BigBear.ai Holdings, Inc.

Previous wording

•Results of Operations: This section provides a discussion of our results of operations for the three months ended March 31, 2026 and March 31, 2025.

Current wording

•Results of Operations: This section provides a discussion of our results of operations for the three and the six months ended June 30, 2026 and June 30, 2025.

Previous wording

On December 31, 2025, the Company completed the acquisition of Ask Sage, Inc. (“Ask Sage” or the “Ask Sage Acquisition”), a secure, multi-modal generative AI platform designed for government and enterprise use. Of the total purchase consideration of $272.1 million, $267.6 million was paid in cash at or around the time of closing and $4.5 million was held back to cover any post-closing downward adjustments to the purchase price.

Current wording

On December 31, 2025, the Company completed the acquisition of Ask Sage, Inc. (“Ask Sage” or the “Ask Sage Acquisition”), a secure, multi-modal generative AI platform designed for government and enterprise use. Of the total purchase consideration of $272.1 million, $267.6 million was paid in cash at or around the time of closing and $4.5 million was held back to cover any post-closing downward adjustments to the purchase price, which was settled in the three months ended June 30, 2026.

Previous wording

The majority of our revenue is derived from federal government contracts. Funding for U.S. Government programs is subject to a variety of factors that can affect our business, including the administration’s budget requests and procurement priorities and policies, annual congressional budget authorization and appropriation processes, and other U.S. Government domestic and international priorities. U.S. Government spending levels, particularly defense spending, and timely funding thereof can affect our financial performance over the short and long term.

Current wording

Historically, the majority of our revenue is derived from federal government contracts. Funding for U.S. Government programs is subject to a variety of factors that can affect our business, including the administration’s budget requests and procurement priorities and policies, annual congressional budget authorization and appropriation processes, and other U.S. Government domestic and international priorities. U.S. Government spending levels, particularly defense spending, and timely funding thereof can affect our financial performance over the short and long term.

Previous wording

We continue to expect the global economic and geopolitical environment to drive adoption of our offerings over the long term, as it has heightened the need for advanced AI tools that provide enhanced intelligence and full spectrum cyber operations – areas where we believe we have unmatched capabilities. While these challenges are still evolving and the eventual outcome remains highly uncertain, we do not believe that these events will have a material impact on our business and results of operations.

Current wording

We continue to expect the global economic and geopolitical environment to drive adoption of our offerings over the long term, as it has heightened the need for advanced AI tools that provide enhanced intelligence and full spectrum cyber operations – areas where we believe we have unmatched capabilities. While these challenges are still evolving and the eventual outcome remains highly uncertain, we do not believe that these events will have a material impact on our business and results of operations. However, if these challenges worsen, leading to greater disruptions and uncertainty within the technology industry or global economy, our business and results of operations could be negatively impacted.

Previous wording

SG&A expenses as a percentage of total revenues for the three months ended March 31, 2026 increased to 85% as compared to 65% for the three months ended March 31, 2025. The year-over-year increases include Ask Sage’s headcount and operating expenses not present in the first quarter of 2025, as well as significant investments in sales, marketing and other initiatives during the three months ended March 31, 2026.

Current wording

SG&A expenses as a percentage of total revenues for the three months ended June 30, 2026 increased to 87% as compared to 66% for the three months ended June 30, 2025. The year-over-year increases include Ask Sage’s headcount and operating expenses not present in three months ended June 30, 2025, as well as significant investments in sales, marketing and other initiatives during three months ended June 30, 2026.

Previous wording

Research and development expenses increased by $1.4 million during the three months ended March 31, 2026 as compared to the three months ended March 31, 2025. The increase in research and development expenses was driven by fewer projects qualifying for software capitalization compared to the three months ended March 31, 2025.

Current wording

Research and development expenses increased by $3.2 million during the three months ended June 30, 2026 as compared to the three months ended June 30, 2025. The increase in research and development expenses was driven by higher headcount and fewer projects qualifying for software capitalization compared to three months ended June 30, 2025. During the three months ended June 30, 2025, $1 million of research and development costs were capitalized compared to $0 for the three months ended June 30, 2026.

Previous wording

Restructuring charges decreased by $1.7 million during the three months ended March 31, 2026 as compared to the three months ended March 31, 2025. Restructuring charges consist of employee separation costs related to strategic cost saving initiatives to better align our organization and cost structure and improve the affordability of our products and services as well as employee separation costs associated with strategic changes in certain key leadership roles.

Current wording

Restructuring charges decreased by $1.5 million during three months ended June 30, 2026 as compared to three months ended June 30, 2025. Restructuring charges consist of employee separation costs related to strategic cost saving initiatives to better align our organization and cost structure and improve the affordability of our products and services as well as employee separation costs associated with strategic changes in certain key leadership roles.

Previous wording

Interest expense during the three months ended March 31, 2026 and 2025 consists primarily of interest expense, debt issuance discount amortization, commitment fees and debt issuance cost amortization under our Convertible Notes. See the Liquidity and Capital Resources section below for more information. The change in interest expense during the three months ended March 31, 2026 as compared to the three months ended March 31, 2025 is primarily due to a lower average principal balance on the 2029 Convertible Notes due to the conversion of the remaining balance during the three months ended March 31, 2026.

Current wording

Interest expense during the three months ended June 30, 2026 and 2025 consists primarily of interest expense, debt issuance discount amortization, commitment fees and debt issuance cost amortization under our Convertible Notes. See the Liquidity and Capital Resources section below for more information. The change in interest expense during three months ended June 30, 2026 as compared to three months ended June 30, 2025 is primarily due to a lower average principal balance on the 2029 Convertible Notes due to the conversion of the remaining balance during the first quarter of 2026.

Previous wording

The change in other expense (income), net during the three months ended March 31, 2026 as compared to the three months ended March 31, 2025 is primarily driven by foreign exchange losses and management fees on our debt securities portfolio.

Current wording

The change in other income during the three months ended June 30, 2026 as compared to the three months ended June 30, 2025 is primarily driven by foreign exchange losses and management fees on our debt securities portfolio.

Previous wording

Revenues decreased by $0.3 million during the three months ended March 31, 2026 as compared to the three months ended March 31, 2025 primarily due to lower volume on the Army programs and significant one time contracts during the three months ended March 31, 2025, that did not recur during the three months ended March 31, 2026, which was substantially offset by the inclusion of Ask Sage during the three months ended March 31, 2026.

Current wording

Revenues increased by $4.0 million during the six months ended June 30, 2026 as compared to the six months ended June 30, 2025 primarily due to the inclusion of Ask Sage offset by lower volume on the Army programs and significant one time contracts that contributed revenues during the six months ended June 30, 2025, that did not recur during the six months ended June 30, 2026..

Previous wording

Cost of revenues as a percentage of total revenues was 66% and 79% for the three months ended March 31, 2026 and 2025, respectively. The decrease in cost of revenue as a percentage of total revenue was driven by the inclusion of higher margin Ask Sage revenues during the three months ended March 31, 2026 as compared to the three months ended March 31, 2025. The decrease in total dollars of cost of revenues was primarily due to lower volume on Army programs during the three months ended March 31, 2026 as compared to the three months ended March 31, 2025.

Current wording

Cost of revenues as a percentage of total revenues was 67% and 77% for the six months ended June 30, 2026 and 2025, respectively. The decrease in cost of revenue as a percentage of total revenue was driven by the inclusion of higher margin Ask Sage revenues during the six months ended June 30, 2026 as compared to the six months ended June 30, 2025. The decrease in total dollars of cost of revenues was primarily due to lower volume on Army programs during the six months ended June 30, 2026 as compared to the six months ended June 30, 2025.

Previous wording

Transaction expenses for the three months ended March 31, 2026 consist of diligence, legal and other related expenses associated with the Ask Sage and CargoSeer acquisitions, as well as costs associated with evaluating other acquisition opportunities. There were no transaction expenses for the three months ended March 31, 2025.

Current wording

Transaction expenses for the six months ended June 30, 2026 consist of diligence, legal and other related expenses associated with the Ask Sage and CargoSeer acquisitions, as well as costs associated with evaluating other acquisition opportunities. There were no transaction expenses for the six months ended June 30, 2025.

Previous wording

The increase in interest income is primarily related to a higher average cash and investment balances during the three months ended March 31, 2026 compared to comparative periods resulting from cash raised through at-the-money equity issuances, and includes interest earned from our investments in debt securities.

Current wording

The increase in interest income is primarily related to a higher average cash and investment balances during the six months ended June 30, 2026 compared to comparative periods resulting from cash raised through at-the-money equity issuances, and includes interest earned from our investments in debt securities.

Previous wording

The net increase in fair value of derivatives of $20.1 million for the three months ended March 31, 2026 includes fair value remeasurements of the 2026 Notes Conversion Option, IPO private warrants, and the 2025 RDO warrants, as well as the remeasurement of 2029 Notes Conversion Option immediately prior to conversion. The decrease of $13.2 million is due to decrease in the stock price as of March 31, 2025 and March 31, 2026.

Current wording

The net increase in fair value of derivatives of $20.6 million for the six months ended June 30, 2026 includes fair value remeasurements of the 2026 Notes Conversion Option, IPO private warrants, and the 2025 RDO warrants, as well as the remeasurement of 2029 Notes Conversion Option immediately prior to conversion. The decrease of $148.5 million is due to a decrease in the stock price between June 30, 2025 and June 30, 2026.

Previous wording

Loss on extinguishment of debt during the three months ended March 31, 2026 relates to the write-off of the unamortized debt issuance costs and discount on the 2029 Convertible Notes that were voluntarily converted by noteholders.

Current wording

Loss on extinguishment of debt during the six months ended June 30, 2026 and 2025 relates to the write-off of the unamortized debt issuance costs and discount on the 2029 Convertible Notes that were voluntarily converted by noteholders.

Previous wording

The effective tax rate for the three months ended March 31, 2026 and 2025 differs from the U.S. federal income tax rate of 21.0% primarily due to state and local income taxes, permanent differences between book and taxable income, certain discrete items and the change in valuation allowance. The benefit for the three months ended March 31, 2026 and 2025 primarily relates to state minimum taxes offset by income tax benefit derived from our United Kingdom entity and to the change in valuation allowance as a result of the Ask Sage acquisition.

Current wording

The effective tax rate for the six months ended June 30, 2026 and 2025 differs from the U.S. federal income tax rate of 21.0% primarily due to state and local income taxes, permanent differences between book and taxable income, certain discrete items and the change in valuation allowance. The benefit for the six months ended June 30, 2026 and 2025 primarily relates to state minimum taxes offset by income tax benefit derived from our United Kingdom entity and to the change in valuation allowance as a result of the Ask Sage acquisition.

Previous wording

The Company uses Adjusted EBITDA to evaluate its operating performance, generate future operating plans, and make strategic decisions, including those relating to operating expenses and the allocation of internal resources. Adjusted EBITDA is a financial measure not calculated in accordance with GAAP. Adjusted EBITDA is defined as net loss adjusted for interest expense, interest income, income tax expense, depreciation and amortization, equity-based compensation and associated employer payroll taxes, net increase in fair value of derivatives, restructuring charges, non-recurring strategic initiatives, non-recurring litigation, transaction expenses, non-recurring integration costs, and loss on extinguishment of debt. Non-GAAP financial performance measures are used to supplement the financial information presented on a GAAP basis. This non-GAAP financial measure should not be considered in isolation or as a substitute for the relevant GAAP measures and should be read in conjunction with information presented on a GAAP basis. Because not all companies use identical calculations, our presentation of non-GAAP measures may not be comparable to other similarly titled measures of other companies.

Current wording

The Company uses Adjusted EBITDA to evaluate its operating performance, generate future operating plans, and make strategic decisions, including those relating to operating expenses and the allocation of internal resources. Adjusted EBITDA is a financial measure not calculated in accordance with GAAP. Adjusted EBITDA is defined as net loss adjusted for interest expense, interest income, income tax expense, depreciation and amortization, equity-based compensation and associated employer payroll taxes, net increase in fair value of derivatives, restructuring charges, non-recurring strategic initiatives, non-recurring litigation, transaction expenses, non-recurring integration costs, goodwill impairment, and loss on extinguishment of debt. Non-GAAP financial performance measures are used to supplement the financial information presented on a GAAP basis. This non-GAAP financial measure should not be considered in isolation or as a substitute for the relevant GAAP measures and should be read in conjunction with information presented on a GAAP basis. Because not all companies use identical calculations, our presentation of non-GAAP measures may not be comparable to other similarly titled measures of other companies.

Previous wording

In April 2023, the Company filed an automatic shelf registration statement on Form S-3 (the “2023 Shelf Registration Statement”) with the SEC registering an indeterminate amount of its common stock, preferred stock, warrants, rights, and units (collectively, “Company securities”), which the SEC declared effective on April 21, 2023. In May 2024, the Company filed a prospectus supplement to the 2023 Shelf Registration Statement which allows the Company to sell, from time to time and at its discretion, Company securities having an aggregate offering price of up to $150 million including shares of common stock that may be sold pursuant to the Company’s controlled equity offering agreement, dated as of May 10, 2024 (the “Controlled Equity Offering Agreement”), with Cantor Fitzgerald & Co. (“Cantor”), as sales agent, under an “at the market” offering program (the “May 2024 Sales Agreement”).

Current wording

In April 2023, the Company filed an automatic shelf registration statement on Form S-3 (the “2023 Shelf Registration Statement”) with the SEC registering an indeterminate amount of its common stock, preferred stock, warrants, rights, and units (collectively, “Company securities”), which the SEC declared effective on April 21, 2023. Pursuant to the Company’s controlled equity offering agreement (the “Controlled Equity Offering Agreement”) dated as of May 10, 2024, with Cantor Fitzgerald & Co. (“Cantor”), as sales agent, under an “at the market” offering program (the “ATM Program”)the Company agreed to pay commissions to Cantor as its sales agent for their service with respect to the sales of common stock through the ATM Program.

Previous wording

Pursuant to the Controlled Equity Offering Agreement, the Company may offer and sell common stock having an aggregate offering price of up to $150 million from time to time to or through Cantor, subject to the Company’s compliance with applicable laws and the applicable requirements of the Controlled Equity Offering Agreement. The Controlled Equity Offering Agreement stipulates that the Company will pay Cantor a commission equal to up to 3.0% of the gross offering proceeds of any shares of common stock sold to or through Cantor pursuant to the Controlled Equity Offering Agreement. The Company intends to use the net proceeds from sales of common stock issued under the ATM Program for general corporate and working capital purposes. The timing of any sales and the number of shares sold will depend on a variety of factors to be determined and considered by the Company. The Company is not obligated to sell any shares under the Controlled Equity Offering Agreement.

Current wording

Pursuant to the Controlled Equity Offering Agreement, the Company may offer and sell common stock from time to time to or through Cantor, subject to the Company’s compliance with applicable laws and the applicable requirements of the Controlled Equity Offering Agreement. The Controlled Equity Offering Agreement stipulates that the Company will pay Cantor a commission of up to 3.0% of the gross offering proceeds of any shares of common stock sold to or through Cantor pursuant to the Controlled Equity Offering Agreement. The Company intends to use the net proceeds from sales of common stock issued under the ATM Program for general corporate and working capital purposes. The timing of any sales and the number of shares sold will depend on a variety of factors to be determined and considered by the Company. The Company is not obligated to sell any shares under the Controlled Equity Offering Agreement.

Previous wording

During the years ended December 31, 2025 and 2024, the Company filed various prospectus supplements to the 2023 Shelf Registration Statement which allowed the Company to sell, from time to time and at its discretion, Company securities having an aggregate offering price of up to $637.1 million including shares of common stock that may be sold pursuant to the Company’s Controlled Equity Offering Agreement (the “Sales Agreements”). During the year ended December 31, 2025, the Company sold 142,253,313 shares of common stock under the Sales Agreements for an aggregate offering price of $637.1 million. Total issuance costs related to the ATM Program were approximately $8.3 million, resulting in aggregate net proceeds of approximately $628.8 million.

Current wording

In August 2025, the Company filed an additional prospectus supplement to the 2023 Shelf Registration Statement which allowed the Company to sell, from time to time and at its discretion, Company securities having an aggregate offering price of up to $337.1 million including shares of common stock that may be sold pursuant to the Company’s Controlled Equity Offering Agreement (the “August 2025 Sales Agreement”). During the remainder of the year ended December 31, 2025, the Company sold 65,000,000 shares of common stock under the August 2025 Sales Agreement for an aggregate offering price of $337.1 million. Total issuance costs related to the ATM Program were approximately $3.1 million, resulting in aggregate net proceeds of approximately $334.0 million.

Previous wording

During the three months ended March 31, 2025, $57.7 million of the 2029 Convertible Notes were voluntarily converted by noteholders following the Exchange Transaction. These conversions resulted in the issuance of 16.7 million shares of common stock.

Current wording

During the six months ended June 30, 2025, $57.7 million of the 2029 Convertible Notes were voluntarily converted by noteholders following the Exchange Transaction. These conversions resulted in the issuance of 16.7 million shares of common stock.

Previous wording

For the three months ended March 31, 2026, net cash used in operating activities was $18.0 million. Net loss before deducting depreciation, amortization and other non-cash items was $10.4 million and was further impacted by an unfavorable change in net working capital of $7.6 million. The unfavorable change in net working capital was largely driven by a decrease in accounts payable of $2.0 million, a decrease in contract liabilities of $3.5 million, an increase in accounts receivable of $0.7 million, and an increase in contract assets of $0.7 million.

Current wording

For the six months ended June 30, 2026, net cash used in operating activities was $40.2 million. Net loss before deducting depreciation, amortization and other non-cash items was $24.1 million and was further impacted by an unfavorable change in net working capital of $16.1 million. The unfavorable change in net working capital was largely driven by an increase in accounts payable of $5.0 million, a decrease in contract liabilities of $4.5 million, an increase in accounts receivable of $8.9 million, and an increase in contract assets of $0.2 million.

Previous wording

For the three months ended March 31, 2025, net cash used in operating activities was $6.7 million. Net loss before deducting depreciation, amortization and other non-cash items was $12.0 million and was further impacted by a favorable change in net working capital of $5.4 million which partially offset operating cash outflows during this period. The favorable change in net working capital was largely driven by a decrease in accounts receivable of $4.3 million, an increase in accrued expenses of $4.4 million, an increase in other liabilities of $1.7 million, an increase in contract liabilities of $0.5 million, and a decrease in contract assets of $0.4 million. These were partially offset by a decrease in accounts payable of $4.2 million and an increase in prepaid expenses and other assets of $1.8 million.

Current wording

For the six months ended June 30, 2025, net cash used in operating activities was $10.5 million. Net loss before deducting depreciation, amortization and other non-cash items was $23.9 million and was further impacted by a favorable change in net working capital of $13.4 million which partially offset operating cash outflows during this period. The favorable change in net working capital was largely driven by a decrease in accounts receivable of $10.3 million, an increase in accrued expenses of $4.8 million, an increase in other liabilities of $1.8 million, an increase in contract liabilities of $1.9 million, and a decrease in contract assets of $0.2 million. These were partially offset by a decrease in accounts payable of $5.0 million and an increase in prepaid expenses and other assets of $0.6 million.

Previous wording

For the three months ended March 31, 2026, net cash provided by investing activities was $32.7 million, primarily consisting of proceeds from the maturities of debt security investments of $43.2 million, cash paid for the acquisitions of Ask Sage and CargoSeer of $10.2 million, and purchases of property, plant and equipment of $0.3 million.

Current wording

For the six months ended June 30, 2026, net cash used in investing activities was $10.3 million, primarily consisting of proceeds from the maturities of debt security investments of $0.5 million, cash paid for the acquisitions of Ask Sage and CargoSeer of $10.2 million, and purchases of property, plant and equipment of $0.6 million.

Previous wording

For the three months ended March 31, 2025, net cash used in investing activities was $1.6 million, primarily consisting of capitalized software development costs of $1.5 million.

Current wording

For the six months ended June 30, 2025, net cash used in investing activities was $2.8 million, primarily consisting of capitalized software development costs of $2.7 million.

Previous wording

For the three months ended March 31, 2026, net cash used in financing activities was $0.8 million, primarily consisting of the proceeds from the exercise of options of $0.1 million, offset by payments of taxes related to net share settlement of equity awards of $0.9 million.

Current wording

For the six months ended June 30, 2026, net cash used in financing activities was $4.2 million, primarily consisting of deferred purchase consideration payment related to the Ask Sage acquisition of $4.5 million, payments of taxes related to net share settlement of equity awards of $1.3 million offset by the proceeds from the exercise of options of $0.1 million.

Previous wording

For the three months ended March 31, 2025, net cash provided by financing activities was $65.9 million, primarily consisting of the net proceeds from the exercise of the 2024 PIPE warrants and 2024 RDO warrants of $64.7 million and proceeds of $6.6 million from the issuance of common stock under our ATM Program. These cash inflows were partially offset by payment of debt issuance costs to third parties in connection with the Exchange Transaction of $4.3 million and payment of taxes related to net share settlement of equity awards of $1.3 million.

Current wording

For the six months ended June 30, 2025, net cash provided by financing activities was $354.8 million, primarily consisting of the net proceeds from the exercise of the 2024 PIPE warrants and 2024 RDO warrants of $64.7 million and proceeds of $294.8 million from the issuance of common stock under our ATM Program. These cash inflows were partially offset by payment of debt issuance costs to third parties in connection with the Exchange Transaction of $4.7 million, payment of transaction costs in connection with the ATM of $5.3 million, and payment of taxes related to net share settlement of equity awards of $1.7 million.