PSN 10-K & 10-Q changes, risk factors and insider trading

Government budgets, spending and priorities could change in a manner that adversely affects our future revenue and limits our growth prospects.

Your ability to influence corporate matters may be limited because the ESOP beneficially owns a majoritysignificant amount 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.

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 negatively affect the U.S. government expenditures on defense, intelligence, and civil programs for which we provide support. TwoOne customer setsset within the federal government exceeded 20% of Parsons’ revenue during 2024.2025. The volume of work awarded to Parsons waspursuant awardedto the secondsecond-year option yearfor toa continuelarge ourconfidential contract withwas asignificantly confidentialreduced customerduring through2025 February 2026. However, a related program performed by others has recently been paused, which impacts our ability to complete the scope of our mission. The long-term continuation of our contractand is contingentcurrently onwinding the related program restarting. If the project is halted, it would have a material adverse impact.down.

The U.S. federal government and its agencies, including the military and intelligence community, collectively are our largest customer. In particular, it represents substantially all of the revenue of our Federal Solutions segment. Approximately 23%19% and 18%23% of accounts receivable as of December 31, 20242025 and December 31, 2023,2024, 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, including the U.S. Department of Defense,War, the U.S. Department of State, the Federal Aviation Administration, the United States Intelligence Community, and other federal civilian customers 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. 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.

The government-related industries within which we do business continue to experience significant changes to business practices as a result of an increased focus on affordability, efficiencies and recovery of costs, among other items. 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. Legislation, regulations and initiatives dealing with procurement reform, mitigation of potential OCIs, deterrence of fraud, and environmental responsibility or sustainability could have an adverse effect on us. Moreover, shifts in the buying practices of government agencies, such as increased usage of fixed price contracts, multiple award contracts and small business set-aside contracts, could have adverse effects on government contractors, including us. Any of these changes could impair our ability to obtain new contracts or contract renewals. Any new contracting requirements or procurement methods could be costly or administratively difficult for us to implement and could adversely affect our business, financial condition and results of operations.

We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Accordingly, our effective tax rate is impacted by changes in the mix amongof earnings in countries with differing tax rates.rates and the changes in tax laws or their interpretation. Due to economic and political conditions, 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. For example, the Organization for Economic Co-Operation and Development continueshas developed a two-pillar framework to advancereform proposalsand for modernizingmodernize international tax rules, including the release of global minimum tax standards referred to as the Pillar Two Model Rules (and also referred to as the Global Anti-Base Erosion (or “GloBE” rules). Several jurisdictions in which we operate have enacted these rules,rules someand of which becameare effective for the Company’s 20242025 fiscal year. The Company has considered the impact of the GloBE implementation in its provision for income taxes based on currently enacted legislation and continues to monitor the impacts of pending enactments and changes to the GloBE rules implementation.rules.

We are also subject regularlyto toregular examination by tax authorities. Although we believe that our positions are reasonable, they could be materially affected by many factors, including the final outcome of tax audits, introduction of new income tax legislation or regulations and related interpretations. We regularly assess the likelihood of an adverse outcome resulting from these examinations to determine the adequacy of our provision for income taxes. There can be no assurance as to the outcome of these examinations. If the ultimate determination of our taxes owed is for an amount in excess of amounts previously accrued, our financial condition and results operation could be materially affected.

13% of our revenue during fiscal 2025, 12% of our revenue during fiscal 2024,2024 and 13% of our revenue during fiscal 2023 and 12% of our revenue during fiscal 2022 was derived from our operations through consolidated joint ventures. In addition, 3.1% of our revenue during fiscal 2025, 2.7% of our revenue during fiscal 2024, 3.9% of our revenue during fiscal 20232024 and 5.1%3.9% of our revenues in fiscal 20222023 related to services we provided to our unconsolidated joint ventures, where control resides with unaffiliated third parties, and 5.5%0.6% of our operating income during fiscal 2024,2025, 16.6%(5.5)% of our operating income during fiscal 2024 and (16.6)% of our operating income during fiscal 2023 and 8.8% of our operating income during fiscal 2022 was derived from equity in our unconsolidated joint ventures. As with most joint venture arrangements, differences in views among the joint venture participants may result in delayed decisions or disputes. We also cannot control the actions of our joint venture partners and we typically have joint and several liability with our joint venture partners under the applicable contracts for joint venture projects. These factors could potentially adversely impact the business and operations of a joint venture and, in turn, our business and operations.

As of December 31, 2024,2025, our total indebtedness was approximately $1.2 billion. 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. 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:

PriorThe toParsons' our initial public offering, we were 100% owned by the ESOP, whichESOP is a qualified retirement plan that is intended to be qualified under the Internal Revenue Code. If the ESOP failed to meet the requirements of a tax qualified retirement plan, we could be subject to substantial penalties.

If the ESOP were determined not to be in material compliance with the Code or ERISA, then the ESOP could lose its tax qualified status and we could be subject to substantial penalties under the Code and ERISA which could have a material adverse effect on our business, financial condition or results of operations. Additionally, loss of the ESOP’s tax-qualified status would adversely impact our prior treatment as an S Corporation.

We are signatory to approximately fourteen10 active union collective bargaining agreements as of December 31, 20242025 and employ more than 300400 employees represented by unions. The outcome of any future negotiations relating to union representation or collective bargaining agreements for these or other employees in the future may not be favorable to us. We may reach agreements in collective bargaining that increase our operating expenses and lower our net income as a result of higher wages or benefit expenses. In addition, negotiations with unions could divert management attention and disrupt operations, which may adversely affect our results of operations. If we are unable to negotiate acceptable collective bargaining agreements, we may have to address the threat of union-initiated work actions, including strikes. 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.

As of December 31, 2024,2025, there were 54,117,90450,864,117 shares of common stock held in the ESOP. Shares held in the ESOP are eligible for sale in the public market, subject to applicable Rule 144 limitations, vesting restrictions and any applicable market standoff agreements and lock-up agreements. Participants are generally entitled to distributions from the ESOP only following termination of employment or upon death and in order to diversify their accounts upon attaining a specified age and completing a specified number of years of service. As previously noted in the section of Part 1, Item 1 entitled “Employee Stock Ownership Plan”, in December 2020, the board of directors previously approved an amendmentamendments to the Employee Stock Ownership Plan to provide more flexible diversification rights for participants, and in January 2021, the board of directors approved the modification of the thresholds for distributions to participants in the ESOP effective March 1, 2021. In April 2022,for the boardprovision of directors approved an amendment providing for lump sum distributions to participants and removing the annual installments. Annual diversification elections and five-year vested termination distributions arewere not impacted by this amendment and will still occur annually and over installments as outlined in the Plan.

The change in new awards in both our Federal Solutions and Critical Infrastructure segmentssegment for the year ended December 31, 20242025 when compared to the corresponding period last year was primarily due to significantan optionoverall periodincrease in awards in the current year. The decrease in awards for the year ended December 31, 2025 in our Federal Solutions segment andwhen threecompared largeto transportationthe corresponding period last year was primarily driven by a delay in the timing of awards andof a miningnumber awardof contracts being pursued. Awards in ourthe CriticalFederal InfrastructureSolutions segment.segment for the year ended December 31, 2024 included $1.5 billion from the confidential contract compared to $293 million for the year ended December 31, 2025.

Increased audit, review, investigation and general scrutiny by government agencies of performance under government contracts and compliance with the terms of those contracts and applicable laws could affect our operating results. Negative publicity and increased scrutiny of government contractors in general, including us, relating to government expenditures for contractor services and incidents involving the mishandling of sensitive or classified information, as well as the increasingly complex requirements of the U.S. Department of DefenseWar and the U.S. intelligence community, including those related to cybersecurity, could impact our ability to perform in the markets we serve.

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

On August 23, 2023, the Company acquired a 100% ownership interest in Sealing Technologies, Inc (“SealingTech”), a privately-owned company, for $176.0 million and up to an additional $25 million in the event an earn out revenue target is exceeded. Headquartered in Maryland, SealingTech expands Parsons’ customer base across the Department of DefenseWar and Intelligence Community, and further enhances the company’s capabilities in defensive cyber operations; integrated mission-solutions powered by artificial intelligence (AI) and machine learning (ML); edge computing and edge access modernization; critical infrastructure protection; and secure data management. The financial results of SealingTech have been included in our consolidated results of operations from August 23, 2023 onward.

The significant change in the contract mix for the year ended December 31, 20242025 compared to the corresponding period last year relates to increaseddecreased business volume from a significant fixed price contract from a confidential contract in our Federal Solutions segment.

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

As a percentage of revenue, SG&A decreased by 1.9% to 14.1% for the year ended December 31, 2024 compared to16.0%to 16.0% for the corresponding period last year.

Total other income (expense) income

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.

Accounts receivable is the principal component of our working capital and is generally driven by revenue growth. Accounts receivable includes billed and unbilled amounts. The total amount of our accounts receivable can vary significantly over time but is generally sensitive to revenue levels. We experience delays in collections from time to time from Middle East customers. Net days sales outstanding, which we refer to as net DSO, is calculated by dividing (i) accounts receivable (net of project accruals, billings in excess of revenue and accounts payable) by (ii) average revenue per day (calculated by dividing trailing twelve months revenue by the number of days in that period). We focus on collecting outstanding receivables to reduce net DSO and improve working capital. Net DSO was 67 days at December 31, 2025, up from 55 days at December 31, 2024,2024 down fromand 59 days at December 31, 2023 and 69 days at December 31, 2022.2023. Our working capital (current assets less current liabilities) was $1.2 billion at December 31, 2025, $546.8 million at December 31, 2024,2024 and $726.6 million at December 31, 2023 and $611.7 million at December 31, 2022.2023.

We are a leading provider of the integrated solutions and services required in today’s complex security environment and a world of digital transformation. We deliver innovative technology-driven solutions to customers worldwide. We have developed significant expertise and differentiated capabilities in key areas of cyber and electronic warfare, space and missile defense, critical infrastructure protection, transportation, water,water environmentand environment, and urban development. 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.

Difference between our backlog of $9.3 billion and our remaining unsatisfied performance obligations, or RUPO, of $7.1$6.9 billion, each as of MarchJune 31,30, 2026, 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.

Awards generally represent the amount of revenue expected to be earned in the future from funded and unfunded contract awards received during the period. Contract awards include both new and re-compete contracts and task orders. Given that new contract awards generate growth, we closely track our new awards each year.awards.

The increase in awards for the three and six months ended MarchJune 31,30, 2026 in our Critical Infrastructure segment when compared to the corresponding period last year was primarily driven by an overall increase in awards in the current year period. The increase in awards for the three and six months ended MarchJune 31,30, 2026 in our Federal Solutions segment when compared to the corresponding period last year was primarily driven by significant awards. The comparable period included a delay in the timing of awards of a number of contracts being pursued.

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. Unfunded backlog does not include potential task orders expected to be awarded under multiple awards IDIQ (indefinite delivery, indefinite quantity) contract vehicles, where task orders are competitively awarded and separately priced.

Difference between our backlog of $9.3 billion and our RUPO of $7.1$6.9 billion, each as of MarchJune 31,30, 2026, 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.

We expect to recognize $4.2$3.8 billion of our funded backlog at MarchJune 31,30, 2026 as revenues in the following twelve months. However, our U.S. federal government customers may cancel their contracts with us at any time through a termination for convenience or may elect to not exercise option periods under such contracts. In the case of a termination for convenience, we would not receive anticipated future revenues, but would generally be permitted to recover all or a portion of our incurred costs and fees for work performed. See “Risk Factors—Risk Relating to Our Business—We may not realize the full value of our backlog, which may result in lower-than-expected revenue” in the Company’s Form 10-K for the year ended December 31, 2025.

The significant change in the contract mix for the three and six months ended MarchJune 31,30, 2026 compared to the corresponding periods last year primarily relates to decreased business volume from a fixed price contract from a confidential contract in our Federal Solutions segment.

We conduct a portion of our business through joint ventures or similar partnership arrangements. For the joint ventures we control, we consolidate all the revenues and expenses in our consolidated statements of income (including revenues and expenses attributable to noncontrolling interests). For the joint ventures we do not control, we recognize equity in (losses) earnings of unconsolidated joint ventures. Our revenues included amounts related to services we provided to our unconsolidated joint ventures for the three months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025 of $49.6$46.7 million and $45.5$42.0 million, respectively and $96.3 million and $87.5 million for the six months ended June 30, 2026 and June 30, 2025, respectively.

Operating costs and expenses primarily include direct costs of contracts and selling, general and administrative expenses. Costs associated with compensation-related expenses for our people and facilities, which includes ESOP contribution expenses, are the most significant component of our operating expenses. Total ESOP contribution expense for the three months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025 was $19.3$19.8 million and $17.8$17.6 million, respectively and $39.1 million and $35.4 million for the six months ended June 30, 2026 and June 30, 2025, respectively and is recorded in “Direct cost of contracts” and “Selling, general and administrative expenses.”

Other income, net primarily consists of gain or loss on sale of businesses and sale of assets, sublease income and transaction gain or loss related to movements in foreign currency exchange rates.

The following table sets forth Adjusted EBITDA, Net Income Margin, and Adjusted EBITDA Margin for the three and six months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025.

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

The following tabletables showsshow Adjusted EBITDA attributable to Parsons Corporation for each of our reportable segments and Adjusted EBITDA attributable to noncontrolling interests (in thousands):

The following table sets forth our results of operations for the three and six months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025 as a percentage of revenue.

Revenue decreased $63.2$8.5 million for the three months ended MarchJune 31,30, 2026 when compared to the corresponding period last year, due to a decrease in revenue in our Federal Solutions segment of $84.2$44.6 million, offset by an increase in revenue in our Critical Infrastructure Segment of $21.0$36.1 million. See “Segment Results” below for a further discussion of the changes in the Company's revenue.

Direct cost of contractsRevenue decreased $66.6$71.6 million for the threesix months ended MarchJune 31,30, 2026 when compared to the corresponding period last year, primarily due to a decrease ofin $76.5 millionrevenue in our Federal Solutions segment of $128.8 million, offset by an increase ofin $9.9 millionrevenue in our Critical Infrastructure segment. The decrease in direct costsSegment of contracts$57.2 in the Federal Solutions segment is primarily related to reduced volume from our confidential contract,million. See “Segment Results” below for a further discussion. The increase in direct costsdiscussion of contractsthe changes in the CriticalCompany's Infrastructure segment is primarily related to increased volume from new and existing contracts.revenue.

Equity in earningslosses of unconsolidated joint ventures improveddecreased by $6.8$33.1 million for the three months ended MarchJune 31,30, 2026 compared to the corresponding period last year.year primarily due to a write down in the Critical Infrastructure segment. The Company is winding down its participation in construction joint ventures.

As a percentage of revenue, our SG&A increased by 2.3%0.6% to 18.0%16.5% for the three months ended MarchJune 31,30, 2026 compared to 15.7%15.9% for the corresponding period last year. The increase in SG&A was primarily due to higher transaction costsacquisitions and intangible asset amortization associated with the Company's acquisitions compared to the corresponding period last year. Partially offsetting these increase in SG&A was a decrease in the estimated fair value of the ATC contingent consideration.

Interest expense for the three and six months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025 is primarily due to debt related to our Convertible Senior Notes, Term Loan, and Revolving Credit Facility.

The amounts in other income (expense), net are primarily related to a gain on sale of business, transaction gains and losses on foreign currency transactions and sublease income.

The Company’s effective tax rate was 19.8%112.4% and 18.8%21.0% and income tax expense was $16.0$4.2 million and $19.0$18.7 million for the three months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025, respectively. The decrease in tax expense for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025 was due primarily to the tax impact of a decrease in pre-tax income,income and a change in the jurisdictional mix of earnings, partially offset by decreasesincreases in taxvaluation benefitsallowances fromon theforeign foreign-derivednet deductionoperating eligibleloss incomecarryovers (FDDEINOLs) and windfallforeign equity-basedtax compensationcredit deductions.carryovers (FTCs).

The decrease in Federal Solutions revenue for the three months ended MarchJune 31,30, 2026 compared to the corresponding period last year was primarily driven by our confidential contract operating at a reduced volume as a result of the Department of State reorganization issued May 29, 2025.2025 Thisand decreasewrite wasdowns on projects. These decreases were offset by growth on existing contracts and the ramp-up of new task orders.acquisitions.

The decrease in Federal Solutions Adjusted EBITDA attributable to Parsons Corporation for the three months ended MarchJune 31,30, 2026 compared to the corresponding period last year was primarily due to write downs on projects and the factors impacting revenue discussed above.

The increasedecrease in CriticalFederal InfrastructureSolutions Adjusted EBITDA attributable to Parsons Corporation for the threesix months ended MarchJune 31,30, 2026 compared to the corresponding period last year was primarily relateddue to the revenue impactsfactors discussed above and recent business acquisitions. These increases infor Adjusted EBITDA,EBITDA werefor partiallythe offsetthree bymonths anended increaseJune in30, SG&A.2026.

As of MarchJune 31,30, 2026, 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. Management continually monitors debt maturities to strategically execute optimal terms and ensure appropriate levels of working capital liquidity are maintained for the company.

Accounts receivable is the principal component of our working capital and is generally driven by revenue growth. Accounts receivable includes billed and unbilled amounts. The total amount of our accounts receivable can vary significantly over time but is generally sensitive to revenue levels. We experience delays in collections from time to time from Middle East customers. Net days sales outstanding, which we refer to as net DSO, is calculated by dividing (i) accounts receivable (net of project accruals, billings in excess of revenue and accounts payable) by (ii) average revenue per day (calculated by dividing trailing twelve months revenue by the number of days in that period). We focus on collecting outstanding receivables to reduce net DSO and improve working capital. Net DSO was 7276 days at MarchJune 31,30, 20262026, a 1416 day increase from MarchJune 31,30, 2025. Impacting the change in DSO was lower volume from our confidential contract and delayed collections in the Middle East. Our working capital (current assets less current liabilities) was $1.1 billion at MarchJune 31,30, 2026 and $1.2 billion at December 31, 2025.

Our cash and cash equivalents decreased by $182.5$200.3 million to $283.9$266.0 million at MarchJune 31,30, 2026 from $466.4 million at December 31, 2025.

Net cash usedprovided inby operating activities decreased $8.1$94.1 million for the threesix months ended MarchJune 31,30, 2026 compared to the threesix months ended MarchJune 31,30, 2025. The primary drivers of the decrease in cash flows usedprovided inby operating activities was a $28.5$56.2 million change in cashflowscash flows from our working capital accounts (primarily from accounts receivable, prepaid expenses and other assets, contract liabilities, and accrued expenses and other current liabilities, offset by changes in contract assets and accounts payable) offset by a change in net income after adjusting for non-cash itemsitems, ofa $13.9change million andin other long-term liabilities of $7.1$21.1 million, and a change in income taxes of $16.0 million.

Net cash used in investing activities increased $302.9$222.2 million for the threesix months ended MarchJune 31,30, 2026, when compared to the threesix months ended MarchJune 31,30, 2025. This change was primarily driven by a $301.9$212.3 million increase in payments for acquisitions, net of cash acquired, and a $7.1$21.4 million increase in investments in unconsolidated joint ventures, offset byand a $7.5$8.1 million increase in returncapital expenditures, offset by $24.0 million in proceeds from sale of investments in unconsolidated joint ventures.business.

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

Net cash provided by (used in) provided by financing activities increasedchanged $297.4by $162.6 million for the threesix months ended MarchJune 31,30, 2026 compared to the threesix months ended MarchJune 31,30, 2025. The change in cash flows provided by (used in) provided by financing activities is primarily driven by net proceeds of $274.0$234.0 million from our Revolving Credit Facility. Also impacting net cash provided by (used in) provided by financing activities were a $8.4$8.5 million change in distributions to noncontrolling interest offset by a $10.0 million of repurchase of common stock.

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 to $336.1$338.7 million as of MarchJune 31,30, 2026. Letters of credit outstanding under the Credit Agreement total $41.8$40.9 million as of MarchJune 31,30, 2026.