BigBear.ai Holdings, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. BigBear.ai provides AI-powered decision intelligence software and services, primarily for national security, supply chain management and digital identity. Unless stated otherwise, amounts below are in U.S. dollars.
Financial performance
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Revenue | $33.1 million | $42.2 million | Down 21.4% |
| Gross profit / margin | $7.0 million / 21% | $10.2 million / 24% | Margin down 3 percentage points |
| Operating loss | $98.1 million | $12.0 million | Worsened, including $85.0 million goodwill impairment |
| Net loss | $125.1 million | $26.2 million | Loss per share: $0.67 vs. $0.19 |
| Adjusted EBITDA (non-GAAP) | $(1.6) million | $(3.8) million | Improved |
| Operating cash flow | $(14.4) million | $(12.0) million | Higher cash use |
| Free cash flow (non-GAAP) | $(16.0) million | $(12.0) million | Higher cash use |
Revenue fell primarily because of the planned wind-down of the Air Force EPASS program, the loss of Virgin Orbit revenue following its bankruptcy, and delays in contract awards. Pangiam contributed $3.4 million of post-acquisition revenue. Cost of revenue declined, but rose as a share of revenue to 79% from 76%; management cited higher equity compensation and the loss of Virgin Orbit gross margin.
Balance sheet, liquidity and capital
- Cash and cash equivalents were $81.4 million at March 31, 2024, up from $32.6 million at year-end. The increase reflected $53.8 million of proceeds from warrant exercises and $13.9 million of cash acquired with Pangiam, partly offset by operating cash use and other investing and financing flows.
- Total debt was $200.8 million, including $200.0 million of 6% unsecured convertible notes due December 2026. The notes’ conversion price is $10.61. The company reported compliance with the convertible-note covenants.
- The $25 million Bank of America revolving facility was undrawn and unavailable at quarter-end because the company did not meet its secured net leverage covenant. Management said cash and expected operating cash flows should cover anticipated needs for the next 12 months.
- Operating cash flow was affected by a $9.0 million increase in accounts receivable and a $6.0 million decrease in accounts payable. The company reported $14.4 million of current assets in excess of current liabilities? Current assets were $125.0 million and current liabilities were $63.1 million.
- Common shares outstanding rose to 246.1 million from 157.3 million at December 31, 2023, largely reflecting 61.8 million shares issued for Pangiam and shares issued upon warrant exercises. The filing reports 246.1 million shares outstanding at quarter-end and 246.1 million as of May 3, 2024.
Material developments and outlook
- BigBear.ai completed its Pangiam acquisition on February 29, 2024. Pangiam adds vision AI capabilities in global trade, travel and digital identity. The recorded purchase consideration was $211.3 million, including equity consideration and a $3.5 million holdback; the acquisition added $156.1 million of goodwill.
- The company recorded an $85.0 million non-cash goodwill impairment after a decline in its share price. Following the impairment, reporting-unit fair value did not exceed carrying value. The valuation used a 31% discount rate and management noted sensitivity to discount rate, growth and projected cash flows.
- Warrant exercises generated approximately $53.8 million in gross proceeds, alongside issuance of replacement warrants exercisable from August and September 2024. Fair-value changes on warrants contributed $24.0 million of expense in Q1, including losses on exercised 2023 warrants.
- Backlog was $296.2 million at March 31, compared with $167.8 million at December 31, 2023. Remaining performance obligations were $111 million; the company expects approximately 100% to be recognized as revenue within the next 12 months.
- The filing provides no specific full-year revenue or earnings guidance. Management expects cash to meet anticipated needs over the next 12 months, while noting that continuing resolutions can delay new awards and push revenue into later periods. It expects geopolitical concerns to support long-term demand, but acknowledged that the timing and effects remain uncertain.
- On May 10, 2024, after quarter-end, the company entered into an at-the-market agreement permitting up to $150 million of common-stock sales, subject to company instructions. Sales are not assured; the agent’s commission may be up to 3% of gross proceeds.
Risks, contingencies and other items
- Revenue is concentrated: three customers accounted for 21%, 19% and 14% of Q1 revenue. Most revenue is tied to U.S. government contracts, exposing results to federal funding levels, award timing and program changes.
- The company reported $1.6 million accrued for ongoing legal disputes and stated that pending matters are not expected to have a material financial impact. Government contract costs may also be subject to audit and adjustment.
- The company reported a full valuation allowance against deferred tax assets. Results also include estimates for long-term contract costs and revenue; changes in estimates at completion reduced pre-tax results by $0.2 million in Q1.
- Disclosure controls and procedures were assessed as effective at March 31, 2024; the company reported no material change in internal control over financial reporting during the quarter.
Key facts for investors to verify
- Whether the company can restore availability under the revolver and sustain liquidity while operating cash flow remains negative.
- How quickly the acquired Pangiam business contributes revenue, margins and expected synergies, and whether further goodwill impairment is required.
- Whether government award delays ease and whether backlog, including unfunded work and unexercised options, converts to funded revenue as expected.
- The potential dilution from replacement warrants, equity compensation and any use of the $150 million ATM program.
- The drivers and sustainability of the reported improvement in Adjusted EBITDA, alongside continuing GAAP losses and warrant fair-value volatility.