BigBear.ai Holdings, Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022; comparisons are with the same 2021 periods. Amounts below are in millions of dollars unless noted. BigBear.ai provides AI and machine-learning decision-support services through its Cyber & Engineering and Analytics segments, principally to U.S. government customers.
Financial performance and position
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $40.7 | $40.2 | $114.7 | $112.1 |
| Gross profit / margin | $11.8 / 28.9% | $10.8 / 26.9% | $31.2 / 27.2% | $30.2 / 27.0% |
| Operating loss | $(12.4) | $(2.6) | $(84.2) | $(6.5) |
| Net loss | $(16.1) | $(3.1) | $(91.8) | $(8.8) |
| Adjusted EBITDA (non-GAAP) | $(3.9) | $3.9 | $(14.6) | $7.2 |
- Q3 revenue grew 1.1%; nine-month revenue grew 2.3%. Analytics growth more than offset Cyber & Engineering declines.
- SG&A was $20.2 million in Q3 and $69.2 million for nine months, up 68.1% and 112.6%, respectively. Q3 operating loss included $1.6 million of restructuring charges; nine-month operating loss also included a $35.3 million non-cash goodwill impairment.
- Nine-month operating cash flow was $(38.4) million, versus $1.2 million provided in 2021. Capital expenditures were $0.7 million; free cash flow, as defined by the company, was $(39.1) million.
- Cash and cash equivalents were $22.0 million at September 30, down from $68.9 million at December 31, 2021; restricted cash was zero. Current assets were $60.0 million and current liabilities $32.7 million.
- Debt totaled $200.8 million before $8.2 million of unamortized issuance costs: $200 million of 6% unsecured convertible notes due December 2026 and $0.8 million of D&O financing debt. The notes’ conversion price reset to $10.61, making them convertible into approximately 18.8 million shares.
- Stockholders’ equity was negative $8.1 million. The company repurchased 9.95 million shares under forward share purchase agreements during Q1, using $100.9 million of cash; the associated treasury stock was recorded at $57.4 million.
Material changes and operating context
- Q3 Cyber & Engineering revenue fell 6.6% to $18.0 million, which management attributed to lower order volume on certain procurement programs. Analytics revenue rose 8.1% to $22.7 million, including new awards such as the U.S. Army Global Force Information Management contract.
- For the first nine months, Cyber & Engineering revenue declined 7.1% to $53.9 million; Analytics increased 12.4% to $60.8 million, aided by new awards and the April acquisition of ProModel Corporation for approximately $16.1 million.
- Management said the federal government’s focus on immediate Ukraine-related needs slowed contract awards and shifted expected revenue timing. The company recorded a $35.3 million impairment in Cyber & Engineering goodwill. Analytics goodwill was $67.1 million; its estimated fair value exceeded carrying value by 8.3% at June 30, and management noted sensitivity to lower forecasts or a higher discount rate.
- Backlog was $288.2 million at September 30, versus $322.1 million at December 31 under the revised methodology. The company changed its calculation to exclude anticipated follow-on awards and reduce estimated unpriced options; the prior-period comparable was restated from $465.7 million. Remaining performance obligations were $113 million, with approximately 98% expected to be recognized as revenue within 12 months.
- Three customers each accounted for 11%–19% of Q3 revenue, underscoring customer concentration. The filing also describes COVID-related supply, labor, access, and scheduling disruptions during the first nine months.
Outlook, liquidity, and risks
- Management stated that operating cash generated during the year is expected to cover anticipated needs for the next 12 months, including payroll, working capital, leases, capital expenditures, and debt service. This is management’s assessment, not formal earnings guidance; the filing provides no numeric revenue or profit forecast.
- The $25 million secured revolving facility was unavailable for borrowing at September 30 following failure to meet its fixed-charge coverage covenant. A November 8, 2022 amendment removed that covenant but reduced the facility from $50 million to $25 million, limited availability to a borrowing base, and increased specified margins and fees by 0.25%. Borrowing access requires at least $1 of Adjusted EBITDA in the initial availability quarter; management said it may fail to meet future requirements and may remain unable to draw.
- Other notable items include $1.6 million of employee separation costs, acquisition and integration expenses, substantial equity-based compensation, and a full valuation allowance against deferred tax assets. Management said ordinary-course litigation, claims, and audits were not expected to have a material financial impact.
Important facts for investors to verify
- Cash generation, working-capital needs, and the assumptions supporting management’s 12-month liquidity assessment.
- Adjusted EBITDA performance and the conditions, borrowing base, and actual availability of the amended revolver.
- Federal contract-award timing, backlog conversion and comparability after the methodology change, and the outlook for both segments.
- Progress against cost-saving and integration plans, recurring SG&A levels, and potential future goodwill impairment—particularly in Analytics.
- Convertible-note interest and dilution exposure, including conversion-rate terms and any further share-price-related resets.