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Segment Information
3 Months Ended
Mar. 31, 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

 

 

 

March 31, 2020

 

 

March 31, 2019

 

Federal Solutions revenue

 

$

477,571

 

 

$

422,812

 

Critical Infrastructure revenue

 

 

493,422

 

 

 

481,593

 

Total revenue

 

$

970,993

 

 

$

904,405

 

 

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

 

Adjusted EBITDA attributable to Parsons Corporation

 

March 31, 2020

 

 

March 31, 2019

 

     Federal Solutions

 

$

31,617

 

 

$

40,599

 

     Critical Infrastructure

 

 

27,357

 

 

 

27,676

 

Adjusted EBITDA attributable to Parsons Corporation

 

 

58,974

 

 

 

68,275

 

Adjusted EBITDA attributable to noncontrolling interests

 

 

1,522

 

 

 

3,749

 

Depreciation and amortization

 

 

(32,409

)

 

 

(30,591

)

Interest expense, net

 

 

(3,794

)

 

 

(7,815

)

Income tax expense

 

 

(5,084

)

 

 

(1,886

)

Equity-based compensation income (expense)

 

 

7,721

 

 

 

(3,850

)

Transaction-related costs (a)

 

 

(12,011

)

 

 

(9,355

)

Restructuring income (expense) (b)

 

 

33

 

 

 

(2,218

)

Other (c)

 

 

(581

)

 

 

(2,923

)

Net income including noncontrolling interests

 

 

14,371

 

 

 

13,386

 

Net income attributable to noncontrolling interests

 

 

1,398

 

 

 

3,645

 

Net income attributable to Parsons Corporation

 

$

12,973

 

 

$

9,741

 

 

(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

 

 

 

March 31, 2020

 

 

March 31, 2019

 

Revenue

 

 

 

 

 

 

 

 

North America

 

$

797,946

 

 

$

731,030

 

Middle East

 

 

168,859

 

 

 

167,952

 

Rest of World

 

 

4,188

 

 

 

5,423

 

Total Revenue

 

$

970,993

 

 

$

904,405

 

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.

 

 

 

March 31, 2020

 

 

December 31, 2019

 

Property and Equipment, Net

 

 

 

 

 

 

 

 

North America

 

$

119,658

 

 

$

117,606

 

Middle East

 

 

4,942

 

 

 

5,145

 

Total Property and Equipment, Net

 

$

124,600

 

 

$

122,751

 

 

North America includes revenue in the United States for the three months ended March 31, 2020 and March 31, 2019 of $735.8 million and $669.2 million, respectively.  North America property and equipment, net includes $112.5 million and $109.9 million of property and equipment, net in the United States at March 31, 2020 and December 31, 2019, respectively.

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

 

 

 

Three Months Ended

 

 

 

March 31, 2020

 

 

March 31, 2019

 

Revenue

 

 

 

 

 

 

 

 

Space & Geospatial Solutions

 

$

51,288

 

 

$

45,757

 

Cyber & Intelligence

 

 

98,882

 

 

 

72,549

 

Engineered Systems

 

 

172,832

 

 

 

145,618

 

Missile Defense & C5ISR

 

 

154,569

 

 

 

158,888

 

Federal Solutions revenues

 

 

477,571

 

 

 

422,812

 

Mobility Solutions

 

 

391,521

 

 

 

373,980

 

Connected Communities

 

 

101,901

 

 

 

107,613

 

Critical Infrastructure revenues

 

 

493,422

 

 

 

481,593

 

Total Revenue

 

$

970,993

 

 

$

904,405

 

 

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.