BigBear.ai Stock

Good afternoon, and thank you all for joining us today for our third quarter 2026 earnings call. I'm Sean Ricker, CFO of BigBear.ai, and I'm 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 security laws. Actual results may differ materially from those projected in the forward-looking statements. These statements, including a 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'll hand it over to Kevin.

Thank you, Sean. BigBear had another strong quarter. I'll 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 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're 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'd 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'll 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 United States 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. 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're agile and well capitalized enough to move quickly and innovate on near-term opportunities and changing customer needs, and we're big enough to scale solutions and technology for complex, hard to navigate mission sets with higher 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, with 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; fourth, 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 don't 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 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. 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 focused 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, our 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's 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 who depend on these tools every day from [ intelligent ] 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 a result 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 2 substantial subcontracts centered on Homeland and Border Security, one on SAIC's team and the other partnering with Unison. Both extend our long-standing work supporting U.S. Customs and Border Protection targeting the system for the [ 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 counterterrorism, counter-narcotics, human smuggling trade enforcement, agriculture protection and other security missions. Under SAIC's newly awarded 5-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. So our work under Unison's newly awarded 5-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 [ AskSage ] 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, U.S. Coast Guard, NASA, the Department of Energy and the Department of Veterans Affairs. While the mission needs and use cases may differ, BigBear's generative platform provides secure access to the latest generative AI models and agentic tools with the choice of available models from leading AI and cloud providers, the ability for these agencies to possess secured 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 gap 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 and manufacturing facilities, airports and supply chain players that we've 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's care use cases, [ FutureFlow Rx ] addresses complex health care operational changes where lives are at stake. We recently secured a 2-year renewal with Children's in Minnesota, one 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 to 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 in the 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 [indiscernible] go-to-market motions are simpler and more targeted, and we are executing with increasing consistency.

I'll now turn it over to Sean to walk us through the details of our financials.

Thanks, Kevin. Our results were strong operationally and financially this quarter. Revenue for the third quarter of 2026 was $43.6 million, an increase of 31% year-over-year due to improved revenue performance across the business and substantially driven by our BigBear generative AI platform, which was acquired at AskSage in December 2025. Our improved gross margins continued this quarter, growing to 31.2% and increase of 878 basis points as compared to [indiscernible] we recorded a noncash goodwill impairment charge of $76.7 million or $0.16 per share in the third quarter of 2026, 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 a great date 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've 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're 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'll turn it back to Kevin for some closing remarks.

Thank you, Sean, and thank you to the whole Big Bear team for your hard work. We approach the end of the year with real confidence, thanks to our underlying financial strength and win momentum. I'd 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 the impact is likely to grow next year. First, defense modernization. How wars are fought is changing, shift of this magnitude happens rarely, and we are only at the start of the change. The world is wrestling with dozens of active conflicts. In 2025 alone, global military spending reached a record $2.9 trillion. While U.S. defense spending grows, the proportion being directed to disruptive technologies and new entrants is increasing as well. In the 2027 U.S. defense budget, the 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 means 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 Trading 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. U.S. Customs and Border Protection processes about 1 million individuals entering the country daily at Air land and Seaport [ of entry ], substantial share of these trial has moved through airports, and our biometric solutions are deployed across more than 2 dozen major U.S. 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 capital 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 non-state actors are increasingly using generative AI tools, 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 were potentially threatening event venues and critical infrastructure, increasing cybersecurity vulnerabilities across the economy and a digital information ecosystem flooded with this information are high on the agendas of policymakers and appropriators.

BigBear customers understand that many of our people came from the security community helped to 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 BigBear 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 analytic technology for operators in national security and trading 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. I 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. This does conclude today's teleconference. We thank you for your participation, and you may disconnect your lines this time.

Greetings, and welcome to the BigBear.ai Holdings, Inc. Second Quarter 2026 Earnings Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Sean Ricker, Chief Financial Officer. Thank you. You may begin.

Good afternoon, and thank you all for joining us today for our second quarter 2026 earnings call. I'm Sean Ricker, CFO of BigBear.ai, and I'm 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. 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 tables on our website today that we plan to address during the call to supplement our comments. These tables 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'll hand it over to Kevin.

Good afternoon, and thank you, Sean. I'm pleased to report to our investors that BigBear.ai had a strong quarter. First, revenue for the second quarter of 2026 exceeded revenue for the same period in 2025 by 13%, and our gross margin improved by 781 basis points. We are on track to meet our top line guidance in the range of $135 million to $165 million. And as a leadership team, we are fully focused on following through, hitting our targets and continuing to earn investor trust.

Second, we continue to win new contracts with both existing and new customers in the U.S. and abroad. I'm happy to share that we won more than 20 new contracts with customers in quarter 2 with values ranging up to $5 million each. For confidentiality reasons, we can't share the details of many of them, but I'll touch on a few.

This follows our announcement in Q1 of a longer-term contract with an intelligence customer with a total contract value of $53 million. Each win proves that customers want specialized AI for complex use cases and secure environments that very few companies have the operational insight to deliver. Customers see that we are focused on the right problems and have the capability to help solve them. As a result, our backlog has grown by 9% since year-end, and the pipeline continues to be healthy. And third, thanks to a clear strategy and focused use of our development resources, we have deployed product enhancements and capabilities that are fundamentally changing operators' ability to drive mission performance across a range of use cases from cargo inspection, to generative AI, to drone swarm orchestration. I'll describe some of these examples shortly.

These 3 facts that BigBear.ai is on track to forecast, realizing strong customer wins in multiple categories, and generating traction for product innovation, strengthen my confidence that we are building momentum as a company. We have laid excellent financial foundations, focused our talent on a disciplined strategy, and global market trends are in our favor.

If I step back and consider what we thought would be true now when we began resetting BigBear in early 2025, our key underlying assumptions are playing out. Governments and business leaders globally are confronted by great power competition and rolling regional conflicts. BigBear.ai was prepared for this shift, thanks to our long-standing work for national security customers and our development of technologies targeted to meet new operational needs. This is the core of our expertise and customer trust. Our roots are deep in mission environments, supporting both domestic and international security.

The trend line for increased investment in and focus on enhanced defense and security technologies is set, both in the U.S. and among our allies. AI and alternative technologies are fundamental to the reimagined global battlefield and emerging military strategy. And commercial entities, especially those engaged in securing and facilitating trade and travel, urgently need advanced applied AI technologies, particularly for supply chain security.

Domestic threat landscapes are far more dynamic as well. Counterterrorism professionals must sprint to stay ahead of threat actors who have access to powerful technologies at low cost. These asymmetric threats make BigBear.ai's technologies and experience ever more relevant to our core customers and of interest to new customers who would not previously have considered security as their priority.

Critical infrastructure must be protected. We predicted many of these changes when I led the Department of Homeland Security. Many of the threats we face now, including drone swarms and the potential for autonomous attacks on public events, as well as AI-enabled cyber threats were detailed in the DHS 2019 strategic framework for countering terrorism and targeted violence, and have become very real today. Additionally, the global travel and tourism industry is projected to reach an all-time high in 2026, accounting for 9.9% of global GDP, which represents 3.2% growth.

In global trade, structural changes have led to increased investment in technology by companies and countries who must adapt to far more complex regulatory regimes. Compounding shocks and the challenges of capacity and security have all driven broad reprioritization towards solving long-standing border management challenges with new technologies, including redesigning immigration systems. These issues sit at the heart of political agendas in both the developed and developing world. BigBear.ai builds and deploys technology to address each of these macro themes, which often converge.

Capital in the private as well as public markets is increasingly invested in businesses with the experience to build, acquire and deploy defense and security technologies that will fundamentally change the world we live in, making nations stronger, safer and more prosperous. That's why as we enter the second half of 2026, we are increasing our pace to meet these opportunities. My full focus is on 2 objectives: delivering top line revenue growth and accelerating our hunt for accretive M&A targets that offer catalytic technologies with clear potential for rapid deployment at scale.

I'm confident that we can do this because as you will see from the examples that follow, we have now fully integrated both acquisitions we executed in the last 6 months, Ask Sage and CargoSeer. These teams are now very much part of the day-to-day of the business and are performing well.

While we will be deliberate about deploying our available cash reserves to acquire new targets, given the dynamic opportunities in very large addressable markets we are focused on, we believe this is time to be aggressive. The BigBear.ai leadership team is ambitious and driving forward. My confidence in our ability to move fast rests on the simple fact that most companies today are searching to find their place in a world being redesigned by AI. BigBear.ai does not face that problem. Applied AI is at the very core of our value proposition and growth strategy and the operators we serve understand and are hungry to use AI where their use cases are real and urgent.

To bring this to life, let me move now to 3 operational use cases for our technology. Each represents a recent enhancement and is underpinned by an example of the business that we have won with an active customer.

The first is illustrated by a significant win in the last week for CargoSeer in El Salvador. We signed a 5-year commercial deployment agreement with a strategic regional customs expert following a successful 12-month pilot. This is the first deployment of CargoSeer in Central America, bringing cargo x-ray imagery, import and export documents, and structured trade data into a single workflow. It helps El Salvador customs officials detect contraband, collect the correct duties and keep legitimate trade moving.

Let's now look at the general application for CargoSeer. The operational challenges facing customs officers all over the world, including the increasing tension between growing trade volumes and increasing smuggling threats are substantial. The customs officer inspecting a shipment must evaluate rapidly assessing an x-ray image, a customs declaration and other trade data to judge whether the cargo is legitimate, often with a little more than a pen, a clipboard, and pages of manifest data. An anomaly may signal a concealed contraband, misclassified commodity, or a trafficked human being, while legitimate shipments need to keep moving.

The stakes are high and error can cost the country significant revenue, put lives at risk through drug or human trafficking or choke legitimate trade. That is the visibility, speed and volume problem that CargoSeer solves.

Just as the doctor reads an x-ray alongside patient history to diagnose, CargoSeer analyzes the cargo scan alongside the entire data package powered by AI and driven by computer vision. The automated image analysis tool compares the image against the declaration and trade data and flag anomalies with the speed and explainability the officer needs to complete an inspection. Why is this so valuable and why does it scale?

Global merchandise trade runs roughly $26 trillion per year. As a former Port Director early in my career at LAX, I can attest that as a major operational challenge to balance protecting national security, collecting revenue and keeping legitimate trade moving with downward pressure on costs and staff. This is true in every port of entry and border crossing in the world, thousands of them, each facing overwhelming volume with limited staff and resources. CargoSeer is configured to each country's own data and the officer's inspection workflow and its models can be updated as trade patterns and risks change. The technologies we are deploying in El Salvador are garnering interest from customs agencies around the world seeking to refine their operating models.

The second product enhancement and use case is generative AI in disconnected environments. Last quarter, I shared that NASA is now a customer of our generative AI platform, Ask Sage. One of the wins we're particularly proud of in Q2 is with Naval Air Systems Command, NAVAIR, which provides full life cycle support for all aircraft, weapons and airborne systems used by the U.S. Navy and Marine Corps. I cannot detail the specific application of our technology, but its rapid software deployment and agentic coding capabilities are part of the use case.

For customers who use our core cloud platform, 2 weeks ago, we expanded our offering for the entire Department of War and customers in other departments, including new air gap and local hardware for deployments up to the top secret level. This is a big step forward for the operator.

Let me explain. Imagine an intelligence analyst in a secure facility comparing reports, searching mission data and preparing an assessment for a commander. The information cannot leave that environment and sometimes Internet connection is removed by design. The analysts still need the latest AI tools to organize and evaluate data, but generative AI models are typically accessed through the cloud. When an external network is unavailable or prohibited, that access disappears.

Our new local device announced 2 weeks ago changes that. About the size of a hardcover book and highly portable, it brings the core capabilities of BigBear.ai's platform into locally connected or fully air-gapped environments that are physically isolated from all unsecured networks. It is model-agnostic and multimodal. The analysts can use a range of frontier AI models and process text, images, video and more. And when a connection is available, teams draw on the broad catalog of cloud-hosted models. When air gapped, models hosted locally keep the platform running with no external network.

This use case scales because our military and commercial customers can't afford service interruptions from patchy connectivity or security compromises. The operator uses the same BigBear generative AI platform across connected and disconnected environments instead of adopting a separate platform for each condition. Teams retain control over where their models run and the device can reach missions that cloud-only AI cannot serve.

This expansion addresses 2 customer pain points, access and predictability, and directly supports the Department of War's AI acceleration strategy. We've also added a new delivery option to help customers manage the cost. Customers can buy tokens through BigBear or bring their own models and tokens if they have preferential pricing from the frontier labs, and they can also white-label our platform. All of these features are intended to offer maximum flexibility to our customers.

The third product enhancement and use case centers on offensive and defensive drone warfare. Recently, in a series of military exercises, our ConductorOS software enabled a single soldier in the field to command multiple drones from multiple vendors running different models to clear an objective against notional enemy forces in a simulated degraded communications environment.

Let's look more deeply at that use case. Today, a commander overseeing a mixed fleet of drones, sensors and mission software from different companies must operate systems that aren't often connected and can't share data, manually moving information between them to make it relevant while piecing together a changing mission across separate interfaces. The result is that massive data volume becomes a serious cognitive burden. ConductorOS gives those systems a common way to connect and coordinate, like a conductor leading an orchestra that unites the mixed fleet of hardware and software through an open vendor-neutral architecture that lets sensors and manned and autonomous platforms from different vendors share data, models, and inferences. Its reach extends beyond drone fleets across sensor networks, a wide array of autonomous systems, including air defense missiles and communications interfaces, but it is particularly powerful for drones, which have rapidly become integral to the modern battle space and are not yet operating autonomously across multiple manufacturers at scale.

The case for scaling is clear. Soon, one operator will control large multi-vendor fleets rather than needing one operator per drone. In Ukraine, drone manufacturers have grown from 7 private companies at the start of Russia's full-scale invasion to nearly 500 today, producing millions of units a year. In the 2027 defense budget request, the United States government called for more than $70 billion for drones and counter drone systems. It's the largest ever investment in the technology. Part of this is a $54.6 billion request for an autonomous warfare unit. Today, there are more than 400 drone companies in the U.S., and BigBear.ai is positioned to help them become operationally viable at scale.

One further example beyond the drone application at the U.S. Army's Jailbreak event in Fort Carson in May, ConductorOS integrated a sensor and missile system that had never been able to communicate, showing the sensor could pass location data on an incoming target directly to the missile system for a kinetic strike. ConductorOS earned jailbroken status, meaning it had the approved interfaces and documentation needed for other systems to connect through it and operate as part of a broader interoperable network. This proves ConductorOS is on the leading edge of turning legacy system integration into a productized repeatable capability.

For operators deploying mixed fleets for multiple vendors, the need only grows as more autonomous platforms emerge. In each of these 3 use cases, we have advanced our technology, won new assignments and tackled operational problems that very few companies have the experience to understand, let alone address.

I'll now turn it over to Sean, to go to a deeper level on our financials.

Thanks, Kevin. Let's jump into our operating results for the second quarter. Revenue for the second quarter of 2026 was $36.7 million, an increase of 13% year-over-year as a result of performance from Gen AI platforms and products. Gross margin was 32.8% in the second quarter of 2026, an increase of 781 basis points as compared to the second quarter of 2025. The expansion in gross margins was driven by a higher mix of revenue from Gen AI platforms and products versus the comparable period.

Our net loss for the second quarter of 2026 was $25.7 million as compared to a net loss of $228.6 million in the comparable period. The decrease in the net loss was primarily related to noncash fair value changes in derivatives and a noncash goodwill impairment charge in the second quarter of 2025 that was not repeated in the second quarter of 2026. Adjusted EBITDA for the second quarter of 2026 was negative $11.6 million versus negative $8.5 million in the comparable period. The decrease in adjusted EBITDA was primarily driven by increased investment in sales and go-to-market capabilities and in research and development, both of which were partially offset by expanded gross margins, as previously mentioned.

Turning to the balance sheet. Our balance sheet remains strong. We finished the second quarter with total cash and investments of $410 million, which we're using to invest in new capabilities and to seek accretive M&A that can accelerate our growth strategy. We ended the second quarter with $270 million in backlog, an increase of about $22 million from where we started the year. As Kevin mentioned, we've seen contract wins across our portfolio, which reflects the dedicated focus and execution of our team in support of our customers and their missions.

Before I turn it back to Kevin for closing remarks, I wanted to share an update relating to our execution rigor. In July, we passed a significant milestone. We officially achieved Cybersecurity Maturity Model Certification or CMMC Level 2, well ahead of schedule. This is a rigorous U.S. federal cybersecurity standard that proves we have the advanced security controls required to protect controlled and classified information. Achieving this means we have successfully verified our defenses against sophisticated cyber threats.

The Department of War shared recently that it's reviewing the standard to lower the barrier to entry for smaller companies, but the threats that drove the CMMC Level 2 requirements are still here, and this certification is valuable to all our customers and also strengthens trust with international partners. The security practices it validates demonstrate a gold standard commitment to data privacy and infrastructure security. This is just one example of how we are, through our focus on executional rigor, maturing BigBear for future growth and expansion.

Now I'll turn it back to Kevin.

Thank you, Sean. For the benefit of our new investors and as a reminder to loyal shareholders, I'll underscore that BigBear.ai is investing in our strengths as a specialized defense and security technology company, delivering mission-ready AI. We are focused on 2 core markets that are growing: national security, and trade and travel, as we've outlined; and we bring together 3 capabilities that make us different: deep mission understanding, an expert command of applied AI, and the unique combination of scale and agility vital for adapting and delivering as mission needs shift. Everything you heard today is evidence of that strategy in action.

The accelerated program I talked about in Q1 is working. We have a realigned structure, clear growth plans and the resources we need to grow BigBear.ai into a powerhouse.

To close, I believe that as attention moves away from legacy technology to the AI capabilities where implementation is vital, not a promise for the future, BigBear is positioned to win. We operate equally well as a new defense and security technology prime or as a partner to the traditional primes, because we have deep customer trust and the size to deliver complex solutions or provide our targeted products and expertise within a larger contract. That flexibility puts us in a highly advantageous position.

During what will be an extended transitional period for big complex legacy businesses who need to pivot, BigBear is the ideal partner as we have already proven. I look forward to updating our shareholders on our next quarterly earnings call in November. Thank you for your interest in BigBear.ai.

Thank you. This does conclude today's conference. We thank you for your participation.

Greetings, and welcome to the BigBear.ai Holdings First Quarter 2026 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Sean Ricker. Please go ahead, sir.

Good afternoon, and thank you all for joining us today for our first quarter 2026 earnings call. I'm Sean Ricker, CFO of BigBear.ai, and I'm 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. 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 have posted charts on our website today that we plan to address during the call to supplement our comments. These charts 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.

And with that, I'll hand it over to Kevin.

Thanks, Sean. I would like to start by expressing appreciation again for our servicemen and women who have been executing missions both overseas and here at home since our last call. We are proud to provide technology that supports their efforts, and we continue to develop solutions that will strengthen our national security posture and capabilities. We also send our well wishes to our allies and partners who have been in harm's way in the Middle East.

In critical moments like these, BigBear.ai teams excel. It is a privilege to work alongside colleagues who have the operational experience and mission insight our customers value and expect. Our teams have stepped forward for government and commercial customers involved in the Iran conflict, augmenting the capabilities of warfighters, helping businesses adjust to supply chain disruptions and supporting the homeland security community as it prepares for a rapidly changing threat landscape here in the United States.

On our last earnings call, I underscored that the BigBear.ai growth strategy builds upon our strengths as a specialized defense and security technology company, delivering mission-ready AI. We are focused on 2 core markets that are growing, national security and trade and travel. And we are bringing together 3 capabilities that make us different: deep mission understanding, expert command of applied AI and a unique combination of scale and agility that is vital for adapting and delivering as mission needs evolve rapidly.

The strategy is working. We are on a path to grow and transform as a business. On our last call, I shared that we finished 2025 in the strongest financial position in the company's history. We closed the first quarter of 2026 with $431 million of cash and investments. We entered the second quarter showing clear progress on key metrics in Q1, and we are armed with a strong balance sheet and clear strategic focus, growth priorities and target customers.

We are currently implementing an enhanced go-to-market approach that aligns talent, technology development and customer delivery teams directly against emerging customer needs where we see the greatest growth potential.

Let me turn now to provide updates against each of the 4 company priorities before Sean covers the details of our Q1 2026 earnings, summarized in the press release issued today. As a reminder, the 4 priorities we outlined for the fiscal year on our last call were, number one, top line growth; two, focusing on the operator; three, enhancing executional rigor; and four, capitalizing on catalytic M&A.

Our first priority is top line growth with high-quality revenue in our target markets. We entered 2026 in a much improved position to take advantage of tailwinds. I'm, therefore, pleased to share 4 significant examples of customer wins in Q1. In Q1, we signed a large, classified sole-source contract with an intelligence community customer that we are executing now and will continue over the next 2 years.

The ceiling value is approximately $53 million. This contract is with an existing customer that values our unique skills and underscores our national security credentials. In this instance, we are the prime contractor, which is a testament to the trust our teams have established over years and our reputation for execution. I'm very proud of the team that has worked hard to serve these customers' needs at a time when operational insight and understanding matters more than ever.

In our trade and travel market, we're well underway deploying capabilities under 2 recent contract wins at Chicago O'Hare and Dallas-Fort Worth. The combined value of these contracts is $7 million and leverages our veriScan and TrueFace products. These wins further demonstrate the demand for faster, more efficient and more secure travel. Our technology outperforms the competition, reducing friction without compromising on security. This need becomes even more pronounced when airport staffing is under pressure, as it was when millions of travelers in the United States felt the pain of disruptions in recent months due to a confluence of factors.

The global market for increased shipbuilding remains robust and underscored by the historic $65.8 billion in new funding requested for naval shipbuilding in the administration's 2027 budget. BigBear.ai is leveraging our manufacturing modeling and simulation platform, Shipyard AI, to support U.S. and allied shipyards. In Q1, we won 2 new notable contracts in this space. The first is with Chantier Davie, Canada's premier shipbuilder and global leader in the delivery of mission-critical vessels to government and commercial customers.

The other is with Bollinger Shipyards, a leading designer and builder of high-performance vessels and a critical part of the U.S. defense industrial base. We are seeing continued demand for ProModel and our predictive analytics platforms, including Shipyard AI. ProModel simulation platforms are the foundation of powerful digital twins, empowering industries for manufacturing, warehousing, logistics, health care and defense to predict and enhance operational outcomes.

We have also won new generative AI platform contracts with NASA, the Army's Intelligence and Security Command in Virginia and the Naval Research Lab, who are now using Ask Sage. The significance of the work these customers are doing to advance our collective national security is a real point of pride, providing them with secure access to the latest generative AI models and agentic tools will support their critical missions.

From a business perspective, new Ask Sage customers also contribute to a continued shift in revenue mix from services to technology contracts. These examples of new contracts illustrate following through against our strategy. Overall, we have increased our backlog from Q4 by 14% to $281.9 million, while substantially improving our gross margin.

Looking forward, I should also take a moment to mention the development relevant to our ongoing work with DHS. Senator Markwayne Mullin was confirmed by the U.S. Senate as the ninth Secretary of Homeland Security on March 23. Secretary Mullin has strongly signaled his intent to enhance the pace of applying funds to projects where BigBear is well positioned to win, and we are actively bidding live RFPs right now.

Secretary Mullin's confirmation and initial actions were further bolstered with the welcome news that the majority of DHS' fiscal year 2026 budget was signed last Thursday, along with a plan to fully fund remaining agencies through a congressional budget reconciliation process by June 1. These are very positive developments. While the partial shutdown has not affected the majority of our work at DHS due to the critical nature of the security missions our program support, receiving full fiscal year funding will unlock the potential for new starts and allow DHS agencies to move forward with additional technology procurements.

I'm also excited to share that Troy Miller, former Acting Customs and Border Protection Commissioner and long-time Director of the National Targeting Center, joined BigBear.ai in a full-time capacity in April after 3 decades of federal service. Troy is an expert in counterterrorism, internationally recognized for being the driving force behind the world's most advanced programs to screen and travel applications and cargo in and out of the United States.

He will lead our efforts to serve DHS and the federal civilian security and law enforcement agencies and no one has more credibility or a more substantive track record of applying emerging technologies to homeland and national security analytical missions. His operational expertise, mission focus and demonstrated leadership skills, and deep and established trust with the communities we serve will further provide momentum and lift to our growth efforts.

Our second priority for 2026 is to focus on the operator. We are centering our business on serving specific groups of operators that will need BigBear.ai technology and solutions in the months and years ahead. In April, we announced internally that we are launching a significant growth initiative that realigns teams to execute against specific mission needs with rigor and pace. We are well into the implementation phase of this important change, which is generating focus and energy within BigBear.

Historically, growth, technology, delivery and customer success teams have been centralized. As of the second quarter, we are taking a new approach, realigning our go-to-market. Dedicated sales, technology, delivery and customer success teams are now integrated and aligned to our growth priorities in national security and travel and trade. This moves decision-making and action across the key organizational growth drivers closer to our customers and will allow us to innovate more rapidly with capabilities tailored to operators' needs.

In April, we launched an integrated marketing campaign in Washington, D.C. and nationally to drive the importance of mission understanding in the development of advanced technology. The center of our message is that technology built and deployed by BigBear.ai is by operators for operators. The campaign is focused on connecting with our customers and underscores that when you choose BigBear.ai, you're getting solutions designed for real operating conditions.

By operators, we mean war fighters, intelligence analysts behind the scenes, officers protecting ports of entry and those in the private sector protecting our supply chain and critical infrastructure. Each day, they make consequential decisions with imperfect information under immense pressure. The campaign launched with an opinion piece placed in the Wall Street Journal. In it, I highlighted the threat landscape is evolving rapidly and that operator insight is critical for our national security.

I believe strongly that the nature of threats from homeland to the edge is morphing at a pace that outstrips traditional planning, procurement and problem-solving structures. This threat system asymmetry, the mismatch between the pace and complexity of modern threats and the rigidity of the systems designed to counter them is critically important. Nations that solve this asymmetry will maintain and extend their strategic advantage. Those that don't will lose it.

This is a message that I have taken to Congress. Last month, I offered BigBear.ai's insights to the House Homeland Security Committee roundtable on the need to invest in critical technology to protect our citizens from emerging threats.

Advanced AI capabilities are already being used by our adversaries in combat zones and by criminal networks at home and abroad. I believe that the United States must be peerless in developing, deploying and countering advanced AI threats. Haste is everything and close collaboration between lawmakers and the executive branch will be essential.

Moving to our third priority, execution rigor. In addition to the internal realignment initiatives that will strengthen our operational rigor and execution, we have strengthened our leadership team with the announcement of 2 experienced executives. Jo Ann Bjornson joined BigBear.ai as Chief Human Resources Officer on March 16, bringing more than 25 years of experience in human resources leadership within federal contracting and commercial markets.

Recognized as one of Washington HR executives to watch, Jo Ann has held senior HR roles at V2X, SAIC and Leidos and has served as the Chair of the Washington HRExec Council. Jo Ann has a deep understanding of the talent landscape in our sector and will play a big role centered on our culture at BigBear, our efforts to scale and our efforts to acquire and integrate companies in the future.

Alex Thompson joined BigBear.ai as the Chief Corporate Affairs Officer on March 1, bringing more than 2 decades of experience. He leads brand strategy, strategic communication, government affairs and marketing. Alex has extensive international experience, having previously served as President of Global Practices & Sectors for the leading strategic communications firm globally, Edelman, and as Chief Communications Officer for the global content-driven software company, Thomson Reuters. In that role, he has also led government and regulatory affairs and spent significant time supporting engagements with U.S. government customers that BigBear.ai also serves.

Our fourth priority is to capitalize on the strategic acquisitions we made in 2025 and early in 2026, Ask Sage and CargoSeer. This includes fully integrating the businesses, identifying opportunities to build on and expand their product sets and cross-selling to our established customer base. I am pleased to update that both integrations are on track and progressing well. Platform-agnostic generative AI that gives customers flexibility to use hundreds of models in secure environments without data leakage or vendor lock-in as well as nonintrusive inspection supported by AI analysis continue to be technology platforms at the forefront of government and commercial procurement agendas.

Both Ask Sage and CargoSeer have launched new capabilities since our last call. For CargoSeer, supply chain disruptions and revenue collection pressures highlighted by global conflicts have reinforced the business case, ensuring facilitated movement of trade while identifying smuggling threats and ensuring accurate revenue collection are universal priorities for customs and border management agencies.

CargoSeer continues to enhance its models and is establishing new beachheads in air cargo environments to support these missions, deploying new technology to correlate documents with the content of air cargo. For example, this week, we launched a new capability to detect fraud in invoices used by shippers in all ports of entry, and the first customer will be live in the coming weeks.

Last week, Ask Sage launched a new simpler user interface. It increases ease of use for customers, and we have received great feedback so far. With Version 2, customers experience faster iteration, a streamlined user experience and powerful tools like Chat, Workbooks, CodeCanvas and Agent Builder. Each is designed to close gaps identified in user feedback.

We've reimagined chat model selection and classification handling to eliminate friction and allow customers to focus on deriving maximum mission capability from the models and agentic tools. In response to strong customer demand, Ask Sage also launched a new commercial offering last week, extending access to our GenAI platform beyond government users and defense industrial-based customers to broader industry and international partners.

The platform supports most current AI models, the vast majority of foundational models available for global consumption, enabling partners to align AI capabilities directly to their missions. This deepens BigBear.ai's commercial relationships with a broader range of customers in the defense industrial base and security and critical infrastructure industries.

I'm really pleased to see this progress, and I'm looking forward to sharing additional news about product and platform extension from our GenAI team in the coming quarters.

I'll turn over now to Sean to talk through the details of our financial performance in Q1.

Thanks, Kevin. Now I'll turn to our operating results for the first quarter. Revenue for the first quarter of 2026 was $34.4 million, which was comparable to the first quarter of 2025 and driven by increased revenue from GenAI platforms and products resulting from the Ask Sage acquisition, which we closed on December 31 of last year. This was offset by lower volume on Army programs in the first quarter of 2025 that was not repeated in the first quarter of 2026.

Gross margin was 34% in the first quarter of 2026, an increase of almost 1,300 basis points as compared to the first quarter of 2025. The expansion in gross margins was driven by a higher mix of revenue from GenAI platforms and products from the Ask Sage acquisition versus the comparable period.

SG&A expenses in the first quarter of 2026 were $29.2 million versus $22.7 million in the comparable period. The increase in SG&A expenses was primarily driven by increased intangible asset amortization from the Ask Sage acquisition, increased legal and proxy expenses related to our special stockholder meeting and our new retail voting program and increased sales and marketing expenses resulting from partnerships and expanding our growth team.

R&D expenses increased from $4.2 million in the first quarter of 2025 to $5.5 million in the first quarter of 2026 as we continue to invest in new capabilities and technologies across the domains of national security and trade and travel. Our net loss for the first quarter of 2026 was $56.8 million versus a net loss of about $62 million in the comparable period.

The decrease in net loss was primarily driven by a decrease in interest expense of $4.8 million, higher gross margin of $4.3 million and increased interest income of $3.2 million. Additionally, we had about $36 million of noncash charges in the first quarter of 2026, comprised of fair value changes in derivatives and losses on debt extinguishment. These noncash items are nonoperational and were mostly the result of the conversion of our 2029 notes to equity, which we executed in January of this year.

Adjusted EBITDA for the first quarter of 2026 was negative $9.9 million versus negative $7 million in the comparable period. The decrease in adjusted EBITDA was primarily driven by increased investment in sales and go-to-market capabilities and investment in research and development, both of which were partially offset by expanded gross margins, as previously mentioned.

Next, turning to backlog. We closed the first quarter of 2026 with ending backlog of about $282 million, roughly a 14% increase from the fourth quarter of 2025 that was primarily driven by the new orders that Kevin previously mentioned. We've had a solid start to the year, and we are affirming our outlook for 2026 of revenue between $135 million and $165 million.

Now I'd like to take a moment to provide 2 updates regarding how we made it easier for retail shareholders to vote for proposals and to mention our upcoming Annual General Meeting in June. First, in recognizing that we have a great number of retail shareholders, we recently launched a retail voting program, which upon opting into the program provides retail shareholders with the ability to automatically have their shares voted in accordance with recommendations of the Board on future proxy solicitation.

BigBear is one of the first public companies to launch such a program, and we've seen positive reception and traction. Retail shareholders who would like more information about how to enroll in the program can visit our website at www.bigbear.ai/sci.

Second, as we look ahead to our Annual General Meeting on June 9, we like to encourage all shareholders to vote, and we encourage all eligible retail shareholders to opt into the retail voting program. By opting into the retail voting program, your votes will be cast in favor of all the proposals at the June 9 meeting and in accordance with Board recommendations at future meetings. I'll now turn it back to Kevin to discuss our priorities and to give a few closing remarks.

Thanks, Sean. Our first quarter results show that we are making progress in our priorities to grow the business while rapidly adapting to our national security and trade and travel customers' needs as the threat landscape evolves. We are moving with clear intent and pace. Our strategy, realigned structure and tech development and acquisitions are all targeted to stay ahead of the operating requirements, anticipating what they will need next so that BigBear.ai continues to deploy mission-ready AI and delivers enduring strategic advantage.

We look forward to continued developments over the rest of the year and appreciate our shareholders' trust and support. I'd like to close by thanking our BigBear.ai team for their energy and focus in this dynamic climate and expressing our appreciation and support for our military professionals serving in harm's way. We were honored last week by the opportunity to support the USO in providing 2,000 care packages for our servicemen and women being deployed abroad, a small token of our thanks.

I would also like to acknowledge the steadfast service of our security professionals at the Department of Homeland Security who have continued to protect us even with the disruptions of the longest shutdown in history and through multiple weeks without pay. Your professionalism is inspiring. Thank you.

To conclude the call, I look forward to updating our shareholders on our next quarterly earnings call in August and welcome you to attend our Annual General Meeting in June.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.

Greetings, and welcome to the BigBear.ai Holdings Inc. Fourth Quarter '25 and Full Year Earnings Call and Webcast. Please note, this conference is being recorded. I will now turn the conference over to Sean Ricker, CFO. Thank you. You may begin.

Good afternoon, and thank you all for joining us today for our fourth quarter 2025 earnings call. I'm Sean Ricker, CFO of BigBear.ai, and I'm joined today by our CEO, Kevin McAleenan.

Statements made in today's call that are not historical fact are considered forward-looking statements that 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. Please see today's press release and our SEC filings for a description of some factors that may cause actual results to differ materially from those in the forward-looking statements.

We have posted charts on our website today that we plan to address during the call to supplement our comments. These charts 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.

With that, I'd like to turn the call over to Kevin.

Good afternoon. Before we begin, I would like to express our appreciation and gratitude to all our servicemen and women and their leaders who are currently engaged here and overseas in the conflict with the Iran. You will continue to have BigBear.ai full support as you carry out your challenging missions. We also want to send well wishes to our allies and partners in the region, who are in harm's way and our BigBear.ai employees.

January 15, 2026, marked 1 year since I stepped into the CEO role. It was a dynamic year on all fronts for BigBear.ai, and I would like to thank our shareholders for their trust and support, our customers for their partnership and the outstanding BigBear.ai team for their hard work.

Our first objective for 2025 was to strengthen the foundations and fundamentals of the business, starting with rebuilding our financial position. To address the growing and rapidly evolving needs of our government and commercial customers, we needed to strengthen our balance sheet and establish financial flexibility that would allow us to invest in technology, retain and attract top talent and take advantage of emerging opportunities in a dynamic marketplace. We knew we needed to do this to enable BigBear.ai to move quickly and decisively, and we made remarkable progress.

As of year-end 2025, BigBear.ai is in the strongest financial position in the company's history. As Sean will speak to in more detail, we have significantly reduced our debt, and we have record liquidity. This is a big achievement by the team, and it's a clear signal to our shareholders that BigBear.ai is building momentum, positioned to move fast and laying the tracks for lasting returns. I would also like to highlight here that despite the longest government shutdown in history, we closed 2025 within our revenue forecast and within single digits of analyst consensus estimates. My thanks to Sean and our growth team for improving the rigor of our forecasting, which will continue to enhance in the quarters ahead.

In addition to strengthening our financial foundations, we also set out to achieve 2 other objectives, given the dynamics of the geopolitical and technology landscape. Our second objective was to expand our international footprint. At the beginning of last year, relationships between the U.S. and its allies and partners globally were evolving. In January 2025, we're already in the process of establishing a lasting presence in United Arab Emirates in the wider region, which I know well from my time at the Department of Homeland Security, where I collaborated on security initiatives and Travel & Trade partnerships like preclearance .

In March, during a diplomatic visit to Washington, the UAE's National Security Adviser pledged a landmark $1.4 trillion investment framework over 10 years. AI infrastructure is one of its three pillars. And in June, BigBear.ai announced a strategic partnership with 2 UAE companies, Vigilix and Easy Lease, a subsidiary of the International Holding Company. We are now working together to deliver mission-critical capabilities that enhance safety, mobility and operational effectiveness across the region, including a partnership with Abu Dhabi Ports to collaborate on advanced AI-enabled capabilities for government and critical infrastructure customers.

By December, we had announced the formation of a new wholly owned subsidiary in our first office in the World Trade Center in Abu Dhabi and committed to not only pursue business in the region, but also to hire and develop local talent. We are now establishing the UAE and our relationships will only get stronger.

Our third objective was to make a catalytic strategic acquisition. We executed on this and completed the acquisition of Ask Sage on December 31. Ask Sage is a model agnostic platform for secure distribution of generative AI models and Agentic capabilities tailored for defense and security agencies and other highly regulated sectors. The changing needs of the intelligence and defense community make Ask Sage a critical platform-level AI technology. It is proven in the most secure and demanding environments, and is an important signal of BigBear.ai's focus on delivering mission impact with maximum flexibility.

Most importantly, Ask Sage doesn't lock customers into any particular frontier model. It is highly flexible, allows customers to integrate their data once and Ask Sage can optimize models and agents across the platform for their use cases. We are well on our way to integrating Ask Sage fully into BigBear.ai since closing just 9 weeks ago and we will now accelerate that work to deliver the highest levels of customer impact in the coming months.

As you will have seen, we recently shared that Nicolas Chaillan has transitioned from his role as CTO for personal reasons. The outstanding Ask Sage team and the Ask Sage platform continue to be an essential part of the BigBear.ai serving our mission customers, war fighters and national security interests. Nick will provide technical advice to ensure continuity for our customers using the platform, and we wish him all the best in his future endeavors.

Shortly after completing the Ask Sage acquisition, we announced that we had acquired the technology platform, CargoSeer. Globally, customs administrations, aviation security agencies, port operators and security teams are all seeking better ways to rapidly identify mission risk and the global movement of cargo and goods. Governments have invested billions in deploying scanning equipment. Trade risks, contraband, dangerous and potent narcotics are all moving through high-volume supply chains.

CargoSeer's AI shipment inspection platform is designed to address exactly those mission needs, reducing costs and increasing speed and accuracy. The core technology supports nonintrusive inspection for cargo by combining automated image analysis, computer vision and machine learning coupled with trade and cargo data. This helps customs operators and security professionals rapidly identify high-risk shipments, detect threats and improve inspection efficiency across ports of entry.

The benefits of this technology are manifold. Governments are losing billions of fraud, undervaluation and other customs and tax violations. This lost revenue affects the services governments can provide their citizens, allows companies that are willing to break the rules to benefit. More broadly, the global supply chain is used by bad actors to smuggle all manner of contraband, narcotics and precursors, counterfeit products and agricultural pests and diseases. It also provides avenues for human trafficking.

CargoSeer makes it easier and more efficient for border officials to fight smuggling by giving them tools to properly identify elicit cargo and quickly intercept it, allowing them to focus on high-impact operational activities with immediate revenue and security benefits. Another positive result of combining these capabilities is the facilitation of trade and reduction of wait times at ports and borders. These 2 acquisitions are clear indicators of where BigBear.ai is heading.

Ask Sage is squarely aligned with our national security core market and has momentum and significant potential with commercial customers. And CargoSeer is centered on our Trade & Travel market, with applications for both government and commercial customers all over the world. They also reinforce our strong mission-first culture centered on delivering enduring strategic advantage for the U.S., our allies and partners in critical commercial centers.

I'd like to turn now to how our operating context has changed since our quarter 3 earnings call. Three significant developments play to our market positioning and strength. First, in December, the U.S. government published its National Security Strategy calling for closer collaboration between the U.S. government and the American private sector. The strategy also called out clearly the need to protect the U.S. from cross-border threats such as terrorism, drugs, espionage and human trafficking. BigBear.ai is built to meet these mission needs.

Our long-standing trust of the Department of Homeland Security and the defense intelligence communities combined with the new solutions we are acquiring and building and our ability to move fast, make us an ideal partner. The administration recently indicated they intend to increase their request of defense budget dramatically, potentially to $1.5 trillion. This request is supported by Congress, it will represent an increase for the Pentagon of $500 billion from this year's budget on top of the generational increase in funding at DHS from the One Big Beautiful Bill. Even if funding remains closer to current levels, we believe that these tickle resources will be substantially directed to cutting-edge technologies like ours.

The second major development was the acceleration of Frontier AI capabilities. In late quarter 4, we saw a generational leaps in chain of thought reasoning, model distillation and Agentic autonomy that outpaced the prior 18 months of progress combined. These advances further underscore the differentiated value of BigBear.ai's capabilities. Every new model release, every improvement in small model performance and every advanced and a genic orchestration makes our rapid and secure deployment infrastructure more essential. Our platforms are deliberately model-agnostic giving operators maximum flexibility to adopt the best available capabilities without vendor lock-in. And because our teams understand the realities of operators, we are able to translate these new technologies into real mission solutions, that fit the nuanced workflows, constraints and unique challenges of our customers.

The third development followed rapidly in January, the publication of the U.S. Department of War's AI acceleration strategy. Seven Pace Setting Plans organized under war fighting, intelligence and enterprise aligned with where BigBear.ai is the strongest. The overarching goal of the strategy is to match the commercial clock speed of AI development shifting from multiyear acquisition cycles to far shorter time lines. The strategy places significant focus on Agentic network architectures and a shift to the tactical edge, all centered on speed of adoption and mission integration.

This is not only a huge gear shift for the Department to War to increasing investment in the cognitive layer of war fighting capabilities, the pace is also likely to shorten the procurement cycle, and that helps us because of our size and speed. As for example, the AI acceleration strategy directs that the latest commercial models to be deployable to U.S. government partners within 30 days of public release that is now the standard and we are well prepared to support it.

Ask Sage is architected to seamlessly and rapidly integrate new frontier model leases into secure enclaves without customers needing to architect or reaccredit their environment. That speed to deployment advantage becomes more valuable with every new model release. The pace of releases is accelerating.

I will close this section on our operating context with one note regarding the recent focus on SaaS businesses. Our work is built around mission-critical workflows for specialized operators. That requires deep domain integration, not generic horizontal software. Our value scales with mission impact. Agentic AI and autonomous workflows support our growth thesis and investments and we are already delivering these Agentic AI capabilities today into the most highly regulated environments in the world. And our development teams are leveraging these capabilities to build and ship tailored mission-critical solutions at increasing pace.

Looking forward, BigBear.ai is stepping into our strengths of the specialized defense technology company in developing and delivering mission-ready AI. In our third quarter earnings call, I sided that we are focused on 2 core markets, National Security and Travel & Trade. Each area is highly specialized and requires deep domain expertise. They're also interdependent. Strengthening national security enables commerce and provides a baseline of trust necessary for nations to build prosperity. In turn, enhanced national security depends on the ability to move people and goods through the global economy and across borders with speed and efficiency, which facilitates tens of trillions of dollars of annual trade.

BigBear.ai operates where these vectors converge. Our thesis is clear: build on our strength in defense and apply it with a discipline to highly specialized use cases for advanced technologies. To execute on that thesis, we are prioritizing the following 4 things: First, deliver top line growth. With strong financial foundations, we will enhance our go-to-market rhythm and drive rapid customer adopting of BigBear.ai Solutions. The funding environment is strong, the demand signal is clear and the window for us to capture share is now. We see significant near-term revenue opportunities. In national security, we are aggressively pursuing significant government competitions in a robust funding environment, largely driven by One Big Beautiful Bill funding and running disciplined high-touch capture campaigns to win programs that map directly to our core strengths.

In Travel & Trade, we're leveraging our established foothold in the UAE to expand our international business, particularly around our ports and borders offerings. Additionally, we also see our partnership with UAE having the potential to address the needs of customers in Africa and Southeast Asia. Coming across both markets, our AI platform capabilities accelerated by the Ask Sage acquisition are proving to be a powerful differentiator. And we are focused on accelerating the delivery of Frontier AI capabilities into highly secured environments, both by optimizing the best commercial products for secure use and tailoring solutions to mission-specific needs, leveraging that deep operational expertise of forward deployed engineers. Over the midterm, we see a clear path to extend this platform beyond its Department of War roots.

Second, focus on the operator. We will keep the needs of our customers, the operators who need the best technology now, front and center. The weekend events put this into stark relief. Initiatives across the business will put intense focus on their shifting needs to ensure we operate with precision, speed and the mission front of mind.

Third, operate with execution rigor. This is critical. And it means allocating resources dynamically and capital surgically. The world is moving quickly and our operating model has to keep up. We believe the future belongs to companies that get the intersection of technology and people right. This is not an either/or.

Fourth, capitalize on catalytic M&A. As we integrate Ask Sage and CargoSeer and advance these capabilities for our customers and within the company, we will continue to consider catalytic technologies that enhance our ability to serve our national security and Travel & Trade markets. We are well positioned to deploy our capital to acquire both market position and capability for the right opportunities arise in our areas of focus. We already have momentum.

Let me now turn to how we are translating that into growth. Ask Sage has continued to scale across the U.S. government. Adoption metrics have remained strong and utilization continues to grow month-over-month. We are actively cross-selling the platform into BigBear.ai's existing customer base beyond the Department of War, and we are also accelerating the development of Ask Sage's edge offering, a turnkey solution that delivers the Ask Sage platform on a ruggedized portable hardware system, the size of a carry-on food case.

This solution brings Ask Sage into denied degraded intermittent and limited bandwidth environments like forward operating bases and label vessels, enabling operators to leverage Ask Sage anywhere without reaching back to the cloud. And as the market moves toward Agentic frameworks, we are already running at an accelerated pace. Not only do we have the agent builder available natively within Ask Sage, we intend to stay on the cutting edge and deliver purpose-built agents and workflows and to support missions along with the technology we make available through the Ask Sage platform.

Beyond Ask Sage, capture campaigns aligned to the One Big Beautiful Bill are well underway, expanding our pipeline across DHS and Defense and positioning us to compete for generational funding. And within our Department of War business, we launched a strategic partnership with C Speed, a leader in advanced software-defined radar. This partnership will extend our capabilities to deliver real-time intelligence and operational support in contested environments, further strengthening our value proposition for defense and intelligence customers.

Additionally, we are actively collaborating with Fincantieri, one of the world's largest shipbuilding groups demonstrating strong progress. This is one example of how our shipyard AI solutions will drive innovation and operational efficiency against the major funding streaming in the One Big Beautiful Bill. These achievements underscore our ability to deliver cutting-edge solutions that meet the evolving needs of customers, and we're excited to see good traction.

Turning to our second core market, Travel & Trade. Our international expansion and recent acquisition activity are generating momentum. BigBear.ai announced the partnership with Abu Dhabi Ports Group at the end of January. Abu Dhabi Ports is one of the region's premier trade into logistics platforms. It will play a substantial role in BigBear.ai efforts to drive secured global trade and economic growth through its integrated portfolio of world-class ports, industrial zones and logistics services.

Together, we are focused on developing next-generation AI-powered customs management systems for ports and borders. By leveraging advanced analytics and AI image analysis, we intend to enhance operational efficiency, streamline customs processes and improved trade facilitation across the region. This collaboration highlights the growing demand for innovative AI solutions in critical infrastructure and offer strong long-term potential.

In North America, our veriScan platform continues to expand. We are now live at Chicago O'Hare, Seattle-Tacoma International Airport, Nashville and Calgary International Airport in support of biometrically enabled enhanced passenger processing programs. These deployments are improving security, accelerating processing times and enhancing the traveler experience in some of the busiest airports.

And finally, CargoSeer's platform for combining AI automated image analysis and trade data is needed by custom administrations and aviation security authorities. We see actionable targets in Central America, the Middle East and within the United States, where the platform's predictive cargo risk scoring capabilities are directly relevant to government and commercial operators seeking to strengthen the efficiency of their customs duty collection and supply chain operations. In short, we see lots of positive developments to drive growth across our portfolio.

Now I'll turn it over to Sean to walk through the financials and our FY 2026 guidance.

Thanks, Kevin. I'll start by highlighting key accomplishments from 2025, and we'll then move to our results for the fourth quarter. This year, we raised $693 million in proceeds from our ATM facilities and warrant exercises and were able to close on the acquisition of Ask Sage. The momentum hasn't stopped in 2026. In the first quarter, we closed on the acquisition of CargoSeer and fully settled the 2029 notes by exercising our right to force conversion of the notes into common stock, which will save almost $9 million of annualized interest expense through the end of 2029. We intend to settle the remaining $17 million on our 2026 notes when those mature at the end of this year.

These milestones have not only strengthened our balance sheet but have also put us on a trajectory for sustainable growth. We've also made meaningful progress strengthening our internal controls. Earlier this year, we transitioned out of emerging growth company status which brought with it the added rigor of SOX 404(b) compliance including an independent auditor attestation on our internal controls. I'm pleased to report that our auditor has issued a clean, unqualified opinion, reflecting well on the work our team has put into building a more mature control environment. As you'll see in today's 10-K filing, we're also pleased to report that the material weakness that we disclosed in last year's filing has been fully remediated as of December 31, 2025.

Now let's turn to our operating results for the fourth quarter. Fourth quarter revenue was $27.3 million, a decrease of $16.5 million year-over-year, which was primarily driven by lower volume on Army programs, which we referenced on previous earnings calls, and which was accounted for in our raised guidance, which we provided in our second quarter earnings call.

Gross margins decreased year-over-year. Gross margin for the fourth quarter of 2025 was 20.4% versus 37.4% for the comparable period, primarily due to certain onetime items, including high-margin license deliveries and infringement overhead true-up. Both of which occurred in the fourth quarter of 2024 and were not repeated in the fourth quarter of 2025. SG&A expenses in the fourth quarter of 2025 were $25.7 million versus $22.2 million in the comparable period. The increase in SG&A was primarily related to certain new growth and marketing investments as we committed to in the second quarter and third quarter of this year.

R&D expenses increased from $2.3 million in the fourth quarter of 2024 to $4.8 million in the fourth quarter of 2025 as we continue to invest in new capabilities and technologies across the domains of national security and Travel & Trade.

Our net loss for the fourth quarter was $5.8 million versus a net loss of $138.2 million in the comparable period. The decrease in net loss was primarily due to a noncash gain on the fair value of derivatives of $143.4 million, a loss on extinguishment of debt of $31.3 million in the fourth quarter of 2024, not repeated in the fourth quarter of 2025. And income tax benefit of $21.8 million in the fourth quarter of 2025 related to the Ask Sage acquisition and an increase of interest income of $6.2 million related to our investments. These were partially offset by a noncash impairment of long-lived assets of $53.4 million recorded in the fourth quarter of 2025.

Adjusted EBITDA for the fourth quarter was negative $10.3 million versus positive $2 million in the comparable period. The decrease in adjusted EBITDA was primarily driven by lower revenue and gross margins as well as increased spend on SG&A and R&D as previously mentioned.

Now let's turn to our outlook for 2026. We are projecting full year 2026 revenue of between $135 million and $155 million. Our 2026 outlook includes the results of our recent acquisitions of Ask Sage and CargoSeer, and represents about 17% growth from our full year 2025 revenue. Given the pace of play, the AI markets and investments we will undertake to integrate recent acquisitions and expand our international presence, and growth team, we will not be giving adjusted EBITDA guidance at this time.

Lastly, I'd like to mention our proxy solicitation to amend our certificate of incorporation to authorize 500 million shares of common stock that can be used in the future. It is good housekeeping for a company at our stage of growth to have authorized shares and reserve to allow us to respond quickly in a dynamic market. That is why it is common practice for businesses looking to accelerate.

The 2 largest proxy advisory firms, Glass Lewis and ISS recommended a for vote and our Board of Directors unanimously supports the proposal. More than 8 and 10 shareholders have voted for the amendment. And as of today's call, we are more than 97% of the way to secure in the votes needed to pass the proposal. We have learned that reaching and mobilizing everyone, particularly smaller shareholders, takes time. We would like to thank our shareholders for the support they have shown us.

As I close this section, I would underscore again that BigBear.ai is in the strongest financial position in our history, and we intend to make it even stronger so that we can invest in our technology and R&D, invest in attracting and retaining top talent and make further strategic acquisitions. Just as we establish greater financial flexibility in the last 12 months, we intend to enhance our freedom to move quickly in the future.

I'll now turn it back to Kevin to give a few closing remarks.

Thanks, Sean. I would like to close on a note that highlights why I'm excited about the year ahead and our ability to support our customers in this intense strategic moment globally. And that's the fact that as a company, we have a huge core former operators. We deeply understand our customers' missions. We've augmented that expertise with cutting-edge technologies that we can apply understanding the reality of the use cases that our customers deal with every day, mission-ready technology by operators for operators.

That's distinct from companies who primarily integrate other's capabilities and from start-ups who don't understand the operational context. What our national security customers and global partners need is the ability to apply emerging tech security to rapidly have a greater flexibility than ever before to address emerging threats and challenges, and that's what we intend to do for them this year.

Thank you very much for your time today and your continuing support of BigBear.ai.

Thank you, ladies and gentlemen. And with that, this does conclude today's teleconference. Thank you for your participation. You may now disconnect, and have a wonderful day.

Good afternoon. I'm Sean Ricker, Chief Financial Officer of BigBear.ai Holdings. I'll be the Chairman of today's meeting. I'm very happy to welcome you to BigBear's.ai reconvened special meeting of Stockholders which is a continuation of our special meeting convened on December 5, 2025, and adjourn to solicit additional votes on proposal 1 to amend our Certificate of Incorporation.

Available at the bottom of your screen are our rules of conduct for the meeting. To conduct an orderly meeting, we ask that participants abide by these rules. It's now 3:00 p.m. Eastern Time on December 19, 2025, and this reconvened meeting is officially called to order. Lastly, also joining us is Mr. Vito Cerone, representative from Continental Stock Transfer & Trust Company, who will act as the Inspector of Elections for this reconvene meeting. Mr. Cerone has signed the customary oath of office to execute his duties with strict impartiality.

We will now proceed with the formal business of the meeting as set forth in the notice of special meeting and proxy statement. The polls opened today, December 19, 2025 at 2:45 p.m. Eastern Time for voting on all matters before the meeting. If you have not already voted and wish to vote, the polls will remain open until we finish presenting the proposal and close the polls.

Our Board of Directors set October 14, 2025, as the record date for stockholders entitled to vote at this meeting. Continental Stock Transfer & Trust Company has provided a list of stockholders of record at the close of business on the record date. For stockholders who entered a valid 12-digit control number, the list of stockholders of record is available at the bottom of your screen.

Mr. Cerone, the Inspector of Elections has informed me that proposal 1 to amend our Second Amended and Restated Certificate of Incorporation to increase the number of authorized shares of common stock has not received the affirmative vote totaling more than 50% of the outstanding shares entitled to vote as of the record date. Accordingly, we are further adjourning the special meeting pursuant to prior stockholder approval of the adjournment proposal to December 30, 2025, at 3:00 p.m. Eastern Time to allow additional time for the company's stockholders to vote on proposal 1 on the agenda and set forth in the definitive proxy statement for this special meeting. The adjourned meeting will be accessible at the same meeting location of www.cstproxy.com/bigbearai/sms2025. Your vote is important, and we ask that you please vote for the approval of an amendment to our certificate of incorporation to authorize additional shares of common stock.

For specific instructions on how to vote your shares, please refer to your proxy card or the section titled Information about the Special Meeting and Voting beginning on Page 1 of the proxy statement. If your shares are held beneficially in street name, please refer to the materials you received from your bank or broker on how to vote your shares.

It is now 3:03 p.m. Eastern time, and that concludes the formal portion of our meeting.

The meeting will go on air at the scheduled time on the meeting web page.

Greetings, and welcome to BigBear.ai Holdings, Inc. Third Quarter 2025 Earnings Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Chief Financial Officer, Sean Ricker.

Thank you, sir. Please go ahead.

Good afternoon and thank you all for joining us today for our third quarter 2025 earnings call. I'm Sean Ricker, CFO of BigBear.ai and I'm 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. 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 have posted charts on our website today that we plan to address during the call to supplement our comments. These charts 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.

With that, I'd like to turn the call over to Kevin.

Good afternoon. It's good to be back speaking with our shareholders and analysts about our progress today. Three months ago, I told you BigBear was going on offense, taking advantage of our positioning in the market and our increased capital to grow organically and to strengthen our position through disciplined M&A.

Since then, we've moved with purpose, assessing markets where we can lead, evaluating strategic opportunities and engaging across our industry to identify the right targets. We've been intentional in every step of the process, scouting the market, evaluating AI technology developments and aligning around a clear thesis for value creation. That deliberate approach has led us to a significant step forward for the company, one intended to advance our vision, accelerate growth and position BigBear.ai for leadership in our core national security market by capitalizing on the increasing adoption of generative AI for defense capabilities.

Today, I'm excited to announce that BigBear has signed a definitive agreement to acquire Ask Sage, a cutting-edge and fast-growing generative AI platform for secure distribution of AI models and agentic capabilities built specifically for defense and national security agencies and other highly regulated sectors. In plain terms, Ask Sage lets organizations safely use the best AI models and AI agents to get real work done with sensitive or classified data.

Ask Sage is cloud and model agnostic, integrates with both current frontier and emerging AI technologies and delivers those rapidly expanding capabilities directly for use by war fighters, coders, contracting professionals, analysts and administrators at all levels of security and at the speed of model development through platform-level cybersecurity certification.

Ask Sage already supports more than 16,000 government teams across 27 agencies and hundreds of commercial companies and annual recurring revenue is on track to grow over 6x from 2024 to 2025. We will dig deeper into the investment rationale in a few moments, but this is a big development that we expect to accelerate our growth and further advance our position as a technology catalyst for both government and commercial customers.

On our agenda for the call, I will share why this acquisition is such an important step for BigBear.ai, how it fits squarely within our M&A framework and why it strengthens our leadership in this rapidly expanding market segment. Then I'll turn to our broader market outlook and business performance and ask Sean to walk through our financial results, and I'll close with a look at where we go from here. But I'd like to start off by congratulating Sean for his official appointment to the role of Chief Financial Officer as of October 14, having held the interim position since June.

Sean has done an excellent job in his expanded role at BigBear.ai. He's been a true strategic partner for me while delivering rigor, transparency and discipline in our financial operations. He maintains the respect of our Board and our team, and I couldn't be more excited to work with him to execute this next phase of BigBear's evolution. To frame today's discussion, I will explain our corporate development strategy because M&A plays a central role in our plans to accelerate BigBear.ai's growth. Over the past several months, we've built and refined a disciplined thesis-driven approach to M&A, one where every investment is structured to advance our mission, strengthen our differentiation and build long-term value.

Our acquisition framework focuses on 3 areas where we believe that BigBear.ai is best positioned to combine our mission expertise with cutting-edge technology and achieve greater impact for our performance and investors. First, disruptive AI mission solutions for national security. Unlocking the power of AI for the defense mission is essential to America's continued leadership in global security and to maintaining our edge in strategic competition with potential adversaries.

We're evaluating high-growth companies that have built secure, scalable, mission-tailored AI solutions with products solving real problems for operators, not solely developing enabling technologies. The opportunity here is significant. AI adoption across defense, intelligence and homeland security is still in the early stages, and the companies that can deliver tangible outcomes are well-positioned for outsized growth.

Second, smart, secure travel and trade. While BigBear.ai's mission is grounded in national security, that mission continues to evolve as global dynamics shift and the secure and transparent movement of people and goods becomes increasingly essential to maintaining economic advantage and safeguarding the prosperity of the United States and our allies.

Accordingly, a second core area for our potential investment is on technology that enhance security and efficiency in travel and trade, particularly computer vision capabilities like biometrics, threat detection and monitoring. With our deep expertise and proven success through our digital identity portfolio, we believe we are well-positioned to lead in an attractive market with growing investment and attention that is still fragmented and prime for disruption.

Third, platform-level AI technologies. Our mission expertise is key to what sets BigBear.ai apart. But to translate that expertise into real-world impact, we must operate on platforms built for the world's most demanding use cases. The missions we serve in security, travel and trade don't operate under typical timelines or tolerances. As a result, we are also targeting companies developing foundational AI tooling, orchestration and data infrastructure to enable us to build and deliver the world's most advanced solutions at speed and ahead of accelerating innovation and competition.

Our national security operators must have immediate access to the cutting-edge commercial models and technologies being advanced globally. To ensure deterrence and readiness, the United States and its allies must maintain their advantage in AI innovation. We intend to help make sure they do. As the market accelerates toward generative, agentic and real-time AI, those same platform capabilities will position us not just to keep pace with our competition, but to lead, driving sustained growth and margin expansion.

Our M&A framework is designed so that the decisions we make sharpen our competitive edge, deepen our mission impact and position us for scalable and durable growth. The acquisition of Ask Sage is a clear example of this framework in action. With Ask Sage, we have found a critical platform-level AI technology, purpose-built, proven in the most secure and demanding mission environments and positioned to accelerate everything we're building at BigBear.ai. Ask Sage is impressive. It is a secure model-agnostic gen AI platform built specifically for government and other highly regulated industries. In these environments, agencies often face challenges leveraging openly available commercial AI models due to data sensitivity, compliance mandates and classified operations.

This constraint slows the adoption of AI and limits mission speed. Ask Sage removes that barrier. By enabling agencies to deploy and operate AI models anywhere from the tactical edge to classified clouds within secure accredited environments, the partners can innovate safely, quickly and at scale, and it's already available in the Microsoft and AWS marketplaces. Ask Sage stands out in this area. It is currently one of the only model-agnostic gen AI platforms holding FedRAMP high accreditation with over 30 frontier models deployed across DoD and national security customers.

It orchestrates the leading open source and government-approved models, pulls in enterprise and mission data under strict governance and makes it easy to stand up production-ready AI agents for real high-value use cases like acquisition, cybersecurity, coding, compliance, intelligence and operational analysis and ultimately, mission automation.

One of the primary elements that makes this so valuable to us is the installed base and accreditation posture we're acquiring. Ask Sage already supports more than 100,000 users on 16,000 government teams and hundreds of commercial companies, which means we're not only buying an idea, we're buying a turnkey platform that's in production today at scale in the environments that matter most.

And because the platform was designed to be agnostic to LLMs and deployment models, we can meet each customer where their security, classification and data residency requirements are without locking them or us into a single model or cloud. Further, with out-of-the-box support for 150-plus open source and commercial AI models, customers can select a specific model best suited to their mission and even build multi-model agents that combine the strengths of different systems to achieve superior outcomes.

Ask Sage also provides a framework to build and ship vertical mission-specific agents quickly. With Ask Sage, we are positioning ourselves to deliver secure AI agents that actually act on mission data and drive outcomes at the highest classification levels and do it repeatedly across defense, security agencies and the defense industrial base. From a business standpoint, this capability not only accelerates delivery and differentiation, but also creates meaningful operating leverage and sustained margin uplift as we scale.

In addition to its capabilities, the market backdrop for Ask Sage is compelling. According to U.S. Government Accountability Office, the number of Federal gen AI use cases has grown over 8x since 2023. Ask Sage is already capturing the wave. It has grown ARR sixfold over the last year and is tracking toward $25 million in ARR in 2025. This growth is powered by real deployments, including the U.S. Space Force, Defense Health Agency, Office of the Secretary of Defense, Chief Digital AI Office, 11 combatant commands, NAVAIR and the U.S. Army's Enterprise LLM Workspace, which all run on Ask Sage today.

This rapid momentum is a clear sign of first-mover advantage and the speed at which Ask Sage has achieved a high-level security posture and the delivery of tangible value. Finally, Ask Sage is led by its founder, an exceptional talent in Nicolas Chaillan. Nick is one of the most respected voices in secure mission-grade AI, having served as the former Chief Software Officer for both the U.S. Air Force and Space Force and founded multiple companies over the past 25 years.

He has proven that he can build technology that the Pentagon actually uses rapidly and iteratively to support critical missions. I am thrilled to announce that Nick will be joining BigBear at the closing of the transaction to lead our technology team as Chief Technology Officer, where he will focus on enhancing our broader portfolio and increasing the efficiency and velocity of our product development and innovation while powering us forward as an AI-first company across all of our functions. By integrating Ask Sage with BigBear.ai, we are creating an offering the market has been asking for, a secure integrated AI platform that connects software, data and mission services in one place.

I'd like to touch on a few important synergies. First, we plan to cross-sell the Ask Sage platform into BigBear.ai's existing federal and commercial accounts, opening up a new group of DHS, intelligence community and travel mobility customers that need secure AI to speed processing and threat detection.

Second, we plan to introduce BigBear.ai products into the large and growing Ask Sage user base. These customers are already operating in a secure AI environment. We can now offer them more mission apps, more data sources and more automation. Third, we plan to wrap our integration in mission services around the applications and agents deployed on Ask Sage, giving customers not only the AI capability, but also the deployment, tuning and change management support to ensure that they maximize the value potential of the offering.

Fourth, Ask Sage application marketplace gives us a faster route to market for future offerings, whether built organically through partnerships or via acquisition. It's become a distribution channel for innovation. In sum, this acquisition represents a watershed moment for BigBear.ai and our shareholders. We are acquiring not just technology, but the foundation of an ecosystem that positions us to support the AI revolution in government and regulated industries.

With unprecedented government AI investments expected in 2026 and 2027, Ask Sage's existing accreditations and operational platform will give us a key competitive advantage. While others are still building and working through certification, we will be deploying and scaling. We intend to move quickly and integrate Ask Sage after closing, and we're looking forward to executing on this shared vision together.

Now turning to the broader market environment. Over the past several months, we strengthened our momentum across core markets in national security and travel and trade while expanding into international arenas. We said we plan to diversify our pipeline, deepen partnerships and demonstrate execution at scale, and we've delivered. Our capture campaigns under the One Big Beautiful Bill are well underway, broadening our pipeline across DHS and defense and positioning BigBear.ai to compete successfully for the key investments in security that this generational funding source will bring.

Across our growth apparatus, we've demonstrated real measurable progress. Our VeriScan biometric platform continues to expand to additional airports and is now live at Chicago O'Hare, Seattle Tacoma International Airport and Nashville in support of CBP's enhanced passenger processing program. These deployments are improving security, accelerating processing times and enhancing traveler experience at some of the country's busiest airports of entry.

In the national security space, we advanced our core platforms, integrating Conductor OS and Bain to deliver real-time situational awareness and decision support for multi-domain operations. New partnerships with TSecond and DEFCON AI extend our capability to the tactical edge, processing data in disconnected environments and strengthening joint force logistics and readiness.

Our participation in United 2025, alongside the U.S. Navy and SMX, further demonstrated the scalability of our AI solutions in complex real-world missions. Internationally, we're proving the reach and reliability of our technology. In the U.K., our Pangiam Threat detection software completed successful trials at Edinburgh Airport, validating performance under operational conditions.

In the Middle East, we continue to build momentum in the UAE, where we serve as title sponsor of the Global AI Show in Abu Dhabi, a premier venue for advancing trusted mission-driven AI with global partners and allies. We also entered the sports and entertainment arena through our landmark partnership with the Washington Commanders, securing naming rights for the BigBear.ai Performance Center.

By stepping onto the national stage alongside one of the NFL's most storied franchises, we're extending our visibility beyond the defense and government sectors, connecting our brand to performance, precision and innovation, the very attributes that define our technology. All that said, like all federal contractors, we are actively navigating the government shutdown. Importantly, over 80% of our government contract work has been deemed accepted and mission essential, including our work for the Department of War and the Department of Homeland Security.

We are proud to have the opportunity to continue to support our government customers during the lapse in appropriations. That said, parts of several contracts, mostly for the intelligence community, have been temporarily paused and have resulted in some revenue and personnel disruption.

We look forward to a resolution of the shutdown and getting our team back to full strength in support of our mission customers. Throughout the quarter, we've executed with rigor, staying disciplined in capital deployment while expanding our customer base, diversifying our pipeline and strengthening our international presence.

With that, I'll turn it over to Sean to walk through our financial performance in more detail.

Thanks, Kevin. This quarter, we have continued to make sequential improvements to our balance sheet in terms of our liquidity and net debt position. At the end of the third quarter, we have total cash and investments of $715 million, which includes $457 million of cash and $258 million of held-to-maturity securities.

During the third quarter, through our at-the-market facilities, we raised gross proceeds of approximately $337 million in exchange for the sale of 65 million shares of our common stock, which equates to an average gross selling price of $5.18 per share. Our ability to access the capital markets at relatively low cost and at attractive prices will allow us to continue to execute on the M&A strategy that Kevin outlined and to make other investments to accelerate growth in the future.

Now let's turn to our operating results for the quarter. Third quarter revenue was $33.1 million, a decrease of $8.4 million year-over-year, which was primarily driven by lower volume on Army programs. Gross margins decreased year-over-year. Gross margin for the third quarter of 2025 was 22.4% versus 25.9% for the comparable period, primarily due to certain higher-margin programs in the third quarter of 2024 that were not repeated in the third quarter of 2025.

SG&A expenses increased from $17.5 million in the third quarter of 2024 to $25.3 million in the third quarter of 2025. The increase in SG&A was primarily related to increased SG&A labor and fringe costs of $4.3 million to support growth and other initiatives, increased nonrecurring strategic initiatives of $2 million and an increase in marketing and other growth investments of $1.4 million.

Our net income for the third quarter was $2.5 million, driven by a decrease in the fair value of derivatives of about $26 million, primarily associated with the quarterly remeasurement of the convertible features of our convertible notes, which was partially offset by the increased SG&A spending previously mentioned.

Adjusted EBITDA for the third quarter was negative $9.4 million versus positive $900,000 in the comparable period. The decrease in adjusted EBITDA was driven by the increased SG&A spending as well as lower gross profit due to contract mix. While there are still risks related to the ultimate resolution and timing of the ongoing government shutdown, for the full year 2025, we continue to project revenue between $125 million and $140 million.

The anticipated acquisition of Ask Sage is expected to close late in the fourth quarter of 2025 or early in the first quarter of 2026. And therefore, we do not expect the financial results of the acquisition to have a material impact on our consolidated 2025 financial results.

I'll now turn it back to Kevin to discuss our priorities and to give a few closing remarks.

Thanks. As Sean presented, our financial position remains strong with cash and investments totaling $715 million. This foundation has allowed us to move quickly and strategically investing in organic growth, targeted partnerships and the infrastructure necessary to scale. And as we scale, another major focus area is talent. We are continuing to develop a world-class team. That includes substantially expanding the size of our growth team, bringing on experienced sales leaders who can expand our reach, deepen customer relationships and translate our technical differentiation into market share gains and long-term revenue growth.

We look to our acquisition of Ask Sage to support accelerating our growth into 2026 and beyond, driving our ability to deliver platform-level AI technologies built for the world's most demanding missions. By combining BigBear.ai's mission expertise with Ask Sage's world-class gen AI capabilities, we'll strengthen our capacity to build and deploy secure, scalable and agile solutions at the speed that our industry's innovation demands.

This acquisition will advance our vision of providing U.S. operators with immediate access to cutting-edge AI, reinforcing deterrence, readiness and leadership across the national security, travel and trade spaces. Before we close, I want to remind our shareholders that your voice matters. Participating in the upcoming special meeting of stockholders is one of the most important ways you can help shape BigBear.ai's future.

To this end, we are asking our shareholders to approve at our December 1 special meeting, an increase in our authorized capital to support these growth initiatives. Looking ahead, the foundations we've built this year set the stage for accelerated growth in 2026 and beyond. We are building a stronger, more resilient BigBear.ai, one positioned to lead in national security and travel and trade modernization worldwide. Thank you, as always, to our BigBear.ai team and to our shareholders for continued support.

I look forward to speaking with all of you next quarter to update you on our progress.

Thank you, sir. Ladies and gentlemen, that then concludes today's conference. Thank you for joining us. You may now disconnect your lines.