrets that we endeavor to protect to ensure their continuing availability to us. Our technical expertise is vital to our growth strategy, and we believe they are a core competitive advantage. We have 33 registered patents and 14 pending patents in the United States and 6 pending patents internationally.
Our main competitors in Federal Solutions are U.S. federal systems integrators and service providers such as Booz Allen Hamilton, CACI International Inc, Leidos Holdings, Inc., ManTech International Corporation, and Science Applications International Corporation.
Our peer group competitors in Federal Solutions are U.S. federal systems integrators and service providers such as Booz Allen Hamilton, CACI International Inc, Leidos Holdings, Inc., and Science Applications International Corporation.
We have more than six decades of experience in this market and have supported over 400 rail and transit customers. Key programs included Edmonton light rail transit (as part of the Marigold Infrastructure Partners consortium), New York MTA Systems and Facility Engineering Services, Program Management for Marseille Metro, and the Bay Area Rapid Transit Communications-Based Train Control.
We have more than six decades of experience in this market and have supported over 400 rail and transit customers. Key programs include Edmonton light rail transit (as part of the Marigold Infrastructure Partners consortium), New York MTA Systems and Facility Engineering Services, and the Bay Area Rapid Transit Communications-Based Train Control.
This reemergence has resulted in increased global disorder and a security environment, defined by rapid technological change, which may be more complex than ever before. We believe the U.S. Department of Defense and intelligence community will continue to invest in cyber, space, C5ISR, and missile defense. 7 Cybersecurity is Mission Critical to U.S.
This reemergence has resulted in increased global disorder and a security environment, defined by rapid technological change, which may be more complex than ever before. We believe the U.S. Department of Defense and Intelligence Community will continue to invest in cyber, space, intelligence, missile defense, and critical infrastructure protection.
We seek to enhance and optimize our core business and improve our financial performance, including revenue growth, margin expansion and positive cash flow, using the following strategies: • Developing a company-wide agile framework to enable responsive solutions delivery • Promoting collaboration and cross-company sharing to drive informed, timely decision making • Aligning goals through shared one-company objectives • Leveraging digital transformation to improve our internal processes and deliver an improved customer experience • Cross-selling new solutions to our existing customers and existing solutions to new customers. 12 • Promoting a culture that enables employees to drive technology and business model innovation • Streamlining operations and processes to optimize performance delivery and reduce overhead expenditures • Rigorously managing our working capital to maximize cash flow • Committing to Environment, Social and Governance (ESG) improvement for both Parsons and our customers Top Positions in High-Growth, Sustainable Markets We have a balanced portfolio between national security and critical infrastructure and diverse range of end markets.
We seek to enhance and optimize our core business and improve our financial performance, including revenue growth, margin expansion and positive cash flow, using the following strategies: • Developing a company-wide agile framework to enable responsive solutions delivery • Promoting collaboration and cross-company sharing to drive informed, timely decision making • Aligning goals through shared one-company objectives and a focus on timely feedback to ensure opportunities for improvement are realized and executed • Using digital transformation to improve our internal processes and deliver an improved customer experience • Cross-selling new solutions to our existing customers and existing solutions to new customers. • Promoting a culture that enables employees to drive technology and business model innovation • Streamlining operations and processes to optimize performance delivery and reduce overhead expenditures • Rigorously managing our working capital to maximize cash flow • Committing to being a responsible corporation for both Parsons and our customers 13 Top Positions in High-Growth, Sustainable Markets We have a balanced portfolio between national security and critical infrastructure and diverse range of end markets.
We develop and maintain enterprise platforms used by the DOD to perform network analysis and vulnerability assessments for defensive missions. ▪ Our tools and products are used across a wide variety of electronic warfare operations, including commercial cellular survey, automated signal identification and characterization using Artificial Intelligence/Machine Learning (AI/ML), signal modeling and simulation used for radio frequency (RF) ranges and test and evaluation centers using our TReX platform, and integrated RF and cyber solutions to deliver effects from long standoff distances. ▪ We conduct vulnerability research and resiliency solutions for existing weapon systems, critical infrastructure and space systems, while supporting the development and integration of next generation electronic warfare capabilities.
Cyber Command, and DOD research laboratories. ▪ Our tools and products are used across a wide variety of electronic warfare operations, including commercial cellular survey, automated signal identification and characterization using Artificial Intelligence/Machine Learning (AI/ML), signal modeling and simulation used for radio frequency (RF) ranges and test and evaluation centers using our TReX platform, and integrated RF and cyber solutions to deliver effects from long standoff distances. ▪ We conduct vulnerability research and resiliency solutions for existing weapon systems, critical infrastructure and space systems, while supporting the development and integration of next generation electronic warfare capabilities.
We recognize the importance of driving business focus and will resource/invest in areas where we believe Parsons can have a top position in markets that are high-growth, profitable, and enduring. These include cybersecurity, C5ISR, space, missile defense, transportation, environmental remediation, and water/wastewater treatment.
We recognize the importance of driving business focus and will resource/invest in areas where we believe Parsons can have a top position in markets that are high-growth, profitable, and enduring. These include cybersecurity and intelligence, space and missile defense, transportation, environmental remediation, and urban development.
These include hiring, retaining, and developing our employees, continually enhancing and optimizing our core business processes, resourcing and capitalizing on our high-growth markets and acquiring and integrating companies that possess transformative and disruptive technologies.
This focus includes hiring, retaining, and developing our employees, continually enhancing and optimizing our core business processes, resourcing and capitalizing on our high-growth markets and acquiring and integrating companies that possess transformative and disruptive technologies.
Our most important asset is our diverse team of talented employees, over 17,000 as of December 31, 2022, who are committed and passionate experts critical to delivering leading capabilities and whose expertise is sought by our clients for their most sophisticated applications and challenges.
Our most important asset is our diverse team of talented employees, over 18,500 as of December 31, 2023, who are committed and passionate experts critical to delivering leading capabilities 12 and whose expertise is sought by our clients for their most sophisticated applications and challenges.
In 2022, Parsons elected to disclose information related to our climate-related governance, risk management and metrics utilizing the Task Force on Climate-Related Financial Disclosures (TCFD) framework. We conducted climate risk and opportunity workshops with senior leaders representing a cross-section of our geographies, markets and corporate functions.
Parsons is focused on the risks and opportunities associated with climate change. In 2023, Parsons elected to disclose information related to our climate-related governance, risk management and metrics utilizing the Task Force on Climate-Related Financial Disclosures (TCFD) framework. We conducted climate risk and opportunity workshops with senior leaders representing a cross-section of our geographies, markets and corporate functions.
Our success is measured by our business performance, by the enthusiasm of our employees, and by our commitment to our employees’ growth. Demonstrated Ability to Identify and Execute Acquisitions to Transform our Business Strategic acquisitions that augment our technology offerings and capabilities are a key tenet of our growth strategy.
Our 10 success is measured by our business performance, by the enthusiasm of our employees, and by our commitment to our employees’ growth. Demonstrated Ability to Identify and Execute Acquisitions to Transform our Business Strategic acquisitions that augment our technology offerings and capabilities are a key tenet of our growth strategy. We have completed eleven strategic acquisitions since 2017.
Department of Defense (DOD), including the Special Operations Command (SOCOM), the United States Space Force, the Space Development Agency (SDA), the National Aeronautics and Space Administration (NASA), research laboratories and military services. ▪ We focus on providing small satellite launch and integration, satellite ground systems, flight dynamics, data fusion and analytics, platform system integration, directed energy, joint all-domain operations, and command and control systems. 3 ▪ As an example, we are the prime contractor responsible for the DOD’s small satellite integration efforts through our Launch Manifest Systems Integration program with the U.S.
Department of Defense (DOD) (military services, Special Operations Command (SOCOM), the Missile Defense Agency (MDA), and United States Cyber Command (CYBERCOM)); the National Oceanic and Atmospheric Administration (NOAA), and the National Aeronautics and Space Administration (NASA). ▪ We focus on providing small satellite launch and integration, satellite ground systems, flight dynamics, data fusion and analytics, platform system integration, directed energy, joint all-domain operations, and command and control systems. ▪ As an example, we are the prime contractor responsible for the DOD’s small satellite integration efforts through our Launch Manifest Systems Integration program with the U.S.
Smith was selected to serve on our board of directors because of the perspective and experience that she brings as our CEO and due to her significant industry and operations experience. Matthew Ofilos was appointed Chief Financial Officer of Parsons Corporation effective July 25, 2022. Mr.
She received the GovCon Executive of the Year award in 2023. Ms. Smith was selected to serve on our board of directors because of the perspective and experience that she brings as our CEO and due to her significant industry and operations experience. Matthew Ofilos, age 44, was appointed Chief Financial Officer of Parsons Corporation effective July 25, 2022. Mr.
Xator also expands Parsons’ customer base and brings differentiated technical capabilities in critical infrastructure protection, counter-unmanned aircraft systems (cUAS), intelligence and cyber solutions, 10 biometrics, and global threat assessment and operations, increasing our addressable market in both the Federal Solutions and Critical Infrastructure segments. • BlackHorse Solutions, Inc.: Acquired July 6, 2021 at a purchase price of $205.0 million.
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. • Echo Ridge LLC: Acquired on July 30, 2021 at a purchase price of $9 million.
For example, in the Federal Solutions segment, we have been providing support to the MDA for nearly 40 years with over 1,000 personnel imbedded with the customer.
For example, in the Federal Solutions segment, we have been providing support to the Missile Defense Agency for nearly 40 years with over 1,000 personnel embedded with the customer.
In the Critical Infrastructure segment, we have supported the WMATA for over 50 years and have served as Program Manager for Yanbu Industrial City for nearly 50 years.
In the Critical Infrastructure segment, we have supported the Washington Metropolitan Area Transit Authority for over 50 years and have served as Program Manager for Yanbu Industrial City for nearly 50 years.
Smith has 36 years of industry experience spanning the defense, intelligence and infrastructure markets. Ms. Smith serves on the Edison International board of directors, including on the Nominating and Governance and Safety and Operations Committees.
Smith has 38 years of industry experience spanning the defense, intelligence and infrastructure markets. Ms. Smith serves on the Edison International board of directors, including on the Compensation and Executive Personnel and Safety and Operations Committees.
Our strategy is to deliver information dominance across all domains. • D&I—Our D&I business unit is organized into three related areas: mission solutions, engineering and technical services, and high consequence missions. Our customers include the U.S. Department of Defense, the U.S. intelligence community, U.S. Cyber Command, and the Department of Justice.
Our strategy is to deliver information dominance across all domains. • D&I—Our D&I business unit is organized into three related areas: defense, space and engineering services; cyber and national operations; and high consequence missions. Our customers include the U.S. Department of Defense, the U.S. Intelligence Community, the Department of Commerce, and the National Aeronautics and Space Administration.
Scalable and Agile Business Offerings Our scalable and agile offerings enable us to satisfy robust and evolving customer needs. The demanding environments where we operate are characterized by a need for high-confidence solutions, widespread application needs and mission critical outcomes.
Primary responsibility for ESG risk and opportunity identification and management is assigned to our vice president for ESG. Scalable and Agile Business Offerings Our scalable and agile offerings enable us to satisfy robust and evolving customer needs. The demanding environments where we operate are characterized by a need for high-confidence solutions, widespread application and mission critical outcomes.
As of December 31, 2022, the company had repurchased 1,193,466 shares of common stock at an average price per share of $36.62 (including commissions calculated at the average price per share) for a total amount of $43.7 million. 17 Intellectual Property Our intellectual property portfolio consists of issued and pending patents as well as trademarks for many of our technologies.
As of December 31, 2023, the company had repurchased 1,426,476 shares of common stock at an average price per share of $38.35 (including commissions calculated at the average price per share) for a total amount of $54.7 million. 18 Intellectual Property Our intellectual property portfolio consists of issued and pending patents as well as trademarks for many of our technologies.
Critical Infrastructure: Our Critical Infrastructure segment provides integrated design and engineering services for complex physical and digital infrastructure around the globe. We are a technology innovator focused on next generation aviation; rail and transit; bridges, roads and highways; leveraging sensors and data to drive smart sustainable infrastructure.
Critical Infrastructure: Our Critical Infrastructure segment provides program management, design and engineering services, and owners representative support for complex physical and digital infrastructure around the globe. We develop digital solutions focused on next generation aviation; rail and transit; bridges, roads and highways; leveraging sensors and data to drive smart sustainable infrastructure.
Provide thought leadership in evolving areas, including hypersonic defense. o Critical Infrastructure Protection – Provide critical infrastructure protection in sectors where we have installed base, including facilities, health care, transportation and energy.
Support our customer’s integrated air and missile defense strategy and deployment. Provide thought leadership in evolving areas, including hypersonic defense. o Critical Infrastructure Protection – Provide critical infrastructure protection in sectors where we have installed base, including facilities, health care, transportation, water and energy.
Technology and our people are our most important assets, allowing us to consistently deliver for our customers and help them solve their most pressing challenges. Investment in key technological capabilities is core to our business and helps us to stay at the forefront of the evolving trends across our end markets.
Technology Innovation Technology and our people are our most important assets, together they underpin our ability to consistently deliver for our customers. Investment in key technological capabilities is core to our business and helps us to stay at the forefront of the evolving trends across our end markets.
The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding registrants that file electronically with the SEC, including us.
Available Information We file annual, quarterly, and current reports and other information with the Securities and Exchange Commission (SEC). The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding registrants that file electronically with the SEC, including us.
Organizationally, we operate in two reportable segments, Federal Solutions and Critical Infrastructure, with revenue contribution of 53% and 47%, respectively, and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) contribution of 57% and 43%, respectively, for the year ended December 31, 2022 (“fiscal 2022”).
Organizationally, we operate in two reportable segments, Federal Solutions and Critical Infrastructure, with revenue contribution of 55% and 45%, respectively, and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) contribution of 62% and 38%, respectively, for the year ended December 31, 2023 (“fiscal 2023”).
Department of Defense and Intelligence Community customers. o Space and Mission Defense- Extend our space situational awareness, small satellite integration and payload, command and control and enterprise ground systems to our current space customers and to new space and geospatial customers in the government and commercial space markets. Support our customer’s integrated air and missile defense strategy and deployment.
Department of Defense and Intelligence Community customers. o Space and Mission Defense – Extend our space situational awareness, small satellite integration and payload, command and control and enterprise ground systems and assured position, navigation and timing solutions to our current space customers and to new space and geospatial customers in the government and commercial space markets.
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.
Special Operations Command, the Intelligence Community, Federal Civilian customers, and global critical infrastructure markets, while providing new customer access at the Department of State.
Backlog includes (i) unissued task orders and unexercised option years, to the extent their issuance or exercise is probable, as well as (ii) contract awards, to the extent we believe contract execution and funding is probable.
Backlog includes (i) unissued task orders and unexercised option years, to the extent their issuance or exercise is probable, as well as (ii) contract awards, to the extent we believe contract execution and funding is probable. Our backlog includes orders under contracts that can extend for several years. For example, the U.S.
Representative offerings include nuclear waste processing and treatment, weapons of mass destruction elimination, munitions destruction, remediation of unexploded ordinances and hazardous, toxic, reactive wastes, architectural and engineering design, program and project management, infectious disease control, advanced electronic security systems, counter-unmanned aircraft systems, and biometrics solutions. • Our expertise includes designing and implementing first of a kind processing and production facilities, technology deployment in response to pandemic outbreaks, and delivery of solutions addressing resiliency, security and sustainability, as well as delivery of highly complex infrastructure in challenging environments and geographies. • Representative programs include the National Science Foundation’s Antarctica Infrastructure Modernization for Science, the FAA Technical Services Contract, the DOE Salt Waste Processing Facility, the DTRA Cooperative Threat Reduction Integrating Contract, and the Radford Army Munition Plant Energetic Waste Incinerator. 5 On June 1, 2022, we completed the acquisition of Xator Corporation in a transaction valued at $ 388 .3 million.
Representative offerings include weapons of mass destruction elimination, munitions destruction; remediation of unexploded ordinances and hazardous, toxic, reactive wastes; architectural and engineering design; program and project management; infectious disease control; advanced electronic security systems; border security; counter-unmanned aircraft systems; and biometrics solutions. • Our expertise includes designing and upgrading processing and production facilities such as Army ammunition, technology deployment in response to pandemic outbreaks, and 4 delivery of solutions addressing resiliency, security and sustainability, as well as delivery of highly complex infrastructure in challenging environments and geographies. • Representative programs include the National Science Foundation’s Antarctica Infrastructure Modernization for Science, the FAA Technical Services Contract, the DTRA Cooperative Threat Reduction Integrating Contract, the Department of State Overseas Security Installation Services, and the Radford Army Munition Plant Energetic Waste Incinerator.
Apply our design capabilities and innovative technologies to modernize, upgrade and create new water/wastewater treatment systems. o Urban development – Leverage our program management, urban planning and urban design competencies to develop new industrial cities and mixed-use developments. 13 Mergers and Acquisitions We continue to pursue the acquisition and integration of high growth, technology driven companies which meet the following criteria: • Financial performance goals: >10% top line growth, >10% Adjusted EBITDA margin, and strong cash flow • Align to our focused markets • Technology differentiation: fill technology gaps, drive end-to-end solutions, move up the value chain, scale within and across our businesses and add valuable intellectual property rights Our objective is to continue to transform our business into an integrated, full life-cycle systems integrator that delivers scalable solutions and drives revenue growth, expanded margins, and strong cash flows.
Mergers and Acquisitions We continue to pursue the acquisition and integration of high growth, technology driven companies which meet the following criteria: • Financial performance goals: >10% top line growth, >10% Adjusted EBITDA margin, and strong cash flow • Align to our six focused markets 14 • Technology differentiation: fill technology gaps, drive end-to-end solutions, move up the value chain, scale within and across our businesses and add valuable intellectual property rights Our objective is to continue to transform our business into an integrated, full life-cycle solutions integrator that delivers scalable solutions and drives revenue growth, expanded margins, and strong cash flows.
An example is our role as provider of Advanced Traffic Management Systems, or ATMS, through our iNET™ platform. Since the first deployment in 2007, iNET® has been delivered to twenty-four state Departments of Transportation, twenty-two cities, eight county agencies, seven toll agencies, and seven different countries. • For aviation, we play a critical role as program manager for global airports.
Since the first deployment in 2007, iNET® has been delivered to twenty-four state Departments of Transportation, twenty-two cities, eight county agencies, seven toll agencies, and seven different countries. 5 • For aviation, we play a critical role as program manager and lead designer for global airports.
We achieved an overall win rate of 48.6% in fiscal 2022, 56.0% in the year ended December 31, 2021 (“fiscal 2021”) and 46.4% in the year ended December 31, 2020 (‘fiscal 2020”), which includes strong re-compete win rates that exceeded 90% in fiscal 2022 giving us long-term certainty on key contracts.
We achieved an overall win rate of 66% in fiscal 2023, 49% in the year ended December 31, 2022 (“fiscal 2022”) and 56% in the year ended December 31, 2021 (‘fiscal 2021”), which includes strong re-compete win rates of 93% in fiscal 2023 giving us long-term certainty on key contracts.
Across a broad set of industries, we provide smart and agile solutions that create the future for our national security and critical infrastructure customers as they adapt to the rapid changes of a more interconnected and technology-driven world. 8 Our Competitive Strengths Proven Track Record Our proven track record is a result of our strong performance, the dedication of our employees and our longstanding customer relationships.
Across a broad set of industries, we provide smart and agile solutions that create the future for our national security and critical infrastructure customers as they adapt to the rapid changes of a more interconnected and technology-driven world.
We serve a diverse global customer base including federal, state, municipal and industry customers, and private sector infrastructure owners, such as the transportation authorities for the cities of Los Angeles, New 1 York, and Paris, the state of New Jersey, AMTRAK, CSX, Metrolinx (Ontario, Canada), Riyadh Metro, Dubai Roads and Transportation Authority (Dubai RTA) , and the Abu Dhabi Municipality.
We serve a diverse global customer base including federal, state, municipal and industry customers, and private sector infrastructure owners, such as the transportation authorities for the cities of Los Angeles, San Francisco, New York, and Paris, the state of New Jersey, AMTRAK, CSX, Metrolinx (Ontario, Canada), Southern Nevada Water Authority, Riyadh Metro, Dubai Roads and Transportation Authority (Dubai RTA), Abu Dhabi Department of Municipalities and Transport, Qatar Public Works Authority (Qatar PWA), the Saudi Arabia Public Investment Fund and international developers.
Program Management: We provide expertise and technology to advance our customers’ execution of large, complex projects within their defined sustainability, technical, quality, time and cost parameters. Design Engineering: We provide advanced systems and infrastructure engineering design associated with missile systems infrastructure, nuclear waste processing facilities, environmental remediation, long-span bridges, rail and transit systems and other associated infrastructure.
Program Management: We provide expertise and technology to advance our customers’ execution of large, complex projects within their defined sustainability, technical, quality, time and cost parameters. Design Engineering: We provide advanced systems and infrastructure engineering design associated with utility capital projects, water/wastewater treatment, environmental remediation, ammunition plant upgrades, roads and highways, bridges, rail and transit systems and other associated infrastructure.
We have 80 trademarks and 6 pending trademark applications in the United States, and 114 trademarks and 18 pending trademark applications internationally. We also currently offer 25 products for sale to our global customers.
We have 77 trademarks and 4 pending trademark applications in the United States, and 105 trademarks and 16 pending trademark applications internationally. We also currently offer 37 products for sale to our global customers.
To address these challenges, our customers are seeking smart technology-enabled solutions to enhance and transform their systems performance. Our wide-ranging capabilities enable us to provide our services, products and solutions across the national security and critical infrastructure markets, and we believe we are well positioned to benefit from the trends in these markets.
Parsons’ wide-ranging capabilities enable us to provide our services, products and solutions across the national security and critical infrastructure markets, and we are well positioned to benefit from the trends in these markets.
Parsons is differentiated by our people, processes and technology that work together to develop, rapidly prototype and deploy specialized hardware, software and infrastructure solutions to meet continually evolving customer missions and needs.
Our Services, Products and Solutions Within each of our segments, we focus our solutions, products and services on the needs of customers in each of our business units. Parsons is differentiated by our people, processes and technology that work together to develop, rapidly prototype and deploy specialized hardware, software and infrastructure solutions to meet continually evolving customer missions and needs.
The Technical Career Path coupled with an integrated competency model and Workday tools such as the Opportunity Graph are resources designed to improve the quality of manager-employee career discussions and, ultimately, career movement. Employee Stock Ownership Plan At December 31, 2022, approximately 6,184 of our employees participated in our Employee Stock Ownership Plan (ESOP).
The Technical Career Path coupled with an integrated competency model and Workday tools such as the Opportunity Graph are resources designed to improve the quality of manager-employee career discussions and, ultimately, career movement.
Thus, our employees own approximately 40% of the total outstanding shares in the ESOP. In December 2020, the board of directors approved an amendment to the ESOP to provide greater diversification rights to participants.
In December 2020, the board of directors approved an amendment to the ESOP to provide greater diversification rights to participants.
We also develop analysis and anomaly detection tools for radio frequency and airborne communications. ▪ We develop tools and tradecraft to conduct Information Operations across the physical and cyber domains, giving customers complete situational awareness for force protection and decision making with the Information Environment. • ES—Our ES business unit focuses on advanced technology services for complex energy and chemical systems, aviation, life sciences and bio-surveillance systems, environmental remediation, security and protection systems, and associated complex infrastructure.
We also develop analysis and anomaly detection tools for radio frequency and airborne communications. • ES—Our ES business unit focuses on advanced technology services for complex energy and chemical systems, aviation, life sciences and bio-surveillance systems, environmental remediation, security and protection systems, and associated complex infrastructure.
Leverage technology to drive smart, sustainable infrastructure. o Environmental remediation – Leverage our specialized skill and experience with respect to remediating mines and oil wells and eliminating emerging contaminants.
Leverage technology to drive smart, sustainable infrastructure. o Environmental remediation – Leverage our specialized skill and experience with respect to remediating mines and oil wells and eliminating emerging contaminants. Apply our design capabilities and innovative technologies to modernize, upgrade and create new water/wastewater treatment systems.
We utilize the following strategies, among others, towards achieving this goal: • We continuously evaluate and shape our portfolio to divest, exit and de-emphasize lower-performing businesses and markets. • We invest in critical, differentiated technology areas, including remote sensing, joint all domain operations, space operations, cybersecurity, data analytics, command and control, environmental remediation and smart mobility. • We seek continuous expansion in our focused high-growth markets: o Cybersecurity – Continue our growth momentum by offering end-to-end solutions, tools, operations and platforms for our U.S.
We utilize the following strategies, among others, towards achieving this goal: • We continuously evaluate and shape our portfolio to divest, exit and de-emphasize lower-performing businesses and markets. • We invest in critical, differentiated technology areas, including artificial intelligence, assured position navigation and timing, PFAS remediation, space cyber/electronic warfare, quantum research and product development in areas including defensive cyber, space command and control, intelligent transportation systems, spectrum operations and biometrics. • We seek continuous expansion in our focused high-growth markets: o Cybersecurity and Intelligence – Continue our growth momentum by offering end-to-end full spectrum cyber operations including solutions, tools, operations and platforms for our U.S.
In fiscal 2022, our Federal Solutions revenues increased 17.2% and our Critical Infrastructure revenues increased 11.8% year-over-year. As of December 31, 2022, our backlog was $8.2 billion, down 2.0% from year end fiscal 2021. Long-Term Customer Relationships We maintain long-term relationships with key government and commercial customers, many of which span over 40 years.
As of December 31, 2023, our backlog was $8.6 billion, an increase of 5% from year end fiscal 2022. Long-Term Customer Relationships We maintain long-term relationships with key government and commercial customers, many of which span over 40 years.
Our team of engineers, scientists, programmers and other specialists include PhDs and certified hackers, and a large number of our skilled workforce hold government security clearances, which provides a competitive advantage for the highly technical and demanding work we perform. Parsons is focused upon the risks and opportunities associated with climate change.
Our team of engineers, scientists, programmers and other specialists include PhDs and certified hackers, and a large number of our skilled workforce hold government security clearances, which provides a competitive advantage for the highly technical and demanding work we perform. Our dual technical career path and Technical Fellows program enable retention and development of our strong technical talent.
Our capabilities include technologies in long-span bridges, tunnels, building Information modeling, and water/wastewater. • Examples of our design capabilities are our role as the lead designer of the Tacoma Narrows Bridge, the largest twin tower suspension bridge in the world when it opened, lead designer for the Goethals bridge connecting Staten Island, NY and Elizabeth, NJ, and lead designer for the Federal Way link extension for Sound Transit in Seattle. • For program management, we are part of the Riyadh Metro Transit Consultants responsible for program management of the Riyadh metro system, the largest metro system under development in the world.
Our capabilities include technologies in long-span bridges, tunnels, building Information modeling, and water/wastewater treatment and conveyance. • Examples of our design capabilities are our role as the lead designer of the Tacoma Narrows Bridge, the largest twin tower suspension bridge in the world when it opened, lead designer for the Goethals bridge connecting Staten Island, NY and Elizabeth, NJ, and lead designer for the Federal Way rail extension for Sound Transit in Seattle. • For program management, we are the Owner’s Engineer for the Gordie Howe International Bridge between Windsor, Ontario and Detroit, Michigan, which will have the longest main span of any cable-stayed bridge in North America.
Within our diverse customer base, our customer relationships include states (e.g., Texas, Florida, California, Colorado, Washington, Georgia, Illinois, New York, and New Jersey), cities and Canadian provinces and territories (e.g., Ontario, British Columbia, Quebec and Alberta), water and wastewater authorities, and Middle East customers (e.g., the Kingdom of Saudi Arabia Royal Commission, Riyadh Metro, Dubai RTA, and the Abu Dhabi Municipality).
Within our diverse base, our customer relationships include states (e.g., Texas, Florida, California, Colorado, Washington, Illinois, New York, New Jersey and Georgia), cities, and Canadian provinces and territories (e.g., Ontario, British Columbia, Quebec, Nova Scotia and Alberta), as well as water and wastewater authorities.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAny disruption in the functioning of government agencies, including as a result of government closures and shutdowns, terrorism, war, natural disasters, destruction of government facilities, and other potential calamities could have a negative impact on our operations and cause us to lose revenue or incur additional costs due to, among other things, our inability to deploy our staff to client locations or facilities as a result of such disruptions.
Biggest changeCRs generally continue the level of funding from the prior year’s appropriations or the previously approved CR from the current year; • U.S. government agencies awarding contracts on a technically acceptable/lowest cost basis in order to reduce expenditures; • delays in the payment of our invoices by government payment offices; • results of elections, including politicians who may have priorities that would reduce spending in areas in which we operate; • an inability by the U.S. government to fund its operations as a result of a failure to increase the federal government’s debt ceiling, a credit downgrade of U.S. government obligations or for any other reason; and • changes in the political climate and general economic conditions, including a slowdown of the economy or unstable economic conditions and responses to conditions, such as emergency spending, that reduce funds available for other government priorities. 25 Any disruption in the functioning of government agencies, including as a result of government closures and shutdowns, terrorism, war, natural disasters, destruction of government facilities, and other potential calamities could have a negative impact on our operations and cause us to lose revenue or incur additional costs due to, among other things, our inability to deploy our staff to client locations or facilities as a result of such disruptions.
In particular, with regard to our largest single customer, the U.S. federal government, budget deficits, the national debt and the prevailing economic condition, and actions taken to address them, could continue to negatively affect the U.S. government expenditures on defense, intelligence and civil programs for which we provide support. The U.S.
In particular, with regard to our largest single customer, the U.S. federal government, budget deficits, the national debt and the prevailing economic condition, and actions taken to address them, could continue to negatively affect the U.S. government expenditures on defense, intelligence and civil programs for which we provide support.
If our or our vendors’ systems, services or other applications have significant defects or errors, are successfully attacked by cyber and other security threats, suffer delivery delays or otherwise fail to meet our clients’ expectations, we may: • lose revenue due to adverse client reaction; • be required to provide additional services to a client at no charge; 36 • incur additional costs related to remediation, monitoring and increasing our cybersecurity; • lose revenue due to the deployment of internal staff for remediation efforts instead of client assignments; • receive negative publicity, which could damage our reputation and adversely affect our ability to attract or retain clients; • be unable to successfully market services that are reliant on the creation and maintaining of secure information technology systems to government and commercial clients; • suffer claims by clients or impacted third parties for substantial damages, particularly as a result of any successful network or systems breach and exfiltration of client and/or third-party information; or • incur significant costs, including fines from government regulators related to complying with applicable federal or state law, including laws pertaining to the security and protection of personal information.
If our or our vendors’ systems, services or other applications have significant defects or errors, are successfully attacked by cyber and other security threats, suffer delivery delays or otherwise fail to meet our clients’ expectations, we may: • lose revenue due to adverse client reaction; 36 • be required to provide additional services to a client at no charge; • incur additional costs related to remediation, monitoring and increasing our cybersecurity; • lose revenue due to the deployment of internal staff for remediation efforts instead of client assignments; • receive negative publicity, which could damage our reputation and adversely affect our ability to attract or retain clients; • be unable to successfully market services that are reliant on the creation and maintaining of secure information technology systems to government and commercial clients; • suffer claims by clients or impacted third parties for substantial damages, particularly as a result of any successful network or systems breach and exfiltration of client and/or third-party information; or • incur significant costs, including fines from government regulators related to complying with applicable federal or state law, including laws pertaining to the security and protection of personal information.
In addition, there can be 37 no assurance that any of our existing insurance coverage will be renewable upon the expiration of the coverage period or that future coverage will be affordable at the required limits. Adverse judgments or settlements in legal disputes could result in materially adverse monetary damages or injunctive relief and damage our reputation.
In addition, there can be no assurance that any of our existing insurance coverage will be renewable upon the expiration of the coverage period or that future coverage will be affordable at the required limits. 37 Adverse judgments or settlements in legal disputes could result in materially adverse monetary damages or injunctive relief and damage our reputation.
Although our employees are subject to confidentiality obligations, this protection may be inadequate to 39 deter or prevent misappropriation of our confidential information and/or the infringement of our patents and copyrights. Further, we may be unable to detect unauthorized use of our intellectual property or otherwise take appropriate steps to enforce our rights.
Although our employees are subject to confidentiality obligations, this protection may be inadequate to deter or prevent misappropriation of our confidential information and/or the infringement of our patents and copyrights. Further, we may be unable to detect unauthorized use of our intellectual property or 39 otherwise take appropriate steps to enforce our rights.
Our operating results and the trading price of our shares may fluctuate in response to various factors, including: • market conditions in the broader stock market; • actual or anticipated fluctuations in our quarterly financial and operating results; • introduction of new products or services by us or our competitors; • changes in our awards, backlog and book-to-bill ratios in a given period; • issuance of new or changed securities analysts’ reports or recommendations; • results of operations that vary from expectations of securities analysis and investors; • guidance, if any, that we provide to the public, any changes in this guidance or our failure to meet this guidance; • strategic actions by us or our competitors; • announcement by us, our competitors or our acquisition targets; • sales, or anticipated sales, of large blocks of our stock; • additions or departures of key personnel; • regulatory, legal or political developments; • public response to press releases or other public announcements by us or third parties, including our filings with the SEC; • litigation and governmental investigations; • seasonality associated with U.S. federal, state, regional and local government funding and spending; • changing economic conditions; • changes in accounting principles; • default under agreements governing our indebtedness; • exchange rate fluctuations; and • other events or factors, including those from natural disasters, war, actors of terrorism or responses to these events and pandemics, such as the COVID-19 pandemic.
Our operating results and the trading price of our shares may fluctuate in response to various factors, including: • market conditions in the broader stock market; 45 • actual or anticipated fluctuations in our quarterly financial and operating results; • introduction of new products or services by us or our competitors; • changes in our awards, backlog and book-to-bill ratios in a given period; • issuance of new or changed securities analysts’ reports or recommendations; • results of operations that vary from expectations of securities analysis and investors; • guidance, if any, that we provide to the public, any changes in this guidance or our failure to meet this guidance; • strategic actions by us or our competitors; • announcement by us, our competitors or our acquisition targets; • sales, or anticipated sales, of large blocks of our stock; • additions or departures of key personnel; • regulatory, legal or political developments; • public response to press releases or other public announcements by us or third parties, including our filings with the SEC; • litigation and governmental investigations; • seasonality associated with U.S. federal, state, regional and local government funding and spending; • changing economic conditions; • changes in accounting principles; • default under agreements governing our indebtedness; • exchange rate fluctuations; and • other events or factors, including those from natural disasters, war, actors of terrorism or responses to these events and pandemics, such as the COVID-19 pandemic.
The degree to which we are able to utilize our employees in a timely manner or at all is affected by a number of factors, including: • our ability to transition employees from completed projects to new assignments and to hire, assimilate and deploy new employees; • our ability to forecast demand for our services and to maintain and deploy headcount that is aligned with demand, including employees with the right mix of skills and experience to support our projects; • our employees’ ability to obtain or retain necessary security clearances or required certifications; • changes to or delays or cancellations of projects, as a result of governmental budgetary processes or otherwise; • our ability to manage attrition; • the impact of inflation upon the cost of services and materials provided to customers; and • our need to devote time and resources to training, business development, and other non-chargeable activities.
The degree to which we are able to utilize our employees in a timely manner or at all is affected by a number of factors, including: • our ability to transition employees from completed projects to new assignments and to hire, assimilate and deploy new employees; • our ability to forecast demand for our services and to maintain and deploy headcount that is aligned with demand, including employees with the right mix of skills and experience to support our projects; • our employees’ ability to obtain or retain necessary security clearances or required certifications; 29 • changes to or delays or cancellations of projects, as a result of governmental budgetary processes or otherwise; • our ability to manage attrition; • the impact of inflation upon the cost of services and materials provided to customers; and • our need to devote time and resources to training, business development, and other non-chargeable activities.
Such restrictions affect or will affect, and in many respects limit or prohibit our ability and the ability of our subsidiaries to, among other things: • incur additional indebtedness; • create liens; • pay dividends and make other distributions in respect of our equity securities; • redeem our equity securities; 42 • make loans, advances, investments or other restricted payments; • sell assets or receivables; • engage in certain business activities; • amend our ESOP’s plan documents; • enter into transactions with affiliates; and • effect mergers or consolidations.
Such restrictions affect or will affect, and in many respects limit or prohibit our ability and the ability of our subsidiaries to, among other things: • incur additional indebtedness; • create liens; • pay dividends and make other distributions in respect of our equity securities; • redeem our equity securities; • make loans, advances, investments or other restricted payments; • sell assets or receivables; • engage in certain business activities; • amend our ESOP’s plan documents; • enter into transactions with affiliates; and • effect mergers or consolidations.
We are party to a registration rights agreement with the ESOP Trustee, providing the ESOP with certain demand registration rights related to shares held by the ESOP in the event the ESOP Trustee determines in good faith, in exercising its fiduciary duties under ERISA, that the ESOP is required to sell its shares, which we believe is only likely to occur if our business, financial condition or results of operations have materially and adversely deteriorated.
We are party to a registration rights agreement with the ESOP Trustee, providing the ESOP with certain demand registration rights related to shares held by the ESOP in the event the ESOP Trustee determines in good faith, in exercising its fiduciary duties under ERISA, that the ESOP is required to sell its shares, which we believe is only likely 46 to occur if our business, financial condition or results of operations have materially and adversely deteriorated.
These activities generally subject us to extensive foreign, federal, state and local environmental protection and health and safety laws and regulations, 38 which, among other things, require us to incur costs to comply with these regulations and could impose liability on us for handling or disposing of hazardous substances or dangerous materials. Numerous governmental authorities, such as the U.S.
These activities generally subject us to extensive foreign, federal, state and local environmental protection and health and safety laws and regulations, which, among other things, require us to incur costs to comply with these regulations and could impose liability on us for handling or disposing of hazardous substances or dangerous materials. Numerous governmental authorities, such as the U.S.
These divestitures similarly require significant investment of time and resources and may disrupt our business, distract management from other responsibilities and may result in losses on disposal or continued financial involvement in the divested business, including through indemnification, guarantee or other financial arrangements, for a period of time following the transaction, which could adversely affect our business, financial condition or results of operations.
These divestitures similarly require significant investment of time and resources and may disrupt our business, distract management from other responsibilities and 32 may result in losses on disposal or continued financial involvement in the divested business, including through indemnification, guarantee or other financial arrangements, for a period of time following the transaction, which could adversely affect our business, financial condition or results of operations.
Our ability to effectively serve our clients is dependent upon our ability to successfully leverage our operating model across all of these and any future locations, maintain effective management controls over all of our locations to ensure, among other things, compliance with applicable laws, rules and regulations, and instill our core values in all of our personnel at each of these and any future locations.
Our ability to effectively serve our clients is dependent upon our ability to successfully leverage our operating model across all of these and any future locations, maintain effective management controls over all of our locations to ensure, among other things, compliance with applicable 30 laws, rules and regulations, and instill our core values in all of our personnel at each of these and any future locations.
We compete with larger companies that have greater name recognition, financial resources and larger technical staffs and with smaller, more specialized companies that are able to concentrate their resources on particular areas. Additionally, we may compete with a government’s own capabilities. Technology-focused companies may also develop products and services that could disrupt our business or compete with our services.
We 31 compete with larger companies that have greater name recognition, financial resources and larger technical staffs and with smaller, more specialized companies that are able to concentrate their resources on particular areas. Additionally, we may compete with a government’s own capabilities. Technology-focused companies may also develop products and services that could disrupt our business or compete with our services.
Any of these factors could have a material adverse effect on our business, financial condition or results of operations. We have operations in the Middle East, neighboring regions, and other regions across the globe, and these regions may experience turmoil, political upheaval or similar crises that may impact our current projects, future business and financial stability.
Any of these factors could have a material adverse effect on our business, financial condition or results of operations. 40 We have operations in the Middle East, neighboring regions, and other regions across the globe, and these regions may experience turmoil, political upheaval or similar crises that may impact our current projects, future business and financial stability.
A finding of significant control deficiencies in a contractor’s business systems or a finding of noncompliance with U.S. government Cost Accounting Standards, or CAS, can result in decremented billing rates to U.S. government customers until the control deficiencies are corrected and their remediation is accepted by the Defense Contract Management Agency.
A finding of significant control deficiencies in a contractor’s business systems or a 27 finding of noncompliance with U.S. government Cost Accounting Standards, or CAS, can result in decremented billing rates to U.S. government customers until the control deficiencies are corrected and their remediation is accepted by the Defense Contract Management Agency.
The risks of combining our operations of the businesses include, among others: • we may have underestimated the costs to integrate the information systems of acquired companies with ours; 33 • we may face difficulties in integrating employees, integrating different corporate cultures and in attracting and retaining key personnel; and • we may face challenges in keeping existing contracts and customers.
The risks of combining our operations of the businesses include, among others: • we may have underestimated the costs to integrate the information systems of acquired companies with ours; • we may face difficulties in integrating employees, integrating different corporate cultures and in attracting and retaining key personnel; and • we may face challenges in keeping existing contracts and customers.
Risk Relating to Our Business • Government spending and priorities could change in a manner that adversely affects our future revenue and limits our growth prospects. 21 • The U.S. federal government and its agencies collectively are our largest single customer and, if our reputation or relationships with the U.S. federal government were harmed, our future revenues and cash flows would be adversely affected. • Our failure to comply with a variety of complex procurement rules and regulations could result in our being liable for penalties, including termination of our government contracts, disqualification from bidding on future government contracts and suspension or debarment from government contracting. • A substantial portion of our business is subject to reviews, audits and cost adjustments by government agencies, which, if resolved unfavorably to us, could adversely affect our profitability, cash flows or growth prospects. • Our government contracts may be terminated by the government counterparty at any time and may contain other provisions permitting the government to discontinue contract performance, and if lost contracts are not replaced, our operating results may differ materially and adversely from those anticipated. • Our revenue and growth prospects may be harmed if we or our employees are unable to obtain government granted eligibility or other qualifications, we and they need to perform services for our customers. • We may make acquisitions, investments, joint ventures and divestitures in the future that involve numerous risks, which if realized, may adversely affect our business and our future results. • Our acquisitions may not achieve their full intended benefits or may disrupt our plans and operations. • We conduct a portion of our work through joint venture entities, some of which we do not have management control over, and with which we typically have joint and several liability with our joint venture partners. • Our earnings and profitability may vary based on the mix of our contracts and may be adversely affected by our failure to accurately estimate and manage costs, time and resources. • We use estimates in recognizing revenues and, if we make changes to estimates used in recognizing revenues, our profitability may be adversely affected. • Systems that we develop, integrate, maintain, or otherwise support could experience security breaches which may damage our reputation with our clients and hinder future contract win rates. • Services we provide and technologies we develop are designed to detect and monitor threats to our clients, the failure of which may lead to reputational harm or liability against us by our clients or third parties and may subject our staff to potential threats, risk of loss or harm. • Internal system or service failures affecting us or our vendors, including as a result of cyber or other security threats, could disrupt our business and impair our ability to effectively provide our services to our clients, which could damage our reputation and have a material adverse effect on our business, financial condition and results of operations. • Our business is subject to numerous legal and regulatory requirements and any violation of these requirements or any misconduct by our employees, subcontractors, agents or business partners could harm our business and reputation. 22 • Our business is subject the impact of supply chain disruption and inflation risk upon the cost of providing materials and services to customers and upon the profitability for certain contracts . • Goodwill and intangible assets represent a significant amount of our total assets, and any impairment of these assets would negatively impact our results of operations. • We depend on our teaming arrangements and relationships with other contractors and subcontractors.
Risk Factors Summary The following is a summary of the principal risks that could adversely affect our business, operations and financial results. 22 Risk Relating to Our Business • Government spending and priorities could change in a manner that adversely affects our future revenue and limits our growth prospects. • The U.S. federal government and its agencies collectively are our largest single customer and, if our reputation or relationships with the U.S. federal government were harmed, our future revenues and cash flows would be adversely affected. • Our failure to comply with a variety of complex procurement rules and regulations could result in our being liable for penalties, including termination of our government contracts, disqualification from bidding on future government contracts and suspension or debarment from government contracting. • A substantial portion of our business is subject to reviews, audits and cost adjustments by government agencies, which, if resolved unfavorably to us, could adversely affect our profitability, cash flows or growth prospects. • Our government contracts may be terminated by the government counterparty at any time and may contain other provisions permitting the government to discontinue contract performance, and if lost contracts are not replaced, our operating results may differ materially and adversely from those anticipated. • Our revenue and growth prospects may be harmed if we or our employees are unable to obtain government granted eligibility or other qualifications, we and they need to perform services for our customers. • We may make acquisitions, investments, joint ventures and divestitures in the future that involve numerous risks, which if realized, may adversely affect our business and our future results. • Our acquisitions may not achieve their full intended benefits or may disrupt our plans and operations. • We conduct a portion of our work through joint venture entities, some of which we do not have management control over, and with which we typically have joint and several liability with our joint venture partners. • Our earnings and profitability may vary based on the mix of our contracts and may be adversely affected by our failure to accurately estimate and manage costs, time and resources. • We use estimates in recognizing revenues and, if we make changes to estimates used in recognizing revenues, our profitability may be adversely affected. • Systems that we develop, integrate, maintain, or otherwise support could experience security breaches which may damage our reputation with our clients and hinder future contract win rates. • Services we provide and technologies we develop are designed to detect and monitor threats to our clients, the failure of which may lead to reputational harm or liability against us by our clients or third parties and may subject our staff to potential threats, risk of loss or harm. • Internal system or service failures affecting us or our vendors, including as a result of cyber or other security threats, could disrupt our business and impair our ability to effectively provide our services to our clients, which could damage our reputation and have a material adverse effect on our business, financial condition and results of operations. • Our business is subject to numerous legal and regulatory requirements and any violation of these requirements or any misconduct by our employees, subcontractors, agents or business partners could harm our business and reputation. 23 • Our business is subject the impact of supply chain disruption and inflation risk upon the cost of providing materials and services to customers and upon the profitability for certain contracts. • Goodwill and intangible assets represent a significant amount of our total assets, and any impairment of these assets would negatively impact our results of operations. • We depend on our teaming arrangements and relationships with other contractors and subcontractors.
Damage to our reputation or limitations on our eligibility for additional work or any liability 35 resulting from a security breach in one of the systems we develop, install, maintain, or otherwise support could have a material adverse effect on our business, financial condition and results of operations.
Damage to our reputation or limitations on our eligibility for additional work or any liability resulting from a security breach in one of the systems we develop, install, maintain, or otherwise support could have a material adverse effect on our business, financial condition and results of operations.
In addition, headcount growth is the primary means by which we are able to achieve revenue growth. Any inability to hire additional appropriately qualified personnel or failure to timely and effectively deploy such additional personnel against funded backlog could negatively affect our ability to grow our revenue.
In addition, headcount growth is the 41 primary means by which we are able to achieve revenue growth. Any inability to hire additional appropriately qualified personnel or failure to timely and effectively deploy such additional personnel against funded backlog could negatively affect our ability to grow our revenue.
Additionally, loss of the ESOP’s tax-qualified status would adversely impact our prior treatment as an S Corporation. 43 Risks Related to our Employees A failure to attract, train and retain skilled employees and our senior management team would adversely affect our ability to execute our strategy and may disrupt our operations.
Additionally, loss of the ESOP’s tax-qualified status would adversely impact our prior treatment as an S Corporation. Risks Related to our Employees A failure to attract, train and retain skilled employees and our senior management team would adversely affect our ability to execute our strategy and may disrupt our operations.
In addition, in the past, when the 46 market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the company that issued the stock. If any of our stockholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit.
In addition, in the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the company that issued the stock. If any of our stockholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit.
If our reputation or relationships with government agencies were to be negatively affected, or if we are suspended or debarred from contracting with government agencies for any reason, the amount of business with government and other customers would decrease and our financial condition and results of operations could be adversely affected.
If our reputation or relationships with government 26 agencies were to be negatively affected, or if we are suspended or debarred from contracting with government agencies for any reason, the amount of business with government and other customers would decrease and our financial condition and results of operations could be adversely affected.
As such, the ESOP Trustee may be able to exercise a greater influence than otherwise over matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. The purpose of the ESOP is to provide retirement income to employees and their beneficiaries.
As such, the ESOP Trustee may be able to exercise a greater influence than otherwise over matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. 47 The purpose of the ESOP is to provide retirement income to employees and their beneficiaries.
Our existing and potential clients are similarly focused on increasing the productivity of their contractual arrangements. Moreover, government agencies may face restrictions or 26 pressure regarding the type and amount of services that they may obtain from private contractors.
Our existing and potential clients are similarly focused on increasing the productivity of their contractual arrangements. Moreover, government agencies may face restrictions or pressure regarding the type and amount of services that they may obtain from private contractors.
Environmental Protection Agency, or the EPA, and analogous state agencies, have the power to enforce compliance with these laws and regulations and the permits issued under them. Such enforcement actions often involve difficult and costly compliance measures or corrective actions.
Environmental Protection Agency, or the EPA, and analogous 38 state agencies, have the power to enforce compliance with these laws and regulations and the permits issued under them. Such enforcement actions often involve difficult and costly compliance measures or corrective actions.
Depending on the nature of the threat or the type and duration of any work action, these actions could disrupt our operations and adversely affect our operating results. 44 Many of our field project sites and facilities are inherently dangerous workplaces.
Depending on the nature of the threat or the type and duration of any work action, these actions could disrupt our operations and adversely affect our operating results. Many of our field project sites and facilities are inherently dangerous workplaces.
This is because the actual receipt, timing and amount of revenue under contracts included in backlog are subject to various contingencies, including congressional appropriations, many of which are 41 beyond our control.
This is because the actual receipt, timing and amount of revenue under contracts included in backlog are subject to various contingencies, including congressional appropriations, many of which are beyond our control.
In addition, the overall integration of the businesses may result in material unanticipated problems, expenses, liabilities, competitive responses, loss of customer relationships and diversion of management’s attention, among other potential adverse consequences.
In addition, the overall integration of the businesses may result in 33 material unanticipated problems, expenses, liabilities, competitive responses, loss of customer relationships and diversion of management’s attention, among other potential adverse consequences.
Work for non-government and commercial clients involving the protection of information systems or that store clients’ information could also be harmed due to associated security breaches.
Work for non-government and commercial clients involving the protection of 35 information systems or that store clients’ information could also be harmed due to associated security breaches.
Item 1A. Risk Factors. You should carefully consider the risks described below and the other information contained in this Annual Report, including our consolidated financial statements and the related notes, before making an investment decision. Our business, financial condition and results of operations could be materially and adversely affected by any of these risks or uncertainties.
Item 1A. Ris k Factors. You should carefully consider the risks described below and the other information contained in this Annual Report, including our consolidated financial statements and the related notes, before making an investment decision. Our business, financial condition and results of operations could be materially and adversely affected by any of these risks or uncertainties.
There are risks inherent in doing business internationally, including: • imposition of governmental controls and changes in laws, regulations or policies; • political and economic instability and turmoil internationally, including countries in the Middle East; • civil unrest, acts of terrorism, force majeure, war, or other armed conflict; • greater physical security risks; • changes in U.S. and other national government trade policies affecting the markets for our services; • changes in regulatory practices, tariffs and taxes; • potential non-compliance with a wide variety of laws and regulations, including anti-corruption, U.S. export controls and economic and trade sanctions, and anti-boycott laws and similar non-U.S. laws and regulations; • changes in labor conditions; • logistical and communication challenges; 40 • currency exchange rate fluctuations, devaluations and other conversion restrictions; and • health and safety concerns, including those related to the COVID-19 pandemic, variants and other potential epidemics.
There are risks inherent in doing business internationally, including: • imposition of governmental controls and changes in laws, regulations or policies; • political and economic instability and turmoil internationally, including countries in the Middle East; • civil unrest, acts of terrorism, force majeure, war, or other armed conflict, including the ongoing war and unrest in Israel, which has the potential to impact other countries in the Middle East; • greater physical security risks; • changes in U.S. and other national government trade policies affecting the markets for our services; • changes in regulatory practices, tariffs and taxes; • potential non-compliance with a wide variety of laws and regulations, including anti-corruption, U.S. export controls and economic and trade sanctions, and anti-boycott laws and similar non-U.S. laws and regulations; • changes in labor conditions; • logistical and communication challenges; • currency exchange rate fluctuations, devaluations and other conversion restrictions; and • health and safety concerns, including those related to the COVID-19 pandemic, variants and other potential epidemics.
Many tax jurisdictions, including the U.S., have called for comprehensive changes to fiscal and tax policies that could significantly impact how we are taxed on our domestic and foreign earnings. Such changes, if enacted into law, could increase our effective tax rate and have a material adverse impact on our financial 31 condition and results of operation s .
Many tax jurisdictions, including the U.S., have called for comprehensive changes to fiscal and tax policies that could significantly impact how we are taxed on our domestic and foreign earnings. Such changes, if enacted into law, could increase our effective tax rate and have a material adverse impact on our financial condition and results of operations.
In fiscal 2022, 2021 and 2020, we made annual contributions to the ESOP in shares of our common stock in the amount of 8% of the participants’ cash compensation for the applicable year (net of shares forfeited by participants in the applicable year).
In fiscal 2023, 2022 and 2021, we made annual contributions to the ESOP in shares of our common stock in the amount of 8% of the participants’ cash compensation for the applicable year (net of shares forfeited by participants in the applicable year).
These rights and remedies allow government clients, among other things, to: • terminate existing contracts, with short notice, for convenience as well as for default; • reduce orders under or otherwise modify contracts; • for contracts subject to the Truthful Cost and Pricing Data Act, reduce the contract price or cost where it was increased because a contractor or subcontractor furnished cost or pricing data during negotiations that was not complete, accurate and current; • for some contracts, (1) demand a refund, make a forward price adjustment or terminate a contract for default if a contractor provided inaccurate or incomplete data during the contract negotiation process and (2) reduce the contract price under triggering circumstances, including the revision of price lists or other documents upon which the contract award was predicated; • terminate our facility security clearances and thereby prevent us from receiving classified contracts and complete work on existing contracts; • cancel multi-year contracts and related task orders if funds for contract performance for any subsequent year become unavailable; • decline to exercise an option to renew a multi-year contract or issue task orders in connection with indefinite delivery/indefinite quantity contracts, or IDIQ contracts; • claim rights in solutions, systems and technology produced by us, appropriate such work-product for their continued use without continuing to contract for our services and disclose such work-product to third parties, including other government agencies and our competitors, which could harm our competitive position; • prohibit future procurement awards with a particular agency due to a finding of organizational conflicts of interest based upon prior related work performed for the agency that would give a contractor an unfair advantage over competing contractors, or the existence of conflicting roles that might bias a contractor’s judgment; • subject the award of contracts to protest by competitors, which may require the contracting federal agency or department to suspend our performance pending the outcome of the protest and may also result in a requirement to resubmit offers for the contract or in the termination, reduction or modification of the awarded contract; • suspend or debar us from doing business with the applicable government; and • control or prohibit the export of our services. 28 Recent and potential future budget cuts, the impact of sequestration and recent efforts by the Office of Management and Budget to decrease federal awards for management support services, may cause agencies with which we currently have contracts to terminate, reduce the number of task orders under or fail to renew such contracts.
These rights and remedies allow government clients, among other things, to: • terminate existing contracts, with short notice, for convenience as well as for default; • reduce orders under or otherwise modify contracts; • for contracts subject to the Truthful Cost and Pricing statute, reduce the contract price or cost where it was increased because a contractor or subcontractor furnished cost or pricing data during negotiations that was not complete, accurate and current; • for some contracts, (1) demand a refund, make a forward price adjustment or terminate a contract for default if a contractor provided inaccurate or incomplete data during the contract negotiation process and (2) reduce the contract price under triggering circumstances, including the revision of price lists or other documents upon which the contract award was predicated; • terminate our facility security clearances and thereby prevent us from receiving classified contracts and complete work on existing contracts; • cancel multi-year contracts and related task orders if funds for contract performance for any subsequent year become unavailable; • decline to exercise an option to renew a multi-year contract or issue task orders in connection with indefinite delivery/indefinite quantity contracts, or IDIQ contracts; 28 • claim rights in solutions, systems and technology produced by us, appropriate such work-product for their continued use without continuing to contract for our services and disclose such work-product to third parties, including other government agencies and our competitors, which could harm our competitive position; • prohibit future procurement awards with a particular agency due to a finding of organizational conflicts of interest based upon prior related work performed for the agency that would give a contractor an unfair advantage over competing contractors, or the existence of conflicting roles that might bias a contractor’s judgment; • subject the award of contracts to protest by competitors, which may require the contracting federal agency or department to suspend our performance pending the outcome of the protest and may also result in a requirement to resubmit offers for the contract or in the termination, reduction or modification of the awarded contract; • suspend or debar us from doing business with the applicable government; and • control or prohibit the export of our services.
Department of Defense, including the Missile Defense Agency and the United States Army, the Federal Aviation Administration, the United States intelligence community and the U.S. Department of Energy are key factors in maintaining and growing these revenues and winning new bids for new business. Negative press reports or publicity, regardless of accuracy, could harm our reputation.
Department of Defense, the Federal Aviation Administration, the United States intelligence community and the U.S. Department of Energy are key factors in maintaining and growing these revenues and winning new bids for new business. Negative press reports or publicity, regardless of accuracy, could harm our reputation.
In addition, 5.1% of our revenue during fiscal 2022, 5.6% of our revenue during fiscal 2021 and 4.4% of our revenues in fiscal 2020 related to services we provided to our unconsolidated joint ventures, where control resides with unaffiliated third parties, and 8.8% of our operating income during fiscal 2022, 27.8% of our operating income during fiscal 2021 and 16.9% of our operating income during fiscal 2020 was derived from equity in our unconsolidated joint ventures.
In addition, 3.9% of our revenue during fiscal 2023, 5.1% of our revenue during fiscal 2022 and 5.6% of our revenues in fiscal 2021 related to services we provided to our unconsolidated joint ventures, where control resides with unaffiliated third parties, and 16.6% of our operating income during fiscal 2023, 8.8% of our operating income during fiscal 2022 and 27.8% of our operating income during fiscal 2021 was derived from equity in our unconsolidated joint ventures.
As of December 31, 2022, we had goodwill and intangible assets of $1.9 billion. Goodwill is tested for impairment annually, or more often if indicators of potential impairment exist, and intangible assets are tested for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable.
As of December 31, 2023, we had goodwill and intangible assets of $2.1 billion. Goodwill is tested for impairment annually, or more often if indicators of potential impairment exist, and intangible assets are tested for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable.
The agreements governing our debt contain a number of restrictive covenants which may limit our ability to finance future operations, acquisitions or capital needs or engage in other business activities that may be in our interest. As of December 31, 2022, our total indebtedness was approximately $744 million.
The agreements governing our debt contain a number of restrictive covenants which may limit our ability to finance future operations, acquisitions or capital needs or engage in other business activities that may be in our interest. As of December 31, 2023, our total indebtedness was approximately $746 million.
In particular, it represents substantially all of the revenue of our Federal Solutions segment. Approximately 17% of accounts receivable as of December 31, 2022 and December 31, 2021 were derived from contracts with the U.S. federal government and its agencies. Our reputation and relationships with various U.S. government entities and agencies, and in particular with the U.S.
In particular, it represents substantially all of the revenue of our Federal Solutions segment. Approximately 18% and 17% of accounts receivable as of December 31, 2023 and December 31, 2022, respectively were derived from contracts with the U.S. federal government and its agencies. Our reputation and relationships with various U.S. government entities and agencies, and in particular with the U.S.
Our anti-takeover provisions: • permit the board of directors to establish the number of directors and fill any vacancies and newly created directorships; • provide that our board of directors is classified into three classes with staggered, three-year terms and that directors may only be removed for cause; • include blank-check preferred stock, the preference, rights and other terms of which may be set by the board of directors and could delay or prevent a transaction or a change in control that might involve a premium price for our common stock or otherwise benefit our stockholders; • eliminate the ability of our stockholders to call special meetings of stockholders; • specify that special meetings of our stockholders can be called only by our board of directors, or a board committee authorized with the power to call such meetings; • prohibit stockholder action by written consent, which has the effect of requiring all stockholder actions to be taken at a meeting of our stockholders; • provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum; • prohibit cumulative voting in the election of directors; and • establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholders’ meetings. 49 In addition, as a Delaware corporation, we are subject to Section 203 of the Delaware General Corporation Law ( DGCL ) .
Our anti-takeover provisions: • permit the board of directors to establish the number of directors and fill any vacancies and newly created directorships; • provide that our board of directors is classified into three classes with staggered, three-year terms and that directors may only be removed for cause; • include blank-check preferred stock, the preference, rights and other terms of which may be set by the board of directors and could delay or prevent a transaction or a change in control that might involve a premium price for our common stock or otherwise benefit our stockholders; • eliminate the ability of our stockholders to call special meetings of stockholders; • specify that special meetings of our stockholders can be called only by our board of directors, or a board committee authorized with the power to call such meetings; • prohibit stockholder action by written consent, which has the effect of requiring all stockholder actions to be taken at a meeting of our stockholders; • provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum; • prohibit cumulative voting in the election of directors; and • establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholders’ meetings.
The issuance of additional stock, not reserved for issuance under our equity incentive plans or otherwise, will dilute all other stockholdings. We have an aggregate of 853,867,984 shares of common stock authorized but not outstanding and not reserved for issuance under our 2021 Plan, under our existing Incentive Plans or otherwise.
The issuance of additional stock, not reserved for issuance under our equity incentive plans or otherwise, will dilute all other stockholdings. We have an aggregate of 853,658,637 shares of common stock authorized but not outstanding and not reserved for issuance under our 2021 Plan, under our existing Incentive Plans or otherwise.
The ESOP holds common stock representing approximately 61% of the voting power of our common stock as of December 31, 2022. As a result, we are considered a “controlled company” for the purposes of New York Stock Exchange (“NYSE”) rules and corporate governance standards.
The ESOP holds common stock representing approximately 57% of the voting power of our common stock as of December 31, 2023. As a result, we are considered a “controlled company” for the purposes of New York Stock Exchange (“NYSE”) rules and corporate governance standards.
Furthermore, even if our backlog results in revenue, the contracts may not be profitable. If we cannot collect our receivables or if payment is delayed, our business may be adversely affected by our inability to generate cash flow, provide working capital or continue our business operations. As of December 31, 2022, our accounts receivable, net was $717.3 million.
Furthermore, even if our backlog results in revenue, the contracts may not be profitable. If we cannot collect our receivables or if payment is delayed, our business may be adversely affected by our inability to generate cash flow, provide working capital or continue our business operations. As of December 31, 2023, our accounts receivable, net was $915.6 million.
Revenue attributable to our services provided outside of the United States as a percentage of our total revenue was 24.9% in 2022, 25.0% in 2021 and 24.5% in 2020.
Revenue attributable to our services provided outside of the United States as a percentage of our total revenue was 24.4% in 2023, 24.9% in 2022 and 25.0% in 2021.
These joint ventures from time to time may borrow money to help finance their activities and, in some circumstances, we may be required to provide guarantees of the obligations of our affiliated entities. At December 31, 2022, we had $106.8 million of letters of credit and guarantees that relate to joint ventures.
These joint ventures from time to time may borrow money to help finance their activities and, in some circumstances, we may be required to provide guarantees of the obligations of our affiliated entities. As of December 31, 2023, we had $147.7 million of letters of credit and guarantees that relate to joint ventures.
Our Credit Agreement and the agreements governing our Senior Notes and Convertible Notes contain a number of covenants that impose operating and other restrictions on us and our subsidiaries.
Our Credit Agreement and the agreements governing our Delayed Draw Term Loan and Convertible Notes contain a number of covenants that impose operating and other restrictions on us and our subsidiaries.
If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our common stock could decrease, which could cause our stock price and trading volume to decline. Item 1B. Unresolved Staff Comments. None. 50
If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our common stock could decrease, which could cause our stock price and trading volume to decline.
In addition, most government contracts are subject to the government’s budgetary approval process. Legislatures typically appropriate funds for a given program on a year-by-year basis, even though contract performance may take more than one year. In addition, public-supported financing such as state and local municipal bonds may be only partially raised to support existing infrastructure projects.
Legislatures typically appropriate funds for a given program on a year-by-year basis, even though contract performance may take more than one year. In addition, public-supported financing such as state and local municipal bonds may be only partially raised to support existing infrastructure projects.
We made contributions of 1,188,129 shares in fiscal 2022, 1,631,477 shares in fiscal 2021, and 1,522,381 shares in fiscal 2020 of our common stock to the ESOP and intend to continue to make annual contributions in shares of our common stock to the ESOP.
We made contributions of 915,113 shares in fiscal 2023, 1,188,129 shares in fiscal 2022, and 1,631,477 shares in fiscal 2021 of our common stock to the ESOP and intend to continue to make annual contributions in shares of our common stock to the ESOP.
Accordingly, our common stock may not have the same protections afforded to stockholders of companies that are subject to all of the NYSE corporate governance requirements. 48 Our ability to raise capital in the future may be limited, which could limit our business plan or adversely affect your investment.
Accordingly, our common stock may not have the same protections afforded to stockholders of companies that are subject to all of the NYSE corporate governance requirements. Our ability to raise capital in the future may be limited, which could limit our business plan or adversely affect your investment. Our business and strategic plans may consume resources faster than we anticipate.
These restrictions could limit our ability to plan for or react to market or economic conditions or meet capital needs or otherwise restrict our activities or business plans and could adversely affect our ability to finance our operations, acquisitions, investments or strategic alliances or other capital needs or to engage in other business activities that would be in our interest.
Our ability to comply with these ratios may be affected by events beyond our control. 42 These restrictions could limit our ability to plan for or react to market or economic conditions or meet capital needs or otherwise restrict our activities or business plans and could adversely affect our ability to finance our operations, acquisitions, investments or strategic alliances or other capital needs or to engage in other business activities that would be in our interest.
For future fiscal years, the annual contribution to the ESOP shall be in amounts as determined by the board of directors. 47 Your ability to influence corporate matters may be limited because the ESOP beneficially owns a majority of our stock and therefore our ESOP participants, voting the shares allocated to them under the ESOP, or the ESOP Trustee, who will have the right to vote shares for which no voting instructions are provided by employees, could have substantial control over us.
Your ability to influence corporate matters may be limited because the ESOP beneficially owns a majority of our stock and therefore our ESOP participants, voting the shares allocated to them under the ESOP, or the ESOP Trustee, who will have the right to vote shares for which no voting instructions are provided by employees, could have substantial control over us.
Qualifying ESOP participants have the right to receive distributions of shares of our common stock from the ESOP and can sell such shares in the market. As of December 31, 2022, there were 63,742,151 shares of common stock held in the ESOP.
Qualifying ESOP participants have the right to receive distributions of shares of our common stock from the ESOP and can sell such shares in the market. As of December 31, 2023, there were 59,879,857 shares of common stock held in the ESOP.
Our government clients may face budget cuts or deficits that prohibit them from funding proposed and existing Critical Infrastructure projects. 25 These or other factors could cause our defense, intelligence, infrastructure or civil clients to decrease the number of new government contracts awarded generally and fail to award us new government contracts, reduce their purchases under our existing government contracts, exercise their right to terminate our government contracts or not exercise options to renew our government contracts, any of which could materially and adversely affect our business, financial condition and results of operations.
These or other factors could cause our defense, intelligence, infrastructure or civil clients to decrease the number of new government contracts awarded generally and fail to award us new government contracts, reduce their purchases under our existing government contracts, exercise their right to terminate our government contracts or not exercise options to renew our government contracts, any of which could materially and adversely affect our business, financial condition and results of operations.
Separately, additional financing may not be available on favorable terms, or at all. If adequate funds are not available on acceptable terms, we may be unable to fund our operations or new investments.
If adequate funds are not available on acceptable terms, we may be unable to fund our operations or new investments.
Any inability to ensure any of the foregoing could have a material adverse effect on our business, financial condition and results of operations. We have submitted claims to clients for work we performed beyond the initial scope of some of our contracts. If these clients do not approve these claims, our results of operations could be adversely impacted.
Any inability to ensure any of the foregoing could have a material adverse effect on our business, financial condition and results of operations. We have submitted claims and change orders to clients for work we performed beyond the initial scope of some of our contracts.
In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we were involved in securities litigation, we could incur substantial costs and our resources, and the attention of management could be diverted from our business. Our operating results and share price may be volatile, and the market price of our common stock may drop.
If we were involved in securities litigation, we could incur substantial costs and our resources, and the attention of management could be diverted from our business. Our operating results and share price may be volatile, and the market price of our common stock may drop. Quarterly operating results may fluctuate.
As a result of these factors, investors in our common stock may not be able to resell their shares at or above the initial purchase price.
As a result of these factors, investors in our common stock may not be able to resell their shares at or above the initial purchase price. These broad market and industry factors may materially reduce the market price of our common stock, regardless of our operating performance.
Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, our stockholders bear the risk of our future securities offerings reducing the market price of our common stock and diluting their interest.
Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings.
Furthermore, we may experience liability regarding our employees and their safety and security in these locations. We also may incur material costs to maintain the safety of our personnel. Despite these precautions, the safety of our personnel in these locations may continue to be at risk.
We also may incur material costs to maintain the safety of our personnel. Despite these precautions, the safety of our personnel in these locations may continue to be at risk.
While fixed-price contracts allow us to benefit from cost savings, these contracts also increase our exposure to the risk of cost overruns. 34 Revenue derived from fixed-price contracts represented 2 7 % of our total revenue during fiscal 202 2 , 26 % of our total revenue during fiscal 20 2 1 , and 3 2 % of our total revenue during fiscal 20 20 .
While fixed-price 34 contracts allow us to benefit from cost savings, these contracts also increase our exposure to the risk of cost overruns. Revenue derived from fixed-price contracts represented 33% of our total revenue during fiscal 2023, 27% of our total revenue during fiscal 2022, and 26% of our total revenue during fiscal 2021.
We design and develop technologically advanced and innovative products and services applied by our customers in a variety of environments. Problems and delays in development or delivery as a result of issues with respect to design, technology, licensing and patent rights, labor, learning curve assumptions or materials and components could prevent us from achieving contractual requirements.
Problems and delays in development or delivery as a result of issues with respect to design, technology, licensing and patent rights, labor, learning curve assumptions or materials and components could prevent us from achieving contractual requirements.
Negotiations with labor unions and possible work actions could divert management attention and disrupt operations. In addition, new collective bargaining agreements or amendments to existing agreements could increase our labor costs and operating expenses. We have entered into twenty-three union labor or collective bargaining agreements as of December 31, 2022.
Negotiations with labor unions and possible work actions could divert management attention and disrupt operations. In addition, new collective bargaining agreements or amendments to existing agreements could increase our labor costs and operating expenses.
Our certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for the following civil actions: • any derivative action or proceeding brought on our behalf; • any action asserting a claim of breach of a fiduciary duty by any of our directors, officers, employees or agents or our stockholders; • any action asserting a claim arising pursuant to any provision of the DGCL or our certificate of incorporation or bylaws or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware; or • any action asserting a claim governed by the internal affairs doctrine.
Our certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for the following civil actions: • any derivative action or proceeding brought on our behalf; • any action asserting a claim of breach of a fiduciary duty by any of our directors, officers, employees or agents or our stockholders; • any action asserting a claim arising pursuant to any provision of the DGCL or our certificate of incorporation or bylaws or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware; or • any action asserting a claim governed by the internal affairs doctrine. 49 This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that the stockholder finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees.
Government spending for our Critical Infrastructure services may also depend on factors related to government demand, such as the condition of the existing infrastructure and buildings and the need for new or expanded infrastructure and buildings.
Government spending for our Critical Infrastructure services may also depend on factors related to government demand, such as the condition of the existing infrastructure and buildings and the need for new or expanded infrastructure and buildings. Our government clients may face budget cuts or deficits that prohibit them from funding proposed and existing Critical Infrastructure projects.
Health emergencies may also have the effect of heightening many of the other risks described in this Annual Report on Form 10-K for the year ended December 31, 2022, such as those relating to government spending and priorities. 23 Risk Related to Our Common Stock • Your ability to influence corporate matters may be limited because the ESOP beneficially owns a majority of our stock and therefore our employees, voting the shares allocated to them under the ESOP, or the ESOP Trustee, who will have the right to vote shares for which no voting instructions are provided by employees, could have substantial control over us. • We are a “controlled company” within the meaning of the New York Stock Exchange listing standards and, as a result, qualify for exemptions from certain corporate governance requirements.
Risk Related to Our Common Stock • Your ability to influence corporate matters may be limited because the ESOP beneficially owns a majority of our stock and therefore our employees, voting the shares allocated to them under 24 the ESOP, or the ESOP Trustee, who will have the right to vote shares for which no voting instructions are provided by employees, could have substantial control over us. • We are a “controlled company” within the meaning of the New York Stock Exchange listing standards and, as a result, qualify for exemptions from certain corporate governance requirements.
Further, we may undertake work in other countries that may experience turmoil, political upheaval, or other similar crises. This uncertainty may affect our ability to continue our projects in these regions due to lack of resources, local support, and safety for our workers. If we are unable to finish these projects, it is likely that our finances will be impacted.
This uncertainty may affect our ability to continue our projects in these regions due to lack of resources, local support, and safety for our workers. If we are unable to finish these projects, it is likely that our finances will be impacted. Furthermore, we may experience liability regarding our employees and their safety and security in these locations.
These provisions may prohibit large stockholders, in particular those owning 15% or more of our outstanding voting stock, from merging or combining with us for a period of time.
In addition, as a Delaware corporation, we are subject to Section 203 of the Delaware General Corporation Law (DGCL). These provisions may prohibit large stockholders, in particular those owning 15% or more of our outstanding voting stock, from merging or combining with us for a period of time.
In addition, our Credit Agreement also requires us to comply with certain financial ratio covenants, including a debt leverage ratio and a fixed charge coverage ratio. Our ability to comply with these ratios may be affected by events beyond our control.
In addition, our Credit Agreement also requires us to comply with certain financial ratio covenants, including a debt leverage ratio and a interest charge coverage ratio.
Our business and strategic plans may consume resources faster than we anticipate. In the future, we may need to raise additional funds through the issuance of new equity securities, debt or a combination of both. However, any decline in the market price of our common stock could impair our ability to raise capital.
In the future, we may need to raise additional funds through the issuance of new equity securities, debt or a combination of both. However, any decline in the market price of our common stock could impair our ability to raise capital. Separately, additional financing may not be available on favorable terms, or at all.
Our business, prospects, financial condition or operating results could be materially harmed, among other causes, by the following: • budgetary constraints, including mandated automatic spending cuts, affecting across-the-board government spending, or specific agencies in particular, and changes in available funding; • a shift in expenditures away from agencies or programs that we support; • reduced government outsourcing of functions that we are currently contracted to provide, including as a result of increased insourcing by various U.S. government agencies due to changes in the definition of “inherently governmental” work, including proposals to limit contractor access to sensitive or classified information and work assignments; • further efforts to improve efficiency and reduce costs affecting government programs; • changes or delays in government programs that we support or the programs’ requirements; • a continuation of recent efforts by the U.S. government in particular to decrease spending for management support service contracts; • U.S. government shutdowns due to, among other reasons, a failure by elected officials to fund the government, such as the shutdowns which occurred during government fiscal years 2019 and 2014 and, to a lesser extent, government fiscal year 2018, and other potential delays in the appropriations process; • U.S. government agencies awarding contracts on a technically acceptable/lowest cost basis in order to reduce expenditures; • delays in the payment of our invoices by government payment offices; 24 • results of elections, including politicians who may have priorities that would reduce spending in areas in which we operate; • an inability by the U.S. government to fund its operations as a result of a failure to increase the federal government’s debt ceiling, a credit downgrade of U.S. government obligations or for any other reason; and • changes in the political climate and general economic conditions, including a slowdown of the economy or unstable economic conditions and responses to conditions, such as emergency spending, that reduce funds available for other government priorities.
Our business, prospects, financial condition or operating results could be materially harmed, among other causes, by the following: • budgetary constraints, including mandated automatic spending cuts, affecting across-the-board government spending, or specific agencies in particular, and changes in available funding; • a shift in expenditures away from agencies or programs that we support; • reduced government outsourcing of functions that we are currently contracted to provide, including as a result of increased insourcing by various U.S. government agencies due to changes in the definition of “inherently governmental” work, including proposals to limit contractor access to sensitive or classified information and work assignments; • efforts to improve efficiency and reduce costs affecting government programs; • changes or delays in government programs that we support or the programs’ requirements; • U.S. government shutdowns due to, among other reasons, a failure by elected officials to fund the government, such as the shutdowns which occurred during government fiscal years 2019 and 2014 and, to a lesser extent, government fiscal year 2018, and other potential delays in the appropriations process; • continuing resolutions (CRs) which are temporary spending bills that allow federal government operations to continue when final appropriations have not been enacted.
When we determine that we would like to divest a business, we may not be able to divest that business on attractive terms or at all. 32 We conduct a portion of our work through joint venture entities, some of which we do not have management control over, and with which we typically have joint and several liability with our joint venture partners. 12% of our revenue during fiscal 2022, 11.0% of our revenue during fiscal 2021 and 11.5% of our revenue during fiscal 2020 was derived from our operations through consolidated joint ventures.
We conduct a portion of our work through joint venture entities, some of which we do not have management control over, and with which we typically have joint and several liability with our joint venture partners. 13% of our revenue during fiscal 2023, 12% of our revenue during fiscal 2022 and 11% of our revenue during fiscal 2021 was derived from our operations through consolidated joint ventures.
This market volatility, as well as general economic, market or political conditions, could subject the market price of our shares to wide price fluctuations regardless of our operating performance.
In addition, securities markets worldwide have experienced, and are likely to continue to experience, significant price and volume fluctuations. This market volatility, as well as general economic, market or political conditions, could subject the market price of our shares to wide price fluctuations regardless of our operating performance.
If we are unable to effectively manage our costs and expenses and achieve efficiencies, our competitiveness and profitability may be adversely affected. Our focus on new growth areas for our business entails risks, including those associated with new relationships, clients, talent needs, capabilities, service offerings and maintaining our collaborative culture and core values.
Our focus on new growth areas for our business entails risks, including those associated with new relationships, clients, talent needs, capabilities, service offerings and maintaining our collaborative culture and core values.
Increased scrutiny could adversely impact our ability to perform on contracts, affect our ability to invoice for work performed, delay the receipt of timely payment on contracts, and weaken our ability to compete for new contracts with the government. 27 Our government contracts may be terminated by the government counterparty at any time and may contain other provisions permitting the government to discontinue contract performance, and if lost contracts are not replaced, our operating results may differ materially and adversely from those anticipated.
Our government contracts may be terminated by the government counterparty at any time and may contain other provisions permitting the government to discontinue contract performance, and if lost contracts are not replaced, our operating results may differ materially and adversely from those anticipated.
In that case, the trading price of our common stock could decline, and you may lose all or part of your investment. Risk Factors Summary The following is a summary of the principal risks that could adversely affect our business, operations and financial results.
In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.
We typically have pending claims submitted under some of our contracts for payment of work performed beyond the initial contractual requirements for which we have already recorded revenue. Some of these relate to change orders from the original scope of the contract.
If these clients do not approve these claims and change orders, our results of operations could be adversely impacted. We typically have pending claims and change orders submitted under some of our contracts for payment of work performed beyond the initial contractual requirements for which we have already recorded revenue.
If our claims are not approved or resolved, our revenue may be reduced in future periods. Many of our contracts require innovative design capabilities, are technologically complex or are dependent upon factors not wholly within our control. Failure to meet these obligations could adversely affect our business, financial condition or results of operations.
Many of our contracts require innovative design capabilities, are technologically complex or are dependent upon factors not wholly within our control. Failure to meet these obligations could adversely affect our business, financial condition or results of operations. We design and develop technologically advanced and innovative products and services applied by our customers in a variety of environments.
Any failure to do so could impair our ability to efficiently perform our contractual obligations, timely meet our customers’ needs and ultimately win new business, all of which could adversely affect our business, financial condition and results of operations.
Any failure to do so could impair our ability to efficiently perform our contractual obligations, timely meet our customers’ needs and ultimately win new business, all of which could adversely affect our business, financial condition and results of operations. 43 We believe that our success also depends on the continued employment of a highly qualified and experienced senior management team and that team’s ability to retain existing business and generate new business.
Risk Related to Our Common Stock If we are unable to maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock may be negatively affected.
As a result, our failure to maintain adequate safety standards and equipment could result in reduced profitability or the loss of projects or clients and could have a material adverse impact on our business, financial condition, and results of operations. 44 Risk Related to Our Common Stock If we are unable to maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock may be negatively affected.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Pro perties. Our headquarters are located in Centreville, Virginia. As of December 31, 2022, we leased 257 commercial facilities (including our headquarters) with an aggregate of approximately 2.8 million square feet of space across 34 U.S. states and 17 countries used in connection with the various services rendered to our customers.
Biggest changeItem 2. Pro perties. Our headquarters are located in Chantilly, Virginia. As of December 31, 2023, we leased 272 commercial facilities (including our headquarters) with an aggregate of approximately 2.6 million square feet of space across 36 U.S. states and 16 countries used in connection with the various services rendered to our customers.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeThe United States government did not intervene in this matter as it is allowed to do so under the statute. The parties are concluding discovery and we anticipate that the court will hear dispositive and/or pre-trial motions in early or mid-2023. Depending upon the court’s rulings upon such motions, a trial may be scheduled in 2023.
Biggest changeThe United States government did not intervene in this matter as it is allowed to do so under the statute. The court heard dispositive motions in 2023, including Parsons’ motion for summary judgment. We are awaiting the court’s rulings upon such motions, which will determine whether a trial will be necessary for this matter in 2024.
Although the outcome of any such matter is inherently uncertain and may be materially adverse, based on current information, except as noted below, we believe there are no pending lawsuits or claims that may have a material adverse effect on our business, financial condition or results of operations.
Although the outcome of any such matter is inherently 51 uncertain and may be materially adverse, based on current information, except as noted below, we believe there are no pending lawsuits or claims that may have a material adverse effect on our business, financial condition or results of operations.
Removed
At this time, the Company is unable to determine the probability of the outcome of the litigation or determine a potential range of loss, if any. Item 4. Mine Safety Disclosures. Not Applicable. 51 PART II
Added
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).
Added
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.
Added
Alstom filed objections to the Proposed Statement of Decision, and Parsons has filed its responses to the objections. It is anticipated that the court will enter a final decision in the first quarter of 2024. At this time, the Company is unable to determine the probability of the outcome of the litigation. Item 4. Mine Safe ty Disclosures.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeRepurchased shares of common stock are retired and included in “Repurchases of common stock” in cash flows from financing activities in the Consolidated Statements of Cash Flows. As of December 31, 2022, the Company has spent $43.7 million (which includes commissions paid of $24 thousand) repurchasing 1,193,466 shares of Common Stock at an average price of $36.62 per share.
Biggest changeAs of December 31, 2023, the Company has spent $54.7 million (which includes commissions paid of $29 thousand) repurchasing 1,426,476 shares of Common Stock at an average price of $38.35 per share. The following table presents the Company’s purchase of equity securities for the three months ended December 31, 2023.
The graph assumes that the value of the initial investment in our common stock and each of the two indexes was $100 on May 8, 2019, the date of the Company’s IPO, and tracks it through December 31, 2022 (including reinvestment of dividends).
The graph assumes that the value of the initial investment in our common stock and each of the two indexes was $100 on May 8, 2019, the date of the Company’s IPO, and tracks it through December 31, 2023 (including reinvestment of dividends).
Shareholders According to the records of our transfer agent, there were three shareholders of record as of February 6, 2023. Securities Authorized for Issuance Under Equity Compensation Plans The following table provides information as of December 31, 2022 regarding compensation plans under which our equity securities are authorized for issuance.
Shareholders According to the records of our transfer agent, there were three shareholders of record as of February 5, 2024. Securities Authorized for Issuance Under Equity Compensation Plans The following table provides information as of December 31, 2023 regarding compensation plans under which our equity securities are authorized for issuance.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock is listed on the NYSE under the ticker symbol “PSN”. Dividend Policy During the years ended December 31, 2022, 2021 and 2020, the Company did not declare any dividends.
Item 5. Market for Registrant’s Common Equity, Related Stoc kholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock is listed on the NYSE under the ticker symbol “PSN”. Dividend Policy During the years ended December 31, 2023, 2022 and 2021, the Company did not declare any dividends.
Any determination to pay dividends on our capital stock will be at the discretion of our board of directors, subject to applicable laws, and will depend on our financial condition, results of operations, capital requirements, restrictions under our Senior Notes issued in a private placement in 2014, or the Convertible Senior Notes, Delayed Draw Term Loan and Credit Agreement, and other factors that our board of directors considers relevant.
Any determination to pay dividends on our capital stock will be at the discretion of our board of directors, subject to applicable laws, and will depend on our financial condition, results of operations, capital requirements, restrictions under our Convertible Senior Notes, or the Delayed Draw Term Loan and Credit Agreement, and other factors that our board of directors considers relevant.
The stock performance included in this graph is not necessarily indicative of future stock price performance. 5/8/19 12/19 12/20 12/21 12/22 Parsons Corp. 100.00 137.28 121.08 111.91 153.81 Russell 2000 100.00 105.95 127.10 145.93 116.11 S&P Composite 1500 IT Consulting & Other Services 100.00 103.18 117.05 161.45 123.35 53 Securities Authorized for Issuance Under Equity Compensation Plans The information required by this item with respect to our equity compensation plans is incorporated by reference to our 2023 Proxy Statement.
The stock performance included in this graph is not necessarily indicative of future stock price performance. 5/8/19 12/19 12/20 12/21 12/22 12/23 Parsons Corp. 100.00 137.28 121.08 111.91 153.81 208.55 Russell 2000 100.00 105.95 127.10 145.93 116.11 135.76 S&P Composite 1500 IT Consulting & Other Services 100.00 103.18 117.05 161.45 123.35 156.59 54 Securities Authorized for Issuance Under Equity Compensation Plans The information required by this item with respect to our equity compensation plans is incorporated by reference to our 2024 Proxy Statement.
(2) Amount represents 1,580,440 shares remaining available for future issuance under the 2020 Employee Stock Purchase Plan (of which 60,381 shares were purchased pursuant to the offering period that ended on December 31, 2022).
(2) Amount represents 1,463,790 shares remaining available for future issuance under the 2020 Employee Stock Purchase Plan (of which 52,364 shares were purchased pursuant to the offering period that ended on December 31, 2023).
Period (a) Total number of shares (or units purchased) (b) Average price paid per share (or unit) (1) (c) Total number of shares (or units) purchased as part of publicly announced plans or programs (d) Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans programs October 1 to 31, 2022 - $ - - $ 58,799,141 November 1 to 30, 2022 - $ - - 58,799,141 December 1 to 31, 2022 52,432 $ 47.68 52,432 56,299,193 Total 52,432 $ 47.68 52,432 $ 56,299,193 (1) Includes commissions and calculated at the average price per share Item 6.
Period (a) Total number of shares (or units purchased) (b) Average price paid per share (or unit) (1) (c) Total number of shares (or units) purchased as part of publicly announced plans or programs (d) Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans programs October 1 to 31, 2023 - $ - - $ 48,299,563 November 1 to 30, 2023 - $ - - 48,299,563 December 1 to 31, 2023 47,535 $ 63.11 47,535 45,299,670 Total 47,535 $ 63.11 47,535 $ 45,299,670 (1) Includes commissions and calculated at the average price per share Item 6.
Plan Category Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights (a) Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b) Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c) Equity compensation plans approved by security holders (1) - 1,580,440 (2) Equity compensation plans not approved by security holders 1,621,155 (3) 9,180,697 (4) Total 1,621,155 10,761,137 (1) Consists of the 2020 Employee Stock Purchase Plan.
Plan Category Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights (a) Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b) Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c) Equity compensation plans approved by security holders (1) - 1,463,790 (2) Equity compensation plans not approved by security holders 2,093,336 (3) 8,238,003 (4) Total 2,093,336 9,701,793 (1) Consists of the 2020 Employee Stock Purchase Plan.
In no event will more than 11,700,000 shares be issued pursuant to awards under the 2019 Incentive Plan. 52 Performance Graph The following graph compares the cumulative total return, from the date of the Company’s initial public offering (“IPO”) through December 31, 2022, to shareholders of Parsons Corporation common stock relative to the cumulative total returns of the Russell 2000 Index and the Standard and Poor’s IT Consulting & Other Services Index.
(3) Amount represents the sum of 2,093,336 shares of common stock subject to outstanding RSU and PSU awards under the 2019 Incentive Plan (with PSU awards reflected at “target” levels), (4) Amount represents 8,238,003 shares remaining available for future issuance under the 2019 Incentive Plan. 53 Performance Graph The following graph compares the cumulative total return, from the date of the Company’s initial public offering (“IPO”) through December 31, 2023, to shareholders of Parsons Corporation common stock relative to the cumulative total returns of the Russell 2000 Index and the Standard and Poor’s IT Consulting & Other Services Index.
Removed
(3) Amount represents the sum of 1,621,155 shares of common stock subject to outstanding RSU and PSU awards under the 2019 Incentive Plan (with PSU awards reflected at “target” levels), (4) Amount represents 9,180,697 shares remaining available for future issuance under the 2019 Incentive.
Added
The Board further amended this authorization in August 2022 to remove the prior expiration date and grant executive leadership the discretion to determine the price for such share repurchases. Repurchased shares of common stock are retired and included in “Repurchases of common stock” in cash flows from financing activities in the Consolidated Statements of Cash Flows.
Removed
The number of shares of our common stock initially reserved for issuance under awards granted pursuant to the 2019 Incentive Plan is equal to 11,700,000 shares.
Added
The primary purpose of the Company’s share repurchase program is to reduce the dilutive effect of shares issued under the Company’s ESOP and other stock benefit plans.
Removed
The following table presents the Company’s purchase of equity securities for the three months ended December 31, 2022.
Added
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.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following table shows Adjusted EBITDA attributable to Parsons Corporation for each of our reportable segments and Adjusted EBITDA attributable to noncontrolling interests: Fiscal Year Ended (U.S. dollars in thousands) December 31, 2022 December 31, 2021 December 31, 2020 Federal Solutions Adjusted EBITDA attributable to Parsons Corporation $ 199,004 $ 162,733 $ 167,340 Critical Infrastructure Adjusted EBITDA attributable to Parsons Corporation 123,385 121,700 154,528 Adjusted EBITDA attributable to noncontrolling interests 30,393 25,287 20,753 Total Adjusted EBITDA $ 352,782 $ 309,720 $ 342,621 Year ended December 31, 2022 compared to year ended December 31, 2021 Federal Solutions The Year Ended Variance (U.S. dollars in thousands) December 31, 2022 December 31, 2021 Dollar Percent Revenue $ 2,212,987 $ 1,888,050 $ 324,937 17.2 % Adjusted EBITDA attributable to Parsons Corporation $ 199,004 $ 162,733 $ 36,271 22.3 % The increase in Federal Solutions revenue for the year ended December 31, 2022 compared to the corresponding period last year was primarily due to increases from business acquisitions of $205 million, and increases in business volume from recent contract awards and increased activity on existing contracts.
Biggest changeAdjusted EBITDA attributable to Parsons Corporation is Adjusted EBITDA excluding Adjusted EBITDA attributable to noncontrolling interests. 69 The following table shows Adjusted EBITDA attributable to Parsons Corporation for each of our reportable segments and Adjusted EBITDA attributable to noncontrolling interests: Fiscal Year Ended (U.S. dollars in thousands) December 31, 2023 December 31, 2022 December 31, 2021 Federal Solutions Adjusted EBITDA attributable to Parsons Corporation $ 289,250 $ 199,004 $ 162,733 Critical Infrastructure Adjusted EBITDA attributable to Parsons Corporation 127,785 123,385 121,700 Adjusted EBITDA attributable to noncontrolling interests 47,638 30,393 25,287 Total Adjusted EBITDA $ 464,673 $ 352,782 $ 309,720 Year ended December 31, 2023 compared to year ended December 31, 2022 Federal Solutions The Year Ended Variance (U.S. dollars in thousands) December 31, 2023 December 31, 2022 Dollar Percent Revenue $ 3,020,701 $ 2,212,987 $ 807,714 36.5 % Adjusted EBITDA attributable to Parsons Corporation $ 289,250 $ 199,004 $ 90,246 45.3 % 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.
Interest income primarily consists of interest earned on U.S. government money market funds. Interest expense consists of interest expense incurred under our Senior Notes, Convertible Senior Notes, Credit Agreement and Delayed Draw Term Loan.
Interest income primarily consists of interest earned on U.S. government money market funds. Interest expense consists of interest expense incurred under our Convertible Senior Notes, Credit Agreement and Delayed Draw Term Loan.
Due to fluctuations in our cash flows and growth in our operations, it may be necessary from time to time in the future to borrow under Credit Agreement to meet cash demands. Our management regularly monitors certain liquidity measures to monitor performance.
Due to fluctuations in our cash flows and growth in our operations, it may be necessary from time to time in the future to borrow under our Credit Agreement to meet cash demands. Our management regularly monitors certain liquidity measures to monitor performance.
Fiscal Year Ended December 31, 2022 December 31, 2021 Revenues 100.0 % 100.0 % Direct costs of contracts 77.4 % 76.7 % Equity in earnings of unconsolidated joint ventures 0.4 % 1.0 % Selling, general and administrative expenses 18.5 % 20.7 % Operating income 4.4 % 3.6 % Interest income 0.0 % 0.0 % Interest expense (0.6 )% (0.5 )% Other income, net 0.1 % (0.1 )% Total other income benefit (expense) (0.5 )% (0.5 )% Income before income tax expense 4.0 % 3.1 % Income tax benefit (expense) (0.9 )% (0.6 )% Net income including noncontrolling interests 3.0 % 2.4 % Net income attributable to noncontrolling interests (0.7 )% (0.7 )% Net income attributable to Parsons Corporation 2.3 % 1.8 % 62 Revenue Fiscal Year Ended Variance (U.S. dollars in thousands) December 31, 2022 December 31, 2021 Dollar Percent Revenue $ 4,195,272 $ 3,660,771 $ 534,501 14.6 % Revenue for the year ended December 31, 2022 compared to the prior year increased $534.5 million.
Fiscal Year Ended December 31, 2022 December 31, 2021 Revenues 100.0 % 100.0 % Direct costs of contracts 77.4 % 76.7 % Equity in earnings of unconsolidated joint ventures 0.4 % 1.0 % Selling, general and administrative expenses 18.5 % 20.7 % Operating income 4.4 % 3.6 % Interest income 0.0 % 0.0 % Interest expense (0.6 )% (0.5 )% Other income, net 0.1 % (0.1 )% Total other income benefit (expense) (0.5 )% (0.5 )% Income before income tax expense 4.0 % 3.1 % Income tax expense (0.9 )% (0.6 )% Net income including noncontrolling interests 3.0 % 2.4 % Net income attributable to noncontrolling interests (0.7 )% (0.7 )% Net income attributable to Parsons Corporation 2.3 % 1.8 % Revenue Fiscal Year Ended Variance (U.S. dollars in thousands) December 31, 2022 December 31, 2021 Dollar Percent Revenue $ 4,195,272 $ 3,660,771 $ 534,501 14.6 % Revenue for the year ended December 31, 2022 compared to the prior year increased $534.5 million.
Self-Insurance We are self-insured for a portion of our 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 our estimates of the aggregate liability for claims incurred using historical experience and certain actuarial assumptions, as provided by an independent 77 actuary.
Self-Insurance We are self-insured for a portion of our 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 our estimates of the aggregate liability for claims incurred using historical experience and certain actuarial assumptions, as provided by an independent actuary.
Goodwill typically represents the value paid for the assembled workforce and enhancement of our service offerings. Transaction costs associated with business combinations are expensed as incurred. The determination of fair values of assets acquired and liabilities assumed requires the Company to make estimates and use valuation techniques when a market value is not readily available.
Goodwill typically represents the value paid for the assembled workforce and enhancement of our service offerings. Transaction costs associated with business combinations are expensed as incurred. The 76 determination of fair values of assets acquired and liabilities assumed requires the Company to make estimates and use valuation techniques when a market value is not readily available.
This process requires significant judgments and estimates, including assumptions about our strategic plans for operations as well as the interpretation of current economic indicators. Development of the present value of future cash flow projections includes assumptions and estimates derived from a review of our expected revenue growth rates, profit margins, business plans, cost of capital and tax rates.
This process requires significant judgments and estimates, including assumptions about our strategic plans for operations as well as the interpretation of current economic indicators. Development of the present value of future cash flow projections includes assumptions and estimates derived from a review of our expected 77 revenue growth rates, profit margins, business plans, cost of capital and tax rates.
In the event that we determine that our goodwill is impaired, we would be required to record a non-cash charge that could result in a material adverse effect on our results of operations or financial position. 75 We use the Income Approach and Market Approach (Guideline Transaction and Guideline Company Method) to determine the fair value of reporting units.
In the event that we determine that our goodwill is impaired, we would be required to record a non-cash charge that could result in a material adverse effect on our results of operations or financial position. We use the Income Approach and Market Approach (Guideline Transaction and Guideline Company Method) to determine the fair value of reporting units.
In addition, costs are generally subject to review by clients and regulatory audit agencies, and such reviews could result in costs being disputed as non-reimbursable under the terms of the contract. • Under time-and-materials contracts, hourly billing rates are negotiated and charged to clients based on the actual time spent on a project.
In addition, costs are generally subject to review by clients and regulatory audit agencies, and such reviews could result in costs being disputed as non-reimbursable under the terms of the contract. 61 • Under time-and-materials contracts, hourly billing rates are negotiated and charged to clients based on the actual time spent on a project.
Additionally, budget deficits and the growing U.S. national debt increase pressure on the U.S. government to reduce federal spending across all federal agencies, with uncertainty about the size and timing of those reductions. Furthermore, delays 58 in the completion of future U.S. government budgets could in the future delay procurement of the federal government services we provide.
Additionally, budget deficits and the growing U.S. national debt increase pressure on the U.S. government to reduce federal spending across all federal agencies, with uncertainty about the size and timing of those reductions. Furthermore, delays in the completion of future U.S. government budgets could in the future delay procurement of the federal government services we provide.
A reduction in the amount of, or delays, or cancellations of funding for, services that we are contracted to provide to the U.S. government as a result of any of these impacts or related initiatives, legislation or otherwise could have a material adverse effect on our business and results of operations .
A reduction in the amount of, or delays, or cancellations of funding for, 59 services that we are contracted to provide to the U.S. government as a result of any of these impacts or related initiatives, legislation or otherwise could have a material adverse effect on our business and results of operations.
A participant will be able to sell such shares of common stock in the market, subject to any requirements of the federal securities laws. Equity-Based Compensation We measure the value of services received from employees and directors in exchange for an equity-based award based on the grant date fair value.
A participant will be able to sell such shares of common stock in the market, subject to any requirements of the federal securities laws. 79 Equity-Based Compensation We measure the value of services received from employees and directors in exchange for an equity-based award based on the grant date fair value.
We recognize revenue for most of our contracts over time as performance obligations are satisfied, as we are continuously transferring control to the customer. Typically, 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.
We recognize revenue for most of our contracts over time as performance obligations are satisfied, as we are continuously transferring control to the customer. Typically, revenue is recognized over time 75 using an input measure (i.e., costs incurred to date relative to total estimated costs at completion) to measure progress.
Selling, general and administrative expenses Fiscal Year Ended Variance (U.S. dollars in thousands) December 31, 2022 December 31, 2021 Dollar Percent Selling, general and administrative expenses $ 777,403 $ 757,237 $ 20,166 2.7 % SG&A expenses for the year ended December 31, 2022 increased by $20.1 million compared to the prior year.
Selling, general and administrative expenses Fiscal Year Ended Variance (U.S. dollars in thousands) December 31, 2022 December 31, 2021 Dollar Percent Selling, general and administrative expenses $ 777,403 $ 757,237 $ 20,166 2.7 % SG&A expenses for the year ended December 31, 2022 increased by $20.2 million compared to the prior year.
Net cash used in investing activities increased $176.6 million to $417.5 million during 2022 compared to $240.9 million during 2021, primarily due to the use of $379.5 million, net of cash acquired during 2022 for the acquisition of Xator compared to the use of cash of $189.6 million, net of cash acquired, for the acquisition of BlackHorse and the use of $8.7 million, net of cash acquired, for the acquisition of Echo Ridge, both in 2021.
Net cash used in investing activities increased $176.6 million to $417.5 million during 2022 compared to $240.9 million during 2021, primarily due to the use of $379.5 million, net of cash acquired 73 during 2022 for the acquisition of Xator compared to the use of cash of $189.6 million, net of cash acquired, for the acquisition of BlackHorse and the use of $8.7 million, net of cash acquired, for the acquisition of Echo Ridge, both in 2021.
Also impacting the increase in cash used in investing activities was a decrease in proceeds from sale of investments in unconsolidated joint ventures to zero during 2022 71 compared to $14.8 million during 2021. These increases in cash used in investment activities were offset in part by a $20.8 million decrease in investments in unconsolidated joint ventures.
Also impacting the increase in cash used in investing activities was a decrease in proceeds from sale of investments in unconsolidated joint ventures to zero during 2022 compared to $14.8 million during 2021. These increases in cash used in investment activities were offset in part by a $20.8 million decrease in investments in unconsolidated joint ventures.
Revenue Recognition and Cost Estimation In our industry, recognition of revenue and profit on long-term contracts requires the use of assumptions and estimates related to total contract revenue, total cost at completion, and the measurement of progress towards completion. Estimates are continually evaluated as work progresses and are revised when necessary.
Revenue Recognition and Cost Estimation In our industry, recognition of revenue and profit on long-term contracts requires the use of assumptions and estimates related to total contract revenue, total cost at completion, and the 74 measurement of progress towards completion. Estimates are continually evaluated as work progresses and are revised when necessary.
These other items include, among other things, impairment of goodwill, intangible and other assets, interest and other expenses recognized on 67 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.
The acquisition was entirely funded by cash on-hand. The financial results of BlackHorse have been included in our consolidated results of operations from July 6, 2021 onward. 59 Echo Ridge LLC On July 30, 2021, the Company acquired Echo Ridge for $9.0 million.
The acquisition was entirely funded by cash on-hand. The financial results of BlackHorse have been included in our consolidated results of operations from July 6, 2021 onward. Echo Ridge LLC On July 30, 2021, the Company acquired Echo Ridge for $9.0 million.
For certain equipment leases, such as vehicles, we account for the lease and non-lease components as a single lease component. Additionally, for certain equipment leases, we apply a portfolio approach to effectively account for the operating lease ROU assets and liabilities. 74 We have operating and finance leases for corporate and project office spaces, vehicles, heavy machinery and office equipment.
For certain equipment leases, such as vehicles, we account for the lease and non-lease components as a single lease component. Additionally, for certain equipment leases, we apply a portfolio approach to effectively account for the operating lease ROU assets and liabilities. We have operating and finance leases for corporate and project office spaces, vehicles, heavy machinery and office equipment.
Our VIEs may be funded through contributions, loans and/or advances from the joint venture partners or by advances and/or letters of credit provided by clients. Certain VIEs are directly governed, managed, operated and administered by the joint venture partners.
Our VIEs may be funded through contributions, loans and/or advances from the joint venture 78 partners or by advances and/or letters of credit provided by clients. Certain VIEs are directly governed, managed, operated and administered by the joint venture partners.
The following table sets forth the book-to-bill ratio for the periods presented below: Fiscal Year Ended December 31, 2022 December 31, 2021 December 31, 2020 Federal Solutions 0.9 1.3 1.1 Critical Infrastructure 1.2 1.2 1.0 Overall 1.0 1.2 1.1 Factors and Trends Affecting Our Results of Operations We believe that the financial performance of our business and our future success are dependent upon many factors, including those highlighted in this section.
The following table sets forth the book-to-bill ratio for the periods presented below: Fiscal Year Ended December 31, 2023 December 31, 2022 December 31, 2021 Federal Solutions 1.1 0.9 1.3 Critical Infrastructure 1.1 1.2 1.2 Overall 1.1 1.0 1.2 Factors and Trends Affecting Our Results of Operations We believe that the financial performance of our business and our future success are dependent upon many factors, including those highlighted in this section.
Our estimates, judgments and assumptions are evaluated periodically and adjusted accordingly. 72 We believe that the following items are the most critical accounting policies and estimates that involved significant judgment as we prepared our financial statements.
Our estimates, judgments and assumptions are evaluated periodically and adjusted accordingly. We believe that the following items are the most critical accounting policies and estimates that involved significant judgment as we prepared our financial statements.
As of December 31, 2022, we believe we have adequate liquidity and capital resources to fund our operations, support our debt service and support our ongoing acquisition strategy for at least the next twelve months based on the liquidity from cash provided by our operating activities, cash and cash equivalents on-hand and our borrowing capacity under our Revolving Credit Facility.
As of December 31, 2023, we believe we have adequate liquidity and capital resources to fund our operations, support our debt service and support our ongoing acquisition strategy for at least the next twelve months based on the liquidity from cash provided by our operating activities, cash and cash equivalents on-hand and our borrowing capacity under our Revolving Credit Facility.
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. For the years ended December 31, 2022, December 31, 2021 and December 31, 2020, we performed a quantitative analysis for all of our reporting units.
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. For the years ended December 31, 2023, December 31, 2022 and December 31, 2021, we performed a quantitative analysis for all of our reporting units.
Liquidity and Capital Resources We currently finance our operations and capital expenditures through a combination of internally generated cash from operations, our Senior Notes, Convertible Senior Notes, Delayed Draw Term Loan and periodic borrowings under our Revolving Credit Facility. 69 Generally, cash provided by operating activities has been adequate to fund our operations.
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. 71 Generally, cash provided by operating activities has been adequate to fund our operations.
Off-Balance Sheet Arrangements As of December 31, 2022, we have no off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.
Off-Balance Sheet Arrangements As of December 31, 2023, we have no off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.
We expect to recognize $3.1 billion of our funded backlog at December 31, 2022 as revenues in the following twelve months. However, our U.S. federal government customers may cancel their contracts with us at any time through a termination for convenience or may elect to not exercise option periods under such contracts.
We expect to recognize $3.8 billion of our funded backlog at December 31, 2023 as revenues in the following twelve months. However, our U.S. federal government customers may cancel their contracts with us at any time through a termination for convenience or may elect to not exercise option periods under such contracts.
Our last review at October 1, 20 2 2 (i.e. , the first day of our fourth quarter in fiscal 20 2 2 ), 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.
Our last review at October 1, 2023 (i.e., the first day of our fourth quarter in fiscal 2023), 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.
Leases We determine if an arrangement is a lease at inception. Operating leases are included in operating lease ROU assets and current and long-term operating lease liabilities in the consolidated balance sheets. Finance leases are included in other noncurrent assets, accrued expenses and other current liabilities and other long-term liabilities in the consolidated balance sheets.
Leases We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (ROU) assets and current and long-term operating lease liabilities in the consolidated balance sheets. Finance leases are included in other noncurrent assets, accrued expenses and other current liabilities and other long-term liabilities in the consolidated balance sheets.
Shares allocated to a participant’s account are fully vested after three years of credited service, or in the event(s) of reaching age 65, death or disability while an active employee.
Shares allocated to a participant’s account are fully vested after three years of credited service, or in the event(s) of reaching age 65, death or disability while an active employee, whichever occurs first.
Approximately 53%, 52%, and 49% of consolidated revenues for the years ended December 31, 2022, December 31, 2021 and December 31, 2020, 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.
Approximately 55%, 53%, and 52% of consolidated revenues for the years ended December 31, 2023, December 31, 2022 and December 31, 2021, 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.
The transaction price for our contracts may include variable consideration, which includes increases to the transaction price for approved and unpriced change orders, claims and incentives, and reductions to transaction price for liquidated damages. We recognize adjustments in estimated profit on contracts under the cumulative catch-up method.
The transaction price for our contracts may include variable consideration, which includes award and incentive fees, increases to the transaction price for approved and unpriced change orders, claims, and reductions to transaction price for liquidated damages. We recognize adjustments in estimated profit on contracts under the cumulative catch-up method.
Other income, net primarily consists of gain or loss on sale of assets, sublease income and transaction gain or loss related to movements in foreign currency exchange rates. Year ended December 31, 2022 compared to year ended December 31, 2021 The following table sets forth our results of operations for fiscal 2022 and fiscal 2021 as a percentage of revenue.
Other income, net primarily consists of gain or loss on sale of assets, sublease income. transaction gain or loss related to movements in foreign currency exchange rates, and contingent consideration. 63 Year ended December 31, 2023 compared to year ended December 31, 2022 The following table sets forth our results of operations for fiscal 2023 and fiscal 2022 as a percentage of revenue.
Then the finite period cash flows and the terminal value are discounted to present value to arrive at an indication of fair value. We utilized internal financial projections through fiscal 20 2 7 . The Market Approach utilizes market comparable transactions and comparable companies to calculate the estimated fair value.
Then the finite period cash flows and the terminal value are discounted to present value to arrive at an indication of fair value. We utilized internal financial projections through fiscal 2028. The Market Approach utilizes market comparable transactions and comparable companies to calculate the estimated fair value.
The table below presents the percentage of total revenue for each type of contract. Fiscal Year Ended December 31, 2022 December 31, 2021 December 31, 2020 Fixed-price 27% 26% 32% Time-and-materials 28% 28% 26% Cost-plus 45% 46% 42% The amount of risk and potential reward varies under each type of contract.
The table below presents the percentage of total revenue for each type of contract. Fiscal Year Ended December 31, 2023 December 31, 2022 December 31, 2021 Fixed-price 33% 27% 26% Time-and-materials 25% 28% 28% Cost-plus 42% 45% 46% The amount of risk and potential reward varies under each type of contract.
When a change in estimate is determined to have an impact on contract revenue or profit, we record a positive or negative adjustment to the consolidated statements of income. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in ASC 606.
When a change in estimate is determined to have an impact on contract revenue or profit, we record a positive or negative adjustment to the consolidated statements of income. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer.
The increase in Federal Solutions Adjusted EBITDA attributable to Parsons Corporation for the year ended December 31, 2022 compared to the prior year was primarily due to increases in business volume, increases related to acquisitions, and a write down on a project in the corresponding period last year. 68 Critical Infrastructure The Year Ended Variance (U.S. dollars in thousands) December 31, 2022 December 31, 2021 Dollar Percent Revenue $ 1,982,285 $ 1,772,721 $ 209,564 11.8 % Adjusted EBITDA attributable to Parsons Corporation $ 123,385 $ 121,700 $ 1,685 1.4 % The increase in revenue for the year ended December 31, 2022 compared to the corresponding period last year was primarily due to an increase in business volume from recent contract awards, increased activity on existing contracts, increased hiring activity, and write downs on projects in the corresponding period last year.
Critical Infrastructure The Year Ended Variance (U.S. dollars in thousands) December 31, 2022 December 31, 2021 Dollar Percent Revenue $ 1,982,285 $ 1,772,721 $ 209,564 11.8 % Adjusted EBITDA attributable to Parsons Corporation $ 123,385 $ 121,700 $ 1,685 1.4 % The increase in revenue for the year ended December 31, 2022 compared to the corresponding period last year was primarily due to an increase in business volume from recent contract awards, increased activity on existing contracts, increased hiring activity, and write downs on projects in the corresponding period last year.
By combining our talented team of professionals and advanced technology, we solve complex technical challenges to enable a safer, smarter, more secure and more connected world. 55 We operate in two reporting segments, Federal Solutions and Critical Infrastructure. Our Federal Solutions business provides advanced technical solutions to the U.S. government.
By combining our talented team of professionals and advanced technology, we solve complex technical challenges to enable a safer, smarter, more secure and more connected world. 56 We operate in two reporting segments, Federal Solutions and Critical Infrastructure. Our Federal Solutions business is an advanced technology provider to the U.S. government.
The guideline company approach focuses on comparing the reporting unit to select reasonably similar ( or ”guideline ”) publicly traded companies. Under this method, valuation multiples are derived from the median of the operating data of selected guideline companies and applied to the operating data of the reporting unit to arrive at an indicati ve value.
The guideline company approach focuses on comparing the reporting unit to select reasonably similar (or ”guideline”) publicly traded companies. Under this method, valuation multiples are derived from the median of the operating data of selected guideline companies and applied to the operating data of the reporting unit to arrive at an indicative value.
Total ESOP contribution expense was $54.7 million for 2022, $54.9 million for 2021, and $55.3 million for fiscal 2020, and is recorded in “Direct cost of contracts” and “Selling, general and administrative expenses.” We expect operating expenses to increase due to our anticipated growth.
Total ESOP contribution expense was $58.2 million for 2023, $54.7 million for 2022, and $54.9 million for fiscal 2021, and is recorded in “Direct cost of contracts” and “Selling, general and administrative expenses.” We expect operating expenses to increase due to our anticipated growth.
Our leases have remaining lease terms of one year to 10 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 seventh year.
Our leases have remaining lease terms of one year to eight years, some of which may include options to extend the leases for up to five years, and some of which may include options to terminate the leases up to the third year.
(2) Net Income Margin is calculated as net income including noncontrolling interest divided by revenue in the applicable period. (3) Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by revenue in the applicable period.
(2) Net Income Margin is calculated as net income including noncontrolling interest divided by revenue in the applicable period.
Non-GAAP Financial Measures: (U.S. dollars in thousands) December 31, 2022 December 31, 2021 December 31, 2020 Other Information: Adjusted EBITDA (1) $ 352,782 $ 309,720 $ 342,621 Net Income Margin (2) 3.0 % 2.4 % 3.0 % Adjusted EBITDA Margin (3) 8.4 % 8.5 % 8.7 % (1) A reconciliation of net income (loss) attributable to Parsons Corporation to Adjusted EBITDA is set forth below (in thousands).
Non-GAAP Financial Measures: (U.S. dollars in thousands) December 31, 2023 December 31, 2022 December 31, 2021 Other Information: Adjusted EBITDA (1) $ 464,673 $ 352,782 $ 309,720 Net Income Margin (2) 3.8 % 3.0 % 2.4 % Adjusted EBITDA Margin (3) 8.5 % 8.4 % 8.5 % (1) A reconciliation of net income attributable to Parsons Corporation to Adjusted EBITDA is set forth below (in thousands).
Joint Ventures We conduct a portion of our business through joint ventures or similar partnership arrangements. For the joint ventures we control, we consolidate all the revenues and expenses in our consolidated statements of income (including revenues and expenses attributable to noncontrolling interests). For the joint ventures we do not control, we recognize equity in earnings of unconsolidated joint ventures.
Joint Ventures We conduct a portion of our business through joint ventures or similar partnership arrangements. For the joint ventures we control, we consolidate all the revenues and expenses in our consolidated statements of income (including revenues and expenses attributable to noncontrolling interests).
We continue to engage in negotiations with our customers on our outstanding claims. However, these claims may be resolved at amounts that differ from our current estimates, which could result in increases or decreases in future estimated contract profits or losses.
We continue to engage in negotiations with our customers on our outstanding claims. However, these claims may be resolved at amounts that differ from our current estimates, which could result in increases or decreases in future estimated contract profits or losses. Costs related to claims are recognized when they are incurred.
The following table sets forth selected key metrics (in thousands, except Book-to-Bill): Fiscal Year Ended December 31, 2022 December 31, 2021 December 31, 2020 Awards $ 4,274,721 $ 4,565,792 $ 4,195,646 Backlog (1) $ 8,179,245 $ 8,346,937 $ 8,093,258 Book-to-Bill 1.0 1.2 1.1 (1) Difference between our backlog of $8.2 billion and our remaining unsatisfied performance obligations, or RUPO, of $5.7 billion, each as of December 31, 2022, is due to (i) unissued task orders and unexercised option years, to the extent their issuance or exercise is probable, as well as (ii) contract awards, to the extent we believe contract execution and funding is probable.
The following table sets forth selected key metrics (in thousands, except Book-to-Bill): Period Ended December 31, 2023 December 31, 2022 December 31, 2021 Awards $ 5,996,780 $ 4,274,721 $ 4,565,792 Backlog (1) $ 8,592,271 $ 8,179,245 $ 8,346,937 Book-to-Bill 1.1 1.0 1.2 (1) Difference between our backlog of $8.6 billion and our remaining unsatisfied performance obligations, or RUPO, of $6.4 billion, each as of December 31, 2023, is due to (i) unissued task orders and unexercised option years, to the extent their issuance or exercise is probable, as well as (ii) contract awards, to the extent we believe contract execution and funding is probable.
Letters of Credit We also have in place several secondary bank credit lines for issuing letters of credit, principally for foreign contracts, to support performance and completion guarantees. Letters of credit commitments outstanding under these bank lines aggregated $222.5 million as of December 31, 2022. Letters of credit outstanding under the Credit Agreement total $44.5 million.
Letters of Credit We also have in place several secondary bank credit lines for issuing letters of credit, principally for foreign contracts, to support performance and completion guarantees. Letters of credit commitments outstanding under these bank lines aggregated $320.7 million as of December 31, 2023. Letters of credit outstanding under the Credit Agreement total $43.8 million.
This provision resulted in additional cash tax liability and additional net deferred tax assets for the 2022 tax year of approximately $16 million. This 2022 additional cash tax liability was offset by other carryforward tax attributes. This provision is expected to increase our 2023 cash tax liability by approximately $12 million.
This provision resulted in additional cash tax liability and additional net deferred tax assets for the 2022 tax year of approximately $16 million. This 2022 additional cash tax liability was offset by other carryforward tax attributes.
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 increased $32.0 million to $237.5 million during 2022 compared to $205.6 million during 2021.
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 increased $170.2 million to $407.7 million during 2023 compared to $237.5 million during 2022.
We deliver innovative technology-driven solutions to customers worldwide. We have developed significant expertise and differentiated capabilities in key areas of cybersecurity, intelligence, missile defense, C5ISR, space, transportation, water/wastewater and environmental remediation.
We deliver innovative technology-driven solutions to customers worldwide. We have developed significant expertise and differentiated capabilities in key areas of cybersecurity and intelligence, space and missile defense, critical infrastructure protection, transportation, environmental remediation and urban development.
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 provided by (used in) financing activities increased $206.9 million to $100.4 million in 2022 compared to $(106.5) million in 2021.
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) provided by financing activities changed by $122.2 million to $(21.9) million in 2023 compared to $100.4 million in 2022.
This compares to a decrease in cash, cash equivalents and restricted cash of $143.3 million to $343.9 million at December 31, 2021 from $487.2 million at December 31, 2020. 70 The following table summarizes our sources and uses of cash over the periods presented (in thousands): Fiscal Year Ended December 31, 2022 December 31, 2021 December 31, 2020 Net cash provided by operating activities $ 237,526 $ 205,574 $ 289,161 Net cash used in investing activities (417,468 ) (240,907 ) (346,369 ) Net cash provided by (used in) financing activities 100,368 (106,503 ) 348,226 Effect of exchange rate changes (1,770 ) (1,496 ) 823 Net (decrease) increase in cash and cash equivalents $ (81,344 ) $ (143,332 ) $ 291,841 Operating Activities Net cash provided by operating activities consists primarily of net income adjusted for noncash items, such as: equity in earnings of unconsolidated joint ventures, contributions of treasury stock, depreciation and amortization of property and equipment and intangible assets, provisions for doubtful accounts, amortization of deferred gains, and impairment charges.
This compares to a decrease in cash and cash equivalents of $81.3 million to $262.5 million at December 31, 2022 from $343.9 million at December 31, 2021. 72 The following table summarizes our sources and uses of cash over the periods presented (in thousands): Fiscal Year Ended December 31, 2023 December 31, 2022 December 31, 2021 Net cash provided by operating activities $ 407,699 $ 237,526 $ 205,574 Net cash used in investing activities (375,970 ) (417,468 ) (240,907 ) Net cash (used in) provided by financing activities (21,871 ) 100,368 (106,503 ) Effect of exchange rate changes 546 (1,770 ) (1,496 ) Net increase (decrease) in cash and cash equivalents $ 10,404 $ (81,344 ) $ (143,332 ) Operating Activities Net cash provided by operating activities consists primarily of net income adjusted for noncash items, such as: equity in (losses) earnings of unconsolidated joint ventures, contributions of treasury stock, depreciation and amortization of property and equipment and intangible assets, provisions for doubtful accounts, amortization of deferred gains, and impairment charges.
Book-to-Bill Book-to-bill is the ratio of total awards to total revenue recorded in the same period. Our management believes our book-to-bill ratio is a useful indicator of our potential future revenue growth in that it measures the rate at which we are generating new awards compared to the Company’s current revenue.
Our management believes our book-to-bill ratio is a useful indicator of our potential future revenue growth in that it measures the rate at which we are generating new awards compared to the Company’s current revenue. To drive future revenue growth, our goal is for the level of awards in a given period to exceed the revenue booked.
We focus on collecting outstanding receivables to reduce net DSO and working capital. Net DSO was 69 days at December 31, 2022, up from 68 days at December 31, 2021. DSO was 64 days at December 31, 2020.
We focus on collecting outstanding receivables to reduce net DSO and improve working capital. Net DSO was 59 days at December 31, 2023, down from 69 days at December 31, 2022. and 68 days at December 31, 2021.
The following table summarizes the total value of new awards for the periods presented below (in thousands): Fiscal Year Ended December 31, 2022 December 31, 2021 December 31, 2020 Federal Solutions $ 1,921,123 $ 2,458,528 $ 2,175,221 Critical Infrastructure 2,353,598 2,107,264 2,020,425 Total Awards $ 4,274,721 $ 4,565,792 $ 4,195,646 The change in new awards from year to year is primarily due to ordinary course fluctuations in our business.
The following table summarizes the total value of new awards for the periods presented below (in thousands): Fiscal Year Ended December 31, 2023 December 31, 2022 December 31, 2021 Federal Solutions $ 3,259,052 $ 1,921,123 $ 2,458,528 Critical Infrastructure 2,737,728 2,353,598 2,107,264 Total Awards $ 5,996,780 $ 4,274,721 $ 4,565,792 The change in new awards from year to year is primarily due to ordinary course fluctuations in our business.
This increase was primarily due to an increase in revenue in our Federal Solutions segment of $324.9 million and an increase in our Critical Infrastructure segment of $209.6 million. See “—Segment Results” below for further discussion.
This increase was primarily due to an increase in revenue in our Federal Solutions segment of $324.9 million and an increase in our Critical Infrastructure segment of $209.6 million.
The financial results of Braxton have been included in our consolidated results of operations from November 19, 2020 onward. Seasonality Our results may be affected by variances as a result of weather conditions and contract award seasonality impacts that we experience across our businesses. The latter issue is typically driven by the U.S. federal government fiscal year-end, September 30.
Seasonality Our results may be affected by variances as a result of weather conditions and contract award seasonality impacts that we experience across our businesses. The latter issue is typically driven by the U.S. federal government fiscal year-end, September 30.
The following table summarizes the value of our backlog at the respective dates presented (in thousands): As of December 31, 2022 December 31, 2021 December 31, 2020 Federal Solutions: Funded $ 1,257,537 $ 1,414,985 $ 1,176,049 Unfunded 3,586,791 3,906,678 4,009,156 Total Federal Solutions 4,844,328 5,321,663 5,185,205 Critical Infrastructure: Funded 3,280,701 2,957,968 2,830,318 Unfunded 54,216 67,306 77,735 Total Critical Infrastructure 3,334,917 3,025,274 2,908,053 Total Backlog (1) $ 8,179,245 $ 8,346,937 $ 8,093,258 (1) Difference between our backlog of $8.2 billion and our RUPO of $5.7 billion, each as of December 31, 2022, is due to (i) unissued task orders and unexercised option years, to the extent their issuance or exercise is probable, as well as (ii) contract awards, to the extent we believe contract execution and funding is probable.
The following table summarizes the value of our backlog at the respective dates presented (in thousands): As of December 31, 2023 December 31, 2022 December 31, 2021 Federal Solutions: Funded $ 1,454,581 $ 1,257,537 $ 1,414,985 Unfunded 3,490,781 3,586,791 3,906,678 Total Federal Solutions 4,945,362 4,844,328 5,321,663 Critical Infrastructure: Funded 3,578,902 3,280,701 2,957,968 Unfunded 68,007 54,216 67,306 Total Critical Infrastructure 3,646,909 3,334,917 3,025,274 Total Backlog (1) $ 8,592,271 $ 8,179,245 $ 8,346,937 (1) Difference between our backlog of $8.6 billion and our RUPO of $6.4 billion, each as of December 31, 2023, is due to (i) unissued task orders and unexercised option years, to the extent their issuance or exercise is probable, as well as (ii) contract awards, to the extent we believe contract execution and funding is probable.
The statements in this discussion regarding industry outlook, our expectations regarding our future performance, liquidity and capital resources and other non-historical statements in this discussion are forward-looking statements.
Certain amounts may not foot due to rounding. The statements in this discussion regarding industry outlook, our expectations regarding our future performance, liquidity and capital resources and other non-historical statements in this discussion are forward-looking statements.
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.
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.
We are deemed to be the primary beneficiary of a VIE if we have (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance; and (ii) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. 76 Many of the joint ventures we enter into are deemed to be VIEs because they lack sufficient equity to finance the activities of the joint venture.
We are deemed to be the primary beneficiary of a VIE if we have (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance; and (ii) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.
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.
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.
These increases were partially offset by a $25.0 million decrease in intangible asset amortization primarily related to the drop-off in intangible asset amortization from the Company’s older acquisitions offset by intangible amortization from the Company’s more recent acquisitions and a reduction in the Company’s liability insurance costs of $4.6 million. 63 Total other (expense) income Fiscal Year Ended Variance (U.S. dollars in thousands) December 31, 2022 December 31, 2021 Dollar Percent Interest income $ 966 $ 396 $ 570 143.9 % Interest expense (23,185 ) (17,697 ) (5,488 ) (31.0 )% Other income (expense), net 2,775 (2,557 ) 5,332 (208.5 )% Total other income (expense) $ (19,444 ) $ (19,858 ) $ 414 (2.1 )% Interest expense increased for the year ended December 31, 2022 compared to the corresponding period last year primarily due to interest expense from borrowings under the Credit Agreement and Delayed Draw Term Loan, neither of which had outstanding balances during the year ended December 31, 2021.
Total other (expense) income Fiscal Year Ended Variance (U.S. dollars in thousands) December 31, 2022 December 31, 2021 Dollar Percent Interest income $ 966 $ 396 $ 570 143.9 % Interest expense (23,185 ) (17,697 ) (5,488 ) 31.0 % Other income (expense), net 2,775 (2,557 ) 5,332 (208.5 )% Total other income (expense) $ (19,444 ) $ (19,858 ) $ 414 (2.1 )% Interest expense increased for the year ended December 31, 2022 compared to the corresponding period last year primarily due to interest expense from borrowings under the Credit Agreement and 67 Delayed Draw Term Loan, neither of which had outstanding balances during the year ended December 31, 2021.
Fiscal Year Ended December 31, 2021 December 31, 2020 Revenues 100.0 % 100.0 % Direct costs of contracts 76.7 % 77.6 % Equity in earnings of unconsolidated joint ventures 1.0 % 0.8 % Selling, general and administrative expenses 20.7 % 18.6 % Operating income 3.6 % 4.5 % Interest income 0.0 % 0.0 % Interest expense (0.5 )% (0.5 )% Other income, net (0.1 )% 0.1 % Total other income benefit (expense) (0.5 )% (0.4 )% Income before income tax expense 3.1 % 4.1 % Income tax benefit (expense) (0.6 )% (1.1 )% Net income including noncontrolling interests 2.4 % 3.0 % Net income attributable to noncontrolling interests (0.7 )% (0.5 )% Net income attributable to Parsons Corporation 1.8 % 2.5 % Revenue Fiscal Year Ended Variance (U.S. dollars in thousands) December 31, 2021 December 31, 2020 Dollar Percent Revenue $ 3,660,771 $ 3,918,946 $ (258,175 ) -6.6 % Revenue for the year ended December 31, 2021 compared to the prior year decreased $258.2 million.
Fiscal Year Ended December 31, 2023 December 31, 2022 Revenues 100.0 % 100.0 % Direct costs of contracts 77.8 % 77.4 % Equity in (losses) earnings of unconsolidated joint ventures (0.9 )% 0.4 % Selling, general and administrative expenses 16.0 % 18.5 % Operating income 5.3 % 4.4 % Interest income 0.0 % 0.0 % Interest expense (0.6 )% (0.6 )% Other income, net 0.1 % 0.1 % Total other income benefit (expense) (0.4 )% (0.5 )% Income before income tax expense 4.9 % 4.0 % Income tax expense (1.0 )% (0.9 )% Net income including noncontrolling interests 3.8 % 3.0 % Net income attributable to noncontrolling interests (0.9 )% (0.7 )% Net income attributable to Parsons Corporation 3.0 % 2.3 % Revenue Fiscal Year Ended Variance (U.S. dollars in thousands) December 31, 2023 December 31, 2022 Dollar Percent Revenue $ 5,442,749 $ 4,195,272 $ 1,247,477 29.7 % Revenue for the year ended December 31, 2023 compared to the prior year increased $1.2 billion.
We recognize compensation costs for these awards on either a straight-line or accelerated basis over the vesting period of the award in “Selling, general and administrative expenses” in the consolidated statements of income.
We recognize compensation costs for these awards on either a straight-line or accelerated basis over the vesting period of the award in “Selling, general and administrative expenses” in the consolidated statements of income. For awards that include market conditions, the grant date fair value is determined using a Monte Carlo simulation.
A number of our contracts may provide for performance-based payments, which allow us to bill and collect cash prior to completing the work. Billed accounts receivable represents amounts billed to clients that have not been collected.
In contrast, we may be limited to bill certain fixed-price contracts only when specified milestones, including deliveries, are achieved. A number of our contracts may provide for performance-based payments, which allow us to bill and collect cash prior to completing the work. Billed accounts receivable represents amounts billed to clients that have not been collected.
Cash provided by financing activities in 2022 included $916.0 million in proceeds from borrowings under our credit agreement and $350 million in proceeds from the Delayed Draw Term Loan.
Net cash provided by (used in) financing activities increased $206.9 million to $100.4 million in 2022 compared to $(106.5) million in 2021. Cash provided by financing activities in 2022 included $916.0 million in proceeds from borrowings under our credit agreement and $350 million in proceeds from the Delayed Draw Term Loan.
Our working capital (current assets less current liabilities) was $611.7 million at December 31, 2022, $601.6 million at December 31, 2021 and $655.7 million at December 31, 2020. Our cash, cash equivalents and restricted cash decreased by $81.3 million to $262.5 million at December 31, 2022 from $343.9 million at December 31, 2021.
Our working capital (current assets less current liabilities) was $726.6 million at December 31, 2023, $611.7 million at December 31, 2022 and $601.6 million at December 31, 2021. Our cash and cash equivalents increased by $10.4 million to $272.9 million at December 31, 2023 from $262.5 million at December 31, 2022.
These contracts are often multi-year, which provides us backlog and visibility on our revenues for future periods. Many of our contracts and task orders are subject to renewal and rebidding at the end of their term, and some are subject to the exercise of contract options and issuance of task orders by the applicable government entity.
Many of our contracts and task orders are subject to renewal and rebidding at the end of their term, and some are subject to the exercise of contract options and issuance of task orders by the applicable government entity.
The awards in Critical Infrastructure for the year ended December 31, 2022 were higher primarily due to several new awards and a large contract value increase during 2022. 56 Backlog We define backlog to include the following two components: • Funded—Funded backlog represents the revenue value of orders for services under existing contracts for which funding is appropriated or otherwise authorized less revenue previously recognized on these contracts. • Unfunded—Unfunded backlog represents the revenue value of orders for services under existing contracts for which funding has not been appropriated or otherwise authorized less revenue previously recognized on these contracts.
The change in new awards in both our Federal Solutions and Critical Infrastructure segments for the year ended December 31, 2023 when compared to the corresponding period last year was primarily driven by an overall increase in the number of large contract awards. 57 Backlog We define backlog to include the following two components: • Funded—Funded backlog represents the revenue value of orders for services under existing contracts for which funding is appropriated or otherwise authorized less revenue previously recognized on these contracts. • Unfunded—Unfunded backlog represents the revenue value of orders for services under existing contracts for which funding has not been appropriated or otherwise authorized less revenue previously recognized on these contracts.
December 31, 2022 December 31, 2021 December 31, 2020 Net income attributable to Parsons Corporation $ 96,664 $ 64,072 $ 98,541 Interest expense, net 22,219 17,301 20,169 Income tax expense (benefit) 39,657 23,636 42,492 Depreciation and amortization 120,501 144,209 127,980 Net income attributable to noncontrolling interests 29,901 24,880 20,380 Equity-based compensation 24,354 19,601 9,785 Transaction-related costs (a) 16,270 11,965 19,922 Restructuring (b) 213 736 2,193 Other (c) 3,003 3,320 1,159 Adjusted EBITDA $ 352,782 $ 309,720 $ 342,621 ( a ) Reflects costs incurred in connection with acquisitions, and other non-recurring transaction costs, primarily fees paid for professional services and employee retention.
(3) Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by revenue in the applicable period. 68 December 31, 2023 December 31, 2022 December 31, 2021 Net income attributable to Parsons Corporation $ 161,149 $ 96,664 $ 64,072 Interest expense, net 29,306 22,219 17,301 Income tax expense (benefit) 56,138 39,657 23,636 Depreciation and amortization 119,973 120,501 144,209 Net income attributable to noncontrolling interests 46,766 29,901 24,880 Equity-based compensation 36,151 24,354 19,601 Transaction-related costs (a) 12,013 16,270 11,965 Restructuring (b) 1,244 213 736 Other (c) 1,933 3,003 3,320 Adjusted EBITDA $ 464,673 $ 352,782 $ 309,720 (a) Reflects costs incurred in connection with acquisitions, and other non-recurring transaction costs, primarily fees paid for professional services and employee retention.
Direct costs of contracts Fiscal Year Ended Variance (U.S. dollars in thousands) December 31, 2022 December 31, 2021 Dollar Percent Direct cost of contracts $ 3,248,550 $ 2,807,950 $ 440,600 15.7 % Direct cost of contracts for the year ended December 31, 2022 compared to the prior year increased $440.6 million This increase was primarily due to an increase in direct cost of contracts in our Federal Solutions segment of $272.6 million and an increase in our Critical Infrastructure segment of $168.0 million.
See “—Segment Results” below for further discussion. 66 Direct costs of contracts Fiscal Year Ended Variance (U.S. dollars in thousands) December 31, 2022 December 31, 2021 Dollar Percent Direct cost of contracts $ 3,248,550 $ 2,807,950 $ 440,600 15.7 % Direct cost of contracts for the year ended December 31, 2022 compared to the prior year increased $440.6 million.
The decrease in Critical Infrastructure Adjusted EBITDA attributable to Parsons for the year ended December 31, 2021 compared to the corresponding period last year was primarily due to write downs on projects and a decrease in business volume.
The increase in Federal Solutions Adjusted EBITDA attributable to Parsons Corporation for the year ended December 31, 2022 compared to the prior year was primarily due to increases in business volume, increases related to acquisitions, and a write down on a project in the corresponding period last year.
Our Critical Infrastructure business provides integrated engineering and management services for complex physical and digital infrastructure to state and local governments and large companies. Our employees provide services pursuant to contracts that we are awarded by the customer and specific task orders relating to such contracts.
Our Critical Infrastructure business provides integrated design and engineering services for complex physical and digital infrastructure around the globe. Our employees provide services pursuant to contracts that we are awarded by the customer and specific task orders relating to such contracts. These contracts are often multi-year, which provides us backlog and visibility on our revenues for future periods.
We generally do not begin work on contracts until funding is appropriated by the customers. Billing timetables and payment terms on our contracts vary based on a number of factors, including whether the contract type is cost-plus, time-and-materials, or fixed-price.
Billing timetables and payment terms on our contracts vary based on a number of factors, including whether the contract type is cost-plus, time-and-materials, or fixed-price. We generally bill and collect cash more frequently under cost-plus and time-and-materials contracts, as we are authorized to bill as the costs are incurred or work is performed.
In addition, clients reimburse actual out-of-pocket costs for other direct costs and expenses that are incurred in connection with the performance under the contract. • Under fixed-price contracts, clients pay an agreed fixed-amount negotiated in advance for a specified scope of work. 60 R efer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” and “Note 2 — Summary of Significant Accounting Polices ” in the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for a description of our policies on revenue recognition applicable to each type of contract .
Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” and “Note 2— Summary of Significant Accounting Polices ” in the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for a description of our policies on revenue recognition applicable to each type of contract.
During October 2022, we prepaid the private placement debt of $200.0 million with borrowings under the revolving credit facility and subsequently borrowed $350.0 million on the 2022 Delayed Draw Term Loan. Proceeds from the Delayed Draw Term Loan were used to pay down the borrowings under the revolving credit facility.
Management continually monitors debt maturities to strategically execute optimal terms and ensure appropriate levels of working capital liquidity are maintained for the company. During October 2022, we prepaid private placement debt of $200.0 million with borrowings under the revolving credit facility and subsequently borrowed $350.0 million on the 2022 Delayed Draw Term Loan.
The decrease in net cash provided by operating activities is primarily due to a $32.9 million change in net income after adjusting for non-cash items and a change in the use of cash related to our working capital accounts of $35.6 million (primarily from accounts receivable, contract assets, prepaid expenses and current assets, offset by accounts payable and accrued expenses).
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 difference between the statutory U.S. federal income tax rate of 21% and the effective tax rate for the year ended December 31, 2021 primarily relates to state income taxes and a recorded valuation allowance on foreign tax credit carryovers, a write down of a foreign tax receivable and an increase in executive compensation subject to IRC Section 162(m) limitations, offset by benefits related to income attributable to noncontrolling interest, release of uncertain tax positions, and federal research tax credits.
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe applicable margin for base rate loans was a range of 0.125% to 1.00% and the applicable margin for LIBOR loans was a range of 1.125% to 2.00%, both based on the leverage ratio of the Company at the end of each quarter. As of December 31, 2022, there was $350.0 million outstanding under the Delayed Draw Term Loan.
Biggest changeAs of December 31, 2023, there was $350.0 million outstanding under the 2022 Delayed Draw Term Loan.
Borrowings under the Revolving Credit Facility effective June 2021 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.
Borrowings under the Revolving Credit Facility effective June 2021 bear interest 80 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.
Item 7A. Qualitative and Quantitative Disclosure About Market Risk Interest Rate Risk We are exposed to interest rate risks related to the Company’s Revolving Credit Facility and Delayed Draw Term Loan. As of December 31, 2022 and December 31, 2021, there were no amounts outstanding under the Revolving Credit Facility.
Item 7A. Qualitative and Quantita tive Disclosure About Market Risk Interest Rate Risk We are exposed to interest rate risks related to the Company’s Revolving Credit Facility and Delayed Draw Term Loan. As of December 31, 2023 and December 31, 2022, there were no amounts outstanding under the Revolving Credit Facility.
The interest rate at December 31, 2022 was 5.7%. 78 Foreign Currency Exchange Risk We are exposed to foreign currency exchange rate risk resulting from our operations outside of the U.S. We limit exposure to foreign currency fluctuations in most of our contracts through provisions that require client payments in currencies corresponding to the currency in which costs are incurred.
Foreign Currency Exchange Risk We are exposed to foreign currency exchange rate risk resulting from our operations outside of the U.S. We limit exposure to foreign currency fluctuations in most of our contracts through provisions that require client payments in currencies corresponding to the currency in which costs are incurred.
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 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, 2023 and December 31, 2022 was 6.6% and 5.6%, respectively.
Removed
Prior to June 2021, interest on borrowings under the Credit Facility were at either the base rate (as defined in the Credit Agreement), plus an applicable margin, or LIBOR plus an applicable margin.

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