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Segment Information | 9 Months Ended
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Sep. 30, 2020
Segment Reporting [Abstract] |
Segment Information |
18. | Segment 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 revenue for the periods presented (in thousands):
|  | Three Months Ended |  |  |  | Nine Months Ended |
|  | September 30, 2020 |  |  | September 30, 2019 |  |  |  | September 30, 2020 |  |  | September 30, 2019 |
Federal Solutions revenue |  | $ | 498,156 |  |  | $ | 486,175 |  |  |  | $ | 1,457,937 |  |  | $ | 1,387,484 |
Critical Infrastructure revenue |  |  | 506,080 |  |  |  | 537,102 |  |  |  |  | 1,496,751 |  |  |  | 1,529,940 |
Total revenue |  | $ | 1,004,236 |  |  | $ | 1,023,277 |  |  |  | $ | 2,954,688 |  |  | $ | 2,917,424 |
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 reconciles business segment Adjusted EBITDA attributable to Parsons Corporation to Net Income attributable to Parsons Corporation for the periods presented (in thousands):
|  | Three Months Ended |  |  |  | Nine Months Ended |
Adjusted EBITDA attributable to Parsons Corporation |  | September 30, 2020 |  |  | September 30, 2019 |  |  |  | September 30, 2020 |  |  | September 30, 2019 |
Federal Solutions |  | $ | 45,874 |  |  | $ | 50,359 |  |  |  | $ | 125,191 |  |  | $ | 126,658 |
Critical Infrastructure |  |  | 48,856 |  |  |  | 33,976 |  |  |  |  | 111,732 |  |  |  | 102,177 |
Adjusted EBITDA attributable to Parsons Corporation |  |  | 94,730 |  |  |  | 84,335 |  |  |  |  | 236,923 |  |  |  | 228,835 |
Adjusted EBITDA attributable to noncontrolling interests |  |  | 6,071 |  |  |  | 4,655 |  |  |  |  | 15,535 |  |  |  | 8,384 |
Depreciation and amortization |  |  | (30,952 | ) |  |  | (31,027 | ) |  |  |  | (95,442 | ) |  |  | (92,692 | )
Interest expense, net |  |  | (5,387 | ) |  |  | (4,482 | ) |  |  |  | (13,144 | ) |  |  | (18,448 | )
Income tax (expense) benefit |  |  | (16,017 | ) |  |  | 15,453 |  |  |  |  | (32,992 | ) |  |  | 67,063 |
Equity-based compensation income (expense) |  |  | 991 |  |  |  | 1,657 |  |  |  |  | (4,142 | ) |  |  | (45,504 | )
Transaction-related costs (a) |  |  | (2,411 | ) |  |  | (9,891 | ) |  |  |  | (11,937 | ) |  |  | (26,961 | )
Restructuring expense (b) |  |  | (365 | ) |  |  | (309 | ) |  |  |  | (1,475 | ) |  |  | (2,880 | )
Other (c) |  |  | (140 | ) |  |  | 902 |  |  |  |  | (1,310 | ) |  |  | (2,973 | )
Net income including noncontrolling interests |  |  | 46,520 |  |  |  | 61,293 |  |  |  |  | 92,016 |  |  |  | 114,824 |
Net income attributable to noncontrolling interests |  |  | 5,862 |  |  |  | 4,481 |  |  |  |  | 15,086 |  |  |  | 8,012 |
Net income attributable to Parsons Corporation |  | $ | 40,658 |  |  | $ | 56,812 |  |  |  | $ | 76,930 |  |  | $ | 106,812 |
(a) | Reflects costs incurred in connection with acquisitions, the IPO, and other non-recurring transaction costs, primarily fees paid for professional services and employee retention.
(b) | Reflects costs associated with corporate restructuring initiatives.
(c) | Includes a combination of gain/loss related to sale of fixed assets, software implementation costs, and other individually insignificant items that are non-recurring in nature.
Asset information by segment is not a key measure of performance used by the CODM. The following tables present revenues and property and equipment, net by geographic area (in thousands):
|  | Three Months Ended |  |  |  | Nine Months Ended |
|  | September 30, 2020 |  |  | September 30, 2019 |  |  |  | September 30, 2020 |  |  | September 30, 2019 |
Revenue |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
North America |  | $ | 831,367 |  |  | $ | 849,839 |  |  |  | $ | 2,429,357 |  |  | $ | 2,400,124 |
Middle East |  |  | 168,043 |  |  |  | 169,028 |  |  |  |  | 511,591 |  |  |  | 504,604 |
Rest of World |  |  | 4,826 |  |  |  | 4,410 |  |  |  |  | 13,740 |  |  |  | 12,696 |
Total Revenue |  | $ | 1,004,236 |  |  | $ | 1,023,277 |  |  |  | $ | 2,954,688 |  |  | $ | 2,917,424 |
The geographic location of revenue is determined by the location of the customer.
|  | September 30, 2020 |  |  | December 31, 2019 |
Property and Equipment, Net |  |  |  |  |  |  |  |
North America |  | $ | 116,805 |  |  | $ | 117,606 |
Middle East |  |  | 4,681 |  |  |  | 5,145 |
Total Property and Equipment, Net |  | $ | 121,486 |  |  | $ | 122,751 |
North America includes revenue in the United States for the three months ended September 30, 2020 and September 30, 2019 of $774.0 million and $774.2 million, respectively, and for the nine months ended September 30, 2020 and September 30, 2019 of $2.2 billion and $2.2 billion, respectively. North America property and equipment, net includes $109.6 million and $109.9 million of property and equipment, net in the United States at September 30, 2020 and December 31, 2019, respectively. The following table presents revenues by business lines (in thousands):
|  | Three Months Ended |  |  |  | Nine Months Ended |
|  | September 30, 2020 |  |  | September 30, 2019 |  |  |  | September 30, 2020 |  |  | September 30, 2019 |
Revenue |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Space & Geospatial Solutions |  | $ | 68,354 |  |  | $ | 49,944 |  |  |  | $ | 177,609 |  |  | $ | 161,469 |
Cyber & Intelligence |  |  | 110,339 |  |  |  | 91,854 |  |  |  |  | 312,214 |  |  |  | 244,892 |
Engineered Systems |  |  | 164,867 |  |  |  | 180,171 |  |  |  |  | 504,182 |  |  |  | 493,065 |
Missile Defense & C5ISR |  |  | 154,596 |  |  |  | 164,206 |  |  |  |  | 463,932 |  |  |  | 488,058 |
Federal Solutions revenues |  |  | 498,156 |  |  |  | 486,175 |  |  |  |  | 1,457,937 |  |  |  | 1,387,484 |
Mobility Solutions |  |  | 389,714 |  |  |  | 435,749 |  |  |  |  | 1,180,125 |  |  |  | 1,211,571 |
Connected Communities |  |  | 116,366 |  |  |  | 101,353 |  |  |  |  | 316,626 |  |  |  | 318,369 |
Critical Infrastructure revenues |  |  | 506,080 |  |  |  | 537,102 |  |  |  |  | 1,496,751 |  |  |  | 1,529,940 |
Total Revenue |  | $ | 1,004,236 |  |  | $ | 1,023,277 |  |  |  | $ | 2,954,688 |  |  | $ | 2,917,424 |
Effective January 1, 2020, the Company made changes to its business lines as described below. The prior year information in the table above has been reclassified to conform to the business line changes. Federal Solutions Business Line Changes As a result of the acquisitions of Polaris Alpha, OGSystems and QRC, we realigned the five business lines within our Federal Solutions segment into four business lines. We consolidated all space and geospatial programs from the former Geospatial Solutions, Defense and Cyber & Intelligence markets into a new Space & Geospatial Solutions business line to increase focus on the critical, evolving space market. This new business line better aligns capabilities and customers to drive growth and performance execution through improved agile, end-to-end solutions and dedicated customer focus. Further, we re-named our Defense business line to Missile Defense & C5ISR. We moved our Missions Solutions business line into our Missile Defense & C5ISR, Engineered Systems and Cyber & Intelligence business lines, for better customer and capability alignment. These changes were the next logical step in our acquisition integration process, to optimize performance delivery and growth. Critical Infrastructure Business Line Changes We re-aligned our Critical Infrastructure segment from three markets to two markets. Industrial is now a part of Mobility Solutions and we moved all Middle East business into Mobility Solutions as well. We believe this will drive improved synergies among like-markets and increased collaboration in areas such as program and engineering management, civil and structural and water/wastewater treatment. We also moved Aviation to Connected Communities and consolidated the civil portion of rail and transit with the systems portion of rail and transit into a consolidated sub-market within Connected Communities to focus on growth in these critical market segments. In each, we are pursuing systems, software and hardware product advanced technology opportunities.

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 31 -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8924-108599 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 34 -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8981-108599 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 21 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8721-108599 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 40 -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e9031-108599 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 32 -Subparagraph (f) -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8933-108599 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 32 -Subparagraph (e) -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8933-108599 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 26 -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8844-108599 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 41 -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e9038-108599 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 32 -Subparagraph (d) -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8933-108599 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 22 -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8736-108599 Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 42 -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e9054-108599 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8657-108599 Reference 13: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 21 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8721-108599 Reference 14: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -URI http://asc.fasb.org/topic&trid=2134510 + Details
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