BigBear.ai Holdings (BBAI) saw its stock price tumble this morning, experiencing a 24% decline by 10:35 a.m. ET. This significant drop followed the release of the company’s fourth-quarter 2024 earnings report, which revealed disappointing results on both revenue and earnings.
Before the report’s release, analysts had projected BigBear.ai to report a loss of $0.14 per share on $54.6 million in sales. However, the actual figures showed a much bleaker picture. The company’s loss was substantially higher, reaching $0.43 per share, and its sales fell short of expectations at $43.8 million.
Despite the disappointing financial results, the AI-powered data analytics provider emphasized its achievements in the quarter. BigBear.ai highlighted its ‘momentum through major contract wins, expanding our backlog and growing our pipeline, maturing our technology portfolio.’ The company also reported an improvement in its gross profit margin, increasing by 530 basis points to 37.4%.
However, significant operating costs and non-cash charges associated with derivative liabilities on convertible debt and stock warrants severely impacted the company’s profitability. These non-cash changes, totaling $93.3 million, contributed to a substantial net loss for the quarter, reaching $108 million. This figure is approximately five times larger than the loss recorded in the fourth quarter of 2023.
While the non-cash charges are likely a one-time occurrence, the company’s sales growth of only 8% year-over-year in Q4 failed to impress investors, especially for a stock considered to have growth potential. Rising research and development costs (15%) and increased selling, general, and administrative expenses (21%), combined with subdued sales growth, suggest that BigBear.ai is not on a trajectory toward profitability in the near future.
Looking ahead, BigBear.ai’s forecast for full-year 2025 sales ranges from $160 million to $180 million. This projection falls short of the Street’s consensus estimate of $193.9 million. Moreover, the company’s management did not offer any indication that it would achieve profitability. Even when considering ‘adjusted EBITDA’ (earnings before interest, taxes, depreciation, and amortization), BigBear.ai anticipates negative results for the year. Such a projection increases the likelihood that the company will not achieve profitability under generally accepted accounting principles (GAAP).
Given slowing growth, the distant prospects of profitability, and the fact that costs are outpacing revenue increases, the stock’s outlook is not positive. Considering all factors, analysts recommend to sell BigBear.ai stock.
