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What changed in BigBear.ai Holdings, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of BigBear.ai Holdings, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+524 added−507 removedSource: 10-K (2025-03-25) vs 10-K (2024-03-15)

Top changes in BigBear.ai Holdings, Inc.'s 2024 10-K

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Item 1. Business

Business — how the company describes what it does

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Biggest changeOur tools play a critical role in capital investment strategies, building design, layouts, and equipment purchases for manufacturing, logistics, business processes, and other operational systems. Digital Identity BigBear.ai is expanding its portfolio to include the Digital Identity market, bringing decades of subject matter expertise in border protection, aviation, travel, and tourism as well as proven software through the Pangiam acquisition.
Biggest changeOur tools play a critical role in aiding 7 Table of Cont e n t s capital investment strategies, building design, layouts, and equipment purchases for manufacturing, logistics, business processes, and other operational systems. Digital Identity BigBear.ai offers software assets that are tailored for digital identity and biometrics, leveraging advanced vision AI technology.
Supply Chain Management BigBear.ai brings decades of experience supporting complex manufacturers, suppliers, and logistics operations to our SCM portfolio. • Digital Twin : Our approach to Modeling & Simulation enables our customers and partners to capture the behavior of complex interdependent processes and execute rapid course-of-action analysis.
Supply Chain Management (SCM) BigBear.ai brings decades of experience supporting complex manufacturers, suppliers, and logistics operations to our SCM portfolio. • Digital Twin : Our approach to Modeling & Simulation enables our customers and partners to capture the behavior of complex interdependent processes and execute rapid course-of-action analysis.
BigBear.ai offers proven computer vision, anomaly/event detection, and descriptive and predictive analytics to support operations and break down silos between vendors and systems. • Contested Logistics : Our approach to enabling our military, intelligence, and federal agencies to facilitate the safe transport of goods and people in contested environments and at points of entry.
BigBear.ai offers proven computer vision, anomaly/event detection, and descriptive and predictive analytics to support operations and break down silos between vendors and systems. • Contested Logistics : Our approach to enabling our military, intelligence, and federal agencies is to facilitate the safe transport of goods and people in contested environments and at points of entry.
Competition Our main sources of current and potential competition fall into several categories: • System integrators that develop and provide custom software solutions; • Agency or corporate IT organizations that develop internal solutions for their enterprises; • Commercial enterprise and point solution software providers; • Public cloud providers offering discrete tools and micro-services with artificial intelligence, analytics and data management tools or functionality 7 Table of Contents • In many cases, we compete with the internal software development efforts of our potential customers.
Competition Our main sources of current and potential competition fall into several categories: • System integrators that develop and provide custom software solutions; • Agency or corporate IT organizations that develop internal solutions for their enterprises; • Commercial enterprise and point solution software providers; • Public cloud providers offering discrete tools and micro-services with artificial intelligence, analytics and data management tools or functionality • In many cases, we compete with the internal software development efforts of our potential customers.
The combination of BigBear.ai and Pangiam creates one of the industry’s most comprehensive vision and edge AI portfolios, combining facial recognition, image-based anomaly detection and advanced biometrics with BigBear.ai’s computer vision and predictive analytics 4 Table of Contents capabilities. We believe the acquisition of Pangiam positions us as a foundational leader in how artificial intelligence is operationalized at the edge.
The combination of BigBear.ai and Pangiam creates one of the industry’s most comprehensive vision and edge AI portfolios, combining facial recognition, image-based anomaly detection and advanced biometrics with BigBear.ai’s computer vision and predictive analytics capabilities. We believe the acquisition of Pangiam positions us as a foundational leader in how artificial intelligence is operationalized at the edge.
Approximately 46% of our workforce is comprised of software engineers, data scientists, cloud/systems engineers, analysts, and cyber subject-matter experts. BigBear.ai has headquarters in Columbia, MD, with additional office locations in Ann Arbor Michigan; Chantilly, Virginia; Charlottesville, Virginia; and McLean, Virginia. In addition, many of our team members work at secure customer facilities across the U.S.
Approximately 53% of our workforce is comprised of software engineers, data scientists, cloud/systems engineers, analysts, and cyber subject-matter experts. BigBear.ai has headquarters in McLean, Virginia, with additional office locations in Ann Arbor, Michigan; Chantilly, Virginia; and Charlottesville, Virginia. In addition, many of our team members work at secure customer facilities across the U.S.
Nevertheless, compliance with existing or future governmental regulations, including, but not limited to, those pertaining to global trade, consumer and data protection, and taxes, could have a material impact on our business in subsequent periods.
Nevertheless, compliance with existing or future governmental or international regulatory bodies regulations, including, but not limited to, those pertaining to global trade, consumer and data protection, and taxes, could have a material impact on our business in subsequent periods.
Embracing diversity and inclusivity, we foster a culture that encourages open dialogue and active engagement on matters crucial to employee contentment. Empowering our employees to contribute significantly to the company's trajectory and achievements is integral to our ethos.
We foster a culture that encourages open dialogue and active engagement on matters crucial to employee contentment. Empowering our employees to contribute significantly to the company's trajectory and achievements is integral to our ethos.
In 2023, in response to the strategic call to action by DoD to connect sensors across all branches of the armed forces powered by artificial intelligence, we made targeted investments into foundational software capabilities that move us closer to our goal of providing the critical infrastructure for AI. We expect these investments to continue in 2024.
Following the strategic call to action by DoD to connect sensors across all branches of the armed forces powered by artificial intelligence, we made targeted investments into foundational software capabilities that move us closer to our goal of providing the critical infrastructure for AI. We expect these investments to continue in 2025.
Our capabilities deliver course of action decision support and event prediction and forecasting, which provides decision makers with insights at the speed of operational relevance. • Autonomy at the Edge : Our approach to orchestrating and fusing data and artificial intelligence at the edge, even in distributed and/or disconnected environments.
Our capabilities deliver course of action decision support and event prediction and forecasting, which provides decision makers with insights at the speed of operational relevance. • Autonomy at the Edge : Our approach is to orchestrate and fuse data and artificial intelligence at the edge, even in distributed and/or disconnected environments.
On February 29, 2024, the Company completed the acquisition of Pangiam Intermediate Holdings, LLC (“ Pangiam ” or the “ Pangiam Acquisition ”), a leader in vision AI for the global trade, travel, and digital identity industries.
On February 29, 2024, the Company completed the acquisition of Pangiam Intermediate Holdings, LLC (“Pangiam” or the “Pangiam Acquisition”), a leader in vision AI for the global trade, travel, and digital identity industries.
For more information on the potential impacts of government regulations affecting our business, see the section titled “ Risk Factors ” contained in this Annual Report on Form 10-K. Intellectual Property We believe that our intellectual property rights are valuable and important to our business.
For more information on the potential impacts of government regulations affecting our business, see the section titled “ Risk Factors ” contained in this Annual Report on Form 10-K. 9 Table of Cont e n t s Intellectual Property We believe that our intellectual property rights are valuable and important to our business.
Our solution portfolios include: National Security BigBear.ai brings over 30 years of experience delivering capabilities into operational environments for critical missions.
National Security BigBear.ai brings over 30 years of experience delivering capabilities into operational environments for critical missions.
Due to the sensitive and oftentimes classified nature of our work with these customers, a significant portion of BigBear.ai’s contracts still require our team members to co-locate on-premises to tailor our solutions for these unique environments and use cases.
Revenue Mix A significant portion of our revenue is from contracts with public sector agencies, including the Federal Government. Due to the sensitive and oftentimes classified nature of our work with these customers, a significant portion of BigBear.ai’s contracts still require our team members to co-locate on-premises to tailor our solutions for these unique environments and use cases.
These software assets are tailored for digital identity and biometrics, leveraging advanced vision AI technology. These assets represent a cornerstone of our commitment to innovation in identity verification and security. Through the integration of sophisticated algorithms and machine learning capabilities, our software solutions empower organizations to authenticate individuals with unparalleled accuracy and efficiency.
These assets represent a cornerstone of our commitment to innovation in identity verification and security. Through the integration of sophisticated algorithms and machine learning capabilities, our software solutions empower organizations to authenticate individuals with unparalleled accuracy and efficiency.
It is a call to action for companies like BigBear.ai, as we are a part of the defense industrial base which must provide the required capabilities at the speed and scale necessary for the U.S. military to engage and prevail in a near-peer conflict.
It was a call to action for companies like BigBear.ai to provide the required capabilities at the speed and scale necessary for the U.S. military to engage and prevail in a near-peer conflict.
Human Capital Our employees are critical to the success of our business. As of December 31, 2023, we had approximately 480 full-time employees, substantially all of which are employed in the United States.
Human Capital Our employees are critical to the success of our business. As of December 31, 2024, we had approximately 630 full-time employees, substantially all of which are employed in the United States. We also engage part-time employees, independent contractors, and third-party personnel to supplement our workforce.
Historically, much of our research and development has been funded and directed by defense and intelligence customers for their specific needs and objectives.
Research & Development Our team has decades of combined experience developing and deploying software products in a variety of environments. Historically, much of our research and development has been funded and directed by defense and intelligence customers for their specific needs and objectives.
Customers BigBear.ai has a global footprint of customers spanning the public and private sector, including U.S. as well as allied nation defense and intelligence agencies, border protection, transportation security, manufacturing, distribution and logistics, as well as travel, entertainment and tourism.
Customers BigBear.ai has a global footprint of customers spanning the public and private sector, including U.S. defense and intelligence agencies, border protection, transportation security, manufacturing, distribution and logistics, as well as travel, entertainment and tourism. We are proud of the trusted, multi-decade relationships we have with our customers and work hard to grow and maintain those relationships every day.
In alignment with the National Defense Strategy (NDS) released in 2022, the Federal Government is focused on fortifying our supply chains and enabling international interoperability and collaboration to deter adversarial entities from impacting the critical infrastructure that fuels our great nation.
In alignment with the National Defense Strategy (NDS) released in 2022, the Federal Government is focused on fortifying supply chains and enabling international interoperability and collaboration to deter adversarial entities from impacting critical infrastructure. BigBear.ai is consistently delivering to this need, playing a role in providing an orchestrated ecosystem of trusted and secure collaboration.
Many of our customers rely on BigBear.ai’s specialized resources to supplement their technical and operational staff for long-term engagements. On January 11, 2024, the Department of Defense (DoD) released its inaugural National Defense Industrial Strategy (NDIS), defining priorities for industry to realize a national modernized defense industrial ecosystem.
US defense initiatives On January 11, 2024, the Department of Defense (DoD) released its inaugural National Defense Industrial Strategy (NDIS), defining priorities for industry to realize a national modernized defense industrial ecosystem.
We also engage part-time employees, independent contractors, and third-party personnel to supplement our workforce. 8 Table of Contents Notably, none of our employees are affiliated with labor unions, and we pride ourselves on maintaining uninterrupted operations free from labor disputes. This underscores the strength of our employee relations.
Notably, none of our employees are affiliated with labor unions, and we pride ourselves on maintaining uninterrupted operations free from labor disputes. This underscores the strength of our employee relations. Our human capital resources objectives include recruiting, retaining, training, and motivating our personnel.
Because of our history in complex systems integration, operating systems artificial intelligence, and Data and AI orchestration, we are well positioned to deliver solutions to solve for at-scale, production grade decision intelligence. Growth Strategy Our growth strategy focuses on executing our backlog, adding new customers, growing within existing customers, and delivering our solutions through partner relationships.
Because of our history in complex systems integration, operating systems artificial intelligence, and Data and AI orchestration, we are well positioned to deliver solutions to solve for at-scale, production grade decision intelligence with both current and related new customers. 8 Table of Cont e n t s Growth Strategy The long-term underlying growth in the business comes from technology-enabled solutions, particularly in the areas of national security and critical infrastructure.
This is a focus area for us in 2024 as we find ways to apply our existing technology to new use cases, combine technologies to expand our offerings, and meet growing customer demand . Company Footprint and Management As of December 31, 2023, we had approximately 480 employees, the vast majority of which hold an active security clearance.
This includes new government contract wins and growing scope on existing contracts, as well digital identity solutions in the US and overseas. Company Footprint and Management As of December 31, 2024, we had 630 employees, the vast majority of which hold an active security clearance.
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Item 1. Business Company Overview BigBear.ai Holdings, Inc.’s (“ BigBear.ai ” or the “ Company ”) mission is to help deliver clarity for the world’s most complex decisions. BigBear.ai is a leading provider of Edge AI-powered decision intelligence solutions for national security, supply chain management, and digital identity.
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Item 1. Business Company Overview BigBear.ai Holdings, Inc.’s (“BigBear.ai” or the “Company”) is an AI-driven technology solutions company. We provide technology that helps organizations operationalize AI: making faster, more informed decisions by analyzing complex data and providing actionable insights in areas of critical national security, defense and related markets.
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Customers and partners rely on BigBear.ai’s predictive analytics capabilities in highly complex, distributed, mission-based operating environments. We are a technology-led solutions organization, providing both software and services to our customers.
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Many of our customers rely on BigBear.ai’s specialized resources to supplement their technical and operational staff for long-term engagements. Hence we provide both software and services to our customers.
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Solutions and Services With the addition of Pangiam, BigBear.ai accelerates and evolves in three markets: national security, supply chain management, and digital identity. Each of these markets are expected to experience double digit growth in the coming years as they embrace and operationalize advanced technologies like artificial intelligence in highly distributed environments.
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These digital identity offerings are no longer restricted to national security uses, but are increasingly expanding into the personal finance world, enabling a frictionless user experience in an ever growing number of settings. BigBear.ai is dedicated to remaining at the forefront of technological advancement in the realm of identity verification and biometrics.
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BigBear.ai’s purpose is to help 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. We also offer specialized services to design, customize, deploy, operate, and support our solutions.
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BigBear.ai has been a trusted partner to our customers for decades—we take that trust seriously and we work every day to keep it.
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This mission is at the center of who BigBear.ai is and what we do – and we are committed to playing a role in positioning the United States, and our allies, to orchestrate an ecosystem of trusted and secure collaboration. Our acquisition of Pangiam bolsters our ability to answer this call to action.
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By harnessing the power of vision AI, we enable seamless identification processes with the potential to revolutionize 5 Table of Contents industries ranging from finance to national security.
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Our commitment to enhancing digital security and enabling frictionless user experiences underscores our dedication to remaining at the forefront of technological advancement in the realm of identity verification and biometrics. • Digital Identity and Biometrics — Our approach to facilitating the secure and efficient flow of people and goods in highly distributed, edge-based environments.
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We bring leading facial recognition, advanced biometrics, anomaly detection and identity verification software to our customers and partners as the world shifts towards facial as the modality of choice for confirming identity. Research & Development Our team has decades of combined experience developing and deploying software products in a variety of environments.
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We are proud of the trusted, multi-decade relationships we have with our customers and work hard to grow and maintain those relationships every day. Revenue Mix A significant portion of our revenue is from contracts with public sector agencies, including the Federal Government.
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Our suite of technology solutions and expertise allows us to target a total addressable market (“ TAM ”) of approximately $80 billion in 2024, growing to $272 billion by 2028, based upon third-party industry reports on the current and projected markets for private and public sector customers in national security, supply chain management, and digital identity. 6 Table of Contents BigBear.ai has been a trusted partner to our customers for decades—we take that trust seriously and we work every day to keep it.
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In 2023 we established new strategic partnerships and we are focused on enabling and scaling those relationships in 2024. We are continuing to grow our customer base in our three markets: National Security, Supply Chain Management and Digital Identity.
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Legal Proceedings We are subject to litigation, claims, investigations and audits arising from time to time in the ordinary course of business. Although legal proceedings are inherently unpredictable, we believe that we have valid defenses with respect to any matters currently pending against us and we intend to vigorously defend against such matters.
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The outcome of these matters, individually and in the aggregate, is not expected to have a material impact on our consolidated balance sheets, statements of operations or cash flows. For additional information regarding these matters, see Note O—Commitments and Contingencies, included in the notes to the consolidated financial statements.
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Our human capital resources objectives include recruiting, retaining, training, and motivating our personnel.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeConsistent with the foregoing, we are exposed to a variety of risks, including risks associated with: • a significant portion of our business being dependent on sales to the public/government sector, including the risk that we may not receive or maintain government contracts or may not receive the full benefit of such contracts; • our limited operating history as a combined company, which makes it difficult to evaluate our current business and future prospects; • our ability to sustain our revenue growth in the future; • our ability to execute our strategy to grow our business and increase our sales and the number and types of markets we compete in; • the length of our sales cycle and the time and expense associated with it; • our ability to grow our customer base and to expand our relationships with our existing customers, including with our government customers; • our reliance on customers in the public/government sector; • the market and our customers accepting and adopting our products, including future new product offerings; • the impact of health epidemics, including the COVID-19 pandemic, on our business, financial condition, growth and the actions we may take in response thereto; • competition in our industry; • our ability to gain contracts on favorable terms, including with our government customers; • our ability to grow, maintain and enhance our brand and reputation; • risks related to security and our technology, including cybersecurity; • our ability to maintain competitive pricing for our products; • our ability to secure financing necessary to operate and grow our business as planned, including through acquisitions; • the high degree of uncertainty of the level of demand for, and market utilization of, our solutions and products; 9 Table of Contents • our estimates and projections may prove to be inaccurate and certain of our assets may be at risk of future impairment; • substantial regulation and the potential for unfavorable changes to, or failure by us to comply with, these regulations, which could substantially harm our business and operating results; • our dependency upon third-party service providers for certain technologies; • increases in costs, disruption of supply or shortage of materials, which could harm our business; • developments and projections relating to our competitors and industry; • the unavailability, reduction or elimination of government and economic incentives, which could have a material adverse effect on our business, prospects, financial condition and operating results; • our existing debt and our ability to refinance it on more favorable terms; • our management team’s limited experience managing a public company; • our ability to hire, retain, train and motivate qualified personnel and senior management and ability to deploy our personnel and resources to meet customer demand; • our ability to successfully execute future joint ventures, channel sales relationships, partnerships, strategic alliances and subcontracting opportunities; • our ability to grow through acquisitions and successfully integrate any such acquisitions; • our ability to successfully maintain, protect, enforce and grow our intellectual property rights; • our compliance with governmental laws, trade controls, customs requirements and other regulations we are subject to; • the possibility of our need to defend ourselves against fines, penalties and injunctions if we are determined to be promoting products for unapproved uses or otherwise found to have violated a law or regulation; • concentration of ownership among our existing executive officers, directors and their respective affiliates, which may prevent new investors from influencing significant corporate decisions; • the effect of economic downturns, depressions and recessions; • the benefits of the Gig Business Combination not being achieved or meeting the expectations of investors or securities; • our significant increased expenses and administrative burdens as a public company; • the volatility of the market for our securities, including our common stock; • our ability to satisfy the continued listing requirements of the NYSE in the future; • our internal controls over financial reporting, including any potential future material weaknesses; • our ability to integrate the new businesses successfully and realize the estimate cost savings expected from the combined companies; • any failure to realize anticipated benefits of the combined operations; and • other factors detailed below.
Biggest changeConsistent with the foregoing, we are exposed to a variety of risks, including risks associated with: • a significant portion of our business being dependent on sales to the public/government sector, including the risk that we may not receive or maintain government contracts or may not receive the full benefit of such contracts; • the U.S. government’s budget deficit and the national debt, as well as any inability of the U.S. government to complete its budget process for any government fiscal year and consequently having to shut down or operate on funding levels equivalent to its prior fiscal year; • our limited operating history as a combined company, which makes it difficult to evaluate our current business and future prospects; • our ability to sustain our revenue growth in the future; 10 Table of Cont e n t s • our ability to execute our strategy to grow our business and increase our sales and the number and types of markets we compete in; • the length of our sales cycle and the time and expense associated with it; • our ability to grow our customer base and to expand our relationships with our existing customers, including with our government customers; • our reliance on customers in the public/government sector including the U.S. government, whose contracts are often only partially funded, subject to immediate termination, and heavily regulated and audited; • the market and our customers accepting and adopting our products, including future new product offerings; • the impact of health epidemics, on our business, financial condition, growth and the actions we may take in response thereto; • competition in our industry; • our ability to gain contracts on favorable terms, including with our government customers; • our ability to grow, maintain and enhance our brand and reputation; • risks related to security and our technology, including cybersecurity; • our ability to maintain competitive pricing for our products; • our ability to secure financing necessary to operate and grow our business as planned, including through acquisitions; • the high degree of uncertainty of the level of demand for, and market utilization of, our solutions and products; • our estimates and projections may prove to be inaccurate and certain of our assets may be at risk of future impairment; • substantial regulation and the potential for unfavorable changes to, or failure by us to comply with, these regulations, which could substantially harm our business and operating results; • issues raised by the use of AI (including machine learning) in our platforms and business may result in reputational harm or liability; • our dependency upon third-party service providers for certain technologies; • increases in costs, disruption of supply or shortage of materials, which could harm our business; • developments and projections relating to our competitors and industry; • the unavailability, reduction or elimination of government and economic incentives, which could have a material adverse effect on our business, prospects, financial condition and operating results; • our existing debt and our ability to refinance it on more favorable terms; • our management team’s limited experience managing a public company; • our ability to hire, retain, train and motivate qualified personnel and senior management and ability to deploy our personnel and resources to meet customer demand; • our ability to successfully execute future joint ventures, channel sales relationships, partnerships, strategic alliances and subcontracting opportunities; • our ability to grow through acquisitions and successfully integrate any such acquisitions; • our ability to successfully maintain, protect, enforce and grow our intellectual property rights; • our compliance with governmental laws, trade controls, economic sanctions, customs requirements and other regulations we are subject to; • the possibility of our need to defend ourselves against fines, penalties and injunctions if we are determined to be 11 Table of Cont e n t s promoting products for unapproved uses or otherwise found to have violated a law or regulation; • concentration of ownership among our existing executive officers, directors and their respective affiliates, which may prevent new investors from influencing significant corporate decisions; • the effect of economic uncertainty, including high inflation, reduced spending or suspension of investment in new or enhanced projects, and concerns of economic depression or recession; • natural disasters, geopolitical conflicts, or other natural or man-made catastrophic events could disrupt and impact our business; • our significant increased expenses and administrative burdens as a public company; • the volatility of the market for our securities, including our common stock; • our ability to satisfy the continued listing requirements of the NYSE in the future; • our internal controls over financial reporting, including our ability to remedy the identified material weakness as well as any potential future material weaknesses; • our ability to integrate Pangiam successfully and realize the estimate cost savings expected from the combined companies; • any failure to realize anticipated benefits of the Pangiam acquisition; and • other factors detailed below.
In addition, as noted above, any payment by us pursuant to the 2026 Convertible Notes or by a guarantor under a guarantee made at a time we or such guarantor was found to be insolvent could be voided and required to be returned to the issuer or such guarantor if such payment is made to an insider within a one-year period prior to a bankruptcy filing or within 90 days for any non-insider party and such payment would give such insider or non-insider party (as the case may be) more than such creditors would have received in a distribution under the U.S.
In addition, as noted above, any payment by us pursuant to the Convertible Notes or by a guarantor under a guarantee made at a time we or such guarantor was found to be insolvent could be voided and required to be returned to the issuer or such guarantor if such payment is made to an insider within a one-year period prior to a bankruptcy filing or within 90 days for any non-insider party and such payment would give such insider or non-insider party (as the case may be) more than such creditors would have received in a distribution under the U.S.
Although each guarantee entered into in connection with the 2026 Convertible Notes will contain a provision intended to limit that guarantor’s liability to the maximum amount that it could incur without causing the incurrence of obligations under its guarantee to be a fraudulent conveyance or fraudulent transfer, this provision may not be effective as a legal matter to protect those guarantees from being voided under fraudulent conveyance or fraudulent transfer law or otherwise, or may reduce that guarantor’s obligation to an amount that effectively makes its guarantee worthless.
Although each guarantee entered into in connection with the Convertible Notes will contain a provision intended to limit that guarantor’s liability to the maximum amount that it could incur without causing the incurrence of obligations under its guarantee to be a fraudulent conveyance or fraudulent transfer, this provision may not be effective as a legal matter to protect those guarantees from being voided under fraudulent conveyance or fraudulent transfer law or otherwise, or may reduce that guarantor’s obligation to an amount that effectively makes its guarantee worthless.
Because many of these contracts involve new technologies and applications and can last for years, unforeseen events, such as technological difficulties, fluctuations in the price of raw materials, a significant increase in inflation in the U.S. or other countries, problems with our suppliers and cost overruns, can result in the contractual price becoming less favorable or even unprofitable to us over time.
Because many of these contracts involve new technologies and applications and can last for years, unforeseen events, such as technological difficulties, fluctuations in the price of labor, raw materials, a significant increase in inflation in the U.S. or other countries, problems with our suppliers and cost overruns, can result in the contractual price becoming less favorable or even unprofitable to us over time.
If we incur any additional indebtedness that ranks equally with the 2026 Convertible Notes, subject to any collateral arrangements, the holders of that debt will be entitled to share ratably in any proceeds distributed in connection with our insolvency, liquidation, reorganization, dissolution or other winding up as a company.
If we incur any additional indebtedness that ranks equally with the Convertible Notes, subject to any collateral arrangements, the holders of that debt will be entitled to share ratably in any proceeds distributed in connection with our insolvency, liquidation, reorganization, dissolution or other winding up as a company.
If a court were to find that the issuance of the 2026 Convertible Notes or the incurrence of a guarantee was a fraudulent transfer or conveyance, the court could void the payment obligations under the 2026 Convertible Notes or that guarantee, could subordinate the 2026 Convertible Notes or that guarantee to our presently existing and future indebtedness or of the relevant guarantor or could require the holders of the 2026 Convertible Notes to repay any amounts received with respect to the 2026 Convertible Notes or that guarantee.
If a court were to find that the issuance of the Convertible Notes or the incurrence of a guarantee was a fraudulent transfer or conveyance, the court could void the payment obligations under the Convertible Notes or that guarantee, could subordinate the Convertible Notes or that guarantee to our presently existing and future indebtedness or of the relevant guarantor or could require the holders of the Convertible Notes to repay any amounts received with respect to the Convertible Notes or that guarantee.
If we breach the covenants under our debt instruments, we would be in default under such instruments. The holders of such indebtedness could exercise their rights, as described above, and we could be forced into bankruptcy or liquidation. All of these events could result in your losing your entire investment in the 2026 Convertible Notes.
If we breach the covenants under our debt instruments, we would be in default under such instruments. The holders of such indebtedness could exercise their rights, as described above, and we could be forced into bankruptcy or liquidation. All of these events could result in your losing your entire investment in the Convertible Notes.
If our cash flows and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and may be forced to reduce or delay investments and capital expenditures, or to sell assets, seek additional capital or restructure or refinance our indebtedness, including the 2026 Convertible Notes.
If our cash flows and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and may be forced to reduce or delay investments and capital expenditures, or to sell assets, seek additional capital or restructure or refinance our indebtedness, including the Convertible Notes.
We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year: (a) following February 11, 2026, the fifth anniversary of the IPO; (b) in which we have total annual gross revenue of at least $1.07 billion; or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Common Stock that is held by non-affiliates exceeds $700 million as of the prior June 30th, and (ii) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.
We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year: (a) following February 11, 2026, the fifth anniversary of the IPO; (b) in which we have total annual gross revenue of at least $1.235 billion; or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Common Stock that is held by non-affiliates exceeds $700 million as of the prior June 30th, and (ii) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.
In the event of a finding that a fraudulent transfer or conveyance occurred, the noteholders may not receive any repayment on the 2026 Convertible Notes. Further, the voiding of the 2026 Convertible Notes could result in an event of default with respect to our and our subsidiaries’ other indebtedness that could result in acceleration of that indebtedness.
In the event of a finding that a fraudulent transfer or conveyance occurred, the noteholders may not receive any repayment on the Convertible Notes. Further, the voiding of the Convertible Notes could result in an event of default with respect to our and our subsidiaries’ other indebtedness that could result in acceleration of that indebtedness.
Additionally, credit ratings may not reflect the potential effect of risks relating to the structure or marketing of the 2026 Convertible Notes. Any future lowering of our ratings likely would make it more difficult or more expensive for us to obtain additional debt financing.
Additionally, credit ratings may not reflect the potential effect of risks relating to the structure or marketing of the Convertible Notes. Any future lowering of our ratings likely would make it more difficult or more expensive for us to obtain additional debt financing.
Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, would materially and adversely affect our financial position and results of operations and our ability to satisfy our obligations under the 2026 Convertible Notes.
Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, would materially and adversely affect our financial position and results of operations and our ability to satisfy our obligations under the Convertible Notes.
Consequently, real or anticipated changes in our credit ratings will generally affect the market value of the 2026 Convertible Notes. Credit ratings are not recommendations to purchase, hold or sell the 2026 Convertible Notes, and may be revised or withdrawn at any time.
Consequently, real or anticipated changes in our credit ratings will generally affect the market value of the Convertible Notes. Credit ratings are not recommendations to purchase, hold or sell the Convertible Notes, and may be revised or withdrawn at any time.
Our obligation to offer to redeem the 2026 Convertible Notes upon the occurrence of a fundamental change will be triggered only by certain specified transactions, and may discourage a transaction that could be beneficial to the holders of our Common Stock and the 2026 Convertible Notes.
Our obligation to offer to redeem the Convertible Notes upon the occurrence of a fundamental change will be triggered only by certain specified transactions, and may discourage a transaction that could be beneficial to the holders of our Common Stock and the Convertible Notes.
We may not be able to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness, including the 2026 Convertible Notes.
We may not be able to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness, including the Convertible Notes.
A court would likely find that a guarantor did not receive reasonably equivalent value or fair consideration for its guarantee to the extent the guarantor did not obtain a reasonably equivalent benefit directly or indirectly from the issuance of the 2026 Convertible Notes.
A court would likely find that a guarantor did not receive reasonably equivalent value or fair consideration for its guarantee to the extent the guarantor did not obtain a reasonably equivalent benefit directly or indirectly from the issuance of the Convertible Notes.
Any failure or perceived failure by us or our software to comply with the laws, regulations, directives, policies, industry standards, or legal obligations of the U.S., European Union, or other governmental or non-governmental bodies at the regional, national, or supra-national level relating to privacy, data protection, or information security, or any security incident that results in actual or suspected loss of or the unauthorized access to, 36 Table of Contents or acquisition, use, release, or transfer of, personal information, personal data, or other customer or sensitive data or information may result in governmental investigations, inquiries, enforcement actions and prosecutions, private claims and litigation, indemnification or other contractual obligations, other remedies, including fines or demands that we modify or cease existing business practices, or adverse publicity, and related costs and liabilities, which could significantly and adversely affect our business and results of operations.
Any failure or perceived failure by us or our software to comply with the laws, regulations, directives, policies, industry standards, or legal obligations of the U.S., European Union, or other governmental or non-governmental bodies at the regional, national, or supra-national level relating to privacy, data protection, or information security, or any security incident that results in actual or suspected loss of or the unauthorized access to, or acquisition, use, release, or transfer of, personal information, personal data, or other customer or sensitive data or information may result in governmental investigations, inquiries, enforcement actions and prosecutions, private claims and litigation, indemnification or other contractual obligations, other remedies, including fines or demands that we modify or cease existing business practices, or adverse publicity, and related costs and liabilities, which could significantly and adversely affect our business and results of operations.
If any credit rating initially assigned to the 2026 Convertible Notes is subsequently lowered or withdrawn for any reason, our noteholders may not be able to resell their 2026 Convertible Notes at a favorable price or at all.
If any credit rating initially assigned to the Convertible Notes is subsequently lowered or withdrawn for any reason, our noteholders may not be able to resell their Convertible Notes at a favorable price or at all.
An acquisition, investment or business relationship may result in unforeseen risks, operating difficulties and expenditures, including the following: • an acquisition may negatively affect our financial results because it may require us to incur charges or assume substantial debt or other liabilities, may cause adverse tax consequences or unfavorable accounting treatment, may expose us to claims and disputes by third parties, including intellectual property claims and disputes, or may not generate sufficient financial return to offset additional costs and expenses related to the acquisition; • costs and potential difficulties associated with the requirement to test and assimilate the internal control processes of the acquired business; • we may encounter difficulties or unforeseen expenditures assimilating or integrating the businesses, technologies, infrastructure, products, personnel, or operations of the acquired companies, particularly if the key personnel of the acquired company choose not to work for us or if we are unable to retain key personnel, if their technology is not easily adapted to work with ours, or if we have difficulty retaining the customers of any acquired business due 27 Table of Contents to changes in ownership, management, or otherwise; • we may not realize the expected benefits of the acquisition; • an acquisition may disrupt our ongoing business, divert resources, increase our expenses, and distract our management; • an acquisition may result in a delay or reduction of customer purchases for both us and the company acquired due to customer uncertainty about continuity and effectiveness of service from either company; • the potential impact on relationships with existing customers, vendors, and distributors as business partners as a result of acquiring another company or business that competes with or otherwise is incompatible with those existing relationships; • the potential that our due diligence of the acquired company or business does not identify significant problems or liabilities, or that we underestimate the costs and effects of identified liabilities; • exposure to litigation or other claims in connection with, or inheritance of claims or litigation risk as a result of, an acquisition, including but not limited to claims from former employees, customers, or other third parties, which may differ from or be more significant than the risks our business faces; • potential goodwill impairment charges related to acquisitions; • we may encounter difficulties in, or may be unable to, successfully sell any acquired products; • an acquisition may involve the entry into geographic or business markets in which we have little or no prior experience or where competitors have stronger market positions; • an acquisition may require us to comply with additional laws and regulations, or to engage in substantial remediation efforts to cause the acquired company to comply with applicable laws or regulations, or result in liabilities resulting from the acquired company’s failure to comply with applicable laws or regulations; • our use of cash to pay for an acquisition would limit other potential uses for our cash; • if we incur debt to fund such acquisition, such debt may subject us to material restrictions on our ability to conduct our business as well as financial maintenance covenants; and • to the extent that we issue a significant amount of equity securities in connection with future acquisitions, existing stockholders may be diluted and earnings per share may decrease.
An acquisition, investment or business relationship may result in unforeseen risks, operating difficulties and expenditures, including the following: • an acquisition may negatively affect our financial results because it may require us to incur charges or assume substantial debt or other liabilities, may cause adverse tax consequences or unfavorable accounting treatment, may expose us to claims and disputes by third parties, including intellectual property claims and disputes, or may not generate sufficient financial return to offset additional costs and expenses related to the acquisition; • costs and potential difficulties associated with the requirement to test and assimilate the internal control processes of the acquired business; • we may encounter difficulties or unforeseen expenditures assimilating or integrating the businesses, technologies, infrastructure, products, personnel, or operations of the acquired companies, particularly if the key personnel of the acquired company choose not to work for us or if we are unable to retain key personnel, if their technology is not easily adapted to work with ours, or if we have difficulty retaining the customers of any acquired business due to changes in ownership, management, or otherwise; 29 Table of Cont e n t s • we may not realize the expected benefits of the acquisition; • an acquisition may disrupt our ongoing business, divert resources, increase our expenses, and distract our management; • an acquisition may result in a delay or reduction of customer purchases for both us and the company acquired due to customer uncertainty about continuity and effectiveness of service from either company; • the potential impact on relationships with existing customers, vendors, and distributors as business partners as a result of acquiring another company or business that competes with or otherwise is incompatible with those existing relationships; • the potential that our due diligence of the acquired company or business does not identify significant problems or liabilities, or that we underestimate the costs and effects of identified liabilities; • exposure to litigation or other claims in connection with, or inheritance of claims or litigation risk as a result of, an acquisition, including but not limited to claims from former employees, customers, or other third parties, which may differ from or be more significant than the risks our business faces; • potential goodwill impairment charges related to acquisitions; • we may encounter difficulties in, or may be unable to, successfully sell any acquired products; • an acquisition may involve the entry into geographic or business markets in which we have little or no prior experience or where competitors have stronger market positions; • an acquisition may require us to comply with additional laws and regulations, or to engage in substantial remediation efforts to cause the acquired company to comply with applicable laws or regulations, or result in liabilities resulting from the acquired company’s failure to comply with applicable laws or regulations; • our use of cash to pay for an acquisition would limit other potential uses for our cash; • if we incur debt to fund such acquisition, such debt may subject us to material restrictions on our ability to conduct our business as well as financial maintenance covenants; and • to the extent that we issue a significant amount of equity securities in connection with future acquisitions, existing stockholders may be diluted and earnings per share may decrease.
Under federal bankruptcy law and comparable provisions of state fraudulent transfer or conveyance laws, which may vary from state to state, the 2026 Convertible Notes or the guarantees thereof 49 Table of Contents could be voided as a fraudulent transfer or conveyance if BigBear.ai or a guarantor, as applicable, • issued the 2026 Convertible Notes or incurred its guarantee with the intent of hindering, delaying or defrauding creditors or • received less than reasonably equivalent value or fair consideration in return for either issuing the 2026 Convertible Notes or incurring the guarantee and, in the case of (2) only, one of the following is also true at the time thereof: • the issuer or such guarantor, as applicable, was insolvent or rendered insolvent by reason of the issuance of the 2026 Convertible Notes or the incurrence of its guarantees; • the issuance of the 2026 Convertible Notes or the incurrence of its guarantees left the issuer or such guarantor, as applicable, with an unreasonably small amount of capital or assets to carry on the business; • the issuer or such guarantor intended to, or believed that it would, incur indebtedness beyond its ability to pay as they mature; or • the issuer or such guarantor was a defendant in an action for money damages, or had a judgment for money damages docketed against it if, in either case, the judgment is unsatisfied after final judgment.
Under federal bankruptcy law and comparable provisions of state fraudulent transfer or conveyance laws, which may vary from state to state, the Convertible Notes or the guarantees thereof could be voided as a fraudulent transfer or conveyance if BigBear.ai or a guarantor, as applicable: • issued the Convertible Notes or incurred its guarantee with the intent of hindering, delaying or defrauding creditors or • received less than reasonably equivalent value or fair consideration in return for either issuing the Convertible Notes or incurring the guarantee and, in the case of (2) only, one of the following is also true at the time thereof: • the issuer or such guarantor, as applicable, was insolvent or rendered insolvent by reason of the issuance of the Convertible Notes or the incurrence of its guarantees; • the issuance of the Convertible Notes or the incurrence of its guarantees left the issuer or such guarantor, as applicable, with an unreasonably small amount of capital or assets to carry on the business; • the issuer or such guarantor intended to, or believed that it would, incur indebtedness beyond its ability to pay as they mature; or • the issuer or such guarantor was a defendant in an action for money damages, or had a judgment for money damages docketed against it if, in either case, the judgment is unsatisfied after final judgment.
Future trading prices of the 2026 Convertible Notes will depend on many factors, including, among other things, prevailing interest rates, our operating results and the market for similar securities.
Future trading prices of the Convertible Notes will depend on many factors, including, among other things, prevailing interest rates, our operating results and the market for similar securities.
The 2026 Convertible Notes are structurally subordinated to all indebtedness and other obligations of any non-guarantor subsidiary such that in the event of insolvency, liquidation, reorganization, dissolution or other winding up of any subsidiary that is not a guarantor, all of that subsidiary’s creditors (including trade creditors and preferred stockholders, if any) would be entitled to payment in full out of that subsidiary’s assets before the 2026 Convertible Note Holders would be entitled to any payment.
The Convertible Notes are structurally subordinated to all indebtedness and other obligations of any non-guarantor subsidiary such that in the event of insolvency, liquidation, reorganization, dissolution or other winding up of any subsidiary that is not a guarantor, all of that subsidiary’s creditors (including trade creditors and preferred stockholders, if any) would be entitled to payment in full out of that subsidiary’s assets before the holders of the Convertible Notes would be entitled to any payment.
Even though the 2026 Convertible Notes are convertible into shares of our Common Stock, the terms of the 2026 Convertible Notes will not provide protection against some types of important corporate events. The 2026 Convertible Notes are convertible into shares of our Common Stock.
Even though the Convertible Notes are convertible into shares of our Common Stock, the terms of the Convertible Notes will not provide protection against some types of important corporate events. The Convertible Notes are convertible into shares of our Common Stock.
These rights and remedies allow government customers, among other things, to: • terminate existing contracts for convenience with short notice; • reduce orders under or otherwise modify contracts; • for contracts subject to the Truth in Negotiations Act, reduce the contract price or cost where it was increased because a contractor or subcontractor furnished cost or pricing data during negotiations that was not complete, accurate, and current; • for some contracts, (i) demand a refund, make a forward price adjustment, or terminate a contract for default if a contractor provided inaccurate or incomplete data during the contract negotiation process and (ii) reduce the contract price under triggering circumstances, including the revision of price lists or other documents upon which the contract award was predicated; • cancel multi-year contracts and related orders if funds for contract performance for any subsequent year become unavailable; • decline to exercise an option to renew a multi-year contract or issue task orders in connection with indefinite delivery/indefinite quantity (“ IDIQ ”) contracts; • claim rights in solutions, systems, or technology produced by us, appropriate such work-product for their continued use without continuing to contract for our services, and disclose such work-product to third parties, 43 Table of Contents including other government agencies and our competitors, which could harm our competitive position; • prohibit future procurement awards with a particular agency due to a finding of organizational conflicts of interest based upon prior related work performed for the agency that would give a contractor an unfair advantage over competing contractors, or the existence of conflicting roles that might bias a contractor’s judgment; • subject the award of contracts to protest by competitors, which may require the contracting federal agency or department to suspend our performance pending the outcome of the protest and may also result in a requirement to resubmit offers for the contract or in the termination, reduction, or modification of the awarded contract; • suspend or debar us from doing business with the applicable government agency; and • control or prohibit the export of our services.
These rights and remedies allow government customers, among other things, to: • terminate existing contracts for convenience with short notice; • reduce orders under or otherwise modify contracts; • for contracts subject to the Truth in Negotiations Act, reduce the contract price or cost where it was increased because a contractor or subcontractor furnished cost or pricing data during negotiations that was not complete, accurate, and current; • for some contracts, (i) demand a refund, make a forward price adjustment, or terminate a contract for default if a contractor provided inaccurate or incomplete data during the contract negotiation process and (ii) reduce the contract price under triggering circumstances, including the revision of price lists or other documents upon which the contract award was predicated; • cancel multi-year contracts and related orders if funds for contract performance for any subsequent year become unavailable; 45 Table of Cont e n t s • decline to exercise an option to renew a multi-year contract or issue task orders in connection with indefinite delivery/indefinite quantity (“ IDIQ ”) contracts; • claim rights in solutions, systems, or technology produced by us, appropriate such work-product for their continued use without continuing to contract for our services, and disclose such work-product to third parties, including other government agencies and our competitors, which could harm our competitive position; • prohibit future procurement awards with a particular agency due to a finding of organizational conflicts of interest based upon prior related work performed for the agency that would give a contractor an unfair advantage over competing contractors, or the existence of conflicting roles that might bias a contractor’s judgment; • subject the award of contracts to protest by competitors, which may require the contracting federal agency or department to suspend our performance pending the outcome of the protest and may also result in a requirement to resubmit offers for the contract or in the termination, reduction, or modification of the awarded contract; • suspend or debar us from doing business with the applicable government agency; and • control or prohibit the export of our services.
They may present significant challenges and risks, including that they may not advance our business strategy, we may get an unsatisfactory return on our investment or lose some or all of our investment, they may distract management and divert resources from our core business, including our business development and product development efforts, they may expose us to unexpected liabilities, they may conflict with our increased sales hiring and direct sales strategy, or 22 Table of Contents we may choose a partner that does not cooperate as we expect them to and that fails to meet its obligations or that has economic, business, or legal interests or goals that are inconsistent with ours.
They may present significant challenges and risks, including that they may not advance our business strategy, we may get an unsatisfactory return on our investment or lose some or all of our investment, they may distract management and divert resources from our core business, including our business development and product development efforts, they may expose us to unexpected liabilities, they may conflict with our increased sales hiring and direct sales strategy, or we may choose a partner that does not cooperate as we expect them to and that fails to meet its obligations or that has economic, business, or legal interests or goals that are inconsistent with ours.
For example, in July 2021, we entered into a Memorandum of Understanding (MOU) with Edge Autonomy (formerly UAV Factory), a company owned by AE Industrial Partners, whereby BigBear.ai will develop AI/ML capabilities for Edge Autonomy’s unmanned systems and components used in autonomous operations within the commercial and defense markets.
For example, in July 2021, we entered into a Memorandum of Understanding (“MOU”) with Edge Autonomy (formerly UAV Factory), a company owned by AE Industrial Partners, whereby BigBear.ai will develop AI/ML capabilities for Edge Autonomy’s unmanned systems and components used in autonomous operations within the commercial and defense markets.
Any interruption in our service, whether as a result of an internal or third-party issue, could damage our brand and reputation, cause our customers to 30 Table of Contents terminate or not renew their contracts with us or decrease use of our software and services, require us to indemnify our customers against certain losses, result in our issuing credit or paying penalties or fines, subject us to other losses or liabilities, cause our software to be perceived as unreliable or unsecure, and prevent us from gaining new or additional business from current or future customers, any of which could harm our business, financial condition, and results of operations.
Any interruption in our service, whether as a result of an internal or third-party issue, could damage our brand and reputation, cause our customers to terminate or not renew their contracts with us or decrease use of our software and services, require us to indemnify our customers against certain losses, result in our issuing credit or paying penalties or fines, subject us to other losses or liabilities, cause our software to be perceived as unreliable or unsecure, and prevent us from gaining new or additional business from current or future customers, any of which could harm our business, financial condition, and results of operations.
We may redeem the unexpired warrants prior to their exercise at a time that is disadvantageous to warrant holders, thereby making their warrants worthless.
We may redeem the unexpired IPO warrants prior to their exercise at a time that is disadvantageous to warrant holders, thereby making their warrants worthless.
The 2026 Convertible Notes are structurally subordinated to all obligations of our existing and future subsidiaries that are not and do not become guarantors of the 2026 Convertible Notes.
The Convertible Notes are structurally subordinated to all obligations of our existing and future subsidiaries that are not and do not become guarantors of the Convertible Notes.
Current U.S. government spending levels for defense-related and other programs may not be sustained beyond government fiscal year 2024. Future spending and program authorizations may not increase or may decrease or shift to programs in areas in which we do not provide services or are less likely to be awarded contracts.
Current U.S. government spending levels for defense-related and other programs may not be sustained beyond government fiscal year 2025. Future spending and program authorizations may not increase or may decrease or shift to programs in areas in which we do not provide services or are less likely to be awarded contracts.
Our ability to make scheduled payments on or to refinance our debt obligations, including the 2026 Convertible Notes, depends on our financial condition and results of operations, which in turn are subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control.
Our ability to make scheduled payments on or to refinance our debt obligations, including our Convertible Notes, depends on our financial condition and results of operations, which in turn are subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control.
If software for the challenges that we address does not achieve widespread adoption, or there is a reduction in demand caused by a lack of customer acceptance, technological challenges, weakening economic conditions (including the ongoing conflicts in Ukraine, Israel, and Gaza, and related economic sanctions, rising inflation and interest rates, and monetary policy changes), security or privacy concerns, competing technologies and products, decreases in corporate spending, or otherwise, or, alternatively, if the market develops but we are unable to continue to penetrate it due to the cost, performance, and perceived value associated with our software, or other factors, it could result in decreased revenue and our business, financial condition, and results of operations could be adversely affected.
If software for the challenges that we address does not achieve widespread adoption, or there is a reduction in demand caused by a lack of customer acceptance, technological challenges, weakening economic conditions (including the ongoing conflicts in Ukraine, the Middle East, and Africa, and related economic sanctions, rising inflation and interest rates, and monetary policy changes), security or privacy concerns, competing technologies and products, decreases in corporate spending, or otherwise, or, alternatively, if the market develops but we are unable to continue to penetrate it due to the cost, performance, and perceived value associated with our software, or other factors, it could result in decreased revenue and our business, financial condition, and results of operations could be adversely affected.
As a result of such acquisitions, our current or potential competitors may be able to accelerate the adoption of new technologies that better address customer needs, devote greater resources to bring these products and services to market, initiate or withstand substantial price competition, or develop and expand their product and service offerings more quickly 21 Table of Contents than we do.
As a result of such acquisitions, our current or potential competitors may be able to accelerate the adoption of new technologies that better address customer needs, devote greater resources to bring these products and services to market, initiate or withstand substantial price competition, or develop and expand their product and service offerings more quickly than we do.
As of December 31, 2023, we were in compliance with all covenants and restrictions associated with our debt agreements. We may acquire or invest in companies and technologies, which may divert our management’s attention, and result in additional dilution to our stockholders.
As of December 31, 2024, we were in compliance with all covenants and restrictions associated with our debt agreements. We may acquire or invest in companies and technologies, which may divert our management’s attention, and result in additional dilution to our stockholders.
Our internal controls over financial reporting may not be effective and our independent registered public accounting firm may not be able to certify as to their effectiveness, which could have a significant and adverse effect on our business and reputation.
Our internal control over financial reporting may not be effective and our independent registered public accounting firm may not be able to certify as to their effectiveness, which could have a significant and adverse effect on our business and reputation.
Accordingly, our business, financial condition, results of operations, and growth prospects may be adversely affected by certain events or activities, including, but not limited to: • changes in fiscal or contracting policies or decreases in available government funding; • changes in government programs or applicable requirements; • restrictions in the grant of personnel security clearances to our employees; • ability to maintain facility clearances required to perform on classified contracts for U.S. federal government agencies; • changes in the political environment, including before or after a change to the leadership within the government administration, and any resulting uncertainty or changes in policy or priorities and resultant funding; • changes in the government’s attitude towards the capabilities that we offer, especially in the areas of national defense, cybersecurity, digital identity and critical infrastructure, including the financial, energy, telecommunications, and healthcare sectors; • changes in the government’s attitude towards us as a company or our software as a viable or acceptable software solution; • appeals, disputes, or litigation relating to government procurement, including but not limited to bid protests by unsuccessful bidders on potential or actual awards of contracts to us or our partners by the government; • the adoption of new laws or regulations or changes to existing laws or regulations; • budgetary constraints, including automatic reductions as a result of “sequestration” or similar measures and constraints imposed by any lapses in appropriations for the federal government or certain of its departments and agencies; • influence by, or competition from, third parties with respect to pending, new, or existing contracts with government customers; 41 Table of Contents • changes in political or social attitudes with respect to security or data privacy issues; • potential delays or changes in the government appropriations or procurement processes, including as a result of events such as war, including the ongoing conflicts in Ukraine, Israel, and Gaza, incidents of terrorism, natural disasters, and public health concerns or epidemics; and • increased or unexpected costs or unanticipated delays caused by other factors outside of our control, such as performance failures of our subcontractors.
Accordingly, our business, financial condition, results of operations, and growth prospects may be adversely affected by certain events or activities, including, but not limited to: • changes in fiscal or contracting policies or decreases in available government funding; • changes in government programs or applicable requirements; • restrictions in the grant of personnel security clearances to our employees; • ability to maintain facility clearances required to perform on classified contracts for U.S. federal government agencies; • changes in the political environment, including before or after a change to the leadership within the government administration, and any resulting uncertainty or changes in policy or priorities and resultant funding; • changes in the government’s attitude towards the capabilities that we offer, especially in the areas of national defense, cybersecurity, digital identity and critical infrastructure, including the financial, energy, telecommunications, and healthcare sectors; • changes in the government’s attitude towards us as a company or our software as a viable or acceptable software solution; • appeals, disputes, or litigation relating to government procurement, including but not limited to bid protests by unsuccessful bidders on potential or actual awards of contracts to us or our partners by the government; • the adoption of new laws or regulations or changes to existing laws or regulations; • budgetary constraints, including automatic reductions as a result of “sequestration” or similar measures and constraints imposed by any lapses in appropriations for the federal government or certain of its departments and 43 Table of Cont e n t s agencies; • influence by, or competition from, third parties with respect to pending, new, or existing contracts with government customers; • changes in political or social attitudes with respect to security or data privacy issues; • potential delays or changes in the government appropriations or procurement processes, including as a result of events such as war, including the ongoing conflicts in Ukraine, the Middle East, and Africa, incidents of terrorism, natural disasters, and public health concerns or epidemics; and • increased or unexpected costs or unanticipated delays caused by other factors outside of our control, such as performance failures of our subcontractors.
Such claims, with or without merit, could result in litigation, could be time-consuming and expensive to settle or litigate, could divert 34 Table of Contents our management’s attention and other resources, could require us to lease some of our proprietary code, or could require us to devote additional research and development resources to change our software, any of which could adversely affect our business.
Such claims, with or without merit, could result in litigation, could be time-consuming and expensive to settle or litigate, could divert our management’s attention and other resources, could require us to lease some of our proprietary code, or could require us to devote additional research and development resources to change our software, any of which could adversely affect our business.
Violations of U.S. sanctions or export control laws can result in fines or penalties, including civil penalties of up to $300,000 or twice the value of the transaction, whichever is greater, per EAR violation and a civil penalty that could exceed $1,000,000 for ITAR violations, depending on the 38 Table of Contents circumstances of the violation or violations.
Violations of U.S. sanctions or export control laws can result in fines or penalties, including civil penalties of up to $300,000 or twice the value of the transaction, whichever is greater, per EAR violation and a civil penalty that could exceed $1,000,000 for ITAR violations, depending on the circumstances of the violation or violations.
Finally, as a court of equity, the bankruptcy court may subordinate the claims in respect of the 2026 Convertible Notes to other 50 Table of Contents claims against us under the principle of equitable subordination if the court determines that (1) the holder of 2026 Convertible Notes engaged in some type of inequitable conduct, (2) the inequitable conduct resulted in injury to our other creditors or conferred an unfair advantage upon the holders of 2026 Convertible Notes and (3) equitable subordination is not inconsistent with the provisions of the United States Bankruptcy Code.
Finally, as a court of equity, the bankruptcy court may subordinate the claims in respect of the Convertible Notes to other claims against us under the principle of equitable subordination if the court determines that (1) the holder of Convertible Notes engaged in some type of inequitable conduct, (2) the inequitable conduct resulted in injury to our other creditors or conferred an unfair advantage upon the holders of Convertible Notes and (3) equitable subordination is not inconsistent with the provisions of the United States Bankruptcy Code.
Compliance with public company requirements have increased costs and made certain activities more time-consuming. A number of those requirements have required us to carry out activities we and our subsidiaries have not done previously. For example, we 56 Table of Contents have created new board committees and adopted new internal controls and disclosure controls and procedures.
Compliance with public company requirements have increased costs and made certain activities more time-consuming. A number of those requirements have required us to carry out activities we and our subsidiaries have not done previously. For example, we have created new board committees and adopted new internal controls and disclosure controls and procedures.
Alleviating any of these problems could require 33 Table of Contents additional significant expenditures of our capital and other resources and could cause interruptions, delays, or cessation of our product licensing, which could cause us to lose existing or potential customers and could adversely affect our business, financial condition, results of operations, and growth prospects.
Alleviating any of these problems could require additional significant expenditures of our capital and other resources and could cause interruptions, delays, or cessation of our product licensing, which could cause us to lose existing or potential customers and could adversely affect our business, financial condition, results of operations, and growth prospects.
We may be able to incur significant additional indebtedness in the future and this could result in additional risk. Although the Credit Agreement and our Indenture contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the additional indebtedness incurred in compliance with these restrictions could be substantial.
We may be able to incur significant additional indebtedness in the future and this could result in additional risk. Although the Indenture contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the additional indebtedness incurred in compliance with these restrictions could be substantial.
As of December 31, 2023 and December 31, 2022, the total remaining deal value of the contracts that we had been awarded by, or entered into with, commercial and government customers, including existing contractual obligations and contract options available to those customers was approximately $168 million and $218 million, respectively. The majority of these contracts contain termination for convenience provisions.
As of December 31, 2024 and December 31, 2023, the total remaining deal value of the contracts that we had been awarded by, or entered into with, commercial and government customers, including existing contractual obligations and contract options available to those customers was approximately $418 million and $168 million, respectively. The majority of these contracts contain termination for convenience provisions.
Uncertainty about global and regional economic conditions, including the ongoing conflicts in Ukraine, Israel, and Gaza, a downturn in the technology sector or any sectors in which our customers operate, or a reduction in information technology spending even if economic conditions are stable, could adversely impact our business, financial condition, and results of operations in a number of ways, including longer sales cycles, lower prices for our software and services, material default rates among our customers, reduced sales of our software or services, and lower or no growth.
Uncertainty about global and regional economic conditions, including the ongoing conflicts in Ukraine, the Middle East, and Africa, a downturn in the technology sector or any sectors in which our customers operate, or a reduction in information technology spending even if economic conditions are stable, could adversely impact our business, financial condition, and results of operations in a number of ways, including longer sales cycles, lower prices for our software and services, material default rates among our customers, reduced sales of our software or services, and lower or no growth.
We also cannot be sure that our existing general liability insurance coverage and coverage for cyber liability or errors or omissions will 29 Table of Contents continue to be available on acceptable terms or will be available in sufficient amounts to cover one or more large claims or that the insurer will not deny coverage as to any future claim.
We also cannot be sure that our existing general liability insurance coverage and coverage for cyber liability or errors or omissions will continue to be available on acceptable terms or will be available in sufficient amounts to cover one or more large claims or that the insurer will not deny coverage as to any future claim.
Our business operations are subject to interruption by natural disasters, earthquakes, flooding, fire, power shortages, pandemics, terrorism, political unrest, telecommunications failure, vandalism, cyberattacks, geopolitical instability, including the ongoing conflicts in Ukraine, Israel, and Gaza, war, the effects of climate change (such as drought, wildfires, increased storm severity, and sea level rise), and other events beyond our control.
Our business operations are subject to interruption by natural disasters, earthquakes, flooding, fire, power shortages, pandemics, terrorism, political unrest, telecommunications failure, vandalism, cyberattacks, geopolitical instability, including the ongoing conflicts in Ukraine, the Middle East, and Africa, war, the effects of climate change (such as drought, wildfires, increased storm severity, and sea level rise), and other events beyond our control.
These provisions will include: 60 Table of Contents • no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • a classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of the Board; • the right of our Board to elect a director to fill a vacancy created by the expansion of our Board or the resignation, death or removal of a director in certain circumstances, which prevents stockholders from being able to fill vacancies on our Board; • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; and • the requirement that a meeting of stockholders may only be called by members of our Board or the stockholders holding a majority of our shares, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors.
These provisions will include: • no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • a classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of the Board; • the right of our Board to elect a director to fill a vacancy created by the expansion of our Board or the resignation, death or removal of a director in certain circumstances, which prevents stockholders from being able to fill vacancies on our Board; • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; and • the requirement that a meeting of stockholders may only be called by members of our Board or the stockholders holding a majority of our shares, which may delay the ability of our stockholders to force consideration of a 62 Table of Cont e n t s proposal or to take action, including the removal of directors.
Our customers have no obligation to 12 Table of Contents renew, upgrade, or expand their agreements with us after the terms of their existing agreements have expired. In addition, many of our customer contracts permit the customer to terminate their contracts with us with little or no notice required.
Our customers have no obligation to renew, upgrade, or expand their agreements with us after the terms of their existing agreements have expired. In addition, many of our customer contracts permit the customer to terminate their contracts with us with little or no notice required.
If the NYSE delists our shares from trading on its exchange for failure to meet the listing standards, we and our stockholders could face significant material adverse consequences including: • a limited availability of market quotations for our securities; • a determination that our Common Stock is a “penny stock” which will require brokers trading in our Common Stock to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for shares of our Common Stock; • being required to repurchase the 2026 Convertible Notes at a price equal to the principal amount plus accrued and unpaid interest; • a limited amount of analyst coverage; and • a decreased ability to issue additional securities or obtain additional financing in the future.
If the NYSE delists our shares from trading on its exchange for failure to meet the listing standards, we and our stockholders could face significant material adverse consequences including: • a limited availability of market quotations for our securities; 54 Table of Cont e n t s • a determination that our Common Stock is a “penny stock” which will require brokers trading in our Common Stock to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for shares of our Common Stock; • being required to repurchase the Convertible Notes at a price equal to the principal amount plus accrued and unpaid interest; • a limited amount of analyst coverage; and • a decreased ability to issue additional securities or obtain additional financing in the future.
Bribery Act. These laws and regulations generally prohibit improper payments or offers of improper payments to government officials, political parties, or commercial partners for the purpose of obtaining or 37 Table of Contents retaining business or securing an improper business advantage.
Bribery Act. These laws and regulations generally prohibit improper payments or offers of improper payments to government officials, political parties, or commercial partners for the purpose of obtaining or retaining business or securing an improper business advantage.
In particular, we make certain estimates and assumptions related to the adoption and interpretation of these principles including the recognition of our revenue and the accounting of our stock-based compensation expense with respect to our financial statements.
In particular, we make certain estimates and assumptions related to the adoption and interpretation of these principles including the recognition of our revenue, the measurement of derivative instruments, and the accounting of our stock-based compensation expense with respect to our financial statements.
Increasingly, our software is deployed in large-scale, complex technology environments, and we believe our future success will depend on our ability to increase sales of our products 18 Table of Contents into these environments.
Increasingly, our software is deployed in large-scale, complex technology environments, and we believe our future success will depend on our ability to increase sales of our products into these environments.
If we are forced to refinance these borrowings on less favorable terms or cannot refinance these borrowings, our results of operations and financial condition could be adversely affected. The Credit Agreement and the Indenture contain cross-default provisions that could result in the acceleration of all of our indebtedness.
If we are forced to refinance these borrowings on less favorable terms or cannot refinance these borrowings, our results of operations and financial condition could be adversely affected. The Indentures contain cross-default provisions that could result in the acceleration of all of our indebtedness.
Furthermore, if any issues in complying with those requirements are identified (for example, if the auditors identify a material weakness or significant deficiency in the internal control over financial reporting), we could incur additional costs rectifying those issues, and the existence of those issues could adversely affect our reputation or investor perceptions of it.
Furthermore, if any issues in complying with those requirements are identified (for example, if the auditors identify a material weakness or significant deficiency in the internal control over financial reporting, including the identified material weakness as of December 31, 2024), we could incur additional costs rectifying those issues, and the existence of those issues could adversely affect our reputation or investor perceptions of it.
Furthermore, the Indenture governing the 2026 Convertible Notes contains limitations on our ability to incur debt and issue preferred and/or disqualified stock. Accordingly, we cannot be certain that we will be able to obtain additional financing on favorable terms or at all.
Furthermore, the Indenture governing our 2029 Convertible Notes contain limitations on our ability to incur debt and issue preferred and/or disqualified stock. Accordingly, we cannot be certain that we will be able to obtain additional financing on favorable terms or at all.
Pangiam’s potential products and technologies are in early stages of development. The development of new technology products is a highly risky undertaking. Pangiam’s technologies and products will require additional research, development and trials. There can be no assurance that any future research, development or trial efforts will result in viable products.
The development of new technology products is a highly risky undertaking. Pangiam’s technologies and products will require additional research, development and trials. There can be no assurance that any future research, development or trial efforts will result in viable products.
Natural disasters and other events beyond our control could harm our business. 55 Table of Contents Natural disasters or other catastrophic events may cause damage or disruption to our operations, non-U.S. commerce and the global economy, and thus could have a negative effect on us.
Natural disasters and other events beyond our control could harm our business. Natural disasters or other catastrophic events may cause damage or disruption to our operations, non-U.S. commerce and the global economy, and thus could have a negative effect on us.
Tax authorities may disagree with our calculation of research and 39 Table of Contents development tax credits, cross-jurisdictional transfer pricing, or other matters and assess additional taxes, interest, or penalties.
Tax authorities may disagree with our calculation of research and development tax credits, cross-jurisdictional transfer pricing, or other matters and assess additional taxes, interest, or penalties.
The liquidity of any trading market and the trading price of such notes may be adversely affected by changes in our financial performance or prospects and by changes in the financial performance of or prospects for companies in our industry generally.
The liquidity of such trading markets and the trading price of such notes may be adversely affected by changes in our financial performance or prospects and by changes in the financial performance of or prospects for companies in our industry generally.
We cannot predict if investors will find our Common Stock less attractive because we rely on these exemptions. If some investors find our Common Stock less attractive as a result, there may be a less active trading market for our Common Stock and our stock 61 Table of Contents price may be more volatile.
We cannot predict if investors will find our Common Stock less attractive because we rely on these exemptions. If some investors find our Common Stock less attractive as a result, there may be a less active trading market for our Common Stock and our stock price may be more volatile.
Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including: • changes in the valuation of our deferred tax assets and liabilities; • expected timing and amount of the release of any tax valuation allowances; • tax effects of stock-based compensation; • costs related to intercompany restructurings; • changes in tax laws, regulations or interpretations thereof; or • lower than anticipated future earnings in jurisdictions where we have lower statutory tax rates and higher than anticipated future earnings in jurisdictions where we have higher statutory tax rates.
Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including: • changes in the valuation of our deferred tax assets and liabilities; • expected timing and amount of the release of any tax valuation allowances; • tax effects of stock-based compensation; • costs related to intercompany restructurings; • changes in tax laws, regulations or interpretations thereof; or 58 Table of Cont e n t s • lower than anticipated future earnings in jurisdictions where we have lower statutory tax rates and higher than anticipated future earnings in jurisdictions where we have higher statutory tax rates.
A breach of the covenants under our Credit Agreement or our Indenture could result in an event of default under the applicable indebtedness. Such a default may allow the creditors to accelerate the related indebtedness and may result in the acceleration of any other indebtedness to which a cross-acceleration or cross-default provision applies.
A breach of the covenants under our Indentures could result in an event of default under the applicable indebtedness. Such a default may allow the creditors to accelerate the related indebtedness and may result in the acceleration of any other indebtedness to which a cross-acceleration or cross-default provision applies.
Although 54 Table of Contents we have already hired additional employees to assist us in complying with these requirements, we may need to hire more employees in the future or engage outside consultants, which will increase our operating expenses.
Although we have already hired additional employees to assist us in complying with these requirements, we may need to hire more employees in the future or engage outside consultants, which will increase our operating expenses.
In general, access 42 Table of Contents to classified information, technology, facilities, or programs requires appropriate personnel security clearances, is subject to additional contract oversight and potential liability, and may also require appropriate facility clearances and other specialized infrastructure.
In general, access to classified information, technology, facilities, or programs requires appropriate personnel security clearances, is subject to additional contract oversight and potential liability, and may also require appropriate facility clearances and other specialized infrastructure.
Political and military events, including the ongoing conflicts in Ukraine, Israel, and Gaza, poor relations between the U.S. and Russia, and sanctions by the international community against Russia or separatist areas of Ukraine may also have an adverse impact on our employees, customers, partners, and vendors.
Political and military events, including the ongoing conflicts in Ukraine, the Middle East, and Africa, poor relations between the U.S. and Russia, and sanctions by the international community against Russia or separatist areas of Ukraine may also have an adverse impact on our employees, customers, partners, and vendors.
On May 29, 2022, pursuant to Section 14.04(f) of the Indenture, the Conversion Rate applicable to the Notes was adjusted to 94.2230 (previously 86.9565) shares of Common Stock per $1,000 principal amount of Notes, as a result of the Reset Date described therein (the “Conversion Rate Adjustment”).
On May 29, 2022, pursuant to Section 14.04(f) of the Indenture, the Conversion Rate applicable to the notes was adjusted to 94.2230 (previously 86.9565) shares of Common Stock per $1,000 principal amount of notes, as a result of the conversion rate reset provisions therein.
Such changes in spending authorizations and budgetary priorities may occur as a result of shifts in spending priorities from defense-related and other programs as a result of competing demands for federal funds and the number and intensity of military conflicts, including the ongoing conflicts in Ukraine, Israel, and Gaza, or other factors.
Such changes in spending authorizations and budgetary priorities may occur as a result of shifts in spending priorities from defense-related and other programs as a result of competing demands for federal funds and the number and intensity of military conflicts, including the ongoing conflicts in Ukraine, the Middle East, and Africa, or other factors.
Each of our existing and future domestic restricted subsidiaries that is a borrower under or that guarantees obligations under the Credit Agreement or that guarantees certain of our other indebtedness is a guarantor of the 2026 Convertible Notes (subject to certain exceptions).
Each of our existing and future domestic restricted subsidiaries that is a borrower under or that guarantees obligations under the Indentures or that guarantees certain of our other indebtedness is a guarantor of the 2026 Convertible Notes (subject to certain exceptions). Each of our existing and future subsidiaries is a guarantor of the 2029 Convertible Notes (subject to certain exceptions).
As of December 31, 2023, we had approximately $196 million of indebtedness. Although we currently anticipate that our existing cash and cash equivalents will be sufficient to meet our cash needs for the next 12 months, additional funds may be required if our growth strategy does not develop as quickly as planned.
As of December 31, 2024, we had approximately $200.0 million of total indebtedness. Although we currently anticipate that our existing cash and cash equivalents will be sufficient to meet our cash needs for the next 12 months, additional funds may be required if our growth strategy does not develop as quickly as planned.
The California state legislature passed the California Consumer Privacy Act (“ CCPA ”) in 2018 and California voters approved a ballot measure subsequently establishing the California Privacy Rights Act 35 Table of Contents (“ CPRA ”) in 2020, which will jointly regulate the processing of personal information of California residents and increase the privacy and security obligations of entities handling certain personal information of California residents, including requiring covered companies to provide new disclosures to California consumers, and afford such consumers new abilities to opt-out of certain sales of personal information.
The California state legislature passed the California Consumer Privacy Act 37 Table of Cont e n t s (“ CCPA ”) in 2018 and California voters approved a ballot measure subsequently establishing the California Privacy Rights Act (“ CPRA ”) in 2020, which will jointly regulate the processing of personal information of California residents and increase the privacy and security obligations of entities handling certain personal information of California residents, including requiring covered companies to provide new disclosures to California consumers, and afford such consumers new abilities to opt-out of certain sales of personal information.
Our 2023 revenues from these significant customers were mainly earned from large multi-year contracts. As of December 31, 2023, about $89 million of our approximate $168 million of total backlog is attributable to these significant customers. The estimated completion dates for these contracts range from 2024 to 2026.
Our 2024 revenues from these significant customers were mainly earned from large multi-year contracts. As of December 31, 2024, about $52 million of our approximate $418 million of total backlog is attributable to these significant customers. The estimated completion dates for these contracts range from 2024 to 2026.
If adequate funds are not available on acceptable terms, or at all, we may be unable to, among other 25 Table of Contents things: • develop new products, features, capabilities, and enhancements; • continue to expand our product development, sales, and marketing organizations; • hire, train, and retain employees; • respond to competitive pressures or unanticipated working capital requirements; or • pursue acquisition or other growth opportunities.
If adequate funds are not available on acceptable terms, or at all, we may be unable to, among other things: 27 Table of Cont e n t s • develop new products, features, capabilities, and enhancements; • continue to expand our product development, sales, and marketing organizations; • hire, train, and retain employees; • respond to competitive pressures or unanticipated working capital requirements; or • pursue acquisition or other growth opportunities.
The 44 Table of Contents competitive bidding process entails substantial costs and managerial time to prepare bids and proposals for contracts that may not be awarded to us or may be split among competitors.
The competitive bidding process entails substantial costs and managerial time to prepare bids and proposals for contracts that may not be awarded to us or may be split among competitors.
The terms of our Credit Agreement and our Indenture that governs the 2026 Convertible Notes allow us to incur additional debt subject to certain limitations; however, there is no assurance that additional financing will be available to us on terms favorable to us, if at all.
The terms of our Indenture that governs the 2029 Convertible Notes allow us to incur additional debt subject to certain limitations; however, there is no assurance that additional financing will be available to us on terms favorable to us, if at all.
If we fail to meet or exceed such expectations for these or any other reasons, the trading price of our common stock could fall, and we could face costly lawsuits, including securities class action suits. Our results of operations and earnings may not meet guidance or expectations. We may provide public guidance on expected results of operations for future periods.
If we fail to meet or exceed such expectations for these or any other reasons, the trading price of our common stock could fall, and we could face costly lawsuits, including securities class action suits. Our results of operations and earnings may not meet guidance or expectations.
Our customers may suffer from reduced operating budgets, which could cause them to defer or forego purchases of our software or services. Moreover, competitors may respond to market conditions by lowering prices and attempting to lure away our customers, and the increased pace of consolidation in certain industries may result in reduced overall spending on our offerings.
Our customers may suffer from reduced operating budgets, which could cause them to defer or forego purchases of our software or services. 56 Table of Cont e n t s Moreover, competitors may respond to market conditions by lowering prices and attempting to lure away our customers, and the increased pace of consolidation in certain industries may result in reduced overall spending on our offerings.
As such, we must 16 Table of Contents continuously modify and enhance our software to adapt to changes in, or to be integrated or otherwise compatible with, hardware, software, networking, browser, and database technologies.
As such, we must continuously modify and enhance our software to adapt to changes in, or to be integrated or otherwise compatible with, hardware, software, networking, browser, and database technologies.
There can be no assurances that any rating assigned to our debt securities will remain for any given period of time or that a rating will not be lowered or withdrawn entirely by a rating agency if, in that rating agency’s judgment, future circumstances relating to the basis of the rating, such as adverse changes, so warrant.
There can be no assurances that any rating assigned to our debt securities will remain for any given period of time or that a rating 52 Table of Cont e n t s will not be lowered or withdrawn entirely by a rating agency if, in that rating agency’s judgment, future circumstances relating to the basis of the rating, such as adverse changes, so warrant.
See “— Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, would materially and adversely affect our financial position and results of operations and our ability to satisfy our obligations under the 2026 Convertible Notes .” We may not be able to generate sufficient cash to service all of our indebtedness, including the 2026 Convertible Notes, and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.
See “— Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, would materially and adversely affect our financial position and results of operations and our ability to satisfy our obligations under the Convertible Notes .” 48 Table of Cont e n t s We may not be able to generate sufficient cash to service all of our indebtedness, including the Convertible Notes, and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.
These proceedings could also result in negative publicity, which could harm customer and public perception of our business, regardless of whether the allegations are valid or whether we are ultimately found liable. Failure to comply with anti-bribery and anti-corruption laws could subject us to penalties and other adverse consequences.
These proceedings could also result in negative publicity, which could harm customer and public perception of our business, regardless of whether the allegations are valid or whether we are ultimately found liable. 39 Table of Cont e n t s Failure to comply with anti-bribery and anti-corruption laws could subject us to penalties and other adverse consequences.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeWe leverage government partnerships, industry and government associations, third-party benchmarking, and threat intelligence to safeguard information and ensure availability of critical data and systems. 64 Table of Contents We have a robust Incident Response Plan that coordinates the activities we take to prepare for, detect, respond to and recover from cybersecurity incidents, which include processes to triage, assess, escalate, contain, investigate, and remediate the incident, as well as comply with potentially applicable legal obligations and mitigate brand and reputational damage.
Biggest changeWe have a robust Incident Response Plan that coordinates the activities we take to prepare for, detect, respond to and recover from cybersecurity incidents, which include processes to triage, assess, escalate, contain, investigate, and remediate the incident, as well as comply with potentially applicable legal obligations and mitigate brand and reputational damage.
Notwithstanding the extensive approach we take to cybersecurity, we may not be successful in preventing or mitigating a cybersecurity incident that could have a material adverse effect on us. While we maintain cybersecurity insurance, the costs related to cybersecurity threats or disruptions may not be fully insured.
Notwithstanding the extensive approach we take to cybersecurity, we may not be successful in preventing or mitigating a cybersecurity incident that could have a material adverse effect on us. While we maintain cybersecurity insurance, the costs related to cybersecurity threats or disruptions may not be fully insured. 66 Table of Cont e n t s
The CISO’s team is responsible for leading enterprise-wide cybersecurity strategy, policy, standards, architecture, and processes. A strong partnership exists between our Information Technology, Cybersecurity, Internal Audit, and Legal functions so that identified issues are addressed in a timely manner and incidents are reported to the appropriate regulatory bodies as required.
A strong partnership exists between our Information Technology, Cybersecurity, Internal Audit, and Legal functions so that identified issues are addressed in a timely manner and incidents are reported to the appropriate regulatory bodies as required.
Our Cybersecurity program, is built upon the National Institute of Standards and Technology Cybersecurity Framework (the “NIST Framework”), issued by the U.S. government as a guideline to manage cybersecurity-related risk. Additionally, we also employ industry best practices and other global and local standards and regulations as we continuously evaluate our risks.
The NIST CSF is issued by the U.S. government as a guideline to manage cybersecurity-related risk. Additionally, we also employ industry best practices and other global and local standards and regulations as we continuously evaluate our risks. We utilize independent third-parties to assess our adherence to these frameworks.
We continuously monitor cybersecurity vulnerabilities and potential attack vectors and evaluate the potential operational impacts of any threat and cybersecurity risk countermeasures made to defend against such threats.
We continuously monitor cybersecurity vulnerabilities and potential attack vectors and evaluate the potential operational impacts of any threat and cybersecurity risk countermeasures made to defend against such threats. We leverage government partnerships, industry and government associations, third-party benchmarking, and threat intelligence to safeguard information and ensure availability of critical data and systems.
We utilize independent third-parties to assess our adherence to these frameworks. Our Cybersecurity program is supervised by a dedicated Chief Information Security Officer (CISO), who has over 15 years experience in cybersecurity and operations and holds the following certifications: Certified Information Systems Security Professional (CISSP) and Certification in Risk and Information Systems Control (CRISC).
Our Cybersecurity program is supervised by a dedicated Chief Information Security Officer (CISO), who has over 16 years experience in cybersecurity and operations and holds the following certifications: Certified Information Systems Security Professional (CISSP) and Certification in Risk and Information Systems Control (CRISC). The CISO’s team is responsible for leading enterprise-wide cybersecurity strategy, policy, standards, architecture, and processes.
Added
Our Cybersecurity program is built upon the National Institute of Standards and Technology Cybersecurity Maturity Framework (the “NIST CSF Framework”), which includes the standards outlined in both NIST 800-53, Security and Privacy Controls for Information Systems and Organizations, and NIST 800-171 Protecting Controlled Unclassified Information in Nonfederal Systems and Organizations.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe have significant operations in the following locations: • Columbia, Maryland (Corporate Headquarters) • Ann Arbor, Michigan; • Chantilly, Virginia; • Charlottesville, Virginia • McLean, Virginia Each of these facilities is strategically located near major national security or civil space community facilities, key customer facilities, commercial space centers and/or prestigious engineering talent pools.
Biggest changeWe have significant operations in the following locations: • McLean, Virginia (Corporate Headquarters) • Ann Arbor, Michigan; • Chantilly, Virginia; and • Charlottesville, Virginia Each of these facilities is strategically located near major national security or civil space community facilities, key customer facilities, commercial space centers and/or prestigious engineering talent pools. Our current footprint is sufficient to support near-term growth.
Our current footprint is sufficient to support near-term growth. However, as we continue to grow, we plan to continue and even accelerate the pace of leasehold improvements so that our facility capacity is not a limiting factor on our growth.
However, as we continue to grow, we plan to continue and even accelerate the pace of leasehold improvements so that our facility capacity is not a limiting factor on our growth.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 65 Part II 65 Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 65 Item 6. [Reserved] 66 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 67 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 86 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 67 Part II 67 Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 67 Item 6. [Reserved] 68 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 69 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 89 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeStock Performance Graph The following graph compares the total return on a cumulative basis through December 31, 2023 of $100 invested in BigBear.ai Holdings common stock on December 8, 2021 to the New York Stock Exchange (NYSE) Index and the S&P 500 Information Technology Index. This graph is not deemed to be “filed” with the U.S.
Biggest changeSecurities Authorized for Issuance Under Equity Compensation Plans See Item 12 of Part III of this Annual Report on Form 10-K regarding information about securities authorized for issuance under our equity compensation plans. 67 Table of Cont e n t s Stock Performance Graph The following graph compares the total return on a cumulative basis through December 31, 2024 of $100 invested in BigBear.ai Holdings common stock on December 8, 2021 to the New York Stock Exchange (NYSE) Index and the S&P 500 Information Technology Index.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is traded on the New York Stock Exchange under the ticker symbol “BBAI” and began trading on December 8, 2021. 65 Table of Contents Holders As of December 31, 2023, there were 86 common stockholders of record.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is traded on the New York Stock Exchange under the ticker symbol “BBAI” and began trading on December 8, 2021. Holders As of December 31, 2024, there were 68 common stockholders of record.
Securities and Exchange Commission or subject to the liabilities of Section 18 of the Exchange Act, and should not be deemed to be incorporated by reference into any of our prior or subsequent filings under the Securities Act or the Exchange Act. Unregistered Sales of Equity Securities.
This graph is not deemed to be “filed” with the U.S. Securities and Exchange Commission or subject to the liabilities of Section 18 of the Exchange Act, and should not be deemed to be incorporated by reference into any of our prior or subsequent filings under the Securities Act or the Exchange Act. Unregistered Sales of Equity Securities.
In addition, the terms of our secured credit facility contains restrictions on our ability to declare and pay cash dividends on our capital stock. Securities Authorized for Issuance Under Equity Compensation Plans See Item 12 of Part III of this Annual Report on Form 10-K regarding information about securities authorized for issuance under our equity compensation plans.
In addition, the terms of our secured credit facility contains restrictions on our ability to declare and pay cash dividends on our capital stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeCost of revenues as a percentage of total revenues decreased to 72% for the year ended December 31, 2022 as compared to 77% for the year ended December 31, 2021 due to lower margins on certain prototype contracts that were performed during 2022. 71 Table of Contents SG&A Year Ended December 31, Year-Over-Year Change 2023 2022 2021 2023 vs 2022 2022 vs 2021 SG&A $ 71,057 $ 84,775 $ 106,507 $ (13,718) (16.2) % $ (21,732) (20.4) % SG&A as a percentage of revenues 46 % 55 % 73 % SG&A expenses as a percentage of total revenues for the year ended December 31, 2023 decreased to 46% as compared to 55% for the year ended December 31, 2022, which was primarily driven by a reduction in personnel costs resulting from the Company’s restructuring actions, as well as reduction in non-recurring integration costs of $7,255, capital market advisory fees of $741, and commercial start-up costs of $6,490 incurred during the year ended December 31, 2022 that were not repeated in the comparable period.
Biggest changeSG&A expenses as a percentage of total revenues for the year ended December 31, 2023 decreased to 46% as compared to 55% for the year ended December 31, 2022, which was primarily driven by a reduction in personnel costs resulting from the Company’s restructuring actions, as well as reduction in non-recurring integration costs of $7.3 million, capital market advisory fees of $0.7 million, and commercial start-up costs of $6.5 million incurred during the year ended December 31, 2022 that were not repeated in the comparable period.
Private Placement Warrant Exercise On March 4, 2024, the Company entered into a warrant exercise agreement with an existing accredited investor (the “ PIPE Investor ”) to exercise in full the outstanding Private Placement (the “ PIPE warrants ”) to purchase up to an aggregate of 13,888,889 shares of the Company’s common stock for gross proceeds of approximately $33.2 million.
Private Placement Warrant Exercise On March 4, 2024, the Company entered into a warrant exercise agreement with an existing accredited investor (the “ PIPE Investor ”) to exercise in full the outstanding PIPE warrants to purchase up to an aggregate of 13,888,889 shares of the Company’s common stock for gross proceeds of approximately $33.2 million.
RDO Warrant Exercise On February 27, 2024, the Company entered into a warrant exercise agreement with an existing accredited investor (the “ RDO Investor ”) to exercise in full the outstanding Registered Direct Offering (the “ RDO warrants ”) to purchase up to an aggregate of 8,886,255 shares of the Company’s common stock for gross proceeds of approximately $20.6 million.
RDO Warrant Exercise On February 27, 2024, the Company entered into a warrant exercise agreement with an existing accredited investor (the “ RDO Investor ”) to exercise in full the outstanding Registered Direct Offering to purchase up to an aggregate of 8,886,255 shares of the Company’s common stock for gross proceeds of approximately $20.6 million (the “ RDO warrants ”) .
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 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 medium-term to long-term cash needs will depend, in part, on our ability to generate cash in the future, which depends on our future financial results.
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, were convertible into 17,391,304 shares of the Company’s common stock at an initial Conversion Price of $11.50.
The 2026 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, were 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, the Conversion Rate Reset described below and in Note K—Debt of the Notes to consolidated financial statements included in this Annual Report on Form 10-K . The Convertible Notes mature on December 15, 2026.
The Conversion Price is subject to adjustments, including but not limited to, the Conversion Rate Reset described below and in Note 12—Debt of the Notes to consolidated financial statements included in this Annual Report on Form 10-K . The 2026 Convertible Notes mature on December 15, 2026.
The categories of backlog are further defined below. • 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.
The categories of backlog are further defined below. • Funded Backlog. Funded backlog represents the remaining 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.
Unfunded backlog represents the remaining 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.
Priced unexercised contract options represent the remaining contract 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.
Refer to Note M—Income Taxes of the Notes to consolidated financial statements included in this Annual Report on Form 10-K 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.
Refer to Note 14—Income Taxes of the Notes to consolidated financial statements included in this Annual Report on Form 10-K 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.
While these conflicts are still evolving and the eventual outcomes remains highly uncertain, we do not believe that these events will have a material impact on our business and results of operations. However, if these conflicts worsen, leading to greater disruptions and uncertainty within the technology industry or global economy, our business and results of operations could be negatively impacted.
While these conflicts are still evolving and the eventual outcome remains highly uncertain, we do not believe that these events will have a material impact on our business and results of operations. However, if these conflicts worsen, leading to greater disruptions and uncertainty within the technology industry or global economy, our business and results of operations could be negatively impacted.
On May 29, 2022, pursuant to the conversion rate adjustment provisions in the Convertible Note indenture, the Conversion Price was adjusted to $10.61 (or 94.2230 shares of common stock per $1,000 principal amount of Convertible Notes) because the average of the daily volume-weighted average price of the common stock during the preceding 30 trading days was less than $10.00 (the “ Conversion Rate Reset ”).
On May 29, 2022, pursuant to the conversion rate adjustment provisions in the 2026 Convertible Notes indenture, the Conversion Price was adjusted to $10.61 (or 94.2230 shares of common stock per $1,000 principal amount of 2026 Convertible Notes) because the average of the daily volume-weighted average price of the common stock during the preceding 30 trading days was less than $10.00 (the “ Conversion Rate Reset ”).
Commencing on the first fiscal quarter after the initial availability quarter, the Company is required to have aggregated reported Adjusted EBITDA of at least $1 over the two preceding quarters to maintain its ability to borrow under the Senior Revolver (though the inability to satisfy such condition does not result in a default under the Senior Revolver).
Commencing on the first fiscal quarter after the initial availability quarter, the Company was required to have aggregated reported Adjusted EBITDA of at least $1 over the two preceding quarters to maintain its ability to borrow under the Senior Revolver (though the inability to satisfy such condition does not result in a default under the Senior Revolver).
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 years ended December 31, 2023, December 31, 2022, and December 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.
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 year ended December 31, 2024, December 31, 2023 and December 31, 2022. • 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 Annual Report on Form 10-K. Business Overview Our mission is to help deliver clarity for the world’s most complex decisions.
In addition, our significant accounting policies, including critical accounting policies, are summarized in Note 3—Summary of Significant Accounting Policies to the accompanying consolidated financial statements included in this Annual Report on Form 10-K. Business Overview Our mission is to help deliver clarity for the world’s most complex decisions.
Additional risks for goodwill across all reporting units include, but are not limited to: • our failure to reach our internal forecasts could impact our ability to achieve our forecasted levels of cash flows and 81 Table of Contents reduce the estimated discounted value of our reporting units; • adverse technological events that could impact our performance; • volatility in equity and debt markets resulting in higher discount rates; and • significant adverse changes in the regulatory environment or markets in which we operate.
Additional risks for goodwill across all reporting units include, but are not limited to: • our failure to reach our internal forecasts could impact our ability to achieve our forecasted levels of cash flows and reduce the estimated discounted value of our reporting units; • adverse technological events that could impact our performance; • volatility in equity and debt markets resulting in higher discount rates; and • significant adverse changes in the regulatory environment or markets in which we operate.
As of December 31, 2023, 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.
As of December 31, 2024, 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.
The Bank of America Credit Agreement requires BigBear.ai to meet certain financial and other covenants. The Company was not in compliance with the Fixed Charge Coverage ratio requirement as of June 30, 2022, and as a result was unable to draw on the facility.
The Bank of America Credit Agreement required BigBear.ai to meet certain financial and other covenants. The Company was not in compliance with the Fixed Charge Coverage ratio requirement as of June 30, 2022, and as a result was unable to draw on the facility.
(6) Transaction expenses during the year ended December 31, 2023 consist primarily of diligence, legal, and other related expenses incurred associated with the Pangiam Acquisition. Transaction costs incurred during the year ended December 31, 2022 are primarily related to our acquisition of ProModel Corporation as well as costs associated with evaluating other acquisition opportunities.
(6) Transaction expenses during the year ended December 31, 2024 and December 31, 2023 consist primarily of diligence, legal and other related expenses incurred associated with the Pangiam acquisition. Transaction costs incurred in 2022 are primarily related to our acquisition of ProModel Corporation as well as costs associated with evaluating other acquisition opportunities.
BigBear.ai is a leading provider of Edge AI-powered decision intelligence solutions for national security, supply chain management, and digital identity. Customers and partners rely on BigBear.ai’s predictive analytics capabilities in highly complex, distributed, mission-based operating environments. We are a technology-led solutions organization, providing both software and services to our customers.
BigBear.ai is a leading provider of Edge AI-powered decision intelligence solutions for national security, supply chain management and digital identity. Customers and 69 Table of Contents partners rely on BigBear.ai’s predictive analytics capabilities in highly complex, distributed, mission-based operating environments. We are a technology-led solutions organization, providing both software and services to our customers.
In consideration for the immediate and full exercise of the RDO warrants, the RDO Investor received a new unregistered common stock purchase warrant to purchase up to an aggregate of 5,800,000 shares of the Company’s common stock (the “ First New Warrant ”) in a private placement.
In consideration for the immediate and full exercise of the RDO warrants, the RDO Investor received a new unregistered common stock purchase warrant to purchase up to an aggregate of 5,800,000 shares of the Company’s common stock (the “ 2024 RDO warrant ”) in a private placement.
In consideration for the immediate and full exercise of the PIPE warrants, the PIPE Investor received a new unregistered common stock purchase warrant to purchase up to an aggregate of 9,000,000 shares of the Company’s common stock (the “ Second New Warrant ”) in a private placement.
In consideration for the immediate and full exercise of the PIPE warrants, the PIPE Investor received a new unregistered common stock purchase warrant to purchase up to an aggregate of 9,000,000 shares of the Company’s common stock (the “ 2024 PIPE warrant ”) in a private placement.
The combination of BigBear.ai and Pangiam creates one of the industry’s most comprehensive vision and edge AI portfolios, combining facial 67 Table of Contents recognition, image-based anomaly detection and advanced biometrics with BigBear.ai’s computer vision and predictive analytics capabilities, positioning the Company as a foundational leader in how artificial intelligence is operationalized at the edge.
The combination of BigBear.ai and Pangiam creates one of the industry’s most comprehensive vision and edge AI portfolios, combining facial recognition, image-based anomaly detection and advanced biometrics with BigBear.ai’s computer vision and predictive analytics capabilities, positioning the Company as a foundational leader in how artificial intelligence is operationalized at the edge.
Class B Unit Incentive Plan In February 2021, the Company’s Parent, BBAI Ultimate Holdings, LLC (“ Parent ”), adopted a written compensatory benefit plan (the “ Class B Unit Incentive Plan ”) to provide incentives to present and future directors, managers, officers, employees, consultants, advisors, and/or other service providers of the Company’s Parent or its Subsidiaries in the form of the Parent’s Class B Units (“ Incentive Units ”).
Class B Unit Incentive Plan In February 2021, the Company’s Parent, BBAI Ultimate Holdings, LLC (“ Parent ”), adopted a written compensatory benefit plan (the “ Class B Unit Incentive Plan ”) to provide incentives to present and future directors, managers, officers, employees, 87 Table of Contents consultants, advisors, and/or other service providers of the Company’s Parent or its Subsidiaries in the form of the Parent’s Class B Units (“ Incentive Units ”).
Recent Developments Pangiam Acquisition On February 29, 2024, the Company completed the acquisition of Pangiam Intermediate Holdings, LLC (“ Pangiam ” or the “ Pangiam Acquisition ”), a leader in vision AI for the global trade, travel, and digital identity industries.
Pangiam Acquisition On February 29, 2024, the Company completed the acquisition of Pangiam Intermediate Holdings, LLC (“ Pangiam ” or the “ Pangiam Acquisition ”), a leader in vision AI for the global trade, travel and digital identity industries.
D&O Financing Loan On December 20, 2023, the Company entered into a $1,229 loan (the “2024 D&O Financing Loan” ) with US Premium Finance to finance the Company’s directors and officers insurance premium through September 2024. The D&O Financing Loan had an interest rate of 6.99% per annum and a maturity date of September 8, 2024.
On December 20, 2023, the Company entered into a $1.2 million loan (the “2024 D&O Financing Loan” ) with US Premium Finance to finance the Company’s directors and officers insurance premium through September 2024. The D&O Financing Loan had an interest rate of 6.99% per annum and a maturity date of September 8, 2024.
Recent Accounting Pronouncements See Note B—Summary of Significant Accounting Policies of the consolidated financial statements included in this Annual Report on Form 10-K for a discussion of recently issued accounting pronouncements.
Recent Accounting Pronouncements See Note 3—Summary of Significant Accounting Policies of the consolidated financial statements included in this Annual Report on Form 10-K for a discussion of recently issued accounting pronouncements.
When adjustments in estimated contract costs are identified, such revisions may result in current period adjustments to earnings applicable to performance in prior periods. Impairment of Long-Lived Assets The Company evaluates the recoverability of the carrying value of long-lived assets whenever events or circumstances indicate the carrying amount may not be recoverable.
When adjustments in estimated contract costs are identified, such revisions may result in current period adjustments to earnings applicable to performance in prior periods. 86 Table of Contents Impairment of Long-Lived Assets The Company evaluates the recoverability of the carrying value of long-lived assets whenever events or circumstances indicate the carrying amount may not be recoverable.
We generate revenue from providing both software and services to our customers. 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 generate revenue from providing both software and services to our customers. Cost of Revenues 71 Table of Contents 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.
BigBear.ai may increase the commitments under the Senior Revolver in an aggregate amount of up to the greater of $25.0 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.
BigBear.ai could increase the commitments under the Senior Revolver in an aggregate amount of up to the greater of $25.0 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, were satisfied.
The Company considers the nature of these contracts and the types of solutions and services provided when determining the proper accounting for a particular contract. The Company performs under various types of contracts, which generally include firm-fixed-price (“ FFP ”), time-and-materials (“ T&M ”), and cost-reimbursable contracts.
The Company 85 Table of Contents considers the nature of these contracts and the types of solutions and services provided when determining the proper accounting for a particular contract. The Company performs under various types of contracts, which generally include firm-fixed-price (“ FFP ”), time-and-materials (“ T&M ”), and cost-reimbursable contracts.
The number of Discretionary PSUs and STIP PSUs that will vest is based on the achievement of the performance criteria during each respective annual measurement period, provided that the employees remain in continuous service on each vesting date. Vesting will not occur unless a minimum performance criteria threshold is achieved.
The number of Discretionary PSUs and STIP PSUs that will vest is based on the achievement of the performance criteria during each respective annual measurement period, provided that the employees remain 88 Table of Contents in continuous service on each vesting date. Vesting will not occur unless a minimum performance criteria threshold is achieved.
The year ended December 31, 2023 does not include activity from Virgin Orbit after the first quarter of 2023 as a result of Virgin Orbit’s bankruptcy announcement in the second quarter of 2023 which was a primary driver of the decrease in gross margin during the year as compared to the year ended December 31, 2022.
The year ended December 31, 2023 does not include activity from Virgin Orbit after the 73 Table of Contents first quarter of 2023 as a result of Virgin Orbit’s bankruptcy announcement in the second quarter of 2023 which was a primary driver of the decrease in gross margin during the year as compared to the year ended December 31, 2022.
Government often contain options to renew existing contracts for an additional period of time (generally a year at a time) under the same terms and 83 Table of Contents conditions as the original contract, and generally do not provide the customer any material rights under the contract.
Government often contain options to renew existing contracts for an additional period of time (generally a year at a time) under the same terms and conditions as the original contract, and generally do not provide the customer any material rights under the contract.
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.
Non-GAAP financial performance measures are used to sup plement 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.
These increases were offset by the wind-down of certain Air Force programs at the beginning of the third quarter of 2023 as well as lower volume from Virgin Orbit as a result of Virgin Orbit’s bankruptcy announcement in the second quarter of 2023.
These increases were offset by the wind-down of certain Air Force programs in the second quarter of 2023 as well as lower volume from Virgin Orbit as a result of Virgin Orbit’s bankruptcy announcement in the second quarter of 2023.
Public warrants meet the criteria for equity classification. The Company remeasures the warrant liability at fair value at each reporting period with changes in fair value recognized in the consolidated statements of operations. Equity-based Compensation Pursuant to ASC 718, Compensation – Stock Compensation , equity-based awards are measured at fair value on the grant date.
Public warrants meet the criteria for equity classification. The Company remeasures these derivatives at fair value at each reporting period with changes in fair value recognized in the consolidated statements of operations. Equity-based Compensation Pursuant to ASC 718, Compensation – Stock Compensation , equity-based awards are measured at fair value on the grant date.
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.
The Senior Revolver included 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 would reduce the amount available under the revolving credit facility.
These decreases were partially offset by $3,025 of professional fees related to non-recurring strategic initiatives, $2,250 of non-recurring litigation expenses, and bad debt reserves of $1,425 related to the settlement of Virgin Orbit’s Chapter 11 bankruptcy proceedings.
These decreases were partially offset by $3.0 million of professional fees related to non-recurring strategic initiatives, $2.3 million of non-recurring litigation expenses, and bad debt reserves of $1,425 million related to the settlement of Virgin Orbit’s Chapter 11 bankruptcy proceedings.
Critical Accounting Policies and Estimates Our significant accounting policies are summarized in Note B of our audited consolidated financial statements for the year ended December 31, 2023 included in this Annual Report on Form 10-K.
Critical Accounting Policies and Estimates Our significant accounting policies are summarized in Note 3 of our audited consolidated financial statements for the year ended December 31, 2024 included in this Annual Report on Form 10-K.
We base our assumptions, judgments and estimates on historical experience and various other factors that we 80 Table of Contents believe are reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions.
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.
Adjusted EBITDA is defined as net income (loss) adjusted for interest expense (income), net, income tax expense (benefit), depreciation and amortization, equity-based compensation and associated employer payroll taxes, net increase (decrease) in fair value of derivatives, restructuring charges, non-recurring strategic initiatives, non-recurring litigation, transaction expenses, goodwill impairment, non-recurring integration costs, capital market advisory fees, commercial start-up costs, loss on extinguishment of debt, transaction bonuses, termination of legacy benefits, and management fees.
Adjusted EBITDA is defined as net income (loss) adjusted for interest expense (incom e), net, income tax (benefit) expense, depreciation and amortization, equity-based compensation and associated employer payroll taxes, net increase in fair value of derivatives, restructuring charges, non-recurring strategic initiatives, non-recurring litigation, transaction expenses, goodwill impairment, non-recurring integration costs, capital market advisory fees, commercial start-up costs, and loss on extinguishment of debt.
As a result of the Second Amendment, funds available under the Senior Revolver are reduced to $25.0 million from $50.0 million, limited to a borrowing base of 90% of Eligible Prime Government Receivables and Eligible Subcontractor Government Receivables, plus 78 Table of Contents 85% of Eligible Commercial Receivables.
As a result of the Second Amendment, funds available under the Senior Revolver were reduced to $25.0 million from $50.0 million, limited to a borrowing base of 90% of Eligible Prime Government Receivables and Eligible Subcontractor Government Receivables, plus 85% of Eligible Commercial Receivables.
Net loss before deducting depreciation, amortization and other non-cash items was $21,918 and offset by a favorable change in net working capital of $3,611 which contributed to operating cash flows during this period.
Net loss before deducting depreciation, amortization and other non-cash items was $21.9 million and offset by a favorable change in net working capital of $3.6 million which contributed to operating cash flows during this period.
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. 76 Table of Contents • Unpriced Unexercised Options.
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.
Investing activities For the year ended December 31, 2023, net cash used in investing activities was $3,830, primarily consisting of capitalized software development costs of $3,828.
For the year ended December 31, 2023, net cash used in investing activities was $3.8 million, primarily consisting of capitalized software development costs.
For the year ended December 31, 2022, net cash used in financing activities was $103,137, primarily consisting of the purchase of Company shares as a result of settlement of the FPAs of $100,896, and the net short-term borrowings of $2,174 related to the D&O Financing Loan and 2023 D&O Financing Loan.
For the year ended December 31, 2022, net cash used in financing activities was $103.1 million, primarily consisting of the purchase of Company shares as a result of settlement of the FPAs of $100.9 million, and the net short-term borrowings of $2.1 million related to the 2022 D&O Financing Loan.
Net loss before deducting depreciation, amortization and other non-cash items was $49,423 and was offset by a favorable change in net working capital of $505 which contributed to operating cash flows during this period. The favorable change in net working capital was largely driven by increases in accounts payable of $9,942 and other liabilities of $2,210.
Net loss before deducting depreciation, amortization and other non-cash items was $49.4 million and was offset by a favorable change in net working capital of $0.5 million which contributed to operating cash flows during this period. The favorable change in net working capital was largely driven by increases in accounts payable of $9.9 million and other liabilities of $2.2 million.
Warrants Warrants are accounted for in accordance with the guidance of ASC 815, Derivatives and Hedging (“ ASC 815 ”), under which private warrants, Private Placement (“ PIPE ”) warrants, and warrants issued under the registered direct offering (“ RDO warrants ”) do not meet the criteria for equity treatment and are classified as liabilities measured at fair value.
Derivatives Derivatives are accounted for in accordance with the guidance of ASC 815, Derivatives and Hedging (“ ASC 815 ”), under which the 2029 Notes Conversion Option, the 2026 Notes Conversion Option, IPO private warrants, Private Placement (“ PIPE ”) warrants, warrants issued under the registered direct offering (“ RDO warrants ”), and the Written Put Option, do not meet the criteria for equity treatment and are classified as liabilities measured at fair value.
As of January 1, 2022, the Company reserved an aggregate of 3,974,948 common shares (subject to annual increases on January 1 of each year and ending in 2031) of the Company’s common stock for grants under the ESPP.
As of January 1, 2025, the Company reserved an aggregate of 3,316,677 common shares (subject to annual increases on January 1 of each year and ending in 2031) of the Company’s common stock for grants under the ESPP.
Additionally, the Second Amendment increased the Base Rate Margin, BSBY Margin and unused commitment fees by 0.25%. Following entry into the Second Amendment, the Senior Revolver no longer is subject to a minimum Fixed Charge Coverage ratio covenant.
Additionally, the Second Amendment increased the Base Rate Margin, BSBY Margin and unused commitment fees by 0.25%. Following entry into the Second Amendment, the Senior Revolver no longer was subject to a minimum Fixed Charge Coverage ratio covenant, but was still subject to the Secured Net Leverage ratio covenant.
These were partially offset by an increase in contract assets of $3,510, a decrease in accounts payable of $4,384, a decrease in contract liabilities of $1,143, and a decrease in other liabilities of $2,291. For the year ended December 31, 2022, net cash used in operating activities was $48,918.
These were partially offset by an increase in contract assets of $3.5 million, a decrease in accounts payable of $4.4 million, a decrease in contract liabilities of $1.1 million, and a decrease in other liabilities of $2.3 million. For the year ended December 31, 2022, net cash used in operating activities was $48.9 million.
Restructuring Charges Year Ended December 31, Year-Over-Year Change 2023 2022 2021 2023 vs 2022 2022 vs 2021 Restructuring charges $ 822 $ 4,203 $ — $ (3,381) (80.4) % $ 4,203 100.0 % Restructuring charges consist of employee separation costs related to strategic cost saving initiatives to better align our organization and cost structure and improve the affordability of our products and services.
Restructuring Charges Year Ended December 31, Year-Over-Year Change 2024 2023 2022 2024 vs 2023 2023 vs 2022 Restructuring charges $ 1,287 $ 822 $ 4,203 $ 465 56.6 % $ (3,381) (80.4) % Restructuring charges consist of employee separation costs related to strategic cost saving initiatives to better align our organization and cost structure and improve the affordability of our products and services.
In assessing the need for a valuation allowance, we evaluate all significant available positive and negative evidence, including historical operating results, estimates of future sources of taxable income, carry-forward periods available, the existence of prudent and feasible tax planning strategies and other relevant factors.
Income Taxes Significant judgments are required in order to determine the realizability of tax assets. In assessing the need for a valuation allowance, we evaluate all significant available positive and negative evidence, including historical operating results, estimates of future sources of taxable income, carry-forward periods available, the existence of prudent and feasible tax planning strategies and other relevant factors.
The table below presents a reconciliation of free cash flow to net cash used in operating activities, computed in accordance with GAAP: Year Ended December 31, 2023 2022 2021 Net cash used in operating activities $ (18,307) $ (48,918) $ (19,782) Capital expenditures, net (3,830) (769) (639) Free cash flow $ (22,137) $ (49,687) $ (20,421) Key Performance Indicators Backlog We view growth in backlog as a key measure of our business growth.
The table below presents a reconciliation of free cash flow to net cash used in operating activities, computed in accordance with GAAP: Year Ended December 31, 2024 2023 2022 Net cash used in operating activities $ (38,119) $ (18,307) $ (48,918) Capital expenditures, net (11,114) (3,830) (769) Free cash flow $ (49,233) $ (22,137) $ (49,687) Key Performance Indicators Backlog We view growth in backlog as a key measure of our business growth.
The 2023 D&O Financing Loan required an upfront payment of $1,109 and has an interest rate of 5.75% per annum and a maturity date of December 8, 2023.
The 2023 D&O Financing Loan required an upfront payment of $1.1 million and has an interest rate of 5.75% per annum and a maturity date of December 8, 2023. The 2023 D&O Financing Loan was fully repaid at maturity.
Financing activities For the year ended December 31, 2023, net cash provided by financing activities was $42,062, primarily consisting of the net proceeds from the issuance of the Private Placement and Registered Direct Offering shares of $50,000, offset by the payment of transaction costs associated with the Private Placement and Registered Direct Offering of $5,724, proceeds from the issuance of common stock upon ESPP purchase of $1,176, the payment of taxes related to net share settlement of equity awards $2,560, and net repayment of $830 related to the D&O Financing Loans.
For the year ended December 31, 2023, net cash provided by financing activities was $42.1 million, primarily consisting of net proceeds from the issuance of the Private Placement and Registered Direct Offering shares of $50.0 million, offset by the payment of transaction costs associated with the Private Placement and Registered Direct Offering of $5.7 million, proceeds from the issuance of common stock upon ESPP purchase of $1.2 million, the payment of taxes related to net share settlement of equity awards of $2.6 million, and net repayment of $0.8 million related to the 2023 D&O Financing Loan.
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.
Proceeds from the Senior Revolver will be used to fund working capital needs, capital expenditures, and other general corporate purposes.
For the year ended December 31, 2022, net cash used in investing activities was $5,234, consisting of the net cash used to acquire ProModel Corporation of $4,465 and purchase of property and equipment of $769.
For the year ended December 31, 2022, net cash used in investing activities was $5.2 million, consisting of the net cash used to acquire ProModel Corporation of $4.5 million and purchase of property and equipment of $0.8 million.
Compensation expense for the Tranche II Incentive Units is recognized over the derived service period of thirty months from the modification date.
Compensation expense for the Tranche II Incentive Units is recognized over the derived service period of thirty months from the modification date. The remaining compensation expense for the Tranche II Incentive Units will be recognized over the remaining service period of approximately 25 months from the date of the amendment.
Other (Income) Expense Year Ended December 31, Year-Over-Year Change 2023 2022 2021 2023 vs 2022 2022 vs 2021 Other (income) expense $ (393) $ 19 $ — $ (412) (2168.4) % $ 19 100.0 % The change in other (income) expense during the year ended December 31, 2023 as compared to the year ended December 31, 2022 is primarily driven by interest income earned on money market accounts.
Other (Income) Expense Year Ended December 31, Year-Over-Year Change 2024 2023 2022 2024 vs 2023 2023 vs 2022 Other (income) expense $ (2,194) $ (393) $ 19 $ (1,801) 458.3 % $ (412) (2168.4) % The change in other income during the year ended December 31, 2024 as compared to the year ended December 31, 2023 is primarily driven by interest income earned on money market accounts.
Selling, General and Administrative (“SG&A”) SG&A expenses include salaries, stock-based compensation expense, and benefits for personnel involved in our executive, finance, accounting, legal, human resources, and administrative functions, as well as third-party professional services and fees, and allocated overhead. 69 Table of Contents 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.
Selling, General and Administrative (“SG&A”) SG&A expenses include salaries, equity-based compensation expense, and benefits for personnel involved in our executive, finance, accounting, legal, human resources, and administrative functions, as well as third-party professional services and fees, and allocated overhead.
On December 8, 2022, the Company entered into a $2,059 loan (the “ 2023 D&O Financing Loan ”) with AFCO Credit Corporation to finance the Company’s directors and officers insurance premium through December 2023.
The 2024 D&O Financing Loan was fully repaid at maturity. On December 8, 2022, the Company entered into a $2.1 million loan (the “ 2023 D&O Financing Loan ”) with AFCO Credit Corporation to finance the Company’s directors and officers insurance premium through December 2023.
The net decrease in fair value of derivatives of $1,591 for the year ended December 31, 2022 consists of fair value remeasurements of the Written put option and private warrants. The Written put option was fully settled as of March 31, 2022.
The net decrease in fair value of derivatives of $21.4 million for the year ended December 31, 2022 consists of fair value remeasurements of the Written put option, 2026 Notes Conversion Option, and the IPO private warrants. The Written put option was fully settled as of March 31, 2022.
The favorable change in net working capital was largely driven by a decrease in accounts receivable of $6,403, a decrease in prepaid expenses and other assets of $5,899, and in increase in accrued liabilities of $2,637.
The favorable change in net working capital was largely driven by a decrease in accounts receivable of $6.4 million, a decrease in prepaid expenses and other assets of $5.9 82 Table of Contents million, and in increase in accrued liabilities of $2.6 million.
The Stock Options expire on the 10th anniversary of the grant date. The Company recognizes equity-based compensation expense for the Stock Options equal to the fair value of the awards on a straight-line basis over the service based vesting period.
The stock options expire on the 10th anniversary of the grant date. The Company recognizes equity-based compensation expense for the stock options equal to the fair value of the awards on a straight-line basis over the service based vesting period. Restricted Stock Units Pursuant to the Plan, the Company may award Restricted Stock Units (“ RSUs ”) to eligible employees.
Free Cash Flow Free cash flow is defined as net cash 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.
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.
Emerging Growth Company Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012 (the “ JOBS ”) Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards.
We believe the following critical accounting policies affect the more significant estimates, assumptions, and judgments we use to prepare our consolidated financial statements. 83 Table of Contents Emerging Growth Company Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012 (the “ JOBS ”) Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards.
Certain research and development expenses relate to software developed for sale, lease, or will otherwise be marketed. Costs incurred subsequent to the establishment of technological feasibility and prior to the general availability of the software, are capitalized when they are expected to become significant. All other research and development expenses are expensed in the period incurred.
Costs incurred subsequent to the establishment of technological feasibility and prior to the general availability of the software, are capitalized when they are expected to become significant. All other research and development expenses are expensed in the period incurred.
Failure to meet these Adjusted EBITDA requirements is not deemed to be a default but will limit the Company’s ability to make borrowings under the Senior Revolver until such time that the Company is able meet the Adjusted EBITDA thresholds as defined in the Second Amendment.
Failure to meet this Adjusted EBITDA requirement was not a default but limited the Company’s ability to make borrowings under the Senior Revolver until such time that the Company was able to meet the Adjusted EBITDA thresholds as defined in the Second Amendment.
Cash Flows The table below summarizes certain information from our consolidated statements of cash flows for the following periods: Year Ended December 31, 2023 2022 2021 Net cash used in operating activities (18,307) (48,918) (19,782) Net cash used in investing activities (3,830) (5,234) (863) Net cash provided by (used in) financing activities 42,062 (103,137) 180,862 Net increase (decrease) in cash and cash equivalents and restricted cash 19,925 (157,289) 160,217 Cash and cash equivalents and restricted cash at the beginning of period 12,632 169,921 9,704 Cash and cash equivalents and restricted cash at the end of the period $ 32,557 $ 12,632 $ 169,921 79 Table of Contents Operating activities For the year ended December 31, 2023, net cash used in operating activities was $18,307.
Cash Flows The table below summarizes certain information from our consolidated statements of cash flows for the following periods: Year Ended December 31, 2024 2023 2022 Net cash used in operating activities (38,119) (18,307) (48,918) Net cash provided by (used in) investing activities 2,821 (3,830) (5,234) Net cash provided by (used in) financing activities 52,458 42,062 (103,137) Net increase (decrease) in cash and cash equivalents 17,584 19,925 (157,289) Cash and cash equivalents at the beginning of period 32,557 12,632 169,921 Cash and cash equivalents at the end of the period $ 50,141 $ 32,557 $ 12,632 Operating activities For the year ended December 31, 2024, net cash used in operating activities was $38.1 million.
The result may be shifting funding priorities, which could have material impacts on defense spending broadly and our federal government contracts. Geopolitical Environment We operate in a complex and evolving security environment and our business is affected by geopolitical issues. Conflicts in Ukraine, Israel, and Gaza have significantly elevated global geopolitical tensions and security concerns.
The result may be shifting funding priorities, which could have material impacts on defense spending broadly and our programs. Geopolitical Environment We operate in a complex and evolving security environment and our business is affected by geopolitical issues.
Potential changes in the underlying judgments, assumptions, and estimates used in our valuations of acquired intangible assets could result in different estimates of the future fair values.
The fair value of the acquired technology and customer relationships has been estimated using various underlying judgments, assumptions, and estimates. Potential changes in the underlying judgments, assumptions, and estimates used in our valuations of acquired intangible assets could result in different estimates of the future fair values.
The effective tax rate for the year ended December 31, 2022 differs from the U.S. federal income tax rate of 21.0% primarily due to state and local income taxes, permanent differences between book and taxable income, goodwill impairment, and the change in valuation allowance primarily resulting from the ProModel Corporation acquisition.
The effective 75 Table of Contents tax rate for the year ended December 31, 2024 differs from the U.S. federal income tax rate of 21.0% primarily due to state and local income taxes, permanent differences between book and taxable income, certain discrete items and the change in valuation allowance.
(3) In the third and fourth quarters of 2022 and the first quarter of 2023, the Company incurred employee separation costs associated with a strategic review of the Company’s capacity and future projections to better align the organization and cost structure and improve the affordability of its products and services.
(3) During the year ended December 31, 2024 and the year ended December 31, 2023, the Company incurred employee separation costs associated with a strategic review of the Company’s capacity and future projections to better align the organization and cost structure and improve the affordability of its products and services.
Transaction costs incurred in 2022 are primarily related to our acquisition of ProModel Corporation as well as costs associated with evaluating other acquisition opportunities. We expect to incur additional transaction expenses and integration costs in the future as we work to integrate the acquisition of Pangiam, which was completed on February 29, 2024.
Transaction Expenses Transaction expenses incurred in 2024 and 2023 consist of diligence, legal and other related expenses associated with the Pangiam Acquisition, which was completed on February 29, 2024. Transaction costs incurred in 2022 are primarily related to our acquisition of ProModel Corporation, which was completed on April 7, 2022, as well as costs associated with evaluating other acquisition opportunities.
Restructuring Charges Restructuring charges consist of employee separation costs and impairment of lease right-of-use assets related to strategic cost saving initiatives to better align our organization and cost structure and improve the affordability of our products and services. Transaction Expenses Transaction expenses incurred in 2023 consist primarily of diligence, legal, and other related expenses incurred associated with the Pangiam Acquisition.
Restructuring Charges Restructuring charges consist of employee separation costs and impairment of lease right-of-use assets related to strategic cost saving initiatives to better align our organization and cost structure and improve the affordability of our products and services.
We intend for this discussion to provide the reader with information to assist in understanding BigBear.ai’s audited 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.
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. All amounts presented below are in thousands of U.S. dollars unless stated otherwise.
These increases were partially offset by an increase in accounts receivable of $798, an increase in prepaid expenses and other assets of $1,702, a decrease in accrued liabilities of $5,121 and a decrease in contract liabilities of $3,740. For the year ended December 31, 2021, net cash used in operating activities was $19,782.
These were partially offset by a decrease in contract assets of $3.9 million, a decrease in prepaid expenses and other assets of $2.1 million, an increase in accrued liabilities of $2.9 million, and an increase in contract liabilities of $0.5 million. For the year ended December 31, 2023, net cash used in operating activities was $18.3 million.
Cost of Revenues Year Ended December 31, Year-Over-Year Change 2023 2022 2021 2023 vs 2022 2022 vs 2021 Cost of revenues $ 114,563 $ 112,018 $ 111,510 $ 2,545 2.3 % $ 508 0.5 % Cost of revenues as a percentage of revenues 74 % 72 % 77 % Cost of revenues as a percentage of total revenues increased to 74% for the year ended December 31, 2023 as compared to 72% for the year ended December 31, 2022.
Cost of Revenues Year Ended December 31, Year-Over-Year Change 2024 2023 2022 2024 vs 2023 2023 vs 2022 Cost of revenues $ 113,016 $ 114,563 $ 111,510 $ (1,547) (1.4) % $ 2,545 2.3 % Cost of revenues as a percentage of revenues 71 % 74 % 77 % Cost of revenues as a percentage of total revenues was 71% for the year ended December 31, 2024 as compared to 74% for the year ended December 31, 2023.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeRefer to Note P—Written Put Option and Note K—Debt in the notes to our consolidated financial statements in Item 1 on this Annual Report on Form 10-K for further information. We are also exposed to market risk related to interest rates.
Biggest changeRefer to Note 18—Derivatives and Note 12—Debt in the notes to our consolidated financial statements in Item 1 on this Annual Report on Form 10-K for further information. As of the date of this filing, approximately $57.7 million of the 2029 Convertible Notes have been voluntarily converted by noteholders following the Exchange Transaction.
In addition, the Convertible Notes indenture contains certain “make-whole” provisions pursuant to which, under certain circumstances, the Company must increase the conversion rate and such increase depends, in part, on the price of our common stock.
Additionally, our Convertible Notes indenture contains certain “make-whole” provisions pursuant to which, under certain circumstances, the Company must increase the conversion rate and such increase depends, in part, on the price of our common stock.
We have established policies, procedures and internal processes governing our management of market risks and to manage and mitigate our exposure to these risks. 87 Table of Contents
We have established policies, procedures and internal processes governing our management of market risks and to manage and mitigate our exposure to these risks. 90 Table of Contents
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Our main exposure to market risk relates to changes in the value of our common stock or other instruments that are tied to our common stock including derivative liabilities and convertible debt.
Market Risk Our main exposure to market risk relates to changes in the market value our common stock or other instruments that are tied to our common stock, including warrants and other derivative liabilities related to our 2029 Convertible Notes and our 2026 Convertible Notes.
Our financial instruments that are subject to interest rate risk principally include fixed-rate long-term debt and revolving credit, if drawn. As of December 31, 2023, the outstanding principal amount of our long-term debt was $200,000 excluding unamortized discounts and issuance costs of $5.7 million. 86 Table of Contents Inflation affects the way we operate in our target markets.
Our financial instruments that are subject to interest rate risk principally include fixed-rate long-term debt. As of December 31, 2024, the outstanding principal amount of our long-term debt was $200.0 million excluding unamortized discounts and issuance costs of $64.6 million.
Removed
Decreases in the value of our common stock have triggered certain reset provisions in our Convertible Notes that are based on the value of our common stock and volume of shares traded during the reset period.
Added
Item 7A. Quantitative and Qualitative Disclosures About Market Risk We are exposed to market risks in the ordinary course of our business, which primarily relate to fluctuations in the value of derivative liabilities that are tied to our common stock or convertible debt, interest rates, foreign currency exchange, and inflation.
Removed
On May 29, 2022, pursuant to the Convertible Note indenture, the conversion rate applicable to the Convertible Notes was adjusted to 94.2230 (previously 86.9565) shares of common stock per $1,000 principal amount of Convertible Notes because the average of the daily volume-weighted average price of the common stock during the preceding 30 trading days was less than $10.00 (the “Conversion Rate Reset”).
Added
The estimated fair value of our derivative liabilities related to our warrants, including the 2024 RDO Warrants, the 2024 PIPE Warrants, and the IPO Private Warrants was $54.7 million as of December 31, 2024. The 2024 RDO Warrants and 2024 PIPE Warrants were fully exercised during the first quarter of 2025 and we issued 3.77 million new warrants.
Removed
After giving effect to the Conversion Rate Reset, the conversion price is $10.61 and the Convertible Notes are convertible into 18,844,600 shares, not including any interest payments that are settled with the issuance of shares.
Added
See Note 24—Subsequent Events for additional information. We remeasures the fair value of these derivatives at the end of each reporting period with changes in fair value recognized in the consolidated statements of operations.
Removed
In general, we believe that, over time, we will be able to increase prices to counteract the majority of the inflationary effects of increasing costs and to generate sufficient cash flows to maintain our productive capability. Additionally, many of our long-term contracts have annual rate escalation clauses.
Added
The estimated fair value of our derivative liabilities related to our 2029 Convertible Notes and our 2026 Convertible Notes was $116.2 million as of December 31, 2024.
Added
These conversions have resulted in the issuance of approximately 16.7 million shares of common stock in exchange for the retirement of the respective notes. Interest Rate Risk Our cash and cash equivalents consist of cash and money market funds. The primary objective of our investment activities and strategies are focused on the preservation of capital and supporting our liquidity requirements.
Added
Due to the short-term nature of the financial instruments, we have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates. Foreign Currency Exchange Risk Our contracts with customers are primarily denominated in U.S. dollars, with the remaining denominated in foreign currencies.
Added
Our expenses are generally denominated in the currencies of the jurisdictions in which we conduct our operations, which are primarily in the United States, United Kingdom, and other countries. Our results of current and future operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in GBP.
Added
We have experienced, and may continue to experience, fluctuations in net income (loss) as a result of transaction gains or losses related to 89 Table of Contents remeasuring certain asset and liability balances that are denominated in foreign currencies. These exposures may change over time as business practices evolve and economic conditions change.
Added
To date, foreign currency transaction gains and losses have not been material to our consolidated financial statements, and we have not engaged in any foreign currency hedging transactions. Inflation Risk We do not believe that inflation has had a material effect on our business, results of operations, or financial condition.
Added
If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition, or results of operations. We are also exposed to market risk related to interest rates.

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