Summary
BigBear.ai closed fiscal 2022 with fourth-quarter revenue of $40.36 million, up 20.5% from the prior-year quarter. Gross profit was $11.78 million, up 207.9%, and gross margin reached 29.2%, up 17.8 percentage points. The quarter's operating loss narrowed to $26.37 million, a 63.4% improvement. Net loss narrowed to $29.90 million, a 74.0% improvement. Operating margin improved to negative 65.3%, up 149.7 percentage points. For the full fiscal year, revenue rose 6.5% to $155.01 million. Gross profit increased 26.2% to $42.99 million, and gross margin was 27.7%, up 4.3 percentage points. The full-year operating loss widened to $110.53 million, a 40.8% increase in the loss. Net loss narrowed to $121.67 million, a 1.5% improvement. Diluted EPS narrowed to -$0.95, a $0.20 improvement. The full-year operating margin was negative 71.3%, down 17.4 percentage points.
Cash generation weakened on a full-year basis. Fourth-quarter operating cash flow was -$10.53 million, up 49.9% from the prior-year quarter. Full-year operating cash flow was -$48.92 million, down 147.3%. Capital expenditures were $0.03 million in the fourth quarter, down 25.0%, and $0.77 million for the full year, up 19.2%. Deferred revenue was $2.02 million at December 31, 2022, down 51.9%. Remaining performance obligations fell 52.8% to $75.00 million. The MD&A also reports non-GAAP free cash flow of negative $49.69 million for 2022, compared with negative $20.42 million for 2021.
Operational momentum in the federal and commercial markets remained uneven. Total backlog was $218.47 million at December 31, 2022, down from $322.11 million a year earlier. Funded backlog was $57.23 million, compared with $78.26 million. Unfunded backlog fell to $18.22 million from $68.20 million. Priced, unexercised options were $112.12 million, down from $143.97 million, and unpriced, unexercised options were $30.90 million, compared with $31.68 million. The company revised its backlog methodology during the second quarter of 2022 to exclude anticipated follow-on awards. Under that revised method, the $466 million of backlog previously reported as of December 31, 2021 would have been $322 million. The MD&A says the fourth quarter included restructuring charges tied to employee separation costs and an impairment of right-of-use assets for vacated real estate. It also says the company recorded non-cash goodwill impairment charges in the second and fourth quarters related to current macroeconomic headwinds, delays in contract awards, and revised growth projections.
Liquidity and credit access are the central near-term issues. Management says the first quarter of fiscal 2023 is the initial availability quarter for the Bank of America Senior Revolver, and borrowings require reported Adjusted EBITDA of at least one dollar. The facility was not available for draw as of December 31, 2022. The Second Amendment cut the Senior Revolver size to $25.0 million from $50.0 million and removed the minimum Fixed Charge Coverage ratio covenant, but it also left the company unable to draw until the Adjusted EBITDA test is met. Management performed a cash flow analysis and believes cash from operating activities will be adequate for the next 12 months, with no need to draw on the revolver in the foreseeable future. The company completed a private placement in January 2023, issuing 13,888,889 shares and warrants for 13,888,889 more shares at a purchase price of $1.80 per share and warrant, with gross proceeds of approximately $25,000. Risks include the Adjusted EBITDA threshold for revolver access, potential covenant issues, goodwill impairment risk, delays in contract awards, macroeconomic headwinds, COVID-19 disruptions, the Russian invasion of Ukraine, and integration risk from the ProModel Corporation acquisition. Management also notes that the long-term impact of COVID-19 on government budgets and funding priorities could hurt future results.
Forecast
No forward guidance in this quarter's filings.
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2022 | Q3 FY2022 | QoQ | Q4 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $40.4M | $40.7M | -0.7% | $145.6M | -72.3% |
| Gross profit | $11.8M | $11.8M | +0.3% | $34.1M | -65.4% |
| Gross margin | 29.2% | 28.9% | +0.3 pp | 23.4% | +5.8 pp |
| Research & development | $1.2M | $1.8M | -32.8% | $6.0M | -80.1% |
| Sales & marketing | $15.6M | $20.2M | -23.0% | $106.5M | -85.4% |
| Operating income (loss) | -$26.4M | -$12.4M | -112.8% | -$74.4M | +64.5% |
| Operating margin | -65.3% | -30.5% | -34.9 pp | -51.1% | -14.3 pp |
| Net income (loss) | -$29.9M | -$16.1M | -85.6% | -$119.3M | +74.9% |
| Net margin | -74.1% | -39.6% | -34.4 pp | -81.9% | +7.9 pp |
| Diluted EPS | -$0.23 | -$0.13 | -$0.10 | -$1.11 | +$0.88 |
Risks
Three customers accounted for 49% of revenue for the twelve months ended December 31, 2022, and about $118 million of BigBear.ai's approximately $218 million total backlog at December 31, 2022 was attributable to these significant customers. Each contract includes termination for convenience provisions, so loss or delay of these customers could reduce revenue and backlog.
A significant portion of business depends on public and government sector sales, which are subject to budgeting, appropriation, continuing resolution, and award process delays. MD&A states the Russian invasion of Ukraine slowed the pipeline and pace of contract awards, pushing revenue further to the right.
RPO for FY2022 Q4 was $75.0 million, down 52.8% from $159.0 million in FY2021 Q4, and total backlog was $218 million at December 31, 2022 versus $322 million at December 31, 2021. The company revised backlog methodology, which removed Anticipated Follow-on Awards and reduced previously reported December 31, 2021 backlog from $466 million to $322 million.
Available cash and cash equivalents were $12.632 million at December 31, 2022 versus $68.900 million at December 31, 2021, and available borrowings were zero versus $50.0 million. Operating cash flow for FY2022 year to date was -$48.9 million, down 147.3% from -$19.8 million in FY2021 year to date, and the company was unable to draw on the Senior Revolver after covenant non-compliance.
The company was not in compliance with the Fixed Charge Coverage ratio under the Bank of America Credit Agreement as of June 30, 2022 and September 30, 2022. The Second Amendment reduced the Senior Revolver to $25.0 million from $50.0 million and requires Adjusted EBITDA of at least $1 to become available for borrowings.
Management concluded disclosure controls and procedures were not effective as of December 31, 2022 due to material weaknesses in IT general controls, segregation of duties, and revenue recognition documentation. Remediation is expected before the end of fiscal year 2023, but the company cannot be certain the measures will be successful.
BigBear.ai's sales cycle often lasts six to nine months and can extend to a year or more, and results depend on government budgeting and commercial fiscal cycles. MD&A states the Russian invasion of Ukraine slowed the pipeline and pace of contract awards, pushing revenue further to the right.
BigBear.ai recognized a $53.544 million non-cash goodwill impairment in the Successor 2022 Period, including $35.252 million in the Cyber & Engineering reporting unit and $18.292 million in the Analytics reporting unit. This signals possible future impairment risk if estimates or market conditions worsen.
Most revenue comes from time-and-material and fixed-price contracts, and fixed-price contracts expose BigBear.ai to cost overruns, inflation, supplier issues, and technological difficulties. Cyber & Engineering cost of revenues as a percentage of revenue increased to 82% in the Successor 2022 Period from 80% in the Successor 2021 Period due to increased subcontractor use.
BigBear.ai depends on its management team and qualified software engineers and data scientists, and it has experienced difficulty hiring and retaining personnel with appropriate qualifications. Security clearance delays or failures could also impair performance on U.S. and non-U.S. government contracts.
BigBear.ai acquired ProModel Corporation for approximately $16.1 million on April 7, 2022, funded by cash on hand and 649,976 shares, and expects to pursue more acquisitions. Integrating acquired businesses may divert management attention, result in dilution, and fail to achieve expected benefits.
BigBear.ai operates in a highly competitive AI and decision intelligence market, and new products or entirely new technologies from competitors could make its software obsolete. Delays in developing or releasing new features and capabilities could reduce market acceptance and revenue growth.
MD&A states COVID-19 continued to cause business impacts during 2022 through supply chain disruptions, delays, labor challenges, and travel restrictions, and the long-term impact on government budgets remains uncertain. Fixed-price contracts also face inflation and raw material price fluctuation risk.
BBAI Ultimate Holdings, LLC controls a majority of voting power, and BigBear.ai is a controlled company under NYSE rules, allowing it to rely on exemptions from certain corporate governance requirements. This may limit protections for other stockholders.
SaaS KPIs
All quarters →Total Backlog
Priced, unexercised options
Unpriced, unexercised options
Funded
Unfunded
Summary, forecast, risks and KPIs are extracted from BigBear.ai Holdings, Inc.'s SEC filings for Q4 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.