BigBear.ai Holdings, Inc. Q3 FY2025 earnings

BigBear.ai's third quarter of 2025 revenue fell 20.1% to $33.1 million. Gross profit dropped 31.0% to $7.4 million. Gross margin slipped to 22.4%. Operating loss widened to $21.9 million. Operating margin was negative 66.0%. Net income was $2.5 million, a swing to profit from a net loss in the prior-year quarter. Diluted EPS was negative $0.03, an improvement from the prior-year quarter. The profit swing came largely from non-cash derivative fair value changes tied to the convertible notes and warrants. The operating loss reflected lower revenue and higher costs. Revenue weakness was primarily due to lower volume on certain Army programs. Higher margin programs in the third quarter of 2024 were not repeated, which weighed on gross margin.

The year-to-date picture is weaker. Revenue for the nine months ended September 30, 2025 was $100.4 million, down 12.3%. Gross profit fell 20.4% to $22.9 million. Gross margin was 22.8%. Operating loss widened to $133.4 million. Operating margin was negative 132.9%. Net loss widened to $288.1 million. Diluted EPS was negative $0.87. Operating cash flow used $20.1 million in the nine months, an improvement from the prior-year period. In the quarter alone, operating cash flow used $9.6 million, down from the prior-year quarter. Capital expenditures were $0.2 million in the quarter, up 37.2%. Deferred revenue was $3.5 million, up 68.4%. Backlog stood at $376 million as of September 30, 2025. Adjusted EBITDA was negative $9.4 million for the quarter, compared with positive $0.9 million in the third quarter of 2024. The year-to-date net loss included a large non-cash goodwill impairment charge recorded earlier in the year.

The company announced a definitive agreement to acquire Ask Sage, a generative AI platform for defense and national security. BigBear.ai will pay $250 million total, with $140 million in cash and $110 million in stock or additional cash. Ask Sage is expected to deliver annual recurring revenue of approximately $25 million in 2025, about six times its 2024 ARR. The platform supports more than 100,000 users on 16,000 government teams. The deal is expected to close late in the fourth quarter of 2025 or early in the first quarter of 2026. Management does not expect the acquisition to have a material impact on consolidated 2025 results. For the full year 2025, BigBear.ai continues to project revenue in the range it previously guided. The company's cash balance gives it room to fund the cash portion of the deal.

Risks remain elevated. The U.S. government shutdown that began on September 30, 2025 has delayed some opportunities. Management still expects border security and defense spending, including accelerated spending from the One Big Beautiful Bill, to materialize into contracts next year. Other risks include funding delays, contract terminations for convenience, budget constraints, and potential program cancellations. The company also faces integration risk from the Ask Sage acquisition and a material weakness in internal control over financial reporting. On the positive side, deferred revenue growth and a $376 million backlog suggest some pipeline stability. The company raised $637 million in gross proceeds from at-the-market offerings during the nine months ended September 30, 2025. That capital supports the Ask Sage cash payment and general corporate purposes. The company was in compliance with all covenants related to the Convertible Notes as of September 30, 2025. Still, the core business is smaller year over year, gross margin is under pressure, and operating cash flow remains negative. The quarter's net profit was not driven by operations. Adjusted EBITDA was negative $9.4 million. The company's gross margin decline was driven by higher margin programs in the third quarter of 2024 that were not repeated. The full-year revenue outlook remains wide, and the shutdown adds uncertainty to the fourth quarter.