BigBear.ai Holdings, Inc. — FY 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual report, not a standalone Q4 report; the filing does not provide clear standalone fourth-quarter financial results. BigBear.ai provides AI/ML-based analytics, decision-support software and consulting, mainly to U.S. government defense and intelligence customers. The December 7, 2021 business combination made the company publicly traded. Because the 2021 results include a full year of acquired businesses and the accounting predecessor/successor periods use different bases, reported comparisons with 2020 are not directly comparable.
Key financial results
Amounts below are in millions of dollars unless stated otherwise. FY 2021 results are for the successor company.
| Metric | FY 2021 | Comparison / context |
|---|---|---|
| Revenue | $145.6 | $139.0 in unaudited 2020 pro forma revenue, which assumes the acquisitions occurred at the start of 2020; reported 2020 periods are not directly comparable. |
| Gross profit and margin | $34.1; 23.4% | Cost of revenue was $111.5. Segment adjusted gross margin was $49.2, or 34%, a non-GAAP/segment measure that adds back specified costs. |
| Operating loss | $(78.5) | Includes $106.5 of SG&A, including substantial equity-based compensation. |
| Net loss | $(123.6) | Includes a $33.4 net increase in derivative fair value and $2.9 loss on extinguishment of debt, in addition to operating losses and interest expense. |
| Adjusted EBITDA | $4.9 | Non-GAAP; excludes specified items including equity compensation, derivative remeasurement, transaction-related costs and other adjustments. |
| Cash flow | Operating cash flow $(19.8); free cash flow $(20.4) | Free cash flow is a company-defined non-GAAP measure and subtracts $0.6 of capital expenditures from operating cash flow. |
| Cash and liquidity | $68.9 cash; $101.0 restricted cash | The restricted cash secured forward share purchase obligations and was not generally available for operations. The company reported $50.0 of undrawn revolver capacity and $118.9 of total available liquidity, excluding restricted cash. |
| Debt | $204.2 gross; $194.6 net carrying value | Primarily $200.0 of 6% convertible notes due 2026, plus a $4.2 D&O premium financing loan due 2022. The $50.0 secured revolver was undrawn at year-end. |
| Backlog and remaining performance obligations | $465.7 backlog; $159.0 remaining performance obligations | Management expected about 96% of remaining performance obligations to be recognized within 12 months. Backlog includes unfunded work, unexercised options and estimated follow-on awards, and is not all firm or funded. |
Changes, outlook and material items
- Revenue was approximately 49% software in 2021, according to management. The company is shifting toward scalable cloud and SaaS offerings, but continues to rely on services and customer-specific engineering. Management stated that commercial cloud deployments often have gross margins above 60% and that a future SaaS business could reach 80% or more; these are expectations, not achieved company-wide margins or formal guidance.
- Revenue increased from $139.0 million in 2020 pro forma results to $145.6 million in 2021, approximately 4.7%. The filing attributes Analytics growth over pro forma 2020 mainly to new contract awards; Cyber & Engineering revenue was slightly lower. The pro forma comparison is unaudited and not equivalent to reported-period growth.
- Reported SG&A included $53.5 million of equity-based compensation under the legacy Class B unit plan. Total equity-based compensation was $60.6 million. The merger-related vesting event drove much of this expense; $22.7 million of Class B unit compensation remained unrecognized at year-end.
- The company received more than $150 million in new contract awards during 2021. Backlog was approximately 84% of management’s projected 2022 revenue, but awards may be unfunded, option-dependent or subject to termination, so this is not guaranteed revenue.
- Management stated that cash and available credit were expected to meet anticipated cash needs for the next 12 months. However, FY 2021 operating and free cash flow were negative, and the company has significant debt service and execution needs. No specific full-year 2022 revenue or earnings guidance is provided in the filing.
- Following year-end, the company repurchased approximately 10.0 million shares under forward share purchase agreements for about $101 million, using the restricted cash set aside for that purpose. The filing reports these repurchases occurred during Q1 2022.
- Principal risks include reliance on government contracting and a small number of customers; customer termination-for-convenience rights; lengthy procurement cycles and budget delays; fixed-price contract cost overruns; competition and uncertain commercial/SaaS adoption; cybersecurity and data risks; employee and clearance retention; and debt, dilution and refinancing risks. COVID-19 effects and geopolitical uncertainty were also cited.
- Ordinary-course litigation, claims, investigations and audits were described as not expected to have a material financial-statement impact. The filing reports an unqualified audit opinion on the financial statements. Management identified IT general-control deficiencies relevant to financial reporting, including user-access and segregation-of-duties issues; it said these had not caused a financial-statement misstatement and that remediation was underway. Disclosure controls were assessed as effective, but the filing contains no management ICFR assessment or auditor attestation for this year.
Important facts for investors to verify
- Reconcile the reported share count: the cover and balance sheet show 135,566,227 shares outstanding, while the statement of changes in equity shows 135,556,227.
- Review the Q1 2022 forward-share repurchases, final cash impact and resulting share count; distinguish restricted funds used for repurchases from operational liquidity.
- Assess how much of the $465.7 million backlog is funded, contractually committed and attributable to options or estimated follow-on awards, and test the 2022 conversion assumptions.
- Track operating cash flow, working-capital collection, customer concentration and the company’s ability to service $200 million of 6% convertible notes due 2026.
- Monitor dilution from convertible notes, warrants and equity awards, including the notes’ potential conversion-rate reset provisions.
- Follow remediation of IT general controls and evaluate future management reporting on internal control over financial reporting.