Segments Information

12 Months Ended

Dec. 31, 2019

21.	Segments Information

The Company operates in two reportable segments: Federal Solutions and Critical Infrastructure.

The Federal Solutions segment provides advanced technical solutions to the U.S. government, delivering timely, cost-effective hardware, software and services for mission-critical projects. The segment provides advanced technologies, supporting national security missions in cybersecurity, missile defense, and military facility modernization, logistics support, hazardous material remediation and engineering services.

The Critical Infrastructure segment provides integrated engineering and management services for complex physical and digital infrastructure around the globe. The Critical Infrastructure segment is a technology innovator focused on next generation digital systems and complex structures. Industry leading capabilities in engineering and project management allow the Company to deliver significant value to customers by employing cutting-edge technologies, improving timelines and reducing costs.

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

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

	2017		2018		2019
Revenues:
Federal Solutions	$	1,079,906	$	1,479,007	$	1,887,907
Critical Infrastructure		1,937,105		2,081,501		2,066,905
Total revenues	$	3,017,011	$	3,560,508	$	3,954,812

The Company defines Adjusted EBITDA attributable to Parsons Corporation as Adjusted EBITDA excluding Adjusted EBITDA attributable to noncontrolling interests. The Company defines Adjusted EBITDA as net income (loss) attributable to Parsons Corporation, adjusted to include net income (loss) attributable to noncontrolling interests and to exclude interest expense (net of interest income), provision for income taxes, depreciation and amortization and certain other items that are not considered in the evaluation of ongoing operating performance. These other items include net income (loss) attributable to noncontrolling interests, asset impairment charges, income and expense recognized on litigation matters, expenses incurred in connection with acquisitions and other non-recurring transaction costs and expenses related to our prior restructuring. The following table summarizes business segment Adjusted EBITDA and a reconciliation to net income attributable to Parsons Corporation for the periods presented (in thousands):

	2017			2018			2019
Adjusted EBITDA attributable to Parsons Corporation
Federal Solutions	$	95,354		$	121,986		$	169,100
Critical Infrastructure		99,402			106,851			138,851
Adjusted EBITDA attributable to Parsons Corporation		194,756			228,837			307,951
Adjusted EBITDA attributable to noncontrolling interests		14,891			17,407			17,096
Depreciation and amortization		(35,198	)		(69,869	)		(125,700	)
Interest expense, net		(13,333	)		(18,132	)		(22,429	)
Income tax (expense) benefit		(21,464	)		(20,367	)		69,886
Litigation-related expenses (a)		(10,026	)		129,674			—
Amortization of deferred gain resulting from sale-leaseback transactions (b)		7,283			7,253			—
Equity-based compensation (c)		(19,016	)		(16,487	)		(65,744	)
Transaction-related costs (d)		(1,190	)		(12,942	)		(34,353	)
Restructuring (e)		—			—			(3,424	)
Other (f)		(5,166	)		(5,938	)		(6,155	)
Net income including noncontrolling interests	$	111,537		$	239,436		$	137,128
Net income attributable to noncontrolling interests		(14,211	)		(17,099	)		(16,594	)
Net income attributable to Parsons Corporation	$	97,326		$	222,337		$	120,534

(a)

Fiscal 2017 reflects post-judgment interest expense recorded in “(Interest and other expense) gain associated with claim on long-term contract” in our results of operations related to a judgment entered against the Company in 2014 in connection with a lawsuit against a joint venture in which the Company is the managing partner. Fiscal 2018 reflects a reversal of an accrued liability, with $55.1 million recorded to revenue and $74.6 million recorded to other income in our results of operations. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report on Form 10-K for a description of this matter, which was resolved in favor of the Company on June 13, 2018.

(b)	Reflects recognized deferred gains related to sales-leaseback transactions described in “Note 10— Sale-Leasebacks.”

(c)	Reflects equity-based compensation costs primarily related to cash-settled awards. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report on Form 10-K for a further discussion of these awards.

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

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

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

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

The following table presents revenues and property and equipment, net by geographic area (in thousands):

	2017		2018		2019
Revenues:
North America	$	2,374,138	$	2,870,494	$	3,249,054
Middle East		621,796		671,925		689,067
Rest of World		21,077		18,089		16,691
Total revenues	$	3,017,011	$	3,560,508	$	3,954,812
Property and equipment, net
North America	$	80,852	$	86,847	$	117,606
Middle East		6,726		5,002		5,145
Total property and equipment, net	$	87,578	$	91,849	$	122,751

North America revenue includes $2.1 billion, $2.6 billion and $3.0 billion of United States revenue for the years ended December 29, 2017, December 31, 2018 and December 31, 2019, respectively. North America property and equipment, net includes $76.2 million, $79.9 million and $109.9 million of property and equipment, net in the United States at December 29, 2017, December 31, 2018 and December 31, 2019, respectively.

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

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

	2017		2018		2019
Revenues:
Federal Solutions
Cyber & Intelligence	$	184,771	$	255,447	$	351,828
Defense		291,358		431,059		577,109
Mission Solutions		291,933		360,969		317,802
Engineered Systems		311,844		431,532		497,793
Geospatial		—		—		143,375
Federal Solutions revenues		1,079,906		1,479,007		1,887,907

Critical Infrastructure
Connected Communities		602,975		656,513		619,220
Mobility Solutions		1,102,725		1,183,863		1,120,563
Industrial		231,405		241,125		327,122
Critical Infrastructure revenues		1,937,105		2,081,501		2,066,905

Total revenues	$	3,017,011	$	3,560,508	$	3,954,812

Revenue for the year ended December 28, 2018 included $55.1 million related to the settlement of a claim that was resolved in favor of the Company in the Mobility Solutions business line of our Critical Infrastructure segment. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report on Form 10-K for a description of this matter, which was resolved in favor of the Company on June 13, 2018. Excluding the claim settlement, revenue for the year ended December 31, 2018 for the Critical Infrastructure segment was $2.0 billion and for the Mobility Solutions revenue business line revenue was $1.1 billion.