Summary
BigBear.ai entered fiscal 2023 with mixed first quarter results. Revenue rose 15.8% to $42.2 million, helped by new contract awards and higher volume on certain Army contracts. Gross profit increased 3.5% to $10.2 million. Gross margin slipped to 24.2%, down 2.9 percentage points, as incremental costs on the Global Force Information Management Phase 2 contract weighed on profitability. Operating loss narrowed to $12.0 million, an improvement of 26.8%. Operating margin was -28.5%, up 16.6 percentage points from the prior-year quarter. Net loss widened to $26.2 million, and diluted EPS was -$0.19, a wider loss per share. The bottom line absorbed non-cash fair value remeasurements tied to PIPE warrants issued in January 2023 and equity-based compensation, while the operating loss improved on lower costs.
Cash generation remained under pressure. Operating cash flow was -$12.0 million, down 59.6% from the prior-year quarter. Capital expenditures were $0.00 million, down 100.0%, leaving no investment in property and equipment during the quarter. Management said the operating cash use reflected the timing of contract awards and vendor payments. Deferred revenue was $2.35 million, down 15.9%. Remaining performance obligations fell to $72.0 million, down 47.1%, a sign of near-term backlog conversion risk. Ending backlog was $196.5 million at March 31, 2023, compared with $218.5 million at December 31, 2022. Funded backlog was $52.2 million, while priced unexercised options were $80.9 million. The company ended the quarter with no available borrowings under its existing credit facilities because it did not meet the Adjusted EBITDA requirement on the Bank of America Senior Revolver. Management still believes operating cash flow from continuing operations will cover payroll, working capital, lease obligations, capital expenditures, and debt service for the next 12 months.
The quarter also brought strategic and reporting changes. BigBear.ai consolidated its two legacy reportable segments into one reporting segment, effective for the first quarter of 2023. A teaming agreement with L3Harris makes BigBear.ai the exclusive provider of computer vision, predictive analytics, and event alerting analytics for autonomous surface vessels and associated shore-based command and control maritime operations systems for the Department of Defense. The company also added two solutions to the Department of Defense Chief Digital and Artificial Intelligence Office's Tradewind Initiative. BigBear.ai also demonstrated its AI and machine learning-powered decision support solution at International Maritime Exercise 23 with Task Force 59. Leadership changes included the appointment of Norm Laudermilch as Chief Operating Officer and the promotion of Greg Goldwater to Chief Growth Officer.
Guidance for the full fiscal year 2023 remains unchanged. Management reiterated its full-year revenue range and single digit negative Adjusted EBITDA. The outlook depends on converting a pipeline that management said has been slowed by the Russian invasion of Ukraine, which pushed some government contract awards into later periods. Management said it does not believe the Russian invasion will have a material impact on the business, but warned that a worsening conflict could disrupt the technology industry or global economy and hurt results. Other risks include government funding and procurement delays, a material weakness in internal controls over financial reporting, and the inability to draw on the Senior Revolver. BigBear.ai filed a universal shelf registration statement in April 2023 to offer up to $500 million of securities, which could support capital needs and acquisitions.
Adjusted EBITDA was -$3.8 million for the first quarter of 2023, compared with -$2.9 million in the prior-year quarter. That non-GAAP measure excludes significant items, including the warrant remeasurement and equity-based compensation. The first quarter showed revenue growth and a narrower operating loss, but the wider net loss, negative operating cash flow, and lower RPO and backlog point to a business still working through cost and contract timing issues. The quarter's revenue growth and lower operating loss show some operating leverage, but the widening net loss and cash burn leave the company dependent on capital markets and contract timing.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2023 | Q4 FY2022 | QoQ | Q1 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $42.2M | $40.4M | +4.5% | $36.4M | +15.8% |
| Gross profit | $10.2M | $11.8M | -13.3% | $9.9M | +3.5% |
| Gross margin | 24.2% | 29.2% | -5.0 pp | 27.1% | -2.9 pp |
| Research & development | $1.1M | $1.2M | -5.9% | $2.9M | -60.8% |
| Sales & marketing | $20.4M | $15.6M | +30.8% | $22.0M | -7.5% |
| Operating income (loss) | -$12.0M | -$26.4M | +54.4% | -$16.4M | +26.8% |
| Operating margin | -28.5% | -65.3% | +36.8 pp | -45.1% | +16.6 pp |
| Net income (loss) | -$26.2M | -$29.9M | +12.3% | -$18.8M | -39.3% |
| Net margin | -62.2% | -74.1% | +11.9 pp | -51.7% | -10.5 pp |
| Diluted EPS | -$0.19 | -$0.23 | +$0.04 | -$0.14 | -$0.05 |
Risks
The company held $21.8 million of available cash and cash equivalents at March 31, 2023, with zero available borrowings, and was unable to draw on the $25.0 million Bank of America Senior Revolver because it did not meet the Adjusted EBITDA requirement during the three months ended March 31, 2023. Management stated it is reasonably likely the company may fail the minimum Adjusted EBITDA requirements in future periods and therefore may be unable to draw on the facility.
Net loss widened to $26.2 million in the quarter ended March 31, 2023 from $18.8 million in the prior-year quarter, and operating cash flow fell to negative $12.0 million (down 59.6%), with free cash flow of negative $12.0 million. The deterioration was driven by an unfavorable $3.6 million working capital change, largely from a $4.9 million decrease in accounts payable.
Cost of revenues rose to 76% of revenues in the quarter ended March 31, 2023 from 73% a year earlier, primarily due to the cumulative impact of estimated cost increases on the GFIM Phase 2 contract. Gross margin declined 2.9 percentage points to 24.2% in the current quarter, so revenue growth of 15.8% did not translate into proportional gross profit growth (up only 3.5%).
Revenue growth of $5.8 million in the quarter ended March 31, 2023 was primarily attributable to new contract awards and increased volume on certain contracts with Army customers, and most historical revenue comes from Federal Government contracts that are typically not fully funded at award. The company also recorded a $750 thousand bad debt reserve against receivables from Virgin Orbit, which announced a Chapter 11 bankruptcy filing in early April.
MD&A states that for government customers, focus on addressing immediate needs in Ukraine has slowed the pipeline and pace of contract awards, pushing revenue into subsequent periods. The conflict remains uncertain and could cause greater disruption to the technology industry or global economy.
Total backlog fell to $196.5 million at March 31, 2023 from $218.5 million at December 31, 2022, with priced unexercised options declining to $80.9 million from $112.1 million. Reported remaining performance obligations fell 47.1% year over year to $72.0 million, and current deferred revenue declined 15.9% to $2.35 million.
The company carries $200.0 million of 6.0% unsecured convertible notes maturing December 15, 2026, with a conversion price reset to $10.61 after the stock traded below $10.00, increasing shares issuable to 18,844,600. Interest expense was $3.6 million in the quarter ended March 31, 2023, flat versus the prior-year quarter, consuming a substantial share of liquidity.
The company incurred $755 thousand of restructuring charges in the quarter ended March 31, 2023 for employee separation costs tied to a strategic review of capacity and future projections, and research and development expense fell 60.8% to $1.1 million, driven by decreased headcount. SG&A also declined 7.5% to $20.4 million as headcount and cost reduction actions were taken.
The January 19, 2023 private placement with Armistice Capital raised approximately $25.0 million gross through 13,888,889 shares and a warrant for up to an additional 13,888,889 shares at $1.80 per share, and net proceeds of $22.0 million are reflected in financing activities for the quarter ended March 31, 2023. This issuance adds potential equity dilution relative to the company's market capitalization.
SaaS KPIs
All quarters →Total Backlog
Adjusted EBITDA
Priced, unexercised options
Unpriced, unexercised options
Gross Margin
Summary, forecast, risks and KPIs are extracted from BigBear.ai Holdings, Inc.'s SEC filings for Q1 FY2023 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.