BigBear.ai Holdings, Inc. 2026 Q3 Earnings Call

Good afternoon, and thank you all for joining us today for our third quarter 2026 earnings call. I am Sean Ricker, CFO of BigBear.ai, and I am joined today by our CEO, Kevin McAleenan. Statements made in today's call that are not historical fact 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 statements.

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.

Thank you, Sean. BigBear had another strong quarter. I will start with four 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-$165 million. This is the first time BigBear 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 almost $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 BigBear 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, and 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. BigBear is a specialized security and defense technology company. Our objective is to be the mission AI partner of choice for the U.S. government, its allies, and critical industries in the U.S. 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. 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 BigBear 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. One, the physical foundation, chips, networking, memory, and the power and cooling equipment that runs them. Two, compute infrastructure, data centers, and cloud providers that deliver computing capacity. Three, foundation models, large-scale general-purpose AI models, including language and multimodal models that support a wide range of applications. Four, tools and enterprise AI platforms, the technology that securely connects models to customer data, workflows, and operational systems. And five, AI applications and solutions, products and mission-specific capabilities that put AI to work for real users. BigBear operates primarily across the last 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 and specific customer requirements and data to solve complex operational problems. This is where we intend to differentiate. In other words, BigBear.ai 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.

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. We 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 and 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 roadmaps. It includes the program leaders who turn operational needs into funded programs, and we never lose sight of the operators who 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, we 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 two substantial subcontracts centered on Homeland and Border Security, one on SAIC's team and the other partnering with Unissant. Both extend our long-standing work supporting US Customs and Border Protection Targeting and Analysis 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 the opportunity to support essential CBP risk assessment and targeting operations for counter-terrorism, counter-narcotics, human smuggling, trade enforcement, agriculture protection, and other security missions. Under SAIC's newly awarded five-year recompete task order, BigBear will provide integrated AI and analytics to optimize critical systems essential for securing the U.S. border. BigBear helps CBP assess the security risk from travelers and cargo entering our country.

Through our work under Unissant's newly awarded five-year contract, BigBear 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, BigBear 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, the US Coast Guard, NASA, the Department of Energy, and the Department of Veterans Affairs.