Log in
Log in
Or log in with
GoogleGoogle
Twitter Twitter
Facebook Facebook
Apple Apple     
Sign up
Or log in with
GoogleGoogle
Twitter Twitter
Facebook Facebook
Apple Apple     

BIGBEAR.AI HOLDINGS, INC.

(BBAI)
  Report
End-of-day quote Nyse  -  2022-12-05
0.9525 USD   -2.81%
12/06Redwire Corporation Announces Its Suite of Space Cybersecurity Tools Developed with Bigbear.ai
CI
11/23Bigbear Ai : U.S. Launches New Unmanned & AI Systems Integration Event
PU
11/21Bigbear.ai Holdings, Inc. : Change in Directors or Principal Officers, Financial Statements and Exhibits (form 8-K)
AQ
SummaryQuotesChartsNewsRatingsCalendarCompanyFinancialsConsensusRevisionsFunds 
SummaryMost relevantAll NewsAnalyst Reco.Other languagesPress ReleasesOfficial PublicationsSector news

BIGBEAR.AI HOLDINGS, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

05/12/2022 | 04:29pm EST

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis provides information that BigBear.ai
Holdings, Inc. ("BigBear.ai" or the "Company") management believes is relevant
to an assessment and understanding of BigBear.ai's consolidated results of
operations and financial condition. The following discussion and analysis should
be read in conjunction with BigBear.ai's consolidated financial statements and
notes to those statements included elsewhere in this Quarterly Report on Form
10-Q. Certain information contained in this management discussion and analysis
includes forward-looking statements that involve risks and uncertainties. Our
actual results may differ materially from those anticipated in these
forward-looking statements as a result of many factors. Please see "Cautionary
Note Regarding Forward-Looking Statements," and "Risk Factors" in our Annual
Report on Form 10-K for the year ended December 31, 2021. Unless the context
otherwise requires, all references in this section to the "Company," "BigBear.ai
" "we," "us" or "our" refer to BigBear.ai Holdings, Inc.

The following discussion and analysis of financial condition and results of
operations of BigBear.ai is provided to supplement the consolidated financial
statements and the accompanying notes of BigBear.ai included elsewhere in this
Quarterly Report on Form 10-Q. We intend for this discussion to provide the
reader with information to assist in understanding BigBear.ai's consolidated
financial statements and the accompanying notes, the changes in those financial
statements and the accompanying notes from period to period, along with the
primary factors that accounted for those changes.

The discussion and analysis of financial condition and results of operations of BigBear.ai is organized as follows:

•Business Overview: This section provides a general description of BigBear.ai's business, our priorities and the trends affecting our industry in order to provide context for management's discussion and analysis of our financial condition and results of operations.

•Recent Developments: This section provides recent developments that we believe are necessary to understand our financial condition and results of operations.

•Results of Operations: This section provides a discussion of our results of operations for the three months ended March 31, 2022 and March 31, 2021.


•Liquidity and Capital Resources: This section provides an analysis of our
ability to generate cash and to meet existing or reasonably likely future cash
requirements.

•Critical Accounting Policies and Estimates: This section discusses the
accounting policies and estimates that we consider important to our financial
condition and results of operations and that require significant judgment and
estimates on the part of management in their application. In addition, our
significant accounting policies, including critical accounting policies, are
summarized in Note B-Summary of Significant Accounting Policies to the
accompanying consolidated financial statements included in this Quarterly Report
on Form 10-Q.

Business Overview

Our mission is to guide our customers to realize their best possible future by
delivering transformative technologies and expert, actionable advice. Through
this mission, we seek to empower people to make the right decisions, at the
right time, every time.

We are a leader in the use of Artificial Intelligence (AI) and Machine Learning
(ML) for decision support. We provide our customers with a competitive advantage
in a world driven by data that is growing exponentially in terms of volume,
variety, and velocity. We believe data - when leveraged effectively - can be a
strategic asset for any organization. Through our mission-critical analytics
solutions and operational expertise, we help our customers make sense of the
world in which they operate, understand how known and previously unforeseen
forces impact their operations, and determine which decision and course of
action will best achieve their objectives.

Our products and services are widely used by government agencies in the United
States to support many of the nation's most critical defense and intelligence
capabilities. These customers operate in environments of unrivaled scale and
complexity, where the cost of a poor decision can be very steep, and the cost of
failure devastating. They demand the most sophisticated and capable
                                       23
--------------------------------------------------------------------------------
  Table of Contents
AI, ML, and predictive analytics solutions available, from a provider who
understands their complex operations and can rapidly deploy technology at scale
with uncompromising reliability.

Recent Developments

Acquisition Activity


On April 7, 2022, the Company's subsidiary BigBear.ai, LLC acquired ProModel
Corporation ("ProModel Corporation"), a leader in simulation-based predictive
and prescriptive analytic software for process improvement enabling
organizations to make better decisions, for $16.1 million, subject to certain
adjustments. This acquisition complements the Company's previous acquisition of
ProModel's Government Services business, ProModel Government Solutions Inc.
("ProModel Government Solutions"), which closed on December 21, 2020. The recent
acquisition of ProModel Corporation was funded through a combination of cash on
hand and newly issued shares of common stock of the Company. The Company plans
to align ProModel Corporation under its Analytics business segment. For risks
related to the transaction, see Item 1A - Risk Factors -Risks Related to Our
Business and Industry - We may acquire or invest in companies and technologies,
which may divert our management's attention, and result in additional dilution
to our stockholders. We may be unable to integrate acquired businesses and
technologies successfully or achieve the expected benefits of such acquisitions
or investments - included in the Company's Annual Report on Form 10-K for the
year ended December 31, 2021.

COVID-19 Operational Posture and Current Impact


The COVID-19 pandemic continued to cause business impacts in the first quarter
of 2022 primarily driven by the emergence of the Omicron variant in late 2021
with a resulting increase in COVID cases in early 2022. During the first quarter
of 2022, our performance was adversely affected by supply chain disruptions and
delays, as well as labor challenges associated with employee absences, travel
restrictions, site access, quarantine restrictions, remote work, and adjusted
work schedules. We are actively engaging with our customers and are continuing
to take measures to protect the health and safety of our employees by
encouraging them to get vaccinated, including booster shots.

The ultimate impact of COVID-19 on our operations and financial performance in
future periods, including our ability to execute on our customer contracts in
the expected timeframe, remains uncertain and will depend on future
pandemic-related developments, including the duration of the pandemic, potential
subsequent waves of COVID-19 infection or potential new variants (e.g. Ba.2),
the effectiveness and adoption of COVID-19 vaccines and therapeutics, supplier
impacts and related government actions to prevent and manage disease spread,
including the implementation of any federal, state, local or foreign vaccine
mandates, all of which are uncertain and cannot be predicted. The long-term
impacts of COVID-19 on government budgets and other funding priorities that
impact demand for our solutions are also difficult to predict but could
negatively affect our future results and performance.

For additional risks to the corporation related to the COVID-19 pandemic, see Item 1A, Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2021.

Components of Results of Operations

Revenues


We generate revenue by providing our customers with highly customizable
solutions and services for data ingestion, data enrichment, data processing,
artificial intelligence, machine learning, predictive analytics and predictive
visualization. We have a diverse base of customers, including government
defense, government intelligence, as well as various commercial enterprises.

Cost of Revenues


Cost of revenues primarily includes salaries, stock-based compensation expense,
and benefits for personnel involved in performing the services described above
as well as allocated overhead and other direct costs.

We expect that cost of revenues will increase in absolute dollars as our revenues grow and will vary from period-to-period as a percentage of revenues.

Selling, General and Administrative ("SG&A")

SG&A expenses include salaries, stock-based compensation expense, and benefits for personnel involved in our executive,

                                       24
--------------------------------------------------------------------------------
  Table of Contents
finance, accounting, legal, human resources, and administrative functions, as
well as third-party professional services and fees, and allocated overhead.

We expect that SG&A expenses will increase in absolute dollars as we hire
additional personnel and enhance our systems, processes, and controls to support
the growth in our business as well as our increased compliance and reporting
requirements as a public company.

Research and Development


Research and development expenses primarily consist of salaries, stock-based
compensation expense, and benefits for personnel involved in research and
development activities as well as allocated overhead. Research and development
expenses are expensed in the period incurred.

We expect research and development expenses to increase in future periods as we continue to invest in research and development activities to achieve our operational and commercial goals.

Transaction Expenses

Transaction expenses consist of acquisition costs and other related expenses incurred in acquiring ProModel Corporation.

We expect to incur acquisition costs and other related expenses periodically in the future as we continue to seek acquisition opportunities to expand our technological capabilities.

Net Decrease in Fair Value of Derivatives

Net decrease in fair value of derivatives consists of fair value remeasurements of private warrants and written put options.

Interest Expense

Interest expense consists primarily of interest expense, commitment fees, and debt issuance cost amortization under our debt agreements.

Income Tax Expense (Benefit)

Income tax expense (benefit) consists of income taxes related to federal and state jurisdictions in which we conduct business.

Segments


We have two operating segments, Cyber & Engineering and Analytics, which were
determined based on the manner in which the chief operating decision maker
("CODM"), who is our Chief Executive Officer, manages our operations for
purposes of allocating resources and evaluating performance. Various factors,
including our organizational and management reporting structure, customer type,
economic characteristics, financial metrics and other factors were considered in
determining these operating segments. Our operating segments are described
below:

Cyber & Engineering


The Cyber & Engineering segment provides high-end technology and management
consulting services to its customers. This segment focuses in the areas of cloud
engineering and enterprise IT, cybersecurity, computer network operations and
wireless, systems engineering, as well as strategy and program planning. The
segment's primary solutions relate to the development and deployment of
customized solutions in the areas of cloud engineering and IT infrastructure,
cybersecurity and computer network operations, data analytics and visualization,
and system engineering and program planning.

Analytics


The Analytics segment provides high-end technology and consulting services to
its customers. This segment focuses on the areas of big data computing and
analytical solutions, including predictive and prescriptive analytics solutions.
The segment's primary solutions assist customers in aggregating, interpreting,
and synthesizing data to enable real-time decision-making capabilities.
                                       25

--------------------------------------------------------------------------------

  Table of Contents

Results of Operations


The table below presents our consolidated statements of operations for the
following periods:
                                                   Three Months Ended March 31,
                                                        2022                    2021
Revenues                                    $         36,390                 $ 35,570
Cost of revenues                                      26,523                   25,290
Gross margin                                           9,867                   10,280
Operating expenses:
Selling, general and administrative                   22,020                   10,114
Research and development                               2,874                      928
Transaction expenses                                   1,399                        -
Operating loss                                       (16,426)                    (762)
Net decrease in fair value of derivatives             (1,263)                       -

Interest expense                                       3,555                    1,860
Other expense (income)                                    30                       (1)
Loss before taxes                                    (18,748)                  (2,621)
Income tax expense (benefit)                              77                     (184)
Net loss                                    $        (18,825)                $ (2,437)






Revenues
                               Three Months Ended March 31,                    Change
                                    2022                    2021         Amount          %
Revenues
Cyber & Engineering     $        17,333                  $ 18,559      $ (1,226)       (6.6) %
Analytics                        19,057                    17,011         2,046        12.0  %
Total Revenues          $        36,390                  $ 35,570      $    820         2.3  %



Cyber & Engineering revenues decreased by $1,226 during the three months ended
March 31, 2022 as compared to three months ended March 31, 2021 as a result of
lower volume on certain customer contracts.

Analytics revenues increased by $2,046 during the three months ended March 31,
2022 as compared to three months ended March 31, 2021, primarily driven by a new
contract award to build a prototype solution that was awarded in the second half
of 2021.

Cost of Revenues
                                              Three Months Ended March 31,                        Change
                                                2022                  2021              Amount                %
Cost of revenues
Cyber & Engineering                       $      14,048           $  14,911          $    (863)                (5.8) %
Analytics                                        12,475              10,379              2,096                 20.2  %
Total cost of revenues                    $      26,523           $  25,290          $   1,233                  4.9  %

Cost of revenues as a percentage of
revenues
Cyber & Engineering                                  81   %              80  %
Analytics                                            65   %              61  %



Cyber & Engineering cost of revenues as a percentage of Cyber & Engineering
revenues increased to 81% for three months ended March 31, 2022 as compared to
80% for the three months ended March 31, 2021 due to increased use of
subcontractors during the three months ended March 31, 2022 as compared to the
same period in 2021.

Analytics cost of revenues as a percentage of Analytics revenues increased to 65% for the three months ended March 31, 2022 as

                                       26
--------------------------------------------------------------------------------
  Table of Contents
compared to 61% for the three months ended March 31, 2021 due to lower margins
on certain prototype contracts as compared to the same period in 2021.

SG&A
                                             Three Months Ended March 31,                        Change
                                               2022                  2021              Amount                %
SG&A                                     $      22,020           $  10,114          $  11,906                117.7  %
SG&A as a percentage of revenues                    61   %              28  %



SG&A expenses as a percentage of total revenues for three months ended March 31,
2022 increased to 61% as compared to 28% for the three months ended March 31,
2021, which was primarily driven by $3,427 investment in commercial start-up
costs, $3,071 of equity-based compensation cost, $1,346 in professional fees and
$1,221 related to D&O insurance. The increase in SG&A as a percentage of
revenues was also driven by increased payroll, information technology and
employee recruiting expenses to increase personnel in advance of planned growth
in our business as well as our increased compliance and reporting requirements
as a public company.

Additionally, the increase for the three months ended March 31, 2022 includes
$703 related to capital market advisory fees related to advisors who assisted
with the Business Combination and various integration projects and $2,375 of
non-recurring integration costs to streamline business functions across the
Company and realize synergies from our acquisitions.

Research and Development
                                    Three Months Ended March 31,                     Change
                                          2022                     2021       Amount          %
Research and development   $           2,874                      $ 928      $ 1,946       209.7  %



Research and development expenses increased by $1,946 during the three months
ended March 31, 2022 as compared to three months ended March 31, 2021. The
increase in research and development expenses was driven by increased hiring and
headcount in our innovations lab as well as investment in various research
projects aimed at continuing to develop and refine our solutions, including
enhancing features and functionality, adding new modules, and improving the
application of the latest AI/ML technologies in the solutions we deliver to our
customers.

Transaction Expenses
                                   Three Months Ended March 31,
                                          2022                       2021
Transaction expenses    $              1,399                        $  -


Transaction expenses for the three months ended March 31, 2022 consist of acquisition costs and other related expenses incurred in acquiring ProModel Corporation.

Net Decrease in Fair Value of Derivatives


The net decrease in fair value of derivatives of $1,263 for the three months
ended March 31, 2022 consists of fair value remeasurements of written put
options and private warrants. The written put option balance was $- as of
March 31, 2021.

Interest Expense
                            Three Months Ended March 31,                    Change
                                  2022                   2021        Amount          %
Interest expense     $        3,555                    $ 1,860      $ 1,695        91.1  %



Interest expense increased by $1,695 during the three months ended March 31,
2022 as compared to three months ended March 31, 2021. The increase in interest
expense was primarily driven by the higher principal balance of debt associated
with our Convertible Notes as compared to the principal balance of debt under
our Antares Capital Credit Facility, which was fully settled and terminated in
December 2021 in connection with the Business Combination. See the Liquidity and
Capital Resources section below for more information.

                                       27
--------------------------------------------------------------------------------
  Table of Contents
Income Tax Expense (Benefit)
                                         Three Months Ended March 31,                   Change
                                      2022                            2021        Amount         %
Income tax expense (benefit)     $       77                         $ (184)      $  261       141.8  %
Effective tax rate                     (0.4)   %                       7.0  %


The increase in the effective tax rate for the three months ended March 31, 2022
from the three months ended March 31, 2021 was primarily due to recognition of a
full valuation allowance on the Company's deferred tax balances. The effective
tax rate for the three months ended March 31, 2022 differs from the U.S. federal
income tax rate of 21.0% primarily due to state and local income taxes, and the
change in valuation allowance.

As of March 31, 2022, the Company has determined that it is not more-likely-than-not that substantially all of its deferred tax assets will be realized in the future, and continues to have a full valuation allowance established against its deferred tax assets.

Refer to Note H-Income Taxes of the Notes to consolidated financial statements included in this Quarterly Report on Form 10-Q for more information.

Supplemental Non-GAAP Information


The Company uses Adjusted EBITDA to evaluate its operating performance, generate
future operating plans, and make strategic decisions, including those relating
to operating expenses and the allocation of internal resources. Adjusted EBITDA
is a financial measure not calculated in accordance with GAAP. Adjusted EBITDA
is defined as net income (loss) adjusted for interest expense (income), net,
income tax expense (benefit), depreciation and amortization, equity-based
compensation, net decrease in fair value of derivatives, capital market advisory
fees, non-recurring integration costs, commercial start-up costs, and
transaction expenses. Non-GAAP financial performance measures are used to
supplement the financial information presented on a GAAP basis.
This non-GAAP financial measure should not be considered in isolation or as a
substitute for the relevant GAAP measures and should be read in conjunction with
information presented on a GAAP basis. Because not all companies use identical
calculations, our presentation of non-GAAP measures may not be comparable to
other similarly titled measures of other companies.

Adjusted EBITDA - Non-GAAP

The following table presents a reconciliation of Adjusted EBITDA to net income (loss), computed in accordance with GAAP:

                                                                   Three Months Ended March 31,
                                                                     2022                2021
Net loss                                                         $  (18,825)         $   (2,437)
Interest expense                                                      3,555               1,860
Income tax expense (benefit)                                             77                (184)
Depreciation and amortization                                         1,772               1,921

EBITDA                                                              (13,421)              1,160
Adjustments:
Equity-based compensation 1                                           3,858                  25
Net decrease in fair value of derivatives 2                          (1,263)                  -

Capital market advisory fees 3                                          703               1,540

Non-recurring integration costs 4                                     2,375                   -
Commercial start-up costs 5                                           3,427                   -
Transaction expenses 6                                                1,399                   -
Adjusted EBITDA                                                  $   (2,922)         $    2,725

1 Equity-based compensation includes approximately $2.7 million related to legacy equity

compensation plans.

2 The decrease in fair value of derivatives primarily relates to the changes in the fair

value of certain Forward Share Purchase Agreements (FPAs) that were entered into prior

to the closing of the Business Combination and were fully settled during the first

quarter of 2022.

3 The Company incurred capital market and advisory fees related to advisors assisting

with the Business Combination.

4 Non-recurring internal integration costs related to the Business Combination.

5 Commercial start-up costs includes certain non-recurring expenses associated with

tailoring the Company's software products for commercial customers and use cases.

  6    Transaction expenses related to the acquisition of ProModel Corporation, which closed
       on April 7, 2022.


                                       28

--------------------------------------------------------------------------------

  Table of Contents


Free Cash Flow

Free cash flow is defined as net cash provided by (used in) operating activities
less capital expenditures. Management believes free cash flow is useful to
investors, analysts and others because it provides a meaningful measure of the
Company's ability to generate cash and meet its debt obligations.

The table below presents a reconciliation of free cash flow to net cash provided by (used in) operating activities, computed in accordance with GAAP:

                                                                    Three 

Months Ended March 31,

                                                                      2022                 2021
Net cash (used in) provided by operating activities              $     (7,529)         $      893
Capital expenditures, net                                                (359)               (170)
Free cash flow                                                   $     (7,888)         $      723


Key Performance Indicators

Backlog


We view growth in backlog as a key measure of our business growth. Backlog
represents the estimated dollar value of contracts that we have been awarded for
which work has not yet been performed, and in certain cases, our estimate of
known opportunities for future contract awards on customer programs that we are
currently supporting.

The majority of our historical revenues are derived from contracts with the
Federal Government and its various agencies. In accordance with the general
procurement practices of the Federal Government, most contracts are not fully
funded at the time of contract award. As work under the contract progresses, our
customers may add incremental funding up to the initial contract award amount.
We generally do not deliver goods and services to our customers in excess of the
appropriated contract funding.

At the time of award, certain contracts may include options for our customers to
procure additional goods and services under the contract. Options do not create
enforceable rights and obligations until exercised by our customers and thus we
only recognize revenues related to options as each option is exercised.
Contracts with such provisions may or may not specify the exact scope, nor
corresponding price, associated with options; however, these contracts will
generally identify the expected period of performance for each option. In cases
where we have negotiated the estimated scope and price of an option in the
contract with our customer, we use that information to measure our backlog and
we refer to this as Priced Unexercised Options. If a contract does not specify
the scope, level-of-effort, or price related to options to procure additional
goods and services, we estimate the backlog associated with those options based
on our discussions with our customer, our current level of support on the
customer's program, and the period of performance for each option that was
negotiated in the contract. We refer to this as Unpriced Unexercised Options.

Many of the customer programs we support relate to key national security and
defense interests. At the end of a contract, our customers may elect to modify
our existing contract, in order to extend the period under which we provide
additional goods and services or may elect to continue to procure additional
goods and services from us under a new contract. If our customer notifies us
that a program we currently support will be continuing under a new contract, we
estimate the backlog associated with that anticipated future contract
("Anticipated Follow-on Awards") based on the assumption that (i) we are highly
likely to be awarded the contract because we are the incumbent, (ii) the program
we support is of critical importance to national security and defense, and
(iii) that if the contract was awarded to a different party, the transition
would be highly disruptive to the achievement of our customer's objectives. For
purposes of estimating backlog related to Anticipated Follow-on Awards, we
assume that the goods and services that we will deliver under that future
contract will be generally similar in scope and pricing compared to our current
contract and that our current level of support on the customer program will
persist under the new contract. Potential contract awards with existing
customers on completely new programs, or with any new customer that we have not
worked with historically, would not be included in Anticipated Follow-on Awards
as there is far greater uncertainty as to whether those opportunities will be
awarded to us.

We define backlog in these categories to provide the reader with additional
context as to the nature of our backlog and so that the reader can understand
the varying degrees of risk, uncertainty, and where applicable, management's
estimates and judgements used in determining backlog at the end of a period. The
categories of backlog are further defined below.

                                       29
--------------------------------------------------------------------------------
  Table of Contents
•Funded Backlog. Funded backlog represents the contract value of goods and
services to be delivered under existing contracts for which funding is
appropriated or otherwise authorized less revenues previously recognized on
these contracts.

•Unfunded backlog. Unfunded backlog represents the contract value, or portion thereof, of goods and services to be delivered under existing contracts for which funding has not been appropriated or otherwise authorized.


•Priced Unexercised Options: Priced unexercised contract options represent the
value of goods and services to be delivered under existing contracts if our
customer elects to exercise all of the options available in the contract. For
priced unexercised options, we measure backlog based on the corresponding
contract values assigned to the options as negotiated in our contract with our
customer.

•Unpriced Unexercised Options: Unpriced unexercised contract options represent
the value of goods and services to be delivered under existing contracts if our
customer elects to exercise all of the options available in the contract. For
unpriced unexercised options, we estimate backlog generally under the assumption
that our current level of support on the contract will persist for each option
period.

•Anticipated Follow-on Awards: Anticipated Follow-on Awards represents our
estimate of the value of goods and services to be delivered under a contract
that has not yet been awarded to us, but where we believe we are highly likely
to be awarded the contract because we are the incumbent on an ongoing customer
program, the program we support is of critical importance to national security,
and that if the contract was awarded to a different party, the transition would
be highly disruptive to the achievement of our customer's objectives. We
estimate backlog related to Anticipated Follow-on Awards based on the assumption
that the goods and services that we will deliver under the anticipated future
contract will be generally similar in scope and pricing compared to our current
contract and that our current level of support on that program will persist
under the new contract.

The following table summarizes certain backlog information (in thousands):

                                 March 31, 2022       December 31, 2021
Funded                          $        65,303      $           91,187
Unfunded                                 70,214                  68,203
Priced, unexercised options             150,572                 143,969
Unpriced, unexercised options           125,689                 119,747
Anticipated follow-on Awards             46,882                  42,582
Total backlog                   $       458,660      $          465,688



Liquidity and Capital Resources


Our primary sources of liquidity are cash flows provided by our operations and
access to existing credit facilities. Our primary short-term cash requirements
are to fund payroll obligations, working capital, operating lease obligations,
and short-term debt, including current maturities of long-term debt. Working
capital requirements can vary significantly from period to period, particularly
as a result of the timing of receipts and disbursements related to long-term
contracts.

Our medium-term to long-term cash requirements are to service and repay debt and
to invest in facilities, equipment, technologies, and research and development
for growth initiatives.

Our ability to fund our cash needs will depend, in part, on our ability to
generate cash in the future, which depends on our future financial results. Our
future results are subject to general economic, financial, competitive,
legislative and regulatory factors that may be outside of our control. Our
future access to, and the availability of credit on acceptable terms and
conditions, is impacted by many factors, including capital market liquidity and
overall economic conditions.

We believe that our cash from operating activities generated from continuing
operations during the year, together with the cash on the balance sheet and
available borrowings under our existing credit facilities, will be adequate for
the next 12 months to meet our anticipated uses of cash flow, including payroll
obligations,working capital, operating lease obligations, capital expenditures
and debt service costs. While we intend to reduce debt over time using cash
provided by operations, we may also attempt to meet long-term debt obligations,
if necessary, by obtaining capital from a variety of additional sources or by
refinancing existing obligations. These sources include public or private
capital markets, bank financings, proceeds from dispositions or other
third-party sources.
                                       30

--------------------------------------------------------------------------------

Table of Contents

Our available liquidity consists primarily of available cash and cash equivalents and available borrowings from our existing credit facilities. The following table details our available liquidity:

                                                                                          December 31,
                                                                  March 31, 2022              2021
Available cash and cash equivalents                             $        59,978          $     68,900
Available borrowings from our existing credit facilities                 50,000                15,000
Total available liquidity                                       $       

109,978 $ 83,900

The following table summarizes our existing credit facilities:

                                     March 31, 2022       December 31, 2021
Convertible Notes                   $       200,000      $          200,000
Bank of America Senior Revolver                   -                       -

D&O Financing Loan                            3,074                   4,233
Total debt                                  203,074                 204,233
Less: unamortized issuance costs              9,147                   9,636
Total debt, net                             193,927                 194,597
Less: current portion                         3,074                   4,233
Long-term debt, net                 $       190,853      $          190,364


Bank of America Senior Revolver


On December 7, 2021, BigBear.ai entered into a new senior credit agreement with
Bank of America, N.A. (the "Bank of America Credit Agreement"), providing
BigBear.ai with a $50.0 million senior secured revolving credit facility (the
"Senior Revolver"). Proceeds from the Senior Revolver will be used to fund
working capital needs, capital expenditures, and other general corporate
purposes. The Senior Revolver matures on December 7, 2025.

The Senior Revolver includes borrowing capacity available for letters of credit
and for borrowings on same-day notice, referred to as the "swing loans." Any
issuance of letters of credit or making of a swing loan will reduce the amount
available under the revolving credit facility. BigBear.ai may increase the
commitments under the Senior Revolver in an aggregate amount of up to the
greater of $18.8 million or 100% of consolidated adjusted EBITDA plus any
additional amounts so long as certain conditions, including compliance with the
applicable financial covenants for such period, in each case on a pro forma
basis, are satisfied.

The Bank of America Credit Agreement requires BigBear.ai to meet certain financial and other covenants. As of March 31, 2022, BigBear.ai was in compliance with the covenant requirements.

As of March 31, 2022, the Company had not drawn on the Senior Revolver. Unamortized debt issuance costs of $511 were recorded on the balance sheet and are presented in Other non-current assets.

Refer to Note F-Debt of the Notes to consolidated financial statements included in this Quarterly Report on Form 10-Q for more information.

Convertible Notes


Upon consummation of the Merger, the Company issued $200.0 million of unsecured
convertible notes (the "Convertible Notes") to certain investors. The
Convertible Notes bear interest at a rate of 6.0% per annum, payable
semi-annually, and not including any interest payments that are settled with the
issuance of shares, are convertible into 17,391,304 shares of the Company's
common stock at an initial Conversion Price of $11.50. The Conversion Price is
subject to adjustments, including but not limited to, a Conversion Rate Reset
180 days after November 30, 2021 should certain daily volume-weighted average
price thresholds be met. The Convertible Notes mature on December 15, 2026.

The Convertible Notes require the Company to meet certain financial and other covenants. As of March 31, 2022, the Company was in compliance with all covenants.


As of March 31, 2022, the Company has an outstanding balance of $200.0 million
related to the Convertible Notes, which is recorded on the balance sheet net of
approximately $9.1 million of unamortized debt issuance costs.
                                       31

--------------------------------------------------------------------------------

Table of Contents

D&O Financing Loan


On December 8, 2021, the Company entered into a $4,233 loan (the "D&O Financing
Loan") with AFCO Credit Corporation to finance the Company's directors and
officers insurance premium. The D&O Financing Loan has an interest rate of 1.50%
per annum and a maturity date of December 8, 2022.

Cash Flows

The table below summarizes certain information from our consolidated statements of cash flows for the following periods:

                                                                   Three 

Months Ended March 31,

                                                                     2022                2021
Net cash (used in) provided by operating activities                  (7,529)                893
Net cash used in investing activities                                  (359)               (394)
Net cash used in financing activities                              (102,055)               (275)

Net (decrease) increase in cash and cash equivalents and restricted cash

                                                    (109,943)                224

Cash and cash equivalents and restricted cash at the beginning of period

                                                           169,921               9,704
Cash and cash equivalents and restricted cash at the end of the
period                                                           $   59,978          $    9,928



Operating activities

For the three months ended March 31, 2022, net cash used in operating activities
was $7,529. Net loss before deducting depreciation, amortization and
other non-cash items was $13,761 and was further impacted by a favorable change
in net working capital of $6,232 which contributed to operating cash flows
during this period. The favorable change in net working capital was largely
driven by an increase in accrued liabilities of $6,307 primarily due to
increases in accrued interest and accrued transaction expenses, a decrease in
accounts receivable of $1,981, and an increase in accounts payable of $1,150.
These increases were partially offset by a decrease in contract liabilities of
$1,415 and an increase in contract assets of $2,306.

For the three months ended March 31, 2021, net cash used in operating activities
was $893. Net loss before deducting depreciation, amortization and other
non-cash items was $550 and was further impacted by a favorable change in net
working capital of $1,443 during this period. The favorable change in net
working capital was largely driven by a decrease in contract assets of $897 and
an increase in accrued liabilities of $2,316. These increases were partially
offset by an increase in accounts receivable of $1,442 and an increase in
prepaid and other current assets of $653.

Investing activities

For the three months ended March 31, 2022, net cash used in investing activities was $359, consisting of the purchase of property and equipment of $359.


For the three months ended March 31, 2021, net cash used in investing activities
was $394, consisting of the purchase of property and equipment of $170 and the
settlement of escrow amounts related to the acquisition of businesses of $224.

Financing activities

For the three months ended March 31, 2022, net cash used in financing activities was $102,055, consisting of the purchase of Company shares as a result of settlement of the FPAs of $100,896, and the partial repayment of short-term borrowings of $1,159 related to the D&O Financing Loan.

For the three months ended March 31, 2021, net cash used in financing activities was $275, consisting of the partial repayment of the term loan of $275.

                                       32
--------------------------------------------------------------------------------
  Table of Contents
Critical Accounting Policies and Estimates

For the critical accounting estimates used in preparing our consolidated
financial statements, we make assumptions and judgments that can have a
significant impact on revenue, cost and expenses, and other expense (income),
net, in our consolidated statements of operations, as well as, on the value of
certain assets and liabilities on our consolidated balance sheets. We base our
assumptions, judgments and estimates on historical experience and various other
factors that we believe are reasonable under the circumstances. Actual results
could differ materially from these estimates under different assumptions or
conditions.

There have been no material changes to the critical accounting policies and estimates as discussed in Note B-Summary of Significant Accounting Policies of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Recent Accounting Pronouncements

See Note B-Summary of Significant Accounting Policies of the consolidated financial statements included in this Quarterly Report on Form 10-Q for a discussion of recently issued accounting pronouncements.

© Edgar Online, source Glimpses

All news about BIGBEAR.AI HOLDINGS, INC.
12/06Redwire Corporation Announces Its Suite of Space Cybersecurity Tools Developed with Big..
CI
11/23Bigbear Ai : U.S. Launches New Unmanned & AI Systems Integration Event
PU
11/21Bigbear.ai Holdings, Inc. : Change in Directors or Principal Officers, Financial Statement..
AQ
11/10BIGBEAR.AI HOLDINGS, INC. Management's Discussion and Analysis of Financial Condition ..
AQ
11/09Transcript : BigBear.ai Holdings, Inc., Q3 2022 Earnings Call, Nov 09, 2022
CI
11/09BigBear.ai Announces Third Quarter 2022 Financial Results
BU
11/09BigBear.ai Holdings, Inc. Reports Earnings Results for the Third Quarter and Nine Month..
CI
11/09BigBear.ai Holdings, Inc. Affirms Earnings Guidance for the Year Ending December 31, 20..
CI
10/25BigBear.ai to Report Third Quarter 2022 Results on November 9, 2022
BU
10/11BigBear.ai Holdings Appoints Mandy Long as CEO
MT
More news
Analyst Recommendations on BIGBEAR.AI HOLDINGS, INC.
More recommendations