BigBear.ai, Inc.

Thank you for joining the Big Bear AI first quarter 2022 conference call. This call is being recorded. And at this time, all participants are in a listen-only mode, and a question and answer session will follow the presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. I would now like to turn the call over to Josh Kinley of Big Bear AI. Please go ahead, Mr. Kinley.

Good afternoon, everyone. Welcome to Big Bear AI's 2022 first quarter earnings conference call. I'm Josh Kinley, Chief Financial Officer, and I'm here with our CEO, Dr. Reggie Brothers, and other members of the Big Bear AI leadership team who will participate in the Q&A session afterwards. During the call today, we may make certain forward-looking statements. Listeners are cautioned not to put undue reliance on the forward-looking statements. and Big Bear AI specifically disclaims any obligation to update the forward-looking statements that may be discussed during the call. Many factors could cause actual events to differ materially from the forward-looking statements made on the call. These statements are based on current expectations and assumptions, and as such, I'm sorry, as a result, are subject to risks and uncertainties. For more information about these risks and uncertainties, please refer to the forward-looking statement section of the earnings press release issued today in our SEC filings. We will also discuss some non-GAAP financial measures during the call today. These non-GAAP measures should not be considered a replacement for GAAP measures and should be read together with the GAAP results. You can find the GAAP to non-GAAP reconciliations within our earnings release. With that said, I will turn the call over to Dr. Reggie Brothers.

Thank you, Josh. Thank you all for joining our first quarter 2022 Ryan's call. As I described in our last call, our mission at Big Bear AI is to guide our customers to realize their best possible future by delivering transformative technologies and expert actionable advice. Our AI powered analytics software and cyber engineering solutions are cornerstones within the defense intelligence agencies of our federal government. We're now bringing these advanced capabilities to the commercial market. In the first quarter of 2022, Big Bear AI took several important steps in our journey from a steady and profitable services-first company to a high-groove, high-margin technology-first company. We made good progress in our land and expansion strategy in the federal market, while establishing a strong foothold in the commercial side of our business through a strategic and creative acquisition. We also continued to position the company for rapid scale, by adding outstanding talent to the team and by gaining operational efficiencies through automation and reorganization. With these developments, We're on track to achieve expected revenue for 2022 in the range of $175 million to $205 million, and to end the year with positive adjusted EBITDA, as stated during our last call. I'd like to share some details on our progress. On the federal side, we're pleased to see the appropriations bill signed into law on March 15th. For those of you unfamiliar with the federal contracting process, it takes some time for budget authority to flow down to individual agencies and then to distinct projects. so this event happened too late in the quarter to positively affect Q1 revenue. However, we anticipate the new bill, coupled with the conclusion of the continuing resolution, will generate momentum for big barrier throughout the rest of the year and into 2023. We added 11 new contracts in the quarter and have added several significant new opportunities to the pipeline. The increased focus of artificial intelligence and machine learning at the federal level was already underway. In the current geopolitical situation, has heightened the need to enhance their intelligence and cyber capabilities through advanced AI tools. Notably, the 2022 defense budget includes $200 million specifically earmarked for the adoption of AI, and the 2023 budget is projected to be considerably higher. The March 2022 GAO report on AI and the DOD noted that the department has made organizational changes and is investing billions of dollars to incorporate AI technology into its operations. For example, the Joint Artificial Intelligence Center, or JIC, which was established in 2018 to accelerate the department's adoption of AI, saw its budget increase from $89 million in fiscal year 2019 to $278.2 million in fiscal year 2021. DoD requested $14.7 billion for science and technology programs in fiscal year 2022, including $874 million for the development of AI, compared with $841 million for fiscal year 2021. This reflects the rapidly growing importance of AI in DOD's operations. The report also noted that fiscal year's 2021 and 2022 requests do not reflect the total of DOD's AI investments. The appointment of the Pentagon's new chief digital and artificial intelligence officer further underscores the government's focus on ramping up their AI and machine learning capabilities. We know from more than 20 years as a trusted advisor to the government they'll need an experienced partner like Big Bear AI to help them deploy these capabilities as quickly as possible. Strong relationships and an outstanding track record of success, we're in the right place at the right time with the right solutions to meet this need. Now, I'd like to turn to our commercial business. You may recall the market penetration strategy we outlined last quarter included both organic and inorganic growth. In early 2022, we made progress on both fronts, First, our commercial revenue for the first quarter exceeded our commercial revenue for all of 2021. Second, we established a solid market presence across several key industries with the acquisition of ProModel Corporation, which we closed on April 7th. ProModel adds industry-leading modeling applications to the Big Bear AI portfolio, extending our reach into the Fortune 500 and giving us a foothold in manufacturing, healthcare, shipbuilding, and other vertical markets where our logistics management capabilities are highly transferable. This accretive acquisition significantly expands our customer base, adding hundreds of commercial customers in more than 30 countries worldwide and providing a solid foundation to accelerate commercial market penetration. We know from our history with ProModel government solutions that our products are complementary, and the synergies between our technology, expertise, and market focus enhance each company's ability to deliver scalable decision support solutions to our customers. For example, ProModel customers in the shipbuilding industry, such as Ingalls Shipbuilding and Newport News, use a shipyard AI tool to streamline production scheduling and capacity planning. ProModel processes that took weeks can now happen in days, and tasks that took days now take only hours to complete. These results are already impressive. We can further increase our value and stickiness with these customers by adding the data curation and AI-powered analytics capabilities Big Bear AI has developed for the maritime industry. Using our rich data sources and pre-built analytics modules, shipyard customers will be able to see and mitigate the impact of global supply chain factors, such as the pricing and availability of iron and steel, allowing them to decrease production risk while achieving better business outcomes. In the healthcare field, ProModel serves dozens of hospitals across the country, including Children's Hospital Colorado. ProModel's FutureFlow RX product provides a simulation platform for patient flow and hospital capacity, including scenario analysis for staffing, bed counts, arrival and discharge patterns, and case mix. The hospital reported significant ROI from their deployment, which allowed them to optimize staffing levels and operations over the past two years of COVID-19. And with Big Bear AI, Children's Hospital Colorado can benefit from augmented data such as national and regional COVID infection rates and real-time emergency calls and ambulance traffic to ensure that beds and medical professionals are available to provide care for children who need a specific specialization expertise of the children's hospital. They're excited about working with us to incorporate external data and predictive insights to optimize their specific beds for, in their words, children only have a chance there at one of the children's specialty hospitals. These are just a few of the many ways in which Big Bear AI data enrichment and AIML capabilities will enhance ProModel solutions to help our customers reach new levels of predictability, efficiency, and profitability. As I mentioned in our last earnings call, channel partnerships will be important to our growth strategy. The addition of ProModel also brings very strong co-marketing and distribution partnerships with industry leaders like Autodesk and Daytech Solutions, which is a global reseller of Autodesk products. ProModel AutoCAD Edition works seamlessly with the Autodesk product design and manufacturing collection, which includes AutoCAD, Inventor, and factory design utilities. According to analyst firm HG Insights, AutoCAD alone is used by more than 500,000 companies worldwide, so our ability to leverage these strategic channels will accelerate the adoption of both ProModel and Big Bear AI solutions on a global scale. To support our federal and commercial growth, we continue to bolster the Big Bear AI leadership team with top talent. Recently, we announced the appointment of Carolyn Blankenship as our general counsel. Carolyn brings deep experience with artificial intelligence and data ethics throughout her 25-year legal career. Most recently, as general counsel for the innovation and product group at Thomson Reuters. Her unique expertise in artificial intelligence Intellectual property and business strategy will be critically important as we expand our portfolio and global reach. Key hires were also made in product, marketing, sales, and sales operations, giving us the commercial experience we need to rapidly bring new products to market, fill the sales pipeline, and convert opportunities into loyal customers. On the federal side of our business, we appointed Tony Barrett as our new president of cyber and engineering, Tony will lead our integrated defense solutions, security efforts, and the creation of new strategies that allow us to involve services customers and the software customers. We continue to invest in research and development to drive innovation and new products for our federal and commercial customers. With an eye towards more strategic acquisitions, our product team has been reorganized to ensure rapid integration, enhancement of acquired technology, while concurrently packaging our unique AI capabilities for the commercial SaaS market. We anticipate increasing our product, sales, and marketing investments in future periods to help us achieve our commercial goals and drive sustainable growth. In summary, we made great progress in the first quarter of 2022 on our growth strategy despite the ongoing impact of government contracting delays. With the continuing resolution lifted and the new appropriations bill signed, we are in an excellent position building our robust backlog of federal business while we expand into the commercial market. The addition of ProMile Corporation gives us a solid customer base and strong channel partnerships in which we will accelerate our commercial market penetration. And we have experienced executives and technical talent in place to lead our strategy, operations, and innovation programs to success. Now I'll turn it over to Josh to go over Q1 financials in detail.