BigBear.ai Holdings (BBAI) risk factors, FY2024 10-K

Risks Related to Our Business and Industry

1. 01We have a limited operating history, which makes it difficult to evaluate our prospects and future results of operations
2. 02We may not be able to sustain our revenue growth rate in the future
3. 03Our sales efforts involve considerable time and expense and our sales cycle is often long and unpredictable
4. 04executing this or any other aspect of our growth strategy. For example, revenue earned from customers contributing in excess of 10% of consolidated revenues were derived from four customers comprising 52% of revenue for the twelve months ended December 31, 2024
5. 05We may not realize the full deal value of our customer contracts, which may result in lower than expected revenue
6. 06Indemnity provisions in various agreements to which we are a party potentially expose us to substantial liability for infringement, misappropriation or other violation of intellectual property rights, data protection and other losses
7. 07Our results of operations and earnings may not meet guidance or expectations
8. 08Our software is complex and may have a lengthy implementation process, and any failure of our software to satisfy our customers or perform as desired could harm our business, results of operations, and financial condition
9. 09If we do not successfully develop and deploy new technologies to address the needs of our customers, our business and results of operations could suffer
10. 10acceptance. If our research and development investments do not accurately anticipate customer demand or if we fail to develop our software in a manner that satisfies customer preferences in a timely and cost-effective manner, we may fail to retain our existing customers or increase demand for our software
11. 11Because we derive, and expect to continue to derive, a substantial percentage of our revenue from customers purchasing our software, market acceptance of these products, and any enhancements or changes thereto, is critical to our success
12. 12If we fail to manage future growth effectively, our business could be harmed
13. 13If we are unable to hire, retain, train, and motivate qualified personnel and senior management and deploy our personnel and resources to meet customer demand around the world, our business could suffer
14. 14If we are unable to successfully deploy our marketing and sales organization in a timely manner, or at all, or to successfully hire, retain, train, and motivate our sales personnel, our growth and long-term success could be adversely impacted
15. 15Once our software is deployed and integrated with our customers’ existing information technology investments, our customers
16. 16If we are not able to grow, maintain, and enhance our brand and reputation, our relationships with our customers, partners, and employees may be harmed, and our business and results of operations may be adversely affected
17. 17Our reputation and business may be harmed by news or social media coverage of BigBear.ai including but not limited to coverage that presents, or relies on, inaccurate, misleading, incomplete, or otherwise damaging information
18. 18Our pricing for our software and services may change to address market conditions
19. 19If our government customers are not able or willing to accept our software-based business model, instead of a labor-based business model, our business and results of operations could be negatively impacted
20. 20We face intense competition in our markets, and we may lack sufficient financial or other resources to maintain or improve our competitive position
21. 21Our culture emphasizes rapid innovation and advancement of successful hires who may, in some cases, have limited prior industry expertise and prioritizes customer outcomes over short-term financial results, and if we cannot maintain or properly manage our culture as we grow, our business may be harmed
22. 22We may not enter into relationships in select countries or with potential customers if their activities or objectives are inconsistent with our mission or values
23. 23Joint ventures, channel sales relationships, platform partnerships, strategic alliances, or subcontracting opportunities may have a material adverse effect on our business, results of operations and prospects
24. 24We have business and customer relationships with certain entities who are stockholders or are affiliated with our directors, or both, and conflicts of interest may arise because of such relationships
25. 25If we are not successful in executing our strategy to increase our sales to larger customers, our results of operations may suffer
26. 26Unfavorable conditions in our industry or the global economy, or reductions in IT spending, could limit our ability to grow our business and negatively affect our results of operations
27. 27If the market for our software and services develops more slowly than we expect, our growth may slow or stall, and our business, financial condition, and results of operations could be harmed
28. 28We will face risks associated with the growth of our business in new commercial markets and with new customer verticals, and we may neither be able to continue our organic growth nor have the necessary resources to dedicate to the overall growth of our business
29. 29In the future, we may not be able to secure the financing necessary to operate and grow our business as planned, or to make acquisitions
30. 30We may need to raise additional capital, which may not be available on favorable terms, if at all, and which may cause dilution to stockholders, restrict our operations or adversely affect our ability to operate our business
31. 31Our ability to make scheduled payments on, or to refinance our obligations under, any indebtedness depends on our financial and operating performance and prevailing economic and competitive conditions. Certain of these financial and business factors, many of which may be beyond our control, are described above
32. 32Our debt agreements contain restrictions that may limit our flexibility in operating our business
33. 33We may acquire or invest in companies and technologies, which may divert our management’s attention, and result in additional dilution to our stockholders. We may be unable to integrate acquired businesses and technologies successfully or achieve the expected benefits of such acquisitions or investments
34. 34Certain revenue metrics such as net dollar-based retention rate or annual recurring revenue may not be accurate indicators of our future financial results

Risks Related to Intellectual Property, Information Technology, Data Privacy and Security

1. 35Our success depends in part on our ability to provide effective data security protection in connection with our software and
2. 36Issues in the use of artificial intelligence (“AI”) and machine learning (“ML”) in our software may result in reputational harm or liability
3. 37Furthermore, our software are in many cases important or essential to our customers’ operations, including in some cases, their
4. 38Our policies regarding customer confidential information and support for individual privacy and civil liberties could cause us to experience adverse business and reputational consequences
5. 39Failure to adequately obtain, maintain, protect and enforce our intellectual property and other proprietary rights could adversely affect our business
6. 40We may in the future be subject to intellectual property rights claims, which are extremely costly to defend, could require us to pay significant damages and could limit our ability to use certain technologies
7. 41Real or perceived errors, failures, defects, or bugs in our software could adversely affect our results of operations and growth prospects
8. 42We rely on the availability of licenses to third-party technology that may be difficult to replace or that may cause errors or delay implementation of our software and services should we not be able to continue or obtain a commercially reasonable license to such technology
9. 43Our software contains “open source” software, and any failure to comply with the terms of one or more of these open source licenses could negatively affect our business

Risks Related to Legal, Regulatory and Accounting

1. 44Our estimates and projections may prove to be inaccurate and certain of our assets may be at risk of future impairment
2. 45Failure to comply with governmental laws and regulations could harm our business, and we may be the subject of legal and regulatory inquiries, which may result in monetary payments or may otherwise negatively impact our reputation, business, and results of operations
3. 46We may become involved in legal, regulatory, and administrative inquiries and proceedings, and unfavorable outcomes in litigation or other matters could negatively impact our business, financial conditions, and results of operations
4. 47Failure to comply with anti-bribery and anti-corruption laws could subject us to penalties and other adverse consequences
5. 48Governmental trade controls, including export and import controls, sanctions, customs requirements, and related regimes, could subject us to liability or loss of contracting privileges or limit our ability to compete in certain markets
6. 49Changes in accounting principles or their application to us could result in unfavorable accounting charges or effects, which could adversely affect our results of operations and growth prospects
7. 50If our judgments or estimates relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our results of operations could fall below expectations of securities analysts and investors, resulting in a decline in our stock price
8. 51We could be subject to additional tax liabilities
9. 52Our ability to use our net operating loss carryforwards may be limited
10. 53Certain U.S. state tax authorities may assert that we have a state nexus and seek to impose state and local income taxes which could harm our results of operations
11. 54Our results of operations may be harmed if we are required to collect sales or other related taxes for our license arrangements in jurisdictions where we have not historically done so

Risks Related to Our Relationships and Business with the Public Sector

1. 55A significant portion of our business depends on sales to the public/government sector, and our failure to receive and maintain government contracts or changes in the contracting or fiscal policies of the public sector could have a material adverse effect on our business
2. 56We have government customers, which subjects us to risks including early termination, audits, investigations, sanctions and penalties
3. 57We have contracts with government agencies that involve classified programs, which may limit investor insight into portions of our business
4. 58Our business could be adversely affected if our employees cannot obtain and maintain required personnel security clearances, or we cannot establish and maintain a required facility security clearance
5. 59Failure to comply with laws, regulations, or contractual provisions applicable to our business could cause us to lose government customers or our ability to contract with the U.S. and other governments
6. 60Evolving government procurement policies and increased emphasis on cost over performance could adversely affect our business
7. 61Increased competition and bid protests in a budget-constrained environment may make it more difficult to maintain our financial performance and customer relationships
8. 62recognition of revenue. We also may not be successful in our efforts to protest or challenge any bids for contracts that were not awarded to us, and we would be required to incur significant time and expense in such efforts
9. 63A decline in the U.S. and other government budgets, changes in spending or budgetary priorities, or delays in contract awards may significantly and adversely affect our future revenue and limit our growth prospects

Risks Related to the Convertible Notes

1. 64Our indebtedness could adversely affect our financial condition and prevent us from fulfilling our obligations under the Convertible Notes
2. 65In addition, it is possible that we may need to incur additional indebtedness in the future in the ordinary course of business
3. 66We may be able to incur substantial indebtedness. This could exacerbate the risks to our financial condition described above and prevent us from fulfilling our obligations under the Convertible Notes
4. 67Our obligation to offer to redeem the Convertible Notes upon the occurrence of a fundamental change will be triggered only by certain specified transactions, and may discourage a transaction that could be beneficial to the holders of our Common Stock and the Convertible Notes
5. 68We may not be able to generate sufficient cash to service all of our indebtedness, including the Convertible Notes, and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful
6. 69Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, would materially and adversely affect our financial position and results of operations and our ability to satisfy our obligations under the Convertible Notes
7. 70The Indentures contain terms which restrict our current and future operations, particularly our ability to respond to changes or to take certain actions
8. 71These restrictions may affect our ability to expand our business, which could have a material adverse effect on our business, financial condition and results of operations
9. 72The Indentures contain cross-default provisions that could result in the acceleration of all of our indebtedness
10. 73The 2026 Convertible Notes are effectively subordinated to our indebtedness under the 2029 Convertible Notes and our other secured indebtedness to the extent of the value of the assets securing that indebtedness
11. 74The Convertible Notes are structurally subordinated to all obligations of our existing and future subsidiaries that are not and do not become guarantors of the Convertible Notes
12. 75Federal and state fraudulent transfer laws may permit a court to void the Convertible Notes or the guarantees and, if that occurs, the noteholders may not receive any payments on the Convertible Notes
13. 76There is limited trading and liquidity for the Convertible Notes, and holders’ ability to sell the Convertible Notes could be limited
14. 77Even though the Convertible Notes are convertible into shares of our Common Stock, the terms of the Convertible Notes will not provide protection against some types of important corporate events
15. 78There can be no assurances that any rating assigned to our debt securities will remain for any given period of time or that a rating

Risks Related to Our Common Stock

1. 79We have convertible debt that may be converted into Common Stock in the future, which would cause immediate and substantial dilution to our stockholders
2. 80Our only significant asset is our ownership interest in our subsidiaries and such ownership may not be sufficient to pay dividends or make distributions or loans to enable us to pay any dividends on our Common Stock or satisfy our other financial obligations
3. 81Because we have no current plans to pay cash dividends on shares of common stock for the foreseeable future, you may not receive any return on investment unless you sell shares of Common Stock for a price greater than that which you paid for it
4. 82The estimated fair value of our derivative liabilities related to our warrants, including the 2024 RDO Warrants, the 2024 PIPE Warrants, and the IPO Private Warrants was $54.7 million as of December 31, 2024. The 2024 RDO Warrants and 2024 PIPE Warrants were fully exercised during the first quarter of 2025
5. 83The price of our Common Stock has been and could remain volatile and a market for our securities may not continue, which would adversely affect the liquidity and price of our securities
6. 84In the past, we have not satisfied certain continued listing requirements of the NYSE and could fail to satisfy those requirements again in the future, which could materially adversely affect our business, financial condition or results of operations

Risk Related to the Acquisition of Pangiam

1. 85BigBear.ai stockholders may not realize a benefit from the Pangiam Acquisition commensurate with the ownership dilution they will experience in connection with the Pangiam Acquisition
2. 86BigBear.ai may not achieve the benefits it expects from the Pangiam Acquisition, which may have an adverse effect on both BigBear.ai’s and Pangiam’s business, financial condition and operating results
3. 87The combined company may be unable to integrate successfully the businesses of BigBear.ai and Pangiam and realize the anticipated benefits of the Pangiam Acquisition
4. 88Pangiam’s potential products and technologies are in early stages of development
5. 89Increasing attention to, and evolving expectations for, environmental, social, and governance (“ESG”) initiatives could increase our costs, harm our reputation, or otherwise adversely impact our business
6. 90Adverse economic conditions or reduced technology spending may adversely impact our business
7. 91We have and will incur increased costs and demands upon management as a result of complying with the laws and regulations affecting public companies, which could adversely affect our business, results of operations, and financial condition
8. 92Natural disasters and other events beyond our control could harm our business
9. 93Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our financial condition and results of operations
10. 94We may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and stock price, which could cause you to lose some or all of your investment
11. 95We will incur significant increased expenses and administrative burdens as a public company, which could have an adverse effect on our business, financial condition and results of operations
12. 96The exercise price for the IPO warrants is $11.50 per share of Common Stock. There is no guarantee that the warrants will ever be in the money prior to their expiration, and as such, the warrants may expire worthless
13. 97The exercise price for our public warrants is higher than in many similar blank check company offerings in the past, and, accordingly, the public warrants are more likely to expire worthless
14. 98Our warrants will become exercisable for our Common Stock, which would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders
15. 99We have no obligation to net cash settle the warrants
16. 100If we fail to introduce or acquire new products or services that achieve broad market acceptance on a timely basis, or if our products or services are not adopted as expected, we will not be able to compete effectively
17. 101If our products fail to achieve and sustain sufficient market acceptance, our revenue will be adversely affected
18. 102The future sales of shares of Common Stock by existing stockholders may adversely affect the market price of the Company’s Common Stock
19. 103If securities or industry analysts cease publishing research or reports about the Company, its business, or its market, or if they change their recommendations regarding the Company’s securities adversely, the price and trading volume of the Company’s securities could decline
20. 104We may redeem the unexpired IPO warrants prior to their exercise at a time that is disadvantageous to warrant holders, thereby making their warrants worthless
21. 105Anti-takeover provisions contained in our Second Amended and Restated Certificate of Incorporation as well as provisions of Delaware law, could impair a takeover attempt
22. 106These provisions, alone or together, could delay hostile takeovers and changes in control of BigBear.ai or changes in our Board and our management
23. 107The JOBS Act permits “emerging growth companies” like us to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies
24. 108Our internal control over financial reporting may not be effective and our independent registered public accounting firm may not be able to certify as to their effectiveness, which could have a significant and adverse effect on our business and reputation
25. 109date we are no longer an emerging growth company. At such time, our independent registered public accounting firm may issue a report that is adverse in the event that it is not satisfied with the level at which the controls of BigBear.ai are documented, designed or operating
26. 110Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect the Company’s business, investments and results of operations
27. 111Although we are no longer a “controlled company” under the New York Stock Exchange (“NYSE”) rules, we may continue to rely on exemptions from certain corporate governance requirements during a one-year transition period
28. 112The future exercise of registration rights may adversely affect the market price of our Common Stock
29. 113If we fail to maintain an effective system of internal controls over financial reporting, there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis