BigBear.ai (BBAI) 8 Aug 232023 Q2 Earnings call transcript

Thank you for joining the BigBear.ai Second Quarter Conference Call. This call is being recorded. At this time, all participants are in listen-only mode and a question-and-answer session will follow the presentation. [Operator Instructions]

I will now turn the call over to Norm Laudermilch, Chief Operating Officer. Mr. ahead, go Please Laudermilch.

and joined BigBear.ai's CEO; by Chief Peffer, everyone conference and second call. our Officer. I'm Mandy Financial welcome afternoon XXXX to quarter Julie Good Long, our

certain call. the statements be forward-looking to During that undue the disclaims may BigBear.ai's on discussed statements, reliance we update any today, may obligation put statements. are to cautioned call Listeners not and specifically this forward-looking during make the forward-looking

on result, from factors call. could and events actual are forward-looking on These uncertainties. the Many to made based to differ statements and the assumptions, statements materially and are cause current risks expectations as subject a

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

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

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

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

Norm and with you Thank to opportunities time markets joining continues. at increasingly the momentum and our I'm as We've service. are across spend thank BigBear.ai call. growth company for you, we poised change to today across excited you capture all driven the today's

win. serve market operational to goals end and also this reintroduction stated the in our closely sectors, on delivering refreshed we We're building our foundational rigor year, our more we supporting the momentum our of We've the in unlocking provide. aligning execution opportunities as markets significant improving culture and branding, and key in and with solutions at BigBear.ai

months. implement & Command, contract system, a by sole being was the integrated mission seven selected $X.X Army, the award Test win the Evaluation key A quarter of this single over US over to Army X us million provider management worth and Phase for as

intelligence and a workflow API-centric to advanced enterprise a application US data, collaboration no-code, unique integration, access the and and ATEX will solution The system combining to BigBear.ai analytics replace platform management, management, capabilities. tools, content data designed offers low-code cloud-based, management, business legacy Army solution modern, democratize project, provide with analytics. and portfolio

to after in X in positions well, important this awarded. provider the to as sole previously recognize is What's as extension from future is This Army sharing moving selected Phase the BigBear.ai contract. work Phase this us X, that

As to we we more execute, of progression. see these continue types will contract of

intelligent supporting This its readiness, work continued upon Force portfolio of Global of US the Environment award including builds automation BigBear.ai's delivery Information Management, Army platform. Objective

Force continuing AIMMS, a US from the on addition Global at we system in just as a contract six-month work received extension X-month Information the contractor prime Army $X.X In Management for to the million. over valued

are on future we X extension builds BigBear.ai's to work how and the is and continues of another our This work. Phase example to previous of relationship in with Phase show Army. US The X, win strength well-positioned

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US Army's team Army migrating the Plan cloud, be Cloud prototype the BigBear.ai with the into extension, aligned US the During XXXX. cARMY will with charged

capabilities global are solution enhance largest the cases. in one variety in efficiency clients' ProModel environment. recently, the world, Our Most shipbuilders displaying a manufacturing for operational the won opportunity with of leveraging expanded continues enable complex our where in to work supporting and of we we US-based operations, use currently our

opportunities the large assisting reducing a where existing with company, won constraints and them. we for process in a understand products automation best fabrication contract industrial or eliminating to identify their We flat also are

of process benefits implementing in doing improvements advance changes, of any our quantify In changes. models expected so, allow will the those stakeholders cost to considered key and

and are world as unlocks discrete simulation power the the digital event small, large and of winning beating and We trends. competitors, both

responsible about Commerce, and policies Now, submitted I'm talk accountability Administration artificial concerning going Department to Earlier for Information National measures ethical gears this systems. and and year, comments intelligence of Telecommunications we AI. to and the switch and

and Specifically, on based policies experience accountability we to sought the that administration's artificial response in for to provide to around Biden a systems. regulations complex industry concerns experiences perspective recommendations measures on related and intelligence technology

US The integration and of of the public the application, private into AI rapid sectors. trustworthy federal the ongoing everyday underscores research, development innovation efforts AI civil acceleration in trustworthy of use and society, importance AI advance to in and and leadership

national systems strategy protect and and defends AI that Furthermore, democratic liberties US leadership applications, civil and a values core security in rights. emerging supports human

critical incentivizing and organizations mitigating governance a component focus standards in frameworks to for accountability assurance benefits and developing products. NTIA's AI and the AI AI invest responsible sound realizing is of and on AI while risk, system

society our address the We associated the technologies frameworks broad to design, mechanisms but and AI between should and challenges that enough also and certification, be evolving academia civil of involve on encompass that to should comprehensive bodies, industry accountability to development, focus and stakeholders, AI regulatory It collaboration and develop with deployment. thoughts audits assessment, scope risks practices. government, adaptable

consistent Additionally, accountability across to cover a and should responsible and differences. topics standards cooperation measures ethical facilitate mechanism borders, consider and while to AI practices should ensure societal accommodating and AI practices. harmonization international cultural, range legal, of

accountability encourage drafting support strongly innovation. on and policies and report As BigBear.ai the NTIA responsible a continues of development, issuing encourages AI its policy and development that regulations work on

we that Put necessary is believe but successful. in to it accountability it only not ever, technology be power and responsible technology, can play in more AI for today, possible the believe than simply, that regulating

Officer, Mr. experience, Chief and of I our on more years serving and Merative. now has Tanner. new want XX our than Watson recently as Health, share at IBM of CTO most to Lastly, the Architect excitement Tanner Strategy announcement Technology Chief Ted

both warehouse and in and machine at life delivering as held natural one technology-led startups, PokitDok, solutions, of operations, He acquired instrumental the also Health. AWS and and also has be on Ted His most Amazon processing Change and and first architect Apple a has several by government healthcare acquired companies in positions cofounded Microsoft, will Belief learning recently language including extensive for and Networks. service sciences. leaders defense, manufacturing called experience created

truly over both talent outside we've worlds. we've BigBear.ai, was last of the think at experienced and from assembled company. about added that top we of place year, As the the talent top already elevated We've in best that team the I

done never I evolving, about positioned are feel this great the We but in with how we're industry AI lead to team.

to With I call turn that, the financials. will review of detailed for our Julie a

market quarter, This challenges, Mandy. we in face bankruptcy Thank headwinds you, Virgin including the Orbit. of of well the from executed past

like our a we legacy the are to from resort begin for a staffing operated Additionally, as subcontractor, EPASS program, on we transformation we focused to our make shift EPASS. contract as represents higher-margin Air where Force. seeing mix move solutions away programs business, progress technology-led US a on and

what to within on to testament the out execute is Despite team we grow these solutions, set to achieve. and we are and building, our headwinds, our a of delivered This our quality ability and we the markets.

has our the for capabilities national increased a efforts, cure geopolitical advanced security need interest anything, are If in highlighted and artificial seeing our intelligence, climate the and we technologies like as result.

to quarter X% $XX.X compared turn quarter to Revenue year-over-year year-to-date. of the $XX.X and up quarter in million, X% up was let's Now, million for XXXX second the results.

can contracts revenue depending quarter As that contracts on I awarded, our which can complete. milestones always, the are to lumpy or fluctuate be in emphasize want and achieved meaningfully,

of the US the completion For phase termination GFIM contract, driven partially our Orbit offset Army Virgin our by QX, year-over-year of and growth contract. was of the one contract by EPASS

after Total Orbit gross revenue basis in they're margin decrease XX% Virgin XXXX, was gross from declared by in the point quarter, in XX% in XXX driven margin the and from bankruptcy April. a primarily QX loss

be quickly, In terms not we contract, that materialized. but sold the this has would this of initially company anticipated

action So, in from we our this SG&A expenses. the most write are invoice which is quarter, remaining taking to off of is further what reflected QX

increase million awards end up of GFIM AIMMS the is to quarter approximately which quarter, of and at first Analytics. $X $XXX XXXX. was million the largely Backlog by driven GX extension, second the the for or contract, compared X% is This

Now, turning to expenses.

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

SG&A actions quarter SG&A significant XXXX first $XX our year structure XX% to to to of in addition in want reduction the were third to million We reduction quarter vendor expenses. taken effects due SG&A XXXX, This realign of $XX million. third-party in that rationalization headcount and operating highlight our versus last when was of down or the of QX is

this On a year-over-year in QX were impairment XX% XX%, basis, or year expenses excluding total goodwill the by lower operating XXXX. expenses QX in

million charge related XXXX. net in The $X.X $XX.X quarter, the Our QX was were warrants loss adjustments fair current in non-cash that in million million on includes value $XX.X quarter XXXX. issued to the a versus

unpaid company to bad the receivables Additionally, a related quarter, of reserve from $XXX,XXX this debt the Virgin Orbit. booked

by XXXX of million, $XX.X decreased overall million, non-cash Similarly, has in operating impairment XXXX impairment have XX% Excluding QX the versus $XX goodwill period. QX million of second XXXX approximately excluded. and approximately goodwill the loss quarter the improved is operating our charge $XX.X expenses comparable even after charge

EBITDA of million loss a or of to year-over-year a compared $X.X the Adjusted adjusted XXXX the was year EBITDA in ago loss period million QX XX% same a in $X.X improvement.

level with pleased operating remain second margin expenses. we rigor operating driving improvement, on and and we a XXXX half improvement, are gross While this focus to of improved to efficiency beyond, report on the committed of in continued

last on additional EBITDA compared the Orbit, adjusted our quarter. Virgin reserve from performance partially bad and offset improved QX loss contract was margin by debt to gross impacted by GSM

second the approximately we the net to In cash $XX.X sheet, direct of quarter, of equivalents million million. and the from June. in of a had increase we the end registered $XX.X offering review balance completed The cash was due of at proceeds

government are QX Most come We been of the quarter, receivables that due to additional $XX these the payments. now of timing have received. already expecting million in of also an will in

cash flow, interest to vesting. non-operational legal get tax second and stock last operational items to such excludes payments the for lowering positive payments, XXXX and focus which transaction to we burn as on we quarter, fees As cash our stated in half non-recurring of continue and

our Now, million. guidance Today, financial outlook. our turning of $XXX we reaffirming to million the XXXX range are in revenue $XXX expected of to

be in adjusted We negative single-digit continue for to adjusted EBITDA EBITDA millions XXXX. expect to

in stated, partnership position and AI. with leadership we to in increased As gives to are we momentum The build. our what out accomplish GFIM within AIMMS us Mandy our confidence previously continued anticipated awards LXHarris and continues doing expansion XXXX, extension, set and

build, talented and we With to sheet, execution, balance we forward are in to a to partners, team a place, operational continue come. stronger looking and growth the better right

for to And we turn to before remarks, now turn I final Mandy Q&A.

Julie. you, Thank

of building great already we're have We progress a extremely excited about am ahead. and deal what and path the I made

ready you. are we Operator, for questions. Thank

you. Instructions] [Operator Thank

Capital. first Vivek comes Your of Palani question Northland from

Your open. line is

on of you are and year And planning Capital. I couple one Vivek I'm the for Mike questions first adding your of on end? have a the with by headcount, is me. is, Hi. Latimore Northland what more

Hi there.

that. about Sorry, your I sorry name. missed missed I name, the

for on Vivek Mike Latimore. I'm Yes,

name. Vivek. the I'm sorry, I missed

Sorry. Sure. Great. Thank you question. for the

headcount, ramping from are I of heavily on specific of don't toward showing release numbers. we that labor. coming I headcount actually now headcount say, ramping will But my a contracts up some right the our contract scripted down and our call Our actually down on we that and others that because is weighted those on that is mentioned are remarks

not But that we is a release. specifically that number

we're in growing will not specifically areas on that this specific we're making. But the headcount releasing We based some numbers at time. be key headcount investments

of Okay. phase of My fourth get question quarter large year? expecting are awarded this is, GFIM the you next in to

open talk And few headcount, positions on comments on we're those GFIM. nice in Hi, hiring executing It's now build to to we're specifically contracts Julie's with that is we are the anticipated that Mandy. related that regards transition to to This right and you quite have again. previous a to for to Vivek.

certainly But our as right, timing say at certainly are any I there -- I now, we as right standpoint, work look of We expectation. is customer as we would the those. updates, hope. we with reflect think is would current on extension, the an right, expectation that continue from our and yes, to if that share

half is the -- the Okay. margins where might year? Thanks. And so trend last of second question in the gross

some the saw first the half Great We headwinds Yes. of Yes. question. in year.

QX, some between Virgin little Orbit down. I our you talked obviously about specifically, creating about books, talked coming headwinds specifically. for And a think ramping in recall, some is we these, that we're off I and contracts that us bit but as

second we But contracts and half up we some are we that that give that that the margin us going that ramping are anticipating to see better margin are that that lower year. down contracts have actually the other are are already ramping of in

improve going very in We're confident the that it's year. the half second to of

that So, when little more I a can but of bit detail give offline, we provide happy later. little maybe more connect you bit to a

a Thanks Sure. lot.

midst that our I reinforcing opening quarter. in are think I'll it's But where we this comment opportunity one that from businesses expansion. right ceilings places of those very that part our the for make, we regarding away bit in And talked of Vivek, larger little shift now, worth large a portfolio a about deliberately that we looking for can particular with margin are it towards remarks margin have

lot think we mix, a of Julie look about changing, how is a I think at about right, from as backlog how we how at really that's changing. basis is And how getting think our was what we contract our

We good. in are the fixed that quarter seeing of price we make when terms up great going those the over our are half we feel year our And indications second quarter. look I that us indicators, I look right, how of think mix mix, at think into

[Operator Instructions]

comes question DiPalma Your Louie next with William Blair. from

open. is line Your

Hi Louie.

afternoon. Good Julie. and Mandy Hi,

Louie. Hi,

of quantify excluding able EPASS what headwind? are growth of EPASS estimate is underlying are you to the able the impact ending? subcontract business the of to And Julie, portion the the you this

say it's EPASS you so It a legacy We down. me really is ramp Yes, a a I mean, program. fair -- that let bit to is a EPASS. on subcontractor. Again, insight give specifically were two-phase of little

specifically, they that notified with quarter prime EPASS subcontract into transitioned quarter we that last we the in a to new in through. So, who were was used prime going

that is shifting. So

Part really QX. in it of two of parts. was is the completing it's completing at QX; But of part it end within

about -- it that time. gradually impacts. over going ramp specific to down So, information we're But not it is release exactly

they're fact can lumpy quarters be is that when when back ramping contracts why about the talked are depending on and the up. this ramping I down But

of in business. something And that reflected see part so the as that you well as can our results consider always we as

Mandy And $XX run end Great. run annual year? Thanks, extension. the at current rate, GFIM to with should Julie, this roughly congrats that the double six-month production rate on be and expected the the roughly Is And awarded Julie. GFIM contract of cash amount? million, the production BigBear

can take part the I take the first -- that. I'll So, of

the So, we the part extension, included right? point, as from production a award was that. it We're prime vendor shared, in sole

customer what I we position, think it for as great in when a award. think our we production the and doing deliver into value look right, we're to us puts so about the chances

deliver. our are into X But ultimately, lies will as decision think to continue know, And why obviously, the I the you we best with that's Phase do extension. Louie, customer, we to but the

total sole-source Mandy, Great. AIM like the AIMMS for potential you GFIM? also the can the size be no-code/low-code call? size Or that as mentioned received there OTA, and you investors solution. involved estimate the And you value the how same like Is AIMMS that contract on like in would

as pattern those is we've transformation worth So, being to about is this there factor. So, definitely work I that strong continue and pattern about -- and the form think what to a along here, with that right? said noting an would with work first, systems so of with do is thread we're partnership thing in one business GFIM -- a note in success I that work that the we you the core think and able have reinforce a very automation doing we do intelligent platform associated thing would AIMMS, associated I absolutely done

then and size Phase Phase as think standpoint, a we assume -- but significantly. value of point, we from of these safe total at up size of have X to indication pattern. expect as goes to The don't shift into a X -- think right, contract From I you this that don't the I happen, an most I similar we production.

count the Great. new share should be diluted using? what we And offering, is the that question, with another equity

handy. quarter I've one the quarter of that; count that count Share share for and got just for Let for me The give the you the Hold average give is for both. the average second. the or can on is XXX,XXX, the end I ending you quarter? XXX,XXX.

cuts there for potential level? final one at currently And Or be we into continuing to half the optimized, are second one, is of the the further optimal Great. with year? SG&A

Mandy Yes, I ahead, mean go -- sorry

problem, Julie. No

right So, role significant. I very the that we in -- progress lot that what And proud are to the been of improvements of is be in we kinds for of The about nine last over have position I think seeing would good terms months. now. we're a year-over-year in say a I've are

I'm team the opportunities. in growing, it's really most I of the to putting associated go expenses we that that grow we proud to exceptional of think how we thing after amount a And that while is that the place testament good we've and have, our And operating level, that still right? with that gotten in we're rigor are

at from now. pretty right I would automation, the look do a better. But that I balanced this the position And we think Now, to year, we're right, optimization. a -- going for always for I we're opportunities always further to in and further rest of how look get right say reserve

Yes.

Yes.

add just our we last million to just little did Let -- -- that year baseline committed to the deliver we Difficulty] you I over reductions. million a bit mean, at savings that in comparison savings members established. if look annualized [Technical think a after QX reminder, as annualized $XX I to me And $XX we

with about, time. we're back structure So, we where to over in our as are line to drive very would committed improved to going we operating done get that's and to to of work this I are. cost continuing improvement, we've say, proud even efficiency, we the talked come

numbers. we're Mandy this is huge and expenses. always continue we're I continue focused to within be would as about, to the shift, see going going on, we'll something operating not that to rigor talked anticipate And have in to but

describe excitement generative customers you the of pipeline federal, own award here, commercial one how market both defense and you your intellectual one, lot as translating? there's this with is have your opportunities associated AI of in Thanks. customers. is final impacting Can for that and property how And Great. a obviously

that. say what see able I would sales being not bucket, we our in is would that being I think pipeline right, interest it opportunities But of to and at we're AI that, can right? I Yes. is Louie, apply. diversifying, one Absolutely. we limited I certainly where how to speak And to as look generative say,

is in at a different we And and The to advanced that this I problems want like we with possible there what approach the variety -- trying they're day, toolbar. technology think how we that and line. right, job the facing. and practical what But way solve, engagements bring we bear, technologies using understand our customers a tools the crossing as about they're to that of think that is challenges is that to will I are business the then end of

right, I think now we lab thresholds. so now crossed many where what's the these both, spectacular that lived a right previously as in possible society is are and capabilities the of about that practical have

And to delivering so more we opportunities in bring customers. and more are those to solutions seeing more we're our that

lines Great. surface unmanned last Yes, discussed you the with quarter of I your was expansion their for vessel. along of partnership how LXHarris the getting

their software the There's and market. opportunities You're integrating in similar into how platform of your partnerships. excitement there's probably for lot Thanks. a other

that's Yes, think I you're And right. I all said. think

are absolutely we're it was a those that right, building lies underlying I when seeing building this BigBear.ai delivering software, together, differentiator. emerge our where intersection in put think right, and superpower have them interesting and like and organizations who and right, platforms and you technology expertise, physical there's these that between

come it partnerships ultimately organizations and really the so customer. we've of opportunities and together some take we're some for it because to benefit will we have say two complementary market got combine that more and think as I forward, let's the And can going stuff I see things where to look

back there management to no call remarks. for I'd time, to this questions. At turn further like any closing are the

the A thoughtful huge for thank for to everyone wonderful you questions. and joining and

clear, I who on, do. to months role, earlier, focused what the around in market we're right, that I As shared this setting what broad out nine on have, been focused the and think we we're really to I've we is it being in are, that

example and doing we with second another what we is this excited. can think leadership continue great you associated be of look to from as BigBear.ai this we quarter year, team rely what of the this And said. I into on half

Thank this beginning, go around of play with us XXXX a Industrial parts Revolution, the has world that been, Fourth BigBear.ai into much. the foundational through look role organization. forward The a quarter. very reconnecting role, the moving every I year for the changing ball right, we in has so to from is and you day all since stepped forward. significant to We everyone next as

everyone conference does today's for today's attending conclude This call. you call. Thank

may disconnect. your of a You rest day. Have wonderful