Earnings call transcript: BigBear.ai Q2 2025 misses forecasts, stock dips

BigBear.ai Holdings Inc. reported its second-quarter 2025 earnings, revealing a significant miss in both earnings per share (EPS) and revenue compared to forecasts. The company posted an EPS of -$0.71, far below the expected -$0.06, marking a surprise of over 1,083%. Revenue also fell short, coming in at $32.5 million against a forecast of $41.19 million, a shortfall of 21.1%. Following the announcement, BigBear.ai’s stock dropped 0.7% to $7.14 in regular trading and a further 2.1% in after-hours trading, settling at $6.99. According to InvestingPro data, the stock has shown remarkable volatility with a beta of 3.19, significantly higher than the market average.

Key Takeaways

• BigBear.ai’s Q2 2025 financial results missed analyst expectations significantly.
• Revenue decreased by $7.3 million year-over-year.
• The company maintains a strong cash position of $391 million.
• Stock price declined 0.7% in regular trading and 2.1% in after-hours.
• BigBear.ai withdrew its adjusted EBITDA guidance amid operational challenges.

Company Performance

BigBear.ai’s performance in Q2 2025 was marked by notable financial challenges, with both revenue and earnings falling short of expectations. The company reported a net loss of $228.6 million, driven largely by non-cash items. Despite these setbacks, BigBear.ai continues to hold a robust cash position, which reached a record $391 million, bolstered by $293 million raised through At-The-Market facilities.

Financial Highlights

• Revenue: $32.5 million, down $7.3 million year-over-year.
• EPS: -$0.71, significantly below the forecast of -$0.06.
• Gross Margin: 25%, down from 27.8% the previous year.
• Cash Position: $391 million, with a net positive cash position of nearly $250 million.

Earnings vs. Forecast

BigBear.ai’s actual EPS of -$0.71 was a substantial miss compared to the forecasted -$0.06, resulting in an earnings surprise of over 1,083%. Revenue also fell short by 21.1%, with actual figures at $32.5 million versus the expected $41.19 million. This marks a significant deviation from projections, impacting investor sentiment negatively.

Market Reaction

The earnings miss led to a decrease in BigBear.ai’s stock price, which fell 0.7% during regular trading hours and dropped an additional 2.1% in after-hours trading. The stock closed at $7.14 and later moved down to $6.99. This movement reflects investor concerns over the company’s financial performance and future outlook.

Outlook & Guidance

BigBear.ai has withdrawn its adjusted EBITDA guidance, citing disruptions in its US Army contracts and focusing on broadening its pipeline and international expansion. The company projects its 2025 revenue to be between $125 million and $140 million. Despite current challenges, BigBear.ai is pursuing aggressive investment strategies and international partnerships to bolster its market position.

Executive Commentary

CEO Kevin McElhinen highlighted the transformative level of investment expected from government funding, stating, "This is not incremental funding for innovation. This is a transformative level of investment." He emphasized the company’s proactive strategy, noting, "We are going on offense in a big way and going after much bigger game."

Risks and Challenges

• Contract Disruptions: Ongoing issues with US Army contracts may impact future revenue.
• Market Competition: Increased competition in AI and defense sectors.
• Economic Uncertainty: Macroeconomic pressures could affect funding and investment.
• Supply Chain Issues: Potential disruptions could hinder product deployment.
• Regulatory Changes: Shifts in government procurement policies may influence operations.

BigBear.ai’s Q2 2025 results underscore significant financial hurdles and a challenging market environment. The company’s focus on strategic investments and international expansion aims to counterbalance these challenges and drive future growth. With a market capitalization of $2.06 billion and trading at a Price-to-Book ratio of 10.44x, investors seeking deeper insights can access the comprehensive BBAI Research Report, available exclusively on InvestingPro, along with detailed analysis of 1,400+ other US stocks.

Full transcript - BigBearai Holdings Inc (BBAI) Q2 2025:

Conference Operator: Welcome to Big Bear AI Holdings Incorporated Second Quarter twenty twenty five Earnings Call. It is now my pleasure to introduce Sean CFO. Thank you. You may begin.

Sean Ricker, CFO, Big Bear AI: Good afternoon, and thank you all for joining us today for our second quarter twenty twenty five earnings call. I’m Sean Ricker, CFO of Big Bear AI, and I’m joined today by our CEO, Kevin McElhinen. Statements made in today’s call that are not historical fact are considered forward looking statements and are made pursuant to the Safe Harbor provisions of the federal securities laws. Actual results may differ materially from those projected in the forward looking statements. Please see today’s press release and our SEC filings for a description of some of the factors that may cause actual results to differ materially from those in the forward looking statements.

We have posted charts on our website today that we plan to address during the call to supplement our comments. These charts also include information regarding non GAAP measures that may be used in today’s call. Please access our website at www.bigbear.ai and click on the Investor Relations link to view and follow the charts. With that, I’d like to turn the call over to Kevin.

Kevin McElhinen, CEO, Big Bear AI: Good afternoon, and thank you for joining us. I’m excited to speak with all of you during such a dynamic and pivotal time in our market and for Big Bear AI. This afternoon, I will share some key developments over the last quarter in our market outlook, operations, and strategy, and Sean will recap our financial results for the quarter. We’re operating in a world that’s rapidly increasing investment in our core capabilities, national and border security, AI, autonomy, tech enabled travel and trade, transportation and logistics. These are not just policy priorities, they are global imperatives.

In the three months since our last earnings call, we have seen landmark developments resulting in powerful market tailwinds in each of these areas. Most significantly, the passage of the one big beautiful bill will bring a generation of investment in areas where Big Bear AI has core capabilities, innovative products, and market leading performance. The one big beautiful bill or o b three as we’re calling it, provides a 170,000,000,000 in supplemental funding to the Department of Homeland Security and a 150,000,000,000 to the Department of Defense for disruptive defense technology, as well as billions more across shipbuilding and other critical national security missions that we support. This is not incremental funding for innovation. This is a transformative level of investment.

And as a mission ready AI company with national and border security focus, it’s directly in our lane. We anticipated these developments, if not their scale, and have made key bets in recent years that we are now positioned to capitalize on. BigBear AI has been proving we are a leading provider of capabilities called for in this legislation both in The US and across the globe. For example, BigBear AI has deployed world class biometric solutions for traveler processing on more than 2,000 devices at over 500 gates and 25 airports. These deployments include providing biometric exit solutions and recently pioneering a new biometrically enabled enhanced passenger processing solution alongside partner airports and in support of US Customs and Border Protection.

We’re also demonstrating progress with our technology that support defense autonomy, including ConductorOS for DOD’s drones forming development efforts. Our supply chain management solutions, including Shipyard AI, are helping transform the industrial base for America and our allies. And we’re partnering internationally with organizations like International Holding Company in The United Arab Emirates and Narval Holdings in Panama in multiple sectors, such as port security and supply chain logistics, expanding our global relevance and impact. Importantly, we’ve done this while building a robust balance sheet and the capital necessary to take advantage of the unprecedented growth opportunities in this market. In our release today, we highlight the strongest ever balance sheet in the history of Big Bear AI with over 390,000,000 in cash to support aggressive new growth initiatives.

We intend to deploy capital with urgency, rigor, and discipline to grow our top line both organically and inorganically through targeted m and a. We are excited to discuss all of this with you today in detail, but first I want to address our second quarter performance and our outlook for the rest of the year. In our first quarter earnings call, we talked about the potential for disruptions in federal contracts from efficiency efforts. We have seen those disruptions this quarter, most notably in programs that support the United States Army. As they seek to consolidate and modernize their data architecture and in turn, we have adjusted our full year guidance this quarter to reflect such disruptions.

That said, BigBear AI will support the army strategy to capitalize on their investment in a new data platform while continuing to support the development of critical capabilities for the war fighter on their new architecture going forward, including competing for the new global force information management contract with our unique expertise in army data systems. Despite these challenges with army contracts, we are not gonna sit back and lick our wounds. We’re gonna compete to win this work again. More broadly, we welcome this type of disruption to streamline data layers and allow for software to address mission use cases to be delivered more quickly. We intend to capitalize on this type of changing focus in government technology investment and the suite of new acquisition methodologies with a larger and better focused pipeline, targeting where the resources are going and bringing mature products and technology assets to bear in addition to our talented and mission focused development teams.

Coming into the role as CEO earlier this year, it was clear to me that our pipeline was narrow and relied on a few large contracts. We have taken steps this year to deepen and broaden that pipeline with additional customers, more prime contract targets, larger opportunities, and expansion into new markets including internationally. It will take time to mature, but we are on the right track. With the historic funding levels announced in recent weeks, directly focused in areas where we have leading capabilities and and a reputation for innovation, we are confident that our mid term outlook remains strong. Further, one of my first priorities as I stepped into my role as CEO was to increase the level of rigor in our forecasting process and transparency in our communication to the market.

In partnership with Sean in his new role, I believe that we are achieving the right balance of optimism while also being mindful of risks that we cannot control. We are building this business for the long term, not building this business around quarterly thinking or focusing myopically on prior contract models. We see the opportunity to build a market leading business that can transform mission areas and industries, and we are firmly placing our focus on those future growth prospects. Our new guidance range will give us the flexibility to invest in an aggressive but disciplined way over the rest of this year and smartly deploy capital to accelerate the major growth inflection that will drive material long term shareholder value in the quarters to come. This quarter is not about taking a step back.

It’s about setting up for an aggressive step forward. We are going on offense in a big way and going after much bigger game. Let’s

Sean Ricker, CFO, Big Bear AI: talk

Kevin McElhinen, CEO, Big Bear AI: in more detail about the exciting emerging environment that we’re operating in because it’s never looked more promising. This quarter, The US and allies have committed to unprecedented partnerships in AI, such as the acceleration of a 1,400,000,000,000 AI investment with The United Arab Emirates, UAE. This type of international partnership is indicative of the rapid push for adoption of mission enhancing AI tools across the security and critical infrastructure sectors. We are excited to be partnering with leading Emirati companies to deliver our AI products in the region and beyond. In The US, o v three includes 170,000,000,000 in supplemental funding for DHS over the next four years.

70,000,000,000 of that is earmarked for CBP, with 6,200,000,000.0 allocated specifically to border technology and 673,000,000 to biometric exit. And fourth, pausing on the magnitude of these funding enhancements. When I led CBP, we had a $16,000,000,000 budget, one of the largest for any law enforcement agency globally. Now CBP has four times that amount in incremental funding on top of their existing base, largely to acquire technology solutions to support operations and all over the next four years. For DOD, o b three includes a 16,000,000,000 military AI autonomy fund to scale swarming unmanned aerial systems, which aligns directly with our investments in ConductorOS and autonomy enablement.

Add to that 29,000,000,000 for domestic shipbuilding, supporting areas where we’ve already demonstrated value with platforms like Shipyard AI. And all of this is underpinned by a surge in AI adoption. In our core markets, security, travel and logistics, defense and intel, AI deployment is no longer an experiment. It’s becoming a global standard. Industry reports indicate that US investments in AI are projected to surge by 44% year over year, and federal procurement for AIML enabled mission systems is estimated to be growing by approximately 10 to 15% year over year.

These are generational investments in areas with a direct line of sight to grow for BigBear AI in markets where we are already a leader. On that note, our efforts over the last quarter reinforce our positioning in these markets, our product innovation and our operational performance. In Borders Travel and Trade, our biometric solution Veriskan has become a market standard for enhanced passenger processing, which enables smooth and secure traveler processing upon entry into United States. Over the last quarter, we expanded deployments across 12 airports and seaports in North America. We are rapidly scaling to meet demand, and combined with our established and growing deployments of biometric exit, BigBear AI has emerged as a market leader in this category.

We’re also preparing to build upon our existing work at DHS and compete for the opportunity to support multiple critical IT systems at CBP, where the agency is pursuing several acquisitions to upgrade critical systems supporting border security, passenger and cargo processing, and risk assessment. Several of these procurements have been accelerated and are scheduled to come to fruition over the next four to six quarters. For our defense and intelligence customers, our autonomous command and control enablement software, ConductorOS, performed exceptionally at the recent Talisman Sabre exercise, supporting operations with real time AI model deployment, enhancing battlefield decision making, and asset coordination. We also recently secured a contract in partnership with Hardy Dynamics under the DOD Joint Program Executive Office for Armaments and Ammunition to work on drones form lethality, another proof point of our strong positioning to play a critical role in the next generation of distributed autonomy. For our supply chain, logistics, and manufacturing business, our shipyard AI capability has already proven itself.

With new funding allocated to shipbuilding and infrastructure as part of o b three, we’re poised to scale these offerings. Regarding our international expansion, we are deepening relationships that matter. We signed a transformative partnership with leading companies in The UAE under the IHC umbrella this quarter focused on accelerating the development and adoption of AI across several domains and applications. Additionally, we launched the cargo security management solution in partnership with Narval Holdings in Panama, opening the door to broader regional expansion and partnerships with global shipping lines. We are proving that we can win in the markets that will be most critical in the next chapter.

As we move forward, we have a strong and talented team to take us to the next level. A prime example of that is our interim CFO, Sean Ricker, joining us today for his first quarterly earnings call in his new role. Sean has been at BigBear AI from the start of the company’s journey in the public markets and most recently served as our chief accounting officer. Sean knows the business inside and out, and he’s an outstanding financial professional with a deep appreciation for our customers and their mission. With that, I’ll turn it over to Sean to share some more about his background and discuss our financial results for the quarter.

Sean Ricker, CFO, Big Bear AI: Thank you, Kevin. It’s a privilege to be joining today’s call in my new capacity as CFO. As Kevin mentioned, I’ve been with Big Bear since the beginning. This is such an exciting time to see the speed and scale of AI development in the world and how that reverberates through the technology we deploy and the customers we serve each and every day. What I can also say is that across the four plus years that I’ve been with the company, we have never been in a better liquidity position than where we stand today.

Kevin, myself, and our board are all aligned on going on offense and doing so in a significant way. The proceeds we raised this quarter, which I’ll discuss in more detail shortly, open up a world of new possibilities that were previously out of reach. On that note, let’s start with our balance sheet. This quarter, we have continued to make sequential improvements to our balance sheet in terms of our liquidity and net debt position. We’re proud to announce that as of the end of the second quarter, we have $391,000,000 of cash, an all time record.

And as you’ll see in the earnings presentation, we ended the quarter with a net positive cash position of almost $250,000,000 another record and the first time in Big Bear’s history where our total cash exceeds our total debt. Our second quarter cash balance, an increase of $341,000,000 from where we ended 2024, provides us with the capital we need to execute on the vast array of opportunities we have ahead of us, both organically and inorganically. During the second quarter, through our at the market facilities, we raised gross proceeds of approximately $293,000,000 in exchange for the sale of roughly 75,000,000 shares of our common stock. This equates to an average gross selling price of $3.90 per share, which is about 370 basis points higher than the average daily closing price of our stock during those days that we were in the market. This demonstrates that not only did we raise significant proceeds, but also executed at strong prices.

Our access to the capital markets through these ATM facilities demonstrates our ability to raise a meaningful amount of capital quickly and at relatively low cost compared to other alternatives for companies of our size. From a macro perspective, the proceeds from these ATM facilities will be the foundational fuel to the offensive strategy we’ve outlined here today. Now let’s turn to our operating results for the quarter. Second quarter revenue was $32,500,000 a decrease of $7,300,000 year over year, which was primarily driven by the Army programs that Kevin previously discussed. Gross margins decreased slightly year over year.

Gross margin for the 2025 was 25% versus 27.8% for the comparable period. SG and A expenses decreased from $23,400,000 in the 2024 to $21,500,000 in the 2025. Our net loss for the second quarter was $228,600,000 driven by changes in the fair value of derivatives of about $136,000,000 primarily associated with the quarterly remeasurement of the convertible features of our convertible notes. We also recorded a goodwill impairment charge of about $71,000,000 this quarter, which was partially driven by our reduced guidance range for 2025. Both of these are noncash items and excluded from our measurement of adjusted EBITDA.

Adjusted EBITDA for the second quarter was negative 8,500,000 versus negative $3,700,000 in the comparable period. The decrease in adjusted EBITDA was primarily driven by lower gross profit due to lower revenue volume as well as higher R and D expenses. As Kevin already mentioned in his remarks, while we see significant opportunities in our portfolio long term, recent near term impacts on certain large programs and government contracting timing risks have impacted our revenue outlook for the rest of this year. We see tremendous growth opportunities ahead of us from expanding our existing portfolio to meet the demands of O B3 and global AI adoption as well as opportunities to accelerate through inorganic growth. In order to capitalize on these opportunities, we plan to make meaningful investments for the duration of this year to pursue these in earnest.

As a result of the reduction in our revenue outlook, coupled with our expected increased investment spend profile for the second half of this year, we are withdrawing our adjusted EBITDA guidance at this time. For the full year 2025, we are now projecting revenue between $125,000,000 and $140,000,000 I’ll now turn it back to Kevin to discuss our priorities and to give a few closing remarks.

Kevin McElhinen, CEO, Big Bear AI: Thanks, Sean. As mentioned, our balance sheet strength and cash position specifically put us in a position to dramatically increase our rate of market capture and capitalize on these unprecedented tailwinds with conviction and agility. Our strategy is clear, go on offense. We’ll find investing in our capability to pursue organic growth with our AI technology products and government solutions and through targeted acquisitions. On organic growth, we’re investing to supercharge our growth engine, specifically around capture campaigns pertaining to o b three in the private sector security technology market.

We will also be expanding our investment in marketing. Given the extent of the value that we can provide potential customers at this moment, we believe that broad awareness is critical, and we have the resources to support a much greater presence. Talent. We’re attracting and retaining top tier talent from both the tech and national security communities. As we expand into this new chapter, we will be bringing on senior advisers and operators that can further support our business in scaling to the next level.

Innovation. Our AI innovation agenda is advancing quickly, and we are focusing on both our core existing capabilities and on additional frontier innovation, including physical AI and Internet of Things integration and agentic systems that will operate in the real world to drive security and efficiency at scale. Partnerships. We are deepening ties with strategic partners domestically and internationally to ensure our capabilities integrate seamlessly into the ecosystems that matter most and that we have distribution access that extends globally. M and A.

Most critically, we are actively pursuing strategic transformational acquisitions. We’re looking at targets that will accelerate scale, unlock new markets, and add step function in AI capability. Let me close by bringing it all together. While we have experienced some contract disruption that has negatively impacted our financial results, this quarter should not be defined by it. Instead, the opportunities we have in this moment are defined by powerful market tailwinds, significant progress in the business and our technology, and a strong financial posture going forward to take rapid advantage of the climate that we’re operating in.

We’re in the right markets with the right platforms, and we are proving that in the field. We intend to gain market share, win new customers, establish new partnerships, and secure our place at the center of AI transformation in national and border security, transportation and mobility, and critical infrastructure. We have the cash to invest, the conviction to advance, and we’re building the team to execute. Thank you to our BigBear AI team and our shareholders for your continued support. I look forward to speaking with all of you next quarter to update you on our progress.

Conference Operator: Thank you. This will conclude today’s conference. You may disconnect at this time, and thank you for your participation.

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