BigBear.ai Holdings, Inc. Q1 FY2024 earnings

BigBear.ai's first quarter of 2024 came down to a smaller top line and a much bigger loss. Revenue fell 21.4% to $33.1 million from $42.2 million in the prior-year quarter. Management pinned most of the drop on the planned wind-down of the Air Force EPASS program in mid-2023, which removed $6.8 million of revenue, and on the loss of Virgin Orbit work after that customer's April 2023 bankruptcy, worth another $1.5 million. Contract award delays tied to continuing resolutions added pressure. The $3.4 million contributed by Pangiam, which closed on February 29, 2024, covered only part of the gap.

Gross profit fell 31.6% to $6.99 million from $10.21 million a year earlier, and gross margin slipped to 21.1% from 24.2%. Cost of revenues climbed to 79% of revenue from 76%, driven by higher equity-based compensation and the loss of Virgin Orbit's margin. The bottom line deteriorated far more sharply. Operating loss widened to $98.1 million from $12.0 million, and net loss widened to $125.1 million from $26.2 million. Diluted loss per share was $0.67 against $0.19. The quarter absorbed an $85.0 million non-cash goodwill impairment tied to the Pangiam purchase, a $24.0 million net increase in the fair value of derivatives, $1.1 million of transaction expenses and $0.9 million of restructuring charges. Operating margin dropped to -296.1% from -28.5%.

Cash told a different story. The company finished March 31, 2024 with $81.4 million in cash and cash equivalents, up from $32.6 million at December 31, 2023. Two warrant exercises drove the build, the RDO warrants at roughly $20.6 million and the PIPE warrants at roughly $33.2 million, and the Pangiam deal added $13.9 million of acquired cash. Operations still consumed cash. Operating cash flow was negative $14.4 million for the quarter against negative $12.0 million a year earlier, and free cash flow was negative $16.0 million. The company also disclosed that it did not meet the Secured Net Leverage ratio covenant during the quarter and cannot draw on its Bank of America revolver, though it stayed in compliance with its $200.0 million convertible notes. In May 2024 it put an at-the-market program in place for up to $150.0 million of common stock.

Cost work showed through in the non-GAAP numbers. Adjusted EBITDA was negative $1.6 million, better than negative $3.8 million a year earlier, and recurring SG&A fell to $13.6 million from $15.3 million. Management said revenue needed to reach breakeven Adjusted EBITDA has fallen to $38.7 million from $65.0 million in the second quarter of 2022. Backlog stood at $296 million as of March 31, 2024, including $68.2 million of funded backlog. Deferred revenue rose 64.2% to $3.85 million from $2.35 million. The quarter also brought an $8.3 million U.S. Army G-3/5/7 extension, an award from the Metropolitan Washington Airports Authority for veriScan at 127 gates across Reagan National and Dulles, a Denver International Airport contract covering 24 gates, a Canadian port authority win, a Project Dartmouth trial with Melbourne Airport, and five products added to the CDAO Tradewinds Solutions Marketplace.

Guidance for the full year 2024 was reaffirmed at $195 million to $215 million of revenue, with Pangiam results counted from February 29, 2024, and management expects the year to be heavily weighted toward the second half. Two risks stand out. Digital identity deployments hinge on local regulatory approvals that sit outside the company's control, and new U.S. government contracts remain exposed to the geopolitical climate and funding headwinds for AI and machine learning. The lumpy nature of quarterly revenue in this business is another reminder that single-period comparisons carry limited weight.