BigBear.ai Holdings, Inc. (BBAI) - 10-Q Summary
Business Context and Reporting Period
This summary covers the quarterly period ended June 30, 2026. BigBear.ai is a provider of Edge AI-powered decision intelligence solutions for national security, supply chain management, and digital identity. The company operates as a single reporting segment. During the period, the company completed the acquisition of Ask Sage (closed Dec 2025) and CargoSeer (Jan 2026) and fully retired its 2029 Convertible Notes via conversion to equity.
Key Financial Metrics
| Metric | Three Months Ended June 30, 2026 | Six Months Ended June 30, 2026 |
|---|---|---|
| Revenue | $36.7 million | $71.2 million |
| Gross Margin | $12.1 million (32.8%) | $23.8 million (33.4%) |
| Net Loss | $(25.7) million | $(82.5) million |
| Diluted EPS | $(0.05) | $(0.17) |
| Operating Cash Flow | N/A | $(40.2) million |
| Free Cash Flow | N/A | $(40.8) million |
| Cash & Equivalents | $36.3 million | $36.3 million |
| Available-for-Sale Investments | $373.5 million | $373.5 million |
| Total Debt (Net) | $16.6 million | $16.6 million |
Material Changes vs. Prior Period
- Revenue Growth: Revenue increased 13.2% year-over-year (Q2) and 5.9% (YTD), driven primarily by the inclusion of Ask Sage revenues, partially offset by lower volume on certain Army programs.
- Margin Expansion: Gross margin improved to 32.8% in Q2 2026 from 25.0% in Q2 2025, attributed to the higher-margin profile of Ask Sage.
- Expense Increases: Selling, General, and Administrative (SG&A) expenses rose 48.2% year-over-year due to Ask Sage integration costs and increased sales/marketing investments. R&D expenses increased 72.1% due to higher headcount and reduced software capitalization.
- Debt Reduction: The company eliminated its $124.6 million 2029 Convertible Notes liability through voluntary conversion into approximately 38.1 million shares of common stock. Only the $17.7 million 2026 Convertible Notes remain outstanding.
- Derivative Volatility: The "Net increase in fair value of derivatives" line item decreased significantly from a $135.8 million gain in Q2 2025 to a $0.5 million gain in Q2 2026, reflecting the removal of the 2029 Notes conversion option liability and stock price fluctuations.
Outlook, Risks, and Unusual Items
- Acquisition Integration: The company incurred $2.0 million in transaction expenses related to the Ask Sage and CargoSeer acquisitions. Ask Sage contributed $6.1 million in revenue for Q2 2026.
- Restructuring: The company recorded $0.4 million in restructuring charges for a 2026 plan focused on organizational realignment. All accrued costs from the 2025 and 2026 plans were settled by June 30, 2026.
- Liquidity Position: Total available liquidity (cash + AFS investments) stands at approximately $410 million. Management believes this is sufficient for the next 12 months. No capacity remains under the At-The-Market (ATM) equity offering programs.
- Backlog: Total backlog increased to $269.6 million, with $79.4 million funded and $31.7 million unfunded. Priced unexercised options represent $149.0 million.
- Risks: Key risks include reliance on U.S. government funding (approx. 85% of revenue), potential contract terminations for convenience, and the impact of geopolitical and economic conditions on defense spending.
Investor Verification Checklist
- Debt Maturity: Verify the repayment plan for the remaining $17.7 million 2026 Convertible Notes maturing in December 2026.
- ATM Capacity: Confirm the status of future equity raise capabilities, as the current ATM program capacity is exhausted.
- Ask Sage Integration: Monitor the realization of synergies and revenue growth from the Ask Sage acquisition against the $272 million purchase price.
- Government Funding: Assess the impact of federal budget authorizations on the $31.7 million unfunded backlog.
- Derivative Liabilities: Review the remaining derivative liabilities ($10.2 million for warrants) and their sensitivity to stock price volatility.