Investment Gems

BigBear.ai heads into tonight’s Q2 print with a handful of telltale markers investors will be watching closely. The most obvious one is backlog, Q4’24 closed at $418M before slipping to $385M in Q1’25 (+30% YoY). The Street will likely treat anything north of $400M as a positive surprise, particularly if conversion to revenue is also accelerating. We’ve seen no public update since Q1, so tonight’s disclosure will be the decider.

Contract progression is another critical angle: the DoD/JCS J-35 ORION award announced in March, a 3.5-year, $13.2M sole-source deal, is one of the clearest examples of a pilot maturing into a multi-year program. On the commercial side, the April/June partnerships with Smiths Detection and Analogic extend BigBear’s reach into CT/X-ray OEM channels, while June’s confirmation of multiple EPP (veriScan) deployments at international airports adds weight to the thesis that initial trials are scaling into sustained rollouts.

Margins will be under scrutiny too. Last quarter’s GAAP gross margin was 21.3% and adjusted GM was 28.6% (dragged by SBC), with Q4’s 37.4% boosted by year-end accounting effects. If software/OEM integration from the airport channel starts showing up in mix, a jump toward or above 30% adjusted GM is possible. Balance sheet watchers will look for continued voluntary 2029 note conversions (Q1 shaved $58M off debt) and signs of further cleanup without excessive dilution. Q1 ended with $107.6M in cash after warrant exercises and modest ATM usage; a move above $115–$120M would suggest an extended runway, while a drawdown could raise concerns about operating cash burn.

New flagship wins could provide upside catalysts. In April, Austal USA adopted BigBear’s Shipyard AI for Navy submarine capacity planning, potentially a template for multi-site shipbuilding adoption. Any quantified deployment deals from Smiths or Analogic could deliver the kind of “named + dollars” disclosures that the market tends to reward. Finally, R&D spend will be a tell on utilization and efficiency. Q1’s higher expense, partly due to carrying idle capacity amid government funding delays, pressured EBITDA (-$7M). If utilization improves or capitalization normalizes, profitability should rebound even at flat revenue.

What moves the stock: Bullish signals tonight would include backlog above $400–$425M, book-to-bill >1.1x, adjusted GM at or above 30%, fresh named contract values, further debt reduction, and a higher cash balance. Bearish indicators would be backlog at or below $385M, book-to-bill under 1.0, adjusted GM slipping under 28%, EBITDA losses widening beyond -$7M, noticeable cash erosion despite warrant inflows, or delays in airport/OEM rollouts.