BigBear.ai Holdings, Inc. Q3 FY2022 earnings call

• Solid third quarter with $40.7 million revenue, 8% quarter-over-quarter growth. - Made progress on cost savings initiatives, expecting over $20 million in annualized savings in Q4. - Three objectives:
  • Repeatable pattern: Leveraging core strengths, GFIM win generating revenue in September driving Q4 growth, opportunities in children's hospitals and discrete manufacturing, and land-and-expand with existing customers.
  • Good housekeeping: Comprehensive operational improvement, including Finance Transformation Summit to accelerate close process and eliminate redundancies.
  • Find rare earth: Continuous discovery process for innovation, uncovering and validating potential software and services solutions.

Total revenue for the third quarter was $40.7 million. The Analytics segment drove $22.7 million of revenue, representing 8% year-over-year growth and approximately 55.8% of total revenue. The C&E segment had $18 million in revenue, a decrease from $19.2 million in Q3 2021, contributing approximately 44.2% of total revenue.

• Reaffirmed 2022 financial outlook with revenue range of $150 million to $170 million. - Expect adjusted EBITDA loss to be in negative single-digit million for 2022 second half. - Anticipate gross margins to expand as revenue shifts towards software. - Will provide 2023 outlook when reporting 4Q and year-end financials.

• Macroeconomic and geopolitical factors impacting business. - Previous mistakes in spend management and lack of operational rigor. - Shifting priorities affecting backlog and cash flow, as seen in backlog reduction due to contracts converting to revenue and expired periods of performance.

Q: Did the commercial momentum continue in the third quarter even as the macro environment has globally deteriorated?

A: Amanda Long and Jeffry Dyer discussed ongoing commercial progress, including an early 4Q win in children's hospitals for digital twin simulation, an emergency room use case implementation, and a promising prospect pipeline.

Q: Estimate on the GFIM contract revenue?

A: Julie Peffer said it's a 5-year contract and expected to be roughly $30 million a year.

Q: Will BigBear.ai be EBITDA positive in 2023?

A: Julie Peffer stated that 2023 outlook will be announced after Q4 reporting, and they are still developing the 2023 budget.

Q: How far along is the cost-cutting program and how much more savings are expected?

A: Amanda Long and Julie Peffer mentioned over $20 million in annualized savings achieved, with ongoing efforts to find more efficiencies through labor and vendor reductions, including reduction in force, reassigning employees, and vendor spend reductions.