BigBear.ai (BBAI) 13 Nov 222022 Q3 Earnings call transcript

Thank you for joining the BigBear.ai Third Quarter 2022 Conference Call. This call is being recorded. [Operator Instructions] And I will now turn the call over to Josh Kinley, Chief Corporate Development Officer of BigBear.ai. Thank you, sir. Please go ahead, Mr. Kinley.

Financial welcome here XXXX new with Julie our and Conference Quarter CEO; everyone, Peffer, I'm Call. Mandy Chief afternoon, to Third BigBear.ai's Earnings and Good Officer. Long, our

may call. statements statements During the cautioned to These discussed that obligation events BigBear.ai may actual undue put are to to certain materially made cause statements. on expectations this statements. on could forward-looking disclaims forward-looking Listeners be not the the make subject reliance to current as specifically call factors Many on are risks forward-looking call. and and update we a statements today, any the during are from based differ assumptions, uncertainties. the and result, forward-looking

to issued statements press more the earnings and of today the forward-looking these information please For about release section SEC risks our filings. and refer uncertainties,

together will the discuss should not considered during a We replacement measures call today. read GAAP non-GAAP measures and should some non-GAAP financial be with also for results. financial These be

You GAAP and within reconciliations can find release. the our earnings non-GAAP

turn like Mandy. I'd over to the Now call to

call. quarter-over-quarter million, technology highest Josh, today's all the and CEO. thrive XX I we that a $XX.X into and you very date to software have the see thrilled time total quarterly right had clearly investment for thesis, revenue talent can and thank And business. days here joining our the X% as services job, with representing of to growth. you, revenue We first as a solid be quarter Thank to third for I'm

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and provide information prospects. society, methodical With more decision-making of environment. trust the a robust maintaining to clients identifying our the be that solve as a as and an partners about challenging our prioritize we difficult factors macroeconomic and and replicating We're complex to of challenges and the strength, global works we're environment face earning going support we highly core geopolitical area with in going what

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second refers mentality. we're a good focused operate is housekeeping. The adopting improving This comprehensively how and to we objective on no-shortcut

also a We create will integrate to necessary, efficiencies us pervasive empower excellence and members team will allow monitor in and more business, our These to opportunities business will culture continue accountability. pivot if and and drive our core functions. the of and closely

that it So decisions we're grateful work how and and over leveraging our systems, ensuring as the and create the they will forward. the part doing This we team's need I'd throughout well technology, practices a new quarter work financial ball planning. made like our It communicate contingency and of we're of This members cost full information for includes how that review methods to control DNA emerge. learning be the tools to quickly And transparency includes as third on we're that the moving community the effectively. we we're best to make includes and as continuously going using. never here and out. and organization note deliver rigorous stops methods team and hard back beginning, progress, from the and a and I'm from have so expense build we've

that this of accelerate actions our The are process, was example, with our leaders and outside Finance critical future of strategic redundancies, exercise of designed plans. departments Summit information receive our road communicate we each as this IT our ensure eliminate improvements and held We'll will harden guide efficiency to to those outcome leaders make the maximizing we're to operating in from our map the and we we close as a shorten to cycle As quarters, one well that X.X-day for value infrastructure quarter, coming Transformation unnecessary of the a time as advisers. objectives decisions.

The an looking progress to complete a atomic third across our and solutions we're all With confident things. that have This right at experimentation our keeping plan portfolio of areas. my technology and provide achieve I'm beginning support eyes we people the amazing technology, on here with the rare our find global extraordinary This we're think to the thoughtful of creators you to ourselves forward when things support and we at from updated way right our meaningful, year-end our and our drive comments, path turn to and sound, at partners. we'll we sustainable the grateful earth. financials. all to investment towards the work. as done customers we growth. share XQ day. process won't about call represents Julie confidence validate forward. investors continuous of BigBear.ai objective application we servicing foster I at encourage And we'll review establish as and and for discovery we get forever to and isn't our savings on for tilting implementation our By BigBear.ai and work cost of specifics information shared get progress the new are these report will I and thesis our we're more by of the to assessment heads is continue X but learn, We're organization focused have have We our markets. that, detailed as also a framing we profitable our openly to and existing we as Today, our will initiatives. objectives, new is over listen, we I'll we the be organizing pipeline. the every the better share needs and potential to and continued transparently. into our to on software and be will to the sustainable the for and outlook XXXX and about services of new reaffirming financial And XXXX in innovation perfect, will growth financials a uncover I'll Innovation and outlook look just for refers and

Mandy. you, Thank

Let's growth growth and turn GFIM about $XX.X to award of our was the third compared by third the driven contract. in quarter XXXX, year-over-year quarter the September results. Revenue quarter-over-quarter million Phase quarter for the OE X X% X% $XX.X of to primarily third million

the last X% addition over year, this award million Analytics quarter compared in year-over-year to largely attributable ProModel growth, drove to same $XX.X Our the about the and revenue is September. which period GFIM segment of $XX million of

of our primarily to than expect higher we of as year. Revenue year. programs. in was segment last As continue compared contracts quarter. QX we is end down result stated as decrease in government will expired as QX of end our last few $XX which was overall our C&E, with to to which Analytics procurement at million lower the XX% QX, of million Backlog of volumes was largely margins fiscal improve in federal that period quarter, this revenue by shift. drives business to mix compared quarter C&E $XX.X faster This on million driven the last certain performance grow well $XXX converting margins The contracts was the a at the

any customer performance and result so seen of year. time reduced ongoing for shifting our the we've did priorities the not the contractual throughout remaining backlog completed. This contracts, their to the funds when is was these a limits, period For of was material spend

We methodology acquired have our a detail to as of our in we businesses integrated move common to application are practical ensure forward. review we backlog and across all continuing

is priced unfunded, backlog to for Even comprised unexercised from XXXX. by reminder, still our into in categories from awarded XX%, we depict unfunded XXXX the more firm a options X methodology calculation contracts. XX% and second unpriced X: increased analytics driven with margins on options. December our accurately QX this third primarily gross and In unexercised XX% funded, up quarter As quarter, revised margin unadjusted was options, priced since funded, of the up unexercised reduction, our contracts quarter's backlog

to year-over-year to adjusted less margin QX compared last QX compared from analytics gross in compared was in in to XX% year-over-year XXXX. of adjusted XXXX for margin year. Our also Segment to XX% in XXXX. due QX in XXXX adjusted This XX% gross margin reduced XX% work the was QX XX% gross C&E impact development XX% to

expenses. to turning Now operating

operating $X.X million, million million. SG&A including $XX of $XX.X and expenses were QX, expenses expenses For R&D of

due $X.X year and of although categorized higher are was public our nonrecurring expenses of million and that to $X.X for booked versus cash revenue as the QX reduction XX% expenses as the operating a same QX related structure period transaction $XXX,XXX also flow decrease last This align rightsize a the by are driven were with expenses. of million better well as largely the our integrated restructuring year. costs and operating exclude in expenses, approximately When actions to of million taking We to cost is nonrecurring, $X.X costs we our QX. or expenses QX company expectations costs reduction sequential infrastructure than you revised

execute As sequential at in internal August. initiated we in a decline. investments, decision in factor was our This force slow to the of our end rightsizing the operating which part a of expense the require some to actions elected QX, contributing difficult of reduction

from number of our internal additional which contractual significant reassigned and while and G&A In employees fulfilling projects new to existing expense a roles, reduced hiring. open without R&D obligations addition, G&A billable we

annualized the we QX, work at guidance meet realize to We QX. during which to XXXX. In savings with us total, negative loss also single-digit facilities will expenses, several in than associated new commitment vendor additional office reductions. locations $XX in space including of operating both and enable reduced second This we expenses expect half where be annualized we've in savings of in continues more labor identified to expect our rate reduced previous this vendor and run million of

to $X.X posted yield loss With stock-based the Overall, possible, quarter repeatable will a identify investments. patterns as management approach and Mandy efficiently run third efficiently deploy Going allow restructuring-related good to operational growth. will we expense, managing a expense, $X.X D&O more as that transaction disciplined housekeeping, we us growth will to described, and forward, and million that take we to investments net of our million which targeted cost rigorous as continue included million XXXX, million we insurance of $XX.X expenses business continue for capital and for of of compensation $XXX,XXX to related of fees. sustainable $X.X

Our of adjusted EBITDA cost nearly savings. from loss month was QX $X.X only realized million, XX% a improvement with which is X

year accrual align year-to-date a with our Additionally, projected in we made to full performance. management adjustment bonus

to an of turning burn reductions QX, to balance Now cash severance burn million. and also equivalents cash $XX the $X allow fees. made for cash our forward. quarter the approximately transaction cost of million since million ended includes We $X.X sheet. minimize with and have but will nonrecurring we This represents us The structural expenses going

are to $XX access amendment million upon better Bank week, give credit the we business fulfillment America facility revised of this our finalizing our will needs. The to Just up agreement align with liquidity of of facility with covenants. of us current

position going us substantially described, lower to burn just enables investments our we growth cash anticipate I've we our and solid As forward, target liquidity believe judiciously.

in reaffirming to revenue the We strong revenue, anticipate comprising we Today, outlook. XX% turning year-over-year our growth of XXXX million. guidance $XXX approximately to of half our Now second of revenue. expected in million commercial X% range financial $XXX to are

cost initiatives, in negative adjusted Following to single-digit we the to XXXX. continue our half EBITDA successful expect of for reduction second be million

expect our remains backlog ahead, strong. expand we as continue gross Looking to revenue software margins towards shifts and to

rare product our over in Mandy on focus core call find sustainable remain to will strategy growth, we turn earth I'd the Our driving we way. continue for efficiencies up and go-to-market like remarks. ramp efforts closing as a opportunities to to and and to

Julie. you, Thank

goals. work comments, software And we how in and to business thesis, the steps existing as new additional and implement business. and shared investment have my the several we questions. choosing and these we know will technology right to I do. services take are As improving my long-term measures for leadership that already taken and to happy investments have keep lay that shared our thrive now to you that today, achieve earlier as still We success. foundation we've we I team we'll to We a We're our manage and committed your updated talent

first Our Louie line Instructions] the Blair. question of comes with from [Operator William DiPalma

on Mandy, your congrats And CEO. appointment as

very you much. Thank

quarter, traction in Did chain. Rx also relates Shipyard the even last supply deal. third Julie, the won the gained significant environment macro health deteriorated? quarter or a AI as Mandy has BigBear.ai's continue commercial simulation as it platform For FutureFlow to platform the care globally And some momentum

are to things emerge. I because add comments, few So I'll also I'll Jeff start some of after maybe additional interesting ask seeing that and pieces my then a color Dyer we're think there

saw first think we you particularly, frankly, implemented as early of I use result case. deal. room some those our of a factors that mentioned, have an emergency -- We've we

I an of kind But a you want in see in little our aggregate, have great from a have indirect I channel standpoint, having only prospect we to standpoint We as would from not it pipeline of say commercial outlook. to but some also an add emerging. direct bit overall, additional a promising, that business think hand looks good relationships Jeff, really additional I I color. to

good pursuit, expand offerings. emergency thanks to room those us Thanks, to innovations existing it our existing said Again, from progress well. with quality Mandy, making new products which clients, first differentiating bringing building well exciting customer She We're and make pipeline for allowing to sales indirect and and Mandy of new in investments our to and customer. with our the our you. new is continuing as question. with that lots clientele hear expanded only department base, we're direct alluded to as both relationships. Louie,

that been that had their this on. Great. GFIM eye has referenced earnings the have And on you a the contract for investors contract call,

with the details you are of solution you what any provide? yourself? of with potentially partnering release provide what contract to do more will were terms And detail versus about what the would you You in aspects Palantir you implications if of in Palantir are discussed Can press how aspects the provide versus Palantir. on terms entirely partnering in your you economic

It's a great question.

a table to Louie, makes I deal it set probably the on So sense, bit think the itself. little

a the award and we of And reports, builds the at GFIM this we that's the contract X. it's delivery about previous other successful X-month did talked $XX.X win, prototype million. platform, Phase work, during valued a So that what in contract and on

entering for into into phase the So where is XXXX. contract where production, we Phase we're are right, and headed getting that's X

standpoint we from them. I relationship a have great think a with with Palantir, relationship

answer federal think are, and ask exactly is partner we you who bit color the Tony, short a have that areas our to does. the want Tony I I'll work still frankly, runs additional Barrett, where around do some our of we business. right, where there? doing where of little add superpowers,

us say Mandy. particular and for complementary. Palantir would in the competitive between It's question. offering. this Thanks, I relationship thanks And the is not

we include Appian. have several fact, solution we're into partners going this In that with to

what the is get leading solution. So we're way answers allows to done approach, them all we've of multimember best team questions which and government's a the with the

Great. Thanks, Tony.

I think...

under up Sorry I'm to when impression shifts $XX good revenue from year. phase to the phase around prototyping Julie. the contract interrupt, that that the Mandy a annual or eventually per million production step to that will the estimate? Is the

you answer go that? do ahead to and want Julie,

million Yes, we I'm contract, to a I a be that I the completely that's expect a not good but obviously, be Yes, it's think X-year and firm it is is to. estimate happy a -- will think year. it we mean do number yet, roughly estimate. $XX

We expect it Phase be X contract. follow-on a the fairly quick to to

from And Great. me. final one a

an with You the facility, the your credit position remarks of of is Julie, what now that with amendment? end America at prepared amendment your you're making mentioned, that Bank liquidity total

Yes.

the facility It's $XX $XX we're roughly locked yesterday, on on to able more our We the going we place. need just and facility we in. America. of government really to receivables. be again, it's to agreement, to our really this new in term, expect credit of within that new are have with terms The provide happy be forward, to were going happy that strong -- can really of that million. the to and in We related finalized details going going get back million actually based But to but our of that near agreement Bank to credit finalized we going access restructured So Q. the access back we're that to don't get and

Okay.

your that cash in $XX million with is there's that... liquidity, the So sheet, balance about on of

right. That's right. That's

[ph] our And Palani from question Vivek next comes Northland with Capital.

I'm Mike here. of me have I on with Latimore. of Vivek a couple questions [ph] behalf

one you among environment? more have macroeconomic is, given first hesitancy The prospects seen corporate the

Vivek, for I thank pipeline that I your just question question. I Yes, want the want it. make understood. sure relation you that I we're Was just to the sure to to make in seeing? understand commercial

Yes.

you. Got

to what right, this half -- about we're look second So in our we expecting at XX% of year, general, the part talked this to our about business we and X% we're when seeing represent of in revenue. terms of that of

I available. an we the we the today, and and the spending work, and today enterprises, we lot are of earth. doing products think we commercial from of within when internally that one of make is this have capabilities base, are a to I find have I talking from to them need that initiatives more we have of cases use evangelical in XXXX, that are the look technology to right, And idea and mentioned validate that field. we more a go those we viable to relevant about and customer highly that portfolio have that rare forward do But see standpoint understand into we're lot certainly that time a

positive FY EBITDA you expect in And to 'XX? do be

It's question. a great

here a has than ongoing. work we about that and XXXX think are speak, Mandy, we budget is a about, we to talked month, I as toward but process our less as been month, continuing now

once do, of haven't completion we're our process. guidance to QX. We But completed we announce that we as planning our announce

So commitments you not know plays let how making that XXXX. but we'll on out, we're yet

sales Are strategy? One in any last right. foreseeing All question. enhancements the you

understand Vivek. there, to question I make sure I your that want

understand go-to-market? sales So you in our in our were could a about Are you Or of help me maybe any how strategy? asked little you bit of whether mix foreseeing we terms enhancements more. we do talking

go-to-market part. the On

you. Got

think business talk the but have I'll think of where that's been, your we some when certainly about can So expand I we on focus about to -- based questions more. and commercial because probably on

a Dyer's we XXXX, enterprise have Within the That's and of course of commercial high-caliber over Jeff a side, brought -- team. sales we part the organization. in really

really to seeing direct fruit channels. relates both are We that and it bearing as indirect

that I go-forward a an cycles So something and to and from alluded for ecosystem we're little of there. That's and we standpoint basis, some things talked bit on we're see opportunity spending some lot doing a the partners. a with of

terms I easier clarity of is of how additional think the service. the more available our mix to messaging market, make and in today and we understand create kind to right market now the personas in of products for go quickly otherwise and approach and we focus customers discover that that our to, we of frankly, the it have for

next Ittai from the [Operator comes line question Oppenheimer. Instructions] of Kidron Our with

program, This is the terms about to for just more you cost-cutting still you ask savings in realize? Ittai. Harshil I how wanted And you? to do have far along are much how think just of on

very much. you Thank

just we the is XX more From how honest think the still to forward. would not role, is and the answer annualized work out analysis I the than progress So I'm of on go-forward only operate. proud we is, spend look made as more expect, -- in of basis, of comprehensive that a through actually a think, right, go type the big into do? When we going I'm you third we from a I to standpoint, we did achieve tool talent, being in have kind XQ quarter. I'm our $XX days cost that doing into initiatives. a standpoint, million savings savings a step incredibly of ton there able that

be we I answer for opportunities is think the we efficient, short wherever to look of that kind can more will.

Julie, we talked of to any color? about. add job kind had you more managing the near-term that and think an do liquidity we've done challenges effective stabilizing want I we of

Sure. Yes, yes.

some of flavor give on of savings elaborate the we've just what a coming. cost initiatives to just what's for you done and me kind Let

more So of and from million both in total, than labor They're $XX we've savings. coming vendor identified annualized savings.

So focused But but got quarter's of we've a QX. -- X started benefit in see essentially areas. QX. worth full in you of August one basically and on you'll we've cost that you're savings really get as both effort that We the month September, -- when to initiatives

run So you your helps that with rate.

our And During doing in in all through August. -- executed the comprehensive to as review we expenses. process, August, reduction of had we end call committed we at that our of to and that of That do part going the to mentioned a do to script, I difficult make had of in think was decision I force. a

to were both G&A both addition functions also across some R&D really to existing new and In functions we talented contracts. billable into and team of our reassign for that, roles able members

reduced and the that into our company. So need to actually go additional out people hire

our does leverage half before, as vendor meet very that to commitment housekeeping sure key continue the the on we that how into made savings including But make to going will And reduction that And -- But to well. XXXX, this areas loss helped we're expenses focus. now. expect we've some mentioned the in of board addition, of course, forward. to as locations. this pattern. invest several opportunities additional operating to then a There's reductions budget and focusing for I vendor we found and through all we, of spend, in full repeatable And mitigate lens of significant move what office our areas cost year in negative are us Those spend, we're driving and areas going efficiencies, does of really of really that of kind so our in of year help if in our to guidance to, that prudent and forward the going as already all you reduce terms across move developing take then single-digit that need we we that for be our really that investment of year. be the about mean achieved good to second

Really you to So the really company. the question. to on save, the opportunity savings we're yes, thank in what doing you give for color appreciate some cost

further There are no this at time. questions

any back Mandy would I turn call to like over remarks. for closing Now the to

Thank to you, joined say big who thank a John. I just wanted you in conclusion today. everyone to

have and the that the partners of and is are to We and believe incredibly path of this now mission in who an investors of we're going fortunate are successful deeply on the doubt have customers right I incredibly the be at that on. and what to a beginning organization we group path no transformation.

of CEO. sitting things able in frankly, be the We and to are, on exciting one it's most to I've the seen privilege a career, my be

wonderful questions. that rest We Take to that day. their and has going I the care things everyone you are safe. of the appreciate about stay doing to coming a excited about of talking some we're be in the quarters, hope we and

conference. joining the earnings for today's concludes the now great call. This rest you day. of BigBear.ai Thank a Have