BigBear.ai Holdings, Inc. Q1 FY2023 earnings call

• Revenue grew 16% YoY despite a challenging macroeconomic environment, showcasing capabilities in autonomous systems, cybersecurity, and supply chain/logistics.
• New strategic partnership with L3Harris to deliver AI/ML-based forecasting, etc., for unmanned service vessels.
• Work with the U.S. Navy on autonomous systems, with analytics and computer vision capabilities demonstrated in live exercises.
• Products added to the Tradewind marketplace, including Observe and AI/ML-based forecasting tools.
• Progress in supply chain, healthcare (new contracts with hospitals), and manufacturing (work with global Fortune 500 food company and diesel engine manufacturer).
• Focus on cost management, streamlined reporting, and restructuring efforts. New hires: Norm Laudermilch as COO and Greg Goldwater as Chief Growth Officer.

In Q1, revenue was $42.2 million, up 16% year-over-year. Gross margin was 24%, a 300 basis point decrease from Q1 2022 due to additional costs on the GFIM Phase 2 program. Backlog was $197 million at the end of Q1, down 10% from Q4 2022, driven by the removal of Virgin Orbit. Operating expenses were $22.2 million, down 15% year-over-year. Net loss was $26.2 million. Adjusted EBITDA was a loss of $3.8 million. The company consolidated its legacy Cyber & Engineering and Analytics segment into one reportable segment starting from Q1 2023.

• Reaffirmed 2023 revenue guidance in the range of $155 million to $170 million.
• Expect adjusted EBITDA to be single-digit negative in millions for 2023.
• Continue to be disciplined in cost management and make targeted investments to accelerate industry leadership in AI.

• Factors causing actual events to differ materially from forward-looking statements.
• Macro economic uncertainties impacting business.
• Lumpy nature of revenue based on contract awards, milestones, and completions.
• Impact of Virgin Orbit bankruptcy on backlog.

Q: Provide more color on the autonomous vessel program partnership, specifically revenue type (software, professional services, etc.) A: Still early days in figuring out execution, but revenue is expected to be per vessel as the vessel base grows.

Q: GFIM Phase 2 conclusion and production funding A: Phase 2 concludes this quarter, expecting a 6-month extension with GAAP funding until production contract in 2024 fiscal year.

Q: Segment consolidation and crossover of resources A: Consolidation streamlines operations, making it more efficient as the business is now functionally organized.

Q: Scale of L3Harris partnership in terms of unmanned vessels A: Partnership will scale as additional vessels are built/retrofitted, with software running on both new and existing vessels.

Q: GFIM Phase 2 margin profile vs production contract A: Production contract margin expected to be more attractive than Phase 2 due to OTA structure of federal contracts.

Q: Commercial growth in macroeconomic environment A: Commercial business, particularly discrete event simulation capabilities, continues to grow as it aids operational decision-making in manufacturing, distribution, etc.

Q: Generative AI and its role in BigBear's offerings A: Leverages large language models and transformer models in defense, intel, and industrial sectors as part of portfolio offerings.

Q: Revenue lumpy nature and guidance A: Revenue is lumpy based on contract start, milestones, and completion; guidance is based on current visibility and will be reassessed as opportunities arise.

Q: Shelf registration and cash flow positivity A: Shelf registration allows access to capital markets for growth. Expect operational cash flow positive in the back half of 2023 excluding nonrecurring items.