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01/11 16:02
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call summary indicates significant financial challenges: a revenue decline, reduced gross margins, increased SG&A expenses, and negative adjusted EBITDA. The company's reliance on federal contracts poses risks, especially given the government shutdown impact. Although the Ask Sage acquisition could support future growth, it presents integration risks. The absence of shareholder return discussion and competitive market pressures further weigh negatively. Despite a strong cash position, these factors suggest a negative stock price reaction in the short term.
Revenue Third quarter revenue was $33.1 million, a decrease of $8.4 million year-over-year, primarily driven by lower volume on Army programs.
Gross Margin Gross margin for the third quarter of 2025 was 22.4% versus 25.9% for the comparable period, primarily due to certain higher-margin programs in the third quarter of 2024 that were not repeated in the third quarter of 2025.
SG&A Expenses SG&A expenses increased from $17.5 million in the third quarter of 2024 to $25.3 million in the third quarter of 2025. The increase was primarily related to increased SG&A labor and fringe costs of $4.3 million to support growth and other initiatives, increased nonrecurring strategic initiatives of $2 million, and an increase in marketing and other growth investments of $1.4 million.
Net Income Net income for the third quarter was $2.5 million, driven by a decrease in the fair value of derivatives of about $26 million, partially offset by increased SG&A spending.
Adjusted EBITDA Adjusted EBITDA for the third quarter was negative $9.4 million versus positive $900,000 in the comparable period. The decrease was driven by increased SG&A spending as well as lower gross profit due to contract mix.
Cash and Investments Total cash and investments at the end of the third quarter were $715 million, which includes $457 million of cash and $258 million of held-to-maturity securities.
Acquisition of Ask Sage: BigBear.ai has signed a definitive agreement to acquire Ask Sage, a generative AI platform designed for defense and national security agencies. Ask Sage supports over 16,000 government teams and hundreds of commercial companies, with annual recurring revenue expected to grow sixfold from 2024 to 2025, reaching $25 million.
Expansion in National Security and Travel & Trade: BigBear.ai strengthened its presence in national security and travel & trade markets, including new deployments of its VeriScan biometric platform at major U.S. airports and international expansion in the U.K. and UAE.
Financial Performance: BigBear.ai reported Q3 2025 revenue of $33.1 million, a year-over-year decrease of $8.4 million, primarily due to lower Army program volumes. Adjusted EBITDA was negative $9.4 million, impacted by increased SG&A expenses and lower gross profit.
Cash and Investments: The company holds $715 million in total cash and investments, including $457 million in cash and $258 million in held-to-maturity securities.
M&A Strategy: BigBear.ai outlined a disciplined, thesis-driven M&A strategy focusing on disruptive AI mission solutions, secure travel and trade technologies, and platform-level AI technologies. The acquisition of Ask Sage aligns with this strategy to enhance its leadership in national security and regulated industries.
Government Shutdown Impact: Parts of several contracts, mostly for the intelligence community, have been temporarily paused due to the government shutdown, resulting in revenue and personnel disruptions.
Revenue Decline: Third quarter revenue decreased by $8.4 million year-over-year, primarily driven by lower volume on Army programs.
Gross Margin Reduction: Gross margins decreased from 25.9% to 22.4% year-over-year, primarily due to the absence of certain higher-margin programs from the previous year.
Increased SG&A Expenses: SG&A expenses increased significantly, driven by higher labor and fringe costs, nonrecurring strategic initiatives, and marketing investments, impacting profitability.
Adjusted EBITDA Decline: Adjusted EBITDA for the third quarter was negative $9.4 million, a significant drop from positive $900,000 in the comparable period, driven by increased SG&A spending and lower gross profit.
M&A Execution Risks: The acquisition of Ask Sage involves integration challenges, including aligning operations, technology, and personnel, which could impact the expected synergies and growth.
Dependence on Federal Contracts: Over 80% of the company's government contract work is deemed mission essential, but reliance on federal contracts exposes the company to risks from budgetary constraints and political uncertainties.
Market Competition: The company faces competitive pressures in the AI and defense sectors, requiring continuous innovation and differentiation to maintain its market position.
Economic and Regulatory Risks: Operating in highly regulated industries and relying on government funding exposes the company to economic uncertainties and compliance challenges.
Revenue Projections: For the full year 2025, the company continues to project revenue between $125 million and $140 million.
Ask Sage Acquisition Impact: The anticipated acquisition of Ask Sage is expected to close late in the fourth quarter of 2025 or early in the first quarter of 2026. The financial results of the acquisition are not expected to have a material impact on consolidated 2025 financial results but are expected to support accelerated growth into 2026 and beyond.
Market Trends and Growth Expectations: The company expects unprecedented government AI investments in 2026 and 2027, positioning Ask Sage's existing accreditations and operational platform as a key competitive advantage. The number of Federal generative AI use cases has grown over 8x since 2023, and Ask Sage is tracking toward $25 million in ARR in 2025.
Strategic Plans for Future Growth: BigBear.ai plans to integrate Ask Sage to deliver secure, scalable, and agile AI solutions, reinforcing deterrence, readiness, and leadership across national security, travel, and trade sectors. The company also aims to cross-sell Ask Sage into existing federal and commercial accounts and introduce BigBear.ai products to Ask Sage's user base.
The selected topic was not discussed during the call.
The earnings call summary indicates significant financial challenges: a revenue decline, reduced gross margins, increased SG&A expenses, and negative adjusted EBITDA. The company's reliance on federal contracts poses risks, especially given the government shutdown impact. Although the Ask Sage acquisition could support future growth, it presents integration risks. The absence of shareholder return discussion and competitive market pressures further weigh negatively. Despite a strong cash position, these factors suggest a negative stock price reaction in the short term.
The earnings call presents mixed signals: positive backlog growth and reduced debt are offset by increased net losses and negative EBITDA. While revenue and gross profit saw modest growth, margins declined slightly. The lack of clear guidance on new product launches and supply chain challenges add uncertainty. Despite reaffirmed revenue guidance, the absence of specific sales figures and vague management responses in the Q&A add to the neutral outlook. Given these factors, the stock price is likely to remain stable over the next two weeks.
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