0001836981-26-000049
SEC filingRevenue slightly declined while gross margin improved significantly, but operating losses widened due to higher SG&A and acquisition costs.
For the three months ended March 31, 2026, BigBear.ai reported total revenue of $34.4 million, a slight decrease of 0.9% from $34.8 million in the same period last year. The decline was primarily due to lower volume on Army programs and the absence of significant one-time contracts that benefited the prior-year period, partially offset by revenue from the Ask Sage acquisition completed on December 31, 2025.
Gross profit improved significantly to $11.7 million (34.0% margin) from $7.4 million (21.3% margin) in Q1 2025, an increase of 58.7%. The 1,270 bps margin expansion was driven by the inclusion of higher-margin Ask Sage revenues and a reduction in lower-margin Army program work, with cost of revenue decreasing 17% year-over-year.
Operating loss widened to $24.3 million from $21.2 million, as SG&A expenses surged 28.6% to $29.2 million (85% of revenue), reflecting Ask Sage's operating costs and increased investment in sales and marketing. Research and development expenses rose 32.8% to $5.5 million due to fewer projects qualifying for software capitalization.
Net loss improved to $56.8 million from $62.0 million, benefiting from a $4.8 million reduction in interest expense following the conversion of the 2029 Convertible Notes, and a $20.1 million net increase in fair value of derivatives (down from $33.3 million). However, a $15.8 million loss on extinguishment of debt from the 2029 Notes conversion partially offset these gains.
The MD&A does not provide discrete segment-level revenue or operating income disclosures. However, it notes that the revenue decline was driven by lower volume on Army programs, while the Ask Sage acquisition contributed positively to both revenue and margin. The company operates as a single reporting segment.
Management highlighted several forward-looking themes: The U.S. government shutdowns in 2025 and early 2026 had an insignificant impact on results, though continued uncertainty around federal budget priorities and defense spending could affect future performance. The company expects global economic and geopolitical tensions to drive long-term adoption of AI and decision intelligence solutions. However, the administration's review of major defense acquisition programs introduces potential risk. With the 2029 Convertible Notes fully converted and the ATM program capacity exhausted as of March 31, 2026, the company's liquidity position stood at $431.5 million, including $330.7 million in available-for-sale investments. No formal guidance for future periods was provided in the MD&A.
As of March 31, 2026, BigBear.ai held $100.7 million in cash and cash equivalents, along with $330.7 million in available-for-sale investments (U.S. Treasuries and corporate bonds), resulting in total liquidity of $431.5 million. Restricted cash of $6.0 million is primarily related to an escrow for the Ask Sage acquisition. Total debt was reduced to $16.6 million (net) from $107.0 million at year-end 2025, driven by the full conversion of the 2029 Convertible Notes into equity. Shareholders' equity increased to $790.4 million from $611.9 million, reflecting the conversion and net losses.
The only significant contractual commitments disclosed are operating lease obligations totaling $12.3 million, with $1.6 million due within the next 12 months, $3.1 million in the following two years, and $7.5 million thereafter. There are no other purchase commitments or contractual obligations noted. Legal contingencies of $0.3 million are accrued.
During Q1 2026, the company did not repurchase any shares or pay dividends. Capital expenditures were minimal at $0.3 million (0.9% of revenue). The primary capital allocation event was the conversion of $124.6 million of 2029 Convertible Notes into 38.1 million shares, which eliminated the associated debt and derivative liability. No new debt was issued. The company retains significant flexibility with its cash and investment portfolio.
BigBear.ai operates as a single reportable segment. Revenues of $34.4 million for the quarter were derived primarily from U.S. government customers ($29.9 million, 87%) and non-U.S. government/commercial ($4.5 million, 13%). Revenue by contract type included time and materials ($17.1 million), firm fixed price ($13.1 million), and cost-reimbursable ($4.2 million). No individual customer exceeded 17% of total revenue.
Net cash used in operating activities was $10.1 million for the three months ended March 31, 2026, compared to $8.2 million used in the same period of 2025. The net loss of $56.8 million was significantly offset by non-cash items: $20.1 million increase in fair value of derivatives, $15.8 million loss on extinguishment of debt, $7.1 million depreciation and amortization, and $3.4 million equity-based compensation. Working capital changes consumed $2.0 million, primarily due to a $1.2 million increase in contract assets and a $0.7 million decrease in accounts payable, partially offset by a $0.7 million decrease in contract liabilities.
Capital expenditures were minimal at $0.2 million, resulting in negative free cash flow of $10.3 million. No share repurchases or dividends were paid. Financing activities provided $29.9 million, mainly from the conversion of 2029 Notes ($233.4 million) offset by the retirement of treasury stock ($57.4 million) and other financing outflows. The company's cash and restricted cash balance increased from $92.6 million at year-end 2025 to $106.7 million at March 31, 2026.
Anomalies: The large non-cash derivative fair value adjustment and debt extinguishment loss distort the operating cash flow comparison. The conversion of debt into equity significantly impacted financing cash flows.