10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________

FORM 10-Q

__________________________

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: September 26, 2021

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 1-38643

__________________________

PAE INCORPORATED

(Exact name of registrant as specified in its charter)

Delaware	82-3173473
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

7799 Leesburg Pike, Suite 300 North, Falls Church, Virginia 22043

(Address of principal executive offices) (Zip Code)

(703) 717-6000

(Registrant’s telephone number, including area code)

__________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbols	Name of each exchange on which registered
Class A Common Stock	PAE	Nasdaq Stock Market
Warrants	PAEWW	Nasdaq Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2

of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the registrant’s common stock outstanding as of November 2, 2021 was 93,117,234

PAE Incorporated

Form 10-Q

Table of Contents

		Page No.
Part I: Financial Information
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Comprehensive Loss	3
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Stockholders’ Equity	5
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	46
Item 4.	Controls and Procedures	46
Part II: Other Information
Item 1.	Legal Proceedings	47
Item 1A.	Risk Factors	48
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	52
Item 3.	Defaults Upon Senior Securities	52
Item 4.	Mine Safety Disclosures	52
Item 5.	Other Information	53
Item 6.	Exhibits	54
Signatures		55

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

PAE Incorporated

Condensed Consolidated Statements of Operations (Unaudited)

(In thousands, except share and per share data)

	Three Months Ended				Nine Months Ended
	September 26,		September 27,		September 26,		September 27,
	2021		2020		2021		2020
Revenues	$	689,514	$	666,240	$	2,185,279	$	1,926,795
Cost of revenues	511,852		512,877		1,643,470		1,474,763
Selling, general and administrative expenses	140,170		119,168		428,237		361,945
Amortization of intangible assets	12,630		8,047		37,476		24,141
Total operating expenses	664,652		640,092		2,109,183		1,860,849
Program profit	24,862		26,148		76,096		65,946
Other operating income, net	1,174		2,384		6,897		4,338
Operating income	26,036		28,532		82,993		70,284
Interest expense, net	(13,109)		(13,607)		(38,783)		(48,312)
Other income, net	16,399		5,000		17,533		15,645
Income before income taxes	29,326		19,925		61,743		37,617
Expense (benefit) from income taxes	1,495		4,194		6,730		(1,582)
Net income	27,831		15,731		55,013		39,199
Noncontrolling interest in earnings of ventures	(1,958)		413		(2,510)		1,344
Net income attributed to PAE Incorporated	$	29,789	$	15,318	$	57,523	$	37,855
Net income per share attributed to PAE Incorporated:
Basic	$	0.32	$	0.17	$	0.62	$	0.47
Diluted	$	0.31	$	0.16	$	0.60	$	0.46
Weighted average shares outstanding:
Basic	93,122,414		92,070,306		92,949,301		81,323,258
Diluted	95,836,986		93,392,565		95,599,019		82,115,825

See accompanying notes to condensed consolidated financial statements

2

PAE Incorporated

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

(In thousands)

	Three Months Ended				Nine Months Ended
	September 26,		September 27,		September 26,		September 27,
	2021		2020		2021		2020
Net income	$	27,831	$	15,731	$	55,013	$	39,199
Other comprehensive (loss) income:
Change in foreign currency translation adjustment, net of tax	(282)		780		(647)		(137)
Other, net	2		1		1		424
Other comprehensive (loss) income	(280)		781		(646)		287
Comprehensive income	27,551		16,512		54,367		39,486
Comprehensive (loss) income attributed to noncontrolling interests	(2,050)		505		(2,752)		1,287
Comprehensive income attributed to PAE Incorporated	$	29,601	$	16,007	$	57,119	$	38,199

See accompanying notes to condensed consolidated financial statements

3

PAE Incorporated

Condensed Consolidated Balance Sheets (Unaudited)

(In thousands, except share and par value amounts)

	September 26,		December 31,
	2021		2020
Assets
Current assets:
Cash and cash equivalents	$	157,268	$	85,908
Accounts receivable, net	524,707		585,511
Prepaid expenses and other current assets	63,043		61,607
Total current assets	745,018		733,026
Property and equipment, net	36,600		27,615
Investments	15,407		18,272
Goodwill	593,171		590,668
Intangible assets, net	220,734		258,210
Operating lease right-of-use assets, net	192,638		191,370
Other noncurrent assets	14,928		10,209
Total assets	$	1,818,496	$	1,829,370
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	124,959	$	152,962
Accrued expenses	107,446		114,222
Customer advances and billings in excess of costs	106,221		106,475
Salaries, benefits and payroll taxes	153,229		145,186
Accrued taxes	12,132		15,582
Current portion of long-term debt, net	7,036		5,961
Operating lease liabilities, current portion	47,205		46,756
Other current liabilities	38,559		45,037
Total current liabilities	596,787		632,181
Deferred income taxes, net	11,006		4,389
Long-term debt, net	865,016		860,306
Long-term operating lease liabilities	150,280		145,569
Warrant liability	32,934		50,467
Other long-term liabilities	13,509		30,273
Total liabilities	1,669,532		1,723,185
Stockholders’ equity:
Preferred stock, $0.0001 par value per share, 1,000,000 shares authorized; no shares issued and outstanding	—		—
Common stock, $0.0001 par value per share: 210,000,000 shares authorized; 93,115,801 and 92,040,654 shares issued and outstanding as of September 26, 2021 and December 31, 2020, respectively	9		9
Additional paid-in capital	171,807		188,685
Accumulated deficit	(59,098)		(116,621)
Accumulated other comprehensive income	1,230		1,876
Total PAE Incorporated stockholders' equity	113,948		73,949
Noncontrolling interests	35,016		32,236
Total liabilities and stockholders’ equity	$	1,818,496	$	1,829,370

See accompanying notes to condensed consolidated financial statements

4

PAE Incorporated

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

(In thousands, except share data)

	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive (Loss) / Income		Total PAE Incorporated Stockholders’ Equity		Noncontrolling Interests		Total Stockholders’ Equity
	Shares	Amount
Balance at December 31, 2019	282,047	$	3	$	101,742	$	(145,371)	$	(134)	$	(43,760)	$	31,851	$	(11,909)
Retrospective application of the Recapitalization	20,845,776	(1)		1				—		—		—		—
Adjusted balance at December 31, 2019	21,127,823	2		101,743		(145,371)		(134)		(43,760)		31,851		(11,909)
Net income	—	—		—		25,984		—		25,984		166		26,150
Other comprehensive loss, net	—	—		—		—		(695)		(695)		—		(695)
Equity contributions from venture partners	—	—		13		—		—		13		152		165
Equity infusion from Gores	46,999,787	5		307,936		—		—		307,941		—		307,941
Private placement	23,913,044	2		212,908		—		—		212,910		—		212,910
Payment to Shay stockholders	—	—		(424,243)		—		—		(424,243)		—		(424,243)
Balance at March 29, 2020	92,040,654	$	9	$	198,357	$	(119,387)	$	(829)	$	78,150	$	32,169	$	110,319
Net (loss) income	—	—		—		(3,446)		—		(3,446)		765		(2,681)
Other comprehensive income, net	—	—		—		—		201		201		—		201
Distributions to venture partners and other	—	—		—		—		—		—		(443)		(443)
Equity contributions from venture partners	—	—		—		—		—		—		1,939		1,939
Payment to Shay stockholders	—	—		(20,169)		—		—		(20,169)		—		(20,169)
Stock-based Compensation	—	—		3,700		—		—		3,700		—		3,700
Balance at June 28, 2020	92,040,654	$	9	$	181,888	$	(122,833)	$	(628)	$	58,436	$	34,430	$	92,866
Net income	—	—		$	—	$	15,318	$	—	$	15,318	$	413	$	15,731
Other comprehensive income, net	—	—		—		—		781		781		—		781
Distributions to venture partners and other	—	—		—		—		—		—		174		174
Equity contributions from venture partners	—	—		(146)		—		—		(146)		—		(146)
Payment to Shay stockholders	—	—		818		—		—		818		—		818
Stock-based Compensation	—	—		4,318		—		—		4,318		—		4,318
Balance at September 27, 2020	92,040,654	$	9	$	186,878	$	(107,515)	$	153	$	79,525	$	35,017	$	114,542

5

PAE Incorporated  Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) (In thousands, except share data)
	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive (Loss) / Income		Total PAE Incorporated Stockholders’ Equity		Noncontrolling Interests		Total Stockholders’ Equity
	Shares	Amount
Balance at December 31, 2020	92,040,654	$	9	$	188,685	$	(116,621)	$	1,876	$	73,949	$	32,236	$	106,185
Net income (loss)	—	—		—		13,384		—		13,384		(1,111)		12,273
Other comprehensive loss, net	—	—		—		—		(995)		(995)		—		(995)
Equity contributions from venture partners	—	—		—		—		—		—		467		467
Deconsolidation of venture	—	—		—		—		—		—		188		188
Purchase of noncontrolling interest	—	—		(17,398)		—		—		(17,398)		2,224		(15,174)
Stock-based compensation tax withholding obligation	—	—		(5,659)		—		—		(5,659)				(5,659)
Stock-based compensation	—	—		2,270		—		—		2,270		—		2,270
Balance at March 28, 2021	92,040,654	$	9	$	167,898	$	(103,237)	$	881	$	65,551	$	34,004	$	99,555
Net income	—	—		—		14,350		—		14,350		559		14,909
Other comprehensive income, net	—	—		—		—		629		629		—		629
Distributions to venture partners	—	—		—		—		—		—		(850)		(850)
Purchase of noncontrolling interest	—	—		(8)		—		—		(8)		—		(8)
Stock-based compensation	—	—		2,355		—		—		2,355		—		2,355
Balance at June 27, 2021	92,040,654	$	9	$	170,245	$	(88,887)	$	1,510	$	82,877	$	33,713	$	116,590
Net income (loss)	—	$	—	$	—	$	29,789	$	—	$	29,789	$	(1,958)	$	27,831
Other comprehensive loss, net	—	—		—		—		(280)		(280)		—		(280)
Distributions to venture partners	—	—		—		—		—		—		(500)		(500)
Equity contributions from venture partners	—	—		—		—		—		—		3,761		3,761
Stock-based compensation tax withholding obligation	—	—		(160)		—		—		(160)		—		(160)
Stock-based compensation	—	—		1,722		—		—		1,722		—		1,722
Balance at September 26, 2021	92,040,654	$	9	$	171,807	$	(59,098)	$	1,230	$	113,948	$	35,016	$	148,964

See accompanying notes to condensed consolidated financial statements

6

PAE Incorporated

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

	Nine Months Ended
	September 26,		September 27,
	2021		2020
Operating activities
Net income	$	55,013	$	39,199
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property and equipment	7,768		7,263
Amortization of intangible assets	37,476		24,141
Amortization of debt issuance cost	2,387		9,560
Stock-based compensation	6,347		8,018
Net undistributed income from unconsolidated ventures	(8,625)		(3,533)
Deferred income taxes, net	7,249		(12,044)
Change in fair value of warrant liability	(17,533)		(19,132)
Other non-cash activities, net	(2,714)		382
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable, net	61,375		(3,477)
Accounts payable	(28,195)		15,852
Accrued expenses	(7,105)		4,252
Customer advances and billings in excess of costs	(256)		8,923
Salaries, benefits and payroll taxes	7,488		10,975
Prepaid expenses and other current assets	(2,124)		(2,118)
Other current and noncurrent liabilities	(19,620)		71
Investments	9,907		2,793
Other noncurrent assets	(5,576)		5,903
Accrued taxes	(3,458)		(4,904)
Net cash provided by operating activities	99,804		92,124
Investing activities
Expenditures for property and equipment	(19,577)		(2,628)
Proceeds from sales of property	5,195		—
Acquisition of CENTRA Technology, Inc., net of acquired cash	(1,441)		—
Acquisition of Metis Solutions Corporation, net of acquired cash	(521)		—
Acquisition of noncontrolling interest	(14,308)		—
Other investing activities, net	2,030		(72)
Net cash used in investing activities	(28,622)		(2,700)
Financing activities
Net contributions from noncontrolling interests	2,927		2,095
Borrowings on long-term debt	237,010		60,734
Repayments on long-term debt	(233,409)		(212,184)
Payment of debt issuance costs	—		(964)
Recapitalization from merger with Gores Holdings III, Inc.	—		605,713
Payment of underwriting and transaction costs	—		(27,267)
Distribution to selling stockholders	—		(439,719)
Stock-based compensation tax withholding obligation	(5,818)		—
Other financing activities, net	—		(292)
Net cash provided by (used in) financing activities	710		(11,884)
Effect of exchange rate changes on cash and cash equivalents	(532)		(129)
Net increase in cash and cash equivalents	71,360		77,411
Cash and cash equivalents at beginning of period	85,908		68,035
Cash and cash equivalents at end of period	$	157,268	$	145,446
Supplemental cash flow information
Cash paid for interest	$	40,048	$	35,085
Cash paid for taxes	$	9,343	$	5,304

See accompanying notes to condensed consolidated financial statements

7

PAE Incorporated

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Description of Business

PAE Incorporated, formerly known as Gores Holdings III, Inc. (“Gores III”), was originally incorporated in Delaware on October 23, 2017 as a special purpose acquisition company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or other similar business combination with one or more target businesses. On September 11, 2018, Gores III consummated its initial public offering (the “IPO”), following which our shares began trading on the Nasdaq Stock Market (“Nasdaq”). Unless the context otherwise indicates, references herein to the “Company" or “PAE” refer to PAE Incorporated and its consolidated subsidiaries.

On February 10, 2020 (the “Closing Date”), the Company completed the previously announced business combination (the “Business Combination”) in which Shay Holding Corporation (“Shay”) was acquired by Gores III. The transaction was completed in a multi-step process pursuant to which Shay ultimately merged with and into a wholly-owned subsidiary of Gores III, with the Gores III subsidiary continuing as the surviving company. As a result of the Business Combination, each share of common stock of Shay was cancelled and converted into the right to receive a portion of the consideration payable in connection with the transaction and Gores III acquired Shay (as it existed immediately prior to the Second Merger, as such term is defined in that certain Agreement and Plan of Merger, dated November 1, 2019, by and among Gores III, EAP Merger Sub, Inc., EAP Merger Sub II, LLC, Shay, and Platinum Equity Advisors, LLC (in its capacity as the stockholder representative) (the “Gores Merger Agreement”)) and its subsidiaries. Additionally, the stockholders of Shay as of immediately prior to the transaction held a portion of the common stock of the Company.

For accounting purposes, the Business Combination is treated as a reverse acquisition and recapitalization (the “Recapitalization”), in which Shay is considered the accounting acquirer (and legal acquiree) and Gores III is considered the accounting acquiree (and legal acquirer).

Accordingly, as of the Closing Date, Shay’s historical results of operations replaced Gores III’s historical results of operations for periods prior to the Business Combination and the results of operations of both companies are included in the accompanying condensed consolidated financial statements for periods following the Closing Date. See Note 6 - “Business Combinations and Acquisitions” for additional information.

PAE provides a wide variety of integrated support solutions, including defense and military readiness, diplomacy, intelligence support, business process outsourcing, counter-terrorism solutions, peacekeeping, development, host nation capacity building, aircraft and ground equipment maintenance and logistics, and operations and maintenance of facilities and infrastructure. Customers include agencies of the U.S. Government, such as the Department of Defense (“DoD”) and Department of State (“DoS”), the National Aeronautics and Space Administration (“NASA”), Department of Homeland Security, intelligence community agencies and other civilian agencies, as well as allied foreign governments and international organizations.

The Company’s operations are currently organized into the following two reportable segments:

•Global Mission Services (“GMS”): GMS provides infrastructure and logistics management, international logistics and stabilization support, and aircraft and vehicle readiness and sustainment support. The segment focuses on customer relationships with DoD, DoS, NASA, and other government agencies for work both in the United States and outside of the United States.

8

•National Security Solutions (“NSS”): NSS provides counter-threat solutions, business process outsourcing, adjudication support services and full life cycle support for complex legal matters. NSS focuses on customer relationships in the areas of intelligence, defense and security, and with civilian agencies.

The Company separately presents the costs associated with certain corporate functions as “Corporate”, which primarily include costs that are not reimbursed by the Company’s U.S. Government customers.

2. Significant Accounting Principles and Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) for annual financial information. In management’s opinion, all adjustments, consisting of only normal recurring adjustments, considered necessary for a fair presentation have been included.

The Company closes its books and records on the last Sunday of the calendar quarter to align its financial closing with its business process, which were on September 26, 2021 and September 27, 2020, respectively. The condensed consolidated financial statements and disclosures included herein are labeled based on that convention. This practice only affects interim periods, as the Company’s fiscal year ends on December 31.

The condensed consolidated financial statements include the accounts of PAE Incorporated and subsidiaries and ventures in which the Company owns more than 50% or otherwise controls. All intercompany amounts have been eliminated in consolidation.

Use of Estimates

These condensed consolidated financial statements are prepared in conformity with U.S. GAAP, which requires the use of estimates and assumptions, including assumptions to determine the fair value of acquired assets and liabilities, recoverability of long-lived assets, goodwill, valuation allowances on deferred taxes, inputs used in stock based compensation, inputs in the valuation of the warrants liability and anticipated contract costs and revenues utilized in the earnings recognition process, which affect the reported amounts in the condensed consolidated financial statements and accompanying notes. Due to the size and nature of many of the Company’s programs, the estimation of total revenues and cost at completion is subject to a wide range of variables, including assumptions for timing and risks. Actual results may differ from management’s estimates and changes in these estimates are recorded when known.

Update to Significant Accounting Policies

There have been no material changes to the Company’s significant accounting policies described in the Company’s Form 10-K/A filed with the SEC on May 7, 2021.

9

3. Recent Accounting Pronouncements

Accounting Pronouncements Adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-12 simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740 related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 is effective in 2021 and interim periods within that year and permits for an early adoption. The Company adopted ASU 2019-12 effective January 1, 2021. The adoption of the guidance did not have a material impact on its financial statements and related disclosures.

Accounting Pronouncements Not Yet Adopted

In March 2020, the FASB issued ASU 2020-04 Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by the reference rate reform. The amendments in ASU 2020-04 are effective for all entities as of March 12, 2020 through December 31, 2022. The Company is currently evaluating the impact this guidance will have on its condensed consolidated financial statements and related disclosures.

4. Revenues

Disaggregated Revenues

Disaggregated revenues by customer type were as follows (in thousands):

	Three Months Ended September 26, 2021
	GMS		NSS		Total
DoD	$	129,261	$	87,886	$	217,147
Other U.S. government agencies	288,543		131,212		419,755
Commercial and non-U.S. customers	30,274		22,338		52,612
Total	$	448,078	$	241,436	$	689,514

	Nine Months Ended September 26, 2021
	GMS		NSS		Total
DoD	$	486,292	$	251,706	$	737,998
Other U.S. government agencies	824,920		383,155		1,208,075
Commercial and non-U.S. customers	169,770		69,436		239,206
Total	$	1,480,982	$	704,297	$	2,185,279

10

	Three Months Ended September 27, 2020
	GMS		NSS		Total
DoD	$	203,693	$	65,354	$	269,047
Other U.S. government agencies	270,344		57,379		327,723
Commercial and non-U.S. customers	47,309		22,161		69,470
Total	$	521,346	$	144,894	$	666,240

	Nine Months Ended September 27, 2020
	GMS		NSS		Total
DoD	$	595,933	$	194,629	$	790,562
Other U.S. government agencies	781,004		177,535		958,539
Commercial and non-U.S. customers	109,706		67,988		177,694
Total	$	1,486,643	$	440,152	$	1,926,795

Revenues by contract type were as follows (in thousands):

	Three Months Ended September 26, 2021
	GMS		NSS		Total
Cost-reimbursable	$	218,152	$	89,948	$	308,100
Fixed-price	191,530		85,287		276,817
Time and materials	38,396		66,201		104,597
Total	$	448,078	$	241,436	$	689,514

	Nine Months Ended September 26, 2021
	GMS		NSS		Total
Cost-reimbursable	$	764,625	$	273,695	$	1,038,320
Fixed-price	532,789		246,840		779,629
Time and materials	183,568		183,762		367,330
Total	$	1,480,982	$	704,297	$	2,185,279

	Three Months Ended September 27, 2020
	GMS		NSS		Total
Cost-reimbursable	$	302,795	$	35,656	$	338,451
Fixed-price	161,024		62,568		223,592
Time and materials	57,527		46,670		104,197
Total	$	521,346	$	144,894	$	666,240

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	Nine Months Ended September 27, 2020
	GMS		NSS		Total
Cost-reimbursable	$	868,780	$	106,848	$	975,628
Fixed-price	481,309		185,218		666,527
Time and materials	136,554		148,086		284,640
Total	$	1,486,643	$	440,152	$	1,926,795

Disaggregated revenues by geographic location were as follows (in thousands):

	Three Months Ended September 26, 2021
	GMS		NSS		Total
United States	$	246,903	$	239,723	$	486,626
International	201,175		1,713		202,888
Total	$	448,078	$	241,436	$	689,514

	Nine Months Ended September 26, 2021
	GMS		NSS		Total
United States	$	801,944	$	700,299	$	1,502,243
International	679,038		3,998		683,036
Total	$	1,480,982	$	704,297	$	2,185,279

	Three Months Ended September 27, 2020
	GMS		NSS		Total
United States	$	275,785	$	142,890	$	418,675
International	245,561		2,004		247,565
Total	$	521,346	$	144,894	$	666,240

	Nine Months Ended September 27, 2020
	GMS		NSS		Total
United States	$	802,230	$	434,904	$	1,237,134
International	684,413		5,248		689,661
Total	$	1,486,643	$	440,152	$	1,926,795

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Remaining Performance Obligations

The Company’s remaining performance obligations balance represents the expected revenue to be recognized for the satisfaction of remaining performance obligations on existing contracts. This balance excludes unexercised contract option years and task orders that may be issued underneath an indefinite delivery, indefinite quantity contract. The remaining performance obligations balance as of September 26, 2021 and December 31, 2020 was $1,701.1 million and $1,722.0 million, respectively.

As of September 26, 2021, the Company expects to recognize approximately 87.8% and 12.2% of the remaining performance obligations balance as revenue over the next year and thereafter, respectively.

5. Contract Assets and Contract Liabilities

Contract assets consist of unbilled receivables, which represent rights to payment for work or services completed but not billed as of the reporting date. Contract assets are recorded as unbilled receivables within accounts receivable, net on the condensed consolidated balance sheets.

Contract liabilities are advances and milestone payments from customers on certain contracts that exceed revenue earned to date. Contract liabilities are recorded as customer advances and billings in excess of costs on the condensed consolidated balance sheets.

Contract assets and contract liabilities consisted of the following as of the dates presented (in thousands):

	September 26,		December 31,
	2021		2020
Contract assets	$	358,345	$	360,552
Contract liabilities	$	106,221	$	106,475

The decrease in contract assets of $2.2 million during the nine months ended September 26, 2021 was primarily due to the timing of billings, partially offset by revenue recognized related to the satisfaction of performance obligations.

The decrease in contract liabilities of $0.3 million during the nine months ended September 26, 2021 was primarily due to the timing of advance payments from customers offset by revenue recognized during the period.

The Company recognized $89.5 million and $34.6 million during the nine months ended September 26, 2021 and September 27, 2020, respectively, relating to amounts that were included in the beginning balance of contract liabilities for each of the periods. The Company recognized $5.9 million and $1.2 million during the three months ended September 26, 2021 and September 27, 2020, respectively, relating to amounts that were included in the beginning balance of contract liabilities for each of the periods.

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6. Business Combinations and Acquisitions

As described in Note 1 - “Description of Business,” the Business Combination was consummated on February 10, 2020. For financial accounting and reporting purposes under U.S. GAAP, the Business Combination was accounted for as a reverse acquisition and recapitalization, with no goodwill or other intangible asset recorded. Under this method of accounting, Gores III (legal acquirer) is treated as the acquired entity and Shay (legal acquiree) is deemed to have issued common stock for the net assets and equity of Gores III consisting of mainly cash, accompanied simultaneously by the Recapitalization. The net assets of Gores III are stated at historical cost, and accordingly the equity and net assets of Shay have not been adjusted to fair value. Consequently, the consolidated assets, liabilities and results of operations of Shay are the historical financial statements of PAE Incorporated and the Gores III assets, liabilities and results of operations are consolidated with the assets, liabilities and results of operations of Shay beginning on the Closing Date. Shares and earnings per share information prior to the Business Combination have been retroactively restated to reflect the exchange ratio established in the Recapitalization.

Other than professional fees paid to consummate the transaction, the Business Combination primarily involved the exchange of cash and equity between Gores III, Shay and the stockholders of the respective companies. The aggregate proceeds paid to the Shay Stockholders (as defined below) on the Closing Date was approximately $424.2 million. The remainder of the consideration paid to the Shay Stockholders consisted of 21,127,823 newly issued shares of Class A Common Stock of PAE Incorporated, par value $0.0001 per share (“Class A Common Stock”).

In addition to the foregoing consideration paid on the Closing Date, former stockholders of Shay are entitled to receive additional Earn-Out Shares from PAE of up to an aggregate of 4,000,000 shares of Class A Common Stock if the price of Class A Common Stock trading on the Nasdaq exceeds certain thresholds during the five-year period following the completion of the Business Combination. See Note 11 - “Stockholders’ Equity - Earn-Out Agreement” for additional information.

The Company also has certain warrants issued by Gores III that remain outstanding after the Business Combination.

In connection with the Business Combination, the Company recorded $18.2 million, net of tax as a reduction to additional paid in capital related to the transaction costs. These costs were directly attributable to the Recapitalization. In addition, the Company recorded $3.4 million of transaction costs related to the warrants as non-operating expense in the consolidated statement of operations.

During the third quarter of 2020, pursuant to the post-closing adjustment provisions contained in the Gores Merger Agreement, the Company made a post-closing adjustment payment of $20.2 million to the Shay Stockholders. In addition, the Company paid $1.0 million to certain members of PAE management in connection with the post-closing adjustment, and such amount was recorded as compensation expense.

CENTRA Technology, Inc.

On November 20, 2020, the Company acquired 100% of the capital stock of CENTRA Technology, Inc. (“CENTRA”) for a consideration paid of $225.3 million, net. The results of CENTRA’s operations have been included in the Company’s condensed consolidated financial statements since that date. This business combination expands and differentiates PAE's capabilities in intelligence analysis, communication systems integration and research and development services for intelligence and defense customers.

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During the second quarter of 2021, the Company made a payment of $1.4 million related to the working capital adjustment, pursuant to the Stock Purchase Agreement (as defined below).

The Company has completed the purchase accounting valuation for this acquisition and recorded final purchase accounting adjustments. As a result, the Company recognized fair values of assets acquired of $177.4 million and assumed liabilities of $77.2 million allocating $126.4 million to goodwill and $74.1 million to intangible assets. The goodwill of $126.4 million arising from the acquisition relates primarily to revenue and cost synergies. This goodwill is not deductible for tax purposes.

Metis Solutions Corporation

On November 23, 2020, the Company completed the acquisition of 100% of the capital stock of Metis Solutions Corporation (“Metis”) for a consideration paid of $95.7 million in cash. The results of Metis’s operations have been included in the condensed consolidated financial statements since that date. This business combination expands and differentiates PAE's capabilities in intelligence analysis, training and program support for intelligence and defense customers.

During the second quarter of 2021, pursuant to the purchase price adjustment provisions of the Metis Merger Agreement (as defined below), the Company made a payment of $0.5 million to the option holders as a result of a closing adjustment.

The Company has completed the purchase accounting valuation for this acquisition and recorded final purchase accounting adjustments. As a result, the Company recognized fair values of assets acquired of $60.4 million and assumed liabilities of $20.7 million allocating $56.5 million to goodwill and $37.8 million to intangible assets. The goodwill of $56.5 million arising from the acquisition relates primarily to revenue and cost synergies. This goodwill is not deductible for tax purposes.

7. Accounts Receivable, net

The components of accounts receivable, net consisted of the following as of the dates presented (in thousands):

	September 26,		December 31,
	2021		2020
Billed receivables	$	170,005	$	227,787
Unbilled receivables	358,345		360,552
Less allowance for credit losses	(3,643)		(2,828)
Total accounts receivables, net	$	524,707	$	585,511

As of September 26, 2021 approximately 92.4% of the Company’s accounts receivable are with the U.S. government.

8. Goodwill and Intangible Assets, net

Goodwill

There was no impairment for the three month and nine month periods ended September 26, 2021 and September 27, 2020, respectively.

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Intangible Assets, net

The components of intangible assets, net consisted of the following as of the dates presented (in thousands):

	September 26, 2021
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Customer relationships	$	390,900	$	(184,427)	$	206,473
Technology	1,700		(1,700)		—
Trade name	24,800		(10,539)		14,261
Total	$	417,400	$	(196,666)	$	220,734
	December 31, 2020
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Customer relationships	$	390,900	$	(149,163)	$	241,737
Technology	1,700		(1,700)		—
Trade name	24,800		(8,327)		16,473
Total	$	417,400	$	(159,190)	$	258,210

As of the nine months period ended September 26, 2021, customer relationships and trade name intangibles had weighted average remaining useful lives of 7.6 years and 5.2 years, respectively.

For the nine months ended September 26, 2021 and September 27, 2020, amortization expense was approximately $37.5 million and $24.1 million, respectively. For the three months ended September 26, 2021 and September 27, 2020, amortization expense was approximately $12.6 million and $8.0 million, respectively.

Estimated amortization expense in future years is expected to be:

	As of
	September 26, 2021
Remainder of 2021	$	12,630
2022	50,089
2023	40,666
2024	33,782
2025	28,015
Thereafter	55,552
Total	$	220,734

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9. Consolidated Ventures

The Company consolidates an investment when it has determined that the investment is a variable interest entity (“VIE”) and that the Company is the primary beneficiary. As the primary beneficiary, the Company has a risk and obligation to absorb any losses significant to the VIE and the power, through voting rights or similar rights, to direct the activities that could impact economic performance of the VIE. The use of the assets of the VIEs to settle the Company’s liabilities is subject to the approval of the managing body of each VIE.

The cash flows generated by these VIEs are included within the Company’s condensed consolidated statements of cash flows. The condensed consolidated balance sheets include the following amounts from these consolidated VIEs as of the dates presented (in thousands):

	September 26,		December 31,
	2021		2020
Assets
Total assets	$	149,866	$	145,664
Liabilities and equity
Total liabilities	$	99,559	$	96,318
Total equity	50,307		49,346
Total liabilities and equity	$	149,866	$	145,664

The condensed consolidated statements of operations include the following amounts from consolidated VIEs for the periods presented (in thousands):

	Three Months Ended				Nine Months Ended
	September 26,		September 27,		September 26,		September 27,
	2021		2020		2021		2020
Income statements
Revenues	$	97,986	$	87,324	$	300,999	$	268,969
Cost of revenues	82,913		70,707		249,013		215,866
Selling, general and administrative expenses	18,998		16,595		55,289		50,477
Total operating expenses	101,911		87,302		304,302		266,343
Program (loss) income	(3,925)		22		(3,303)		2,626
Other loss, net	(96)		(32)		(715)		(241)
Net (loss) income	$	(4,021)	$	(10)	$	(4,018)	$	2,385

DZSP 21 LLC

On January 31, 2021, the Company, acquired the 49.0% minority interest in the DZSP 21 LLC (“DZSP”) joint venture from Parsons Government Services, Inc. for total consideration of $15.8 million. Following the completion of this transaction, the Company owns 100% of DZSP.

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10. Debt

Long-term debt consisted of the following as of the dates presented (in thousands):

	September 26,		December 31,
	2021		2020
First Term Loan	$	885,550	$	890,000
Other debt	8,051		—
Total debt	893,601		890,000
Unamortized discount and debt issuance costs	(21,549)		(23,733)
Total debt, net of discount and debt issuance costs	872,052		866,267
Less current maturities of long-term debt	(7,036)		(5,961)
Total long-term debt, net of current	$	865,016	$	860,306

Credit Agreements

Term Loan

On October 19, 2020, the Company refinanced the 2016 credit agreements (comprised of (i) a first lien term loan credit agreement, as amended; (ii) a second lien term loan credit agreement, as amended; and (iii) a revolving credit facility, as amended, each dated as of October 26, 2016) (the “2016 Credit Agreements”) and entered into new senior secured credit facilities (the “2020 Credit Agreements”). The 2020 Credit Agreements provide for borrowings up to $890.0 million. The 2020 Credit Agreements established a $740.0 million term loan facility maturing in October 2027 priced at LIBOR plus a spread of 4.5%, a $150.0 million delayed draw term loan facility maturing in October 2027 priced at LIBOR plus a spread of 4.5% (together the “First Term Loan”), and a $175.0 million senior secured revolving credit facility (the “2020 ABL Credit Agreement”) maturing in October 2025 priced at LIBOR plus a spread of 1.8% to 2.3%.

The 2020 Credit Agreements require the Company to comply with specified financial covenants under certain circumstances, including the maintenance of certain leverage ratios.

The 2020 Credit Agreements also contain various non-financial covenants, including affirmative covenants with respect to reporting requirements and maintenance of business activities, and negative covenants that, among other things, may limit or impose restrictions on the Company’s ability to alter the character of the business, consolidate, merge, or sell assets, incur liens or additional indebtedness, make investments, and undertake certain additional actions.

PAE was in compliance with the financial covenants under the 2020 Credit Agreements as of September 26, 2021 and December 31, 2020, respectively.

Equipment Notes

The Company, through DZSP, entered into a line of credit with Bank of America for the financing of program specific equipment through the issuance of secured loan notes. Each note represents a separate and independent financing of equipment. As of September 26, 2021, PAE has two outstanding equipment loan notes (the “Equipment Notes”) in an aggregate amount of $8.1 million with a maturity date of March 2028 and August 2028, respectively.

The interest rate per annum applicable to the Equipment Notes is equal to a fixed rate of 2.8% and 2.9%, respectively.

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Future principal maturities of the Company’s long-term debt are summarized as follows (in thousands):

	As of
	September 26, 2021
Remainder of 2021	$	4,759
2022	10,016
2023	10,048
2024	10,082
2025	10,116
Thereafter	848,580
Total	$	893,601

As of September 26, 2021 and December 31, 2020, the available borrowing capacity under the 2020 ABL Credit Agreement was approximately $151.8 million and $132.8 million, respectively.

Interest Rates on Credit Agreements

The interest rate per annum applicable to amounts borrowed under the First Term Loan is equal to either the Base Rate (as defined below) or the LIBO Rate (as defined below), in either case, plus (i) 4.5% in the case of the Base Rate loans and (ii) 3.5% in the case of LIBO Rate loans.

The “Base Rate” is defined as a fluctuating rate per annum equal to the highest of (a) the Federal Funds Rate plus one half of one percent, (b) the rate of interest in effect for such day as publicly announced from time to time by Bank of America (“BofA”) as its “prime rate,” and (c) the LIBO Rate for a LIBO Rate Term Loan with a one month interest period commencing on such day plus 1.0%. The “prime rate” is a rate set by BofA based upon various factors including BofA’s costs and desired return, general economic conditions and other factors. The “LIBO Rate” is defined as the rate per annum equal to the London Interbank Offered Rate or a comparable or successor rate, whichever rate is approved by the Administrative Agent (as that term is defined in the 2020 Credit Agreements).

As of September 26, 2021 and December 31, 2020, the applicable interest rate on the amounts borrowed under the First Term Loan was 5.3% for each period, respectively.

The interest rate per annum applicable to the 2020 Credit Agreements is equal to either a Base Rate or a LIBO Rate plus (i) a range of 0.8% to 1.3% in the case of Base Rate loans and (ii) a range of 1.8% to 2.3% in the case of LIBO Rate loans, each based on average availability as of the first day of each quarter.

As of September 26, 2021 and December 31, 2020, the applicable interest rate on amounts borrowed under the 2020 Revolving Credit Facility was 4.0% for each period, respectively.

Letters of Credit

The Company had ten outstanding letters of credit for program and insurance requirements totaling approximately $23.2 million as of September 26, 2021 and 13 outstanding letters of credit for program and insurance requirements totaling approximately $23.9 million as of December 31, 2020.

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11. Stockholders’ Equity

Authorized and Outstanding Stock

In connection with the Business Combination, the Company made changes to its capital stock. The Company’s amended and restated certificate of incorporation authorizes the issuance of 211,000,000 shares of capital stock, par value of $0.0001 per share, consisting of (a) 210,000,000 shares of Class A common stock, and (b) 1,000,000 shares of preferred stock.

As a result of the Business Combination, the shares issued to Shay Stockholders are reflected as if they were issued and outstanding as of the earliest reported period to reflect the new capital structure.

Earn-Out Agreement

In connection with the Business Combination, stockholders of Shay immediately prior to the transaction (which stockholders consisted of certain affiliates of Platinum Equity, LLC and members of PAE management (the “Shay Stockholders”)) are entitled to receive up to an aggregate of 4,000,000 additional shares of Class A Common Stock (the “Earn-Out Shares”) if at any time during the five-year period following the Closing Date (the “Earn-Out Period”) the volume weighted average closing sale price of one share of Class A Common Stock on the Nasdaq (or the exchange which shares of Class A Common Stock are then listed) for a period of at least 10 days out of 20 consecutive trading days (the “Common Share Price”) exceeds certain thresholds, as described below.

The thresholds (each a “Triggering Event”) causing the Earn-Out Shares to be issued by the Company to the Shay Stockholders is any such event that occurs within the Earn-Out period as follows: (i) a one-time issuance of 1,000,000 shares if the Common Share Price is greater than $13.00; (ii) a one-time issuance of 1,000,000 shares if the Common Share Price is greater than $15.50; (iii) a one-time issuance of 1,000,000 shares if the Common Share Price is greater than $18.00; and (iv) a one-time issuance of 1,000,000 shares if the Common Share Price is greater than $20.50.

Further, if during the Earn-Out Period there is a change in control (as defined in the Gores Merger Agreement) that results in the holders of Class A Common Stock receiving a per share price in respect of their Class A Common Stock that is equal to or greater than the applicable Common Share Price required in connection with any Triggering Event (an “Acceleration Event”), then any such Triggering Event that has not previously occurred will be deemed to have occurred, and the Company must issue Earn-Out Shares accordingly.

If no Triggering Event is achieved within the Earn-Out Period, the Company will not be required to issue the Earn-Out Shares. No Triggering Event was achieved during the three month and nine month periods ended September 26, 2021.

Any transactions related to Earn-Out Shares are recorded within the stockholders’ equity section of the Company’s condensed consolidated financial statements. Earn-Out Shares will be recognized as stock dividends and recorded at fair value when they are effective upon achievement of a Triggering Event.

12. Net Income Per Share

Basic net income per common share is determined by dividing the net income attributed to stockholders by the weighted average number of common shares outstanding during the period presented. Diluted income per share is determined by adjusting the weighted average number of shares of common stock and common stock equivalents outstanding for the dilutive effect of common stock equivalents for the periods presented.

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The following table sets forth the computation of basic and diluted income per share attributable to the Company’s common stockholders for the periods presented (in thousands, except shares and per share amounts): 

	Three Months Ended				Nine Months Ended
	September 26,		September 27,		September 26,		September 27,
	2021		2020		2021		2020
Numerator:
Net income attributed to PAE Incorporated	$	29,789	$	15,318	$	57,523	$	37,855
Denominator:
Basic weighted average shares	93,122,414		92,070,306		92,949,301		81,323,258
Diluted weighted average shares	95,836,986		93,392,565		95,599,019		82,115,825
Basic income per share	$	0.32	$	0.17	$	0.62	$	0.47
Diluted income per share	$	0.31	$	0.16	$	0.60	$	0.46

The Company has not included the effect of 19,999,985 shares of Common Stock issuable upon the exercise of warrants in the calculation of diluted net income per share for the three months and nine months ended September 26, 2021. Warrants are excluded when the exercise price exceeds the average market value of the Company’s common stock price during the applicable period.

The Company has not included the effect of 4,000,000 Earn-Out Shares in the calculation of basic and diluted net income per share for the three months and nine months ended September 26, 2021. The condition for the issuance of these shares is based on the weighted average closing sale price of the Company’s Class A Common Stock and such condition has not been met as of September 26, 2021.

Unvested RSUs and PSUs will not impact the calculation of basic earnings per share (“EPS”) until vested, in which case they would be included in the total weighted average number of shares. All potential dilutive securities, which include unvested RSUs, are included in the diluted EPS calculation. Unvested PSUs are included in the calculation of diluted EPS to the extent that the performance criteria have been achieved.

13. Leases

As of September 26, 2021, the Company had right-of-use (“ROU”) assets, net of $192.6 million and lease liabilities of $197.5 million recorded on the condensed consolidated balance sheet.

The Company rents certain facilities and equipment under operating leases. The Company’s total lease cost is recorded primarily within selling, general and administrative expenses on the condensed consolidated statements of operations. Rents which are directly chargeable to a project are charged to cost of revenues.

During the three month and nine month periods ended September 26, 2021, the Company recognized operating lease costs of approximately $15.3 million and $46.1 million, respectively.

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The Company’s future minimum operating lease payments for noncancelable operating leases were as follows (in thousands):

	September 26, 2021
Remainder of 2021	$	12,432
2022	47,908
2023	43,401
2024	35,333
2025	28,928
Thereafter	69,772
Total future minimum lease payments	237,774
Less imputed interest	40,289
Present value of minimum lease payments	197,485
Less current maturities of lease liabilities	47,205
Long-term lease liabilities	$	150,280

The weighted-average remaining lease term and the weighted-average discount rate for the Company’s operating leases were approximately 6.6 years and 6.0%, respectively, at September 26, 2021.

The Company made cash payments of approximately $12.2 million and $36.5 million for operating leases for the three month and nine month periods ended September 26, 2021, which are included in cash flows from operating activities in the condensed consolidated statement of cash flows.

14. Fair Value Measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between marketplace participants at the measurement date. The valuation techniques the Company utilizes to measure the fair value of financial instruments are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions.

These two types of inputs create the following fair value hierarchy:

•Level 1 – Quoted prices for identical instruments in observable active markets.

•Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

•Level 3 – Significant inputs to the valuation model are unobservable and reflect the Company’s own estimates and assumptions.

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, and amounts included in other current assets and current liabilities that meet the definition of a financial instrument approximate fair value because of the short-term nature of these amounts.

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The carrying value of the Company’s outstanding debt obligations approximates its fair value. The fair value of long-term debt is calculated using Level 2 inputs, based on interest rates available for debt with terms and maturities similar to the Company’s 2020 Credit Agreements.

The warrant liability is measured at fair value at each reporting period and changes in fair value are recorded in other income, net. The public warrants liability is measured using Level 1 inputs based on observable active markets. The private placement warrants liability is measured using Level 3 inputs using the Black-Scholes option pricing model. The significant assumptions the Company used in the model are:

Valuation Inputs	September 26, 2021			December 31, 2020
Asset price	$	5.7		$	9.2
Exercise price	$	11.5		$	11.5
Contractual term	3.4			4.1
Volatility	84.1		%	50.0		%
Risk-free rate of return	0.6		%	0.3		%
Dividend yield	—		%	—		%

Details of the changes in fair value for the public warrants and private placement warrants are as follows:

Public warrant liability	September 26, 2021
Public warrant liability as of December 31	$	30,667
Changes in fair value	(13,200)
Ending public warrant liability	$	17,467

Private warrant liability	September 26, 2021
Private warrant liability as of December 31	$	19,800
Changes in fair value	(4,333)
Ending private warrant liability	$	15,467

15. Legal Proceedings, Commitments, and Contingencies

The Company is a party to, or has property subject to, litigation and other proceedings. Management believes the probability is remote that the outcome of the matters will have a material adverse effect on its operations as a whole, notwithstanding that the unfavorable resolution of any matter may have a material effect on net earnings in a future period. The Company cannot predict the outcome of legal proceedings and loss or range of loss contingencies with certainty.

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16. Segment Reporting

The Company's operations and reportable segments are organized around the nature of the services and products provided to customers. The Company defines its reportable segments based on the way the chief operating decision maker (“CODM”) manages the operations of the Company for purposes of allocating resources and assessing performance.

The GMS operating segment provides support to the U.S. Government and its partners within and outside the United States providing sustainment, training and readiness support and advancing foreign policy objectives. The NSS operating segment provides a wide-ranging portfolio of offerings that support all facets of national security, including intelligence, homeland security and civil government missions.

While the CODM uses a variety of different measures to evaluate the Company’s segments, the primary measures used to evaluate segment performance and allocate resources are revenues and operating income. As a result, interest expense, net and provision for income taxes as recorded on the condensed consolidated statements of operations are not allocated to the Company’s operating segments.

The following table shows information by reportable segment for the periods presented (in thousands):

	Three Months Ended				Nine Months Ended
	September 26,		September 27,		September 26,		September 27,
	2021		2020		2021		2020
Revenues
GMS	$	448,078	$	521,346	$	1,480,982	$	1,486,643
NSS	241,436		144,894		704,297		440,152
Corporate	—		—		—		—
Total revenues	$	689,514	$	666,240	$	2,185,279	$	1,926,795
Operating income (loss)
GMS	$	20,459	$	31,401	$	73,673	$	75,541
NSS	13,091		5,679		33,729		17,770
Corporate	(7,514)		(8,548)		(24,409)		(23,027)
Total operating income	$	26,036	$	28,532	$	82,993	$	70,284
Amortization of intangible assets
GMS	$	4,161	$	4,115	$	12,483	$	12,346
NSS	8,469		3,932		24,993		11,795
Corporate			—		—		—
Total amortization of intangible assets	$	12,630	$	8,047	$	37,476	$	24,141

Under U.S. Government cost accounting standards, indirect costs including depreciation expense are collected in numerous indirect cost pools, which are then collectively allocated to the Company’s reportable segments based on a representative causal or beneficial relationship of the costs in the pool to the costs in the base. While depreciation expense is a component of the allocated costs, the allocation process precludes depreciation expense from being

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specifically identified by the Company’s individual reportable segments. For this reason, depreciation expense by reportable segment is not presented separately above.

Asset information by segment is not a key measure of performance used by the CODM and therefore segment assets are not presented.

Less than 10.0% of the Company’s revenues and tangible long-lived assets are generated by or owned by entities outside of the United States. Therefore, additional segment financial information by geographic location is not presented.

17. Related-Party Transactions

Tax Overpayment/Underpayment Amount

In connection with the Business Combination, the Shay Stockholders are entitled to a payment of the net cash savings in U.S. federal, state and local income tax that the post-closing company actually realizes (or is deemed to realize in certain circumstances) in periods after the Closing Date. The liability for this estimated payment and the corresponding charge to equity of $4.7 million are reflected in the Company’s consolidated balance sheet as of September 26, 2021.

Advisory Services

During the nine months ended September 26, 2021, there were no management fees, transaction and advisory fee recognized related to any of the Company’s affiliates. During the nine months ended September 27, 2020, the Company recognized management fees, transaction and advisory fees, and related expenses of approximately $15.8 million. These expenses were for services rendered by one or more affiliates of Platinum Equity, LLC. As a result of the Business Combination, $15.0 million was included with other similar transactional expenses and recorded as a reduction to the recapitalized equity and $0.8 million was recorded in selling, general and administrative expenses.

18. Income Taxes

The Company’s provision for income tax expense (benefits) was approximately $1.5 million and $6.7 million and its effective income tax rates were 5.1% and 10.9% for the three months and nine months period ended September 26, 2021, respectively. The Company’s provision for income tax expense (benefits) were approximately $4.2 million, and $(1.6) million and its effective income tax rates were 21.0% and (4.2)% for the three months and nine months periods ended September 27, 2020, respectively.

The provision for income taxes for the period ended September 26, 2021 differed from the U.S. federal statutory rate computed by applying the U.S. federal statutory rate to income or loss before income taxes primarily due to the benefit of Foreign Derived Intangible Income (“FDII”), nontaxable income including the fair value adjustment for warrants, offset by the effect of foreign operations. The provision for income taxes for the period ended September 27, 2020 differed from the U.S. federal statutory rate computed by applying the U.S. federal statutory rate to income or loss before income taxes primarily due to the benefit of FDII, increased prior year interest expense deduction under the Coronavirus Aid, Relief and Economic Security Act (as amended, the “CARES Act”) adjustments, nontaxable income including the fair value adjustment for warrants, and settlement of foreign taxes, offset by disallowed compensation deduction under Internal Revenue Code Section 162(m) and disallowed transaction costs.

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On March 27, 2020, the CARES Act was signed into law. Under the CARES Act, the Company deferred $37.0 million of employer share of Social Security tax that will be paid equally by December 31, 2021 and 2022.

19. Subsequent Events

On October 25, 2021, PAE Incorporated (the “Company”) entered into an Agreement and Plan of Merger (the “Amentum Merger Agreement”) with Amentum Government Services Holdings LLC (“Parent”) and Pinnacle Virginia Merger Sub Inc., an indirect wholly-owned subsidiary of Parent (“Merger Sub”), providing for the merger of Merger Sub with and into the Company (the “Merger”), with the Company continuing as the surviving company of the Merger and an indirect wholly-owned subsidiary of Parent (the “Surviving Corporation”). Pursuant to the terms and conditions set forth in the Amentum Merger Agreement, at the effective time of the merger (the “Effective Time”), each share of Class A common stock par value $0.0001 of the Company outstanding as of immediately prior to the Effective Time will automatically be canceled, extinguished and converted into the right to receive an amount equal to $10.05 in cash per share, net any applicable withholding and without interest. The Amentum Merger Agreement prohibits the Company and its advisors and representatives from soliciting, encouraging, providing information or entering into discussions concerning proposals relating to alternative business combination transactions, subject to certain limited exceptions. However, during the period beginning on October 25, 2021 and continuing until November 29, 2021 (the “Go-Shop Period”), the Company is permitted to take such actions with respect to certain competing acquisition proposals. At the end of the Go-Shop Period, the Company will cease such activities and will be subject to customary “no shop” restrictions on its ability to solicit third party proposals relating to competing acquisition proposals or to provide information to and engage in discussions with certain third parties. In the event the Amentum Merger Agreement is terminated by the Company in certain circumstances, the Company may be required to pay a termination fee of either $15.0 million or $30.0 million (including in order to enter into a definitive agreement with respect to a Company Superior Proposal, as defined in the Amentum Merger Agreement) to the Parent. The termination rights of the parties to the Amentum Merger Agreement are subject to certain notice, cure and other rights.

ITEM 2.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is designed to provide a reader of our financial statements with a narrative from the perspective of management on the Company’s financial condition, results of operations, liquidity and certain other factors that may affect future results. The following discussion of the Company’s financial condition and results of operations should be read in conjunction with the MD&A and the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2020, which was filed with the Securities and Exchange Commission (the “SEC”) on May 7, 2021 and the unaudited condensed consolidated financial statements and related notes contained in this Quarterly Report on Form 10-Q. Certain information contained in the discussion and analysis set forth below includes forward-looking statements. Unless otherwise noted, the MD&A compares the three month and nine month periods ended September 26, 2021 to the three month and nine month periods ended September 27, 2020.

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking

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statements include information concerning the Company’s plans, objectives, goals, strategies, future events, future revenues, performance, capital expenditures, financing needs and other information that is not historical information. Many of these statements appear, in particular, in the MD&A. When used in this Quarterly Report on Form 10-Q, the words “anticipates,” “assumes,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “seeks,” “should,” and variations of such words or similar expressions, or the negatives thereof, are intended to identify forward-looking statements. All forward-looking statements, including, without limitation, those based on the Company’s examination of historical operating trends, are based upon the Company’s current expectations and various assumptions. The Company believes there is a reasonable basis for its expectations and assumptions, but there can be no assurance that the Company will realize its expectations or that the Company’s assumptions will prove correct.

There are a number of risks and uncertainties that could cause the Company’s actual results to differ materially from the forward-looking statements contained in this Quarterly Report. Important factors that could cause the Company’s actual results to differ materially from those expressed as forward-looking statements are set forth in the Company’s 2020 Annual Report on Form 10-K/A in Part I, Item 1A under the heading Risk Factors. Such risks, uncertainties and other important factors include, among others, risks related to:

•a loss of, or reduction in scope of existing, contracts with the U.S. Government or its agencies or other state, local or foreign governments or agencies, including as a result of a reduction in government spending or changes in government spending;

•U.S. Government shutdowns or other delays in the government appropriations process;

•service failures or failures to properly manage projects;

•issues that damage our professional reputation;

•disruptions in or changes to prices relating to our supply chain, including as a result of difficulties in the supplier qualification process;

•failures on the part of our subcontractors or joint venture partners to perform their contractual obligations;

•failures to maintain strong relationships with other contractors;

•the impact of a negative audit or other investigation;

•failure to comply with numerous laws and regulations regarding procurement, anti-bribery and organizational conflicts of interest;

•failure to comply with the laws and other security requirements governing access to classified information;

•issues arising from the interpretation and application of foreign law affecting our overseas operations, including taxation, labor and employment law, and business licenses and registration;

•inability to share information from classified contracts with investors;

•impact of implementing various data privacy and cybersecurity laws;

•costs and liabilities arising under various environmental laws and regulations;

•various claims, litigation and other disputes that could be resolved against PAE;

•delays, contract terminations or cancellations caused by competitors’ protests of major contract awards received by us;

•risks related to mergers and acquisitions, including our ability to realize the benefits of any such transactions in a manner consistent with our expectations and integration risks;

•risks from operating internationally;

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•the effects of COVID-19 and other pandemics or health epidemics, including disruptions to our workforce and the impact on government spending and compliance with U.S. vaccine mandates as applicable to contractor workforces;

•disruptions caused by natural or environmental disasters, terrorist activities or other events outside our control;

•issues arising from cybersecurity threats or intellectual property infringement claims;

•the loss of members of senior management;

•the inability to attract, train or retain employees with the requisite skills, experience and security clearances;

•the impact of the expiration of our collective bargaining agreements;

•legislative or regulatory changes or changes in accounting principles, policies or guidelines; and

•other risks and uncertainties described in this Form 10-Q and our 2020 Annual Report on Form 10-K/A, including under the section entitled “Risk Factors,” and described in our other reports filed with the SEC.

There may be other factors that may cause the Company’s actual results to differ materially from those expressed in these forward-looking statements. Except as may be required by law, the Company undertakes no obligation to publicly update or revise forward-looking statements that may be made to reflect events or circumstances after the date made or to reflect the occurrence of unanticipated events.

Stockholders of the Company should read the following discussion and analysis of our financial condition and results of operations together with the condensed consolidated financial statements and related notes that are included elsewhere in this Quarterly Report on Form 10-Q.

This MD&A generally discusses 2021 and 2020 items and year-over-year comparisons between 2021 and 2020. Discussions of 2019 items and year-to-year comparisons between 2020 and 2019 that are not included in this Form 10-Q can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 27, 2020. As used in this MD&A, unless the context indicates otherwise, the financial information relating to the three month and nine month periods ended September 27, 2020, are those of Shay and its subsidiaries for the period prior to the Closing and the financial information and data of PAE Incorporated and its subsidiaries for the period subsequent to the Closing, and the financial information and data for the three month and nine month periods ended September 26, 2021 includes the financial information and data of PAE Incorporated and its subsidiaries. See Note 1 - “Description of Business” and Note 6 - “Business Combinations and Acquisitions” for additional information.

Business Overview    

PAE is a leading, highly diversified, global company that provides a broad range of operational solutions and outsourced services to meet the critical enduring needs of the U.S. government, other allied governments, international organizations and companies. PAE merges technology with advanced business practices to deliver faster, smarter and more efficient managed services. Whether clients require high-profile support to operate the largest U.S. embassies around the world or need technical solutions for programs that monitor bioterrorism agents, PAE delivers for its customers. PAE leverages its scale, over 65 years of experience and talented global workforce of approximately 20,000 to provide the essential services PAE’s clients need to tackle some of the world’s toughest challenges.

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Basis of Presentation

PAE provides a wide variety of integrated support solutions, including defense and military readiness, diplomacy, intelligence support, business process outsourcing, counter-terrorism solutions, peacekeeping, development, host nation capacity building, aircraft and ground equipment maintenance and logistics, and operations and maintenance of facilities and infrastructure. Customers include agencies of the U.S. Government, such as the Department of Defense (“DoD”) and Department of State (“DoS”), the National Aeronautics and Space Administration (“NASA”), Department of Homeland Security, intelligence community agencies and other civilian agencies, as well as allied foreign governments and international organizations.

PAE’s operations are currently organized into two reportable segments, Global Mission Services (“GMS”) and National Security Solutions (“NSS”).

•The GMS segment generates revenues through contracts under which PAE provides customers with logistics and stability operations, force readiness and infrastructure management.

•The NSS segment generates revenues through contracts under which PAE provides customers with counter-threat solutions, intelligence solutions and information optimization.

Segment performance is based on consolidated revenues and consolidated operating income. For additional information regarding PAE’s reportable segments, refer to Note 16 - “Segment Reporting” of the notes to PAE’s condensed consolidated financial statements.

Factors Affecting PAE’s Operating Results

Recent Developments

As described in Note 19 - “Subsequent Events” of the notes to the condensed consolidated financial statements, the Company entered into the Amentum Merger Agreement. The transaction is expected to close in the first quarter of 2022.

Business Combinations and Acquisitions

Business Combination

Merger Consideration

As described in Note 1 - “Description of Business” and Note 6 - “Business Combinations and Acquisitions” of the notes to the consolidated financial statements, the Company completed the Business Combination on February 10, 2020. Pursuant to the terms of the Gores Merger Agreement, the aggregate merger consideration paid for the Business Combination was approximately $1,427.0 million. The consideration paid to the Shay Stockholders consisted of a combination of cash and stock consideration. The aggregate cash consideration paid to the Shay Stockholders at the Closing was approximately $424.2 million, consisting of (a) approximately $408.0 million of cash available to Gores III from its trust account, after giving effect to income and franchise taxes payable in respect of interest income earned in the trust account and redemptions that were elected by Gores III’s public stockholders, plus (b) all of Gores III’s other cash and cash equivalents, plus (c) gross proceeds of approximately $220.0 million from a private placement offering conducted by Gores III in which investors purchased an aggregate of 23,913,044 shares of Class A Common Stock for $9.20 per share, less (d) certain transaction fees and expenses, including the payment of deferred underwriting commissions agreed to at the time of Gores III’s initial public offering, less (e) certain payments to participants

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in the 2016 Participation Plan, less (f) approximately $136.5 million used to repay a portion of the indebtedness of Shay immediately prior to the Closing, less (g) approximately $33.8 million of transaction fees and expenses of Shay. The remainder of the consideration paid to the Shay Stockholders consisted of 21,127,823 newly issued shares of Class A Common Stock.

In addition to the foregoing consideration paid on the Closing Date, Shay Stockholders are entitled to receive additional Earn-Out Shares (as both terms are defined in Note 11 - “Stockholders’ Equity - Earn Out Agreement” of the notes to the condensed consolidated financial statements) of up to an aggregate of four million shares of Class A Common Stock, if the price of Class A Common Stock trading on the Nasdaq exceeds certain thresholds during the five-year period following the completion of the Business Combination or if there is an Acceleration Event, as defined in Note 11 - “Stockholders’ Equity - Earn-Out Agreement” of the notes to the condensed consolidated financial statements.

During the third quarter of 2020, pursuant to the post-closing adjustment provisions contained in the Gores Merger Agreement, the Company made a post-closing adjustment payment of $20.2 million to the Shay Stockholders. In addition, the Company paid $1.0 million to certain members of PAE management in connection with the post-closing adjustment, and such amount was recorded as compensation expense.

Incentive Plan

Prior to the closing of the Business Combination, the Gores III Board of Directors and stockholders approved the PAE Incorporated 2020 Equity Incentive Plan (the “2020 Incentive Plan”). The 2020 Incentive Plan provides for the grant of stock options, stock appreciation rights, restricted stock units (RSUs) and other stock or cash-based awards.

Debt

In connection with the Business Combination, Shay was required to amend its 2016 Credit Agreements and reduce its outstanding indebtedness under its credit facilities such that the total indebtedness under the facilities, minus cash on hand at the consummation of the transaction would not be greater than $572.1 million. Immediately after the closing of the Business Combination, Shay reduced the outstanding balance on the 2016 Credit Agreements by approximately $136.5 million to a principal balance of $128.8 million.

CENTRA Technology, Inc. Business Acquisition

On October 26, 2020, Pacific Architects and Engineers, LLC, a Delaware limited liability company (“PAE, LLC”), an indirect wholly owned subsidiary of the Company, entered into a stock purchase agreement (the “Stock Purchase Agreement”) by and among PAE, LLC, CENTRA Technology, Inc., a Maryland corporation (“CENTRA”), certain stockholders of CENTRA, and Barbara Rosenbaum as the sellers’ representative. CENTRA provides mission critical services to the U.S. intelligence community and other U.S. national and homeland security customers. The Company completed the acquisition on November 20, 2020. Pursuant to the Stock Purchase Agreement, the consideration paid to acquire all of the shares of CENTRA was approximately $208.0 million (net of tax benefits) in cash, subject to customary purchase price adjustments as set forth in the Stock Purchase Agreement.

The Stock Purchase Agreement contains customary representations, warranties and covenants of the parties. The Stock Purchase Agreement also contains customary indemnities, and PAE, LLC has obtained representation and warranty insurance, subject to exclusions, policy limits and certain other terms and conditions, to obtain coverage for losses that may result from a breach of certain representations and warranties made by the sellers in the Stock Purchase Agreement.

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An aggregate of $5.0 million of the purchase price was deposited into an escrow account to satisfy purchase price adjustments, if any.

CENTRA’s financial results have been included in our condensed consolidated financial statements commencing on November 20, 2020.

On April 16, 2021, PAE, LLC made a payment of $1.4 million related to the working capital adjustment, pursuant to the Stock Purchase Agreement.

Metis Solutions Corporation Business Acquisition

On November 16, 2020, PAE, LLC entered into an Agreement and Plan of Merger (the “Metis Merger Agreement”) by and among PAE, LLC, Metis Solutions Corporation, a Delaware corporation (“Metis”), Rising Tide Merger Sub, Inc., a Delaware corporation, and Christopher Wynes, solely in his capacity as the representative of the sellers. Metis provides services focused on supporting intelligence community, security and defense customers. The Company completed the acquisition on November 23, 2020. Pursuant to the Metis Merger Agreement, the consideration paid to acquire Metis was approximately $92.0 million in cash, subject to customary purchase price adjustments as set forth in the Metis Merger Agreement.

The Metis Merger Agreement contains customary representations, warranties and covenants of the parties. The Metis Merger Agreement also contains customary indemnities, and PAE, LLC has obtained representation and warranty insurance, subject to exclusions, policy limits and certain other terms and conditions, to obtain coverage for losses that may result from a breach of certain representations and warranties made by the sellers in the Metis Merger Agreement. An aggregate of $2.5 million of the purchase price was deposited into an escrow account to satisfy purchase price adjustments, if any.

Metis’ financial results have been included in our condensed consolidated financial statements commencing on November 23, 2020.

On March 30, 2021, pursuant to the purchase price adjustment provisions of the Metis Merger Agreement, $2.5 million of the purchase price that was in an escrow account was released in accordance with the directions specified by the representative of the sellers for distribution to the sellers. In addition, the Company made a payment of $0.5 million to the option holders as a result of a closing adjustment.

DZSP 21 LLC Minority Interest Acquisition

On January 31, 2021, PAE Aviation and Technical Services LLC, a Delaware limited liability company (“PAE AvTech”), an indirect wholly owned subsidiary of the Company, acquired from Parsons Government Services, Inc. its 49% minority interest in the DZSP 21 LLC (“DZSP”) joint venture for a purchase price of $15.8 million. Following the completion of this transaction, the Company owns 100% of DZSP and all the rights, duties and obligations under the DZSP operating agreement and the Guam contracts, all as set forth in the purchase agreement.

Financial and Other Highlights

From December 31, 2020 to September 26, 2021, PAE’s overall contract backlog decreased by 4.8% from $7,915.4 million to $7,536.0 million, of which $800.8 million was funded as of September 26, 2021. The reduction in backlog was primarily attributable to an approximate $364.0 million related to the Afghanistan demobilization. Backlog is an operational measure representing PAE’s estimate of the amount of revenue that it expects to realize over the remaining life of awarded contracts and task orders; the funded backlog refers to the value on contracts for which funding is appropriated less revenues previously recognized on these

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contracts. Unfunded backlog represents the estimated future revenues to be earned from negotiated contracts for which funding has not been appropriated or authorized, and unexercised priced contract options. The total backlog consists of remaining performance obligations plus unexercised options. PAE believes backlog is a useful metric for investors because it is an important measure of business development performance and revenue growth. This metric is used by management to conduct and evaluate its business during its regular review of operating results for the periods presented. See Note 4 - “Revenues" of the notes to the condensed consolidated financial statements for more information.

The estimated value of PAE’s total backlog was as follows (in thousands):

	As of		As of
	September 26,		December 31,
	2021		2020
Global Mission Services:
Funded GMS backlog	$	387,927	$	946,711
Unfunded GMS backlog	4,496,641		4,445,442
Total GMS backlog	$	4,884,568	$	5,392,153
National Security Solutions:
Funded NSS backlog	$	412,866	$	476,618
Unfunded NSS backlog	2,238,612		2,046,634
Total NSS backlog	$	2,651,478	$	2,523,252
Total:
Funded backlog	$	800,793	$	1,423,329
Unfunded backlog	6,735,253		6,492,076
Total backlog	$	7,536,046	$	7,915,405

Trends and Factors Affecting PAE’s Future Performance

External Factors

PAE’s business primarily focuses on providing services to the U.S. Government and allied nations and organizations; PAE’s performance is inherently linked to governmental missions and goals. We have concentrated our business efforts on those missions and goals that are enduring and that have limited exposure to abrupt policy changes. For example, PAE has supported U.S. embassies since the 1970s. We are also trusted by our customers to support them on major policy initiatives that require immediate response to solve an acute crisis. Examples of this work include our rapid establishment and operation of Ebola treatment units in Liberia in 2015 and our work beginning in 2020 supporting COVID-19 testing and care, including on behalf of the state of Georgia converting a convention center to a COVID-19 treatment center in less than one week, mobilizing trained-and-ready test teams to conduct COVID-19 testing for the Southeastern Conference of the National Collegiate Athletic Association, and serving as the joint logistics and medical integrator for the Navajo Nation Department of Health’s COVID-19 response. More recently, we were awarded a contract by the U.S. Department of Health & Human Services to support a facility in Albion, Michigan caring for children who had entered the United States unaccompanied.

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Over most of the last two decades, the U.S. Government has increased its reliance on the private sector for a wide range of professional and support services. This development has been driven by a variety of factors, including lean-government initiatives launched in the 1990s, surges in demand during times of national crisis, the increased complexity of missions conducted by the U.S. military and the DoS, increased focus of the U.S. military on war-fighting efforts and loss of skills within the government caused by workforce reductions and retirements.

Although the size of future U.S. Government department and agency budgets remains subject to change, current indications are that overall U.S. Government spending will remain largely consistent with current spending levels. PAE believes the following industry trends will result in continued strong demand in the target markets for the types of services it provides:

•new U.S. Government policies and programs, both within the United States and overseas, to provide services to address health and other social issues;

•the continued transformation of military forces, leading to continued performance of non-combat functions by government contractors, including life-cycle asset management functions ranging from organizational to depot level maintenance;

•an increased level of coordination between the DoS and DoD on key national security initiatives and foreign policies;

•increased maintenance, overhaul and upgrade needs to support aging military platforms; and

•the on-going evolution of international relations that may require enhanced or new policy initiatives.

Current Economic Conditions

PAE believes that its industry and customer base are less likely to be affected by many of the factors generally affecting business and consumer spending. PAE’s contract awards typically extend to five years, including options, and it has a strong history of being awarded a majority of these contract options. Additionally, since PAE’s primary customers are departments and agencies within the U.S. Government, it has not historically had significant issues collecting its receivables. However, the economic environment, government debt levels, public policy decisions or other factors could adversely impact PAE’s business, financial condition or results of operations in the future. A recent example of this was the U.S. Government’s April 2021 decision to withdraw U.S. troops and contractor personnel from Afghanistan. Due to the fall of the Afghan government, this decision impacted all of the Company’s work in Afghanistan. PAE contracts in Afghanistan affected by this decision include work for the following programs: U.S. Embassy Kabul (AEK), National Maintenance Strategy (NMS), Enterprise Training Services Contract (ETSC), and Afghanistan Security and Mission Support Services (SaSS). As of the end of the quarter ended September 26, 2021, all of the aforementioned contracts have effectively concluded. As a result, we have experienced a $73.0 million negative impact to revenue from the Afghanistan demobilization, for the nine months ended September 26, 2021 as compared to the comparable period in 2020.

Impact of COVID-19

As the COVID-19 pandemic has evolved, we have worked with our stakeholders (including customers, employees, suppliers and local communities) to address the issues it has raised. Due to the widespread availability of vaccines and based on the guidance from local jurisdictions, most of our operating locations have now re-opened fully.

Due to the gradual and varied nature of re-opening in different jurisdictions, COVID-19 has had a marginally unfavorable impact on the Company’s results of operations for the three month and

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nine month periods ended September 26, 2021. Although our operations were disrupted by the COVID-19 pandemic, the impact has been mitigated due to the nature of our business. In particular, our U.S. Government customers took steps to ensure the continuance of many of the services provided by us and other contractors, including, but not limited to, designating certain PAE contracts as essential for continued performance and authorizing remote work for contractor personnel that cannot access worksites. In addition, the impact was further mitigated by Section 3610 of the CARES Act, which allows U.S. government agencies to reimburse contractors such as us at the minimum applicable contract billing rate for costs of certain paid leave for employees who cannot access work sites or telework through September 30, 2021. While the vast majority of our workforce has returned to full contract work, it is possible that the pandemic could evolve and lead the U.S. Government customers to again suspend or reduce work under certain of our contracts. On September 9, 2021, President Biden issued an executive order mandating COVID-19 vaccinations for employees of certain contractors to the U.S. Government. The Company is in the process of evaluating the impact of this executive order on its operations, contracts, workforce and subcontractors. Based on the new requirements it is possible that the Company will experience increased costs and labor disruptions, including loss of experienced personnel, and/or difficulty in filling open positions.

COVID-19 related costs for us and our subcontractors could be significant, and we are seeking reimbursement of such costs under our U.S. Government contracts through a combination of contract actions and reimbursement of costs under Section 3610 of the CARES Act. Reimbursement of any costs under Section 3610 is not expected to include profit or fee. Costs for employees whose jobs cannot be performed remotely may not be fully recoverable under our contracts. We also have no assurance that Congress will appropriate funds to cover the reimbursement of contractors authorized by the CARES Act.

Management continues to expect that the impact of COVID-19 will be marginally unfavorable on our full year results based on information known to us at this time. Since our primary customers are departments and agencies within the U.S. Government, we have not historically had significant issues collecting our receivables and do not foresee issues collecting our receivables in the foreseeable future. In addition, our contract awards typically extend to at least five years, including options, and we have a strong history of being awarded a majority of these contract options; we do not anticipate that the pandemic will have a materially adverse impact on such awards.

Our liquidity position has not been materially impacted by COVID-19, and we continue to believe that we have adequate liquidity to fund our operations and meet our debt service obligations for the foreseeable future. However, we cannot predict the future course of COVID-19 or whether jurisdictions may impose additional or new restrictions on business operations that could have an adverse impact on our financial condition, results of operations, and/or cash flows.

Inflation and Pricing

Most of PAE’s contracts provide for estimates of future labor costs to be escalated for any option periods, while the non-labor costs in its contracts are normally considered reimbursable at cost. PAE’s property and equipment consists principally of computer systems equipment, machinery and transportation equipment, leasehold improvements, and furniture and fixtures. PAE does not expect the overall impact of inflation on replacement costs of its property and equipment to be material to its future results of operations or financial condition.

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Primary Components of Operating Results

Revenues

The majority of PAE’s revenues are generated from contracts with the U.S. Government and its agencies. PAE enters into a variety of contract types, including fixed price, cost reimbursable, and time and materials contracts.

Cost of revenues

Cost of revenues includes costs related to labor, material, subcontract labor and other costs that are allowable and allocable to contracts under federal procurement standards.

Selling, general and administrative expenses

Selling, general and administrative expenses primarily consist of (i) fringe benefits related to the contract costs; (ii) salaries and wages plus associated fringe benefits and occupancy costs related to executive and senior management, business development, bid and proposal, contracts administration, finance and accounting, human resources, recruiting, information systems support, legal and corporate governance; and (iii) unallowable costs under applicable procurement standards that are not allocable to contracts for billing purposes. Unallowable costs do not generate revenue but are necessary for business operations.

Results of Operations

Comparison of Results for the Three Months Ended September 26, 2021 (unaudited) and September 27, 2020 (unaudited) (in thousands):

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	Three Months Ended						Percent Change %
	September 26,		September 27,		Dollar Change
	2021		2020
Revenues	$	689,514	$	666,240	$	23,274	3.5
Cost of revenues	511,852		512,877		(1,025)		(0.2)
Selling, general and administrative expenses	140,170		119,168		21,002		17.6
Amortization of intangible assets	12,630		8,047		4,583		57.0
Total operating expenses	664,652		640,092		24,560		3.8
Program profit	24,862		26,148		(1,286)		(4.9)
Other operating income, net	1,174		2,384		(1,210)		(50.8)
Operating income	26,036		28,532		(2,496)		31.1
Interest expense, net	(13,109)		(13,607)		498		(3.7)
Other income, net	16,399		5,000		11,399		228.0
Income before income taxes	29,326		19,925		9,401		47.2
Expense (benefit) from income taxes	1,495		4,194		(2,699)		(64.4)
Net income	27,831		15,731		12,100		76.9
Noncontrolling interest in earnings of ventures	(1,958)		413		(2,371)		(574.1)
Net income attributed to PAE Incorporated	$	29,789	$	15,318	$	14,471	94.5

Revenues

Revenues for the three months ended September 26, 2021, increased by approximately $23.3 million, or 3.5%, from the comparable period in 2020. The increase was attributable to recent acquisitions and a net increase in program volume and new business, partially offset by an impact of $69.1 million from the Afghanistan demobilization.

Cost of revenues

Cost of revenues for the three months ended September 26, 2021, decreased by approximately $1.0 million, or 0.2%, from the comparable period in 2020. The decrease in cost of revenues was primarily driven by program performance and higher non labor revenue participation, partially offset by higher revenue volume.

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Selling, general and administrative expenses

Selling, general and administrative expense for the three months ended September 26, 2021, increased by approximately $21.0 million, or 17.6%, from the comparable period in 2020. The increase in selling, general and administrative expenses was primarily driven by the recent acquisitions and higher fringe expenses.

Amortization of intangible assets

Amortization of intangible assets for the three months ended September 26, 2021, increased by approximately $4.6 million, or 57.0%, from the comparable period in 2020. The increase was associated with the acquisitions of CENTRA and Metis.

Other operating income, net

Other operating income, net for the three months ended September 26, 2021, decreased by approximately $1.2 million, from the comparable period in 2020. The decrease was driven by lower equity investments income.

Operating income

Operating income for the three months ended September 26, 2021, decreased by approximately $2.5 million, from the comparable period in 2020. The decrease resulted from higher selling, general and administrative expenses and increased amortization of intangible assets, partially offset by higher revenue volume.

Interest expense, net

Interest expense, net for the three months ended September 26, 2021, decreased by approximately $0.5 million, or 3.7%, from the comparable period in 2020. The decrease was primarily driven by lower cost of debt from refinancing in the fourth quarter of 2020, partially offset by higher borrowings.

Other income, net

Other income, net for the three months ended September 26, 2021, increased by approximately $11.4 million driven by the changes in fair value related to the accounting for our public warrants and private placement warrants.

Net income

Net income attributed to PAE for the three months ended September 26, 2021 was $29.8 million compared with a net income attributed to PAE of approximately $15.3 million in the comparable period in 2020. The increase in net income for the three-month period ended September 26, 2021, was primarily driven by factors impacting operating income.

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Results of Operations

Comparison of Results for the Nine Months Ended September 26, 2021 and September 27, 2020 (in thousands):

	Nine Months Ended
	September 26,		September 27,		Dollar Change		Percent Change
	2021		2020
Revenues	$	2,185,279	$	1,926,795	$	258,484	13.4	%
Cost of revenues	1,643,470		1,474,763		168,707		11.4
Selling, general and administrative expenses	428,237		361,945		66,292		18.3
Amortization of intangible assets	37,476		24,141		13,335		55.2
Total operating expenses	2,109,183		1,860,849		248,334		13.3
Program profit	76,096		65,946		10,150		15.4
Other operating income, net	6,897		4,338		2,559		59.0
Operating income	82,993		70,284		12,709		18.1
Interest expense, net	(38,783)		(48,312)		9,529		(19.7)
Other income, net	17,533		15,645		1,888		12.1
Income before income taxes	61,743		37,617		24,126		64.1
Expense (benefit) from income taxes	6,730		(1,582)		8,312		(525.4)
Net income	55,013		39,199		15,814		40.3
Noncontrolling interest in earnings of ventures	(2,510)		1,344		(3,854)		(286.8)
Net income attributed to PAE Incorporated	$	57,523	$	37,855	$	19,668	52.0	%

Revenues

Revenues for the nine months ended September 26, 2021, increased by approximately $258.5 million, or 13.4%, from the comparable period in 2020. The increase was attributable to recent acquisitions and a net increase in program volume and new business, partially offset by a $73.0 million impact from the Afghanistan demobilization.

Cost of revenues

Cost of revenues for the nine months ended September 26, 2021, increased by approximately $168.7 million, or 11.4%, from the comparable period in 2020. The increase in cost of revenues was primarily driven by higher revenue volume, partially offset by improved program performance.

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Selling, general and administrative expenses

Selling, general and administrative expenses for the nine months ended September 26, 2021, increased by approximately $66.3 million, or 18.3%, from the comparable period in 2020. The increase in selling, general and administrative expenses was primarily driven by the recent acquisitions and higher fringe expenses.

Amortization of intangible assets

Amortization of intangible assets for the nine months ended September 26, 2021, increased by approximately $13.3 million, or 55.2%, from the comparable period in 2020. The increase was associated with amortizing certain customer relationships, development technologies, and trade names.

Other operating income, net

Other operating income, net for the nine months ended September 26, 2021, increased by approximately $2.6 million, or 59.0%, from the comparable period in 2020. This increase was primarily driven by increased equity investments income.

Operating income

Operating income for the nine months ended September 26, 2021, increased by approximately $12.7 million, or 18.1%, from the comparable period in 2020. The increase resulted from higher labor revenue participation and increased equity investments income.

Interest expense, net

Interest expense, net for the nine months ended September 26, 2021, decreased by approximately $9.5 million, or 19.7%, from the comparable period in 2020. This decrease was primarily driven by lower cost of debt from refinancing in the fourth quarter of 2020, partially offset by higher borrowings.

Other income, net

Other income, net for the nine months ended September 26, 2021, increased by approximately $1.9 million driven by the changes in fair value related to the accounting for our public warrants and private placement warrants.

Net income

Net income attributed to PAE for the nine months ended September 26, 2021 was $57.5 million compared with a net income attributed to PAE of approximately $37.9 million in the comparable period in 2020. The increase in net income for the nine months ended September 26, 2021, was primarily driven by factors impacting operating income.

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PAE’s Segments

Comparison of Results by Segments for the Three Months Ended September 26, 2021, and September 27, 2020 (Unaudited) (in thousands):

	September 26, 2021			September 27, 2020
	Revenues		% of Total Revenues	Revenues		% of Total Revenues
GMS	$	448,078	65.0	$	521,346	78.3
NSS	241,436		35.0	144,894		21.7
Corporate	—		—	—		—
Consolidated revenues	$	689,514	100.0	$	666,240	100.0
	Operating Income (Loss)		Profit Margin %	Operating Income (Loss)		Profit Margin %
GMS	$	20,459	3.0	$	31,401	4.7
NSS	13,091		1.9	5,679		0.9
Corporate	(7,514)			(8,548)
Consolidated operating income	$	26,036		$	28,532

Global Mission Services Segment Results

Revenues

Revenues for the three months ended September 26, 2021, decreased by $73.3 million, or 14.1%, from the comparable period in 2020. The decrease was primarily driven by a $59.9 million impact from the Afghanistan demobilization and a $13.4 million reduction in contract volume net of new business revenue.

Operating income

Operating income for the three months ended September 26, 2021 decreased by $10.9 million from the comparable period in 2020. This decrease was primarily driven by higher selling, general and administrative expenses and lower revenue volume.

National Security Solutions Segment Results

Revenues

Revenues for the three months ended September 26, 2021 increased by $96.5 million, or 66.6%, from the comparable period in 2020. The increase was attributable to recent acquisitions and a net increase in program volume, partially offset by a $9.2 million decrease from the Afghanistan demobilization.

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Operating income

Operating income for the three months ended September 26, 2021 increased by $7.4 million from the comparable period in 2020. The increase was primarily driven by higher revenue volume and improved program performance, partially offset by higher selling, general and administrative expenses.

PAE’s Segments

Comparison of Results by Segments for the Nine Months Ended September 26, 2021, and September 27, 2020 (Unaudited) (in thousands):

	September 26, 2021				September 27, 2020
	Revenues		% of Total Revenues		Revenues		% of Total Revenues
GMS	$	1,480,982	67.8	%	$	1,486,643	77.2	%
NSS	704,297		32.2		440,152		22.8
Corporate	—		—		—		—
Consolidated revenues	$	2,185,279	100.0	%	$	1,926,795	100.0	%
	Operating Income (Loss)		Profit Margin %		Operating Income (Loss)		Profit Margin %
GMS	$	73,673	3.4	%	$	75,541	3.9	%
NSS	33,729		1.5		17,770		0.9
Corporate	(24,409)				(23,027)
Consolidated operating income	$	82,993			$	70,284

Global Mission Services Segment Results

Revenues

Revenues for the nine months period ended September 26, 2021, decreased by $5.7 million, or 0.4%, from the comparable period in 2020. This decrease was driven by a $52.1 million impact from the Afghanistan demobilization and a $34.4 million net decrease in contract volume, partially offset by $81.0 million attributable to new business including COVID relief opportunities.

Operating income

Operating income for the nine months period ended September 26, 2021 decreased by $1.9 million, or 2.5%, from the comparable period in 2020. The decrease was primarily driven by increased selling, general and administrative expenses and lower revenue volume, partially offset by increased equity investment income.

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National Security Solutions Segment Results

Revenues

Revenues for the nine months period ended September 26, 2021 increased by $264.1 million, or 60.0%, from the comparable period in 2020. This increase was attributable to recent acquisitions and increase in program volume, partially offset by a $20.9 million decrease from the Afghanistan demobilization.

Operating income

Operating income for the nine months period ended September 26, 2021 increased by $16.0 million, or 89.8%, from the comparable period in 2020. The increase was primarily driven by higher revenue volume and improved program performance, partially offset by higher amortization of intangible assets.

Liquidity and Capital Resources

PAE’s primary sources of liquidity are cash flow from operations and borrowings under its credit facility to provide capital necessary for financing working capital requirements, capital expenditures and making selective strategic acquisitions.

On October 19, 2020 the Company refinanced the 2016 Credit Agreements and entered into the 2020 Credit Agreements. The 2020 Credit Agreements provide a $740.0 million term loan facility maturing in October 2027, a $150.0 million delayed draw term loan facility maturing in October 2027, and a $175.0 million senior secured revolving credit facility (the “2020 ABL Credit Agreement”) maturing in October 2025.

In addition, the Company, through its DZSP subsidiary, entered into a line of credit with Bank of America for the financing of program specific equipment. As of September 26, 2021, PAE has two outstanding equipment loan notes (“Equipment Notes”) in an aggregate amount of $8.1 million with a maturity date of March 2028 and August 2028, respectively.

As of September 26, 2021, PAE had cash and cash equivalents totaling $157.3 million and the Company had no outstanding borrowings on its 2020 ABL Credit Agreement.

PAE expects the combination of its current cash, cash flow from operations, and the available borrowing capacity under the 2020 Credit Agreements to be sufficient to continue to meet its normal working capital requirements, capital expenditures and other cash requirements. However, significant increases or decreases in revenues, accounts receivable, accounts payable, and merger and acquisition activity could affect PAE’s liquidity. PAE’s accounts receivable and accounts payable levels can be affected by changes in the level of contract work it performs, by the timing of large materials purchases, and subcontractor efforts used in its contracts. Government funding delays can cause delays in PAE’s ability to invoice for revenues earned, presenting a potential negative impact on liquidity. PAE’s ability to generate sufficient cash flows from operations necessary to fulfill its obligations under the 2020 Credit Agreements and any other commitments will depend on future financial performance, which could be affected by financial market conditions.

See Note 10 - “Debt” of the notes to the condensed consolidated financial statements for further information on the terms and availability of PAE’s credit facilities.

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Cash Flows Analysis

Comparison of Results for the Three Months Ended September 26, 2021 (Unaudited), and September 27, 2020 (Unaudited) (in thousands):

	Three Months Ended
	September 26,		September 27,		Dollar Change
	2021		2020
Net cash provided by operating activities	$	56,267	$	36,536	$	19,731
Net cash provided by (used in) investing activities	2,190		(1,140)		3,330
Net cash provided by (used in) financing activities	3,905		(27,480)		31,385
Effect of exchange rate changes on cash and cash equivalents	196		(939)		1,135
Net increase in cash and cash equivalents	$	62,558	$	6,977	$	55,581

Net cash provided by operating activities

Net cash provided by operating activities for the quarter of $56.3 million, increased by $19.7 million over the prior year period, primarily as a result of higher cash collections and increases in customer advances and billings in excess of costs.

Net cash provided by (used in) investing activities

Cash provided by (used in) investing activities for the three months ended September 26, 2021 increased from the comparable period in 2020, primarily driven by proceeds from sales of property and equipment and other assets, partially offset by higher expenditures in property, plant and equipment.

Net cash provided by (used in) financing activities

Cash used in financing activities for the three months ended September 26, 2021 was $3.9 million, an improvement of $31.4 million from the comparable period in 2020. The improvement was primarily driven by higher net borrowings and net contributions from noncontrolling interests.

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Cash Flows Analysis

Comparison of Results for the Nine Months Ended September 26, 2021 (Unaudited), and September 27, 2020 (Unaudited) (in thousands):

	Nine Months Ended
	September 26,		September 27,		Dollar Change
	2021		2020
Net cash provided by operating activities	$	99,804	$	92,124	$	7,680
Net cash used in investing activities	(28,622)		(2,700)		(25,922)
Net cash provided by (used in) financing activities	710		(11,884)		12,594
Effect of exchange rate changes on cash and cash equivalents	(532)		(129)		(403)
Net increase in cash and cash equivalents	$	71,360	$	77,411	$	(6,051)

Net cash provided by operating activities

Net cash provided by operating activities for the nine months ended September 26, 2021 increased by $7.7 million from the comparable period in 2020, driven primarily by higher net income and cash collections which was partially offset by a use of cash related to accounts payable, accrued expenses and other current and noncurrent liabilities in the current period.

Net cash used in investing activities

Cash used in investing activities for the nine months ended September 26, 2021 increased by $25.9 million from the comparable period in 2020, primarily driven by the acquisition of the DZSP 49% minority interest from Parsons Government Services, Inc., and higher expenditures in property, plant and equipment.

Net cash provided by (used in) financing activities

Cash provided by (used in) financing activities for the nine months ended September 26, 2021 improved by $12.6 million from the comparable period in 2020. The improvement was primarily driven by the Recapitalization.

For a discussion of the Recapitalization, see Note 6 – “Business Combinations and Acquisitions” of the notes to the condensed consolidated financial statements.

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Financing

Long-term debt consisted of the following as of the dates presented (in thousands):

	September 26,		December 31,
	2021		2020
First Term Loan	$	885,550	$	890,000
Other debt	8,051		$	—
Total debt	893,601		890,000
Unamortized discount and debt issuance costs	(21,549)		(23,733)
Total debt, net of discount and debt issuance costs	872,052		866,267
Less current maturities of long-term debt	(7,036)		(5,961)
Total long-term debt, net of current	$	865,016	$	860,306

During the fourth quarter of 2020, the Company refinanced the 2016 Credit Agreements and entered into the 2020 Credit Agreements, which provide for borrowings up to $890.0 million. The 2020 Credit Agreements establish a $740.0 million term loan facility maturing in October 2027 priced at LIBOR plus a spread of 4.5%, a $150.0 million delayed draw term loan facility maturing in October 2027 priced at LIBOR plus a spread of 4.5%, and a $175.0 million senior secured revolving credit facility maturing in October 2025 priced at LIBOR plus a spread of 1.8% to 2.3%.

The Company used the proceeds from the 2020 Credit Agreements to repay the amounts outstanding under its 2016 Credit Agreements, with the remaining amounts to be used for general corporate purposes, mergers and acquisitions, and transaction fees and expenses.

The loans under the 2020 Credit Agreements are secured by a first lien over substantially all of the Company’s assets. The 2020 Credit Agreements also contain affirmative and negative covenants customary for transactions of this type, including (i) affirmative covenants requiring the Company to comply with specified financial covenants under certain circumstances, including the maintenance of certain leverage ratios; and (ii) various non-financial covenants, including affirmative covenants with respect to reporting requirements and maintenance of business activities, and negative covenants that, among other things, may limit or impose restrictions on the Company’s ability to alter the character of the business, consolidate, merge, or sell assets, incur liens or additional indebtedness, make investments, and undertake certain additional actions.

PAE was in compliance with the financial covenants under the 2020 Credit Agreements as of September 26, 2021. See Note 10 - “Debt” of the notes to the condensed consolidated financial statements.

Off-Balance Sheet Arrangements

PAE has outstanding performance guarantees and cross-indemnity agreements in connection with certain aspects of its business. PAE also has letters of credit outstanding principally related to performance guarantees on contracts and surety bonds outstanding principally related to performance and subcontractor payment bonds as described in Note 10 - “Debt” of the notes to the condensed consolidated financial statements.

PAE has entered into various arrangements to provide program management, construction management and operations and maintenance services. The ownership percentage of these ventures is typically representative of the work to be performed or the amount of risk assumed

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by each venture partner. Some of these ventures are considered variable interest entities. PAE has consolidated all ventures over which it has control. For all others, PAE’s portion of the earnings is recorded in equity in earnings of ventures. See Note 9 - “Consolidated Ventures” of the notes to the condensed consolidated financial statements.

PAE does not believe that it has any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that would be material to investors.

Recently Issued Accounting Pronouncements

For a description of recently announced accounting standards, including the expected dates of adoption and estimated effects, if any, on PAE’s condensed consolidated financial statements, see Note 3 - “Recent Accounting Pronouncements" of the notes to the condensed consolidated financial statements.

Critical Accounting Policies

The preparation of condensed consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingencies, as well as the reported amounts of revenues, expenses, gains and losses during the reporting periods. Management evaluates these estimates and assumptions on an ongoing basis. These estimates may change in the future if underlying assumptions or factors change. Actual results could differ materially from our estimates under different assumptions, judgments or conditions. We consider certain policies to be critical because of their complexity and the high degree of judgment and assumptions involved. Our critical accounting policies and estimates are discussed in Part II, Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2020 under “Critical Accounting Policies.” There have been no changes to our existing critical accounting policies from those disclosed in our most recently filed Annual Report on Form 10-K/A.

ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have not been any material changes to the Company’s market risk from those disclosed in our most recently filed Annual Report on Form 10-K/A. For additional information, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Annual Report on Form 10-K/A filed with the SEC on May 7, 2021.

ITEM 4.     CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Principal Executive Officer (“PEO”) and Principal Financial Officer (“PFO”), to allow timely decisions regarding required disclosure.

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As required by Rules 13a-15 and 15d-15 under the Exchange Act, our PEO and PFO carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 26, 2021. Based upon such evaluation, the PEO and PFO concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective.

Remediation Efforts to Address Material Weakness in Internal Control over Financial Reporting

As described in Item 9A - “Controls and Procedures”, on our amended Annual Report on Form 10-K/A for the year ended December 31, 2020, a material weakness was identified in the accounting for warrants. Since identifying the material weakness, management took the necessary steps to address the causes of the material weakness to remediate this material weakness. The Company performed the following remediation efforts to address the material weakness identified:

•    Additional review procedures over complex financial instruments and accounting matters

•    Additional training and enhancements to the accounting policy related to the accounting for complex financial instruments

Management has been testing the Company’s controls to determine if they operate effectively over time. Management believes that the controls are operating effectively and the deficiencies that contributed to the material weakness have been remediated. Management will continue the evaluation of these controls through the end of the fiscal year.

Internal Control over Financial Reporting

We have evaluated our internal control over financial reporting for the nine months ended September 26, 2021 and, in addition to the changes discussed above, the Company continued to make changes to certain internal controls to reflect the operations of PAE’s acquisitions of Metis and CENTRA. There have been no other changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II. Other Information

ITEM 1.     LEGAL PROCEEDINGS

PAE is involved in various legal proceedings, government audits, investigations, claims and disputes that arise in the normal course of business, including those related to employment matters, contractual relationships and other business matters. These legal proceedings seek various remedies, including claims for monetary damages in varying or unspecified amounts. In addition, awards of government contracts may be protested at the U.S. Government Accountability Office or the U.S. Court of Federal Claims; and conversely, PAE may from time to time protest awards made to other companies.

Although the outcome of any such matter is inherently uncertain and may be materially adverse, based on current information, PAE does not expect any of the currently ongoing audits, reviews, investigations, or litigation to have a material adverse effect on its financial condition or operating results. Its view of the matters not specifically disclosed could change in future periods as events unfold.

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ITEM 1A.     RISK FACTORS

For a discussion of risk factors that could significantly and negatively affect our business, financial condition, results of operations, cash flows and prospects, see the disclosure under Part I, Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K/A filed with the SEC on May 7, 2021. There have been no material changes from the risk factors set forth in Part I, Item 1A “Risk Factors” on Form 10-K/A for the year ended December 31, 2020, other than the additional risk factors provided below, which are updates to the risk factors included in Part II, item 1A of our Form 10-K/A for the year ended December 31, 2020 and in Part II, Item 1A of our Form 10-Q for the quarter ended June 27, 2021.

PAE relies on contracts with U.S. Government entities for substantially all of its revenue. A loss of contracts, a failure to obtain new contracts or a reduction of services provided under existing contracts with the U.S. Government, including as a result of changes in government policy or a reduction in U.S. Government spending, could adversely affect PAE’s operating performance and result in a loss of expected revenue.

Substantially all of PAE’s revenue is derived from services ultimately provided to the U.S. Government. For the year ended December 31, 2020, PAE generated approximately 89.5% of its total revenue from contracts with the U.S. Government, with 35.7% of its total revenue from the DoD and 18.7% of its total revenue from the DoS. For the nine months ended September 26, 2021, PAE’s largest single contract accounts for approximately 5.6% of its total revenue. The remainder of its revenue is derived from other U.S. agencies, including DHS, National Aeronautics and Space Administration (“NASA”), U.S. intelligence agencies, the National Science Foundation, non-governmental organizations and U.S. Government allies. PAE expects that U.S. Government contracts will continue to be its primary source of revenue for the foreseeable future. The continuation and renewal of PAE’s existing U.S. Government contracts and entrance into new U.S. Government contracts are, among other things, contingent upon the availability of adequate funding for various U.S. Government agencies. Changes in U.S. Government spending could directly affect PAE’s operating performance and result in a loss of expected revenue. The loss or significant reduction in government funding of a program in which PAE participates could also result in a material decrease to PAE’s future sales, earnings and cash flows.

U.S. Government contracts are also conditioned upon the approval of spending by the U.S. Congress. In addition, Congress usually appropriates funds for a given program on a September 30 fiscal year basis, even though contract periods of performance may extend over many years. Consequently, at the beginning of a major program, the contract is usually partially funded and additional monies are normally committed to the contract by the procuring agency only as appropriations are made by Congress for future fiscal years. The factors that could impact U.S. Government spending and reduce PAE’s U.S. Government contracting business include: (i) policy and/or spending changes implemented by presidential administrations or Congress; (ii) a significant decline in, or reapportioning of, spending by the U.S. Government in general; (iii) changes, delays or cancellations of U.S. Government programs, requirements or policies; (iv) the adoption of new laws or regulations that affect companies that provide services to the U.S. Government; (v) U.S. Government shutdowns or other delays in the government appropriations process; (vi) changes in the political climate, including with regard to the funding or operation of the services PAE provides; and (vii) general economic conditions, including a slowdown in the economy or unstable economic conditions in the United States or in the countries in which PAE operates.

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A change in any number of public policy objectives, including with respect to national security and foreign aid, could materially impact PAE’s business. For example, changes in immigration policy and border protection in the United States could negatively impact PAE’s business.

In addition, PAE’s business has been negatively impacted by the U.S. Government’s decision to withdraw its personnel and operations from Afghanistan in 2021. PAE contracts in Afghanistan affected by this decision include work for the following programs: U.S. Embassy Kabul (AEK), National Maintenance Strategy (NMS), Enterprise Training Services Contract (ETSC), and Afghanistan Security and Mission Support Services (SaSS). For the year ended December 31, 2020, PAE derived revenues of $393.6 million from its work in Afghanistan.

These or other factors have caused or could cause U.S. Government agencies to reduce their purchases under PAE’s contracts, to exercise their right to terminate PAE’s contracts in whole or in part, to issue temporary stop-work orders or to decline to exercise options to renew PAE’s contracts. The loss or significant curtailment of PAE’s material U.S. Government contracts, the decision by PAE’s customers not to renew existing contracts or a failure to enter into new contracts have adversely affected and could adversely affect PAE’s operating performance and result in a loss of expected revenue.

PAE has operations in the Middle East and in certain regions that may experience turmoil, political unrest and destabilization, insurgency, war or terrorism.

The services PAE provides internationally are sometimes in countries with unstable governments, in areas of military conflict, in hostile and unstable environments, including war zones, or at military installations. Political unrest and destabilization and insurgent activities in the areas in which PAE operates may cause further destabilization in these regions. These factors increase the risk of an incident resulting in damage or destruction to PAE’s work or living sites or resulting in injury or loss of life to its employees, subcontractors or other third parties. PAE maintains insurance to mitigate risk and potential liabilities related to its international operations, but coverage may not be adequate to cover these claims and liabilities and it may be forced to bear substantial costs arising from those claims. Substantial claims in excess of PAE’s related insurance coverage could have an adverse effect on its financial position, results of operations and/or cash flows.

In certain circumstances, including civil war or increased insurgent activities, the U.S. Government may decide to terminate some or all U.S. Government activities, including PAE’s operations under applicable U.S. Government contracts, in a location, country or region and to withdraw all personnel. For example, as discussed above, the U.S. Government evacuated its personnel and ceased operations in Afghanistan in August 2021 and this had a negative impact on PAE’s business. Acts of terrorism and threats of armed conflicts in or around various areas in which PAE operates could limit or disrupt markets and its operations, including disruptions resulting from evacuation of personnel, cancellation of contracts or the loss of key employees, contractors or assets. Furthermore, PAE may experience liability arising from accidents or incidents, which could involve significant potential injury, involving its employees or third parties. PAE also may incur material costs to maintain the safety of its personnel or be subject to increasing insurance costs.

We face various risks related to public health crisis, such as the coronavirus (“COVID-19”), that could disrupt PAE’s business and result in loss of revenue or higher expenses.

Our operations face risks related to public health crises, such as the global outbreak of COVID-19 and other pandemic and epidemics. The ability of our personnel to work effectively and travel and the continued adequacy of our supply chains have been adversely impacted by the pandemic and responses thereto, such as the travel restrictions resulting from the

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COVID-19 virus. Additionally, as a result of COVID-19, we have experienced, and expect that we will experience in the future, delays, or partial reductions or full suspensions of contract work, which have caused and could result in decreases of revenue and/or profit and may have a material adverse impact on our business. We have experienced increased medical, housing, facility cleaning, and other costs due to quarantine requirements imposed by various jurisdictions and exposure of our personnel to pandemics such as COVID-19. In addition, we are permitting employees to telework who can meet our customer commitments remotely, and many of our employees are teleworking. Due to COVID-19, we are uncertain when and how many teleworking employees will return to work in person. Moreover, we may be subject to additional cyber security risks as a result of a significant portion of our workforce working remotely. Due to the September 9, 2021 Executive Order mandating COVID-19 vaccinations for employees of certain contractors to the U.S. Government, we may experience increased costs and labor disruptions, including loss of experienced personnel, and/or difficulty in filling open positions. In addition, the resulting volatility in the global capital markets could, among other things, restrict our access to capital and/or increase our cost of capital. At this time, we cannot predict the impact of the COVID-19 pandemic or the duration of time that the pandemic and its impacts will last, but it could have a material adverse effect on our business, financial position, results of operations and/or cash flows. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations- Trends and Factors Affecting PAE’s Future”.

The Merger is subject to conditions, some or all of which may not be satisfied, or completed on a timely basis, if at all. Failure to complete the Merger could have material adverse effects on the Company.

The completion of the Merger is subject to a number of conditions, including, among others, the approval by our stockholders, which make the completion and timing of the completion of the Merger uncertain. Also, either we or Parent may terminate the Amentum Merger Agreement if the Merger has not been consummated by April 25, 2022 which may be extended until July 25, 2022 under certain conditions.

If the Merger is not completed on a timely basis, or at all, our ongoing business may be materially adversely affected and, without realizing any of the benefits of having completed the Merger, we will be subject to a number of risks, including the following:

•the market price of our common stock could decline;

•we could owe substantial termination fees to parent under certain circumstances;

•if the Amentum Merger Agreement is terminated and our Board of Directors (the “Board”) seeks another business combination, our stockholders cannot be certain that we will be able to find a party willing to enter into a transaction on terms equivalent to or more attractive than the terms that Parent has agreed to in the Amentum Merger Agreement;

•time and resources committed by our management to matters relating to the Merger could otherwise have been devoted to pursuing other beneficial opportunities for the Company’; and

•we will be required to pay our costs relating to the Merger, such as legal, accounting, financial advisory and printing fees, whether or not the Merger is completed.

In addition, we could be subject to litigation related to any failure to complete the Merger or related to any enforcement proceeding commenced against us to perform our obligations under the Amentum Merger Agreement. Either of these developments could adversely impact our ongoing business.

The Merger is subject to the expiration or termination of applicable waiting periods and the receipt of approvals, consents or clearances from regulatory authorities that may impose conditions that could have an adverse effect on the Company or, if not obtained, could prevent completion of the Merger.

50

Before the Merger may be completed, any waiting period (or extension thereof) applicable to the Merger must have expired or been terminated, and any approvals, consents or clearances required in connection with the Merger must have been obtained, in each case, under the Hart Scott Rodino Antitrust Improvements Act of 1976, as amended, the National Security Law and other applicable law. In deciding whether to grant the required regulatory approval, consent or clearance, the relevant governmental entities may, among other things, consider the effect of the Merger on competition within their relevant jurisdiction. Under the Amentum Merger Agreement, we have agreed to use our reasonable best efforts to obtain such approvals, consents and clearances and therefore may be required to comply with conditions or limitations imposed by governmental authorities, except that we are not required to agree to any term, limitation, condition, restriction or requirement that, individually or in the aggregate, would have or would reasonably be expected to have a material and adverse effect on the condition (financial or otherwise), assets, liabilities, business or results of operations of the combined business, taken as a whole, after giving effect to the Merger.

In addition, regulators may impose conditions, terms, obligations or restrictions in connection with their approval of or consent to the Merger, and such conditions, terms, obligations or restrictions may delay completion of the Merger.

The Amentum Merger Agreement contains provisions that limit our ability to pursue alternatives to the Merger, could discourage a potential competing acquirer of the Company from making a favorable alternative transaction proposal and, in specified circumstances, could require us to pay substantial termination fees to Parent.

The Amentum Merger Agreement contains certain provisions that restrict our ability to initiate, solicit, knowingly encourage or, subject to certain exceptions, including a go-shop provision, engage in discussions or negotiations with respect to, or approve or recommend, any third-party proposal for an alternative transaction. In this regard, during the period beginning on October 25, 2021 and continuing until November 29, 2021 (the “Go-Shop Period”), the Company is permitted to take such actions with respect to certain competing acquisition proposals. At the end of the Go-Shop Period, the Company will cease such activities and will be subject to customary “no shop” restrictions on its ability to solicit third party proposals relating to competing acquisition proposals or to provide information to and engage in discussions with certain third parties. Further, even if our Board withdraws or qualifies its recommendation with respect to the adoption of the Amentum Merger Agreement, unless the Amentum Merger Agreement has been terminated in accordance with its terms, we will still be required to submit our merger-related proposals to a vote at a special meeting of our stockholders. In addition, Parent generally has an opportunity to offer to modify the terms of the transactions contemplated by the Amentum Merger Agreement in response to any third-party alternative transaction proposal made to our Board before our Board may withdraw or qualify its recommendation with respect to the merger-related proposals.

In some circumstances, upon termination of the Amentum Merger Agreement, we may be required to pay a termination fee of either $15.0 million or $30.0 million to Parent.

These provisions could discourage a potential third-party acquirer or merger partner that might have an interest in acquiring all or a significant portion of the Company or pursuing an alternative transaction from considering or proposing such a transaction, even if it were prepared to pay consideration with a higher per share cash or market value than the per share cash proposed to be received or realized in the Merger. In particular, a termination fee, if applicable, may be substantial, and could result in a potential third-party acquirer or merger partner proposing to pay a lower price to our stockholders than it might otherwise have proposed to pay absent such a fee.

51

If the Amentum Merger Agreement is terminated and we determine to seek another business combination, we may not be able to negotiate a transaction with another party on terms comparable to, or better than, the terms of the Merger.

We are subject to business uncertainties and contractual restrictions while the proposed Merger is pending, which could adversely affect our business and operations.

In connection with the pendency of the Merger, it is possible that some customers, suppliers and other persons with whom we have a business relationship may delay or defer certain business decisions or might decide to seek to terminate, change or renegotiate their relationships with us as a result of the Merger, which could negatively affect our revenues, earnings and cash flows, as well as the market price of our common stock, regardless of whether the Merger is completed.

Under the terms of the Amentum Merger Agreement, we are subject to certain restrictions on the conduct of our business prior to completing the Merger, which may adversely affect our ability to execute certain of our business strategies, including the ability in certain cases to enter into or amend contracts, acquire or dispose of assets, incur indebtedness or incur capital expenditures. Such limitations could negatively affect our business and operations prior to the completion of the Merger.

Each of the risks described above may be exacerbated by delays or other adverse developments with respect to the completion of the Merger.

Uncertainties associated with the Merger may cause a loss of management personnel and other key employees which could adversely affect our business and results of operations.

We are dependent on the experience and industry knowledge of our officers and other key employees to execute our business plan. While we have implemented retention bonuses for key personnel, prior to completion of the Merger, current and prospective employees of the Company may experience uncertainty about their roles within the surviving company following the completion of the Merger. Such uncertainty may have an adverse effect on our ability to attract or retain key management and other key personnel and in turn could adversely affect our business and results of operations.

Any legal proceedings or governmental inquiries in connection with the Merger, the outcomes of which are uncertain, could delay or prevent the completion of the Merger.

In connection with the Transaction, plaintiffs may file lawsuits against the Company, Parent, Merger Sub and/or the directors and officers of each company. In addition, we may face inquiries from governmental entities in connection with the Merger. Although we believe any such lawsuits would be meritless, the outcome of such litigation or governmental inquiry is uncertain. Such legal proceedings or governmental inquiries could also prevent or delay the completion of the Merger and result in additional costs and expenses to us.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

52

ITEM 4.     MINE SAFETY DISCLOSURES

None.

ITEM 5.     OTHER INFORMATION

None.

53

ITEM 6.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES

See the Exhibit Index below, which is incorporated by reference herein.

Exhibit Index

Exhibit No.
31.1	Certification by the Principal Executive Officer and Principal Financial Officer of the Company Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification by the Principal Executive Officer and Principal Financial Officer of the Company Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	Inline XBRL Instance Document
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Labels Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*Management contract or compensatory plan or arrangement

54

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: November 4, 2021	PAE Incorporated
	By:	/s/ Charles D. Peiffer
	Name:	Charles D. Peiffer
	Title:	Interim President & Chief Executive Officer
		Executive Vice President & Chief Financial Officer

55

EX-31.1

Exhibit 31.1

Section 302 Certification

I, Charles D. Peiffer, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of PAE Incorporated (the “Registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and

5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent function):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to affect the Registrant's ability to record, process, summarize, and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal controls over financial reporting.

Date: November 4, 2021

/s/ Charles D. Peiffer

Charles D. Peiffer

Interim President & Chief Executive Officer Executive Vice President & Chief Financial Officer (Principal Executive Officer and Principal Financial Officer)

EX-32.1

Exhibit 32.1

Section 906 Certification

In connection with the quarterly report on Form 10-Q of PAE Incorporated (the “Company”) for the period ended September 26, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned President and Chief Executive Officer, Executive Vice President and Chief Financial Officer of the Company certifies, to the best of his knowledge and belief pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 4, 2021

/s/ Charles D. Peiffer

Charles D. Peiffer

Interim President & Chief Executive Officer Executive Vice President & Chief Financial Officer (Principal Executive Officer and Principal Financial Officer)

XML

Cover Page - shares	9 Months Ended
	Sep. 26, 2021	Nov. 02, 2021
Entity Information [Line Items]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 26, 2021
Document Transition Report	false
Entity File Number	1-38643
Entity Registrant Name	PAE INCORPORATED
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	82-3173473
Entity Address, Address Line One	7799 Leesburg Pike
Entity Address, Address Line Two	Suite 300 North
Entity Address, City or Town	Falls Church
Entity Address, State or Province	VA
Entity Address, Postal Zip Code	22043
City Area Code	703
Local Phone Number	717-6000
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		93,117,234
Entity Central Index Key	0001720821
Amendment Flag	false
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2021
Current Fiscal Year End Date	--12-31
Class A Common Stock
Entity Information [Line Items]
Title of 12(b) Security	Class A Common Stock
Trading Symbol	PAE
Security Exchange Name	NASDAQ
Warrants
Entity Information [Line Items]
Title of 12(b) Security	Warrants
Trading Symbol	PAEWW
Security Exchange Name	NASDAQ

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 26, 2021	Sep. 27, 2020	Sep. 26, 2021	Sep. 27, 2020
Income Statement [Abstract]
Revenues	$ 689,514	$ 666,240	$ 2,185,279	$ 1,926,795
Cost of revenues	511,852	512,877	1,643,470	1,474,763
Selling, general and administrative expenses	140,170	119,168	428,237	361,945
Amortization of intangible assets	12,630	8,047	37,476	24,141
Total operating expenses	664,652	640,092	2,109,183	1,860,849
Program profit	24,862	26,148	76,096	65,946
Other operating income, net	1,174	2,384	6,897	4,338
Operating income	26,036	28,532	82,993	70,284
Interest expense, net	(13,109)	(13,607)	(38,783)	(48,312)
Other income, net	16,399	5,000	17,533	15,645
Income before income taxes	29,326	19,925	61,743	37,617
Expense (benefit) from income taxes	1,495	4,194	6,730	(1,582)
Net income	27,831	15,731	55,013	39,199
Noncontrolling interest in earnings of ventures	(1,958)	413	(2,510)	1,344
Net income attributed to PAE Incorporated	$ 29,789	$ 15,318	$ 57,523	$ 37,855
Net income per share attributed to PAE Incorporated:
Basic (in dollars per share)	$ 0.32	$ 0.17	$ 0.62	$ 0.47
Diluted (in dollars per share)	$ 0.31	$ 0.16	$ 0.60	$ 0.46
Weighted average shares outstanding:
Basic (in shares)	93,122,414	92,070,306	92,949,301	81,323,258
Diluted (in shares)	95,836,986	93,392,565	95,599,019	82,115,825

XML

Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 26, 2021	Sep. 27, 2020	Sep. 26, 2021	Sep. 27, 2020
Statement of Comprehensive Income [Abstract]
Net income	$ 27,831	$ 15,731	$ 55,013	$ 39,199
Other comprehensive (loss) income:
Change in foreign currency translation adjustment, net of tax	(282)	780	(647)	(137)
Other, net	2	1	1	424
Other comprehensive (loss) income	(280)	781	(646)	287
Comprehensive income	27,551	16,512	54,367	39,486
Comprehensive (loss) income attributed to noncontrolling interests	(2,050)	505	(2,752)	1,287
Comprehensive income attributed to PAE Incorporated	$ 29,601	$ 16,007	$ 57,119	$ 38,199

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Sep. 26, 2021	Dec. 31, 2020
Current assets:
Cash and cash equivalents	$ 157,268	$ 85,908
Accounts receivable, net	524,707	585,511
Prepaid expenses and other current assets	63,043	61,607
Total current assets	745,018	733,026
Property and equipment, net	36,600	27,615
Investments	15,407	18,272
Goodwill	593,171	590,668
Intangible assets, net	220,734	258,210
Operating lease right-of-use assets, net	192,638	191,370
Other noncurrent assets	14,928	10,209
Total assets	1,818,496	1,829,370
Current liabilities:
Accounts payable	124,959	152,962
Accrued expenses	107,446	114,222
Customer advances and billings in excess of costs	106,221	106,475
Salaries, benefits and payroll taxes	153,229	145,186
Accrued taxes	12,132	15,582
Current portion of long-term debt, net	7,036	5,961
Operating lease liabilities, current portion	47,205	46,756
Other current liabilities	38,559	45,037
Total current liabilities	596,787	632,181
Deferred income taxes, net	11,006	4,389
Long-term debt, net	865,016	860,306
Long-term operating lease liabilities	150,280	145,569
Warrant liability	32,934	50,467
Other long-term liabilities	13,509	30,273
Total liabilities	1,669,532	1,723,185
Stockholders’ equity:
Preferred stock, $0.0001 par value per share, 1,000,000 shares authorized; no shares issued and outstanding	0	0
Common stock, $0.0001 par value per share: 210,000,000 shares authorized; 93,115,801 and 92,040,654 shares issued and outstanding as of September 26, 2021 and December 31, 2020, respectively	9	9
Additional paid-in capital	171,807	188,685
Accumulated deficit	(59,098)	(116,621)
Accumulated other comprehensive income	1,230	1,876
Total PAE Incorporated stockholders' equity	113,948	73,949
Noncontrolling interests	35,016	32,236
Total liabilities and stockholders’ equity	$ 1,818,496	$ 1,829,370

XML

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Sep. 26, 2021	Dec. 31, 2020
Stockholders’ equity:
Preferred stock par value (in dollars per share)	$ 0.0001	$ 0.0001
Preferred stock authorized (in shares)	1,000,000	1,000,000
Preferred stock issued (in shares)	0	0
Preferred stock outstanding (in shares)	0	0
Common stock par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock authorized (in shares)	210,000,000	210,000,000
Common stock issued (in shares)	93,115,801	92,040,654
Common stock outstanding (in shares)	93,115,801	92,040,654

XML

Condensed Consolidated Statements of Stockholders Equity (Unaudited) - USD ($) $ in Thousands	Total	Previously Reported	Revision of Prior Period, Adjustment	Total PAE Incorporated Stockholders’ Equity	Total PAE Incorporated Stockholders’ Equity Previously Reported	Common Stock	Common Stock Previously Reported	Common Stock Revision of Prior Period, Adjustment	Additional Paid-in Capital	Additional Paid-in Capital Previously Reported	Additional Paid-in Capital Revision of Prior Period, Adjustment	Accumulated Deficit	Accumulated Deficit Previously Reported	Accumulated Other Comprehensive (Loss) / Income	Accumulated Other Comprehensive (Loss) / Income Previously Reported	Noncontrolling Interests	Noncontrolling Interests Previously Reported
Beginning balance at Dec. 31, 2019	$ (11,909)	$ (11,909)	$ 0	$ (43,760)	$ (43,760)	$ 2	$ 3	$ (1)	$ 101,743	$ 101,742	$ 1	$ (145,371)	$ (145,371)	$ (134)	$ (134)	$ 31,851	$ 31,851
Beginning balance (in shares) at Dec. 31, 2019						21,127,823	282,047	20,845,776
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	26,150			25,984								25,984				166
Other comprehensive income (loss), net	(695)			(695)										(695)
Equity contributions from venture partners	165			13					13							152
Equity infusion from Gores	307,941			307,941		$ 5			307,936
Equity infusion from Gores (in shares)						46,999,787
Private placement	212,910			212,910		$ 2			212,908
Private placement (in shares)						23,913,044
Payment to Shay stockholders	(424,243)			(424,243)					(424,243)
Ending balance at Mar. 29, 2020	110,319			78,150		$ 9			198,357			(119,387)		(829)		32,169
Ending balance (in shares) at Mar. 29, 2020						92,040,654
Beginning balance at Dec. 31, 2019	(11,909)	$ (11,909)	$ 0	(43,760)	$ (43,760)	$ 2	$ 3	$ (1)	101,743	$ 101,742	$ 1	(145,371)	$ (145,371)	(134)	$ (134)	31,851	$ 31,851
Beginning balance (in shares) at Dec. 31, 2019						21,127,823	282,047	20,845,776
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	39,199
Other comprehensive income (loss), net	287
Ending balance at Sep. 27, 2020	114,542			79,525		$ 9			186,878			(107,515)		153		35,017
Ending balance (in shares) at Sep. 27, 2020						92,040,654
Beginning balance at Mar. 29, 2020	110,319			78,150		$ 9			198,357			(119,387)		(829)		32,169
Beginning balance (in shares) at Mar. 29, 2020						92,040,654
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	(2,681)			(3,446)								(3,446)				765
Other comprehensive income (loss), net	201			201										201
Distributions to venture partners and other	(443)															(443)
Equity contributions from venture partners	1,939															1,939
Payment to Shay stockholders	(20,169)			(20,169)					(20,169)
Stock-based compensation	3,700			3,700					3,700
Ending balance at Jun. 28, 2020	92,866			58,436		$ 9			181,888			(122,833)		(628)		34,430
Ending balance (in shares) at Jun. 28, 2020						92,040,654
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	15,731			15,318								15,318				413
Other comprehensive income (loss), net	781			781										781
Distributions to venture partners and other	174															174
Equity contributions from venture partners	(146)			(146)					(146)
Payment to Shay stockholders	818			818					818
Stock-based compensation	4,318			4,318					4,318
Ending balance at Sep. 27, 2020	114,542			79,525		$ 9			186,878			(107,515)		153		35,017
Ending balance (in shares) at Sep. 27, 2020						92,040,654
Beginning balance at Dec. 31, 2020	$ 106,185			73,949		$ 9			188,685			(116,621)		1,876		32,236
Beginning balance (in shares) at Dec. 31, 2020	92,040,654					92,040,654
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	$ 12,273			13,384								13,384				(1,111)
Other comprehensive income (loss), net	(995)			(995)										(995)
Equity contributions from venture partners	467															467
Deconsolidation of venture	188															188
Purchase of noncontrolling interest	(15,174)			(17,398)					(17,398)							2,224
Stock-based compensation tax withholding obligation	(5,659)			(5,659)					(5,659)
Stock-based compensation	2,270			2,270					2,270
Ending balance at Mar. 28, 2021	99,555			65,551		$ 9			167,898			(103,237)		881		34,004
Ending balance (in shares) at Mar. 28, 2021						92,040,654
Beginning balance at Dec. 31, 2020	$ 106,185			73,949		$ 9			188,685			(116,621)		1,876		32,236
Beginning balance (in shares) at Dec. 31, 2020	92,040,654					92,040,654
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	$ 55,013
Other comprehensive income (loss), net	(646)
Ending balance at Sep. 26, 2021	$ 148,964			113,948		$ 9			171,807			(59,098)		1,230		35,016
Ending balance (in shares) at Sep. 26, 2021	93,115,801					92,040,654
Beginning balance at Mar. 28, 2021	$ 99,555			65,551		$ 9			167,898			(103,237)		881		34,004
Beginning balance (in shares) at Mar. 28, 2021						92,040,654
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	14,909			14,350								14,350				559
Other comprehensive income (loss), net	629			629										629
Distributions to venture partners and other	(850)															(850)
Purchase of noncontrolling interest	(8)			(8)					(8)
Stock-based compensation	2,355			2,355					2,355
Ending balance at Jun. 27, 2021	116,590			82,877		$ 9			170,245			(88,887)		1,510		33,713
Ending balance (in shares) at Jun. 27, 2021						92,040,654
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	27,831			29,789								29,789				(1,958)
Other comprehensive income (loss), net	(280)			(280)										(280)
Distributions to venture partners and other	(500)															(500)
Equity contributions from venture partners	3,761															3,761
Stock-based compensation tax withholding obligation	(160)			(160)					(160)
Stock-based compensation	1,722			1,722					1,722
Ending balance at Sep. 26, 2021	$ 148,964			$ 113,948		$ 9			$ 171,807			$ (59,098)		$ 1,230		$ 35,016
Ending balance (in shares) at Sep. 26, 2021	93,115,801					92,040,654

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 26, 2021	Sep. 27, 2020
Operating activities
Net income	$ 55,013	$ 39,199
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property and equipment	7,768	7,263
Amortization of intangible assets	37,476	24,141
Amortization of debt issuance cost	2,387	9,560
Stock-based compensation	6,347	8,018
Net undistributed income from unconsolidated ventures	(8,625)	(3,533)
Deferred income taxes, net	7,249	(12,044)
Change in fair value of warrant liability	(17,533)	(19,132)
Other non-cash activities, net	(2,714)	382
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable, net	61,375	(3,477)
Accounts payable	(28,195)	15,852
Accrued expenses	(7,105)	4,252
Customer advances and billings in excess of costs	(256)	8,923
Salaries, benefits and payroll taxes	7,488	10,975
Prepaid expenses and other current assets	(2,124)	(2,118)
Other current and noncurrent liabilities	(19,620)	71
Investments	9,907	2,793
Other noncurrent assets	(5,576)	5,903
Accrued taxes	(3,458)	(4,904)
Net cash provided by operating activities	99,804	92,124
Investing activities
Expenditures for property and equipment	(19,577)	(2,628)
Proceeds from sales of property	5,195	0
Acquisition of CENTRA Technology, Inc., net of acquired cash	(1,441)	0
Acquisition of Metis Solutions Corporation, net of acquired cash	(521)	0
Acquisition of noncontrolling interest	(14,308)	0
Other investing activities, net	2,030	(72)
Net cash used in investing activities	(28,622)	(2,700)
Financing activities
Net contributions from noncontrolling interests	2,927	2,095
Borrowings on long-term debt	237,010	60,734
Repayments on long-term debt	(233,409)	(212,184)
Payment of debt issuance costs	0	(964)
Recapitalization from merger with Gores Holdings III, Inc.	0	605,713
Payment of underwriting and transaction costs	0	(27,267)
Distribution to selling stockholders	0	(439,719)
Stock-based compensation tax withholding obligation	(5,818)	0
Other financing activities, net	0	(292)
Net cash provided by (used in) financing activities	710	(11,884)
Effect of exchange rate changes on cash and cash equivalents	(532)	(129)
Net increase in cash and cash equivalents	71,360	77,411
Cash and cash equivalents at beginning of period	85,908	68,035
Cash and cash equivalents at end of period	157,268	145,446
Supplemental cash flow information
Cash paid for interest	40,048	35,085
Cash paid for taxes	$ 9,343	$ 5,304

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Description of Business

9 Months Ended

Sep. 26, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Description of Business

Description of Business

PAE Incorporated, formerly known as Gores Holdings III, Inc. (“Gores III”), was originally incorporated in Delaware on October 23, 2017 as a special purpose acquisition company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or other similar business combination with one or more target businesses. On September 11, 2018, Gores III consummated its initial public offering (the “IPO”), following which our shares began trading on the Nasdaq Stock Market (“Nasdaq”). Unless the context otherwise indicates, references herein to the “Company" or “PAE” refer to PAE Incorporated and its consolidated subsidiaries.

On February 10, 2020 (the “Closing Date”), the Company completed the previously announced business combination (the “Business Combination”) in which Shay Holding Corporation (“Shay”) was acquired by Gores III. The transaction was completed in a multi-step process pursuant to which Shay ultimately merged with and into a wholly-owned subsidiary of Gores III, with the Gores III subsidiary continuing as the surviving company. As a result of the Business Combination, each share of common stock of Shay was cancelled and converted into the right to receive a portion of the consideration payable in connection with the transaction and Gores III acquired Shay (as it existed immediately prior to the Second Merger, as such term is defined in that certain Agreement and Plan of Merger, dated November 1, 2019, by and among Gores III, EAP Merger Sub, Inc., EAP Merger Sub II, LLC, Shay, and Platinum Equity Advisors, LLC (in its capacity as the stockholder representative) (the “Gores Merger Agreement”)) and its subsidiaries. Additionally, the stockholders of Shay as of immediately prior to the transaction held a portion of the common stock of the Company.

For accounting purposes, the Business Combination is treated as a reverse acquisition and recapitalization (the “Recapitalization”), in which Shay is considered the accounting acquirer (and legal acquiree) and Gores III is considered the accounting acquiree (and legal acquirer).

Accordingly, as of the Closing Date, Shay’s historical results of operations replaced Gores III’s historical results of operations for periods prior to the Business Combination and the results of operations of both companies are included in the accompanying condensed consolidated financial statements for periods following the Closing Date. See Note 6 - “Business Combinations and Acquisitions” for additional information.

PAE provides a wide variety of integrated support solutions, including defense and military readiness, diplomacy, intelligence support, business process outsourcing, counter-terrorism solutions, peacekeeping, development, host nation capacity building, aircraft and ground equipment maintenance and logistics, and operations and maintenance of facilities and infrastructure. Customers include agencies of the U.S. Government, such as the Department of Defense (“DoD”) and Department of State (“DoS”), the National Aeronautics and Space Administration (“NASA”), Department of Homeland Security, intelligence community agencies and other civilian agencies, as well as allied foreign governments and international organizations.

The Company’s operations are currently organized into the following two reportable segments:

•Global Mission Services (“GMS”): GMS provides infrastructure and logistics management, international logistics and stabilization support, and aircraft and vehicle readiness and sustainment support. The segment focuses on customer relationships with DoD, DoS, NASA, and other government agencies for work both in the United States and outside of the United States.

•National Security Solutions (“NSS”): NSS provides counter-threat solutions, business process outsourcing, adjudication support services and full life cycle support for complex legal matters. NSS focuses on customer relationships in the areas of intelligence, defense and security, and with civilian agencies.

The Company separately presents the costs associated with certain corporate functions as “Corporate”, which primarily include costs that are not reimbursed by the Company’s U.S. Government customers.

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Significant Accounting Principles and Policies

9 Months Ended

Sep. 26, 2021

Accounting Policies [Abstract]

Significant Accounting Principles and Policies

Significant Accounting Principles and Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) for annual financial information. In management’s opinion, all adjustments, consisting of only normal recurring adjustments, considered necessary for a fair presentation have been included.

The Company closes its books and records on the last Sunday of the calendar quarter to align its financial closing with its business process, which were on September 26, 2021 and September 27, 2020, respectively. The condensed consolidated financial statements and disclosures included herein are labeled based on that convention. This practice only affects interim periods, as the Company’s fiscal year ends on December 31.

The condensed consolidated financial statements include the accounts of PAE Incorporated and subsidiaries and ventures in which the Company owns more than 50% or otherwise controls. All intercompany amounts have been eliminated in consolidation.

Use of Estimates

These condensed consolidated financial statements are prepared in conformity with U.S. GAAP, which requires the use of estimates and assumptions, including assumptions to determine the fair value of acquired assets and liabilities, recoverability of long-lived assets, goodwill, valuation allowances on deferred taxes, inputs used in stock based compensation, inputs in the valuation of the warrants liability and anticipated contract costs and revenues utilized in the earnings recognition process, which affect the reported amounts in the condensed consolidated financial statements and accompanying notes. Due to the size and nature of many of the Company’s programs, the estimation of total revenues and cost at completion is subject to a wide range of variables, including assumptions for timing and risks. Actual results may differ from management’s estimates and changes in these estimates are recorded when known.

Update to Significant Accounting Policies

There have been no material changes to the Company’s significant accounting policies described in the Company’s Form 10-K/A filed with the SEC on May 7, 2021.

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Recent Accounting Pronouncements

9 Months Ended

Sep. 26, 2021

Accounting Changes and Error Corrections [Abstract]

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Accounting Pronouncements Adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-12 simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740 related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 is effective in 2021 and interim periods within that year and permits for an early adoption. The Company adopted ASU 2019-12 effective January 1, 2021. The adoption of the guidance did not have a material impact on its financial statements and related disclosures.

Accounting Pronouncements Not Yet Adopted

In March 2020, the FASB issued ASU 2020-04 Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by the reference rate reform. The amendments in ASU 2020-04 are effective for all entities as of March 12, 2020 through December 31, 2022. The Company is currently evaluating the impact this guidance will have on its condensed consolidated financial statements and related disclosures.

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Revenues

9 Months Ended

Sep. 26, 2021

Revenue from Contract with Customer [Abstract]

Revenues

Revenues

Disaggregated Revenues

Disaggregated revenues by customer type were as follows (in thousands):

	Three Months Ended September 26, 2021
	GMS		NSS		Total
DoD	$	129,261	$	87,886	$	217,147
Other U.S. government agencies	288,543		131,212		419,755
Commercial and non-U.S. customers	30,274		22,338		52,612
Total	$	448,078	$	241,436	$	689,514

	Nine Months Ended September 26, 2021
	GMS		NSS		Total
DoD	$	486,292	$	251,706	$	737,998
Other U.S. government agencies	824,920		383,155		1,208,075
Commercial and non-U.S. customers	169,770		69,436		239,206
Total	$	1,480,982	$	704,297	$	2,185,279

	Three Months Ended September 27, 2020
	GMS		NSS		Total
DoD	$	203,693	$	65,354	$	269,047
Other U.S. government agencies	270,344		57,379		327,723
Commercial and non-U.S. customers	47,309		22,161		69,470
Total	$	521,346	$	144,894	$	666,240

	Nine Months Ended September 27, 2020
	GMS		NSS		Total
DoD	$	595,933	$	194,629	$	790,562
Other U.S. government agencies	781,004		177,535		958,539
Commercial and non-U.S. customers	109,706		67,988		177,694
Total	$	1,486,643	$	440,152	$	1,926,795

Revenues by contract type were as follows (in thousands):

	Three Months Ended September 26, 2021
	GMS		NSS		Total
Cost-reimbursable	$	218,152	$	89,948	$	308,100
Fixed-price	191,530		85,287		276,817
Time and materials	38,396		66,201		104,597
Total	$	448,078	$	241,436	$	689,514

	Nine Months Ended September 26, 2021
	GMS		NSS		Total
Cost-reimbursable	$	764,625	$	273,695	$	1,038,320
Fixed-price	532,789		246,840		779,629
Time and materials	183,568		183,762		367,330
Total	$	1,480,982	$	704,297	$	2,185,279

	Three Months Ended September 27, 2020
	GMS		NSS		Total
Cost-reimbursable	$	302,795	$	35,656	$	338,451
Fixed-price	161,024		62,568		223,592
Time and materials	57,527		46,670		104,197
Total	$	521,346	$	144,894	$	666,240

	Nine Months Ended September 27, 2020
	GMS		NSS		Total
Cost-reimbursable	$	868,780	$	106,848	$	975,628
Fixed-price	481,309		185,218		666,527
Time and materials	136,554		148,086		284,640
Total	$	1,486,643	$	440,152	$	1,926,795

Disaggregated revenues by geographic location were as follows (in thousands):

	Three Months Ended September 26, 2021
	GMS		NSS		Total
United States	$	246,903	$	239,723	$	486,626
International	201,175		1,713		202,888
Total	$	448,078	$	241,436	$	689,514

	Nine Months Ended September 26, 2021
	GMS		NSS		Total
United States	$	801,944	$	700,299	$	1,502,243
International	679,038		3,998		683,036
Total	$	1,480,982	$	704,297	$	2,185,279

	Three Months Ended September 27, 2020
	GMS		NSS		Total
United States	$	275,785	$	142,890	$	418,675
International	245,561		2,004		247,565
Total	$	521,346	$	144,894	$	666,240

	Nine Months Ended September 27, 2020
	GMS		NSS		Total
United States	$	802,230	$	434,904	$	1,237,134
International	684,413		5,248		689,661
Total	$	1,486,643	$	440,152	$	1,926,795

Remaining Performance Obligations

The Company’s remaining performance obligations balance represents the expected revenue to be recognized for the satisfaction of remaining performance obligations on existing contracts. This balance excludes unexercised contract option years and task orders that may be issued underneath an indefinite delivery, indefinite quantity contract. The remaining performance obligations balance as of September 26, 2021 and December 31, 2020 was $1,701.1 million and $1,722.0 million, respectively.

As of September 26, 2021, the Company expects to recognize approximately 87.8% and 12.2% of the remaining performance obligations balance as revenue over the next year and thereafter, respectively.

Contract Assets and Contract Liabilities

Contract assets consist of unbilled receivables, which represent rights to payment for work or services completed but not billed as of the reporting date. Contract assets are recorded as unbilled receivables within accounts receivable, net on the condensed consolidated balance sheets.

Contract liabilities are advances and milestone payments from customers on certain contracts that exceed revenue earned to date. Contract liabilities are recorded as customer advances and billings in excess of costs on the condensed consolidated balance sheets.

Contract assets and contract liabilities consisted of the following as of the dates presented (in thousands):

	September 26,		December 31,
	2021		2020
Contract assets	$	358,345	$	360,552
Contract liabilities	$	106,221	$	106,475

The decrease in contract assets of $2.2 million during the nine months ended September 26, 2021 was primarily due to the timing of billings, partially offset by revenue recognized related to the satisfaction of performance obligations.

The decrease in contract liabilities of $0.3 million during the nine months ended September 26, 2021 was primarily due to the timing of advance payments from customers offset by revenue recognized during the period.

The Company recognized $89.5 million and $34.6 million during the nine months ended September 26, 2021 and September 27, 2020, respectively, relating to amounts that were included in the beginning balance of contract liabilities for each of the periods. The Company recognized $5.9 million and $1.2 million during the three months ended September 26, 2021 and September 27, 2020, respectively, relating to amounts that were included in the beginning balance of contract liabilities for each of the periods.

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Contract Assets and Contract Liabilities

9 Months Ended

Sep. 26, 2021

Revenue from Contract with Customer [Abstract]

Contract Assets and Contract Liabilities

Revenues

Disaggregated Revenues

Disaggregated revenues by customer type were as follows (in thousands):

	Three Months Ended September 26, 2021
	GMS		NSS		Total
DoD	$	129,261	$	87,886	$	217,147
Other U.S. government agencies	288,543		131,212		419,755
Commercial and non-U.S. customers	30,274		22,338		52,612
Total	$	448,078	$	241,436	$	689,514

	Nine Months Ended September 26, 2021
	GMS		NSS		Total
DoD	$	486,292	$	251,706	$	737,998
Other U.S. government agencies	824,920		383,155		1,208,075
Commercial and non-U.S. customers	169,770		69,436		239,206
Total	$	1,480,982	$	704,297	$	2,185,279

	Three Months Ended September 27, 2020
	GMS		NSS		Total
DoD	$	203,693	$	65,354	$	269,047
Other U.S. government agencies	270,344		57,379		327,723
Commercial and non-U.S. customers	47,309		22,161		69,470
Total	$	521,346	$	144,894	$	666,240

	Nine Months Ended September 27, 2020
	GMS		NSS		Total
DoD	$	595,933	$	194,629	$	790,562
Other U.S. government agencies	781,004		177,535		958,539
Commercial and non-U.S. customers	109,706		67,988		177,694
Total	$	1,486,643	$	440,152	$	1,926,795

Revenues by contract type were as follows (in thousands):

	Three Months Ended September 26, 2021
	GMS		NSS		Total
Cost-reimbursable	$	218,152	$	89,948	$	308,100
Fixed-price	191,530		85,287		276,817
Time and materials	38,396		66,201		104,597
Total	$	448,078	$	241,436	$	689,514

	Nine Months Ended September 26, 2021
	GMS		NSS		Total
Cost-reimbursable	$	764,625	$	273,695	$	1,038,320
Fixed-price	532,789		246,840		779,629
Time and materials	183,568		183,762		367,330
Total	$	1,480,982	$	704,297	$	2,185,279

	Three Months Ended September 27, 2020
	GMS		NSS		Total
Cost-reimbursable	$	302,795	$	35,656	$	338,451
Fixed-price	161,024		62,568		223,592
Time and materials	57,527		46,670		104,197
Total	$	521,346	$	144,894	$	666,240

	Nine Months Ended September 27, 2020
	GMS		NSS		Total
Cost-reimbursable	$	868,780	$	106,848	$	975,628
Fixed-price	481,309		185,218		666,527
Time and materials	136,554		148,086		284,640
Total	$	1,486,643	$	440,152	$	1,926,795

Disaggregated revenues by geographic location were as follows (in thousands):

	Three Months Ended September 26, 2021
	GMS		NSS		Total
United States	$	246,903	$	239,723	$	486,626
International	201,175		1,713		202,888
Total	$	448,078	$	241,436	$	689,514

	Nine Months Ended September 26, 2021
	GMS		NSS		Total
United States	$	801,944	$	700,299	$	1,502,243
International	679,038		3,998		683,036
Total	$	1,480,982	$	704,297	$	2,185,279

	Three Months Ended September 27, 2020
	GMS		NSS		Total
United States	$	275,785	$	142,890	$	418,675
International	245,561		2,004		247,565
Total	$	521,346	$	144,894	$	666,240

	Nine Months Ended September 27, 2020
	GMS		NSS		Total
United States	$	802,230	$	434,904	$	1,237,134
International	684,413		5,248		689,661
Total	$	1,486,643	$	440,152	$	1,926,795

Remaining Performance Obligations

The Company’s remaining performance obligations balance represents the expected revenue to be recognized for the satisfaction of remaining performance obligations on existing contracts. This balance excludes unexercised contract option years and task orders that may be issued underneath an indefinite delivery, indefinite quantity contract. The remaining performance obligations balance as of September 26, 2021 and December 31, 2020 was $1,701.1 million and $1,722.0 million, respectively.

As of September 26, 2021, the Company expects to recognize approximately 87.8% and 12.2% of the remaining performance obligations balance as revenue over the next year and thereafter, respectively.

Contract Assets and Contract Liabilities

Contract assets consist of unbilled receivables, which represent rights to payment for work or services completed but not billed as of the reporting date. Contract assets are recorded as unbilled receivables within accounts receivable, net on the condensed consolidated balance sheets.

Contract liabilities are advances and milestone payments from customers on certain contracts that exceed revenue earned to date. Contract liabilities are recorded as customer advances and billings in excess of costs on the condensed consolidated balance sheets.

Contract assets and contract liabilities consisted of the following as of the dates presented (in thousands):

	September 26,		December 31,
	2021		2020
Contract assets	$	358,345	$	360,552
Contract liabilities	$	106,221	$	106,475

The decrease in contract assets of $2.2 million during the nine months ended September 26, 2021 was primarily due to the timing of billings, partially offset by revenue recognized related to the satisfaction of performance obligations.

The decrease in contract liabilities of $0.3 million during the nine months ended September 26, 2021 was primarily due to the timing of advance payments from customers offset by revenue recognized during the period.

The Company recognized $89.5 million and $34.6 million during the nine months ended September 26, 2021 and September 27, 2020, respectively, relating to amounts that were included in the beginning balance of contract liabilities for each of the periods. The Company recognized $5.9 million and $1.2 million during the three months ended September 26, 2021 and September 27, 2020, respectively, relating to amounts that were included in the beginning balance of contract liabilities for each of the periods.

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Business Combinations and Acquisitions

9 Months Ended

Sep. 26, 2021

Business Combination and Asset Acquisition [Abstract]

Business Combinations and Acquisitions

Business Combinations and Acquisitions

As described in Note 1 - “Description of Business,” the Business Combination was consummated on February 10, 2020. For financial accounting and reporting purposes under U.S. GAAP, the Business Combination was accounted for as a reverse acquisition and recapitalization, with no goodwill or other intangible asset recorded. Under this method of accounting, Gores III (legal acquirer) is treated as the acquired entity and Shay (legal acquiree) is deemed to have issued common stock for the net assets and equity of Gores III consisting of mainly cash, accompanied simultaneously by the Recapitalization. The net assets of Gores III are stated at historical cost, and accordingly the equity and net assets of Shay have not been adjusted to fair value. Consequently, the consolidated assets, liabilities and results of operations of Shay are the historical financial statements of PAE Incorporated and the Gores III assets, liabilities and results of operations are consolidated with the assets, liabilities and results of operations of Shay beginning on the Closing Date. Shares and earnings per share information prior to the Business Combination have been retroactively restated to reflect the exchange ratio established in the Recapitalization.

Other than professional fees paid to consummate the transaction, the Business Combination primarily involved the exchange of cash and equity between Gores III, Shay and the stockholders of the respective companies. The aggregate proceeds paid to the Shay Stockholders (as defined below) on the Closing Date was approximately $424.2 million. The remainder of the consideration paid to the Shay Stockholders consisted of 21,127,823 newly issued shares of Class A Common Stock of PAE Incorporated, par value $0.0001 per share (“Class A Common Stock”).

In addition to the foregoing consideration paid on the Closing Date, former stockholders of Shay are entitled to receive additional Earn-Out Shares from PAE of up to an aggregate of 4,000,000 shares of Class A Common Stock if the price of Class A Common Stock trading on the Nasdaq exceeds certain thresholds during the five-year period following the completion of the Business Combination. See Note 11 - “Stockholders’ Equity - Earn-Out Agreement” for additional information.

The Company also has certain warrants issued by Gores III that remain outstanding after the Business Combination.

In connection with the Business Combination, the Company recorded $18.2 million, net of tax as a reduction to additional paid in capital related to the transaction costs. These costs were directly attributable to the Recapitalization. In addition, the Company recorded $3.4 million of transaction costs related to the warrants as non-operating expense in the consolidated statement of operations.

During the third quarter of 2020, pursuant to the post-closing adjustment provisions contained in the Gores Merger Agreement, the Company made a post-closing adjustment payment of $20.2 million to the Shay Stockholders. In addition, the Company paid $1.0 million to certain members of PAE management in connection with the post-closing adjustment, and such amount was recorded as compensation expense.

CENTRA Technology, Inc.

On November 20, 2020, the Company acquired 100% of the capital stock of CENTRA Technology, Inc. (“CENTRA”) for a consideration paid of $225.3 million, net. The results of CENTRA’s operations have been included in the Company’s condensed consolidated financial statements since that date. This business combination expands and differentiates PAE's capabilities in intelligence analysis, communication systems integration and research and development services for intelligence and defense customers.

During the second quarter of 2021, the Company made a payment of $1.4 million related to the working capital adjustment, pursuant to the Stock Purchase Agreement (as defined below).

The Company has completed the purchase accounting valuation for this acquisition and recorded final purchase accounting adjustments. As a result, the Company recognized fair values of assets acquired of $177.4 million and assumed liabilities of $77.2 million allocating $126.4 million to goodwill and $74.1 million to intangible assets. The goodwill of $126.4 million arising from the acquisition relates primarily to revenue and cost synergies. This goodwill is not deductible for tax purposes.

Metis Solutions Corporation

On November 23, 2020, the Company completed the acquisition of 100% of the capital stock of Metis Solutions Corporation (“Metis”) for a consideration paid of $95.7 million in cash. The results of Metis’s operations have been included in the condensed consolidated financial statements since that date. This business combination expands and differentiates PAE's capabilities in intelligence analysis, training and program support for intelligence and defense customers.

During the second quarter of 2021, pursuant to the purchase price adjustment provisions of the Metis Merger Agreement (as defined below), the Company made a payment of $0.5 million to the option holders as a result of a closing adjustment.

The Company has completed the purchase accounting valuation for this acquisition and recorded final purchase accounting adjustments. As a result, the Company recognized fair values of assets acquired of $60.4 million and assumed liabilities of $20.7 million allocating $56.5 million to goodwill and $37.8 million to intangible assets. The goodwill of $56.5 million arising from the acquisition relates primarily to revenue and cost synergies. This goodwill is not deductible for tax purposes.

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Accounts Receivable, net

9 Months Ended

Sep. 26, 2021

Receivables [Abstract]

Accounts Receivable, net

Accounts Receivable, net

The components of accounts receivable, net consisted of the following as of the dates presented (in thousands):

	September 26,		December 31,
	2021		2020
Billed receivables	$	170,005	$	227,787
Unbilled receivables	358,345		360,552
Less allowance for credit losses	(3,643)		(2,828)
Total accounts receivables, net	$	524,707	$	585,511

As of September 26, 2021 approximately 92.4% of the Company’s accounts receivable are with the U.S. government.

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Goodwill and Intangible Assets, net

9 Months Ended

Sep. 26, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets, net

Goodwill and Intangible Assets, net

Goodwill

There was no impairment for the three month and nine month periods ended September 26, 2021 and September 27, 2020, respectively.

Intangible Assets, net

The components of intangible assets, net consisted of the following as of the dates presented (in thousands):

	September 26, 2021
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Customer relationships	$	390,900	$	(184,427)	$	206,473
Technology	1,700		(1,700)		—
Trade name	24,800		(10,539)		14,261
Total	$	417,400	$	(196,666)	$	220,734
	December 31, 2020
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Customer relationships	$	390,900	$	(149,163)	$	241,737
Technology	1,700		(1,700)		—
Trade name	24,800		(8,327)		16,473
Total	$	417,400	$	(159,190)	$	258,210

As of the nine months period ended September 26, 2021, customer relationships and trade name intangibles had weighted average remaining useful lives of 7.6 years and 5.2 years, respectively.

For the nine months ended September 26, 2021 and September 27, 2020, amortization expense was approximately $37.5 million and $24.1 million, respectively. For the three months ended September 26, 2021 and September 27, 2020, amortization expense was approximately $12.6 million and $8.0 million, respectively.

Estimated amortization expense in future years is expected to be:

	As of
	September 26, 2021
Remainder of 2021	$	12,630
2022	50,089
2023	40,666
2024	33,782
2025	28,015
Thereafter	55,552
Total	$	220,734

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Consolidated Ventures

9 Months Ended

Sep. 26, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Consolidated Ventures

Consolidated Ventures

The Company consolidates an investment when it has determined that the investment is a variable interest entity (“VIE”) and that the Company is the primary beneficiary. As the primary beneficiary, the Company has a risk and obligation to absorb any losses significant to the VIE and the power, through voting rights or similar rights, to direct the activities that could impact economic performance of the VIE. The use of the assets of the VIEs to settle the Company’s liabilities is subject to the approval of the managing body of each VIE.

The cash flows generated by these VIEs are included within the Company’s condensed consolidated statements of cash flows. The condensed consolidated balance sheets include the following amounts from these consolidated VIEs as of the dates presented (in thousands):

	September 26,		December 31,
	2021		2020
Assets
Total assets	$	149,866	$	145,664
Liabilities and equity
Total liabilities	$	99,559	$	96,318
Total equity	50,307		49,346
Total liabilities and equity	$	149,866	$	145,664

The condensed consolidated statements of operations include the following amounts from consolidated VIEs for the periods presented (in thousands):

	Three Months Ended				Nine Months Ended
	September 26,		September 27,		September 26,		September 27,
	2021		2020		2021		2020
Income statements
Revenues	$	97,986	$	87,324	$	300,999	$	268,969
Cost of revenues	82,913		70,707		249,013		215,866
Selling, general and administrative expenses	18,998		16,595		55,289		50,477
Total operating expenses	101,911		87,302		304,302		266,343
Program (loss) income	(3,925)		22		(3,303)		2,626
Other loss, net	(96)		(32)		(715)		(241)
Net (loss) income	$	(4,021)	$	(10)	$	(4,018)	$	2,385

DZSP 21 LLC

On January 31, 2021, the Company, acquired the 49.0% minority interest in the DZSP 21 LLC (“DZSP”) joint venture from Parsons Government Services, Inc. for total consideration of $15.8 million. Following the completion of this transaction, the Company owns 100% of DZSP.

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Debt

9 Months Ended

Sep. 26, 2021

Debt Disclosure [Abstract]

Debt

Debt

Long-term debt consisted of the following as of the dates presented (in thousands):

	September 26,		December 31,
	2021		2020
First Term Loan	$	885,550	$	890,000
Other debt	8,051		—
Total debt	893,601		890,000
Unamortized discount and debt issuance costs	(21,549)		(23,733)
Total debt, net of discount and debt issuance costs	872,052		866,267
Less current maturities of long-term debt	(7,036)		(5,961)
Total long-term debt, net of current	$	865,016	$	860,306

Credit Agreements

Term Loan

On October 19, 2020, the Company refinanced the 2016 credit agreements (comprised of (i) a first lien term loan credit agreement, as amended; (ii) a second lien term loan credit agreement, as amended; and (iii) a revolving credit facility, as amended, each dated as of October 26, 2016) (the “2016 Credit Agreements”) and entered into new senior secured credit facilities (the “2020 Credit Agreements”). The 2020 Credit Agreements provide for borrowings up to $890.0 million. The 2020 Credit Agreements established a $740.0 million term loan facility maturing in October 2027 priced at LIBOR plus a spread of 4.5%, a $150.0 million delayed draw term loan facility maturing in October 2027 priced at LIBOR plus a spread of 4.5% (together the “First Term Loan”), and a $175.0 million senior secured revolving credit facility (the “2020 ABL Credit Agreement”) maturing in October 2025 priced at LIBOR plus a spread of 1.8% to 2.3%.

The 2020 Credit Agreements require the Company to comply with specified financial covenants under certain circumstances, including the maintenance of certain leverage ratios.

The 2020 Credit Agreements also contain various non-financial covenants, including affirmative covenants with respect to reporting requirements and maintenance of business activities, and negative covenants that, among other things, may limit or impose restrictions on the Company’s ability to alter the character of the business, consolidate, merge, or sell assets, incur liens or additional indebtedness, make investments, and undertake certain additional actions.

PAE was in compliance with the financial covenants under the 2020 Credit Agreements as of September 26, 2021 and December 31, 2020, respectively.

Equipment Notes

The Company, through DZSP, entered into a line of credit with Bank of America for the financing of program specific equipment through the issuance of secured loan notes. Each note represents a separate and independent financing of equipment. As of September 26, 2021, PAE has two outstanding equipment loan notes (the “Equipment Notes”) in an aggregate amount of $8.1 million with a maturity date of March 2028 and August 2028, respectively.

The interest rate per annum applicable to the Equipment Notes is equal to a fixed rate of 2.8% and 2.9%, respectively.

Future principal maturities of the Company’s long-term debt are summarized as follows (in thousands):

	As of
	September 26, 2021
Remainder of 2021	$	4,759
2022	10,016
2023	10,048
2024	10,082
2025	10,116
Thereafter	848,580
Total	$	893,601

As of September 26, 2021 and December 31, 2020, the available borrowing capacity under the 2020 ABL Credit Agreement was approximately $151.8 million and $132.8 million, respectively.

Interest Rates on Credit Agreements

The interest rate per annum applicable to amounts borrowed under the First Term Loan is equal to either the Base Rate (as defined below) or the LIBO Rate (as defined below), in either case, plus (i) 4.5% in the case of the Base Rate loans and (ii) 3.5% in the case of LIBO Rate loans.

The “Base Rate” is defined as a fluctuating rate per annum equal to the highest of (a) the Federal Funds Rate plus one half of one percent, (b) the rate of interest in effect for such day as publicly announced from time to time by Bank of America (“BofA”) as its “prime rate,” and (c) the LIBO Rate for a LIBO Rate Term Loan with a one month interest period commencing on such day plus 1.0%. The “prime rate” is a rate set by BofA based upon various factors including BofA’s costs and desired return, general economic conditions and other factors. The “LIBO Rate” is defined as the rate per annum equal to the London Interbank Offered Rate or a comparable or successor rate, whichever rate is approved by the Administrative Agent (as that term is defined in the 2020 Credit Agreements).

As of September 26, 2021 and December 31, 2020, the applicable interest rate on the amounts borrowed under the First Term Loan was 5.3% for each period, respectively.

The interest rate per annum applicable to the 2020 Credit Agreements is equal to either a Base Rate or a LIBO Rate plus (i) a range of 0.8% to 1.3% in the case of Base Rate loans and (ii) a range of 1.8% to 2.3% in the case of LIBO Rate loans, each based on average availability as of the first day of each quarter.

As of September 26, 2021 and December 31, 2020, the applicable interest rate on amounts borrowed under the 2020 Revolving Credit Facility was 4.0% for each period, respectively.

Letters of Credit

The Company had ten outstanding letters of credit for program and insurance requirements totaling approximately $23.2 million as of September 26, 2021 and 13 outstanding letters of credit for program and insurance requirements totaling approximately $23.9 million as of December 31, 2020.

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Stockholders' Equity

9 Months Ended

Sep. 26, 2021

Equity [Abstract]

Stockholders' Equity

Stockholders’ Equity

Authorized and Outstanding Stock

In connection with the Business Combination, the Company made changes to its capital stock. The Company’s amended and restated certificate of incorporation authorizes the issuance of 211,000,000 shares of capital stock, par value of $0.0001 per share, consisting of (a) 210,000,000 shares of Class A common stock, and (b) 1,000,000 shares of preferred stock.

As a result of the Business Combination, the shares issued to Shay Stockholders are reflected as if they were issued and outstanding as of the earliest reported period to reflect the new capital structure.

Earn-Out Agreement

In connection with the Business Combination, stockholders of Shay immediately prior to the transaction (which stockholders consisted of certain affiliates of Platinum Equity, LLC and members of PAE management (the “Shay Stockholders”)) are entitled to receive up to an aggregate of 4,000,000 additional shares of Class A Common Stock (the “Earn-Out Shares”) if at any time during the five-year period following the Closing Date (the “Earn-Out Period”) the volume weighted average closing sale price of one share of Class A Common Stock on the Nasdaq (or the exchange which shares of Class A Common Stock are then listed) for a period of at least 10 days out of 20 consecutive trading days (the “Common Share Price”) exceeds certain thresholds, as described below.

The thresholds (each a “Triggering Event”) causing the Earn-Out Shares to be issued by the Company to the Shay Stockholders is any such event that occurs within the Earn-Out period as follows: (i) a one-time issuance of 1,000,000 shares if the Common Share Price is greater than $13.00; (ii) a one-time issuance of 1,000,000 shares if the Common Share Price is greater than $15.50; (iii) a one-time issuance of 1,000,000 shares if the Common Share Price is greater than $18.00; and (iv) a one-time issuance of 1,000,000 shares if the Common Share Price is greater than $20.50.

Further, if during the Earn-Out Period there is a change in control (as defined in the Gores Merger Agreement) that results in the holders of Class A Common Stock receiving a per share price in respect of their Class A Common Stock that is equal to or greater than the applicable Common Share Price required in connection with any Triggering Event (an “Acceleration Event”), then any such Triggering Event that has not previously occurred will be deemed to have occurred, and the Company must issue Earn-Out Shares accordingly.

If no Triggering Event is achieved within the Earn-Out Period, the Company will not be required to issue the Earn-Out Shares. No Triggering Event was achieved during the three month and nine month periods ended September 26, 2021.

Any transactions related to Earn-Out Shares are recorded within the stockholders’ equity section of the Company’s condensed consolidated financial statements. Earn-Out Shares will be recognized as stock dividends and recorded at fair value when they are effective upon achievement of a Triggering Event.

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Net Income Per Share

9 Months Ended

Sep. 26, 2021

Earnings Per Share [Abstract]

Net Income Per Share

Net Income Per ShareBasic net income per common share is determined by dividing the net income attributed to stockholders by the weighted average number of common shares outstanding during the period presented. Diluted income per share is determined by adjusting the weighted average number of shares of common stock and common stock equivalents outstanding for the dilutive effect of common stock equivalents for the periods presented.

The following table sets forth the computation of basic and diluted income per share attributable to the Company’s common stockholders for the periods presented (in thousands, except shares and per share amounts): 

	Three Months Ended				Nine Months Ended
	September 26,		September 27,		September 26,		September 27,
	2021		2020		2021		2020
Numerator:
Net income attributed to PAE Incorporated	$	29,789	$	15,318	$	57,523	$	37,855
Denominator:
Basic weighted average shares	93,122,414		92,070,306		92,949,301		81,323,258
Diluted weighted average shares	95,836,986		93,392,565		95,599,019		82,115,825
Basic income per share	$	0.32	$	0.17	$	0.62	$	0.47
Diluted income per share	$	0.31	$	0.16	$	0.60	$	0.46

The Company has not included the effect of 19,999,985 shares of Common Stock issuable upon the exercise of warrants in the calculation of diluted net income per share for the three months and nine months ended September 26, 2021. Warrants are excluded when the exercise price exceeds the average market value of the Company’s common stock price during the applicable period.

The Company has not included the effect of 4,000,000 Earn-Out Shares in the calculation of basic and diluted net income per share for the three months and nine months ended September 26, 2021. The condition for the issuance of these shares is based on the weighted average closing sale price of the Company’s Class A Common Stock and such condition has not been met as of September 26, 2021.

Unvested RSUs and PSUs will not impact the calculation of basic earnings per share (“EPS”) until vested, in which case they would be included in the total weighted average number of shares. All potential dilutive securities, which include unvested RSUs, are included in the diluted EPS calculation. Unvested PSUs are included in the calculation of diluted EPS to the extent that the performance criteria have been achieved.

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Leases

9 Months Ended

Sep. 26, 2021

Leases [Abstract]

Leases

Leases

As of September 26, 2021, the Company had right-of-use (“ROU”) assets, net of $192.6 million and lease liabilities of $197.5 million recorded on the condensed consolidated balance sheet.

The Company rents certain facilities and equipment under operating leases. The Company’s total lease cost is recorded primarily within selling, general and administrative expenses on the condensed consolidated statements of operations. Rents which are directly chargeable to a project are charged to cost of revenues.

During the three month and nine month periods ended September 26, 2021, the Company recognized operating lease costs of approximately $15.3 million and $46.1 million, respectively.

The Company’s future minimum operating lease payments for noncancelable operating leases were as follows (in thousands):

	September 26, 2021
Remainder of 2021	$	12,432
2022	47,908
2023	43,401
2024	35,333
2025	28,928
Thereafter	69,772
Total future minimum lease payments	237,774
Less imputed interest	40,289
Present value of minimum lease payments	197,485
Less current maturities of lease liabilities	47,205
Long-term lease liabilities	$	150,280

The weighted-average remaining lease term and the weighted-average discount rate for the Company’s operating leases were approximately 6.6 years and 6.0%, respectively, at September 26, 2021.

The Company made cash payments of approximately $12.2 million and $36.5 million for operating leases for the three month and nine month periods ended September 26, 2021, which are included in cash flows from operating activities in the condensed consolidated statement of cash flows.

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Fair Value Measurements

9 Months Ended

Sep. 26, 2021

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between marketplace participants at the measurement date. The valuation techniques the Company utilizes to measure the fair value of financial instruments are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions.

These two types of inputs create the following fair value hierarchy:

•Level 1 – Quoted prices for identical instruments in observable active markets.

•Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

•Level 3 – Significant inputs to the valuation model are unobservable and reflect the Company’s own estimates and assumptions.

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, and amounts included in other current assets and current liabilities that meet the definition of a financial instrument approximate fair value because of the short-term nature of these amounts.

The carrying value of the Company’s outstanding debt obligations approximates its fair value. The fair value of long-term debt is calculated using Level 2 inputs, based on interest rates available for debt with terms and maturities similar to the Company’s 2020 Credit Agreements.

The warrant liability is measured at fair value at each reporting period and changes in fair value are recorded in other income, net. The public warrants liability is measured using Level 1 inputs based on observable active markets. The private placement warrants liability is measured using Level 3 inputs using the Black-Scholes option pricing model. The significant assumptions the Company used in the model are:

Valuation Inputs	September 26, 2021			December 31, 2020
Asset price	$	5.7		$	9.2
Exercise price	$	11.5		$	11.5
Contractual term	3.4			4.1
Volatility	84.1		%	50.0		%
Risk-free rate of return	0.6		%	0.3		%
Dividend yield	—		%	—		%

Details of the changes in fair value for the public warrants and private placement warrants are as follows:

Public warrant liability	September 26, 2021
Public warrant liability as of December 31	$	30,667
Changes in fair value	(13,200)
Ending public warrant liability	$	17,467

Private warrant liability	September 26, 2021
Private warrant liability as of December 31	$	19,800
Changes in fair value	(4,333)
Ending private warrant liability	$	15,467

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Legal Proceedings, Commitments, and Contingencies	9 Months Ended
	Sep. 26, 2021
Commitments and Contingencies Disclosure [Abstract]
Legal Proceedings, Commitments, and Contingencies	Legal Proceedings, Commitments, and ContingenciesThe Company is a party to, or has property subject to, litigation and other proceedings. Management believes the probability is remote that the outcome of the matters will have a material adverse effect on its operations as a whole, notwithstanding that the unfavorable resolution of any matter may have a material effect on net earnings in a future period. The Company cannot predict the outcome of legal proceedings and loss or range of loss contingencies with certainty.

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Segment Reporting

9 Months Ended

Sep. 26, 2021

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting

The Company's operations and reportable segments are organized around the nature of the services and products provided to customers. The Company defines its reportable segments based on the way the chief operating decision maker (“CODM”) manages the operations of the Company for purposes of allocating resources and assessing performance.

The GMS operating segment provides support to the U.S. Government and its partners within and outside the United States providing sustainment, training and readiness support and advancing foreign policy objectives. The NSS operating segment provides a wide-ranging portfolio of offerings that support all facets of national security, including intelligence, homeland security and civil government missions.

While the CODM uses a variety of different measures to evaluate the Company’s segments, the primary measures used to evaluate segment performance and allocate resources are revenues and operating income. As a result, interest expense, net and provision for income taxes as recorded on the condensed consolidated statements of operations are not allocated to the Company’s operating segments.

The following table shows information by reportable segment for the periods presented (in thousands):

	Three Months Ended				Nine Months Ended
	September 26,		September 27,		September 26,		September 27,
	2021		2020		2021		2020
Revenues
GMS	$	448,078	$	521,346	$	1,480,982	$	1,486,643
NSS	241,436		144,894		704,297		440,152
Corporate	—		—		—		—
Total revenues	$	689,514	$	666,240	$	2,185,279	$	1,926,795
Operating income (loss)
GMS	$	20,459	$	31,401	$	73,673	$	75,541
NSS	13,091		5,679		33,729		17,770
Corporate	(7,514)		(8,548)		(24,409)		(23,027)
Total operating income	$	26,036	$	28,532	$	82,993	$	70,284
Amortization of intangible assets
GMS	$	4,161	$	4,115	$	12,483	$	12,346
NSS	8,469		3,932		24,993		11,795
Corporate			—		—		—
Total amortization of intangible assets	$	12,630	$	8,047	$	37,476	$	24,141

Under U.S. Government cost accounting standards, indirect costs including depreciation expense are collected in numerous indirect cost pools, which are then collectively allocated to the Company’s reportable segments based on a representative causal or beneficial relationship of the costs in the pool to the costs in the base. While depreciation expense is a component of the allocated costs, the allocation process precludes depreciation expense from being

specifically identified by the Company’s individual reportable segments. For this reason, depreciation expense by reportable segment is not presented separately above.

Asset information by segment is not a key measure of performance used by the CODM and therefore segment assets are not presented.

Less than 10.0% of the Company’s revenues and tangible long-lived assets are generated by or owned by entities outside of the United States. Therefore, additional segment financial information by geographic location is not presented.

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Related-Party Transactions

9 Months Ended

Sep. 26, 2021

Related Party Transactions [Abstract]

Related-Party Transactions

Related-Party Transactions

Tax Overpayment/Underpayment Amount

In connection with the Business Combination, the Shay Stockholders are entitled to a payment of the net cash savings in U.S. federal, state and local income tax that the post-closing company actually realizes (or is deemed to realize in certain circumstances) in periods after the Closing Date. The liability for this estimated payment and the corresponding charge to equity of $4.7 million are reflected in the Company’s consolidated balance sheet as of September 26, 2021.

Advisory Services

During the nine months ended September 26, 2021, there were no management fees, transaction and advisory fee recognized related to any of the Company’s affiliates. During the nine months ended September 27, 2020, the Company recognized management fees, transaction and advisory fees, and related expenses of approximately $15.8 million. These expenses were for services rendered by one or more affiliates of Platinum Equity, LLC. As a result of the Business Combination, $15.0 million was included with other similar transactional expenses and recorded as a reduction to the recapitalized equity and $0.8 million was recorded in selling, general and administrative expenses.

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Income Taxes

9 Months Ended

Sep. 26, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company’s provision for income tax expense (benefits) was approximately $1.5 million and $6.7 million and its effective income tax rates were 5.1% and 10.9% for the three months and nine months period ended September 26, 2021, respectively. The Company’s provision for income tax expense (benefits) were approximately $4.2 million, and $(1.6) million and its effective income tax rates were 21.0% and (4.2)% for the three months and nine months periods ended September 27, 2020, respectively.

The provision for income taxes for the period ended September 26, 2021 differed from the U.S. federal statutory rate computed by applying the U.S. federal statutory rate to income or loss before income taxes primarily due to the benefit of Foreign Derived Intangible Income (“FDII”), nontaxable income including the fair value adjustment for warrants, offset by the effect of foreign operations. The provision for income taxes for the period ended September 27, 2020 differed from the U.S. federal statutory rate computed by applying the U.S. federal statutory rate to income or loss before income taxes primarily due to the benefit of FDII, increased prior year interest expense deduction under the Coronavirus Aid, Relief and Economic Security Act (as amended, the “CARES Act”) adjustments, nontaxable income including the fair value adjustment for warrants, and settlement of foreign taxes, offset by disallowed compensation deduction under Internal Revenue Code Section 162(m) and disallowed transaction costs.

On March 27, 2020, the CARES Act was signed into law. Under the CARES Act, the Company deferred $37.0 million of employer share of Social Security tax that will be paid equally by December 31, 2021 and 2022.

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Subsequent Events	9 Months Ended
	Sep. 26, 2021
Subsequent Events [Abstract]
Subsequent Events	Subsequent EventsOn October 25, 2021, PAE Incorporated (the “Company”) entered into an Agreement and Plan of Merger (the “Amentum Merger Agreement”) with Amentum Government Services Holdings LLC (“Parent”) and Pinnacle Virginia Merger Sub Inc., an indirect wholly-owned subsidiary of Parent (“Merger Sub”), providing for the merger of Merger Sub with and into the Company (the “Merger”), with the Company continuing as the surviving company of the Merger and an indirect wholly-owned subsidiary of Parent (the “Surviving Corporation”). Pursuant to the terms and conditions set forth in the Amentum Merger Agreement, at the effective time of the merger (the “Effective Time”), each share of Class A common stock par value $0.0001 of the Company outstanding as of immediately prior to the Effective Time will automatically be canceled, extinguished and converted into the right to receive an amount equal to $10.05 in cash per share, net any applicable withholding and without interest. The Amentum Merger Agreement prohibits the Company and its advisors and representatives from soliciting, encouraging, providing information or entering into discussions concerning proposals relating to alternative business combination transactions, subject to certain limited exceptions. However, during the period beginning on October 25, 2021 and continuing until November 29, 2021 (the “Go-Shop Period”), the Company is permitted to take such actions with respect to certain competing acquisition proposals. At the end of the Go-Shop Period, the Company will cease such activities and will be subject to customary “no shop” restrictions on its ability to solicit third party proposals relating to competing acquisition proposals or to provide information to and engage in discussions with certain third parties. In the event the Amentum Merger Agreement is terminated by the Company in certain circumstances, the Company may be required to pay a termination fee of either $15.0 million or $30.0 million (including in order to enter into a definitive agreement with respect to a Company Superior Proposal, as defined in the Amentum Merger Agreement) to the Parent. The termination rights of the parties to the Amentum Merger Agreement are subject to certain notice, cure and other rights.

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Significant Accounting Principles and Policies (Policies)

9 Months Ended

Sep. 26, 2021

Accounting Policies [Abstract]

Segment Reporting

The Company’s operations are currently organized into the following two reportable segments:

•Global Mission Services (“GMS”): GMS provides infrastructure and logistics management, international logistics and stabilization support, and aircraft and vehicle readiness and sustainment support. The segment focuses on customer relationships with DoD, DoS, NASA, and other government agencies for work both in the United States and outside of the United States.

•National Security Solutions (“NSS”): NSS provides counter-threat solutions, business process outsourcing, adjudication support services and full life cycle support for complex legal matters. NSS focuses on customer relationships in the areas of intelligence, defense and security, and with civilian agencies.

Basis of Presentation

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) for annual financial information. In management’s opinion, all adjustments, consisting of only normal recurring adjustments, considered necessary for a fair presentation have been included.

The Company closes its books and records on the last Sunday of the calendar quarter to align its financial closing with its business process, which were on September 26, 2021 and September 27, 2020, respectively. The condensed consolidated financial statements and disclosures included herein are labeled based on that convention. This practice only affects interim periods, as the Company’s fiscal year ends on December 31.

The condensed consolidated financial statements include the accounts of PAE Incorporated and subsidiaries and ventures in which the Company owns more than 50% or otherwise controls. All intercompany amounts have been eliminated in consolidation.

Use of Estimates

Use of Estimates

These condensed consolidated financial statements are prepared in conformity with U.S. GAAP, which requires the use of estimates and assumptions, including assumptions to determine the fair value of acquired assets and liabilities, recoverability of long-lived assets, goodwill, valuation allowances on deferred taxes, inputs used in stock based compensation, inputs in the valuation of the warrants liability and anticipated contract costs and revenues utilized in the earnings recognition process, which affect the reported amounts in the condensed consolidated financial statements and accompanying notes. Due to the size and nature of many of the Company’s programs, the estimation of total revenues and cost at completion is subject to a wide range of variables, including assumptions for timing and risks. Actual results may differ from management’s estimates and changes in these estimates are recorded when known.

Accounting Pronouncements Adopted and Accounting Pronouncements Not Yet Adopted

Accounting Pronouncements Adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-12 simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740 related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 is effective in 2021 and interim periods within that year and permits for an early adoption. The Company adopted ASU 2019-12 effective January 1, 2021. The adoption of the guidance did not have a material impact on its financial statements and related disclosures.

Accounting Pronouncements Not Yet Adopted

In March 2020, the FASB issued ASU 2020-04 Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by the reference rate reform. The amendments in ASU 2020-04 are effective for all entities as of March 12, 2020 through December 31, 2022. The Company is currently evaluating the impact this guidance will have on its condensed consolidated financial statements and related disclosures.

Fair Value of Financial Instruments

Fair value is the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between marketplace participants at the measurement date. The valuation techniques the Company utilizes to measure the fair value of financial instruments are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions.

These two types of inputs create the following fair value hierarchy:

•Level 1 – Quoted prices for identical instruments in observable active markets.

•Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

•Level 3 – Significant inputs to the valuation model are unobservable and reflect the Company’s own estimates and assumptions.

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, and amounts included in other current assets and current liabilities that meet the definition of a financial instrument approximate fair value because of the short-term nature of these amounts.

The carrying value of the Company’s outstanding debt obligations approximates its fair value. The fair value of long-term debt is calculated using Level 2 inputs, based on interest rates available for debt with terms and maturities similar to the Company’s 2020 Credit Agreements.The warrant liability is measured at fair value at each reporting period and changes in fair value are recorded in other income, net. The public warrants liability is measured using Level 1 inputs based on observable active markets. The private placement warrants liability is measured using Level 3 inputs using the Black-Scholes option pricing model.

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Revenues (Tables)

9 Months Ended

Sep. 26, 2021

Revenue from Contract with Customer [Abstract]

Disaggregated Revenues

Disaggregated revenues by customer type were as follows (in thousands):

	Three Months Ended September 26, 2021
	GMS		NSS		Total
DoD	$	129,261	$	87,886	$	217,147
Other U.S. government agencies	288,543		131,212		419,755
Commercial and non-U.S. customers	30,274		22,338		52,612
Total	$	448,078	$	241,436	$	689,514

	Nine Months Ended September 26, 2021
	GMS		NSS		Total
DoD	$	486,292	$	251,706	$	737,998
Other U.S. government agencies	824,920		383,155		1,208,075
Commercial and non-U.S. customers	169,770		69,436		239,206
Total	$	1,480,982	$	704,297	$	2,185,279

	Three Months Ended September 27, 2020
	GMS		NSS		Total
DoD	$	203,693	$	65,354	$	269,047
Other U.S. government agencies	270,344		57,379		327,723
Commercial and non-U.S. customers	47,309		22,161		69,470
Total	$	521,346	$	144,894	$	666,240

	Nine Months Ended September 27, 2020
	GMS		NSS		Total
DoD	$	595,933	$	194,629	$	790,562
Other U.S. government agencies	781,004		177,535		958,539
Commercial and non-U.S. customers	109,706		67,988		177,694
Total	$	1,486,643	$	440,152	$	1,926,795

Revenues by contract type were as follows (in thousands):

	Three Months Ended September 26, 2021
	GMS		NSS		Total
Cost-reimbursable	$	218,152	$	89,948	$	308,100
Fixed-price	191,530		85,287		276,817
Time and materials	38,396		66,201		104,597
Total	$	448,078	$	241,436	$	689,514

	Nine Months Ended September 26, 2021
	GMS		NSS		Total
Cost-reimbursable	$	764,625	$	273,695	$	1,038,320
Fixed-price	532,789		246,840		779,629
Time and materials	183,568		183,762		367,330
Total	$	1,480,982	$	704,297	$	2,185,279

	Three Months Ended September 27, 2020
	GMS		NSS		Total
Cost-reimbursable	$	302,795	$	35,656	$	338,451
Fixed-price	161,024		62,568		223,592
Time and materials	57,527		46,670		104,197
Total	$	521,346	$	144,894	$	666,240

	Nine Months Ended September 27, 2020
	GMS		NSS		Total
Cost-reimbursable	$	868,780	$	106,848	$	975,628
Fixed-price	481,309		185,218		666,527
Time and materials	136,554		148,086		284,640
Total	$	1,486,643	$	440,152	$	1,926,795

Disaggregated revenues by geographic location were as follows (in thousands):

	Three Months Ended September 26, 2021
	GMS		NSS		Total
United States	$	246,903	$	239,723	$	486,626
International	201,175		1,713		202,888
Total	$	448,078	$	241,436	$	689,514

	Nine Months Ended September 26, 2021
	GMS		NSS		Total
United States	$	801,944	$	700,299	$	1,502,243
International	679,038		3,998		683,036
Total	$	1,480,982	$	704,297	$	2,185,279

	Three Months Ended September 27, 2020
	GMS		NSS		Total
United States	$	275,785	$	142,890	$	418,675
International	245,561		2,004		247,565
Total	$	521,346	$	144,894	$	666,240

	Nine Months Ended September 27, 2020
	GMS		NSS		Total
United States	$	802,230	$	434,904	$	1,237,134
International	684,413		5,248		689,661
Total	$	1,486,643	$	440,152	$	1,926,795

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Contract Assets and Contract Liabilities (Tables)

9 Months Ended

Sep. 26, 2021

Revenue from Contract with Customer [Abstract]

Components of Contract Assets and Contract Liabilities

Contract assets and contract liabilities consisted of the following as of the dates presented (in thousands):

	September 26,		December 31,
	2021		2020
Contract assets	$	358,345	$	360,552
Contract liabilities	$	106,221	$	106,475

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Accounts Receivable, net (Tables)

9 Months Ended

Sep. 26, 2021

Receivables [Abstract]

Components of Accounts Receivable, Net

The components of accounts receivable, net consisted of the following as of the dates presented (in thousands):

	September 26,		December 31,
	2021		2020
Billed receivables	$	170,005	$	227,787
Unbilled receivables	358,345		360,552
Less allowance for credit losses	(3,643)		(2,828)
Total accounts receivables, net	$	524,707	$	585,511

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Goodwill and Intangible Assets, net (Tables)

9 Months Ended

Sep. 26, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets, net

The components of intangible assets, net consisted of the following as of the dates presented (in thousands):

	September 26, 2021
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Customer relationships	$	390,900	$	(184,427)	$	206,473
Technology	1,700		(1,700)		—
Trade name	24,800		(10,539)		14,261
Total	$	417,400	$	(196,666)	$	220,734
	December 31, 2020
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Customer relationships	$	390,900	$	(149,163)	$	241,737
Technology	1,700		(1,700)		—
Trade name	24,800		(8,327)		16,473
Total	$	417,400	$	(159,190)	$	258,210

Estimated Amortization Expense in Future Years

Estimated amortization expense in future years is expected to be:

	As of
	September 26, 2021
Remainder of 2021	$	12,630
2022	50,089
2023	40,666
2024	33,782
2025	28,015
Thereafter	55,552
Total	$	220,734

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Consolidated Ventures (Tables)

9 Months Ended

Sep. 26, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Schedule of Variable Interest Entities

The cash flows generated by these VIEs are included within the Company’s condensed consolidated statements of cash flows. The condensed consolidated balance sheets include the following amounts from these consolidated VIEs as of the dates presented (in thousands):

	September 26,		December 31,
	2021		2020
Assets
Total assets	$	149,866	$	145,664
Liabilities and equity
Total liabilities	$	99,559	$	96,318
Total equity	50,307		49,346
Total liabilities and equity	$	149,866	$	145,664

The condensed consolidated statements of operations include the following amounts from consolidated VIEs for the periods presented (in thousands):

	Three Months Ended				Nine Months Ended
	September 26,		September 27,		September 26,		September 27,
	2021		2020		2021		2020
Income statements
Revenues	$	97,986	$	87,324	$	300,999	$	268,969
Cost of revenues	82,913		70,707		249,013		215,866
Selling, general and administrative expenses	18,998		16,595		55,289		50,477
Total operating expenses	101,911		87,302		304,302		266,343
Program (loss) income	(3,925)		22		(3,303)		2,626
Other loss, net	(96)		(32)		(715)		(241)
Net (loss) income	$	(4,021)	$	(10)	$	(4,018)	$	2,385

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Debt (Tables)

9 Months Ended

Sep. 26, 2021

Debt Disclosure [Abstract]

Long-term Debt

Long-term debt consisted of the following as of the dates presented (in thousands):

	September 26,		December 31,
	2021		2020
First Term Loan	$	885,550	$	890,000
Other debt	8,051		—
Total debt	893,601		890,000
Unamortized discount and debt issuance costs	(21,549)		(23,733)
Total debt, net of discount and debt issuance costs	872,052		866,267
Less current maturities of long-term debt	(7,036)		(5,961)
Total long-term debt, net of current	$	865,016	$	860,306

Future Principal Maturities of Long-Term Debt

Future principal maturities of the Company’s long-term debt are summarized as follows (in thousands):

	As of
	September 26, 2021
Remainder of 2021	$	4,759
2022	10,016
2023	10,048
2024	10,082
2025	10,116
Thereafter	848,580
Total	$	893,601

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Net Income Per Share (Tables)

9 Months Ended

Sep. 26, 2021

Earnings Per Share [Abstract]

Computation of Basic and Diluted Income Per Share

The following table sets forth the computation of basic and diluted income per share attributable to the Company’s common stockholders for the periods presented (in thousands, except shares and per share amounts): 

	Three Months Ended				Nine Months Ended
	September 26,		September 27,		September 26,		September 27,
	2021		2020		2021		2020
Numerator:
Net income attributed to PAE Incorporated	$	29,789	$	15,318	$	57,523	$	37,855
Denominator:
Basic weighted average shares	93,122,414		92,070,306		92,949,301		81,323,258
Diluted weighted average shares	95,836,986		93,392,565		95,599,019		82,115,825
Basic income per share	$	0.32	$	0.17	$	0.62	$	0.47
Diluted income per share	$	0.31	$	0.16	$	0.60	$	0.46

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Leases (Tables)

9 Months Ended

Sep. 26, 2021

Leases [Abstract]

Future Minimum Operating Lease Payments

The Company’s future minimum operating lease payments for noncancelable operating leases were as follows (in thousands):

	September 26, 2021
Remainder of 2021	$	12,432
2022	47,908
2023	43,401
2024	35,333
2025	28,928
Thereafter	69,772
Total future minimum lease payments	237,774
Less imputed interest	40,289
Present value of minimum lease payments	197,485
Less current maturities of lease liabilities	47,205
Long-term lease liabilities	$	150,280

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 26, 2021

Fair Value Disclosures [Abstract]

Schedule of Fair Value Assumptions

The significant assumptions the Company used in the model are:

Valuation Inputs	September 26, 2021			December 31, 2020
Asset price	$	5.7		$	9.2
Exercise price	$	11.5		$	11.5
Contractual term	3.4			4.1
Volatility	84.1		%	50.0		%
Risk-free rate of return	0.6		%	0.3		%
Dividend yield	—		%	—		%

Schedule of Changes in Fair Value of Warrants

Details of the changes in fair value for the public warrants and private placement warrants are as follows:

Public warrant liability	September 26, 2021
Public warrant liability as of December 31	$	30,667
Changes in fair value	(13,200)
Ending public warrant liability	$	17,467

Private warrant liability	September 26, 2021
Private warrant liability as of December 31	$	19,800
Changes in fair value	(4,333)
Ending private warrant liability	$	15,467

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Segment Reporting (Tables)

9 Months Ended

Sep. 26, 2021

Segment Reporting [Abstract]

Information by Reportable Segment

The following table shows information by reportable segment for the periods presented (in thousands):

	Three Months Ended				Nine Months Ended
	September 26,		September 27,		September 26,		September 27,
	2021		2020		2021		2020
Revenues
GMS	$	448,078	$	521,346	$	1,480,982	$	1,486,643
NSS	241,436		144,894		704,297		440,152
Corporate	—		—		—		—
Total revenues	$	689,514	$	666,240	$	2,185,279	$	1,926,795
Operating income (loss)
GMS	$	20,459	$	31,401	$	73,673	$	75,541
NSS	13,091		5,679		33,729		17,770
Corporate	(7,514)		(8,548)		(24,409)		(23,027)
Total operating income	$	26,036	$	28,532	$	82,993	$	70,284
Amortization of intangible assets
GMS	$	4,161	$	4,115	$	12,483	$	12,346
NSS	8,469		3,932		24,993		11,795
Corporate			—		—		—
Total amortization of intangible assets	$	12,630	$	8,047	$	37,476	$	24,141

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Description of Business (Details)	9 Months Ended
	Sep. 26, 2021 segment
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Number of reportable segments	2

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Revenues - Disaggregated Revenues (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 26, 2021	Sep. 27, 2020	Sep. 26, 2021	Sep. 27, 2020
Disaggregation of Revenue [Line Items]
Revenues	$ 689,514	$ 666,240	$ 2,185,279	$ 1,926,795
United States
Disaggregation of Revenue [Line Items]
Revenues	486,626	418,675	1,502,243	1,237,134
International
Disaggregation of Revenue [Line Items]
Revenues	202,888	247,565	683,036	689,661
Cost-reimbursable
Disaggregation of Revenue [Line Items]
Revenues	308,100	338,451	1,038,320	975,628
Fixed-price
Disaggregation of Revenue [Line Items]
Revenues	276,817	223,592	779,629	666,527
Time and materials
Disaggregation of Revenue [Line Items]
Revenues	104,597	104,197	367,330	284,640
GMS | Operating Segments
Disaggregation of Revenue [Line Items]
Revenues	448,078	521,346	1,480,982	1,486,643
GMS | United States | Operating Segments
Disaggregation of Revenue [Line Items]
Revenues	246,903	275,785	801,944	802,230
GMS | International | Operating Segments
Disaggregation of Revenue [Line Items]
Revenues	201,175	245,561	679,038	684,413
GMS | Cost-reimbursable | Operating Segments
Disaggregation of Revenue [Line Items]
Revenues	218,152	302,795	764,625	868,780
GMS | Fixed-price | Operating Segments
Disaggregation of Revenue [Line Items]
Revenues	191,530	161,024	532,789	481,309
GMS | Time and materials | Operating Segments
Disaggregation of Revenue [Line Items]
Revenues	38,396	57,527	183,568	136,554
NSS | Operating Segments
Disaggregation of Revenue [Line Items]
Revenues	241,436	144,894	704,297	440,152
NSS | United States | Operating Segments
Disaggregation of Revenue [Line Items]
Revenues	239,723	142,890	700,299	434,904
NSS | International | Operating Segments
Disaggregation of Revenue [Line Items]
Revenues	1,713	2,004	3,998	5,248
NSS | Cost-reimbursable | Operating Segments
Disaggregation of Revenue [Line Items]
Revenues	89,948	35,656	273,695	106,848
NSS | Fixed-price | Operating Segments
Disaggregation of Revenue [Line Items]
Revenues	85,287	62,568	246,840	185,218
NSS | Time and materials | Operating Segments
Disaggregation of Revenue [Line Items]
Revenues	66,201	46,670	183,762	148,086
DoD
Disaggregation of Revenue [Line Items]
Revenues	217,147	269,047	737,998	790,562
DoD | GMS | Operating Segments
Disaggregation of Revenue [Line Items]
Revenues	129,261	203,693	486,292	595,933
DoD | NSS | Operating Segments
Disaggregation of Revenue [Line Items]
Revenues	87,886	65,354	251,706	194,629
Other U.S. government agencies
Disaggregation of Revenue [Line Items]
Revenues	419,755	327,723	1,208,075	958,539
Other U.S. government agencies | GMS | Operating Segments
Disaggregation of Revenue [Line Items]
Revenues	288,543	270,344	824,920	781,004
Other U.S. government agencies | NSS | Operating Segments
Disaggregation of Revenue [Line Items]
Revenues	131,212	57,379	383,155	177,535
Commercial and non-U.S. customers
Disaggregation of Revenue [Line Items]
Revenues	52,612	69,470	239,206	177,694
Commercial and non-U.S. customers | GMS | Operating Segments
Disaggregation of Revenue [Line Items]
Revenues	30,274	47,309	169,770	109,706
Commercial and non-U.S. customers | NSS | Operating Segments
Disaggregation of Revenue [Line Items]
Revenues	$ 22,338	$ 22,161	$ 69,436	$ 67,988

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Revenues - Narrative (Details) - USD ($) $ in Millions	Sep. 26, 2021	Dec. 31, 2020
Revenue from Contract with Customer [Abstract]
Remaining performance obligations balance	$ 1,701.1	$ 1,722.0
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-09-27
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Expected revenue recognized (as a percent)	87.80%
Expected period of satisfaction	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-09-27
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Expected revenue recognized (as a percent)	12.20%
Expected period of satisfaction	1 year

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Contract Assets and Contract Liabilities - Components of Contract Assets and Liabilities (Details) - USD ($) $ in Thousands	Sep. 26, 2021	Dec. 31, 2020
Revenue from Contract with Customer [Abstract]
Contract assets	$ 358,345	$ 360,552
Contract liabilities	$ 106,221	$ 106,475

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Contract Assets and Contract Liabilities - Narrative (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 26, 2021	Sep. 27, 2020	Sep. 26, 2021	Sep. 27, 2020
Revenue from Contract with Customer [Abstract]
Increase (decrease) in contract assets			$ (2.2)
Increase (decrease) in contract liabilities			(0.3)
Recognition of contract liabilities	$ 5.9	$ 1.2	$ 89.5	$ 34.6

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Business Combinations and Acquisitions (Details) - USD ($) $ / shares in Units, $ in Thousands					3 Months Ended
	Nov. 23, 2020	Nov. 20, 2020	Feb. 11, 2020	Feb. 10, 2020	Jun. 27, 2021	Sep. 27, 2020	Sep. 26, 2021	Dec. 31, 2020
Business Acquisition [Line Items]
Common stock par value (in dollars per share)							$ 0.0001	$ 0.0001
Goodwill							$ 593,171	$ 590,668
PE Shay Holdings, LLC
Business Acquisition [Line Items]
Post-closing adjustment payments						$ 20,200
PAE Management
Business Acquisition [Line Items]
Post-closing adjustment payments						$ 1,000
Class A Common Stock
Business Acquisition [Line Items]
Common stock par value (in dollars per share)							$ 0.0001
Shay Holding Corporation Merger
Business Acquisition [Line Items]
Aggregate cash consideration paid			$ 424,200
Transaction costs			$ 3,400
Shay Holding Corporation Merger | Earn-Out Shares
Business Acquisition [Line Items]
Period following completion of business combination (in years)			5 years	5 years
Shay Holding Corporation Merger | Additional Paid-in Capital
Business Acquisition [Line Items]
Acquisition fees and expenses			$ 18,200
Shay Holding Corporation Merger | Class A Common Stock
Business Acquisition [Line Items]
Consideration paid (in shares)			21,127,823
Shay Holding Corporation Merger | Class A Common Stock | Earn-Out Shares
Business Acquisition [Line Items]
Maximum additional earn-out (in shares)			4,000,000	4,000,000
CENTRA
Business Acquisition [Line Items]
Post-closing adjustment payments					$ 1,400
Outstanding capital stock acquired (as a percent)		100.00%
Business combination, consideration transferred		$ 225,300
Assets acquired		177,400
Liabilities assumed		77,200
Goodwill		126,400
Intangible assets acquired		$ 74,100
Metis Solution
Business Acquisition [Line Items]
Post-closing adjustment payments					$ 500
Outstanding capital stock acquired (as a percent)	100.00%
Business combination, consideration transferred	$ 95,700
Assets acquired	60,400
Liabilities assumed	20,700
Goodwill	56,500
Intangible assets acquired	$ 37,800

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Accounts Receivable, net - Components of Accounts Receivable, Net (Details) - USD ($) $ in Thousands	Sep. 26, 2021	Dec. 31, 2020
Receivables [Abstract]
Billed receivables	$ 170,005	$ 227,787
Unbilled receivables	358,345	360,552
Less allowance for credit losses	(3,643)	(2,828)
Total accounts receivables, net	$ 524,707	$ 585,511

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Accounts Receivable, net - Narrative (Details)	9 Months Ended
	Sep. 26, 2021
Accounts Receivable | U.S. Government Agencies | Customer Concentration Risk
Product Information [Line Items]
Concentration risk (as a percent)	92.40%

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Goodwill and Intangible Assets, net - Narrative (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 26, 2021	Sep. 27, 2020	Sep. 26, 2021	Sep. 27, 2020
Finite-Lived Intangible Assets [Line Items]
Goodwill impairment loss	$ 0	$ 0	$ 0	$ 0
Amortization of intangible assets	$ 12,630,000	$ 8,047,000	$ 37,476,000	$ 24,141,000
Customer relationships | Weighted Average
Finite-Lived Intangible Assets [Line Items]
Useful life of finite-lived intangible assets (in years)			7 years 7 months 6 days
Trade name | Weighted Average
Finite-Lived Intangible Assets [Line Items]
Useful life of finite-lived intangible assets (in years)			5 years 2 months 12 days

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Goodwill and Intangible Assets, net - Intangible Assets, net (Details) - USD ($) $ in Thousands	Sep. 26, 2021	Dec. 31, 2020
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 417,400	$ 417,400
Accumulated Amortization	(196,666)	(159,190)
Total	220,734	258,210
Customer relationships
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	390,900	390,900
Accumulated Amortization	(184,427)	(149,163)
Total	206,473	241,737
Technology
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	1,700	1,700
Accumulated Amortization	(1,700)	(1,700)
Total	0	0
Trade name
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	24,800	24,800
Accumulated Amortization	(10,539)	(8,327)
Total	$ 14,261	$ 16,473

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Goodwill and Intangible Assets, net - Estimated Amortization Expense in Future Years (Details) - USD ($) $ in Thousands	Sep. 26, 2021	Dec. 31, 2020
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]
Remainder of 2021	$ 12,630
2022	50,089
2023	40,666
2024	33,782
2025	28,015
Thereafter	55,552
Total	$ 220,734	$ 258,210

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Consolidated Ventures - Balance Sheets (Details) - USD ($) $ in Thousands	Sep. 26, 2021	Dec. 31, 2020
Assets
Total assets	$ 1,818,496	$ 1,829,370
Liabilities and equity
Total liabilities	1,669,532	1,723,185
Total equity	113,948	73,949
Total liabilities and stockholders’ equity	1,818,496	1,829,370
Variable Interest Entity, Primary Beneficiary
Assets
Total assets	149,866	145,664
Liabilities and equity
Total liabilities	99,559	96,318
Total equity	50,307	49,346
Total liabilities and stockholders’ equity	$ 149,866	$ 145,664

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Consolidated Ventures - Statements of Operations (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 26, 2021	Sep. 27, 2020	Sep. 26, 2021	Sep. 27, 2020
Variable Interest Entity [Line Items]
Revenues	$ 689,514	$ 666,240	$ 2,185,279	$ 1,926,795
Cost of revenues	511,852	512,877	1,643,470	1,474,763
Selling, general and administrative expenses	140,170	119,168	428,237	361,945
Total operating expenses	664,652	640,092	2,109,183	1,860,849
Program profit	24,862	26,148	76,096	65,946
Other loss, net	1,174	2,384	6,897	4,338
Net income attributed to PAE Incorporated	29,789	15,318	57,523	37,855
Variable Interest Entity, Primary Beneficiary
Variable Interest Entity [Line Items]
Revenues	97,986	87,324	300,999	268,969
Cost of revenues	82,913	70,707	249,013	215,866
Selling, general and administrative expenses	18,998	16,595	55,289	50,477
Total operating expenses	101,911	87,302	304,302	266,343
Program profit	(3,925)	22	(3,303)	2,626
Other loss, net	(96)	(32)	(715)	(241)
Net income attributed to PAE Incorporated	$ (4,021)	$ (10)	$ (4,018)	$ 2,385

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Consolidated Ventures - Narrative (Details) - Parsons Government Services, Inc. $ in Millions	Jan. 31, 2021 USD ($)
Variable Interest Entity [Line Items]
Minority interest (as a percent)	49.00%
Payments to acquire equity method investments	$ 15.8
Ownership percentage (as a percent)	100.00%

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Debt - Long-Term Debt (Details) - USD ($) $ in Thousands	Sep. 26, 2021	Dec. 31, 2020
Debt Instrument [Line Items]
Total debt	$ 893,601	$ 890,000
Other debt	8,051	0
Unamortized discount and debt issuance costs	(21,549)	(23,733)
Total debt, net of discount and debt issuance costs	872,052	866,267
Less current maturities of long-term debt	(7,036)	(5,961)
Total long-term debt, net of current	865,016	860,306
Secured Debt | First Term Loan
Debt Instrument [Line Items]
Total debt	$ 885,550	$ 890,000

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Debt - Narrative (Details)			9 Months Ended	12 Months Ended
	Oct. 19, 2020 USD ($)	Oct. 20, 2016	Sep. 26, 2021 USD ($) loan letter_of_credit	Dec. 31, 2020 USD ($) letter_of_credit
Debt Instrument [Line Items]
Number of letters of credit outstanding | letter_of_credit			10	13
Letters of credit outstanding, amount			$ 23,200,000	$ 23,900,000
London Interbank Offered Rate (LIBOR) | Addition to LIBO Rate
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate		1.00%
Base Rate | Variable Rate Component One
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate		0.50%
Revolving Credit Facility | London Interbank Offered Rate (LIBOR) | Minimum
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate	1.80%
Revolving Credit Facility | London Interbank Offered Rate (LIBOR) | Maximum
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate	2.30%
First Term Loan | Secured Debt
Debt Instrument [Line Items]
Debt instrument, face amount	$ 890,000,000
Debt instrument, interest rate during period (as a percent)			5.30%	5.30%
First Term Loan | London Interbank Offered Rate (LIBOR) | Secured Debt
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate		3.50%
First Term Loan | Base Rate | Secured Debt
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate		4.50%
Term Loan Facility Maturing October 2027 | Secured Debt
Debt Instrument [Line Items]
Maximum borrowing capacity	$ 740,000,000
Term Loan Facility Maturing October 2027 | Secured Debt | London Interbank Offered Rate (LIBOR)
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate	4.50%
Delayed Draw Term Loan Facility Maturing October 2027 | Secured Debt
Debt Instrument [Line Items]
Maximum borrowing capacity	$ 150,000,000
Delayed Draw Term Loan Facility Maturing October 2027 | Secured Debt | London Interbank Offered Rate (LIBOR)
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate	4.50%
Delayed Draw Term Loan Facility Maturing October 2027 | Revolving Credit Facility
Debt Instrument [Line Items]
Maximum borrowing capacity	$ 175,000,000
Equipment Loan One
Debt Instrument [Line Items]
Debt instrument, face amount			$ 8,100,000
Number of equipment loans | loan			2
Interest rate (as a percent)			2.80%
Equipment Loan Two
Debt Instrument [Line Items]
Interest rate (as a percent)			2.90%
Revolving Credit Facility | Revolving Credit Facility | Line of Credit
Debt Instrument [Line Items]
Remaining borrowing capacity			$ 151,800,000	$ 132,800,000
Applicable interest rate (as a percent)			4.00%	4.00%
Revolving Credit Facility | Revolving Credit Facility | London Interbank Offered Rate (LIBOR) | Minimum | Line of Credit
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate		1.80%
Revolving Credit Facility | Revolving Credit Facility | London Interbank Offered Rate (LIBOR) | Maximum | Line of Credit
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate		2.30%
Revolving Credit Facility | Revolving Credit Facility | Base Rate | Minimum | Line of Credit
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate		0.80%
Revolving Credit Facility | Revolving Credit Facility | Base Rate | Maximum | Line of Credit
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate		1.30%

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Debt - Future Principal Maturities of Long-Term Debt (Details) - USD ($) $ in Thousands	Sep. 26, 2021	Dec. 31, 2020
Long-term Debt, Fiscal Year Maturity [Abstract]
Remainder of 2021	$ 4,759
2022	10,016
2023	10,048
2024	10,082
2025	10,116
Thereafter	848,580
Total	$ 893,601	$ 890,000

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Stockholders' Equity (Details) - $ / shares			9 Months Ended
	Feb. 11, 2020	Feb. 10, 2020	Sep. 26, 2021	Dec. 31, 2020
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Capital stock authorized (in shares)			211,000,000
Common stock par value (in dollars per share)			$ 0.0001	$ 0.0001
Preferred stock par value (in dollars per share)			$ 0.0001	$ 0.0001
Common stock authorized (in shares)			210,000,000	210,000,000
Preferred stock authorized (in shares)			1,000,000	1,000,000
Shay Holding Corporation Merger | Earn-Out Shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Period following completion of business combination (in years)	5 years	5 years
Shay Holding Corporation Merger | Earn-Out Shares, Tranche One
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Maximum additional earn-out (in shares)			1,000,000
Share price threshold (in dollars per share)			$ 13.00
Shay Holding Corporation Merger | Earn-Out Shares, Tranche Two
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Maximum additional earn-out (in shares)			1,000,000
Share price threshold (in dollars per share)			$ 15.50
Shay Holding Corporation Merger | Earn-Out Shares, Tranche Three
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Maximum additional earn-out (in shares)			1,000,000
Share price threshold (in dollars per share)			$ 18.00
Shay Holding Corporation Merger | Earn-Out Shares, Tranche Four
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Maximum additional earn-out (in shares)			1,000,000
Share price threshold (in dollars per share)			$ 20.50
Class A Common Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock par value (in dollars per share)			$ 0.0001
Class A Common Stock | Shay Holding Corporation Merger | Earn-Out Shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Maximum additional earn-out (in shares)	4,000,000	4,000,000
Minimum threshold trading days			10 days
Consecutive trading days			20 days

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Net Income Per Share - Computation of Basic and Diluted Loss Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 26, 2021	Sep. 27, 2020	Sep. 26, 2021	Sep. 27, 2020
Numerator:
Net income attributed to PAE Incorporated	$ 29,789	$ 15,318	$ 57,523	$ 37,855
Denominator:
Basic weighted average shares (in shares)	93,122,414	92,070,306	92,949,301	81,323,258
Diluted weighted average shares (in shares)	95,836,986	93,392,565	95,599,019	82,115,825
Basic income per share (in dollars per share)	$ 0.32	$ 0.17	$ 0.62	$ 0.47
Diluted income per share (in dollars per share)	$ 0.31	$ 0.16	$ 0.60	$ 0.46

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Net Income Per Share - Narrative (Details) - shares	3 Months Ended	9 Months Ended
	Sep. 26, 2021	Sep. 26, 2021
Warrants
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from calculation of diluted income (loss) per share (in shares)	19,999,985	19,999,985
Earn-Out Shares
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from calculation of diluted income (loss) per share (in shares)	4,000,000	4,000,000

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Leases - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 26, 2021	Sep. 26, 2021	Dec. 31, 2020
Leases [Abstract]
Operating lease right-of-use assets, net	$ 192,638	$ 192,638	$ 191,370
Operating lease liabilities	197,485	197,485
Operating lease cost	$ 15,300	$ 46,100
Weighted average remaining lease term (in years)	6 years 7 months 6 days	6 years 7 months 6 days
Weighted average discount rate (as a percent)	6.00%	6.00%
Cash payments for operating leases	$ 12,200	$ 36,500

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Leases - Future Minimum Operating Lease Payments (Details) - USD ($) $ in Thousands	Sep. 26, 2021	Dec. 31, 2020
Lessee, Operating Lease, Liability, Payment, Due [Abstract]
Remainder of 2021	$ 12,432
2022	47,908
2023	43,401
2024	35,333
2025	28,928
Thereafter	69,772
Total future minimum lease payments	237,774
Less imputed interest	40,289
Present value of minimum lease payments	197,485
Less current maturities of lease liabilities	47,205	$ 46,756
Long-term lease liabilities	$ 150,280

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Fair Value Measurements - Schedule of Fair Value Assumptions (Details)	Sep. 26, 2021 $ / shares	Dec. 31, 2020 $ / shares
Asset price
Class of Warrant or Right [Line Items]
Warrant liability, measurement input	5.7	9.2
Exercise price
Class of Warrant or Right [Line Items]
Warrant liability, measurement input	11.5	11.5
Contractual term
Class of Warrant or Right [Line Items]
Warrant, term	3 years 4 months 24 days	4 years 1 month 6 days
Volatility
Class of Warrant or Right [Line Items]
Warrant liability, measurement input	0.841	0.500
Risk-free rate of return
Class of Warrant or Right [Line Items]
Warrant liability, measurement input	0.006	0.003
Dividend yield
Class of Warrant or Right [Line Items]
Warrant liability, measurement input	0	0

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Fair Value Measurements - Schedule of Changes in Fair Value of Warrants (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 26, 2021	Sep. 27, 2020
Warrants and Rights Outstanding [Roll Forward]
Beginning balance	$ 50,467
Changes in fair value	17,533	$ 19,132
Ending balance	32,934
Public Warrants
Warrants and Rights Outstanding [Roll Forward]
Beginning balance	30,667
Changes in fair value	(13,200)
Ending balance	17,467
Private Placement
Warrants and Rights Outstanding [Roll Forward]
Beginning balance	19,800
Changes in fair value	(4,333)
Ending balance	$ 15,467

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Segment Reporting - Information by Reportable Segment (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 26, 2021	Sep. 27, 2020	Sep. 26, 2021	Sep. 27, 2020
Segment Reporting Information [Line Items]
Revenues	$ 689,514	$ 666,240	$ 2,185,279	$ 1,926,795
Operating income (loss)	26,036	28,532	82,993	70,284
Amortization of intangible assets	12,630	8,047	37,476	24,141
Corporate
Segment Reporting Information [Line Items]
Revenues	0	0	0	0
Operating income (loss)	(7,514)	(8,548)	(24,409)	(23,027)
Amortization of intangible assets		0	0	0
GMS | Operating Segments
Segment Reporting Information [Line Items]
Revenues	448,078	521,346	1,480,982	1,486,643
Operating income (loss)	20,459	31,401	73,673	75,541
Amortization of intangible assets	4,161	4,115	12,483	12,346
NSS | Operating Segments
Segment Reporting Information [Line Items]
Revenues	241,436	144,894	704,297	440,152
Operating income (loss)	13,091	5,679	33,729	17,770
Amortization of intangible assets	$ 8,469	$ 3,932	$ 24,993	$ 11,795

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Related-Party Transactions (Details) - USD ($)		9 Months Ended
	Feb. 10, 2020	Sep. 26, 2021	Sep. 27, 2020
PE Shay Holdings, LLC
Related Party Transaction [Line Items]
Liability for estimated payment to platinum stockholder		$ 4,700,000
Affiliated Entity | Advisory Services
Related Party Transaction [Line Items]
Related party transaction expenses	$ 15,000,000	$ 0	$ 15,800,000
Affiliated Entity | Advisory Services | Selling, General and Administrative Expenses
Related Party Transaction [Line Items]
Related party transaction expenses	$ 800,000

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Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 26, 2021	Sep. 27, 2020	Sep. 26, 2021	Sep. 27, 2020	Mar. 27, 2020
Income Tax Disclosure [Abstract]
Expense (benefit) from income taxes	$ 1,495	$ 4,194	$ 6,730	$ (1,582)
Effective income tax rate (as a percent)	5.10%	21.00%	10.90%	(4.20%)
Payroll tax funding deferral					$ 37,000

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Subsequent Events (Details) - USD ($) $ / shares in Units, $ in Millions	Oct. 25, 2021	Oct. 24, 2021	Sep. 26, 2021	Dec. 31, 2020
Subsequent Event [Line Items]
Common stock par value (in dollars per share)			$ 0.0001	$ 0.0001
Subsequent Event
Subsequent Event [Line Items]
Common stock par value (in dollars per share)		$ 0.0001
Subsequent Event | Minimum | Amentum Merger Agreement
Subsequent Event [Line Items]
Merger agreement, right to receive amount (in dollars per share)	$ 10.05
Termination fee	$ 15.0
Subsequent Event | Maximum | Amentum Merger Agreement
Subsequent Event [Line Items]
Termination fee	$ 30.0