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What changed in BigBear.ai Holdings, Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of BigBear.ai Holdings, Inc.'s 2024 and 2025 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 2025 report.

+469 added−462 removedSource: 10-K (2026-03-02) vs 10-K (2025-03-25)

Top changes in BigBear.ai Holdings, Inc.'s 2025 10-K

469 paragraphs added · 462 removed · 309 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeOur tools play a critical role in aiding 7 Table of Cont e n t s capital investment strategies, building design, layouts, and equipment purchases for manufacturing, logistics, business processes, and other operational systems. Digital Identity BigBear.ai offers software assets that are tailored for digital identity and biometrics, leveraging advanced vision AI technology.
Biggest changeDigital Twin Our approach to modeling and simulation enables our customers and partners to capture the behavior of complex interdependent processes and execute rapid course-of-action analysis. Our tools play a critical role in aiding capital investment strategies, building design, layouts, and equipment purchases for manufacturing, logistics, business processes, and other operational systems.
Competition Our main sources of current and potential competition fall into several categories: • System integrators that develop and provide custom software solutions; • Agency or corporate IT organizations that develop internal solutions for their enterprises; • Commercial enterprise and point solution software providers; • Public cloud providers offering discrete tools and micro-services with artificial intelligence, analytics and data management tools or functionality • In many cases, we compete with the internal software development efforts of our potential customers.
Competition and Unique Industry Variables 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; and • Public cloud providers offering discrete tools and micro-services with artificial intelligence, analytics and data management tools or functionality In many cases, we compete with the internal software development efforts of our potential customers.
Nevertheless, compliance with existing or future governmental or international regulatory bodies regulations, including, but not limited to, those pertaining to global trade, consumer and data protection, and taxes, could have a material impact on our business in subsequent periods.
Nevertheless, compliance with existing or future governmental or international regulatory bodies’ regulations, including, but not limited to, those pertaining to global trade, consumer and data protection, and taxes, could have a material impact on our business in subsequent periods.
For more information on the potential impacts of government regulations affecting our business, see the section titled “ Risk Factors ” contained in this Annual Report on Form 10-K. 9 Table of Cont e n t s Intellectual Property We believe that our intellectual property rights are valuable and important to our business.
For more information on the potential impacts of government regulations affecting our business, see the section titled “ Risk Factors ” contained in this Annual Report on Form 10-K. Intellectual Property We believe that our intellectual property rights are valuable and important to our business.
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.
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.
Notably, none of our employees are affiliated with labor unions, and we pride ourselves on maintaining uninterrupted operations free from labor disputes. This underscores the strength of our employee relations. Our human capital resources objectives include recruiting, retaining, training, and motivating our personnel.
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.
Approximately 53% of our workforce is comprised of software engineers, data scientists, cloud/systems engineers, analysts, and cyber subject-matter experts. BigBear.ai has headquarters in McLean, Virginia, with additional office locations in Ann Arbor, Michigan; Chantilly, Virginia; and Charlottesville, Virginia. In addition, many of our team members work at secure customer facilities across the U.S.
Approximately 67% of our workforce comprises software engineers, data scientists, cloud/systems engineers, analysts, and cyber subject-matter experts. We are headquartered in McLean, Virginia, with additional office locations in Ann Arbor, Michigan; Chantilly, Virginia; Columbia, Maryland; and Charlottesville, Virginia. Many of our team members work at secure customer facilities across the U.S.
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.
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.
Seasonality We generally experience seasonality in the timing of recognition of revenue as a result of the timing of the execution of our contracts, as we have historically executed many of our contracts in the third and fourth quarters due to the fiscal year ends and procurement cycles of our customers.
We also face competition from government contractors and system integrators who are building custom solutions in the same industries. 7 Table of Contents Seasonality We generally experience seasonality in the timing of recognition of revenue as a result of the timing of the execution of our contracts, as we have historically executed many of our contracts in the third and fourth quarters due to the fiscal year ends and procurement cycles of our customers.
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.
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. We also engage part-time employees, independent contractors, and third-party personnel to supplement our workforce.
BigBear.ai combines subject matter expertise with technology to connect the enterprise, provide insights on process performance and recommendations for managing risk.
BigBear.ai combines subject matter expertise with technology to connect capabilities, provide insights on process performance and recommendations for managing risk. 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.
BigBear.ai offers proven computer vision, anomaly/event detection, and descriptive and predictive analytics to support operations and break down silos between vendors and systems. • Contested Logistics : Our approach to enabling our military, intelligence, and federal agencies is to facilitate the safe transport of goods and people in contested environments and at points of entry.
Logistics and Supply Chain Management (SCM) Our approach to enabling our military, intelligence, and federal agencies is to facilitate the safe transport of goods and people in contested environments and at points of entry.
The BigBear.ai executive team is a driving force behind the company’s success. With strong industry experience and knowledge of both government and commercial markets, our diverse executives are shaping the Company’s vision and market penetration strategies, while ensuring operational excellence.
We also have offices in London, U.K., and Abu Dhabi, UAE. The BigBear.ai executive team brings strong industry experience and knowledge of both government and commercial markets. Their role is to shape the Company’s vision and market penetration strategies, while driving operational excellence.
These digital identity offerings are no longer restricted to national security uses, but are increasingly expanding into the personal finance world, enabling a frictionless user experience in an ever growing number of settings. BigBear.ai is dedicated to remaining at the forefront of technological advancement in the realm of identity verification and biometrics.
Through the integration of sophisticated algorithms and machine learning capabilities, our software solutions empower organizations to authenticate individuals with unmatched accuracy and efficiency. These digital identity offerings are no longer restricted to national security uses - they are increasingly expanding into enabling a frictionless user experience in an ever-growing number of settings wherever identity verification is valuable.
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.
The technology helps customs authority operators rapidly identify high-risk shipments, detect threats, and improve inspection efficiency across ports of entry. 6 Table of Contents Financial Strength and Growth Focus BigBear.ai has been a trusted partner to our customers for decades—we take that trust seriously and we work every day to keep it.
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Item 1. Business Company Overview BigBear.ai Holdings, Inc.’s (“BigBear.ai” or the “Company”) is an AI-driven technology solutions company. We provide technology that helps organizations operationalize AI: making faster, more informed decisions by analyzing complex data and providing actionable insights in areas of critical national security, defense and related markets.
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Item 1. Business Company Overview BigBear.ai Holdings, Inc.’s (“BigBear.ai” or the “Company”) is a specialized provider of mission-ready artificial intelligence (“AI”) technology, founded originally to serve defense and national security mission customers. Our objective is to deliver enduring strategic advantage for the U.S., its allies, and select commercial partners.
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Many of our customers rely on BigBear.ai’s specialized resources to supplement their technical and operational staff for long-term engagements. Hence we provide both software and services to our customers.
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We unite cutting-edge technology capabilities - from artificial intelligence to computer vision, predictive analytics and biometrics. National security, travel and trade are our core industries. Each area is highly specialized and requires deep domain expertise. They are also interdependent. Strengthening national security enables commerce and provides the baseline of trust necessary for nations to build prosperity.
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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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In turn, enhanced national security depends on the ability to move people and goods through the global economy and across borders with speed, precision and efficiency, which facilitates tens of trillions of dollars of annual trade. BigBear.ai operates where these vectors converge. We advance each of these systems by developing and deploying advanced technology and human expertise.
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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 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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In doing so, we both enable systems of commerce to operate faster and more effectively, and we reduce the risk that bad actors succeed in their tireless efforts to attack and destabilize societies and the economies on which we all depend.
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US defense initiatives On January 11, 2024, the Department of Defense (DoD) released its inaugural National Defense Industrial Strategy (NDIS), defining priorities for industry to realize a national modernized defense industrial ecosystem.
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To that end, BigBear.ai opposes the forces that would harm the U.S. and its allies, and partners closely with governments and businesses who embrace their role in building prosperous, safer societies and international stability. Customer Context There is an urgent need for greater security in a volatile world and for greater transparency in how people and goods move.
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It was a call to action for companies like BigBear.ai to provide the required capabilities at the speed and scale necessary for the U.S. military to engage and prevail in a near-peer conflict.
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These trends have collided with historic demand for game-changing technology and pressure on governments and businesses all over the world to transform at breakneck pace, recognizing that never in the history of humankind has a technology as powerful as AI emerged and spread through industries and our lives as rapidly as AI will.
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In alignment with the National Defense Strategy (NDS) released in 2022, the Federal Government is focused on fortifying supply chains and enabling international interoperability and collaboration to deter adversarial entities from impacting critical infrastructure. BigBear.ai is consistently delivering to this need, playing a role in providing an orchestrated ecosystem of trusted and secure collaboration.
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BigBear.ai is positioned to help our customers win in this context.
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National Security BigBear.ai brings over 30 years of experience delivering capabilities into operational environments for critical missions.
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The majority of our employees are security-cleared and many operate alongside their customers daily, we have deep trusting relationships with unique and discerning customers in the U.S. government, and with select commercial partners, putting us in the ideal position to deliver custom-designed AI solutions for the pressing, complex problems of today. Policy and political landscapes are relevant.
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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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In January 2026, The U.S. government published its AI Acceleration Strategy. This marks a decisive pivot toward state-driven technological dominance, prioritizing rapid military deployment and federal preemption over regional regulation. The administration aims to create a unified national "Frontier", prioritizing innovation over state ethics mandates.
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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 is to orchestrate and fuse data and artificial intelligence at the edge, even in distributed and/or disconnected environments.
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This wartime footing is designed to ensure the U.S. maintains a lead in the global AI race, treating computational power and algorithmic speed as national capital. The government’s AI Acceleration strategy is anchored by Pace-Setting Projects (PSPs), a series of high-velocity initiatives intended to bridge the gap between commercial breakthroughs and battlefield application.
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Supply Chain Management (SCM) BigBear.ai brings decades of experience supporting complex manufacturers, suppliers, and logistics operations to our SCM portfolio. • Digital Twin : Our approach to Modeling & Simulation enables our customers and partners to capture the behavior of complex interdependent processes and execute rapid course-of-action analysis.
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By mandating "AI Model Parity," the government intends to fast-follow private sector speed, ensuring that every branch of the Joint Force has immediate access to the same frontier models. The strategy includes a significant legal and physical infrastructure overhaul, aiming to cement a permanent American "AI Technology Stack" that is both ideologically neutral and strategically unassailable.
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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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Similarly, businesses across broad industries are reviewing and reimagining how technology can help them win – from the products and services they sell to how they operate. BigBear.ai works with a number of these commercial partners to enhance their capabilities. This can range from providing greater supply chain transparency to optimizing processes and technical workflows.
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Research & Development Our team has decades of combined experience developing and deploying software products in a variety of environments. Historically, much of our research and development has been funded and directed by defense and intelligence customers for their specific needs and objectives.
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National Security Capabilities Generative AI for Defense & Intelligence On December 31st, 2025, BigBear.ai announced that it had completed the acquisition of Ask Sage, a platform-agnostic generative AI solution designed specifically to serve defense and intelligence customers.
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Following the strategic call to action by DoD to connect sensors across all branches of the armed forces powered by artificial intelligence, we made targeted investments into foundational software capabilities that move us closer to our goal of providing the critical infrastructure for AI. We expect these investments to continue in 2025.
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It is the first platform of its kind to have been FedRAMP (Federal Risk and Authorization Management Program) authorized, which means that it passes a U.S. government program that provides a standardized approach to security assessment, authorization, and continuous monitoring for cloud 5 Table of Contents products and services.
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Customers BigBear.ai has a global footprint of customers spanning the public and private sector, including U.S. defense and intelligence agencies, border protection, transportation security, manufacturing, distribution and logistics, as well as travel, entertainment and tourism. We are proud of the trusted, multi-decade relationships we have with our customers and work hard to grow and maintain those relationships every day.
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This is critically important because before Ask Sage, defense and national security staff in the U.S. could not use generative AI platforms freely to assist with their work.
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Revenue Mix A significant portion of our revenue is from contracts with public sector agencies, including the Federal Government. Due to the sensitive and oftentimes classified nature of our work with these customers, a significant portion of BigBear.ai’s contracts still require our team members to co-locate on-premises to tailor our solutions for these unique environments and use cases.
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Having been subjected to rigorous security vetting and certified to meet federal security standards for handling government data up to DoD IL5, IL6 and Top-Secret use, Ask Sage is - as of January 2026 - used by more than 16,000 government teams, 100,000 Department of War users, and 2,500 companies.
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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.
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While other platforms that enable Frontier AI models to be used in sensitive contexts are emerging, Ask Sage has first-mover advantage and will serve as a central pillar of BigBear.ai’s technology capabilities.
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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.
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Autonomy at the Edge In a military context, operating “at the edge” means working in tactical locations where troops, sensors, and weapons systems are engaged—often far from centralized command centers or cloud data centers. BigBear.ai orchestrates and fuses data and artificial intelligence in these arenas, even in distributed and/or disconnected environments.
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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.
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Proven computer vision, anomaly/event detection, and descriptive and predictive analytics supports operations and breaks down silos between vendors and systems. For example, as the modern battle space evolves in complexity, ConductorOS arms defense operators with intelligent, resilient, and mission-ready systems of interconnected edge devices.
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Because of our history in complex systems integration, operating systems artificial intelligence, and Data and AI orchestration, we are well positioned to deliver solutions to solve for at-scale, production grade decision intelligence with both current and related new customers. 8 Table of Cont e n t s Growth Strategy The long-term underlying growth in the business comes from technology-enabled solutions, particularly in the areas of national security and critical infrastructure.
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It is a sophisticated AI, data and sensor orchestration platform designed to transform how distributed systems are built and managed in mission-critical defense environments. ConductorOS transforms connected devices and systems into a dynamic orchestration layer, running AI models at the mission’s edge for split-second inference and autonomy.
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This includes new government contract wins and growing scope on existing contracts, as well digital identity solutions in the US and overseas. Company Footprint and Management As of December 31, 2024, we had 630 employees, the vast majority of which hold an active security clearance.
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In 2025, ConductorOS was central to exercise “Talisman Sabre” a joint exercise to strengthen military interoperability between allied forces, practice crisis-action planning and contingency responses between U.S., Australian Forces, and more than two dozen other nations. 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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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.
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Travel and Trade Capabilities Digital Identity BigBear.ai is at the forefront of technological advancement in the realm of identity verification and biometrics. We offer software assets leveraging advanced vision AI technologies that are the cornerstone of our commitment to innovation in identity verification and security.
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Human Capital Our employees are critical to the success of our business. As of December 31, 2024, we had approximately 630 full-time employees, substantially all of which are employed in the United States. We also engage part-time employees, independent contractors, and third-party personnel to supplement our workforce.
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In January 2026, we acquired the assets of CargoSeer, a specialized AI software company delivering cargo scanning enhancement and trade risk management capabilities for customs enforcement missions worldwide. The CargoSeer AI Shipment Inspection Platform supports enhanced Non-Intrusive Inspection (NII) for cargo, by combining automated image analysis, computer vision, and machine learning coupled with trade and cargo data.
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Bigbear.ai is now in the strongest financial position in the history of the Company. The changes are reflected in our capital structure, liquidity profile, and market valuation. Market capitalization expanded from approximately $1.1 billion in January 2024 to $2.4 billion in December 2025, an increase of more than $1.2 billion, or 112%.
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The increase in market capitalization was achieved alongside a dramatic improvement in net cash, reflecting a higher-quality valuation supported by a substantially stronger balance sheet.
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Cash and cash equivalents and investments in available for sale debt securities increased from $50.1 million as of December 31. 2024 to $461.5 million as of December 31, 2025, a nearly tenfold improvement, providing meaningful strategic flexibility. Total debt was reduced from $142.3 million as of December 31, 2025 to $17.7 million subsequent to year-end, an 88% reduction.
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This transition fundamentally changes the Company’s profile and positions us to invest from a position of strength. [ People and Culture As of December 31, 2025, we had 579 employees, the vast majority of which are employed in the United States and hold an active security clearance.
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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 and periods of government shutdown. Regulatory Our business activities are subject to various federal, state, local, and foreign laws, rules, and regulations.
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Legal Proceedings We are subject to litigation, claims, investigations and audits arising from time to time in the ordinary course of business. Although legal proceedings are inherently unpredictable, we believe that we have valid defenses with respect to any matters currently pending against us and we intend to vigorously defend against such matters.
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The outcome of these matters, individually and in the aggregate, is not expected to have a material impact on our consolidated balance sheets, statements of operations or cash flows. For additional information regarding these matters, see Note 16—Commitments and Contingencies, included in the notes to the consolidated financial statements.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeConsistent with the foregoing, we are exposed to a variety of risks, including risks associated with: • a significant portion of our business being dependent on sales to the public/government sector, including the risk that we may not receive or maintain government contracts or may not receive the full benefit of such contracts; • the U.S. government’s budget deficit and the national debt, as well as any inability of the U.S. government to complete its budget process for any government fiscal year and consequently having to shut down or operate on funding levels equivalent to its prior fiscal year; • our limited operating history as a combined company, which makes it difficult to evaluate our current business and future prospects; • our ability to sustain our revenue growth in the future; 10 Table of Cont e n t s • our ability to execute our strategy to grow our business and increase our sales and the number and types of markets we compete in; • the length of our sales cycle and the time and expense associated with it; • our ability to grow our customer base and to expand our relationships with our existing customers, including with our government customers; • our reliance on customers in the public/government sector including the U.S. government, whose contracts are often only partially funded, subject to immediate termination, and heavily regulated and audited; • the market and our customers accepting and adopting our products, including future new product offerings; • the impact of health epidemics, on our business, financial condition, growth and the actions we may take in response thereto; • competition in our industry; • our ability to gain contracts on favorable terms, including with our government customers; • our ability to grow, maintain and enhance our brand and reputation; • risks related to security and our technology, including cybersecurity; • our ability to maintain competitive pricing for our products; • our ability to secure financing necessary to operate and grow our business as planned, including through acquisitions; • the high degree of uncertainty of the level of demand for, and market utilization of, our solutions and products; • our estimates and projections may prove to be inaccurate and certain of our assets may be at risk of future impairment; • substantial regulation and the potential for unfavorable changes to, or failure by us to comply with, these regulations, which could substantially harm our business and operating results; • issues raised by the use of AI (including machine learning) in our platforms and business may result in reputational harm or liability; • our dependency upon third-party service providers for certain technologies; • increases in costs, disruption of supply or shortage of materials, which could harm our business; • developments and projections relating to our competitors and industry; • the unavailability, reduction or elimination of government and economic incentives, which could have a material adverse effect on our business, prospects, financial condition and operating results; • our existing debt and our ability to refinance it on more favorable terms; • our management team’s limited experience managing a public company; • our ability to hire, retain, train and motivate qualified personnel and senior management and ability to deploy our personnel and resources to meet customer demand; • our ability to successfully execute future joint ventures, channel sales relationships, partnerships, strategic alliances and subcontracting opportunities; • our ability to grow through acquisitions and successfully integrate any such acquisitions; • our ability to successfully maintain, protect, enforce and grow our intellectual property rights; • our compliance with governmental laws, trade controls, economic sanctions, customs requirements and other regulations we are subject to; • the possibility of our need to defend ourselves against fines, penalties and injunctions if we are determined to be 11 Table of Cont e n t s promoting products for unapproved uses or otherwise found to have violated a law or regulation; • concentration of ownership among our existing executive officers, directors and their respective affiliates, which may prevent new investors from influencing significant corporate decisions; • the effect of economic uncertainty, including high inflation, reduced spending or suspension of investment in new or enhanced projects, and concerns of economic depression or recession; • natural disasters, geopolitical conflicts, or other natural or man-made catastrophic events could disrupt and impact our business; • our significant increased expenses and administrative burdens as a public company; • the volatility of the market for our securities, including our common stock; • our ability to satisfy the continued listing requirements of the NYSE in the future; • our internal controls over financial reporting, including our ability to remedy the identified material weakness as well as any potential future material weaknesses; • our ability to integrate Pangiam successfully and realize the estimate cost savings expected from the combined companies; • any failure to realize anticipated benefits of the Pangiam acquisition; and • other factors detailed below.
Biggest changeConsistent with the foregoing, we are exposed to a variety of risks, including risks associated with: • a significant portion of our business being dependent on sales to the public/government sector, including the risk that we may not receive or maintain government contracts or may not receive the full benefit of such contracts; • the U.S. government’s budget deficit and the national debt, as well as any inability of the U.S. government to complete its budget process for any government fiscal year and consequently having to shut down or operate on funding levels equivalent to its prior fiscal year; • our limited operating history as a combined company, which makes it difficult to evaluate our current business and future prospects; • our ability to sustain our revenue growth in the future; • our ability to execute our strategy to grow our business and increase our sales and the number and types of markets we compete in; • the length of our sales cycle and the time and expense associated with it; • our ability to grow our customer base and to expand our relationships with our existing customers, including with our government customers; • our reliance on customers in the public/government sector including the U.S. government, whose contracts are often only partially funded, subject to immediate termination, and heavily regulated and audited; • the market and our customers accepting and adopting our products, including future new product offerings; • the impact of health epidemics, on our business, financial condition, growth and the actions we may take in response thereto; • competition in our industry; • our ability to gain contracts on favorable terms, including with our government customers; • our ability to grow, maintain and enhance our brand and reputation; • risks related to security and our technology, including cybersecurity; • our ability to maintain competitive pricing for our products; • our ability to secure financing necessary to operate and grow our business as planned, including through acquisitions; • the high degree of uncertainty of the level of demand for, and market utilization of, our solutions and products; • our estimates and projections may prove to be inaccurate and certain of our assets may be at risk of future impairment; • substantial regulation and the potential for unfavorable changes to, or failure by us to comply with, these regulations, which could substantially harm our business and operating results; • issues raised by the use of AI (including machine learning) in our platforms and business may result in reputational harm or liability; • a significant commercial market for biometrics technology may not develop, and even if it does, there can be no assurance our biometrics technology will be successful; • 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; 9 Table of Contents • 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 management team’s limited experience managing a public company; • our ability to hire, retain, train and motivate qualified personnel and senior management and ability to deploy our personnel and resources to meet customer demand; • our ability to successfully execute future joint ventures, channel sales relationships, partnerships, strategic alliances and subcontracting opportunities; • our ability to grow through acquisitions and successfully integrate any such acquisitions; • our ability to successfully maintain, protect, enforce and grow our intellectual property rights; • our compliance with governmental laws, trade controls, economic sanctions, customs requirements and other regulations we are subject to; • the possibility of our need to defend ourselves against fines, penalties and injunctions if we are determined to be promoting products for unapproved uses or otherwise found to have violated a law or regulation; • the effect of economic uncertainty, including high inflation, reduced spending or suspension of investment in new or enhanced projects, and concerns of economic depression or recession; • natural disasters, geopolitical conflicts, or other natural or man-made catastrophic events could disrupt and impact our business; • our significant increased expenses and administrative burdens as a public company; • the volatility of the market for our securities, including our common stock; • our ability to satisfy the continued listing requirements of the NYSE in the future; • our internal controls over financial reporting, including any potential future material weaknesses; • our ability to integrate acquisitions successfully and realize the estimate cost savings expected from the combined companies; and • other factors detailed below.
Additionally, we may not be able to borrow money from other lenders to enable us to refinance our indebtedness. The 2026 Convertible Notes are effectively subordinated to our indebtedness under the 2029 Convertible Notes and our other secured indebtedness to the extent of the value of the assets securing that indebtedness.
Additionally, we may not be able to borrow money from other lenders to enable us to refinance our indebtedness. The 2029 Convertible Notes are effectively subordinated to our indebtedness under the 2026 Convertible Notes and our other secured indebtedness to the extent of the value of the assets securing that indebtedness.
We have certain financial instruments, including warrants and the convertible features of our 2029 Convertible Notes and our 2026 Convertible Notes, that are accounted for as derivative liabilities and are recorded at fair value upon issuance with changes in fair value each period reported in earnings, which may have an adverse effect on the market price of our common stock.
We have certain financial instruments, including warrants and the convertible features of our 2029 Convertible Notes, that are accounted for as derivative liabilities and are recorded at fair value upon issuance with changes in fair value each period reported in earnings, which may have an adverse effect on the market price of our common stock.
These risks include: • increased leverage held by large customers in negotiating contractual arrangements with us; • changes in key decision makers within these organizations that may negatively impact our ability to negotiate in the future; • customer IT departments may perceive that our software and services pose a threat to their internal control and advocate for legacy or internally developed solutions over our software; • resources may be spent on a potential customer that ultimately elects not to purchase our software and services; • more stringent requirements in our service contracts, including stricter service response times, and increased penalties for any failure to meet service requirements; • increased competition from larger competitors, such as defense contractors, system integrators, or large software and service companies that traditionally target large enterprises and government entities and that may already have purchase commitments from those customers; and • less predictability in completing some of our sales than we have with smaller customers.
These risks include: • increased leverage held by large customers in negotiating contractual arrangements with us; • changes in key decision makers within these organizations that may negatively impact our ability to negotiate in the future; 23 Table of Contents • customer IT departments may perceive that our software and services pose a threat to their internal control and advocate for legacy or internally developed solutions over our software; • resources may be spent on a potential customer that ultimately elects not to purchase our software and services; • more stringent requirements in our service contracts, including stricter service response times, and increased penalties for any failure to meet service requirements; • increased competition from larger competitors, such as defense contractors, system integrators, or large software and service companies that traditionally target large enterprises and government entities and that may already have purchase commitments from those customers; and • less predictability in completing some of our sales than we have with smaller customers.
Our indebtedness could have important consequences to the holders of the 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; and • limiting our ability to borrow additional funds or to borrow funds at rates or on other terms that we find acceptable; In addition, it is possible that we may need to incur additional indebtedness in the future in the ordinary course of business.
Our indebtedness could have important consequences to the holders of the 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; and 46 Table of Contents • limiting our ability to borrow additional funds or to borrow funds at rates or on other terms that we find acceptable; In addition, it is possible that we may need to incur additional indebtedness in the future in the ordinary course of business.
Accordingly, our business, financial condition, results of operations, and growth prospects may be adversely affected by certain events or activities, including, but not limited to: • changes in fiscal or contracting policies or decreases in available government funding; • changes in government programs or applicable requirements; • restrictions in the grant of personnel security clearances to our employees; • ability to maintain facility clearances required to perform on classified contracts for U.S. federal government agencies; • changes in the political environment, including before or after a change to the leadership within the government administration, and any resulting uncertainty or changes in policy or priorities and resultant funding; • changes in the government’s attitude towards the capabilities that we offer, especially in the areas of national defense, cybersecurity, digital identity and critical infrastructure, including the financial, energy, telecommunications, and healthcare sectors; • changes in the government’s attitude towards us as a company or our software as a viable or acceptable software solution; • appeals, disputes, or litigation relating to government procurement, including but not limited to bid protests by unsuccessful bidders on potential or actual awards of contracts to us or our partners by the government; • the adoption of new laws or regulations or changes to existing laws or regulations; • budgetary constraints, including automatic reductions as a result of “sequestration” or similar measures and constraints imposed by any lapses in appropriations for the federal government or certain of its departments and 43 Table of Cont e n t s agencies; • influence by, or competition from, third parties with respect to pending, new, or existing contracts with government customers; • changes in political or social attitudes with respect to security or data privacy issues; • potential delays or changes in the government appropriations or procurement processes, including as a result of events such as war, including the ongoing conflicts in Ukraine, the Middle East, and Africa, incidents of terrorism, natural disasters, and public health concerns or epidemics; and • increased or unexpected costs or unanticipated delays caused by other factors outside of our control, such as performance failures of our subcontractors.
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; • changes in political or social attitudes with respect to security or data privacy issues; • potential delays or changes in the government appropriations or procurement processes, including as a result of events such as war, including the ongoing conflicts in Ukraine, the Middle East, and Africa, incidents of terrorism, natural disasters, and public health concerns or epidemics; and • increased or unexpected costs or unanticipated delays caused by other factors outside of our control, such as performance failures of our subcontractors.
An acquisition, investment or business relationship may result in unforeseen risks, operating difficulties and expenditures, including the following: • an acquisition may negatively affect our financial results because it may require us to incur charges or assume substantial debt or other liabilities, may cause adverse tax consequences or unfavorable accounting treatment, may expose us to claims and disputes by third parties, including intellectual property claims and disputes, or may not generate sufficient financial return to offset additional costs and expenses related to the acquisition; • costs and potential difficulties associated with the requirement to test and assimilate the internal control processes of the acquired business; • we may encounter difficulties or unforeseen expenditures assimilating or integrating the businesses, technologies, infrastructure, products, personnel, or operations of the acquired companies, particularly if the key personnel of the acquired company choose not to work for us or if we are unable to retain key personnel, if their technology is not easily adapted to work with ours, or if we have difficulty retaining the customers of any acquired business due to changes in ownership, management, or otherwise; 29 Table of Cont e n t s • we may not realize the expected benefits of the acquisition; • an acquisition may disrupt our ongoing business, divert resources, increase our expenses, and distract our management; • an acquisition may result in a delay or reduction of customer purchases for both us and the company acquired due to customer uncertainty about continuity and effectiveness of service from either company; • the potential impact on relationships with existing customers, vendors, and distributors as business partners as a result of acquiring another company or business that competes with or otherwise is incompatible with those existing relationships; • the potential that our due diligence of the acquired company or business does not identify significant problems or liabilities, or that we underestimate the costs and effects of identified liabilities; • exposure to litigation or other claims in connection with, or inheritance of claims or litigation risk as a result of, an acquisition, including but not limited to claims from former employees, customers, or other third parties, which may differ from or be more significant than the risks our business faces; • potential goodwill impairment charges related to acquisitions; • we may encounter difficulties in, or may be unable to, successfully sell any acquired products; • an acquisition may involve the entry into geographic or business markets in which we have little or no prior experience or where competitors have stronger market positions; • an acquisition may require us to comply with additional laws and regulations, or to engage in substantial remediation efforts to cause the acquired company to comply with applicable laws or regulations, or result in liabilities resulting from the acquired company’s failure to comply with applicable laws or regulations; • our use of cash to pay for an acquisition would limit other potential uses for our cash; • if we incur debt to fund such acquisition, such debt may subject us to material restrictions on our ability to conduct our business as well as financial maintenance covenants; and • to the extent that we issue a significant amount of equity securities in connection with future acquisitions, existing stockholders may be diluted and earnings per share may decrease.
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; • 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; 27 Table of Contents • 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.
The New Warrant will become exercisable commencing any time on or after August 6, 2025 (the “Exercise Date”) with an expiration date five years after the Exercise Date with an exercise price per share equal to $9.00. See Note 18—Derivatives for additional information related to warrants. We have no obligation to net cash settle the warrants.
The New Warrant will become exercisable commencing any time on or after August 6, 2025 (the “Exercise Date”) with an expiration date five years after the Exercise Date with an exercise price per share equal to $9.00. See Note 19—Derivatives for additional information related to warrants. We have no obligation to net cash settle the warrants.
These rights and remedies allow government customers, among other things, to: • terminate existing contracts for convenience with short notice; • reduce orders under or otherwise modify contracts; • for contracts subject to the Truth in Negotiations Act, reduce the contract price or cost where it was increased because a contractor or subcontractor furnished cost or pricing data during negotiations that was not complete, accurate, and current; • for some contracts, (i) demand a refund, make a forward price adjustment, or terminate a contract for default if a contractor provided inaccurate or incomplete data during the contract negotiation process and (ii) reduce the contract price under triggering circumstances, including the revision of price lists or other documents upon which the contract award was predicated; • cancel multi-year contracts and related orders if funds for contract performance for any subsequent year become unavailable; 45 Table of Cont e n t s • decline to exercise an option to renew a multi-year contract or issue task orders in connection with indefinite delivery/indefinite quantity (“ IDIQ ”) contracts; • claim rights in solutions, systems, or technology produced by us, appropriate such work-product for their continued use without continuing to contract for our services, and disclose such work-product to third parties, including other government agencies and our competitors, which could harm our competitive position; • prohibit future procurement awards with a particular agency due to a finding of organizational conflicts of interest based upon prior related work performed for the agency that would give a contractor an unfair advantage over competing contractors, or the existence of conflicting roles that might bias a contractor’s judgment; • subject the award of contracts to protest by competitors, which may require the contracting federal agency or department to suspend our performance pending the outcome of the protest and may also result in a requirement to resubmit offers for the contract or in the termination, reduction, or modification of the awarded contract; • suspend or debar us from doing business with the applicable government agency; and • control or prohibit the export of our services.
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, 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; 44 Table of Contents • suspend or debar us from doing business with the applicable government agency; and • control or prohibit the export of our services.
We depend on computing infrastructure operated by Amazon Web Services (AWS), Google Cloud Platform (GCP), Microsoft Azure, and other third parties to support some of our customers, and any errors, disruption, performance problems, or failure in their or our operational infrastructure could adversely affect our business, financial condition, and results of operations.
We depend on computing infrastructure operated by Amazon Web Services (AWS), Google Cloud Platform (GCP), Microsoft Azure, and other third parties and data centers to support some of our customers, and any errors, disruption, performance problems, or failure in their or our operational infrastructure could adversely affect 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.
As our business has grown and as interest in BigBear.ai and the technology industry overall has increased, we have attracted, and may continue to attract, significant attention from news and social media outlets, including unfavorable coverage and coverage that is not directly attributable to statements authorized by our leadership, that incorrectly reports on statements made by our leadership or employees and the nature of our work, perpetuates unfounded speculation about company involvements, or that is otherwise misleading.
As our business has grown and as interest in BigBear.ai and the technology industry overall has increased, we have attracted, and may continue to attract, significant attention from news and social media outlets, including unfavorable 19 Table of Contents coverage and coverage that is not directly attributable to statements authorized by our leadership, that incorrectly reports on statements made by our leadership or employees and the nature of our work, perpetuates unfounded speculation about company involvements, or that is otherwise misleading.
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.
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 38 Table of Contents by one of our employees or third-party business partners, representatives, and agents that could be in violation of various laws including the FCPA.
If one or more of our customers terminate their contracts with us, whether for convenience, for default in the event of a breach by us, or for other reasons specified in our contracts, as applicable; if our customers elect not to renew their contracts with us; if our customers renew their contractual arrangements with us for shorter contract lengths or for a reduced scope; or if our customers otherwise seek to renegotiate terms of their existing agreements on terms less favorable to us, our business and results of operations could be adversely affected.
If one or more of our customers terminate their contracts with us, whether for convenience, for default in the event of a breach by us, or for other reasons specified in our contracts, as applicable; if our customers elect not to renew their contracts with us; if our customers renew their contractual arrangements with us for shorter contract lengths or for a reduced scope; or if our customers otherwise seek to renegotiate terms of their existing agreements on terms less favorable to us, our business and results of operations could be 12 Table of Contents adversely affected.
Our future success will depend in large part on the growth and expansion of this market, which is difficult to predict and relies on a number of factors, including customer adoption, customer demand, changing customer needs, the entry of competitive products, the success of existing competitive products, potential customers’ willingness to adopt an alternative approach to data collection, storage, and processing and their willingness to invest in new software after significant prior investments in legacy data collection, storage, and processing software.
Our future success will depend in large part on the growth and expansion of this market, which is difficult to predict and relies on a number of factors, including customer adoption, customer demand, changing 24 Table of Contents customer needs, the entry of competitive products, the success of existing competitive products, potential customers’ willingness to adopt an alternative approach to data collection, storage, and processing and their willingness to invest in new software after significant prior investments in legacy data collection, storage, and processing software.
Furthermore, the Indenture governing our 2029 Convertible Notes contain limitations on our ability to incur debt and issue preferred and/or disqualified stock. Accordingly, we cannot be certain that we will be able to obtain additional financing on favorable terms or at all.
Furthermore, the Indentures governing our 2029 Convertible Notes contain limitations on our ability to incur debt and issue preferred and/or disqualified stock. Accordingly, we cannot be certain that we will be able to obtain additional financing on favorable terms or at all.
If we are unable to attract, hire, develop, retain, and motivate qualified sales personnel, if our new sales personnel are unable to achieve sufficient sales productivity levels in a reasonable period of time or at all, if our marketing programs are not effective or if we are unable to effectively build, expand, and manage our sales organization and operations, our sales and revenue may grow more slowly than expected or materially decline, and our business may be significantly harmed.
If we are unable to attract, hire, develop, retain, and motivate qualified sales personnel, if our new sales personnel are unable to achieve sufficient sales 18 Table of Contents productivity levels in a reasonable period of time or at all, if our marketing programs are not effective or if we are unable to effectively build, expand, and manage our sales organization and operations, our sales and revenue may grow more slowly than expected or materially decline, and our business may be significantly harmed.
Further, certain of our agreements with customers and other third parties may include indemnification provisions under which we agree to indemnify them for losses suffered or incurred as a result of third-party claims of intellectual property infringement, misappropriation, or other violations of intellectual property rights, damages caused by us to property or persons, or other liabilities relating to or arising from our software, services, or other contractual obligations.
Further, certain of our agreements with customers and other third parties may include indemnification provisions under which we agree to indemnify them for losses suffered or incurred as a result of third-party claims of intellectual property infringement, misappropriation, or other violations of intellectual property rights, damages caused by us to property or persons, or other 33 Table of Contents liabilities relating to or arising from our software, services, or other contractual obligations.
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, 2024, we were in compliance with all covenants and restrictions associated with our debt agreements. We may acquire or invest in companies and technologies, which may divert our management’s attention, and result in additional dilution to our stockholders.
As of December 31, 2025, 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.
Any such event or activity, among others, could cause governments and governmental agencies to delay or refrain from purchasing our software and services in the future, reduce the size or payment amounts of purchases from existing or new government customers, or otherwise have an adverse effect on our business, results of operations, financial condition, and growth prospects.
Any such event or activity, among others, could cause governments and governmental agencies to delay or refrain from purchasing our software and services in the future, reduce the size or payment amounts of purchases from existing or new 42 Table of Contents government customers, or otherwise have an adverse effect on our business, results of operations, financial condition, and growth prospects.
Our internal control over financial reporting may not be effective and our independent registered public accounting firm may not be able to certify as to their effectiveness, which could have a significant and adverse effect on our business and reputation.
Our internal controls over financial reporting may not be effective and our independent registered public accounting firm may not be able to certify as to their effectiveness, which could have a significant and adverse effect on our business and reputation.
As a result of these and other factors, our sales efforts typically require an extensive effort throughout a customer’s organization, a significant investment of human resources, expense and time, including by our senior management, and there can be no assurances that we will be successful in making a sale to a potential customer.
As a result of these and other factors, our sales efforts typically require an extensive effort throughout a customer’s organization, a significant investment of human 11 Table of Contents resources, expense and time, including by our senior management, and there can be no assurances that we will be successful in making a sale to a potential customer.
The rapid evolution of AI and its evolving regulatory landscape may also require additional resources to develop, test and maintain our platforms and products to help ensure that AI is implemented appropriately in order to minimize unintended or harmful impact, which may be costly and may not produce the benefits and results that we expect.
The rapid evolution of AI and its evolving 29 Table of Contents regulatory landscape may also require additional resources to develop, test and maintain our platforms and products to help ensure that AI is implemented appropriately in order to minimize unintended or harmful impact, which may be costly and may not produce the benefits and results that we expect.
Our and our third-party vendors’ technology systems may be damaged or compromised by malicious events, such as cyberattacks (including computer viruses, malicious and destructive code, phishing attacks, and denial of service attacks), physical or electronic security breaches, natural disasters, fire, power loss, telecommunications failures, personnel misconduct, and human error.
Our and our third-party vendors’ technology systems may be damaged or compromised by 28 Table of Contents malicious events, such as cyberattacks (including computer viruses, malicious and destructive code, phishing attacks, and denial of service attacks), physical or electronic security breaches, natural disasters, fire, power loss, telecommunications failures, personnel misconduct, and human error.
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.
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 39 Table of Contents 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.
These restrictive covenants could adversely affect our ability to: • finance our operations; • make needed capital expenditures; • make strategic acquisitions or investments or enter into joint ventures; • withstand a future downturn in our business, the industry or the economy in general; • engage in business activities, including future opportunities, that may be in our best interest; and • plan for or react to market conditions or otherwise execute our business strategies.
These restrictive covenants could adversely affect our ability to: • finance our operations; • make needed capital expenditures; • make strategic acquisitions or investments or enter into joint ventures; • withstand a future downturn in our business, the industry or the economy in general; • engage in business activities, including future opportunities, that may be in our best interest; and 48 Table of Contents • plan for or react to market conditions or otherwise execute our business strategies.
On May 29, 2022, pursuant to Section 14.04(f) of the Indenture, the Conversion Rate applicable to the notes was adjusted to 94.2230 (previously 86.9565) shares of Common Stock per $1,000 principal amount of notes, as a result of the conversion rate reset provisions therein.
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 51 Table of Contents (previously 86.9565) shares of Common Stock per $1,000 principal amount of notes, as a result of the conversion rate reset provisions therein.
If we are required to transfer to other cloud providers or invest in a private cloud, we could incur significant costs and experience possible service interruption in connection with doing so, or risk loss of customer contracts if they are unwilling to accept such a change.
If we are 31 Table of Contents required to transfer to other cloud providers or invest in a private cloud, we could incur significant costs and experience possible service interruption in connection with doing so, or risk loss of customer contracts if they are unwilling to accept such a change.
Such proceedings may result in substantial cost and require significant time from our management, even if the eventual outcome is favorable to us. Third parties also may legitimately and independently develop products, services, and technology similar to or duplicative of our software.
Such proceedings may result in substantial cost and require significant time from our management, even if the eventual outcome is favorable to us. Third parties also may legitimately and independently develop 32 Table of Contents products, services, and technology similar to or duplicative of our software.
While we may at times engage in voluntary initiatives (such as voluntary disclosures, certifications, or goals, among others) to improve the ESG profile of our company and/or offerings or to respond to stakeholder demands, such initiatives may be costly and may not have the desired effect.
While we may at times engage in voluntary initiatives (such as voluntary disclosures, certifications, or goals, 54 Table of Contents among others) to improve the ESG profile of our company and/or offerings or to respond to stakeholder demands, such initiatives may be costly and may not have the desired effect.
The Warrant Agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 50% of the then outstanding public warrants to make any other change.
The Warrant Agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the 58 Table of Contents approval by the holders of at least 50% of the then outstanding public warrants to make any other change.
Failure to do so could have an adverse impact on our business, financial condition, and results of operations. The U.S. government may procure non-commercial developmental services rather than commercial products, which could materially impact our future U.S. government business and revenue.
Failure to do so could have an adverse impact on our business, financial condition, and results of operations. 45 Table of Contents The U.S. government may procure non-commercial developmental services rather than commercial products, which could materially impact our future U.S. government business and revenue.
If the NYSE delists our shares from trading on its exchange for failure to meet the listing standards, we and our stockholders could face significant material adverse consequences including: • a limited availability of market quotations for our securities; 54 Table of Cont e n t s • a determination that our Common Stock is a “penny stock” which will require brokers trading in our Common Stock to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for shares of our Common Stock; • being required to repurchase the Convertible Notes at a price equal to the principal amount plus accrued and unpaid interest; • a limited amount of analyst coverage; and • a decreased ability to issue additional securities or obtain additional financing in the future.
If the NYSE delists our shares from trading on its exchange for failure to meet the listing standards, we and our stockholders could face significant material adverse consequences including: • a limited availability of market quotations for our securities; • a determination that our Common Stock is a “penny stock” which will require brokers trading in our Common Stock to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for shares of our Common Stock; • being required to repurchase the Convertible Notes at a price equal to the principal amount plus accrued and unpaid interest; • a limited amount of analyst coverage; and • a decreased ability to issue additional securities or obtain additional financing in the future.
These provisions will include: • no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • a classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of the Board; • the right of our Board to elect a director to fill a vacancy created by the expansion of our Board or the resignation, death or removal of a director in certain circumstances, which prevents stockholders from being able to fill vacancies on our Board; • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; and • the requirement that a meeting of stockholders may only be called by members of our Board or the stockholders holding a majority of our shares, which may delay the ability of our stockholders to force consideration of a 62 Table of Cont e n t s proposal or to take action, including the removal of directors.
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.
If the combined company is not successful in addressing these and other challenges, then the benefits of the Pangiam Acquisition may not be realized and, as a result, the combined company’s operating results and the market price of BigBear.ai Common Stock may be adversely affected.
If the combined company is not successful in addressing these and other challenges, then the benefits of the Ask Sage Acquisition may not be realized and, as a result, the combined company’s operating results and the market price of BigBear.ai Common Stock may be adversely affected.
Outside of the United States, virtually every jurisdiction in which we operate has established its own legal framework relating to privacy, data protection, and information security matters with which we and/or our customers must comply.
Outside of the United States, 36 Table of Contents virtually every jurisdiction in which we operate has established its own legal framework relating to privacy, data protection, and information security matters with which we and/or our customers must comply.
None of the private placement warrants and warrants underlying the units issuable upon conversion of working capital loan will be redeemable by BigBear.ai so long as they are held by their initial purchasers or their permitted transferees.
None of the private placement warrants and warrants underlying the units issuable upon conversion of working capital loan will be redeemable by BigBear.ai so long as they are held by their initial 60 Table of Contents purchasers or their permitted transferees.
Other factors that may cause fluctuations in our quarterly results of operations and financial position include, without limitation, those listed below: • the success of our sales and marketing efforts, including the success of pilot deployments; • our ability to increase our margins; • the timing of expenses and revenue recognition; • the timing and amount of payments received from our customers; • termination of one or more large contracts by customers, including for convenience; • the time and cost-intensive nature of our sales efforts and the length and variability of sales cycles; • the amount and timing of operating expenses related to the maintenance and expansion of our business and operations; • the timing and effectiveness of new sales and marketing initiatives; • changes in our pricing policies or those of our competitors; • the timing and success of new products, features, and functionality introduced by us or our competitors; • cyberattacks and other actual or perceived data or security breaches; • our ability to hire and retain employees, in particular, those responsible for the development, operations and maintenance, and selling or marketing of our software; and our ability to develop and retain talented sales personnel who are able to achieve desired productivity levels in a reasonable period of time and provide sales leadership in areas in which we are expanding our sales and marketing efforts; • the amount and timing of our stock-based compensation expenses; • changes in the fair value of derivatives, including the convertible features of our 2029 Convertible Notes and our 2026 Convertible Notes, that are remeasured quarterly • changes in the way we organize and compensate our sales teams; • changes in the way we operate and maintain our software; • changes in the competitive dynamics of our industry; • the cost of and potential outcomes of future claims or litigation, which could have a material adverse effect on our business; • changes in laws and regulations that impact our business, such as the Federal Acquisition Streamlining Act of 1994 (“ FASA ”); • indemnification payments to our customers or other third parties; • ability to scale our business with increasing demands; • the timing of expenses related to any future acquisitions; and 16 Table of Cont e n t s • general economic, regulatory, and market conditions, including the impact of ongoing conflicts in Ukraine, the Middle East, and Africa which may cause financial market volatility.
Other factors that may cause fluctuations in our quarterly results of operations and financial position include, without limitation, those listed below: • the success of our sales and marketing efforts, including the success of pilot deployments; • our ability to increase our margins; • the timing of expenses and revenue recognition; • the timing and amount of payments received from our customers; • termination of one or more large contracts by customers, including for convenience; • the time and cost-intensive nature of our sales efforts and the length and variability of sales cycles; • the amount and timing of operating expenses related to the maintenance and expansion of our business and operations; • the timing and effectiveness of new sales and marketing initiatives; • changes in our pricing policies or those of our competitors; • the timing and success of new products, features, and functionality introduced by us or our competitors; • cyberattacks and other actual or perceived data or security breaches; • our ability to hire and retain employees, in particular, those responsible for the development, operations and maintenance, and selling or marketing of our software; and our ability to develop and retain talented sales personnel who are able to achieve desired productivity levels in a reasonable period of time and provide sales leadership in areas in which we are expanding our sales and marketing efforts; • the amount and timing of our stock-based compensation expenses; • changes in the way we organize and compensate our sales teams; • changes in the way we operate and maintain our software; • changes in the competitive dynamics of our industry; • the cost of and potential outcomes of future claims or litigation, which could have a material adverse effect on our business; • changes in laws and regulations that impact our business, such as the Federal Acquisition Streamlining Act of 1994 (“ FASA ”); 14 Table of Contents • indemnification payments to our customers or other third parties; • ability to scale our business with increasing demands; • the timing of expenses related to any future acquisitions; and • general economic, regulatory, and market conditions, including the impact of ongoing conflicts in Ukraine, the Middle East, and Africa which may cause financial market volatility.
In addition, we may incur significant costs to attract and recruit skilled personnel, and we may lose new personnel to our competitors or other technology companies before we realize the benefit of our investment in recruiting and training them.
In addition, we may incur significant costs to attract and recruit 17 Table of Contents skilled personnel, and we may lose new personnel to our competitors or other technology companies before we realize the benefit of our investment in recruiting and training them.
If tax authorities change applicable tax laws, our overall taxes could increase, and our financial condition or results of operations may be adversely impacted. Our ability to use our net operating loss carryforwards may be limited.
If tax 40 Table of Contents authorities change applicable tax laws, our overall taxes could increase, and our financial condition or results of operations may be adversely impacted. Our ability to use our net operating loss carryforwards may be limited.
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.
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, 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.
We also must comply with laws and regulations relating to the formation, administration, and performance of contracts, which provide public sector customers rights, many of which are not typically found in commercial contracts.
We also must comply with laws and regulations relating to the formation, administration, and 41 Table of Contents performance of contracts, which provide public sector customers rights, many of which are not typically found in commercial contracts.
Some of our executive officers and key personnel are at-will employees and may terminate their employment relationship with us at any time.
Our executive officers and key personnel are at-will employees and may terminate their employment relationship with us at any time.
Third parties may terminate their licenses with us for a variety of reasons, including actual or perceived failures or breaches of security or privacy, or reputational concerns, or they may choose not to renew their licenses with us.
Third parties may terminate their licenses with us for a variety of reasons, including actual or perceived failures or breaches of security or privacy, 34 Table of Contents or reputational concerns, or they may choose not to renew their licenses with us.
Furthermore, if any issues in complying with those requirements are identified (for example, if the auditors identify a material weakness or significant deficiency in the internal control over financial reporting, including the identified material weakness as of December 31, 2024), we could incur additional costs rectifying those issues, and the existence of those issues could adversely affect our reputation or investor perceptions of it.
Furthermore, if any issues in complying with those requirements are identified (for example, if the auditors identify a material weakness or significant deficiency in the internal control over financial reporting), we could incur additional costs rectifying those issues, and the existence of those issues could adversely affect our reputation or investor perceptions of it.
Further, our Indenture that governs the 2029 Convertible Notes contains provisions will restrict our ability to dispose of assets and use the proceeds from any such disposition.
Further, our Indenture that governs the 2029 Convertible Notes contains provisions will restrict our ability to dispose of assets and 47 Table of Contents use the proceeds from any such disposition.
The standards required for a public company under Section 404 of the Sarbanes-Oxley Act are significantly more stringent than those required of BigBear.ai as a privately held company.
The standards required for a 61 Table of Contents public company under Section 404 of the Sarbanes-Oxley Act are significantly more stringent than those required of BigBear.ai as a privately held company.
Risk Related to the Acquisition of Pangiam BigBear.ai stockholders may not realize a benefit from the Pangiam Acquisition commensurate with the ownership dilution they will experience in connection with the Pangiam Acquisition.
Risk Related to the Acquisition of Ask Sage BigBear.ai stockholders may not realize a benefit from the Ask Sage Acquisition commensurate with the ownership dilution they will experience in connection with the Ask Sage Acquisition.
Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including: • changes in the valuation of our deferred tax assets and liabilities; • expected timing and amount of the release of any tax valuation allowances; • tax effects of stock-based compensation; • costs related to intercompany restructurings; • changes in tax laws, regulations or interpretations thereof; or 58 Table of Cont e n t s • lower than anticipated future earnings in jurisdictions where we have lower statutory tax rates and higher than anticipated future earnings in jurisdictions where we have higher statutory tax rates.
Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including: • changes in the valuation of our deferred tax assets and liabilities; • expected timing and amount of the release of any tax valuation allowances; • tax effects of stock-based compensation; • costs related to intercompany restructurings; • changes in tax laws, regulations or interpretations thereof; or • lower than anticipated future earnings in jurisdictions where we have lower statutory tax rates and higher than anticipated future earnings in jurisdictions where we have higher statutory tax rates.
The California state legislature passed the California Consumer Privacy Act 37 Table of Cont e n t s (“ CCPA ”) in 2018 and California voters approved a ballot measure subsequently establishing the California Privacy Rights Act (“ CPRA ”) in 2020, which will jointly regulate the processing of personal information of California residents and increase the privacy and security obligations of entities handling certain personal information of California residents, including requiring covered companies to provide new disclosures to California consumers, and afford such consumers new abilities to opt-out of certain sales of personal information.
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 estimated fair value of our derivative liabilities related to our warrants, including the 2024 RDO Warrants, the 2024 PIPE Warrants, and the IPO Private Warrants was $54.7 million as of December 31, 2024. The 2024 RDO Warrants and 2024 PIPE Warrants were fully exercised during the first quarter of 2025.
The estimated fair value of our derivative liabilities related to our warrants, including the 2024 RDO Warrants, the 2024 PIPE Warrants, and the IPO Private Warrants was $0.1 million as of December 31, 2025. The 2024 RDO Warrants and 2024 PIPE Warrants were fully exercised during the first quarter of 2025.
Also, we may not be able to respond effectively to new product or service announcements by competitors by quickly introducing competitive products and services. In addition, we may acquire companies and technologies in the future.
Also, we may not be able to respond effectively to new product or service announcements by competitors by quickly introducing competitive products and 59 Table of Contents services. In addition, we may acquire companies and technologies in the future.
See “— Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, would materially and adversely affect our financial position and results of operations and our ability to satisfy our obligations under the Convertible Notes .” 48 Table of Cont e n t s We may not be able to generate sufficient cash to service all of our indebtedness, including the Convertible Notes, and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.
See “— Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, would materially and adversely affect our financial position and results of operations and our ability to satisfy our obligations under the Convertible Notes .” We may not be able to generate sufficient cash to service all of our indebtedness, including the Convertible Notes, and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.
BigBear.ai may not achieve the benefits it expects from the Pangiam Acquisition, which may have an adverse effect on both BigBear.ai’s and Pangiam’s business, financial condition and operating results. BigBear.ai consummated the Pangiam Acquisition with the expectation that the Pangiam Acquisition will result in benefits to the combined company.
BigBear.ai may not achieve the benefits it expects from the Ask Sage Acquisition, which may have an adverse effect on both BigBear.ai’s and Ask Sage’s business, financial condition and operating results. BigBear.ai consummated the Ask Sage Acquisition with the expectation that the Ask Sage Acquisition will result in benefits to the combined company.
Any failure or perceived failure by us or our software to comply with the laws, regulations, directives, policies, industry standards, or legal obligations of the U.S., European Union, or other governmental or non-governmental bodies at the regional, national, or supra-national level relating to privacy, data protection, or information security, or any security incident that results in actual or suspected loss of or the unauthorized access to, or acquisition, use, release, or transfer of, personal information, personal data, or other customer or sensitive data or information may result in governmental investigations, inquiries, enforcement actions and prosecutions, private claims and litigation, indemnification or other contractual obligations, other remedies, including fines or demands that we modify or cease existing business practices, or adverse publicity, and related costs and liabilities, which could significantly and adversely affect our business and results of operations.
Any failure or perceived failure by us or our software to comply with the laws, regulations, directives, policies, industry standards, or legal obligations of the U.S., European Union, or other governmental or non-governmental bodies at the regional, national, or supra-national level relating to privacy, data protection, or information security, or any security incident that results in actual or suspected loss of or the unauthorized access to, or acquisition, use, release, or transfer of, personal information, personal data, or other customer or sensitive data or information may result in governmental investigations, inquiries, enforcement actions and prosecutions, private claims and litigation, indemnification or other contractual obligations, other remedies, including fines or demands that we modify or cease existing business practices, or adverse publicity, and related costs and liabilities, which could significantly and adversely affect our business and results of operations. 37 Table of Contents Failure to comply with governmental laws and regulations could harm our business, and we may be the subject of legal and regulatory inquiries, which may result in monetary payments or may otherwise negatively impact our reputation, business, and results of operations.
Our Indenture governing our 2026 Convertible Notes and related documents do not contain covenants similar to those described above, but both 49 Table of Cont e n t s of our Indentures governing our Convertible Notes contain a substantially similar covenant that restricts our ability to consolidate, merge, sell or otherwise dispose of all or substantially all of our assets unless, among other things, the surviving entity assumes our obligations under the 2026 Convertible Notes and 2029 Convertible Notes, respectively.
Our Indenture governing our 2026 Convertible Notes and related documents do not contain covenants similar to those described above, but both of our Indentures governing our Convertible Notes contain a substantially similar covenant that restricts our ability to consolidate, merge, sell or otherwise dispose of all or substantially all of our assets unless, among other things, the surviving entity assumes our obligations under the 2026 Convertible Notes and 2029 Convertible Notes, respectively.
If we are unable to realize the full strategic and financial benefits currently anticipated from the Pangiam Acquisition, BigBear.ai stockholders will have experienced dilution of their ownership interests without receiving a commensurate benefit, or only receiving part of the commensurate benefit to the extent the combined company is able to realize only part of the strategic and financial benefits currently anticipated from the Pangiam Acquisition.
If we are unable to realize the full strategic and financial benefits currently anticipated from the Ask Sage Acquisition, BigBear.ai 53 Table of Contents stockholders will have experienced dilution of their ownership interests without receiving a commensurate benefit, or only receiving part of the commensurate benefit to the extent the combined company is able to realize only part of the strategic and financial benefits currently anticipated from the Ask Sage Acquisition.
If we fail to meet or exceed such expectations for these or any other reasons, the trading price of our common stock could fall, and we could face costly lawsuits, including securities class action suits. Our results of operations and earnings may not meet guidance or expectations.
If we fail to meet or exceed such expectations for these or any other reasons, the trading price of our common stock could fall, and we could face costly lawsuits, including securities class action suits. Our results of operations and earnings may not meet guidance or expectations. We may provide public guidance on expected results of operations for future periods.
Our customers may suffer from reduced operating budgets, which could cause them to defer or forego purchases of our software or services. 56 Table of Cont e n t s Moreover, competitors may respond to market conditions by lowering prices and attempting to lure away our customers, and the increased pace of consolidation in certain industries may result in reduced overall spending on our offerings.
Our customers may suffer from reduced operating budgets, which could cause them to defer or forego purchases of our software or services. Moreover, competitors may respond to market conditions by lowering prices and attempting to lure away our customers, and the increased pace of consolidation in certain industries may result in reduced overall spending on our offerings.
As of December 31, 2024 and December 31, 2023, the total remaining deal value of the contracts that we had been awarded by, or entered into with, commercial and government customers, including existing contractual obligations and contract options available to those customers was approximately $418 million and $168 million, respectively. The majority of these contracts contain termination for convenience provisions.
As of December 31, 2025, 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 $248 million. The majority of these contracts contain termination for convenience provisions.
There can be no assurances that any rating assigned to our debt securities will remain for any given period of time or that a rating 52 Table of Cont e n t s will not be lowered or withdrawn entirely by a rating agency if, in that rating agency’s judgment, future circumstances relating to the basis of the rating, such as adverse changes, so warrant.
There can be no assurances that any rating assigned to our debt securities will remain for any given period of time or that a rating will not be lowered or withdrawn entirely by a rating agency if, in that rating agency’s judgment, future circumstances relating to the basis of the rating, such as adverse changes, so warrant.
These proceedings could also result in negative publicity, which could harm customer and public perception of our business, regardless of whether the allegations are valid or whether we are ultimately found liable. 39 Table of Cont e n t s Failure to comply with anti-bribery and anti-corruption laws could subject us to penalties and other adverse consequences.
These proceedings could also result in negative publicity, which could harm customer and public perception of our business, regardless of whether the allegations are valid or whether we are ultimately found liable. Failure to comply with anti-bribery and anti-corruption laws could subject us to penalties and other adverse consequences.
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 26 Table of Cont e n t s 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.
As of December 31, 2024, we had approximately $200.0 million of total indebtedness. Although we currently anticipate that our existing cash and cash equivalents will be sufficient to meet our cash needs for the next 12 months, additional funds may be required if our growth strategy does not develop as quickly as planned.
As of December 31, 2025, we had approximately $142.3 million of indebtedness. Although we currently anticipate that our existing cash and cash equivalents will be sufficient to meet our cash needs for the next 12 months, additional funds may be required if our growth strategy does not develop as quickly as planned.
We have certain financial instruments, including warrants and the convertible features of our 2029 Convertible Notes and 2026 Convertible Notes, that are accounted for in accordance with the guidance of Accounting Standards Codification (“ ASC ”) 815, Derivatives and Hedging (“ASC 815”).
We have certain financial instruments, including warrants and the convertible features of our 2029 Convertible Notes, that are accounted for in accordance with the guidance of ASC 815, Derivatives and Hedging (“ASC 815”).
Any decision to declare and pay dividends as a public company in the future will be made at the discretion of the Board and will depend on, among other things, our results of operations, financial condition, cash 53 Table of Cont e n t s requirements, contractual restrictions and other factors that the Board may deem relevant.
Any decision to declare and pay dividends as a public company in the future will be made at the discretion of the Board and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual restrictions and other factors that the Board may deem relevant.
If the protection of our proprietary rights is inadequate to prevent use or appropriation by third parties, the value of our software, brand, and other intangible assets may be diminished, and competitors may be able to more effectively replicate our software products.
If the protection of our proprietary rights is inadequate to prevent use or appropriation by third parties, the value of our software, brand, and other intangible assets may be diminished, and competitors may be able to more effectively replicate our software products. Any of these events would harm our business.
In addition, companies competing with us may have an entirely 23 Table of Cont e n t s different pricing or distribution model. Increased competition could result in fewer customer orders, price reductions, reduced margins, and loss of market share, any of which could harm our business and results of operations.
In addition, companies competing with us may have an entirely different pricing or distribution model. Increased competition could result in fewer customer orders, price reductions, reduced margins, and loss of market share, any of which could harm our business and results of operations.
We may not be successful in convincing the management teams of our potential customers to deploy our software in lieu of existing software solutions or in-house software development projects often favored by internal IT departments 22 Table of Cont e n t s or other competitive products and services.
We may not be successful in convincing the management teams of our potential customers to deploy our software in lieu of existing software solutions or in-house software development projects often favored by internal IT departments or other competitive products and services.
We may also face claims from others seeking to enforce the terms of an open source license, including by demanding 36 Table of Cont e n t s release of the open source software, derivative works or our proprietary source code that was developed using such software.
We may also face claims from others seeking to enforce the terms of an open source license, including by demanding release of the open source software, derivative works or our proprietary source code that was developed using such software.
We cannot be certain as to the standards a court would use to determine whether or not we or a guarantor was insolvent at the relevant time or, regardless of the standard that a court uses, whether the Convertible Notes or the guarantees would be 51 Table of Cont e n t s subordinated to other indebtedness.
We cannot be certain as to the standards a court would use to determine whether or not we or a guarantor was insolvent at the relevant time or, regardless of the standard that a court uses, whether the Convertible Notes or the guarantees would be subordinated to other indebtedness.
Material inaccuracies in our financial statements would impair their value to management and our Board of Directors in making decisions as to the operation of our business, could impair our reputation and cause investors to lose confidence in our reported financial information, which could have a negative effect on investor confidence in our financial statements, the trading price of our stock and our access to capital. 65 Table of Cont e n t s Item 1B.
Material inaccuracies in our financial statements would impair their value to management and our Board of Directors in making decisions as to the operation of our business, could impair our reputation and cause investors to lose confidence in our reported financial information, which could have a negative effect on investor confidence in our financial statements, the trading price of our stock and our access to capital.
The successful assertion of one or more large claims against us that 31 Table of Cont e n t s 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.
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.
The development of new technology products is a highly risky undertaking. Pangiam’s technologies and products will require additional research, development and trials. There can be no assurance that any future research, development or trial efforts will result in viable products.
Ask Sage’s potential products and technologies are in early stages of development. The development of new technology products is a highly risky undertaking. Ask Sage’s technologies and products will require additional research, development and trials. There can be no assurance that any future research, development or trial efforts will result in viable products.
Any intellectual property claims, with or without merit, are difficult to predict, could be very time-consuming and expensive to settle or litigate, could divert our management’s attention and other resources, and may not be covered by the insurance that we 34 Table of Cont e n t s carry.
Any intellectual property claims, with or without merit, are difficult to predict, could be very time-consuming and expensive to settle or litigate, could divert our management’s attention and other resources, and may not be covered by the insurance that we carry.
We have $119.1 million of goodwill assets recorded on our consolidated balance sheet as of December 31, 2024, from previous acquisitions, which represents approximately 35% of our total assets as of the end of this period.
We have $241.1 million of goodwill assets recorded on our consolidated balance sheet as of December 31, 2025, from previous acquisitions, which represents approximately 13% of our total assets as of the end of this period.
If our customers do not renew or expand their agreements with us or if they renew their contracts for shorter lengths or on other 14 Table of Cont e n t s terms less favorable to us, our revenue may decline or grow more slowly than expected, and our business could suffer.
If our customers do not renew or expand their agreements with us or if they renew their contracts for shorter lengths or on other terms less favorable to us, our revenue may decline or grow more slowly than expected, and our business could suffer.
Because we have a limited operating history and the market for our products, 60 Table of Cont e n t s including newly acquired or developed products, is rapidly evolving, it is difficult to predict the company’s operating results, particularly with respect to any new products that it may introduce.
Because we have a limited operating history and the market for our products, including newly acquired or developed products, is rapidly evolving, it is difficult to predict the company’s operating results, particularly with respect to any new products that it may introduce.
We may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and stock price, which could cause you to lose some or all of your investment.
Outcomes from these audits could have an adverse effect on our financial condition and results of operations. 57 Table of Contents We may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and stock price, which could cause you to lose some or all of your investment.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeItem 1C. Cybersecurity We face a multitude of cybersecurity threats that range from attacks common to most industries, such as ransomware and denial-of-service, to attacks from more advanced and persistent, highly organized adversaries, including nation state actors, that target the defense industrial base and other critical infrastructure sectors.
Biggest changeItem 1C. Cybersecurity We face a broad and evolving landscape of cybersecurity threats, ranging from attacks common across most industries—such as ransomware, phishing, and denial-of-service incidents—to more advanced, persistent, and highly organized threats, including nation-state and state-sponsored actors.
We have established a Governance, Risk, and Compliance (GRC) program to further strengthen our cybersecurity risk management activities across the Company, including the prevention, detection, mitigation and remediation of cybersecurity incidents. The CISO reports information about such risks to the Board of Directors.
We have a Governance, Risk, and Compliance (GRC) program to further strengthen our cybersecurity risk management activities across the Company, including the prevention, detection, mitigation and remediation of cybersecurity incidents. The CISO reports information about such risks to the Board of Directors.
We continuously monitor cybersecurity vulnerabilities and potential attack vectors and evaluate the potential operational impacts of any threat and cybersecurity risk countermeasures made to defend against such threats. We leverage government partnerships, industry and government associations, third-party benchmarking, and threat intelligence to safeguard information and ensure availability of critical data and systems.
We continuously monitor cybersecurity vulnerabilities and 63 Table of Contents potential attack vectors and evaluate the potential operational impacts of any threat and cybersecurity risk countermeasures made to defend against such threats. We leverage government partnerships, industry and government associations, third-party benchmarking, and threat intelligence to safeguard information and ensure availability of critical data and systems.
Notwithstanding the extensive approach we take to cybersecurity, we may not be successful in preventing or mitigating a cybersecurity incident that could have a material adverse effect on us. While we maintain cybersecurity insurance, the costs related to cybersecurity threats or disruptions may not be fully insured. 66 Table of Cont e n t s
Notwithstanding the extensive approach we take to cybersecurity, we may not be successful in preventing or mitigating a cybersecurity incident that could have a material adverse effect on us. While we maintain cybersecurity insurance, the costs related to cybersecurity threats or disruptions may not be fully insured.
We carry cyber liability insurance to provide a level of financial protection should a data breach occur. To date, the Company has not experienced any material cybersecurity incidents and we are not aware of any cybersecurity risks that are reasonably likely to materially affect the Company.
We provide specialized security training for certain employees, such as application developers. We carry cyber liability insurance to provide a level of financial protection should a data breach occur. To date, the Company has not experienced any material cybersecurity incidents and we are not aware of any cybersecurity risks that are reasonably likely to materially affect the Company.
Our Cybersecurity program is supervised by a dedicated Chief Information Security Officer (CISO), who has over 16 years experience in cybersecurity and operations and holds the following certifications: Certified Information Systems Security Professional (CISSP) and Certification in Risk and Information Systems Control (CRISC). The CISO’s team is responsible for leading enterprise-wide cybersecurity strategy, policy, standards, architecture, and processes.
Our Cybersecurity program is supervised by a dedicated Chief Information Security Officer (CISO), who has over 17 years experience in cybersecurity and operations and holds the following certifications: Certified Information Systems Security Professional (CISSP) and ISO/IEC 42001 AI Management Systems Lead Implementor. The cybersecurity team is responsible for leading enterprise-wide cybersecurity strategy, policy, standards, architecture, and processes.
Our Cybersecurity Awareness Program engages personnel through training on how to identify potential cybersecurity risks and protect BigBear.ai’s resources and information. This training is mandatory for all employees and is supplemented by enterprise testing initiatives, including periodic phishing tests. We provide specialized security training for certain employees, such as application developers.
Our plan is tested annually, at a minimum via tabletop exercises. Our Cybersecurity Awareness Program engages personnel through training on how to identify potential cybersecurity risks and protect BigBear.ai’s resources and information. This training is mandatory for all employees and is supplemented by enterprise testing initiatives, including periodic phishing tests.
Our customers, suppliers, subcontractors and joint venture partners face similar cybersecurity threats, and a cybersecurity incident impacting us or any of these entities could materially adversely affect our operations, performance and results of operations.
Our customers, suppliers, subcontractors, joint venture partners, and other third parties—both domestic and international—face similar cybersecurity threats. A cybersecurity incident affecting us or any of these entities, including incidents originating from or impacting our international operations, could materially and adversely affect our business, operations, financial condition, and results of operations.
Added
These sophisticated adversaries increasingly target the defense industrial base, critical infrastructure sectors, and companies expanding operations, partnerships, and supply chains across international markets. As we grow our global footprint, we are exposed to additional risks arising from cross-border data flows, varying regulatory regimes, geopolitical tensions, and heightened cyber espionage activity in certain regions.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe have significant operations in the following locations: • McLean, Virginia (Corporate Headquarters) • Ann Arbor, Michigan; • Chantilly, Virginia; and • Charlottesville, Virginia Each of these facilities is strategically located near major national security or civil space community facilities, key customer facilities, commercial space centers and/or prestigious engineering talent pools. Our current footprint is sufficient to support near-term growth.
Biggest changeWe have significant operations in the following locations: • McLean, Virginia (Corporate Headquarters) • Ann Arbor, Michigan • Chantilly, Virginia • Columbia, Maryland • London, United Kingdom • Abu Dhabi, United Arab Emirates 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.
However, as we continue to grow, we plan to continue and even accelerate the pace of leasehold improvements so that our facility capacity is not a limiting factor on our growth.
Our current footprint is sufficient to support near-term growth. However, as we continue to grow, we plan to continue and even accelerate the pace of leasehold improvements so that our facility capacity is not a limiting factor on our growth.
Item 2. Properties We occupy approximately fifty four thousand square feet of leased building space at five primary locations.
Item 2. Properties We occupy approximately fifty nine thousand square feet of leased building space at six 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 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 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. 67 Table of Cont e n t s Stock Performance Graph The following graph compares the total return on a cumulative basis through December 31, 2024 of $100 invested in BigBear.ai Holdings common stock on December 8, 2021 to the New York Stock Exchange (NYSE) Index and the S&P 500 Information Technology Index.
Biggest changeStock Performance Graph The following graph compares the total return on a cumulative basis through December 31, 2025 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, 2024, there were 68 common stockholders of record.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is traded on the New York Stock Exchange under the ticker symbol “BBAI” and began trading on December 8, 2021. Holders As of December 31, 2025, there were 72 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. 65 Table of Contents 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 changeIncome Tax Benefit Income tax benefit consists of income taxes related to federal and state jurisdictions in which we conduct business. 72 Table of Contents Results of Operations The table below presents our consolidated statements of operations for the following periods: Year Ended December 31, 2024 2023 (as restated) 2022 (as restated) Revenues $ 158,236 $ 155,164 $ 155,011 Cost of revenues 113,016 114,563 112,018 Gross margin 45,220 40,601 42,993 Operating expenses: Selling, general and administrative 80,040 71,057 84,775 Research and development 10,863 5,035 8,393 Restructuring charges 1,287 822 4,203 Transaction expenses 1,450 2,721 2,605 Goodwill impairment 85,000 — 53,544 Operating loss (133,420) (39,034) (110,527) Net increase (decrease) in fair value of derivatives 107,658 7,361 (21,387) Loss on extinguishment of debt 31,272 — — Interest expense 25,647 24,877 24,092 Other (income) expense (2,194) (393) 19 Loss before taxes (295,803) (70,879) (113,251) Income tax benefit (256) (222) (1,884) Net loss $ (295,547) $ (70,657) $ (111,367) Comparison of the Year Ended December 31, 2024, 2023 and 2022 Revenues Year Ended December 31, Year-Over-Year Change 2024 2023 2022 2024 vs 2023 2023 vs 2022 Revenues $ 158,236 $ 155,164 $ 155,011 $ 3,072 2.0 % $ 153 0.1 % Revenues increased by $3.1 million during the year ended December 31, 2024 as compared to the year ended December 31, 2023.
Biggest changeResults of Operations The table below presents our consolidated statements of operations and comprehensive loss for the following periods: Years Ended December 31, 2025 2024 2023 Revenues $ 127,672 $ 158,236 $ 155,164 Cost of revenues 99,194 113,016 114,563 Gross margin 28,478 45,220 40,601 Operating expenses: Selling, general and administrative 95,132 80,040 71,057 Research and development 16,752 10,863 5,035 Restructuring charges 4,370 1,287 822 Transaction expenses 2,082 1,450 2,721 Impairment of long-lived assets 53,403 — — Goodwill impairment 70,636 85,000 — Operating loss (213,897) (133,420) (39,034) Interest expense 18,116 25,647 24,877 Interest income (13,253) (2,293) (392) Net increase in fair value of derivatives 92,794 107,658 7,361 Loss on extinguishment of debt 2,577 31,272 — Other expense (income), net 1,505 99 (1) Loss before taxes (315,636) (295,803) (70,879) Income tax benefit (21,722) (256) (222) Net loss $ (293,914) $ (295,547) $ (70,657) Comparison of the Years Ended December 31, 2025, 2024, and 2023 Revenues Years Ended December 31, Year-Over-Year Change Year-Over-Year Change 2025 2024 2023 2025 vs 2024 2024 vs 2023 Revenues $ 127,672 $ 158,236 $ 155,164 $ (30,564) (19.3) % $ 3,072 2.0 % Revenues decreased by $30.6 million during the year ended December 31, 2025 as compared to the year ended December 31, 2024 primarily due to lower volume on the Army programs and significant one time contracts during the year ended December 31, 2024, that did not recur during the year ended December 31, 2025.
On December 19, 2024, the Company entered into privately negotiated exchange agreements (each, an “ Exchange Agreement ”) with a limited number of holders of the Company’s existing 2026 Convertible Notes, to exchange the 2026 Convertible Notes for new senior secured convertible notes due 2029 (the “2029 Convertible Notes ”, together with the 2026 Convertible Notes, the “ Convertible Notes ”).
On December 19, 2024, the Company entered into privately negotiated exchange agreements (each, an “ Exchange Agreement ”) with a limited number of holders of the Company’s existing 2026 Convertible Notes, to exchange the existing convertible notes for new senior secured convertible notes due 2029 (the “2029 Convertible Notes ”, together with the 2026 Convertible Notes, the “ Convertible Notes ”).
Investing activities For the year ended December 31, 2024, net cash provided by investing activities was $2.8 million, primarily consisting of cash acquired from the Pangiam acquisition of $13.9 million, partially offset by capitalized software development costs of $10.6 million.
For the year ended December 31, 2024, net cash provided by investing activities was $2.8 million, primarily consisting of cash acquired from the Pangiam acquisition of $13.9 million, partially offset by capitalized software development costs of $10.6 million.
Financing activities For the year ended December 31, 2024, net cash provided by financing activities was $52.5 million, primarily consisting of the net proceeds from the issuance of shares pursuant to the exercise of the PIPE warrants and RDO warrants of $53.8 million, partially offset by the payment of taxes related to net share settlement of equity awards $2.4 million and the net repayment of $0.4 million related to the 2023 D&O Financing Loan.
For the year ended December 31, 2024, net cash provided by financing activities was $52.5 million, primarily consisting of the net proceeds from the issuance of shares pursuant to the exercise of the PIPE warrants and RDO warrants of $53.8 million, partially offset by the payment of taxes related to net share settlement of equity awards $2.4 million and the net repayment of $0.4 million related to the 2023 D&O Financing Loan.
Within each income approach method, a tax amortization benefit is included, which represents the tax benefit resulting from the amortization of that intangible asset depending on the tax jurisdiction where the intangible asset is held. Finite-lived intangible assets are reported at cost, net of accumulated amortization, and are amortized on a straight-line basis over their estimated useful lives.
Within each income approach method, a tax amortization benefit is included, which represents the tax benefit resulting from the amortization of that intangible asset depending on the tax jurisdiction where the intangible asset is held. Finite-lived intangible assets are reported at cost, net of accumulated amortization and impairment, and are amortized on a straight-line basis over their estimated useful lives.
The discussion and analysis of financial condition and results of operations of BigBear.ai is organized as follows: • Business Overview : This section provides a general description of BigBear.ai’s business, our priorities and the trends affecting our industry in order to provide context for management’s discussion and analysis of our financial condition and results of operations. • Recent Developments : This section provides recent developments that we believe are necessary to understand our financial condition and results of operations. • Results of Operations : This section provides a discussion of our results of operations for the year ended December 31, 2024, December 31, 2023 and December 31, 2022. • Liquidity and Capital Resources : This section provides an analysis of our ability to generate cash and to meet existing or reasonably likely future cash requirements. • Critical Accounting Policies and Estimates : This section discusses the accounting policies and estimates that we consider important to our financial condition and results of operations and that require significant judgment and estimates on the part of management in their application.
The discussion and analysis of financial condition and results of operations of BigBear.ai is organized as follows: • Business Overview : This section provides a general description of BigBear.ai’s business, our priorities and the trends affecting our industry in order to provide context for management’s discussion and analysis of our financial condition and results of operations. • Recent Developments : This section provides recent developments that we believe are necessary to understand our financial condition and results of operations. • Results of Operations : This section provides a discussion of our results of operations for the year ended December 31, 2025, December 31, 2024 and December 31, 2023. • 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.
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 our reporting unit 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.
While these conflicts are still evolving and the eventual outcome remains highly uncertain, we do not believe that these events will have a material impact on our business and results of operations. However, if these conflicts worsen, leading to greater disruptions and uncertainty within the technology industry or global economy, our business and results of operations could be negatively impacted.
While these challenges are still evolving and the eventual outcome remains highly uncertain, we do not believe that these events will have a material impact on our business and results of operations. However, if these challenges worsen, leading to greater disruptions and uncertainty within the technology industry or global economy, our business and results of operations could be negatively impacted.
Derivatives Derivatives are accounted for in accordance with the guidance of ASC 815, Derivatives and Hedging (“ ASC 815 ”), under which the 2029 Notes Conversion Option, the 2026 Notes Conversion Option, IPO private warrants, Private Placement (“ PIPE ”) warrants, warrants issued under the registered direct offering (“ RDO warrants ”), and the Written Put Option, do not meet the criteria for equity treatment and are classified as liabilities measured at fair value.
Derivatives Derivatives are accounted for in accordance with the guidance of ASC 815, Derivatives and Hedging (“ ASC 815 ”), under which the 2029 Notes Conversion Option, the 2026 Notes Conversion Option, IPO private warrants, Private Placement (“ PIPE ”) warrants, 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.
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.
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 judgments used in determining backlog at the end of a period.
We generate revenue from providing both software and services to our customers. Cost of Revenues 71 Table of Contents Cost of revenues primarily includes salaries, stock-based compensation expense, and benefits for personnel involved in performing the services described above as well as allocated overhead and other direct costs.
We generate revenue from providing both software and services to our customers. 69 Table of Contents 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.
In addition, our significant accounting policies, including critical accounting policies, are summarized in Note 3—Summary of Significant Accounting Policies to the accompanying consolidated financial statements included in this Annual Report on Form 10-K. Business Overview Our mission is to help deliver clarity for the world’s most complex decisions.
In addition, our significant accounting policies, including critical accounting policies, are summarized in Note 2—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.
For the critical accounting estimates used in preparing our consolidated financial statements, we make assumptions and judgments that can have a significant impact on revenue and expenses in our consolidated statements of operations , as well as, on the value of certain assets and liabilities on our consolidated balance sheets.
For the critical accounting estimates used in preparing our consolidated financial statements, we make assumptions and judgments that can have a significant impact on revenue and expenses in our consolidated statements of operations and comprehensive loss , as well as, on the value of certain assets and liabilities on our consolidated balance sheets.
BigBear.ai is a leading provider of Edge AI-powered decision intelligence solutions for national security, supply chain management and digital identity. Customers and 69 Table of Contents partners rely on BigBear.ai’s predictive analytics capabilities in highly complex, distributed, mission-based operating environments. We are a technology-led solutions organization, providing both software and services to our customers.
BigBear.ai is a leading provider of Edge AI-powered decision intelligence solutions for national security, supply chain management and digital identity. Customers and partners rely on BigBear.ai’s predictive analytics capabilities in highly complex, distributed, mission-based operating environments. We are a technology-led solutions organization, providing both software and services to our customers.
On February 5, 2025, the Company entered into a warrant exercise agreement with an existing accredited investor to exercise in full an outstanding Common Stock Purchase Warrant to purchase up to an aggregate of 5,800,000 shares of the Company’s common stock.
On February 5, 2025, the Company entered into a warrant exercise agreement with an existing accredited investor to exercise in full an outstanding Common Stock Purchase Warrant, the 2024 RDO warrant, to purchase up to an aggregate of 5,800,000 shares of the Company’s common stock.
When adjustments in estimated contract costs are identified, such revisions may result in current period adjustments to earnings applicable to performance in prior periods. 86 Table of Contents Impairment of Long-Lived Assets The Company evaluates the recoverability of the carrying value of long-lived assets whenever events or circumstances indicate the carrying amount may not be recoverable.
When adjustments in estimated contract costs are identified, such revisions may result in current period adjustments to earnings applicable to performance in prior periods. Impairment of Long-Lived Assets The Company evaluates the recoverability of the carrying value of long-lived assets whenever events or circumstances indicate the carrying amount may not be recoverable.
The following table presents the carrying amounts and fair values associated with the Convertible Notes as of December 31, 2024. The fair value of the Convertible Notes is considered to be a Level 3 fair value measurement.
The following table presents the carrying amounts and fair values associated with the Convertible Notes as of December 31, 2025. The fair value of the Convertible Notes is considered to be a Level 3 fair value measurement.
We evaluate the recoverability of our intangible assets for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the intangible assets are expected to generate.
We evaluate the recoverability of our intangible assets for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of these assets is measured by a comparison of the 83 Table of Contents carrying amounts to the future undiscounted cash flows the intangible assets are expected to generate.
Public warrants meet the criteria for equity classification. The Company remeasures these derivatives at fair value at each reporting period with changes in fair value recognized in the consolidated statements of operations. Equity-based Compensation Pursuant to ASC 718, Compensation – Stock Compensation , equity-based awards are measured at fair value on the grant date.
Public warrants meet the criteria for equity classification. The Company remeasures these derivatives at fair value at each reporting period with changes in fair value recognized in the consolidated statements of operations and comprehensive loss. Equity-based Compensation Pursuant to ASC 718, Compensation – Stock Compensation , equity-based awards are measured at fair value on the grant date.
The Company 85 Table of Contents considers the nature of these contracts and the types of solutions and services provided when determining the proper accounting for a particular contract. The Company performs under various types of contracts, which generally include firm-fixed-price (“ FFP ”), time-and-materials (“ T&M ”), and cost-reimbursable contracts.
The Company considers the nature of these contracts and the types of solutions and services provided when determining the proper accounting for a particular contract. The Company performs under various types of contracts, which generally include firm-fixed-price (“ FFP ”), time-and-materials (“ T&M ”), and cost-reimbursable contracts.
Under the percentage-of-completion cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs to complete the performance obligation(s). Our cost estimation process is based on the professional knowledge of our professionals and draws on their significant experience and judgment.
Under the percentage-of-completion cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs to complete the performance obligation(s). 84 Table of Contents Our cost estimation process is based on the professional knowledge of our professionals and draws on their significant experience and judgment.
The number of Discretionary PSUs and STIP PSUs that will vest is based on the achievement of the performance criteria during each respective annual measurement period, provided that the employees remain 88 Table of Contents in continuous service on each vesting date. Vesting will not occur unless a minimum performance criteria threshold is achieved.
The 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.
Based on our projected cash flow and liquidity needs, we believe that our cash from operating activities generated from continuing operations during the year will be adequate for the next 12 months to meet our anticipated uses of cash flow.
Based on our projected cash flow and liquidity needs, we believe that our cash from operating activities generated from continuing operations 77 Table of Contents during the year will be adequate for the next 12 months to meet our anticipated uses of cash flow.
In consideration for the immediate and full exercise of the existing warrant for cash, the investor received a new unregistered Common Stock Purchase Warrant to purchase up to an aggregate of 3,770,000 shares of the Company’s common stock (the “New Warrant”) in a private placement.
In consideration for the immediate and full exercise of the existing warrant for cash, the investor received a new unregistered Common Stock Purchase Warrant to purchase up to an aggregate of 3,770,000 shares of the Company’s common stock (the “2025 RDO Warrant”) in a private placement.
The favorable change in net working capital was largely driven by a decrease in accounts receivable of $6.4 million, a decrease in prepaid expenses and other assets of $5.9 82 Table of Contents million, and in increase in accrued liabilities of $2.6 million.
The favorable change in net working capital was largely driven by a decrease in accounts receivable of $6.4 million, a decrease in prepaid expenses and other assets of $5.9 million, and in increase in accrued liabilities of $2.6 million.
The Company recognized a loss on extinguishment of $31.3 million on the consolidated statements of operations related to the unamortized debt issuance costs of the exchanged 2026 Convertible Notes. The 2029 Convertible Notes were issued pursuant to, and are governed by, an indenture, dated as of December 27, 2024.
The Company recognized a loss on extinguishment of $31.3 million on the consolidated statements of operations and comprehensive loss related to the unamortized debt issuance costs of the exchanged 2026 Convertible Notes during the year ended December 31, 2024. The 2029 Convertible Notes were issued pursuant to, and are governed by, an indenture, dated as of December 27, 2024.
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.
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 one reporting unit.
Specifically, judgment is used in interpreting complex arrangements with nonstandard terms and conditions and determining when all criteria for revenue recognition have been met. The Company’s revenues are derived from the sale of artificial intelligence, machine learning, and technical consulting solutions and services.
Revenue Recognition The recognition and measurement of revenue requires the use of judgments and estimates. Specifically, judgment is used in interpreting complex arrangements with nonstandard terms and conditions and determining when all criteria for revenue recognition have been met. The Company’s revenues are derived from the sale of artificial intelligence, machine learning, and technical consulting solutions and services.
We continue to expect the geopolitical climate to drive adoption of our offerings over the long term, as it has heightened the need for advanced AI tools that provide enhanced intelligence and full spectrum cyber operations – areas where we have unmatched capabilities.
We continue to expect the global economic and geopolitical environment to drive adoption of our offerings over the long term, as it has heightened the need for advanced AI tools that provide enhanced intelligence and full spectrum cyber operations – areas where we believe we have unmatched capabilities.
The effective 75 Table of Contents tax rate for the year ended December 31, 2024 differs from the U.S. federal income tax rate of 21.0% primarily due to state and local income taxes, permanent differences between book and taxable income, certain discrete items and the change in valuation allowance.
The effective tax rate for the year ended December 31, 2025 differs from the U.S. federal income tax rate of 21.0% primarily due to state and local income taxes, permanent differences between book and taxable income, certain discrete items and the change in valuation allowance.
(7) Non-recurring internal integration costs related to the Pangiam acquisition. (8) During the year ended December 31, 2024, the Company recognized a non-cash goodwill impairment charge primarily driven by a decrease in share price during the quarter compared to the share price of the equity issued as consideration for the purchase of Pangiam.
(7) Non-recurring internal integration costs related to the Pangiam and Ask Sage acquisitions, respectively. (8) During the year ended December 31, 2024, the Company recognized a non-cash goodwill impairment charge primarily driven by a decrease in share price during the quarter compared to the share price of the equity issued as consideration for the purchase of Pangiam.
The 2023 PIPE warrants and the 2023 RDO warrant were fully settled as of December 31, 2024 . The net increase in fair value of derivatives of $7.4 million for the year ended December 31, 2023 consists of fair value remeasurements of IPO private warrants, 2026 Notes Conversion Option, PIPE warrants, and RDO warrants.
The net increase in fair value of derivatives of $107.7 million for the year ended December 31, 2024 includes fair value remeasurements of the 2026 Notes Conversion Option, 2029 Notes Conversion Option, IPO private warrants, PIPE warrants, and RDO warrants. The 2023 PIPE warrants and the 2023 RDO warrant were fully settled as of December 31, 2024.
The Company exchanged (the “ Exchange Transaction ”) approximately $182.3 million principal amount of the 2026 Convertible Notes for $182.3 million in aggregate principal amount of the Company’s 2029 Convertible Notes and approximately $0.4 million in cash, with such cash payment representing the accrued and unpaid interest on such the exchanged 2026 Convertible Notes.
The Company exchanged (the “ Exchange Transaction ”) approximately $182.3 million principal amount of the 2026 Convertible Notes for $182.3 million in aggregate principal amount of the Company’s 2029 Convertible Notes and 79 Table of Contents approximately $0.4 million in cash, with such cash payment representing the accrued and unpaid interest on such then existing Convertible Notes.
The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable.
The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies, but any such election to opt out is irrevocable. The Company previously elected not to opt out of the extended transition period.
The approaches used for determining the fair value of finite-lived technology and customer relationships acquired depends on the circumstances; the Company has used the income approach (within the income approach, various methods are available such as multi-period excess earnings, with and without, incremental and relief from royalty methods).
The approaches used for determining the fair value of finite-lived intangible assets depends on the circumstances; the Company has used the income approach (within the income approach, various methods are available such as multi-period excess earnings, with and without, incremental and relief from royalty methods).
The decrease in cost of revenues as a percentage of total revenues was driven by higher margins from the inclusion of Pangiam’s results. Cost of revenues as a percentage of total revenues increased to 74% for the year ended December 31, 2023 as compared to 77% for the year ended December 31, 2022.
Cost of revenues as a percentage of total revenues was 71% for the year ended December 31, 2024 as compared to 74% for the year ended December 31, 2023. The decrease in cost of revenues as a percentage of total revenues was driven by higher margins from the inclusion of Pangiam’s results.
Adjusted EBITDA is defined as net income (loss) adjusted for interest expense (incom e), net, income tax (benefit) expense, depreciation and amortization, equity-based compensation and associated employer payroll taxes, net increase in fair value of derivatives, restructuring charges, non-recurring strategic initiatives, non-recurring litigation, transaction expenses, goodwill impairment, non-recurring integration costs, capital market advisory fees, commercial start-up costs, and loss on extinguishment of debt.
Adjusted EBITDA is defined as net loss adjusted for interest expense, interest income, income tax benefit, depreciation and amortization, equity-based compensation and associated employer payroll taxes, net increase in fair value of derivatives, restructuring charges, non-recurring strategic initiatives, non-recurring litigation, transaction expenses, non-recurring integration costs, goodwill impairment, and loss on extinguishment of debt.
As of January 1, 2025, the Company reserved an aggregate of 3,316,677 common shares (subject to annual increases on January 1 of each year and ending in 2031) of the Company’s common stock for grants under the ESPP.
As of January 1, 2025, the Company reserved an aggregate of 5,260,346 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.
The additional loss relates to $11.4 million fair market value adjustment of the 2026 Notes Conversion Option, 2024 Warrants, and IPO Private Warrants during the year ended December 31, 2024.This loss is net of a $10.6 million gain related to the issuance of the 2024 Warrants and was further offset by a reduction of $11.4 million upon remeasurement of the 2024 Warrants and IPO Private Warrants’ fair value during the year ended December 31, 2024.
This loss is net of a $10.6 million gain related to the issuance of the 2024 Warrants and was further offset by a reduction of $11.4 million upon remeasurement of the 2024 Warrants and IPO Private Warrants’ fair value during the year ended December 31, 2024.
Equity-based compensation expense related to purchase rights issued under the ESPP is based on the Black-Scholes OPM fair value of the estimated number of awards as of the beginning of the offering period. Equity-based compensation expense is recognized using the straight-line method over the offering period.
Equity-based compensation expense related to purchase rights issued under the ESPP is based on the Black-Scholes OPM fair value of the estimated number of awards as of the beginning of the offering period.
Goodwill Impairment Year Ended December 31, Year-Over-Year Change 2024 2023 2022 2024 vs 2023 2023 vs 2022 Goodwill impairment $ 85,000 $ — $ 53,544 $ 85,000 100.0 % $ (53,544) (100.0) % During the year ended December 31, 2024, the Company recognized a non-cash goodwill impairment charge of $85.0 million primarily driven by a decrease in share price during the quarter compared to the share price of the equity issued as consideration for the acquisition of Pangiam.
During the year ended December 31, 2024, the Company recognized a non-cash goodwill impairment charge of $85.0 million primarily driven by a decrease in share price during the first quarter of 2024 compared to the share price of the equity issued as consideration for the acquisition of Pangiam.
The table below presents a reconciliation of free cash flow to net cash used in operating activities, computed in accordance with GAAP: Year Ended December 31, 2024 2023 2022 Net cash used in operating activities $ (38,119) $ (18,307) $ (48,918) Capital expenditures, net (11,114) (3,830) (769) Free cash flow $ (49,233) $ (22,137) $ (49,687) Key Performance Indicators Backlog We view growth in backlog as a key measure of our business growth.
The table below presents a reconciliation of free cash flow to net cash used in operating activities, computed in accordance with GAAP: Years Ended December 31, 2025 2024 2023 Net cash used in operating activities $ (41,951) $ (38,119) $ (18,307) Capital expenditures, net (4,366) (11,114) (3,830) Free cash flow $ (46,317) $ (49,233) $ (22,137) Key Performance Indicators Backlog We view growth in backlog as a key measure of our business growth.
The 2029 Convertible Notes added a covenant that require the Company to maintain liquidity of at least $15 million measured as an average of the last five business days of any month. As of December 31, 2024, the Company was in compliance with all covenants related to the Convertible Notes.
The 2029 Convertible Notes added a covenant that requires the Company to maintain liquidity of at least $15 million measured as of the last business day of any month. As of December 31, 2025, the Company was in compliance with all covenants related to the Convertible Notes.
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 85 Table of Contents other relevant factors.
The stock options expire on the 10th anniversary of the grant date. The Company recognizes equity-based compensation expense for the stock options equal to the fair value of the awards on a straight-line basis over the service based vesting period. Restricted Stock Units Pursuant to the Plan, the Company may award Restricted Stock Units (“ RSUs ”) to eligible employees.
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.
Goodwill Impairment Goodwill impairment consists of non-cash impairments of goodwill. Net Increase (Decrease) in Fair Value of Derivatives Net increase (decrease) in fair value of derivatives consists of fair value remeasurements of the 2029 Convertible Notes Conversion Option, 2026 Convertible Notes Conversion Option, PIPE warrants, RDO warrants, IPO private warrants, and the Written put option.
Net increase in fair value of derivatives Net increase in fair value of derivatives consists of fair value remeasurements of the 2029 Convertible Notes Conversion Option, 2026 Convertible Notes Conversion Option, PIPE warrants, RDO warrants, and IPO private warrants.
(2) The increase in fair value of derivatives during the year ended December 31, 2024, relates to the $42.3 million loss recorded upon the exercise of the 2023 RDO and 2023 PIPE Warrants (the “2023 Warrants”) and issuance of the warrants in 2024 (the “2024 Warrants”) in connection with the warrant exercise agreements entered into on February 27, 2024 and March 4, 2024.
Additionally, there was a loss of $20.8 million fair market value adjustments of the 2026 and 2029 Notes Conversion Option, during the year ended December 31, 2025. 75 Table of Contents (2) The increase in fair value of derivatives during the year ended December 31, 2024, relates to the $42.3 million loss recorded upon the exercise of the 2023 RDO and 2023 PIPE Warrants (the “2023 Warrants”) and issuance of the warrants in 2024 (the “2024 Warrants”) in connection with the warrant exercise agreements entered into on February 27, 2024 and March 4, 2024.
The fair value of the acquired technology and customer relationships has been estimated using various underlying judgments, assumptions, and estimates. Potential changes in the underlying judgments, assumptions, and estimates used in our valuations of acquired intangible assets could result in different estimates of the future fair values.
Potential changes in the underlying judgments, assumptions, and estimates used in our valuations of acquired intangible assets could result in different estimates of the future fair values.
The Company did not receive any cash proceeds from the issuance of the 2029 Convertible Notes pursuant to the Exchange Transactions. The 2026 Convertible Notes and the 2029 Convertible Notes require the Company to meet certain financial and other covenants.
Upon completion of the Exchange Transaction, the aggregate principal amount of the 2026 Convertible Notes outstanding was $17.7 million . The Company did not receive any cash proceeds from the issuance of the 2029 Convertible Notes pursuant to the Exchange Transactions. The 2026 Convertible Notes and the 2029 Convertible Notes require the Company to meet certain financial and other covenants.
These were partially offset by an increase in contract assets of $3.5 million, a decrease in accounts payable of $4.4 million, a decrease in contract liabilities of $1.1 million, and a decrease in other liabilities of $2.3 million. For the year ended December 31, 2022, net cash used in operating activities was $48.9 million.
These were partially offset by an increase in prepaid expenses and other assets of $10.4 million, a decrease in accounts payable of $5.7 million, and a decrease in accrued expenses of $0.3 million. For the year ended December 31, 2024, net cash used in operating activities was $38.1 million.
The change in revenues were primarily driven by increases due to the acquisition of Pangiam, offset by decreased volume from the Air Force EPASS program which wound down in the second quarter of 2023.
Revenues increased by $3.1 million during the year ended December 31, 2024 as compared to the year ended December 31, 2023. The change in revenues were primarily driven by increases due to the acquisition of Pangiam, offset by decreased volume from the Air Force EPASS program which wound down in the second quarter of 2023.
The 2029 Convertible Notes will be fully and unconditionally guaranteed, on a senior, secured basis, by the Company and certain of its existing and future direct and indirect subsidiaries, subject to certain exceptions (the “Guarantors”), and will initially be secured on a first-priority basis by substantially all assets of the Company and such Guarantors, subject to certain exceptions. 80 Table of Contents Upon completion of the Exchange Transaction, the aggregate principal amount of the 2026 Convertible Notes outstanding was $17.7 million.
The 2029 Convertible Notes will be fully and unconditionally guaranteed, on a senior, secured basis, by the Company and certain of its existing and future direct and indirect subsidiaries, subject to certain exceptions (the “Guarantors”), and will initially be secured on a first-priority basis by substantially all assets of the Company and such Guarantors, subject to certain exceptions.
For the year ended December 31, 2023, net cash provided by financing activities was $42.1 million, primarily consisting of net proceeds from the issuance of the Private Placement and Registered Direct Offering shares of $50.0 million, offset by the payment of transaction costs associated with the Private Placement and Registered Direct Offering of $5.7 million, proceeds from the issuance of common stock upon ESPP purchase of $1.2 million, the payment of taxes related to net share settlement of equity awards of $2.6 million, and net repayment of $0.8 million related to the 2023 D&O Financing Loan.
For the year ended December 31, 2023, net cash provided by financing activities was $42.1 million, primarily consisting of net proceeds from the issuance of the Private Placement and Registered Direct Offering shares of $50.0 million, offset by the payment of transaction costs associated with the Private Placement and Registered Direct Offering of $5.7 million, proceeds from the issuance of common stock upon ESPP purchase of $1.2 million, the payment of taxes related to net share settlement of equity awards of $2.6 million, and net repayment of $0.8 million related to the 2023 D&O Financing Loan. 81 Table of Contents Critical Accounting Policies and Estimates Our significant accounting policies are summarized in Note 2 of our audited consolidated financial statements for the year ended December 31, 2025 included in this Annual Report on Form 10-K.
Interest Expense Year Ended December 31, Year-Over-Year Change 2024 2023 (as restated) 2022 (as restated) 2024 vs 2023 2023 vs 2022 (as restated) Interest expense $ 25,647 $ 24,877 $ 24,092 $ 770 3.1 % $ 785 3.3 % Interest expense during the years ended December 31, 2024, December 31, 2023, and December 31, 2022 consists primarily of interest expense, commitment fees, debt issuance discount amortization, and debt issuance cost amortization under our Convertible Notes and Bank of America Senior Revolver.
Interest expense Years Ended December 31, Year-Over-Year Change Year-Over-Year Change 2025 2024 2023 2025 vs 2024 2024 vs 2023 Interest expense $ 18,116 $ 25,647 $ 24,877 $ (7,531) (29.4) % $ 770 3.1 % Interest expense during the year ended December 31, 2025 and 2024 consists primarily of interest expense, debt issuance discount amortization, commitment fees and debt issuance cost amortization under our Convertible Notes.
Our quantitative goodwill impairment test reflected an allocation of 50% and 50% between the income and market-based approaches, respectively. Significant inputs into the valuation models included the discount rate, EBITDA growth and estimated future cash flows.
Our goodwill impairment test reflected an allocation of 50% and 50% between the income and market-based approaches, respectively. Significant inputs into the valuation models included the discount rate, EBITDA growth and estimated future cash flows. We used a discount rate of 12%, guideline peer group and their historical and forward-looking revenues in the goodwill impairment test.
(3) During the year ended December 31, 2024 and the year ended December 31, 2023, the Company incurred employee separation costs associated with a strategic review of the Company’s capacity and future projections to better align the organization and cost structure and improve the affordability of its products and services.
(3) Employee separation costs associated with strategic reviews 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.
Net Increase (Decrease) in Fair Value of Derivatives Year Ended December 31, Year-Over-Year Change 2024 2023 (as restated) 2022 (as restated) 2024 vs 2023 2023 vs 2022 (as restated) Net increase (decrease) in fair value of derivatives $ 107,658 $ 7,361 $ (21,387) $ 100,297 1362.5 % $ 28,748 (134.4) % The net increase in fair value of derivatives of $107.7 million for the year ended December 31, 2024 includes fair value remeasurements of the 2026 Notes Conversion Option, 2029 Notes Conversion Option, IPO private warrants, PIPE warrants, and RDO warrants.
Net increase in fair value of derivatives Years Ended December 31, Year-Over-Year Change Year-Over-Year Change 2025 2024 2023 2025 vs 2024 2024 vs 2023 Net increase in fair value of derivatives $ 92,794 $ 107,658 $ 7,361 $ (14,864) (13.8) % $ 100,297 1362.5 % The net increase in fair value of derivatives of $92.8 million for the year ended December 31, 2025 includes fair value remeasurements of the 2029 Notes Conversion Option, IPO private warrants, 2026 Notes Conversion Option, and the 2025 RDO warrants.
The 2024 RDO warrants became exercisable commencing on August 28, 2024, expiring after five years, with an exercise price per share equal to $3.78. These warrants were fully exercised during the first quarter of 2025.
The 2024 RDO warrants became exercisable six months after issuance and had a five-year term, with an exercise price per share equal to $3.78. These warrants were fully exercised during the first quarter of 2025.
These increases were partially offset by an increase in accounts receivable of $0.8 million, an increase in prepaid expenses and other assets of $1.7 million, a decrease in accrued liabilities of $5.1 million and a decrease in contract liabilities of $3.7 million.
These were partially offset by an increase in contract assets of $3.5 million, a decrease in accounts payable of $4.4 million, a decrease in contract liabilities of $1.1 million, and a decrease in other liabilities of $2.3 million.
SG&A Year Ended December 31, Year-Over-Year Change 2024 2023 2022 2024 vs 2023 2023 vs 2022 SG&A $ 80,040 $ 71,057 $ 84,775 $ 8,983 12.6 % $ (13,718) (16.2) % SG&A as a percentage of revenues 51 % 46 % 55 % SG&A expenses as a percentage of total revenues for the year ended December 31, 2024 increased to 51% as compared to 46% for the year ended December 31, 2023.
SG&A Years Ended December 31, Year-Over-Year Change Year-Over-Year Change 2025 2024 2023 2025 vs 2024 2024 vs 2023 SG&A $ 95,132 $ 80,040 $ 71,057 $ 15,092 18.9 % $ 8,983 12.6 % SG&A as a percentage of revenues 75 % 51 % 46 % SG&A expenses as a percentage of total revenues for the year ended December 31, 2025 increased to 75% as compared to 51% for the year ended December 31, 2024.
Research and Development Year Ended December 31, Year-Over-Year Change 2024 2023 2022 2024 vs 2023 2023 vs 2022 Research and development $ 10,863 $ 5,035 $ 8,393 $ 5,828 115.7 % $ (3,358) (40.0) % Research and development expenses increased by $5.8 million during the year ended December 31, 2024 as compared to the year ended December 31, 2023.
Research and development Years Ended December 31, Year-Over-Year Change Year-Over-Year Change 2025 2024 2023 2025 vs 2024 2024 vs 2023 Research and development $ 16,752 $ 10,863 $ 5,035 $ 5,889 54.2 % $ 5,828 115.7 % Research and development expenses increased by $5.9 million during the year ended December 31, 2025 as compared to the year ended December 31, 2024.
Interest Expense Interest expense consists primarily of interest expense, commitment fees, debt issuance discount amortization, and debt issuance cost amortization under our debt agreements.
Interest expense Interest expense consists primarily of interest expense, commitment fees, debt issuance discount amortization, and debt issuance cost amortization under our debt agreements. Interest income Interest income consists primarily of interest income earned on our money market accounts and investments in debt securities.
Additionally, for the year-ended December 31, 2024, $54.4 million is related to derivative liabilities in connection with the 2029 Convertible Notes. The increase in fair value of derivatives during the year ended December 31, 2023 primarily relates to changes in the fair value of PIPE warrant and RDO warrants issued during the first and second quarters of 2023.
The increase in fair value of derivatives during the year ended December 31, 2023 primarily relates to changes in the fair value of PIPE warrant and RDO warrants issued during the first and second quarters of 2023.
(6) Transaction expenses during the year ended December 31, 2024 and December 31, 2023 consist primarily of diligence, legal and other related expenses incurred associated with the Pangiam acquisition. Transaction costs incurred in 2022 are primarily related to our acquisition of ProModel Corporation as well as costs associated with evaluating other acquisition opportunities.
(6) Transaction expenses during the year ended December 31, 2024 consist primarily of diligence, legal and other related expenses incurred associated with the Pangiam acquisition. Transaction expenses during the year ended December 31, 2025 consist primarily of diligence, legal and other related expenses incurred associated with the Ask Sage acquisition, as well as expenses incurred to explore other acquisition options.
Cash Flows The table below summarizes certain information from our consolidated statements of cash flows for the following periods: Year Ended December 31, 2024 2023 2022 Net cash used in operating activities (38,119) (18,307) (48,918) Net cash provided by (used in) investing activities 2,821 (3,830) (5,234) Net cash provided by (used in) financing activities 52,458 42,062 (103,137) Net increase (decrease) in cash and cash equivalents 17,584 19,925 (157,289) Cash and cash equivalents at the beginning of period 32,557 12,632 169,921 Cash and cash equivalents at the end of the period $ 50,141 $ 32,557 $ 12,632 Operating activities For the year ended December 31, 2024, net cash used in operating activities was $38.1 million.
Cash Flows The table below summarizes certain information from our consolidated statements of cash flows for the following periods: Years Ended December 31, 2025 2024 2023 Net cash used in operating activities $ (41,951) $ (38,119) $ (18,307) Net cash (used in) provided by investing activities (606,682) 2,821 (3,830) Net cash provided by financing activities 691,313 52,458 42,062 Effect of foreign currency rate changes on cash and cash equivalents (174) 424 — Net increase in cash, cash equivalents, and restricted cash 42,506 17,584 19,925 Cash, cash equivalents, and restricted cash at the beginning of the period 50,141 32,557 12,632 Cash, cash equivalents, and restricted cash at the end of the period $ 92,647 $ 50,141 $ 32,557 80 Table of Contents Operating activities For the year ended December 31, 2025, net cash used in operating activities was $42.0 million.
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. 76 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, 2024 2023 (as restated) 2022 (as restated) Net loss $ (295,547) $ (70,657) $ (111,367) Interest expense 25,647 24,877 24,092 Interest income (2,293) (392) — Income tax benefit (256) (222) (1,884) Depreciation and amortization 11,872 7,901 7,758 EBITDA (260,577) (38,493) (81,401) Adjustments: Equity-based compensation 21,127 18,671 10,865 Employer payroll taxes related to equity-based compensation (1) 985 440 — Net increase in fair value of derivatives (2) 107,658 7,361 (21,387) Restructuring charges (3) 1,287 822 4,203 Non-recurring strategic initiatives (4) 6,459 3,025 — Non-recurring litigation (5) 1,142 2,250 — Transaction expenses (6) 1,450 2,721 2,605 Non-recurring integration costs (7) 1,800 — — Goodwill impairment (8) 85,000 — 53,544 Loss on extinguishment of debt (9) 31,272 — — Capital market advisory fees (10) — — 741 Commercial start-up costs (11) — — 6,490 Adjusted EBITDA $ (2,397) $ (3,203) $ (17,085) (1) Includes employer payroll taxes due upon the vesting of equity awards granted to employees.
Adjusted EBITDA - Non-GAAP The following table presents a reconciliation of Adjusted EBITDA to net loss, computed in accordance with GAAP: Years Ended December 31, 2025 2024 2023 Net loss $ (293,914) $ (295,547) $ (70,657) Interest expense 18,116 25,647 24,877 Interest income (13,253) (2,293) (392) Income tax benefit (21,722) (256) (222) Depreciation and amortization 15,281 11,872 7,901 EBITDA (295,492) (260,577) (38,493) Adjustments: Equity-based compensation 23,330 21,127 18,671 Employer payroll taxes related to equity-based compensation (1) 2,011 985 440 Net increase in fair value of derivatives (2) 92,794 107,658 7,361 Restructuring charges (3) 4,370 1,287 822 Non-recurring strategic initiatives (4) 9,075 6,459 3,025 Non-recurring litigation (5) 30 1,142 2,250 Transaction expenses (6) 2,082 1,450 2,721 Non-recurring integration costs (7) 44 1,800 — Goodwill impairment (8) 70,636 85,000 — Impairment of long-lived assets (9) 53,403 — — Loss on extinguishment of debt (10) 2,577 31,272 — Adjusted EBITDA $ (35,140) $ (2,397) $ (3,203) (1) Includes employer payroll taxes due upon the vesting of equity awards granted to employees.
Unpriced unexercised contract options represent the remaining contract value of goods and services to be delivered under existing contracts if our customer elects to exercise all of the options available in the contract.
Unpriced unexercised contract options represent the remaining contract value of goods and services to be delivered under existing contracts if our customer elects to exercise all of the options available in the contract. 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.
The increase in research and development expenses was driven by increased headcount, the timing of certain research and development projects, as well as the inclusion of Pangiam’s results. Research and development expenses decreased by $3.4 million during the year ended December 31, 2023 as compared to the year ended December 31, 2022.
The increase in research and development expenses was driven by increased headcount, the timing of certain research and development projects, as well as the inclusion of Pangiam’s results.
Cost of Revenues Year Ended December 31, Year-Over-Year Change 2024 2023 2022 2024 vs 2023 2023 vs 2022 Cost of revenues $ 113,016 $ 114,563 $ 111,510 $ (1,547) (1.4) % $ 2,545 2.3 % Cost of revenues as a percentage of revenues 71 % 74 % 77 % Cost of revenues as a percentage of total revenues was 71% for the year ended December 31, 2024 as compared to 74% for the year ended December 31, 2023.
Cost of revenues Years Ended December 31, Year-Over-Year Change Year-Over-Year Change 2025 2024 2023 2025 vs 2024 2024 vs 2023 Cost of revenues $ 99,194 $ 113,016 $ 114,563 $ (13,822) (12.2) % $ (1,547) (1.4) % Cost of revenues as a percentage of revenues 78 % 71 % 74 % Cost of revenues as a percentage of total revenues was 78% and 71% for the year ended December 31, 2025 and 2024, respectively.
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.
Restructuring charges Restructuring charges consist of employee separation costs related to strategic cost saving initiatives to better align our organization and cost structure and improve the affordability of our products and services as well as employee separation costs associated with strategic changes in certain key leadership roles.
Because the fair value of the reporting unit approximated its carrying value, a negative change in the key assumptions used in the interim impairment analysis or an increase in the carrying value may result in a future impairment of goodwill.
Due to the proximity of the long-lived asset impairment and the acquisition of Ask Sage, the fair value of the reporting unit approximates its carrying value, and a negative change in the key assumptions used in the interim impairment analysis and the purchase price allocation or an increase in the carrying value may result in a future impairment of goodwill.
The conversion rate is 281.4491 shares of common stock per $1,000 principal amount of 2029 Convertible Notes, which represents an initial conversion price of $3.55 per share of the Company’s common stock.
The conversion rate is 281.4491 shares of common stock per $1,000 principal amount of 2029 Convertible Notes, which represents an initial conversion price of $3.55 per share of the Company’s common stock. During the three months ended March 31, 2025, $57.7 million of the 2029 Convertible Notes were voluntarily converted by noteholders following the Exchange Transaction.
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.
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.
The following table summarizes certain backlog information: December 31, 2024 December 31, 2023 Funded $ 46,552 $ 30,112 Unfunded 72,474 49,382 Priced, unexercised options 283,258 63,878 Unpriced, unexercised options 16,021 24,438 Total backlog $ 418,305 $ 167,810 Liquidity and Capital Resources Our primary sources of liquidity are cash flows provided by our operations.
The following table summarizes certain backlog information (in thousands): December 31, 2025 December 31, 2024 Funded $ 54,859 $ 46,552 Unfunded 57,509 72,474 Priced, unexercised options 130,564 283,258 Unpriced, unexercised options 5,128 16,021 Total backlog $ 248,060 $ 418,305 Liquidity and Capital Resources Sources of Liquidity Our primary sources of liquidity are cash flows provided by our operations and maturities of available-for-sale investments.
Recent Accounting Pronouncements See Note 3—Summary of Significant Accounting Policies of the consolidated financial statements included in this Annual Report on Form 10-K for a discussion of recently issued accounting pronouncements.
However, as of December 31, 2025, the Company has adopted all applicable accounting standards effective for non-EGC filers as required. See Note 2—Summary of Significant Accounting Policies of the consolidated financial statements included in this Annual Report on Form 10-K for a discussion of recently issued accounting pronouncements.
As of December 31, 2024, the Company has determined that it is not more-likely-than-not that substantially all of its deferred tax assets will be realized in the future and continues to have a full valuation allowance established against its deferred tax assets.
The decrease in the effective tax rate for the year ended December 31, 2024 from the year ended December 31, 2023 was primarily due to significant pre-tax loss, non-deductible goodwill impairment and derivative losses, largely offset by an increase in valuation allowance. 74 Table of Contents As of December 31, 2025, the Company has determined that it is not more-likely-than-not that substantially all of its deferred tax assets will be realized in the future and continues to have a full valuation allowance established against its deferred tax assets.
The New Warrant will become exercisable commencing any time on or after August 6, 2025 (the “Exercise Date”) with an expiration date five years after the Exercise Date with an exercise price per share equal to $9.00. The gross proceeds to the Company from the exercise were $21.9 million, prior to deducting estimated offering expenses.
The 2025 RDO Warrant became exercisable commencing on August 6, 2025 (the “Exercise Date”) with an expiration date five years after the Exercise Date with an exercise price per share equal to $9.00.
Net loss before deducting depreciation, amortization and other non-cash items was $49.4 million and was offset by a favorable change in net working capital of $0.5 million which contributed to operating cash flows during this period. The favorable change in net working capital was largely driven by increases in accounts payable of $9.9 million and other liabilities of $2.2 million.
Net loss before deducting depreciation, amortization and other non-cash items was $46.9 million and was further impacted by a favorable change in net working capital of $5.0 million.
Transaction Expenses Year Ended December 31, Year-Over-Year Change 2024 2023 2022 2024 vs 2023 2023 vs 2022 Transaction expenses $ 1,450 $ 2,721 $ 2,605 $ (1,271) (46.7) % $ 116 4.5 % Transaction expenses for the years ended December 31, 2024 and December 31, 2023 consist of diligence, legal and other related expenses associated with the Pangiam Acquisition. 74 Table of Contents Transaction expenses the year ended December 31, 2022 are related to our acquisition of ProModel Corporation as well as costs associated with evaluating other acquisition opportunities.
Restructuring charges consist of employee separation costs related to strategic cost saving initiatives to better align our organization and cost structure and improve the affordability of our products and services as well as employee separation costs associated with strategic changes in certain key leadership roles 72 Table of Contents Transaction expenses Years Ended December 31, Year-Over-Year Change Year-Over-Year Change 2025 2024 2023 2025 vs 2024 2024 vs 2023 Transaction expenses $ 2,082 $ 1,450 $ 2,721 $ 632 43.6 % $ (1,271) (46.7) % Transaction expenses for the year ended December 31, 2025 consist of diligence, legal and other related expenses associated with the Ask Sage Acquisition, as well as costs associated with evaluating other acquisition opportunities .
If our assumptions or conditions change, the actual results the Company reports may differ from these estimates.
If our assumptions or conditions change, the actual results the Company reports may differ from these estimates. We believe the following critical accounting policies affect the more significant estimates, assumptions, and judgments we use to prepare our consolidated financial statements.

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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 changeDue to the short-term nature of the financial instruments, we have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates. Foreign Currency Exchange Risk Our contracts with customers are primarily denominated in U.S. dollars, with the remaining denominated in foreign currencies.
Biggest changeThe primary objective of our investment activities and strategies are focused on the preservation of capital and supporting our liquidity requirements. Due to the short-term nature of the financial instruments, we have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates.
To date, foreign currency transaction gains and losses have not been material to our consolidated financial statements, and we have not engaged in any foreign currency hedging transactions. Inflation Risk We do not believe that inflation has had a material effect on our business, results of operations, or financial condition.
To date, foreign currency transaction gains and losses have not been material to our consolidated financial statements, and we have not engaged in any foreign currency hedging transactions. 87 Table of Contents Inflation Risk We do not believe that inflation has had a material effect on our business, results of operations, or financial condition.
We have established policies, procedures and internal processes governing our management of market risks and to manage and mitigate our exposure to these risks. 90 Table of Contents
We have established policies, procedures and internal processes governing our management of market risks and to manage and mitigate our exposure to these risks. 88 Table of Contents
We have experienced, and may continue to experience, fluctuations in net income (loss) as a result of transaction gains or losses related to 89 Table of Contents remeasuring certain asset and liability balances that are denominated in foreign currencies. These exposures may change over time as business practices evolve and economic conditions change.
We have experienced, and may continue to experience, fluctuations in net income (loss) as a result of transaction gains or losses related to remeasuring certain asset and liability balances that are denominated in foreign currencies. These exposures may change overtime as business practices evolve and economic conditions change.
The estimated fair value of our derivative liabilities related to our warrants, including the 2024 RDO Warrants, the 2024 PIPE Warrants, and the IPO Private Warrants was $54.7 million as of December 31, 2024. The 2024 RDO Warrants and 2024 PIPE Warrants were fully exercised during the first quarter of 2025 and we issued 3.77 million new warrants.
The estimated fair value of our derivative liabilities related to our warrants, including the 2025 RDO Warrants and the IPO Private Warrants, was $16.6 million as of December 31, 2025. The 2024 RDO Warrants and 2024 PIPE Warrants were fully exercised during the first quarter of 2025 and we issued 3,770,000 new warrants.
Our financial instruments that are subject to interest rate risk principally include fixed-rate long-term debt. As of December 31, 2024, the outstanding principal amount of our long-term debt was $200.0 million excluding unamortized discounts and issuance costs of $64.6 million.
Our financial instruments that are subject to interest rate risk principally include fixed-rate long-term debt. As of December 31, 2025, the outstanding principal amount of our long-term debt was $124.6 million excluding unamortized discounts and issuance costs of $35.2 million.
Refer to Note 18—Derivatives and Note 12—Debt in the notes to our consolidated financial statements in Item 1 on this Annual Report on Form 10-K for further information. As of the date of this filing, approximately $57.7 million of the 2029 Convertible Notes have been voluntarily converted by noteholders following the Exchange Transaction.
Refer to Note 19—Derivatives and Note 12—Debt in the notes to our consolidated financial statements in Item 1 on this Annual Report on Form 10-K for further information. As of the date of this filing, the entire balance of the 2029 Convertible Notes have been voluntarily converted by noteholders.
Our expenses are generally denominated in the currencies of the jurisdictions in which we conduct our operations, which are primarily in the United States, United Kingdom, and other countries. Our results of current and future operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in GBP.
Our results of current and future operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in GBP.
These conversions have resulted in the issuance of approximately 16.7 million shares of common stock in exchange for the retirement of the respective notes. Interest Rate Risk Our cash and cash equivalents consist of cash and money market funds. The primary objective of our investment activities and strategies are focused on the preservation of capital and supporting our liquidity requirements.
These conversions have resulted in the issuance of approximately 38.1 million shares of common stock in exchange for the retirement of the respective notes. See Note 24—Subsequent Events for additional information. Interest Rate Risk Our cash and cash equivalents consist of cash and money market funds.
The estimated fair value of our derivative liabilities related to our 2029 Convertible Notes and our 2026 Convertible Notes was $116.2 million as of December 31, 2024.
We remeasure the fair value of these derivatives at the end of each reporting period with changes in fair value recognized in the consolidated statements of operations and comprehensive loss. The estimated fair value of our derivative liabilities related to our 2029 Convertible Notes and our 2026 Convertible Notes was $100.3 million as of December 31, 2025.
Removed
See Note 24—Subsequent Events for additional information. We remeasures the fair value of these derivatives at the end of each reporting period with changes in fair value recognized in the consolidated statements of operations.
Added
Foreign Currency Exchange Risk Our contracts with customers are primarily denominated in U.S. dollars, with the remaining denominated in foreign currencies. Our expenses are generally denominated in the currencies of the jurisdictions in which we conduct our operations, which are primarily in the United States, United Kingdom, and other countries.

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