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What changed in BigBear.ai Holdings, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of BigBear.ai Holdings, Inc.'s 2022 and 2023 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 2023 report.

+423 added−468 removedSource: 10-K (2024-03-15) vs 10-K (2023-03-31)

Top changes in BigBear.ai Holdings, Inc.'s 2023 10-K

423 paragraphs added · 468 removed · 291 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeOur suite of technology solutions and expertise allows us to target a total addressable market (“ TAM ”) of more than $68 billion, growing to $315 billion by 2028, based upon third-party industry reports on the current and projected markets for government and commercial customers in the following areas: AI in logistics and supply chain, military AI and autonomous systems, AI orchestration, digital twins, AI in computer vision, and cybersecurity. 4 Table of Contents Growth Strategy BigBear.ai has multiple growth tactics, including performing on our existing backlog of approximately $222 million as of December 31, 2022, adding new customers, expanding relationships with existing customers, and scaling our direct and indirect sales channels.
Biggest changeOur 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.
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 and Charlottesville, Virginia. In addition, many of our team members work at secure customer facilities across the U.S.
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.
See “ Risk Factors—Risks Related to Our Business and Industry—Our sales efforts involve considerable time and expense and our sales cycle is often long and unpredictable ” and “ Risk Factors—Risks Related to Our Business and Industry—Our results of operations and our key business measures are likely to fluctuate significantly on a quarterly basis in future periods and may not fully reflect the underlying performance of our business, which makes our future results difficult to predict and could cause our results of operations to fall below expectations .” Additionally, recurring delays in the federal government’s budgeting process can adversely affect the award of new contracts or growth on existing contracts during continuing resolutions. 5 Table of Contents Regulatory Our business activities are subject to various federal, state, local, and foreign laws, rules, and regulations.
See “ Risk Factors—Risks Related to Our Business and Industry—Our sales efforts involve considerable time and expense and our sales cycle is often long and unpredictable ” and “ Risk Factors—Risks Related to Our Business and Industry—Our results of operations and our key business measures are likely to fluctuate significantly on a quarterly basis in future periods and may not fully reflect the underlying performance of our business, which makes our future results difficult to predict and could cause our results of operations to fall below expectations .” Additionally, recurring delays in the federal government’s budgeting process can adversely affect the award of new contracts or growth on existing contracts during continuing resolutions.
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 data scientists and software engineers to co-locate on-premises to tailor our solutions for these unique environments and use cases.
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.
Compliance with these laws, rules, and regulations has not had, and is not expected to have, a material effect on our capital expenditures, results of operations and competitive position as compared to prior periods.
Regulatory Our business activities are subject to various federal, state, local, and foreign laws, rules, and regulations. Compliance with these laws, rules, and regulations has not had, and is not expected to have, a material effect on our capital expenditures, results of operations and competitive position as compared to prior periods.
Organizations frequently attempt to build their own decision support and analytics platforms using a patchwork of custom development, outside consultants, IT services companies, packaged and open-source software, and significant internal IT resources, before turning to BigBear.ai.
Organizations frequently attempt to build their own decision support and analytics platforms using a patchwork of custom development, outside consultants, IT services companies, packaged and open-source software, and significant internal IT resources, before turning to BigBear.ai. We also face competition from government contractors and system integrators who are building custom solutions in the same industries.
Research & Development Our team has more than 20 years of combined experience developing and deploying software products. Historically, much of our research and development has been funded and directed by defense and intelligence customers for their specific needs and objectives.
Historically, much of our research and development has been funded and directed by defense and intelligence customers for their specific needs and objectives.
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. Human Capital Our employees are critical to the success of our business.
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.
We believe data—when leveraged effectively—can be a strategic asset for any organization. Through our supply chain & logistics, autonomous systems and cybersecurity solutions, we help our customers make sense of the world in which they operate, understand how known and previously unforeseen forces impact their operations, and determine which decision and course of action will best achieve their objectives.
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.
Item 1. Business Company Overview BigBear.ai Holdings, Inc.’s (“ BigBear.ai ” or the “ Company ”) mission is to help deliver clarity for our clients as they face their most complex decisions.
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.
Further, the leadership team is committed to maintaining a corporate culture and employee value proposition that attracts and retains the brightest talent in the industry. Competition Our competitors include software companies that develop horizontal solutions in the supply chain & logistics, cybersecurity and autonomous systems markets, as well as vertically focused analytics tools within our target markets.
Further, the leadership team is committed to maintaining a corporate culture and employee value proposition that attracts and retains the brightest talent in the industry.
Competitive Advantage BigBear.ai’s principle competitive advantage is that we are an organization built on a culture of recruiting and retaining talent that we believe attracts the brightest talent in the industry. BigBear.ai is made up of hundreds of employees with domain expertise and hands-on experience in the environments that we build and deliver solutions for.
Our people are the lifeblood of our business and we have a history of recruiting and retaining high-caliber talent. BigBear.ai is comprised of hundreds of employees with domain expertise and hands-on experience in the environments that our customers work in.
We have not experienced any work stoppages due to employee disputes, and we believe that our employee relations are strong. Our human capital resources objectives include recruiting, retaining, training, and motivating our personnel.
Our human capital resources objectives include recruiting, retaining, training, and motivating our personnel.
We are focused on creating technology that solves real customer problems, and our team is a critical part of understanding the challenges our customers face. Additionally, BigBear.ai has been a trusted partner to federal, military, and intelligence agencies of the U.S. government for decades—we take that trust seriously and we work every day to keep it.
We are focused on creating technology that solves real customer problems, and our team is a critical part of understanding the evolving challenges our customers face every day. Market Opportunity BigBear.ai operationalizes artificial intelligence at the edge in multiple large, diverse and rapidly evolving addressable markets. Our key addressable markets include Edge AI, Vision AI, and Digital Twin.
As of December 31, 2022, we had 649 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. None of our employees is represented by a labor union.
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.
This is a focus area for us in 2023 as we find ways to apply our existing technology to new use cases and meet growing customer demand. As new use cases are onboarded, we expand our capabilities by adding new data sources, analysis tools, and integrated services to our platform to support new industries and decision scenarios.
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.
However, as we have continued to amass knowledge and intellectual property (“ IP ”), our proprietary products now require less customization, and our pipeline has begun to reflect our customers’ desire to more rapidly integrate our capabilities into their current operating environments.
However, as we have continued to mature and expand our portfolio, our pipeline has begun to reflect our customers’ desire to more rapidly integrate our capabilities into their current operating environments. Competitive Advantage BigBear.ai’s principle competitive advantage is that we are an organization built on a mission-first culture that focuses on delivering outcomes.
Due to the breadth and depth of experience and expertise in our team, many of our customers rely on BigBear.ai resources to supplement their technical and operational staff for long-term engagements as well.
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.
Because of our history in complex systems integration and AI orchestration, we are well positioned to support the current wave of excitement regarding artificial intelligence, as key decision makers and leaders across government and industry are recognizing the necessity of at-scale, production-grade augmented decision intelligence.
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.
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BigBear.ai’s AI-powered decision intelligence solutions are leveraged across our Cyber & Engineering and Analytics business segments and in three primary markets—global supply chains & logistics, autonomous systems and cybersecurity.
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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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Our Cyber & Engineering segment provides high-end technology and management consulting services to our customers, focusing on cloud engineering and enterprise IT, cybersecurity, computer network operations and wireless, systems engineering, as well as strategy and program planning.
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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.
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Our Analytics segment provides high-end technology and consulting services to our customers, focusing on big data computing and analytical solutions, including predictive and prescriptive analytics solutions.
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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.
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BigBear.ai’s customers, including federal defense and intelligence agencies, manufacturers, third party logistics 1 Table of Contents providers, retailers, healthcare, and life sciences organizations, rely on BigBear.ai’s solutions to empower leaders to decide on the best possible course of action by creating order from complex data, identifying blind spots, and building predictive outcomes.
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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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We are a technology-led solutions organization, providing both software and services to our customers. Solutions and Services BigBear.ai is a leader in the use of Artificial Intelligence (AI) and Machine Learning (ML) for decision support. We provide our customers with a competitive advantage in a world driven by data that is growing exponentially in terms of volume, variety, and velocity.
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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.
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With all of our solutions, as needed by each customer, we offer specialized consulting services to design, customize, deploy, operate, and support our solutions for federal and commercial customers.
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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.
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Supply Chains & Logistics Solutions Our supply chain & logistics solutions include our Observe Data-as-a-Service (“ DaaS ”) solution, our ProModel discrete event simulator and our Dominate forecasting tool. Observe DaaS—Data Conflation at Scale .
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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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Observe is a near-real time data collection and curation tool designed to collect and process enormous volumes of data from multiple domains, including BigBear.ai data collections, customer proprietary data, and third-party data, to create more holistic insights .
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Our solution portfolios include: National Security BigBear.ai brings over 30 years of experience delivering capabilities into operational environments for critical missions.
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Observe captures and distills data to identify relevant information , forming a more coherent and continuously updated view of the situations that matter to our customers anywhere across the globe. Our collections cover many subjects, including facilities, locations, news, events, social media, public communications, internet services and more.
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We have long supported the national security mission through the DoD, Department of Homeland Security (DHS), and the Intelligence Community (IC). • Operational Readiness: Our approach to operational readiness streamlines the existing complex processes of organizing and forecasting manpower, equipment, and supply chain data.
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For situations that require a more customized solution, Observe collections can be used to enrich the customer’s proprietary data and analytics via modern, robust application programming interfaces (APIs). Our Observe DaaS solution is live in production, with over 25 sources, across more than 100 countries, and 140 million records processed daily.
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BigBear.ai combines subject matter expertise with technology to connect the enterprise, provide insights on process performance and recommendations for managing risk.
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ProModel Discrete Event Simulator—Course of Action Analysis & Digital Twin . ProModel is a robust discrete-event simulation technology that captures the behavior of complex interdependent processes and enables rapid course-of-action analysis through a “what if” user interface that allows customers to alter various parameters without changing the model directly.
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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.
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The ProModel 2 Table of Contents digital twin modeling platform is used to plan, design and improve new or existing manufacturing, logistics, business processes and other operational systems, and has been implemented in multiple vertical use cases including shipyard planning (Shipyard AI), patient flow optimization in hospitals (Future Flow) and complex portfolio management (Enterprise Portfolio Simulator).
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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.
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Because our Discrete Event Simulator is built and deployed as foundational technology, it can be tailored to many use cases for customers based on specific needs and embedded in existing platforms for an optimal user experience. Dominate—Macroeconomic & Geopolitical Forecasting .
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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.
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Dominate is a decision support engine that provides customers goal-oriented advice to help them determine the right decision or course of action to best achieve their desired results.
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Our 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.
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Using technology derived from our battlefield expertise, Dominate forecasts future outcomes based on different decision options, assigns a likelihood to each of those outcomes, and allows users to understand potential impacts for each of these decision options.
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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.
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Dominate is based on a resilient analytical architecture specifically designed to make sense of data sets that are periodically dirty, erroneous, or full of gaps. Customers can easily manipulate constraints or modify outcome goals through an interactive interface to quickly reveal the impacts of different decisions.
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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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Even in complex environments, Dominate helps customers reveal unexpected insights and develop innovative courses of action. Cybersecurity Solutions “BEARCLAW”—AI-Powered, Machine Accelerated Binary Analysis and SpaceCREST—Vulnerability Assessment & Monitoring, Digital Twin .
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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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Our cybersecurity offerings include our Binary Extraction Analysis Repository / Customizable Logic Automated Workflow (“ BEARCLAW ”) engine and the Space Cyber Resiliency through Evaluation and Security Testing (“ SpaceCREST ”) laboratory environment.
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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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Our BEARCLAW engine is a modular framework that incorporates AI/ML to assess vulnerabilities using automation and our data collections to conduct analysis on binaries and better, more quickly inform analysts to help them rapidly identify and/or respond to threats.
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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.
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SpaceCREST is a laboratory environment designed to study and evaluate vulnerabilities of space assets in a cyber-physical system, develop cyber resiliency, and provide situational awareness and monitoring of those assets. The SpaceCREST initiative leverages Redwire Corporation’s digital engineering ecosystem, including its Hyperion Operational Space Simulation (“ HOSS ”) Lab and Advanced Configurable Open-system Research Network (“ ACORN ”) capabilities.
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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.
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Using HOSS and the ACORN platform, BigBear.ai develops tools and technologies to perform vulnerability research on space infrastructure hardware components, identify potential vulnerabilities that could compromise space systems, and provide tools and techniques that demonstrate how to mitigate and protect against the potential vulnerabilities identified. SpaceCREST’s digital twin helps operators rapidly identify when an attack or system failure is occurring.
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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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SpaceCREST also performs catastrophic testing without physically destroying the space asset or interrupting operations and our team of specialists then develops cyber security to mitigate the risk of cyber-attacks for our customers.
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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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Our specialists also provide ongoing offensive and defensive cybersecurity analysis services to certain key customers and our mission operators often partner with government teams to contribute to missions for the intelligence community and the Department of Defense (the “ DoD ”).
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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.
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Autonomous Systems Solutions We are well positioned to address the need for scaled cyber-physical systems for complex customers in the federal government, and in the future, the private sector. Our autonomous systems solutions currently in use by the DoD provide geospatial tracking, anomaly detection, computer vision capabilities, and AI at the edge.
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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.
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By conflating millions of data points using AI/ML, our autonomous systems benefit from increased situational awareness, enable predictive forecasts, and can alert both analysts and decision-makers of potential threats.
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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.
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Analysts can combine data sets, including traditional and nontraditional sources, including social media, traditional news media and event data (e.g., GDELT), SIGINT (e.g., X-band, Lband, AIS), SAR, weather and enterprise data sources, to improve situational awareness.
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Currently, our algorithms run against a myriad of sensors in a maritime environment to support forces who may be operating in disadvantaged or disconnected environments. We believe that this can be leveraged in ground, space, and air combat force contexts in the future.
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In 2022, we increased hiring and headcount in our innovations lab as well as investment in various research projects aimed at continuing to develop and refine our solutions, including enhancing features and functionality, adding new modules, and improving the application of the latest AI/ML technologies in the solutions we deliver to our customers. 3 Table of Contents One area of our research and development efforts has focused on contributing to the Joint All-Domain Command and Control (“ JADC2 ”)—the DoD’s strategy to connect sensors globally from all branches of the armed forces into a unified network, powered by AI.
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JADC2 is one of the Pentagon’s top priorities, and we are aiming to play a major role in the realization of this concept by delivering the operating system for its delivery. Customers BigBear.ai’s customers include U.S. defense and intelligence agencies, manufacturing, distribution and logistics, healthcare and life sciences.
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To date, BigBear.ai has predominantly served federal, military, and intelligence agencies of the U.S. government. We are proud of the trusted, multi-decade relationships we have with several U.S. defense and intelligence agencies, including the Joint Staff, U.S. Army, U.S. Air Force, and Department of Homeland Security (“ DHS ”).
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These customers entrust us with their most critical data and operations and represent most of our historical growth. Our capabilities are also used extensively by the private sector, with hundreds of complex manufacturing, retail, and logistics clients.
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Our process simulation and modeling solutions help companies manage massive and complex physical and information environments and gain clarity on facility, equipment and personnel systems, forecasting requirements, and simulating real-world situations. We are continuing to grow our customer base in our three markets: supply chains & logistics, cybersecurity, and autonomous systems.
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Thus, every new engagement expands our capability baseline and opens the door to a pipeline of new opportunities within that market and within adjacent markets. Revenue Mix We derive a significant portion of our revenue from contracts with the federal government and government agencies.
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Specifically, we believe we are well positioned because of our team’s ability to deploy innovative solutions quickly, offering our customer’s competitive pricing and robust support while leveraging our track record of success in complex environments. Market Opportunity BigBear.ai serves multiple large, diverse and rapidly growing addressable markets, delivering AI/ML-powered solutions in supply chains & logistics, cybersecurity, and autonomous systems.
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Given the continued uncertainty in the global economy associated with macroeconomic and geopolitical conditions, we believe in a diversified growth strategy and are actively pursuing multiple plays in each area. Company Footprint and Management As of December 31, 2022, we had 649 employees, the vast majority of which hold an active security clearance.
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We also face competition from government contractors and system integrators who are building custom solutions to enter this market. In many cases, we are competing with the internal software development efforts of our potential customers.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAs further described, in Part II Item 9A “Controls and Procedures” management has concluded that, because of material weaknesses in internal controls as a result of inadequate segregation of duties, revenue recognition, and ineffective IT General Controls, our disclosure controls and procedures were not effective as of December 31, 2022.
Biggest changeAs further described, in Part II Item 9A “Controls and Procedures”, we previously identified and disclosed in our Annual Report, on Form 10-K for the year ended December 31, 2022, as well as in our Quarterly Report on Form 10-Q filed for the quarters ended March 31, 2023, June 30, 2023, and September 30, 2023, material weaknesses in internal controls over financial reporting related to the combination of inadequate segregation of duties, the timeliness of contract award and modification evaluation for proper revenue recognition, and ineffective IT General Controls.
Commencing on the first fiscal quarter after the Senior Revolver becomes available pursuant to the preceding sentence, 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 Senior Revolver becomes available pursuant to the preceding sentence, 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).
The additional reporting and other obligations imposed by these rules and regulations will increase legal and financial compliance costs and the costs of related legal, accounting and administrative activities. These increased costs will require us to divert a significant amount of money that could otherwise be used to expand the business and achieve strategic objectives.
The additional reporting and other obligations imposed by these rules and regulations will increase legal and financial compliance costs and the costs of related legal, accounting and administrative activities. These increased costs could require us to divert a significant amount of money that could otherwise be used to expand the business and achieve strategic objectives.
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; • we may not realize the expected benefits of the acquisition; 25 Table of Contents • 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 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.
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; 41 Table of Contents • 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.
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.
If we identify material weaknesses in the internal control over financial reporting of BigBear.ai or are unable to comply with the requirements of Section 404 or assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal controls over financial reporting when we no longer qualify as an emerging growth company, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our Common Stock could be negatively affected, and we could become subject to investigations by the SEC or other regulatory authorities, which could require additional financial and management resources.
If we identify material weaknesses in the internal control over financial reporting of BigBear.ai in the future or are unable to comply with the requirements of Section 404 or assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal controls over financial reporting when we no longer qualify as an emerging growth company, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our Common Stock could be negatively affected, and we could become subject to investigations by the SEC or other regulatory authorities, which could require additional financial and management resources.
BigBear.ai or its subsidiaries may have previously undergone an “ownership change.” In addition, the Business Combination, or future issuances or sales of our common stock, including certain transactions involving our common stock that are outside of its control, could result in future “ownership changes.” “Ownership changes” that have occurred in the past or that may occur in the future, including in connection with the Business Combination, could result in the imposition of an annual limit on the amount of pre-ownership change NOLs and other tax attributes BigBear.ai and its subsidiaries can use to reduce their respective taxable incomes, potentially increasing and accelerating their liability for income taxes, and also potentially causing those tax attributes to expire unused.
BigBear.ai or its subsidiaries may have previously undergone an “ownership change.” In addition, the Gig Business Combination, or future issuances or sales of our common stock, including certain transactions involving our common stock that are outside of its control, could result in future “ownership changes.” “Ownership changes” that have occurred in the past or that may occur in the future, including in connection with the Gig Business Combination, could result in the imposition of an annual limit on the amount of pre-ownership change NOLs and other tax attributes BigBear.ai and its subsidiaries can use to reduce their respective taxable incomes, potentially increasing and accelerating their liability for income taxes, and also potentially causing those tax attributes to expire unused.
The standards required for a public company under Section 404(a) of the Sarbanes-Oxley Act are significantly more stringent than those required of us as a privately-held company. Management may not be able to effectively and timely implement controls and procedures that adequately respond to the increased regulatory compliance and reporting requirements that are applicable after the Business Combination.
The standards required for a public company under Section 404(a) of the Sarbanes-Oxley Act are significantly more stringent than those required of us as a privately-held company. Management may not be able to effectively and timely implement controls and procedures that adequately respond to the increased regulatory compliance and reporting requirements that are applicable after the Gig Business Combination.
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 34 Table of Contents 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, 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.
Our ability to renew or expand our customer relationships may decrease or vary due to a number of factors, including our customers’ satisfaction or dissatisfaction with our software and services, the frequency and severity of software and implementation errors, our software’s reliability, our pricing, the effects of general economic conditions and budgets, competitive offerings or alternatives, or reductions in our customers’ spending levels.
Our ability to renew or expand our customer relationships may decrease or vary due to a number of factors, including our customers’ satisfaction or dissatisfaction with our solutions and services, the frequency and severity of software and implementation errors, our software’s reliability, our pricing, the effects of general economic conditions and budgets, competitive offerings or alternatives, or reductions in our customers’ spending levels.
See Exhibit 4.5 “Description of the Registrant’s Securities Registered pursuant to Section 12 of the Securities Exchange Act of 1934.” We may be able to incur substantial indebtedness. This could exacerbate the risks to our financial condition described above and prevent us from fulfilling our obligations under the 2026 Convertible Notes.
See Exhibit 4.4 “Description of the Registrant’s Securities Registered pursuant to Section 12 of the Securities Exchange Act of 1934.” We may be able to incur substantial indebtedness. This could exacerbate the risks to our financial condition described above and prevent us from fulfilling our obligations under the 2026 Convertible Notes.
Any failure of our systems to meet these customer benchmarks could result in potential customers choosing to retain their existing systems or to purchase systems other than ours. If the Business Combination’s benefits do not meet the expectations of investors, stockholders or financial analysts, the market price of our securities may decline.
Any failure of our systems to meet these customer benchmarks could result in potential customers choosing to retain their existing systems or to purchase systems other than ours. If the Gig Business Combination’s benefits do not meet the expectations of investors, stockholders or financial analysts, the market price of our securities may decline.
We derive a significant portion of our revenue from existing customers that expand their relationships with us. Increasing the size and number of the deployments of our existing customers is a major part of our growth strategy. We may not be effective in executing this or any other aspect of our growth strategy.
We derive a significant portion of our revenue from existing customers that expand their relationships with us. Increasing the size and number of the deployments to our existing customers is a major part of our growth strategy. We may not be effective in executing this or any other aspect of our growth strategy.
The Credit Agreement and the Indenture contain a number of restrictive covenants that impose significant operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best interest, including, among other things, restrictions on our ability to: 45 Table of Contents • incur or guarantee additional indebtedness or issue disqualified stock or preferred stock; • pay dividends and make other distributions on, or redeem or repurchase, capital stock; • make certain investments; • incur certain liens; • enter into transactions with affiliates; • merge or consolidate; • enter into agreements that restrict the ability of restricted subsidiaries to make dividends or other payments to us or the guarantors; • designate restricted subsidiaries as unrestricted subsidiaries; and • transfer or sell assets.
The Credit Agreement and the Indenture contain a number of restrictive covenants that impose significant operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best interest, including, among other things, restrictions on our ability to: • incur or guarantee additional indebtedness or issue disqualified stock or preferred stock; • pay dividends and make other distributions on, or redeem or repurchase, capital stock; • make certain investments; • incur certain liens; • enter into transactions with affiliates; 47 Table of Contents • merge or consolidate; • enter into agreements that restrict the ability of restricted subsidiaries to make dividends or other payments to us or the guarantors; • designate restricted subsidiaries as unrestricted subsidiaries; and • transfer or sell assets.
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 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 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.
In addition, fluctuations in the price of our securities could contribute to the loss of all or part of your investment. Prior to the Business Combination, there was not a public market for BigBear.ai’s stock and trading in the shares of our Common Stock has not been active.
In addition, fluctuations in the price of our securities could contribute to the loss of all or part of your investment. Prior to the Gig Business Combination, there was not a public market for BigBear.ai’s stock and trading in the shares of our Common Stock has not been active.
Our new and existing software and changes to our existing software could fail to attain sufficient market acceptance for many reasons, including: • our failure to predict market demand accurately in terms of product functionality and to supply offerings that meet this demand in a timely fashion; • product defects, errors, or failures or our inability to satisfy customer service level requirements; • negative publicity or negative private statements about the security, performance, or effectiveness of our software or product enhancements; • delays in releasing to the market our new offerings or enhancements to our existing offerings, including new product modules; • introduction or anticipated introduction of competing software or functionalities by our competitors; • inability of our software or product enhancements to scale and perform to meet customer demands; • receiving qualified or adverse opinions in connection with security or penetration testing, certifications or audits, such as those related to IT controls and security standards and frameworks or compliance; • poor business conditions for our customers, causing them to delay software purchases; • reluctance of customers to purchase proprietary software products; 13 Table of Contents • reluctance of our customers to purchase products hosted by our vendors and/or service interruption from such providers; and • reluctance of customers to purchase products incorporating open source software.
Our new and existing software and changes to our existing software could fail to attain sufficient market acceptance for many reasons, including: • our failure to predict market demand accurately in terms of product functionality and to supply offerings that meet this demand in a timely fashion; • product defects, errors, or failures or our inability to satisfy customer service level requirements; • negative publicity or negative private statements about the security, performance, or effectiveness of our software or product enhancements; • delays in releasing to the market our new offerings or enhancements to our existing offerings, including new product modules; • introduction or anticipated introduction of competing software or functionalities by our competitors; • inability of our software or product enhancements to scale and perform to meet customer demands; • receiving qualified or adverse opinions in connection with security or penetration testing, certifications or audits, such as those related to IT controls and security standards and frameworks or compliance; • poor business conditions for our customers, causing them to delay software purchases; • reluctance of customers to purchase proprietary software products; • reluctance of our customers to purchase products hosted by our vendors and/or service interruption from such providers; and • reluctance of customers to purchase products incorporating open source software.
We operate in a highly competitive, quickly changing environment, and the combined company’s future success depends on its ability to develop or acquire, and introduce new products and services that achieve broad market acceptance. Our ability to successfully introduce and market new products is unproven.
We operate in a highly competitive, quickly changing environment, and the Company’s future success depends on its ability to develop or acquire, and introduce new products and services that achieve broad market acceptance. Our ability to successfully introduce and market new products is unproven.
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 28 Table of Contents 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 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.
If an active market for our securities develops and continues, the trading price of our securities following the Business Combination could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond our control.
If an active market for our securities develops and continues, the trading price of our securities following the Gig Business Combination could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond our control.
Our indebtedness could have important consequences to the holders of the 2026 Convertible Notes, including: • increasing our vulnerability to general adverse economic and industry conditions; • requiring us to dedicate a portion of our cash flow from operations to principal and interest payments on our indebtedness, thereby reducing the availability of cash flow to fund working capital, capital expenditures, acquisitions and investments and other general corporate purposes; • making it more difficult for us to optimally capitalize and manage the cash flow for our businesses; • limiting our flexibility in planning for, or reacting to, changes in our businesses and the markets in which we operate; • possibly placing us at a competitive disadvantage compared to our competitors that have less debt; • limiting our ability to borrow additional funds or to borrow funds at rates or on other terms that we find acceptable; and • exposing us to the risk of increased interest rates because certain of our borrowings, including our Credit Agreement, are subject to variable rates of interest.
Our indebtedness could have important consequences to the holders of the 2026 Convertible Notes, including: • increasing our vulnerability to general adverse economic and industry conditions; 45 Table of Contents • requiring us to dedicate a portion of our cash flow from operations to principal and interest payments on our indebtedness, thereby reducing the availability of cash flow to fund working capital, capital expenditures, acquisitions and investments and other general corporate purposes; • making it more difficult for us to optimally capitalize and manage the cash flow for our businesses; • limiting our flexibility in planning for, or reacting to, changes in our businesses and the markets in which we operate; • possibly placing us at a competitive disadvantage compared to our competitors that have less debt; • limiting our ability to borrow additional funds or to borrow funds at rates or on other terms that we find acceptable; and • exposing us to the risk of increased interest rates because certain of our borrowings, including our Credit Agreement, are subject to variable rates of interest.
Our Credit Agreement, our Indenture governing our 2026 Convertible Notes and related documents contain, and instruments governing any future indebtedness of ours would likely contain, a number of covenants that will impose significant operating and financial restrictions on us, including restrictions on our ability to, among other things: • create liens on certain assets; • incur additional debt or issue new equity; • consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; and 24 Table of Contents • sell certain assets.
Our Credit Agreement, our Indenture governing our 2026 Convertible Notes and related documents contain, and instruments governing any future indebtedness of ours would likely contain, a number of covenants that will impose significant operating and financial restrictions on us, including restrictions on our ability to, among other things: • create liens on certain assets; 26 Table of Contents • incur additional debt or issue new equity; • consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; and • sell certain assets.
Furthermore, there are no contractual penalties for failure to deliver securities to the holders of the warrants upon consummation of an initial business combination, including the Business Combination, or exercise of the warrants. Accordingly, the warrants may expire worthless.
Furthermore, there are no contractual penalties for failure to deliver securities to the holders of the warrants upon consummation of an initial business combination, including the Gig Business Combination, or exercise of the warrants. Accordingly, the warrants may expire worthless.
The additional shares of Common Stock issued upon exercise of our warrants will result in dilution to the then existing holders of our Common Stock and increase the number of shares eligible for resale in the public market.
The additional shares of Common Stock issued upon exercise of our public and private warrants will result in dilution to the then existing holders of our Common Stock and increase the number of shares eligible for resale in the public market.
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 proposal or to take action, including the removal of directors.
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.
If adequate funds are not available on acceptable terms, or at all, we may be unable to, among other things: • develop new products, features, capabilities, and enhancements; 23 Table of Contents • 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 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.
Accordingly, the valuation ascribed to BigBear.ai and our Common Stock in the Business Combination may not be indicative of the price that prevailed in the trading market following the Business Combination.
Accordingly, the valuation ascribed to BigBear.ai and our Common Stock in the Gig Business Combination may not be indicative of the price that prevailed in the trading market following the Gig Business Combination.
There is no assurance that our enhancements to our software or our new product features, capabilities, or offerings, including new product modules, will be compelling to our customers or gain market acceptance.
There is no assurance that our enhancements to our software or our new product features, capabilities, or offerings, including new products or modules, will be compelling to our customers or gain market acceptance.
For example, during the second and fourth quarters of 2022, we recognized a non-cash goodwill impairment charge related to our Cyber & Engineering and Analytics business segments, respectively. We will incur significant increased expenses and administrative burdens as a public company, which could have an adverse effect on our business, financial condition and results of operations.
For example, during the second and fourth quarters of 2022, we recognized a non-cash goodwill impairment charge related to our previously reported Cyber & Engineering and Analytics business segments, respectively. We will incur significant increased expenses and administrative burdens as a public company, which could have an adverse effect on our business, financial condition and results of operations.
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.
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.
We rely on the technology, infrastructure, and software applications, including software-as-a-service offerings, of certain third parties, such as AWS, in order to host or operate some or all of certain key platform features or functions of our business, including our cloud-based services, customer relationship management activities, billing and order management, and financial accounting services.
We rely on the technology, infrastructure, and software applications, including software-as-a-service offerings, of certain third parties, such as AWS, GCP & Azure, in order to host or operate some or all of certain key platform features or functions of our business, including our cloud-based services, customer relationship management activities, billing and order management, and financial accounting services.
We have not yet undertaken an analysis of whether the Business Combination constitutes an “ownership change” for purposes of Section 382 and Section 383 of the Code.
We have not yet undertaken an analysis of whether the Gig Business Combination constitutes an “ownership change” for purposes of Section 382 and Section 383 of the Code.
If we do not file and maintain a current and effective prospectus relating to the Common Stock issuable upon exercise of the warrants, holders will only be able to exercise such warrants on a “cashless basis.” If we do not file and maintain a current and effective prospectus relating to the Common Stock issuable upon exercise of the warrants at the time that holders wish to exercise such warrants, they will only be able to exercise them on a “cashless basis” provided that an exemption from registration is available.
If we do not file and maintain a current and effective registration statement relating to the Common Stock issuable upon exercise of the warrants, holders will only be able to exercise such warrants on a “cashless basis.” If we do not file and maintain a current and effective registration statement relating to the Common Stock issuable upon exercise of the warrants at the time that holders wish to exercise such warrants, they will only be able to exercise them on a “cashless basis” provided that an exemption from registration is available.
Consistent 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; • 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, platform partnerships, strategic 7 Table of Contents 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 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 our current material weaknesses and any potential future material weaknesses; and • other factors detailed below.
Consistent 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.
In addition, many of our employees may receive significant proceeds from sales of our equity in the public markets at some point after the Closing, which may reduce their motivation to continue to work for us. Any of these factors could harm our business, financial condition, and results of operations.
In addition, many of our employees may receive significant proceeds from sales of our equity in the public markets at some point after the closing of the Gig Business Combination, which may reduce their motivation to continue to work for us. Any of these factors could harm our business, financial condition, and results of operations.
Under these rules, a company of which more than 50% of the voting power for the election of directors is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including the requirements: • that a majority of the board consists of independent directors; • for an annual performance evaluation of the nominating and corporate governance and compensation committees; • that the controlled company has a nominating and corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and • that the controlled company has a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibility.
Under these rules, a company of which more than 50% of the voting power for the election of directors is held by an 62 Table of Contents individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including the requirements: • that a majority of the board consists of independent directors; • for an annual performance evaluation of the nominating and corporate governance and compensation committees; • that the controlled company has a nominating and corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and • that the controlled company has a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibility.
Although each guarantee entered into in connection with the 2026 Convertible Notes will contain a provision intended to limit 48 Table of Contents 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 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.
Current U.S. government spending levels for defense-related and other programs may not be sustained beyond government fiscal year 2023. 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 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.
Therefore, we are required to account for these Private Placement Warrants as a warrant liability and record (a) that liability at fair value, which was determined as the same as the fair value of the warrants included in the units sold in the IPO, and (b) any subsequent changes in fair value as of the end of each period for which earnings are reported.
Therefore, we are required to account for these IPO Warrants as a warrant liability and record (a) that liability at fair value, which was determined as the same as the fair value of the warrants included in the units sold in the IPO, and (b) any subsequent changes in fair value as of the end of each period for which earnings are reported.
Corruption issues pose a risk in every country and jurisdiction, but in many countries, particularly in countries with developing economies, it may be more common for businesses to engage in practices that are prohibited by the FCPA or other applicable 35 Table of Contents laws and regulations, and our activities in these countries pose a heightened risk of unauthorized payments or offers of payments by one of our employees or third-party business partners, representatives, and agents that could be in violation of various laws including the FCPA.
Corruption issues pose a risk in every country and jurisdiction, but in many countries, particularly in countries with developing economies, it may be more common for businesses to engage in practices that are prohibited by the FCPA or other applicable laws and regulations, and our activities in these countries pose a heightened risk of unauthorized payments or offers of payments by one of our employees or third-party business partners, representatives, and agents that could be in violation of various laws including the FCPA.
In addition, some of our larger competitors have substantially broader and more diverse product and service offerings and may be 18 Table of Contents able to leverage their relationships with distribution partners and customers based on other products or incorporate functionality into existing products to gain business in a manner that discourages customers from purchasing our software, including by selling at zero or negative margins, product bundling, or offering closed technology software.
In addition, some of our larger competitors have substantially broader and more diverse product and service offerings and may be able to leverage their relationships with distribution partners and customers based on other products or incorporate functionality into existing products to gain business in a manner that discourages customers from purchasing our software, including by selling at zero or negative margins, product bundling, or offering closed technology software.
Finally, as a court of equity, the bankruptcy court may subordinate the claims in respect of the 2026 Convertible Notes to other 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 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.
Factors affecting the trading price of our securities may include: • actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us; • changes in the market’s expectations about our operating results; • success of competitors; • our operating results failing to meet the expectation of securities analysts or investors in a particular period; • changes in financial estimates and recommendations by securities analysts concerning us or the market in general; • operating and stock price performance of other companies that investors; deem comparable to us; • our ability to market new and enhanced services and products on a timely basis; • changes in laws and regulations affecting our business; • commencement of, or involvement in, litigation involving us; • changes in our capital structure, such as future issuances of securities or the incurrence of additional debt; • the volume of shares of our securities available for public sale; • any major change in the board or management; • sales of substantial amounts of Common Stock by our directors, executive officers or significant stockholders or the perception that such sales could occur; and • general economic and political conditions such as recessions, interest rates, fuel prices, international currency fluctuations and acts of war or terrorism.
Factors affecting the trading price of our securities may include: • actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us; • changes in the market’s expectations about our operating results; • success of competitors; • our operating results failing to meet the expectation of securities analysts or investors in a particular period; • changes in financial estimates and recommendations by securities analysts concerning us or the market in general; • operating and stock price performance of other companies that investors; deem comparable to us; • our ability to market new and enhanced services and products on a timely basis; • changes in laws and regulations affecting our business; • commencement of, or involvement in, litigation involving us; • changes in our capital structure, such as future issuances of securities or the incurrence of additional debt; • the volume of shares of our securities available for public sale; • any major change in the board or management; • sales of substantial amounts of Common Stock by our directors, executive officers or significant stockholders or the perception that such sales could occur; and • general economic and political conditions such as recessions, interest rates, fuel prices, international currency fluctuations and acts of war or terrorism, including the ongoing conflicts in Ukraine, Israel, and Gaza.
Many factors may contribute to declines in our revenue growth rate, including increased competition, slowing demand for our products and services from existing and new customers, a failure by us to continue capitalizing on growth opportunities including expansion into the commercial marketplace, strategic acquisitions, terminations of existing contracts or failure to exercise existing options by our customers, our failure to execute on the existing backlog of customer contracts, the maturation of our business, and a contraction of our overall market, among others.
Many factors may contribute to declines in our revenue growth rate, including increased competition, slowing demand for our products and services from existing and new customers, a failure by us to continue capitalizing on growth opportunities including expansion into the commercial marketplace, strategic acquisitions, the wind down of significant contracts, terminations of existing contracts or failure to exercise existing options by our customers, our failure to execute on the existing backlog of customer contracts, the maturation of our business, and a contraction of our overall market, among others.
Because our software is used by our customers to store, transmit, index, or otherwise process and analyze 26 Table of Contents large data sets that often contain proprietary, confidential, and/or sensitive information (including in some instances personal or identifying information and personal health information), our software is perceived as an attractive target for attacks by computer hackers or others seeking unauthorized access, and our software faces threats of unintended exposure, exfiltration, alteration, deletion, or loss of data.
Because our software is used by our customers to store, transmit, index, or otherwise process and analyze large data sets that often contain proprietary, confidential, and/or sensitive information (including in some instances personal or identifying information and personal health information), our software is perceived as an attractive target for attacks by computer hackers or others seeking unauthorized access, and our software faces threats of unintended exposure, exfiltration, alteration, deletion, or loss of data.
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 (“ 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 (“ 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.
Further, if an exemption from registration is not available, holders would not be able to exercise on a cashless basis and would only be able to exercise their warrants for cash if a current and effective prospectus relating to the Common Stock issuable upon exercise of the warrants is available.
Further, if an exemption from registration is not available, holders would not be able to exercise on a cashless basis and would only be able to exercise their warrants for cash if a current and effective registration statement relating to the Common Stock issuable upon exercise of the warrants is available.
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 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 of December 31, 2022, 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, 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.
Sales of substantial numbers of 54 Table of Contents such shares in the public market could adversely affect the market price of our Common Stock. We have no obligation to net cash settle the warrants. In no event will we have any obligation to net cash settle the warrants.
Sales of 57 Table of Contents substantial numbers of such shares in the public market could adversely affect the market price of our Common Stock. We have no obligation to net cash settle the warrants. In no event will we have any obligation to net cash settle the warrants.
Our systems and the third-party systems upon which we and our customers rely are also vulnerable to damage or interruption from catastrophic occurrences such as earthquakes, floods, fires, power loss, telecommunication failures, cybersecurity threats, terrorist attacks, natural disasters, public health crises such as the COVID-19 pandemic, geopolitical and similar events, or acts of misconduct.
Our systems and the third-party systems upon which we and our customers rely are also vulnerable to damage or interruption from catastrophic occurrences such as earthquakes, floods, fires, power loss, telecommunication failures, cybersecurity threats, terrorist attacks, natural disasters, public health crises, geopolitical and similar events, or acts of misconduct.
We note that there is uncertainty as to whether a court would enforce the choice of forum provision with respect to claims under the Securities Act, and that investors cannot waive compliance with the Securities Act and the rules and regulations thereunder. 60 Table of Contents The future exercise of registration rights may adversely affect the market price of our Common Stock.
We note that there is uncertainty as to whether a court would enforce the choice of forum provision with respect to claims under the Securities Act, and that investors cannot waive compliance with the Securities Act and the rules and regulations thereunder. The future exercise of registration rights may adversely affect the market price of our Common Stock.
U.S. government contracts can expose us to potentially large losses because the U.S. government 8 Table of Contents can hold us responsible for completing a project or, in certain circumstances, require us to pay the entire cost of its replacement by another provider regardless of the size or foreseeability of any cost overruns that occur over the life of the contract.
U.S. government contracts can expose us to potentially large losses because the U.S. government can hold us responsible for completing a project or, in certain circumstances, require us to pay the entire cost of its replacement by another provider regardless of the size or foreseeability of any cost overruns that occur over the life of the contract.
The appearance of conflicts, even if such conflicts do not materialize, might adversely affect the public’s perception of us, as well as our relationship with other companies and our ability to enter into new relationships in the future, including with competitors of such related parties, which could harm our business and results of operations.
The 23 Table of Contents appearance of conflicts, even if such conflicts do not materialize, might adversely affect the public’s perception of us, as well as our relationship with other companies and our ability to enter into new relationships in the future, including with competitors of such related parties, which could harm our business and results of operations.
The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could harm our financial condition. 27 Table of Contents Issues in the use of AI and ML in our software may result in reputational harm or liability.
The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could harm our financial condition. Issues in the use of AI and ML in our software may result in reputational harm or liability.
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.
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.
We also note that if we or our business partners or counterparties, including licensors and licensees, prime contractors, 36 Table of Contents subcontractors, sublicensors, vendors, customers, contractors, or agents fail to obtain appropriate import, export, or re-export licenses or permits, notwithstanding regulatory requirements or contractual commitments to do so, or if we fail to secure such contractual commitments where necessary, we may also be adversely affected, through reputational harm as well as other negative consequences, including government investigations and penalties.
We also note that if we or our business partners or counterparties, including licensors and licensees, prime contractors, subcontractors, sublicensors, vendors, customers, contractors, or agents fail to obtain appropriate import, export, or re-export licenses or permits, notwithstanding regulatory requirements or contractual commitments to do so, or if we fail to secure such contractual commitments where necessary, we may also be adversely affected, through reputational harm as well as other negative consequences, including government investigations and penalties.
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, 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 39 Table of Contents 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, incidents of terrorism, natural disasters, and public health concerns or epidemics, such as the COVID-19 outbreak; 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 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.
These claims could also subject us to significant liability for damages if we are found to have infringed patents, copyrights, trademarks, or other intellectual property rights, or breached trademark co-existence agreements or other intellectual property licenses and could 29 Table of Contents require us to cease using or to rebrand all or portions of our software.
These claims could also subject us to significant liability for damages if we are found to have infringed patents, copyrights, trademarks, or other intellectual property rights, or breached trademark co-existence agreements or other intellectual property licenses and could require us to cease using or to rebrand all or portions of our software.
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 49 Table of Contents 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 Reset Date described therein (the “Conversion Rate Adjustment”).
For example, during the second and fourth quarters of 2022, we recognized a non-cash goodwill impairment charge related to our Cyber & Engineering and Analytics business segments, respectively.
For example, during the second and fourth quarters of 2022, we recognized a non-cash goodwill impairment charge related to our previously reported Cyber & Engineering and Analytics business segments, respectively.
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. 46 Table of Contents 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 Credit Agreement and the Indenture contain cross-default provisions that could result in the acceleration of all of our indebtedness.
We are highly dependent on the continued contributions of our management team, including their customer relationships, expertise in science and technology, business development experience, and innovative management in both public 14 Table of Contents and private sectors. These contributions are integral to our growth and would be difficult to replace.
We are highly dependent on the continued contributions of our management team, including their customer relationships, expertise in science and technology, business development experience, and innovative management in both public and private sectors. These contributions are integral to our growth and would be difficult to replace.
Bid protests could result, among other things, in significant expenses to us, contract modifications, or even loss of the contract award. Even where a bid protest does not result in the loss of a contract award, the resolution can extend the time until contract activity can begin and, as a result, delay the 42 Table of Contents recognition of revenue.
Bid protests could result, among other things, in significant expenses to us, contract modifications, or even loss of the contract award. Even where a bid protest does not result in the loss of a contract award, the resolution can extend the time until contract activity can begin and, as a result, delay the recognition of revenue.
Any notice mailed in the manner provided in the Warrant Agreement shall be conclusively presumed to have been duly given whether or not 57 Table of Contents the registered holder received such notice. In addition, beneficial owners of the warrants will be notified of such redemption via the Company’s posting of the redemption notice to DTC.
Any notice mailed in the manner provided in the Warrant Agreement shall be conclusively presumed to have been duly given whether or not the registered holder received such notice. In addition, beneficial owners of the warrants will be notified of such redemption via the Company’s posting of the redemption notice to DTC.
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the exemption 58 Table of Contents from complying with new or revised accounting standards provided in Section 7(a)(2)(B) of the Securities Act as long as we are an emerging growth company.
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the exemption from complying with new or revised accounting standards provided in Section 7(a)(2)(B) of the Securities Act as long as we are an emerging growth company.
Compliance with, and monitoring of, applicable laws, regulations and rules may be difficult, time consuming and costly. Those laws, regulations and 59 Table of Contents rules and their interpretation and application may also change from time to time and those changes could have a material adverse effect on the Company’s business, investments and results of operations.
Compliance with, and monitoring of, applicable laws, regulations and rules may be difficult, time consuming and costly. Those laws, regulations and rules and their interpretation and application may also change from time to time and those changes could have a material adverse effect on the Company’s business, investments and results of operations.
Large enterprises and government entities often undertake a significant evaluation process that results in a lengthy sales cycle, in some cases over 12 months, requiring approvals of multiple management personnel and more technical personnel than would be 21 Table of Contents typical of a smaller organization.
Large enterprises and government entities often undertake a significant evaluation process that results in a lengthy sales cycle, in some cases over 12 months, requiring approvals of multiple management personnel and more technical personnel than would be typical of a smaller organization.
Our results of operations may vary based on the impact of changes in our industry or the global economy on us or our customers. The revenue growth and potential profitability of our business depend on demand for our platform. Current or future economic uncertainties or downturns could adversely affect our business and results of operations.
Our results of operations may vary based on the impact of changes in our industry or the global economy on us or our customers. 24 Table of Contents The revenue growth and potential profitability of our business depend on demand for our platform. Current or future economic uncertainties or downturns could adversely affect our business and results of operations.
Negative conditions in the global economy or individual markets, including changes in gross domestic product growth, financial and credit market fluctuations, 22 Table of Contents political turmoil, natural catastrophes, warfare and terrorist attacks on the United States, Europe, Australia, the Asia Pacific region or elsewhere, could cause a decrease in business investments, including spending on IT and negatively affect our business.
Negative conditions in the global economy or individual markets, including changes in gross domestic product growth, financial and credit market fluctuations, political turmoil, natural catastrophes, warfare and terrorist attacks on the United States, Europe, Australia, the Asia Pacific region or elsewhere, could cause a decrease in business investments, including spending on IT and negatively affect our business.
The Private Placement Warrants and the shares of Common Stock issuable upon the exercise of the Private Placement Warrants are exercisable for cash or on a cashless basis, at the holder’s option, and are non-redeemable so long as they are held by the initial purchasers or their permitted transferees.
The IPO Warrants and the shares of Common Stock issuable upon the exercise of the IPO Warrants are exercisable for cash or on a cashless basis, at the holder’s option, and are non-redeemable so long as they are held by the initial purchasers or their permitted transferees.
As of December 31, 2022 and December 31, 2021, 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 $218 million and $322 million, respectively. The majority of these contracts contain termination for convenience provisions.
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.
If the 56 Table of Contents Company’s stockholders sell, or the market perceives that the Company’s stockholders intend to sell, substantial amounts of the Company’s Common Stock in the public market, the market price of the Company’s Common Stock could decline.
If the 59 Table of Contents Company’s stockholders sell, or the market perceives that the Company’s stockholders intend to sell, substantial amounts of the Company’s Common Stock in the public market, the market price of the Company’s Common Stock could decline.
Sales of a substantial number of shares of Common Stock pursuant to a prospectus in the public market could occur at any time our prospectus remains effective. In addition, certain registration rights holders can request underwritten offerings to sell their securities.
Sales of a substantial number of shares of Common Stock pursuant to a prospectus in the public market could occur at any time a prospectus covering such shares remains effective. In addition, certain registration rights holders can request underwritten offerings to sell their securities.
For example, revenue earned from customers contributing in excess of 10% of consolidated revenues were derived from three customers comprising 49% of revenue for the twelve months ended December 31, 2022 (Successor). As of December 31, 2022, we have supported these customers for more than five years.
For example, revenue earned from customers contributing in excess of 10% of consolidated revenues were derived from three customers comprising 49% of revenue for the twelve months ended December 31, 2023. As of December 31, 2023, we have supported these customers for more than five years.
Uncertainty about global and regional economic conditions, 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, 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.
As a result of the provision that the Private Placement Warrants, when held by someone other than the initial purchasers or their permitted transferees, will be redeemable by us, the requirements for accounting for these warrants as equity are not satisfied.
As a result of the provision that the IPO Warrants, when held by someone other than the initial purchasers or their permitted transferees, will be redeemable by us, the requirements for accounting for these warrants as equity are not satisfied.
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 due to the ongoing COVID-19 pandemic, the ongoing Russia-Ukraine conflict 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, 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 the benefits of the Business Combination do not meet the expectations of investors or securities analysts, the market price of 55 Table of Contents our securities may decline. The market values of our securities may vary significantly from their prices on the date the Business Combination was executed.
If the benefits of the Gig Business Combination do not meet the expectations of investors or securities analysts, the market price 58 Table of Contents of our securities may decline. The market values of our securities may vary significantly from their prices on the date the Gig Business Combination was executed.
In the future, we plan to increasingly focus on such customers, including in the manufacturing, supply chain, and commercial space industries. Entering new verticals and expanding in the verticals in which we are already operating will continue to require significant resources and there is no guarantee that such efforts will be successful or beneficial to us.
In the future, we plan to increasingly focus on such customers, including in the manufacturing, supply chain, and digital identity industries. Entering new verticals and expanding in the verticals in which we are already operating will continue to require significant resources and there is no guarantee that such efforts will be successful or beneficial to us.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe have significant operations in the following locations: • Cyber and Engineering - Columbia, Maryland • Analytics - Ann Arbor, Michigan; Chantilly, Virginia; Charlottesville, Virginia • Corporate activities - Columbia, Maryland The following is a summary of our leased square footage by reportable segment (in thousands): Segment Square Footage Cyber and Engineering 8.4 Analytics 17.8 Corporate 8.4 Total 34.6 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: • 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.
Item 2. Properties At December 31, 2022, we leased building space at four locations, all within the United States.
Item 2. Properties We occupy approximately fifty four thousand square feet of leased building space at five primary locations.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeThe 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 61 Table of Contents cash flows. Item 4. Mine Safety Disclosures Not applicable. Part II
Biggest changeThe 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. Item 4. Mine Safety Disclosures Not applicable. Part II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 62 Part II 62 Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 62 Item 6. [Reserved] 63 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 64 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 87 Item 8.
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.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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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. 62 Table of Contents Stock Performance Graph The following graph compares the total return on a cumulative basis through December 31, 2022 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.
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.
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, 2022, there were 84 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. 65 Table of Contents Holders As of December 31, 2023, there were 86 common stockholders of record.
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.
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.
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.

Item 7. Management's Discussion & Analysis

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

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Biggest changeSuccessor 2022 Period Successor 2021 Period Successor 2020 Period Successor Pro Forma 2020 Period Predecessor 2020 Period PCI January 1, 2022 – December 31, 2022 January 1, 2021 – December 31, 2021 October 23, 2020 - December 31, 2020 January 1, 2020 - December 31, 2020 January 1, 2020 – October 22, 2020 Open Solutions December 2, 2020 -December 31, 2020 Not Applicable ProModel December 21, 2020 -December 31, 2020 NuWave June 19, 2020 – December 31, 2020 BigBear.ai May 22, 2020 – December 31, 2020 69 Table of Contents The table below presents our consolidated statements of operations for the following periods: Successor Predecessor Successor 2022 Period 2021 Period 2020 Period 2020 Period Pro Forma 2020 Revenues $ 155,011 $ 145,578 $ 31,552 $ 59,765 $ 138,992 Cost of revenues 112,018 111,510 22,877 46,755 96,133 Gross margin 42,993 34,068 8,675 13,010 42,859 Operating expenses: Selling, general and administrative 84,775 106,507 7,909 7,632 30,235 Research and development 8,393 6,033 530 85 615 Restructuring charges 4,203 — — — — Transaction expenses 2,605 — 10,091 — 10,091 Goodwill impairment 53,544 — — — — Operating (loss) income (110,527) (78,472) (9,855) 5,293 1,918 Net decrease in fair value of derivatives (1,591) 33,353 — — — Loss on extinguishment of debt — 2,881 — — — Interest expense 14,436 7,762 616 1 8,396 Other expense 19 — — — — (Loss) income before taxes (123,391) (122,468) (10,471) 5,292 (6,478) Income tax (benefit) expense (1,717) 1,084 (2,633) 3 (1,795) Net (loss) income $ (121,674) $ (123,552) $ (7,838) $ 5,289 $ (4,683) The following table summarizes our Successor 2020 Pro Forma Period statements of operations: Lake Intermediate (Historical) NuWave PCI Open Solutions ProModel Acquisition Accounting Adjustments January 1, 2020 – June 18, 2020 (Historical) January 1, 2020 - October 22, 2020 (Historical) January 1 2020 – December 1, 2020 (Historical) January 1, 2020 – December 20, 2020 (Historical) Successor Pro Forma 2020 Revenues $ 31,552 $ 10,809 $ 59,765 $ 22,693 $ 15,782 (1,609) (a) $ 138,992 Cost of revenues 22,877 5,436 46,755 13,183 9,491 (1,609) (a) 96,133 Gross Margin 8,675 5,373 13,010 9,510 6,291 — 42,859 Operating expenses: Selling, general and administrative 7,909 3,266 7,632 4,192 1,555 5,681 (b) 30,235 Research and development 530 — 85 — — — 615 Transaction expenses 10,091 — — — — — 10,091 Operating income (loss) (9,855) 2,107 5,293 5,318 4,736 (5,681) 1,918 Interest expense 616 — 1 (3) — 7,782 (c) 8,396 (Loss) income before taxes (10,471) 2,107 5,292 5,321 4,736 (13,463) (6,478) Income tax (benefit) expense (2,633) (6) 3 61 1,169 (389) (d) (1,795) Net (loss) income $ (7,838) $ 2,113 $ 5,289 $ 5,260 $ 3,567 $ (13,074) $ (4,683) Acquisition Accounting Adjustments: a.
Biggest changeIncome Tax Expense (Benefit) Income tax expense (benefit) consists of income taxes related to federal and state jurisdictions in which we conduct business. 70 Table of Contents Results of Operations The table below presents our consolidated statements of operations for the following periods: Year Ended December 31, 2023 2022 2021 Revenues $ 155,164 $ 155,011 $ 145,578 Cost of revenues 114,563 112,018 111,510 Gross margin 40,601 42,993 34,068 Operating expenses: Selling, general and administrative 71,057 84,775 106,507 Research and development 5,035 8,393 6,033 Restructuring charges 822 4,203 — Transaction expenses 2,721 2,605 — Goodwill impairment — 53,544 — Operating loss (39,034) (110,527) (78,472) Net increase (decrease) in fair value of derivatives 7,424 (1,591) 33,353 Loss on extinguishment of debt — — 2,881 Interest expense 14,200 14,436 7,762 Other (income) expense (393) 19 — Loss before taxes (60,265) (123,391) (122,468) Income tax expense (benefit) 101 (1,717) 1,084 Net loss $ (60,366) $ (121,674) $ (123,552) Comparison of the Year Ended December 31, 2023, 2022 and 2021 Revenues Year Ended December 31, Year-Over-Year Change 2023 2022 2021 2023 vs 2022 2022 vs 2021 Revenues $ 155,164 $ 155,011 $ 145,578 $ 153 0.1 % $ 9,433 6.5 % Revenues increased by $153 during the year ended December 31, 2023 as compared to the year ended December 31, 2022 primarily as a result of increased revenue on certain Army programs as a result of new contract awards and higher volume.
Investing activities 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 $5,234, consisting of the net cash used to acquire ProModel Corporation of $4,465 and purchase of property and equipment of $769.
Financing activities 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 $103,137, 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.
Employee Share Purchase Plan Concurrently with the adoption of the Plan, the Company’s Board of Directors adopted the 2021 Employee Stock Purchase Plan (the “ ESPP ”), which authorizes the grant of rights to purchase common stock of the Company to employees, officers, and directors (if they are otherwise employees) of the Company.
Employee Share Purchase Plan (“ESPP”) Concurrently with the adoption of the Plan, the Company’s Board of Directors adopted the 2021 Employee Stock Purchase Plan (the “ ESPP ”), which authorizes the grant of rights to purchase common stock of the Company to employees, officers, and directors (if they are otherwise employees) of the Company.
The Stock Options vest over four years with 25% vesting on the one year anniversary of the grant date and then 6.25% per each quarter thereafter during years two, three and four.
Stock Options generally vest over four years with 25% vesting on the one year anniversary of the grant date and then 6.25% per each quarter thereafter during years two, three and four.
The Company notified Bank of America N.A. of the covenant violation, and, on August 9, 2022, entered into the First Amendment (the “ First Amendment ”) to the Bank of America Credit Agreement, which, among other things, waived the requirement that the Company demonstrate compliance with the minimum Fixed Charge Coverage ratio provided for in the Credit Agreement for the quarter ended June 30, 2022.
The Company notified Bank of America N.A. of the covenant violation, and on August 9, 2022, entered into the First Amendment, which among other things, waived the requirement that the Company demonstrate compliance with the minimum Fixed Charge Coverage ratio provided for in the Credit Agreement for the quarter ended June 30, 2022.
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.
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.
Our primary short-term cash requirements are to fund payroll obligations, working capital, operating lease obligations, and short-term debt, including current maturities of long-term debt. Working capital requirements can vary significantly from period to period, particularly as a result of the timing of receipts and disbursements related to long-term contracts.
Our primary short-term cash requirements are to fund payroll obligations, working capital, operating lease obligations, interest payments and short-term debt, including current maturities of long-term debt. Working capital requirements can vary significantly from period to period, particularly as a result of the timing of receipts and disbursements related to long-term contracts.
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, 2022 included in this Annual Report on Form 10-K.
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.
Subsequent to the Conversion Rate Reset, the Convertible Notes are convertible into 18,844,600 shares, not including any interest payments that are settled with the issuance of shares. The Convertible Notes require the Company to meet certain financial and other covenants. As of December 31, 2022, the Company was in compliance with all covenants.
Subsequent to the Conversion Rate Reset, the Convertible Notes are convertible into 18,844,600 shares, not including any interest payments that are settled with the issuance of shares. The Convertible Notes require the Company to meet certain financial and other covenants. As of December 31, 2023, the Company was in compliance with all covenants related to the Convertible Notes.
For contracts with multiple performance obligations, the Company allocates the transaction price to each performance obligation 83 Table of Contents based on the estimated standalone selling price of the solution or service underlying each performance obligation. In circumstances where the standalone selling price is not directly observable, we estimate the standalone selling price using the expected cost-plus margin approach.
For contracts with multiple performance obligations, the Company allocates the transaction price to each performance obligation based on the estimated standalone selling price of the solution or service underlying each performance obligation. In circumstances where the standalone selling price is not directly observable, we estimate the standalone selling price using the expected cost-plus margin approach.
Unpriced unexercised contract options represent the value of goods and services to be delivered under existing contracts if our customer elects to exercise all of the options available in the contract.
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.
A potential increase in discount rates, a reduction in projected cash flows or a combination of the two could lead to a reduction in estimated fair values, which may result in impairment charges that could materially affect our financial statements in 82 Table of Contents any given year.
A potential increase in discount rates, a reduction in projected cash flows or a combination of the two could lead to a reduction in estimated fair values, which may result in impairment charges that could materially affect our financial statements in any given year.
The increase in interest expense was primarily driven by the higher principal balance of debt associated with our Convertible Notes as compared to the principal balance of debt under our Antares Capital Credit Facility, which was fully settled and terminated in December 2021 in connection with the Business Combination.
The increase in interest expense was primarily driven by the higher principal balance of debt associated with our Convertible Notes as compared to the principal balance of debt under our Antares Capital Credit Facility, which was fully settled and terminated in December 2021.
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.
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.
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 85% of Eligible Commercial Receivables.
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.
Class B Unit Incentive Plan In February 2021, the Company’s 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, 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 ”).
As of December 31, 2022 , the Company has an outstanding balance of $200.0 million related to the Convertible Notes, which is recorded on the balance sheet net of approximately $7.7 million of unamortized debt issuance costs.
As of December 31, 2023 , the Company has an outstanding balance of $200.0 million related to the Convertible Notes, which is recorded on the balance sheet net of approximately $5.7 million of unamortized debt issuance costs.
Intangible assets Identifiable finite-lived intangible assets, including technology and customer relationships, have been acquired through the Company’s various business combinations. The fair value of the acquired technology and customer relationships has been estimated using various underlying judgments, assumptions, and estimates.
Intangible assets 82 Table of Contents Identifiable finite-lived intangible assets, including technology and customer relationships, have been acquired through the Company’s various business combinations. The fair value of the acquired technology and customer relationships has been estimated using various underlying judgments, assumptions, and estimates.
These sources include public or private capital markets, bank financings, proceeds from dispositions or other third-party sources. 77 Table of Contents Our available liquidity consists primarily of available cash and cash equivalents.
These sources include public or private capital markets, bank financings, proceeds from dispositions or other third-party sources. Our available liquidity consists primarily of available cash and cash equivalents.
As such events are not considered probable until they 85 Table of Contents occur, recognition of equity-based compensation for the Incentive Units is deferred until the vesting conditions are met.
As such events are not considered probable until they occur, recognition of equity-based compensation for the Incentive Units is deferred until the vesting conditions are met.
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.
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.
As of January 1, 2022, the Company reserved an aggregate of 3,212,786 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, 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.
We define backlog in these categories to provide the reader with additional context as to the nature of our backlog and so that the reader can understand the varying degrees of risk, uncertainty, and where applicable, management’s estimates and judgements used in determining backlog at the end of a period.
We refer to this as Unpriced Unexercised Options. We define backlog in these categories to provide the reader with additional context as to the nature of our backlog and so that the reader can understand the varying degrees of risk, uncertainty, and where applicable, management’s estimates and judgements used in determining backlog at the end of a period.
Components of Results of Operations Revenues We generate revenue by providing our customers with highly customizable solutions and services for data ingestion, data enrichment, data processing, artificial intelligence, machine learning, predictive analytics and predictive visualization. We have a diverse base of customers, including government defense, government intelligence, as well as various commercial enterprises.
Components of Results of Operations Revenues We generate revenue by providing our customers with Edge AI-powered decision intelligence solutions and services for data ingestion, data enrichment, data processing, artificial intelligence, machine learning, predictive analytics and predictive visualization. We have a diverse base of customers, including government defense, government intelligence, as well as various commercial enterprises.
(2) In the third and fourth quarters of 2022, 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) 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.
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 our clients as they face their most complex decisions.
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.
On July 29, 2021, the Company’s Parent amended the Class B Unit Incentive Plan so that the Tranche I and the Tranche III Incentive Units will immediately become fully vested, subject to continued employment or provision of services, upon the closing of the transaction stipulated in the Merger Agreement.
On July 29, 2021, the Company’s Parent amended the Class B Unit Incentive Plan so that the Tranche I and the Tranche III Incentive Units will immediately become fully vested, subject to continued employment or provision of services, upon the closing of the transaction stipulated in the GigCapital4, Inc. (“ GigCapital4 ”) Business Combination Agreement .
Goodwill Impairment Testing During the second and fourth quarters of the fiscal year ending December 31, 2022, the Company identified factors indicating that the fair value of both the Cyber & Engineering and Analytics reporting units may be less than their respective carrying amounts and performed a qualitative goodwill impairment assessment.
During the second and fourth quarters of the fiscal year ending December 31, 2022, the Company identified factors indicating that the fair value of the Cyber & Engineering and Analytics reporting units, which comprised the previously reported Cyber & Engineering and Analytics reportable segments, may be less than their respective carrying amounts and performed a qualitative goodwill impairment assessment.
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.
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 Stock Options expire on the 10th anniversary of the grant date. The Stock Options had no intrinsic value as of December 31, 2022. 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.
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.
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.
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.
Compensation expense for the Tranche II Incentive Units is recognized over the derived service period of thirty months from the modification date.
Once the event occurs, unrecognized compensation cost associated with the performance-vesting Incentive Units (based on their modification date fair value) will be recognized based on the portion of the requisite service period that has been rendered. On December 7, 2021, the previously announced merger was consummated.
Once the event occurs, unrecognized compensation cost associated with the performance-vesting Incentive Units (based on their modification date fair value) will be recognized based on the portion of the requisite service period that has been rendered. On December 7, 2021, the Gig Business Combination between Parent and GigCapital4 was consummated.
Although the Company entered into the First Amendment, which waived the requirement that the Company demonstrate compliance with the minimum Fixed Charge Coverage ratio provided for in the Credit Agreement for the quarter ended June 30, 2022, and the Second Amendment, which removed the requirement to comply with the minimum Fixed Charge Coverage ratio, it is currently unable to draw on the Senior Revolver.
The Company entered into the First Amendment, which waived the requirement that the Company demonstrate compliance with the minimum Fixed Charge Coverage ratio provided for in the Credit Agreement for the quarter ended June 30, 2022, and the Second Amendment, which removed the requirement to comply with the minimum Fixed Charge Coverage ratio.
Warrants are accounted for in accordance with the guidance of ASC 815, Derivatives and Hedging (“ ASC 815 ”), under which private warrants do not meet the criteria for equity treatment and are classified as liabilities measured at fair value. Public warrants meet the criteria for equity classification.
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.
During the measurement period, which is up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill.
During the measurement period, which is up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.
As of December 31, 2022, the Company has determined that it is not more-likely-than-not that substantially all of its deferred tax assets will be realized in the future, and continues to have a full valuation allowance established against its deferred tax assets. On August 16, 2022, the U.S. government enacted the Inflation Reduction Act.
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.
Adjusted EBITDA is a financial 73 Table of Contents measure not calculated in accordance with GAAP.
Adjusted EBITDA is a financial measure not calculated in accordance with GAAP.
As of December 31, 2022 , the Company had not drawn on the Senior Revolver. Unamortized debt issuance costs of $198 were recorded on the balance sheet and are presented in Other non-current assets. Refer to Note K—Debt of the Notes to consolidated financial statements included in this Annual Report on Form 10-K for more information.
Unamortized debt issuance costs of $134 were recorded on the balance sheet and are presented in Other non-current assets. Refer to Note K—Debt of the Notes to consolidated financial statements included in this Annual Report on Form 10-K for more information.
Adjusted EBITDA is defined as net income (loss) adjusted for interest expense (income), net, income tax expense (benefit), depreciation and amortization, equity-based compensation, net (decrease) increase in fair value of derivatives, restructuring charges, capital market advisory fees, non-recurring integration costs, commercial start-up costs, transaction expenses, and goodwill impairment.
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.
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.
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.
The percentage of vesting is based on achieving certain performance criteria during each respective 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 in continuous service on each vesting date. Vesting will not occur unless a minimum performance criteria threshold is achieved.
For our government customers, their focus on addressing immediate needs in Ukraine has slowed the pipeline and pace of contract awards, pushing revenue further to the right.
For our government customers, their focus on addressing immediate needs in these regions has slowed the pipeline and pace of contract awards, pushing revenue into subsequent periods.
SG&A Successor Predecessor Successor 2022 Period 2021 Period 2020 Period 2020 Period Pro Forma 2020 SG&A $ 84,775 $ 106,507 $ 7,909 $ 7,632 $ 30,235 SG&A as a percentage of revenues 55 % 73 % 25 % 13 % 22 % SG&A expenses as a percentage of total revenues for the Successor 2022 Period decreased to 55% as compared to 73% for the 71 Table of Contents Successor 2021 Period, which was primarily driven by a $46,367 reduction of equity-based compensation cost and $6,176 reduction in capital market advisory fees, offset by additional investment in commercial start-up costs of $3,472, $5,472 of non-recurring integration costs to streamline business functions across the Company and realize synergies from our acquisitions, and $4,233 related to D&O insurance.
SG&A expenses as a percentage of total revenues for the year ended December 31, 2022 decreased to 55% as compared to 73% for the year ended December 31, 2021, which was primarily driven by a $46,367 reduction of equity-based compensation cost and $6,176 reduction in capital market advisory fees, partially offset by additional investment in commercial start-up costs of $3,472, $5,472 of increased non-recurring integration costs to streamline business functions across the Company and realize synergies from our acquisitions, and $4,233 related to D&O insurance.
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 Operation s : This section provides a discussion of our current period, pro forma information and historical results of operations. • the year ended December 31, 2022 (the “ Successor 2022 Period”) • the year ended December 31, 2021 (the “ Successor 2021 Period”) • the period from May 22, 2020 through December 31, 2020 (the “ Successor 2020 Period” ) • the period from January 1, 2020 through October 22, 2020 (the “ Predecessor 2020 Period”) • the year ended December 31, 2020 after giving effect to each acquisition as if each had been completed as of January 1, 2020 (the “ Successor 2020 Pro Forma Period ”). • 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 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.
Subsequent Events On January 19, 2023, the Company consummated the closing of a private placement (the “ Private Placement ”), pursuant to the terms and conditions of the Securities Purchase Agreement, dated January 16, 2023, by and among the Company and a certain accredited investor (the “ Purchaser ”).
Private Placement On January 19, 2023, the Company consummated the closing of a private placement (the “ Private Placement ”), pursuant to the terms and conditions of the Securities Purchase Agreement, dated January 16, 2023, by and among the Company and Armistice Capital Master Fund Ltd.
The following table details our available liquidity: December 31, 2022 December 31, 2021 Available cash and cash equivalents $ 12,632 $ 68,900 Available borrowings from our existing credit facilities — 50,000 Total available liquidity $ 12,632 $ 118,900 The following table summarizes our existing credit facilities: December 31, 2022 December 31, 2021 Convertible Notes $ 200,000 $ 200,000 Bank of America Senior Revolver — — D&O Financing Loan 2,059 4,233 Total debt 202,059 204,233 Less: unamortized issuance costs 7,682 9,636 Total debt, net 194,377 194,597 Less: current portion 2,059 4,233 Long-term debt, net $ 192,318 $ 190,364 Convertible Notes Upon consummation of the Merger, the Company issued $200.0 million of unsecured convertible notes (the “Convertible Notes” ) to certain investors.
The following table details our available liquidity: December 31, 2023 December 31, 2022 Available cash and cash equivalents $ 32,557 $ 12,632 Available borrowings from our existing credit facilities — — Total available liquidity $ 32,557 $ 12,632 77 Table of Contents The following table summarizes our existing credit facilities: December 31, 2023 December 31, 2022 Convertible Notes $ 200,000 $ 200,000 Bank of America Senior Revolver — — D&O Financing Loan 1,229 2,059 Total debt 201,229 202,059 Less: unamortized issuance costs 5,727 7,682 Total debt, net 195,502 194,377 Less: current portion 1,229 2,059 Long-term debt, net $ 194,273 $ 192,318 Convertible Notes On December 7, 2021, the Company issued $200.0 million of unsecured convertible notes (the “Convertible Notes” ) to certain investors.
The Company measured the private warrant liability at fair 84 Table of Contents value at the closing of the Merger and then 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 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.
The written put option balance was $— as of December 31, 2022. Loss on Extinguishment of Debt The loss on extinguishment of debt of $2,881 for the Successor 2021 Period consists of the derecognition of the remaining unamortized debt issuance costs related to the Antares Capital Credit Facility upon its settlement in December 2021.
Loss on Extinguishment of Debt The loss on extinguishment of debt of $2,881 for the year ended December 31, 2021 consists of the derecognition of the remaining unamortized debt issuance costs related to the settlement of the Antares Capital Credit Facility in December 2021.
The purchase price of each Shares and associated Warrants was $1.80. The aggregate gross proceeds to the Company from the Private Placement were approximately $25,000, before deducting the placement agent fees and other offering expenses payable by the Company. Refer to Note X—Subsequent Events for further information.
The purchase price per share of each Private Placement Share and the associated Warrant was $1.80. The aggregate gross proceeds to the Company from the Private Placement were approximately $25 million before deducting the placement agent fees and other offering expenses payable by the Company.
Research and Development Successor Predecessor Successor 2022 Period 2021 Period 2020 Period 2020 Period Pro Forma 2020 Research and development $ 8,393 $ 6,033 $ 530 $ 85 $ 615 The increase in research and development expenses was driven by increased hiring and headcount in our innovations lab as well as investment in various research projects aimed at continuing to develop and refine our solutions, including enhancing features and functionality, adding new modules, and improving the application of the latest AI/ML technologies in the solutions we deliver to our customers.
Research and development expenses increased by $2,360 during the year ended December 31, 2022 as compared to the year ended December 31, 2021, driven by increased hiring and headcount in our innovations lab as well as investment in various research projects aimed at continuing to develop and refine our solutions, including enhancing features and functionality, adding new modules, and improving the application of the latest AI/ML technologies in the solutions we deliver to our customers.
Cost of Revenues Cost of revenues primarily includes salaries, stock-based compensation expense, and benefits for personnel involved in performing the services described above as well as allocated overhead and other direct costs. We expect that cost of revenues will increase in absolute dollars as our revenues grow and will vary from period-to-period as a percentage of revenues.
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.
D&O Financing Loan On December 8, 2021, the Company entered into a $4,233 loan (the “D&O Financing Loan” ) with AFCO Credit Corporation to finance the Company’s directors and officers insurance premium through December 2022. The D&O Financing Loan had an interest rate of 1.50% per annum and a maturity date of December 8, 2022.
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.
Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors. Please see “Cautionary Note Regarding Forward-Looking Statements,” and “Risk Factors” in this Annual Report on Form 10-K .
Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors. Please see “Cautionary Note Regarding Forward-Looking Statements,” and “Risk Factors” in our Annual Report on Form 10-K . Unless the context otherwise requires, all references in this section to the “Company,” “BigBear.ai,” “we,” “us,” or “our” refer to BigBear.ai Holdings, Inc.
The 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. 79 Table of Contents Cash Flows The table below summarizes certain information from our consolidated statements of cash flows for the following periods: Successor Predecessor 2022 Period 2021 Period 2020 Period 2020 Period Net cash (used in) provided by operating activities (48,918) (19,782) (7,416) 8,614 Net cash used in investing activities (5,234) (863) (184,869) (121) Net cash (used in) provided by financing activities (103,137) 180,862 201,989 (9,773) Net (decrease) increase in cash and cash equivalents and restricted cash (157,289) 160,217 9,704 (1,280) Cash and cash equivalents and restricted cash at the beginning of period 169,921 9,704 — 1,644 Cash and cash equivalents and restricted cash at the end of the period $ 12,632 $ 169,921 $ 9,704 $ 364 Operating activities For the year ended December 31, 2022, net cash used in operating activities was $48,918.
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.
At the closing of the Private Placement, the Company issued (i) 13,888,889 shares of common stock (the “ Private Placement Shares ”); and (ii) a common stock purchase warrant (the “ Warrant ”) to purchase up to an additional 13,888,889 shares of common stock (the “ Warrant Shares ”) that are issuable upon its exercise.
At the closing of the Private Placement, the Company issued 13,888,889 shares (the “ Private Placement Shares ”) of the Company’s common stock at par value and a Common Stock purchase warrant (the “ PIPE Warrant ”) to purchase up to an additional 13,888,889 shares of Common Stock at an exercise price of $2.39 per share.
Priced unexercised contract options represent the value of goods and services to be delivered under existing contracts if our customer elects to exercise all of the options available in the contract. For priced unexercised options, we measure backlog based on the corresponding contract values assigned to the options as negotiated in our contract with our customer. • Unpriced Unexercised Options.
Unpriced unexercised contract options represent the value of goods and services to be delivered under existing contracts if our customer elects to exercise all of the options available in the contract. For unpriced unexercised options, we estimate backlog generally under the assumption that our current level of support on the contract will persist for each option period.
Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. 81 Table of Contents We assess goodwill for impairment at least annually, as of the October 1, and whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable.
We assess goodwill for impairment at least annually, as of October 1, and whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. For the purposes of impairment testing, we have determined that we have two reporting units.
It is not possible at this time to determine if an impairment charge would result from these factors. We will continue to monitor our goodwill for potential impairment indicators in future periods.
It is not possible at this time to determine if an impairment charge would result from these factors. We will continue to monitor our goodwill for potential impairment indicators in future periods. Goodwill Impairment Testing As of December 31, 2022, the Company had two operating and reportable segments that were organized by sector: Cyber & Engineering and Analytics.
Income Tax (Benefit) Expense Successor Predecessor Successor 2022 Period 2021 Period 2020 Period 2020 Period Pro Forma 2020 Income tax (benefit) expense $ (1,717) $ 1,084 $ (2,633) $ 3 $ (1,795) Effective tax rate 1.4 % (0.9) % 25.1 % 0.1 % — % The increase in the effective tax rate for the year ended December 31, 2022 from the year ended December 31, 2021 was primarily due to the change in the valuation allowance on the Company’s deferred tax balances.
The increase in the effective tax rate for the year ended December 31, 2022 from the year ended December 31, 2021 was primarily due to the change in the valuation allowance on the Company’s deferred tax balances.
Restructuring Charges Successor Predecessor Successor 2022 Period 2021 Period 2020 Period 2020 Period Pro Forma 2020 Restructuring charges $ 4,203 $ — $ — $ — $ — Restructuring charges for Successor 2022 Period 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.
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.
The aggregate gross proceeds to the Company from the Private Placement were approximately $25,000, before deducting the placement agent fees and other offering expenses payable by the Company. The Company has used and intends to use the net proceeds from the offering for general corporate purposes, including working capital.
The aggregate gross proceeds to the Company were approximately $25 million before deducting underwriting discounts and commissions and offering expenses. The Company intends to use the proceeds from the Offering primarily for general corporate purposes.
Adjusted EBITDA - Non-GAAP The following table presents a reconciliation of Adjusted EBITDA to net (loss) income, computed in accordance with GAAP: Successor Predecessor Successor 2022 Period 2021 Period 2020 Period 2020 Period Pro Forma 2020 Net (loss) income $ (121,674) $ (123,552) $ (7,838) $ 5,289 $ (4,683) Interest expense 14,436 7,762 616 1 8,396 Income tax (benefit) expense (1,717) 1,084 (2,633) 3 (1,795) Depreciation and amortization 7,758 7,262 1,028 52 6,990 EBITDA (101,197) (107,444) (8,827) 5,345 8,908 Adjustments: Equity-based compensation 10,865 60,615 — 80 1,097 Net (decrease) increase in fair value of derivatives (1) (1,591) 33,353 — — — Restructuring charges (2) 4,203 — — — — Loss on extinguishment of debt (3) — 2,881 — — — Transaction bonuses (4) — 1,089 — — — Capital market advisory fees (5) 741 6,917 — — — Termination of legacy benefits (6) — 1,639 — — — Management fees (7) — 1,001 414 — 414 Non-recurring integration costs (8) 7,255 1,783 — — — Commercial start-up costs (9) 6,490 3,018 — — — Transaction expenses (10) 2,605 — 10,091 — 10,091 Goodwill impairment (11) 53,544 — — — — Adjusted EBITDA $ (17,085) $ 4,852 $ 1,678 $ 5,425 $ 20,510 74 Table of Contents (1) The (decrease) increase in fair value of derivatives primarily relates to the changes in the fair value of certain Forward Share Purchase Agreements (FPAs) that were entered into prior to the closing of the Business Combination and were fully settled during the first quarter of 2022, as well as changes in the fair value of private warrants.
Because not all companies use identical calculations, our presentation of non-GAAP measures may not be comparable to other similarly titled measures of other companies. 74 Table of Contents Adjusted EBITDA - Non-GAAP The following table presents a reconciliation of Adjusted EBITDA to net loss, computed in accordance with GAAP: Year Ended December 31, 2023 2022 2021 Net loss $ (60,366) $ (121,674) $ (123,552) Interest expense 14,200 14,436 7,762 Interest income (392) — — Income tax expense (benefit) 101 (1,717) 1,084 Depreciation and amortization 7,901 7,758 7,262 EBITDA (38,556) (101,197) (107,444) Adjustments: Equity-based compensation 18,671 10,865 60,615 Employer payroll taxes related to equity-based compensation (1) 440 — — Net increase (decrease) in fair value of derivatives (2) 7,424 (1,591) 33,353 Restructuring charges (3) 822 4,203 — Non-recurring strategic initiatives (4) 3,025 — — Non-recurring litigation (5) 2,250 — — Transaction expenses (6) 2,721 2,605 — Goodwill impairment (7) — 53,544 — Non-recurring integration costs (8) — 7,255 1,783 Capital market advisory fees (9) — 741 6,917 Commercial start-up costs (10) — 6,490 3,018 Loss on extinguishment of debt (11) — — 2,881 Transaction bonuses (12) — — 1,089 Termination of legacy benefits (13) — — 1,639 Management fees (14) — — 1,001 Adjusted EBITDA $ (3,203) $ (17,085) $ 4,852 (1) Includes employer payroll taxes due upon the vesting of restricted stock units granted to employees.
Net (Decrease) Increase in Fair Value of Derivatives Net (decrease) increase in fair value of derivatives consists of fair value remeasurements of private warrants and written put options. Loss on Extinguishment of Debt Loss on extinguishment of debt consists of the derecognition of the remaining unamortized debt issuance costs related to the Antares Capital Credit Facility upon its settlement.
Loss on Extinguishment of Debt Loss on extinguishment of debt consists of the derecognition of the remaining unamortized debt issuance costs related to the Antares Capital Credit Facility upon its settlement. Interest Expense Interest expense consists primarily of interest expense, commitment fees, and debt issuance cost amortization under our debt agreements.
We believe the assumptions used are reflective of what a market participant would have used in calculating fair value considering current economic conditions.
The discounted cash flow approach requires management to make certain assumptions based upon information available at the time the valuations are performed. Actual results could differ from these assumptions. We believe the assumptions used are reflective of what a market participant would have used in calculating fair value considering current economic conditions.
For the year ended December 31, 2021, net cash provided by financing activities was $180,862, consisting of the partial repayment of the term loan of $180,862.
For the year ended December 31, 2021, net cash provided by financing activities was $180,862, consisting primarily of the proceeds from the issuance of convertible notes of $200,000, proceeds from the Gig Business Combination of $101,958, and net proceeds from short-term borrowings of $4,233.
However, if the conflict continues or worsens, 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 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.
In addition, restructuring charges include an impairment of the right-of-use assets associated with certain underutilized real estate leases that we vacated during the fourth quarter. (3) Loss on extinguishment of debt consists of the derecognition of the remaining unamortized debt issuance costs related to the Antares Capital Credit Facility upon its settlement in December 2021.
(10) Commercial start-up costs include certain non-recurring expenses associated with tailoring the Company’s products for commercial customers and use cases. (11) Loss on extinguishment of debt consists of the derecognition of the remaining unamortized debt issuance costs related to the Antares Capital Credit Facility upon its settlement in December 2021.
For the purposes of impairment testing, we have determined that we have two reporting units. Our test of goodwill impairment starts with a qualitative assessment to determine whether it is necessary to perform a quantitative goodwill impairment test.
Our test of goodwill impairment starts with a qualitative assessment to determine whether it is necessary to perform a quantitative goodwill impairment test. If qualitative factors indicate that the fair value of the reporting unit is more likely than not less than its carrying amount, then a quantitative goodwill impairment test is performed.
Analytics revenues increased by $13,198 during the Successor 2022 Period as compared to the Successor 2021 Period, primarily driven by new contracts awarded in 2022, resulting in higher volume. Analytics revenues increased $54,731 from the Successor 2020 Period due to the full year of activity for NuWave, Open Solutions, and ProModel.
Revenues increased by $9,433 during the year ended December 31, 2022 as compared to the year ended December 31, 2021 primarily driven by new contracts awarded in 2022, resulting in higher volume.
The interest expense in the Successor 2021 period was primarily incurred in connection with the Antares Capital Credit Facility, which was entered into in December 2020. See the Liquidity and Capital Resources section below for more information.
The interest expense in the year ended December 31, 2021 was primarily incurred in connection with the Antares Capital Credit Facility.
(4) Bonuses paid to certain employees related to the closing of the Business Combination. (5) The Company incurred capital market and advisory fees related to advisors assisting with the Business Combination. (6) In the third quarter of 2021, the Company elected to terminate certain legacy employee incentive benefits with final payments made in the fourth quarter of 2021.
(12) Bonuses paid to certain employees related to the closing of the Gig Business Combination. 75 Table of Contents (13) In the third quarter of 2021, the Company elected to terminate certain legacy employee incentive benefits. (14) Management and other related consulting fees paid to AE Partners. These fees ceased subsequent to the Gig Business Combination.
Transaction Expenses 67 Table of Contents Transaction expenses consist of acquisition costs and other related expenses incurred in acquiring NuWave, PCI, Open Solutions, ProModel, and ProModel Corporation as well as costs associated with evaluating other acquisition opportunities.
Transaction expenses for the year ended December 31, 2022 are related to our acquisition of ProModel Corporation as well as 72 Table of Contents costs associated with evaluating other acquisition opportunities.
ProModel Corporation is aligned under the Company’s Analytics business segment. Refer to Note D—Business Combinations of the Notes to consolidated financial statements included in this Annual Report on Form 10-K for more information.
Refer to Note W—Subsequent Events of the consolidated financial statements included in this Annual Report on Form 10-K for more information. Goodwill Impairment Goodwill impairment consists of non-cash impairments of the goodwill in the previously reported Cyber & Engineering and Analytics reportable segments.
Private Placement On January 19, 2023, the Company consummated the closing of a private placement (the “ Private Placement ”), issuing 13,888,889 shares of the Company’s common stock and a common stock purchase warrant to purchase up to an additional 13,888,889 shares of Common Stock. The aggregate gross proceeds to the Company from the Private Placement were approximately $25,000.
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.
As of December 31, 2022 (Successor), there was $5,034 of unrecognized compensation costs related to Incentive Units, which is expected to be recognized over the remaining weighted average period of 1.08 years. Stock Options On December 7, 2021, the Company adopted the BigBear.ai Holdings, Inc. 2021 Long-Term Incentive Plan (the “ Plan ”).
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. 85 Table of Contents Stock Options On December 7, 2021, the Company adopted the BigBear.ai Holdings, Inc. 2021 Long-Term Incentive Plan (the “ Plan ”).
Restricted Stock Units Pursuant to the Plan, the Company’s Board of Directors communicated the key terms and committed to grant Restricted Stock Units (“ RSUs ”) to certain employees and nonemployee directors. The Company granted 8,529,066 RSUs to employees during the year ended December 31, 2022 at a weighted-average fair value of $2.62 .
Performance Stock Units Pursuant to the Plan, the Company’s Board of Directors communicated the key terms and committed to grant Performance Stock Units (“ PSUs ”) to a certain employees. The Company grants PSUs to certain employees with performance measures specific to the role of that employee (“ Discretionary PSUs ”).
Costs include both diligence and integration costs after each company was acquired. (11) During the second and fourth quarters of 2022, the Company recognized non-cash goodwill impairment charges related to its Cyber & Engineering and Analytics business segments, respectively. Free Cash Flow Free cash flow is defined as net cash (used in) provided by operating activities less capital expenditures.
(7) During the second and fourth quarter of 2022, the Company recognized non-cash goodwill impairment charges related to its previously reported Cyber & Engineering and Analytics reportable segments, respectively.
The table below presents a reconciliation of free cash flow to net cash (used in) provided by operating activities, computed in accordance with GAAP: Successor Predecessor 2022 Period 2021 Period 2020 Period 2020 Period Net cash (used in) provided by operating activities $ (48,918) $ (19,782) $ (7,416) $ 8,614 Capital expenditures, net (769) (639) (155) (121) Free cash flow $ (49,687) $ (20,421) $ (7,571) $ 8,493 Free cash flow from acquired businesses 19,770 Operating cash flow from acquired businesses 20,000 Capital expenditures of acquired businesses (230) Pro Forma free cash flow (i) $ 12,199 (i) The Successor 2020 Pro Forma Period free cash flow represents free cash flow for the year ended December 31, 2020, adjusted for estimated free cash flow for NuWave, PCI, Open Solutions, and ProModel as if each of those transactions occurred at the beginning of the period.
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.

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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 changeOur 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, 2022, the outstanding principal amount of our debt was $202.1 million, excluding unamortized discounts and issuance costs of $7.7 million. Inflation affects the way we operate in our target markets.
Biggest changeOur 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.

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