Summary
BigBear.ai reported third-quarter revenue of $40.65 million, up 1.1% from the prior-year quarter. Gross profit rose 8.8% to $11.75 million, and gross margin reached 28.9%, up 2.1 percentage points from the prior-year quarter. The company highlighted the U.S. Army Global Force Information Management contract, a $14.8 million sole-source award that closed in the quarter. Ending backlog was $288 million. Remaining performance obligations were $113 million at Sept. 30, 2022, and current deferred revenue was $4.76 million.
Profitability deteriorated. Operating loss widened 376.2% to $12.40 million. Operating margin was negative 30.5%, down 24.0 percentage points from the prior-year quarter. Net loss widened 412.1% to $16.11 million, and diluted EPS was negative $0.13, down from the prior-year quarter. The press release attributed the larger net loss to higher public company expenses as well as infrastructure and integration costs. Year-to-date operating loss was $84.16 million, and net loss was $91.78 million. Both widened from the prior-year period. Diluted EPS for the nine months was negative $0.72, down from the prior-year period. The company recorded a non-cash goodwill impairment charge related to its Cyber & Engineering reporting unit during the second quarter, and the filing pointed to a full valuation allowance against deferred tax assets.
Cash generation weakened. Operating cash flow was negative $6.39 million in the quarter, down from positive cash generation in the prior-year quarter. For the nine months, operating cash flow was negative $38.39 million, down from positive cash generation in the prior-year period. Capital expenditures were $0.23 million in the quarter, down 28.5%, and $0.74 million year to date, up 22.5%. Free cash flow, a non-GAAP measure, was negative $39.126 million for the nine months, according to the MD&A.
Guidance was affirmed. For the full year ended Dec. 31, 2022, BigBear.ai continues to expect revenue of approximately $150 million to $170 million. It also expects single-digit negative Adjusted EBITDA for the second half of 2022. The company said cost savings initiatives are expected to drive $20 million of annualized operating expense savings, and a reduction in force largely focused on non-billable headcount is underway. Liquidity remains a focus. The company was not in compliance with the Fixed Charge Coverage ratio under its Bank of America credit agreement at Sept. 30, 2022. A second amendment on Nov. 8, 2022 reduced the Senior Revolver to $25.0 million from $50.0 million and removed the minimum Fixed Charge Coverage ratio covenant. The company must report Adjusted EBITDA of at least one dollar to regain access to borrowings. Management said current working capital is sufficient for short-term operations and that it is unlikely to need the revolver in the foreseeable future.
Risks include government funding and procurement delays. The filing said the Federal Government's focus on immediate needs in Ukraine has slowed the pipeline and pace of contract awards, pushing revenue to the right. COVID-19 continued to affect operations through supply chain disruptions, labor challenges, and site access restrictions. The company also carries integration risk from acquisitions, including the ProModel Corporation deal that closed on April 7, 2022. Goodwill remains a concern. The Cyber & Engineering reporting unit took a non-cash impairment, and the Analytics reporting unit is still monitored for impairment. At June 30, 2022, the estimated fair value of the Analytics reporting unit exceeded its carrying value by 8.3%. The filing said a 1% increase in the weighted-average cost of capital or a 3% reduction in forecasted revenues would have resulted in an impairment of the goodwill within the Analytics reporting unit using the Income Approach. BigBear.ai performed a quarterly assessment in the third quarter and did not identify impairment indicators for Analytics, but it continues to monitor revenue, gross margin projections, and cost reductions.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2022 | Q2 FY2022 | QoQ | Q3 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $40.7M | $37.6M | +8.1% | — | — |
| Gross profit | $11.8M | $9.6M | +22.5% | — | — |
| Gross margin | 28.9% | 25.5% | +3.4 pp | — | — |
| Research & development | $1.8M | $2.5M | -29.6% | — | — |
| Sales & marketing | $20.2M | $27.0M | -24.9% | — | — |
| Operating income (loss) | -$12.4M | -$55.3M | +77.6% | -$2.0M | -531.0% |
| Operating margin | -30.5% | -147.1% | +116.6 pp | — | — |
| Net income (loss) | -$16.1M | -$56.8M | +71.7% | -$1.9M | -736.9% |
| Net margin | -39.6% | -151.1% | +111.5 pp | — | — |
| Diluted EPS | -$0.13 | -$0.45 | +$0.32 | — | — |
Risks
As of September 30, 2022 the Company was not in compliance with the Fixed Charge Coverage ratio under the Bank of America Credit Agreement and is currently unable to draw on the Senior Revolver, which was reduced to $25.0 million from $50.0 million by the Second Amendment.
Operating loss widened to $12.40 million in FY2022 Q3 from $2.60 million in FY2021 Q3 and net loss widened to $16.11 million from $3.15 million; year-to-date operating cash flow was down to negative $38.39 million from positive $1.22 million.
The Company recorded a $35.252 million non-cash goodwill impairment in the Cyber & Engineering reporting unit for the nine months ended September 30, 2022, and the Analytics reporting unit had $67.125 million of goodwill that remains at risk for future impairment.
The Russian invasion of Ukraine caused government customers to focus on immediate needs, slowing the pipeline and pace of contract awards and pushing revenue further to the right; this contributed to lower revenues and revised projections that led to the goodwill impairment assessment.
Total backlog was $288.212 million at September 30, 2022 compared with $322.110 million at December 31, 2021 under the revised methodology, and funded backlog was $60.548 million compared with $78.258 million.
The majority of historical revenues are derived from contracts with the Federal Government and its agencies, and most contracts are not fully funded at award, exposing the Company to funding and procurement changes.
The April 2022 ProModel Corporation acquisition for approximately $16.1 million, funded by cash and 649,976 shares, contributed to $2.151 million of transaction expenses year to date and $6.474 million of non-recurring integration costs year to date.
COVID-19 continued to adversely affect operations in the first nine months of 2022 through supply chain disruptions, delays, labor challenges, employee absences, travel restrictions, and site access limits.
Interest expense increased 90.2% to $3.557 million in FY2022 Q3 from $1.870 million in FY2021 Q3, primarily due to the higher principal balance of the $200.0 million Convertible Notes.
As of September 30, 2022 the Company determined it is not more-likely-than-not that substantially all deferred tax assets will be realized and continues to have a full valuation allowance established against them.
SaaS KPIs
All quarters →Total Backlog
Summary, forecast, risks and KPIs are extracted from BigBear.ai Holdings, Inc.'s SEC filings for Q3 FY2022 (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.