BigBear.ai (BBAI), a leading data analytics company, underdelivered on expectations for Q4 2024. Both sales and expected losses fell far below anticipated figures, with the company experiencing a loss three times larger than forecast. Furthermore, the company’s full-year sales for 2025 are predicted to be significantly less than market expectations. Despite these financial setbacks, the company has seen growth in some areas, including an 8% increase in revenue for Q4 2024 compared to the previous year, largely due to additional revenue related to Department of Homeland Security and Digital Identity awards. However, the news sparked a 39.50% drop in stock value following the earnings report, underscoring the company’s current challenges.
Securing Meaningful Wins
BigBear.ai is a technology company specializing in AI decision-making solutions, employing advanced analytics and predictive models to aid organizations in making precise decisions. It operates in various sectors including national security, defense, travel, and trade. The company recently secured a contract with the Department of Defense’s Chief Digital and AI office (CDAO) to enhance the Virtual Anticipation Network (VANE) prototype, which aggregates and analyzes large data points to provide clarity in multi-domain environments and identify key trends in potential foreign adversarial regions.
In addition to the contract with the Defense Department, BigBear.ai got a prime Indefinite Delivery/Indefinite Quantity (IDIQ) contract under the U.S. Department of Navy’s SeaPort Next Generation (SeaPort NxG) program. This opened a gateway for BigBear.ai to offer technologies and vital support to the U.S. Navy and other federal agencies. As part of this contract, the company is developing AI for advanced autonomous surface vessels, digital twins, asset management for shipbuilding, and computer vision for maritime situational awareness projects.
Accelerated Costs Weighing on the Bottom Line
The fourth quarter of 2024 saw an 8% year-over-year rise in revenue, reaching $43.8 million, up from $40.6 million in Q4 of 2023. This surge is primarily attributed to added revenue from the Department of Homeland Security and Digital Identity awards. The company also enjoyed a higher gross margin of 37.4%, compared to 32.1% in Q4 of 2023, due to year-end fringe and overhead allocation adjustments.
However, significant changes in the fair value of derivative liabilities related to the 2029 convertible notes and warrants caused a net loss in Q4 of 2024 of $108.0 million, a significant increase from Q4 2023’s $21.3 million loss. The non-GAAP adjusted EBITDA of $2.0 million in Q4 2024 was lower than the $3.7 million reported in the same quarter in 2023, a decline driven by increased recurring SG&A.
SG&A expenses rose to $22.2 million in Q4 2024 from $18.2 million in Q4 2023. This increase was primarily due to an increase in headcount and operating expenses and year-end fringe and overhead true-up allocation adjustments.
Despite these challenges, the company’s ending backlog grew considerably to $418 million, a 2.5x increase from the end of 2023. Management forecasts 2025 revenue between $160 million and $180 million and a negative single-digit million adjusted EBITDA.
Analysts Cautiously Optimistic
Analysts following the company have responded to the recent financials by taking a more cautious outlook on the stock. For instance, William Blair’s Louie DiPalma has maintained a neutral stance with a Hold rating, noting the lower-than-predicted guidance for 2025, an uncertain funding environment, and ongoing resolutions affecting the financial outlook.
Meanwhile, Cantor Fitzgerald’s Jonathan Ruykhaver reassumed coverage and revised the firm’s price target from $8 to $6 while maintaining an Overweight rating. Despite lower-than-expected Q4 growth, guidance, and federal uncertainty, Ruykhaver is optimistic about potential growth catalysts.
BigBearai Holdings is rated a Moderate Buy overall, based on the recent recommendations of four analysts. The average price target for BBAI stock is $5.33, which represents a potential upside of 59.58% from current levels.
