BigBear.ai (BBAI) Q3 2026 Earnings Call Transcript

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DATE

Tuesday, Oct. 27, 2026

CALL PARTICIPANTS

• Chief Financial Officer - Sean Ricker
• Chief Executive Officer - Kevin McAleenan

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TAKEAWAYS

• Revenue -- $43.6 million, an increase of 31% year over year driven by improved performance across the business and contributions from the generative AI platform.
• Gross Margin -- 31.2%, representing an increase of 878 basis points year over year supported by the results of the generative AI platform.
• Net Loss -- $91.9 million or $0.19 per share, compared to net income of $2.5 million in the prior year period.
• Noncash Goodwill Impairment Charge -- $76.7 million or $0.16 per share, which management cited as the primary driver of the net loss for the quarter.
• Adjusted EBITDA -- Negative $9.1 million, compared to negative $9.4 million in the third quarter of 2025.
• Full-Year 2026 Revenue Guidance -- $150 million to $165 million, an increase of 5% at the midpoint versus the prior guidance range.
• New Contract Wins -- More than 25 contracts awarded since the second quarter, representing over $225 million in total contract value.
• Backlog -- $330 million at the end of the third quarter, a 22% increase from the previous quarter.
• Cash and Investments -- Approximately $400 million in reserve as of the end of the third quarter.
• Convertible Debt -- $17 million outstanding, which the company expects to be settled when the debt matures in Dec. 2026.
• Quarter-over-Quarter Revenue Growth -- 18.6% in the third quarter, which accelerated from 6.7% growth in the second quarter.
• Subcontract Awards -- Two multiyear contracts totaling five years each to support US Customs and Border Protection risk assessment and targeting operations.
• Biometric Solutions Deployment -- Deployed across more than 24 major US airports to support international travel security.
• Customer Expansion -- New third quarter contracts secured with the Federal Bureau of Investigation, NASA, the Department of Energy, and the Department of Veterans Affairs.
• Healthcare Segment Renewal -- 2-year renewal with Children's Minnesota for the company's digital twin and predictive analytics solution.

SUMMARY

BigBear.ai Holdings, Inc. (NYSE:BBAI) reported accelerated revenue growth and a raised full-year outlook as the company expanded its presence in the security and defense technology sectors. Management stated that the business is focused on the tools and application layers of the AI value chain, specifically targeting mission-critical environments for government and national infrastructure. The company reported a net loss for the quarter, which was attributed to a noncash goodwill impairment charge, while operating with a target to be debt free by the end of 2026.

• CEO McAleenan stated, "We specialize in technology, platforms, tools, and solutions for missions that are very difficult for new entrants to understand and penetrate."
• Management categorized the AI value chain into five layers, indicating that BigBear operates primarily in the tools, enterprise platforms, and specific mission applications segments.
• The company reported that its generative AI platform, acquired through the Ask Sage transaction in Dec. 2025, was a primary driver of the 31% year-over-year revenue increase.
• McAleenan noted that the firm's model agnostic platform allows for the incorporation of third-party AI model advances without reliance on a single provider.
• Management indicated that global defense modernization and a $112 billion combined AI and autonomy request in the 2027 US defense budget are creating significant market tailwinds.

INDUSTRY GLOSSARY

• Ask Sage: An AI technology company acquired by BigBear.ai in Dec. 2025 that provides generative AI capabilities for government and enterprise customers.
• CBP: US Customs and Border Protection, the federal agency responsible for border security and trade enforcement.
• FutureFlow Rx: A digital twin and predictive analytics solution designed for healthcare capacity and resource optimization.
• AgenTeq: A set of tools used within the company's generative AI platform to build agents for advanced workflows.
• Digital Twin: A virtual model of a physical system or process used for simulation and predictive analysis in operational environments.

Full Conference Call Transcript

Operator: Greetings, and welcome to the Big Bear AI Holdings Inc. Third Quarter 26 Earnings Call and Webcast. At this time, all participants are in a listen-only mode. As a reminder, this conference is being recorded. It is now my pleasure to introduce Sean Ricker, Chief Financial Officer.

Sean Ricker: Good afternoon, and thank you all for joining us today for our third quarter 26 earnings call. I am Sean Ricker, CFO of BigBear AI. I am joined today by our CEO, Kevin McAleenan. Statements made in today's call that are not historical facts are considered forward looking statements and are made pursuant to the safe harbor provisions of the federal securities laws. Actual results may differ materially from those projected in the forward-looking statements. These statements including discussion of our guidance, expectations for 2027, and market estimates speak only as of today, and we undertake no obligation to update them.

Please see today's press release and our SEC filings for a description of some of the factors that may cause actual results to differ materially from those in the forward-looking. We also have posted presentation slides and financial charts on our website today that we plan to address during the call to supplement our comments. These materials also include information regarding non GAAP measures that may be used in today's call. Please access our website at www.bigbear.ai and click on the Investor Relations link to view and follow the charts. Now I will hand it over to Kevin.

Kevin McAleenan: Thank you, Sean. BigBear had another strong quarter. I will start with 4 important financial updates for our shareholders. First, revenue grew 31% year over year, our third consecutive quarter of growth. Because of this performance, we are raising our full year 2026 revenue guidance range to $150 million to $165 million. This is the first time Big Bear has raised our revenue guidance and achieving the midpoint would represent 23% growth over last year. Second, we have won and announced more than 25 new contracts since the second quarter. Together, these represent more than $225 million in contract value.

Wins include significant recompetes for the Department of Homeland Security, and several important new mission customers as well as classified awards in our national security business. Third, we have sustained our gross margin improvement trend. Gross margins rose by 878 basis points compared with the same period last year. Fourth, we maintained our strong cash position. We entered the fourth quarter with $400 million in cash and investments in reserve. Taken together, we are following through on what we set out to achieve this year. We are growing top line revenue and expanding our customer base faster than Big Bear has achieved before. While diversifying our revenue mix.

And defending our existing business, all of which strengthens our position for growth in the years ahead. My top 2 priorities for the remainder of the year continue to be delivering top line revenue growth and pursuing our hunt for M&A targets with clear potential for either rapid deployment of cutting edge capabilities or increasing our market penetration and scale. We are executing against those priorities, intend to finish the fiscal year strong, are in a solid position to grow in 2027.

Given the dynamic environment in security and defense technology, I would like to turn now to why we are winning with customers where we play in the AI landscape, and the contract wins that show our strategy is working. Stated simply, we are winning because we combine operational experience, unique technical capabilities, and deep customer trust. I will unpack that to emphasize where we are focused and why I believe we are differentiated. Big Bear is a specialized security and defense technology company. Our objective is to be the mission AI partner of choice for the United States government, its allies, and critical industries in the US and internationally.

We focus on developing and deploying cutting edge AI capabilities for operators who take on the toughest problems in national security and trade and travel. We specialize in technology, platforms, tools, and solutions for missions that are very difficult for new entrants to understand and penetrate. We leverage deep customer trust to accelerate the application of AI in secure, complex, and high consequence operating environments. And because we are a first mover, we can address and capitalize on demand for secure AI now, while innovating at the pace our mission partners need. I believe we can do all of this as well as any company in the world.

We are agile and well capitalized enough to move quickly and innovate on near term opportunities and changing customer needs. Yet we are big enough to scale solutions and apply technology for complex, hard to navigate mission sets with the highest security expectations. For those who are looking to situate Big Bear in the wider technology landscape, you can think of the AI value chain as having 5 basic layers. Each with different economics, capital requirements, and risk profiles. 1, the physical foundation. Chips, networking, memory, and the power and cooling equipment that runs them. 2, compute infrastructure, data centers and cloud providers that deliver computing capacity.

3, foundation models, large scale general purpose AI models, including language, and multimodal models that support a wide range of applications. 4, tools and enterprise AI platforms. The technology that securely connects models to customer data, workflows, and operational systems. And 5, AI applications and solutions. Products and mission specific capabilities that put AI to work for real users. Big Bear operates primarily across the last 2 layers, 4 and 5, and that is where we aim to continue to win greater market share. We are an applied AI business combining proprietary platforms, applications, and specialized AI and machine learning models, with the expertise required to deploy them in mission critical environments.

We connect AI to our customers' data and workflows. And we build and deploy mission specific platforms and solutions that make AI work in practice. Importantly, we do not simply integrate AI developed by others. We also develop our own specialized capabilities drawing on domain expertise, specific customer requirements and data to solve complex operational problems. This is where we intend to differentiate. In other words, Big Bear turns advanced AI capabilities, including frontier or open-weight models, multi-agent systems, and specialized machine learning algorithms into production ready deployments, providing immediate operational value and changing how critical missions get done.

And I would like to underscore that our position in this value chain is deliberate and built on our track record of rapid innovation with advanced tools directly supporting operators. You do not need to finance data center build outs or the development of general purpose foundation models to participate in the growth of AI. While markets focus on these macro trends and investors increasingly scrutinize the capital intensity, leverage, and financing risks associated with the infrastructure build, it is important to distinguish those exposures from the more focused economics of our business and the opportunities presented by how government and critical infrastructure customers are now working to adopt AI tools. We benefit from innovation across the AI ecosystem.

But pursue that opportunity through a much more targeted and less capital intensive model. In fact, our strategy is designed so that our business benefits as the technology advances. Our model agnostic platform capabilities give us the flexibility to incorporate advances in third party AI models as they emerge, alongside the specialized capabilities we develop ourselves without depending on any single model provider. Deep mission expertise, a security cleared workforce, and the ability to deploy in secure real world environments are differentiators. Government customers want capability that works in the field. So do commercial leaders in critical industries. The demand is here now, and customers are starting to move more quickly because their missions require it.

As do policymakers and shareholders alike. In reality, most agencies and companies are in the early stages of applying AI to operational use cases and workflows. And the adoption curve is steep. that is exactly where we play. We serve the full spectrum of national security and travel and trade mission customers. That includes the executives who set mission priorities and the CIOs and CTOs who own and execute technology road maps. It includes the program leaders who turn operational needs into funded programs, and we never lose sight of the operators. We depend on these tools every day, from intelligence fusion centers to combatant commands and operations at the edge to shipyards and ports of entry.

We understand what each of them needs. Each win we secure is further proof that our customers want to deploy specialized AI in secure environments for these complex use cases. The best evidence for customer trust is the results that we are delivering in contract wins. Demand for AI built by operators for operators is getting stronger by the quarter. Combining Q2 and Q3,, have announced more than 45 new contract wins in multiple markets demonstrating that we are gaining significant traction across the board. Included in our Q3 wins, we secured 2 substantial subcontracts centered on Homeland and Border Security, 1 on SAIC's team and the other partnering with Unison.

Both extend our long standing work supporting US customs and border protection targeting and systems program directorate. Together, they represent a meaningful contribution to our revenue base and enhance our backlog. More broadly, these contracts provide our developers and program professionals opportunity to support essential CBP risk assessment and targeting operations for counterterrorism, counter narcotics, human smuggling, trade enforcement, agriculture protection, and other security missions. Under SAIC's newly awarded 5-year recompete task order, Big Bear will provide integrated AI and analytics to optimize critical systems essential for securing the US border. Big Bear helps CBP assess security risk from travelers and cargo entering our country.

Through our work under Unison's newly awarded 5-year contract, Big Bear will continue software development work on CBP vetting workflow operations and analysis extending our team's history of supporting CBP's ability to detect and interdict threats at our borders. In addition to these key long term wins with existing customers, Big Bear successfully expanded our customer and contract base in Q3. Our generative AI platform, which we have adapted and enhanced since acquiring Ask Sage in December, has played a big part in growing our customer base. New enterprise customers in Q3 include critical national security departments and agencies, including the Federal Bureau of Investigation, US Coast Guard, NASA, the Department of Energy, the Department of Veterans Affairs.

While the mission needs and use cases may differ, Big Bear's generative AI platform provides secure access to the latest generative AI models and AgenTeq tools with the choice of available models from leading AI and cloud providers, and the ability for these agencies to process secure data with these tools, and build agents for advanced workflows. These contracts demonstrate that demand continues to grow across defense intelligence, and civilian agencies, including in disconnected and air gapped environments. The team and I are extremely proud to be serving these agencies, each of which plays a critical role in our national and economic security.

In addition, the work we do to support critical national infrastructure, often with our digital twin modeling and simulation tools, is also growing well. In addition to the contracts with shipyards, manufacturing facilities, airports, and supply chain players that we have announced this year, we have added customers in health care. Our health care system is part of our nation's critical infrastructure. And requires a level of operational rigor and data security similar to our security customers. Just as we deploy specialized AI for national security use cases, FutureFlow Rx addresses complex health care operational challenges where lives are at stake.

We recently secured a 2-year renewal with Children's Minnesota 1 of the largest pediatric health systems in the United States, continuing their investment in our digital twin and predictive analytics solution for health care. The agreement focuses on AI applications that help hospital leaders anticipate patient flow, evaluate operational challenges, and optimize capacity and resources. Our continued partnership validates our ability to deliver mission ready AI solutions across sectors extending our impact into critical civilian infrastructure that communities depend on every day. Combined, these wins show that our strategy is working. We have organized our business to pursue growth with focus and discipline, with technology teams aligned to the specific mission customers that we serve.

Since May this year, our structure and go to market motions are simpler and more targeted, and we are executing with increasing consistency. I will now turn it over to Sean to walk us through the details on our financials.

Sean Ricker: Thanks, Kevin. Our results were strong operationally and financially this quarter. Revenue for the third quarter of 26 was $43.6 million an increase of 31% year over year due to improved revenue performance across the business. And substantially driven by our Big Bear generative AI platform, which was acquired as Ask Sage in December 2025. Our improved gross margins continued this quarter. Growing to 31.2% an increase of 878 basis points as compared to the third quarter of 25. The expansion in gross margins was particularly supported by the results of our generative AI platform. We recorded a noncash goodwill impairment charge of $76.7 million or $0.16 per share in the third quarter of 26.

Which was the primary driver of our net loss of $91.9 million or $0.19 per share this quarter as compared to net income of $2.5 million in the comparable period. Adjusted EBITDA improved to negative $9.1 million this quarter versus negative $9.4 million in the comparable period. Our balance sheet continues to remain strong. We finished the third quarter with almost $400 million of cash and investments. With about $17 million of convertible debt outstanding, that will mature in December of this year, we expect to be in great shape to kick off 2027 debt free and with maximum flexibility to be opportunistic in the execution of our strategy.

Turning to backlog, we ended the third quarter with $330 million in backlog, an increase of 22% from the end of last quarter driven by the new wins and successful recompetes that Kevin previously mentioned. The performance we saw this quarter exceeded our expectations giving us confidence in a stronger revenue trajectory as we look ahead to the end of this year. Building on the momentum we have seen this quarter, we now expect full year revenue between $150 million to $165 million representing a 5% increase at the midpoint versus the guidance range we provided earlier this year. At the midpoint, this would represent 23% revenue growth relative to our 2025 results.

This higher revenue guidance reinforces 2 important growth dynamics. First, we are growing top line revenue. This is our third sequential quarter of organic revenue growth this year. Second, our revenue growth has accelerated this year. Quarter over quarter revenue growth was 6.7% in the second quarter and has accelerated to 18.6% in the third quarter. As we look ahead at the business in totality, we are feeling positive about our momentum as we close out this year and look ahead to 2027. Now I will turn it back to Kevin for some closing remarks.

Kevin McAleenan: Thank you, Sean. And thank you to the whole Big Bear team for your hard work. We approached the end of the year with real confidence, thanks to our underlying financial strength and win momentum. I would like to close by looking out to 2027. And talk about 4 trend lines in the macro environment that are generating tailwinds for our business. The catalyst fueling these trends are continued technological breakthroughs, increased geopolitical instability, and accelerating great power competition. And I believe their impact is likely to grow next year. First, defense modernization. How wars are fought is changing. Shifts of this magnitude happen rarely, and we are only at the start of the change curve.

The world is wrestling with dozens of active conflicts. In 2025 alone, global military spending reached a record $2.9 trillion. While US defense spending grows, the proportion being directed to disruptive technologies and new entrants is increasing as well. In the 2027 US defense budget, combined AI and autonomy request is $112 billion. And over the next decade, G7 governments are expected to make $8 trillion of additional investment on top of the prior trends. Second, redesigned global trade flows. The global economy is undergoing equally significant change. Regional conflicts and increased great power competition mean that global trade requires faster cargo processing at the same time as more precise risk assessment. To keep goods moving securely and at pace.

Global trade and goods reached $26 trillion in 2025. Growing 7% year over year. Third, demand for secure international travel. Global passenger travel is also on the rise. In 2025, international air traffic grew by 7.1%. IATA's forecast show increased growth in international air traffic in 2026, as well. US Customs and Border Protection processes about 1 million individuals entering the country daily at air, land, and seaports of entry. Substantial share of these travelers move through airports. And our biometric solutions are deployed across more than 24 major US airports. The global aviation security market is estimated to be more than $17 billion in 2026, and is predicted to reach $27 billion by 2031.

Finally, pressure on the security apparatus. The message from security professionals in Washington and other global capitals is that agencies responsible for protecting people are deeply concerned about the diversity and pace of the threats facing us. This includes asymmetric technology driven threats. there is mounting evidence that state and nonstate actors are increasingly using generative AI tools, and are able to plan and execute attacks with far fewer resources, far less time, and fewer guardrails.

For example, the challenges associated with detecting and intercepting drones involved in cross border smuggling operations or potentially threatening event venues and critical infrastructure, increasing cybersecurity vulnerabilities across the economy, and a digital information ecosystem flooded with disinformation are high on the agendas of policymakers and appropriators. Big Bear customers understand that many of our people came from the security community. Helped build the technology it depends on, and understand the nature of the changing threat landscape. Indeed, our executives, technology, and combined experience are respected internationally by government and commercial customers in each of these areas.

While the underlying trends present significant concern, they also present a galvanizing opportunity for the private sector to help governments and critical infrastructure operators to outpace the threats. This is what Big Bear was built for. Our full focus is on delivering enduring strategic advantage for the United States, its allies, and critical industries. Our strategy to build, deploy, and acquire catalytic technology for operators in national security and trade and travel is the right strategy at the right time. The financial opportunity for our business is clear. Our leadership, organization, and resources are fully focused on capturing and delivering value, and it is an exciting time to be deploying AI in our markets.

My continued thanks to our team for your efforts and to our shareholders for supporting us. Look forward to talking with you again at our next earnings call, where we will cover the full year performance for 2026 and chart our path to sustained growth in 2027 and beyond. Thank you.

Operator: This does conclude today's teleconference. Thank you for your participation, and you may disconnect your lines at this time.

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