BigBear.ai Holdings, Inc. (BBAI)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis provides information that BigBear.ai Holdings, Inc. (“BigBear.ai”, “BigBear.ai Holdings”, or the “Company”) management believes is relevant to an assessment and understanding of BigBear.ai’s audited consolidated results of operations and financial condition. The following discussion and analysis should be read in conjunction with BigBear.ai’s condensed consolidated financial statements and notes to those statements included elsewhere in this Quarterly Report on Form 10-Q. Certain information contained in this management discussion and analysis includes forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors. Please see “Cautionary Note Regarding Forward-Looking Statements,” and “Risk Factors” in our Annual Report on Form 10-K. Unless the context otherwise requires, all references in this section to the “Company,” “BigBear.ai,” “we,” “us,” or “our” refer to BigBear.ai Holdings, Inc.

The following discussion and analysis of financial condition and results of operations of BigBear.ai is provided to supplement the unaudited condensed consolidated financial statements and the accompanying notes of BigBear.ai included elsewhere in this Quarterly Report on Form 10-Q. We intend for this discussion to provide the reader with information to assist in understanding BigBear.ai’s condensed consolidated financial statements and the accompanying notes, the changes in those financial statements and the accompanying notes from period to period, along with the primary factors that accounted for those changes. All amounts presented below are in thousands of U.S. dollars unless stated otherwise.

The discussion and analysis of financial condition and results of operations of BigBear.ai is organized as follows:

•Business Overview: This section provides a general description of BigBear.ai’s business, our priorities and the trends affecting our industry in order to provide context for management’s discussion and analysis of our financial condition and results of operations.

•Recent Developments: This section provides recent developments that we believe are necessary to understand our financial condition and results of operations.

•Results of Operations: This section provides a discussion of our results of operations for the three and the six months ended June 30, 2026 and June 30, 2025.

•Liquidity and Capital Resources: This section provides an analysis of our ability to generate cash and to meet existing or reasonably likely future cash requirements.

•Critical Accounting Policies and Estimates: This section discusses the accounting policies and estimates that we consider important to our financial condition and results of operations and that require significant judgment and estimates on the part of management in their application. In addition, our significant accounting policies, including critical accounting policies, are summarized in Note 2—Summary of Significant Accounting Policies to the accompanying condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Business Overview

Our mission is to help deliver clarity for the world’s most complex decisions. BigBear.ai is a leading provider of Edge AI-powered decision intelligence solutions for national security, supply chain management and digital identity. Customers and partners rely on BigBear.ai’s predictive analytics capabilities in highly complex, distributed, mission-based operating environments. We are a technology-led solutions organization, providing both software and services to our customers.

Recent Developments

Acquisition of CargoSeer

On January 16, 2026, the Company acquired certain assets and liabilities of CargoSeer Ltd (“CargoSeer”), an Israel-based leader in unified AI decision support technology for customs and border operations, for $5.0 million, subject to certain customary net working capital adjustments.

38

Table of Contents

Ask Sage Acquisition

On December 31, 2025, the Company completed the acquisition of Ask Sage, Inc. (“Ask Sage” or the “Ask Sage Acquisition”), a secure, multi-modal generative AI platform designed for government and enterprise use. Of the total purchase consideration of $272.1 million, $267.6 million was paid in cash at or around the time of closing and $4.5 million was held back to cover any post-closing downward adjustments to the purchase price, which was settled in the three months ended June 30, 2026.

2029 Convertible Notes

On January 2, 2026, the Company announced that all 2029 Convertible Notes outstanding as of January 16, 2026 (the “Redemption Date”), would be redeemed for cash at a price equal to the principal amount of such notes plus accrued and unpaid interest, as provided by the terms of the Exchange Agreement. All of the 2029 Convertible Notes, with a par value of $124.6 million, were voluntarily converted by noteholders prior to the Redemption Date. These conversions resulted in the issuance of approximately 38.1 million shares of common stock in exchange for the retirement of the respective notes.

Global Economic and Geopolitical Environment

Historically, the majority of our revenue is derived from federal government contracts. Funding for U.S. Government programs is subject to a variety of factors that can affect our business, including the administration’s budget requests and procurement priorities and policies, annual congressional budget authorization and appropriation processes, and other U.S. Government domestic and international priorities. U.S. Government spending levels, particularly defense spending, and timely funding thereof can affect our financial performance over the short and long term.

We anticipate the federal budget, debt ceiling, regulatory environment, and potential tax reform will continue to be subject to debate and compromise shaped by, among other things, the current administration and Congress, heightened political tensions, the global security environment, inflationary pressures, and macroeconomic conditions. The result may be shifting funding priorities, which could have material impacts on defense spending broadly and our programs. Additionally, the administration continues to take steps to evaluate government-wide and defense-specific staffing and procurement, which includes assessing mission priorities, procurement methods, program performance, and other factors and then potentially taking action based on those assessments. Those actions remain uncertain and could result in impacts to both our current and future business prospects and financial performance.

Additionally, the President of the United States has issued multiple Executive Orders, including two that are intended to (i) simplify and accelerate the procurement process through a review and restructuring of the Federal Acquisition Regulation (FAR), and its supplements and (ii) modernize defense acquisitions by promoting commercial solutions, innovative acquisition authorities, and other existing streamlined processes. Among the actions directed by the President is a review of major defense acquisition programs that are behind schedule or over budget, including identifying any programs for potential cancellation.

While the impact of these reforms on our business is uncertain, they could potentially lead to changes in the way we interact with the U.S. Government. We will continue to monitor and assess their effects on our business and financial results. Should the U.S. Government review one or more major defense programs in which we provide solutions or services, and this review leads to a full or partial cancellation of one of these programs, this could have an adverse effect on our business, financial condition, results of operations and cash flows.

We continue to expect the global economic and geopolitical environment to drive adoption of our offerings over the long term, as it has heightened the need for advanced AI tools that provide enhanced intelligence and full spectrum cyber operations – areas where we believe we have unmatched capabilities. While these challenges are still evolving and the eventual outcome remains highly uncertain, we do not believe that these events will have a material impact on our business and results of operations. However, if these challenges worsen, leading to greater disruptions and uncertainty within the technology industry or global economy, our business and results of operations could be negatively impacted.

Components of Results of Operations

Revenues

We generate revenue by providing our customers with Edge AI-powered decision intelligence solutions and services for data ingestion, data enrichment, data processing, artificial intelligence, machine learning, predictive analytics and predictive visualization. We have a diverse base of customers, including government defense, government intelligence, as well as various

39

Table of Contents

commercial enterprises. We generate revenue from providing both software and services to our customers.

Cost of revenues

Cost of revenues primarily includes salaries, stock-based compensation expense, and benefits for personnel involved in performing the services described above, as well as allocated overhead and other direct costs.

Selling, general and administrative (“SG&A”)

SG&A expenses include salaries, equity-based compensation expense, and benefits for personnel involved in our executive, finance, accounting, legal, human resources, and administrative functions, as well as third-party professional services and fees, and allocated overhead.

Research and development

Research and development expenses primarily consist of salaries, equity-based compensation expense, and benefits for personnel involved in research and development activities as well as allocated overhead. Certain research and development expenses relate to software developed for sale, lease, or that will otherwise be marketed. Costs incurred subsequent to the establishment of technological feasibility and prior to the general availability of the software, are capitalized when they are expected to become significant. All other research and development expenses are expensed in the period incurred.

Restructuring charges

Restructuring charges consist of employee separation costs related to strategic cost saving initiatives to better align our organization and cost structure and improve the affordability of our products and services as well as employee separation costs associated with strategic changes in certain key leadership roles.

Transaction expenses

Transaction expenses consist of diligence, legal and other related expenses associated with recent acquisitions, as well as costs associated with evaluating other acquisition opportunities.

Goodwill impairment

Goodwill impairment consists of non-cash impairments of goodwill.

Interest expense

Interest expense consists primarily of interest expense, commitment fees, debt issuance discount amortization, and debt issuance cost amortization under our debt agreements.

Interest income

Interest income consists primarily of interest income earned on our money market accounts and investments in debt securities.

Net increase in fair value of derivatives

Net increase in fair value of derivatives consists of fair value remeasurements of the 2029 Convertible Notes Conversion Option, 2026 Convertible Notes Conversion Option, PIPE warrants, RDO warrants, and IPO private warrants.

Loss on extinguishment of debt

Loss on extinguishment of debt consists of the derecognition of the unamortized debt issuance costs and discount related to the 2029 Convertible Notes upon conversion.

Other expense, net

[Excerpt truncated for page length; source filing is linked above.]

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis provides information that BigBear.ai Holdings, Inc. (“BigBear.ai”, “BigBear.ai Holdings”, or the “Company”) management believes is relevant to an assessment and understanding of BigBear.ai’s audited consolidated results of operations and financial condition. The following discussion and analysis should be read in conjunction with BigBear.ai’s consolidated financial statements and notes to those statements included elsewhere in this Annual Report on Form 10-K. Certain information contained in this management discussion and analysis includes forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors. Please see “Cautionary Note Regarding Forward-Looking Statements,” and “Risk Factors” in our Annual Report on Form 10-K. Unless the context otherwise requires, all references in this section to the “Company,” “BigBear.ai,” “we,” “us,” or “our” refer to BigBear.ai Holdings, Inc.

The following discussion and analysis of financial condition and results of operations of BigBear.ai is provided to supplement the audited consolidated financial statements and the accompanying notes of BigBear.ai included elsewhere in this Annual Report on Form 10-K. We intend for this discussion to provide the reader with information to assist in understanding BigBear.ai’s consolidated financial statements and the accompanying notes, the changes in those financial statements and the accompanying notes from period to period, along with the primary factors that accounted for those changes. All amounts presented below are in thousands of U.S. dollars unless stated otherwise.

The discussion and analysis of financial condition and results of operations of BigBear.ai is organized as follows:

•Business Overview: This section provides a general description of BigBear.ai’s business, our priorities and the trends affecting our industry in order to provide context for management’s discussion and analysis of our financial condition and results of operations.

•Recent Developments: This section provides recent developments that we believe are necessary to understand our financial condition and results of operations.

•Results of Operations: This section provides a discussion of our results of operations for the year ended December 31, 2025, December 31, 2024 and December 31, 2023.

•Liquidity and Capital Resources: This section provides an analysis of our ability to generate cash and to meet existing or reasonably likely future cash requirements.

•Critical Accounting Policies and Estimates: This section discusses the accounting policies and estimates that we consider important to our financial condition and results of operations and that require significant judgment and estimates on the part of management in their application. In addition, our significant accounting policies, including critical accounting policies, are summarized in Note 2—Summary of Significant Accounting Policies to the accompanying consolidated financial statements included in this Annual Report on Form 10-K.

Business Overview

Our mission is to help deliver clarity for the world’s most complex decisions. BigBear.ai is a leading provider of Edge AI-powered decision intelligence solutions for national security, supply chain management and digital identity. Customers and partners rely on BigBear.ai’s predictive analytics capabilities in highly complex, distributed, mission-based operating environments. We are a technology-led solutions organization, providing both software and services to our customers.

Recent Developments

Ask Sage Acquisition

On December 31, 2025, the Company completed the acquisition of Ask Sage, Inc. (“Ask Sage” or the “Ask Sage Acquisition”), a secure, multi-modal generative AI platform designed for government and enterprise use. Of the total purchase consideration of $271.6 million, $267.6 million was paid in cash at or around the time of closing and $4.0 million was held back to cover any post-closing downward adjustments to the purchase price.

67

Table of Contents

ATM Program

The Company completed the “May 2024 Sales Agreement,” the “June 2025 Sales Agreement” and the “August 2025 Sales Agreement” during the year ended December 31, 2025 for total gross proceeds of $637 million and 142 million shares issued.

2029 Convertible Notes

On December 19, 2024, the Company entered into privately negotiated exchange agreements (the “Exchange Transaction”) with a limited number of holders of the Company’s 2026 Convertible Notes, to exchange the 2026 Convertible Notes for new senior secured convertible notes due 2029 (the “2029 Convertible Notes”, together with the 2026 Convertible Notes, the “Convertible Notes”). The Company exchanged approximately $182.3 million principal amount of the 2026 Convertible Notes for $182.3 million in aggregate principal amount of the Company’s 2029 Convertible Notes. The 2029 Convertible Notes bear interest at a rate of (i) 6.0% per annum, if interest is paid in cash and (ii) 7.0% per annum, if the Company elects, subject to certain conditions, to pay interest in kind with shares of its common stock, subject to other adjustments if certain liquidity requirements are not met. The conversion rate is 281.4491 shares of common stock per $1,000 principal amount of 2029 Convertible Notes, which represents an initial conversion price of $3.55 per share of the Company’s common stock.

During the three months ended March 31, 2025, $57.7 million of the 2029 Convertible Notes were voluntarily converted by noteholders following the Exchange Transaction. These conversions have resulted in the issuance of approximately 16.7 million shares of common stock in exchange for the retirement of the respective notes.

On January 2, 2026, the Company announced that all 2029 Convertible Notes outstanding as of January 16, 2026 (the “Redemption Date”), would be redeemed for cash at a price equal to the principal amount of such notes plus accrued and unpaid interest, as provided by the terms of the Exchange Agreement. All of the 2029 Convertible Notes, with a par value of $124.6 million, were voluntarily converted by noteholders prior to the Redemption Date. These conversions resulted in the issuance of approximately 38.1 million shares of common stock in exchange for the retirement of the respective notes.

RDO Warrant Exercise

On February 27, 2024, the Company entered into a warrant exercise agreement with an existing accredited investor (the “RDO Investor”) to exercise in full the outstanding Registered Direct Offering to purchase up to an aggregate of 8,886,255 shares of the Company’s common stock for gross proceeds of approximately $20.6 million (the “RDO warrants”). In consideration for the immediate and full exercise of the RDO warrants, the RDO Investor received a new unregistered common stock purchase warrant to purchase up to an aggregate of 5,800,000 shares of the Company’s common stock (the “2024 RDO warrant”) in a private placement. The 2024 RDO warrants became exercisable six months after issuance and had a five-year term, with an exercise price per share equal to $3.78. These warrants were fully exercised during the first quarter of 2025.

On February 5, 2025, the Company entered into a warrant exercise agreement with an existing accredited investor to exercise in full an outstanding Common Stock Purchase Warrant, the 2024 RDO warrant, to purchase up to an aggregate of 5,800,000 shares of the Company’s common stock. The gross proceeds to the Company from the exercise were $21.9 million, prior to deducting estimated offering expenses.

In consideration for the immediate and full exercise of the existing warrant for cash, the investor received a new unregistered Common Stock Purchase Warrant to purchase up to an aggregate of 3,770,000 shares of the Company’s common stock (the “2025 RDO Warrant”) in a private placement.

The 2025 RDO Warrant became exercisable commencing on August 6, 2025 (the “Exercise Date”) with an expiration date five years after the Exercise Date with an exercise price per share equal to $9.00.

Private Placement Warrant Exercise

On March 4, 2024, the Company entered into a warrant exercise agreement with an existing accredited investor (the “PIPE Investor”) to exercise in full the outstanding PIPE warrants to purchase up to an aggregate of 13,888,889 shares of the Company’s common stock for gross proceeds of approximately $33.2 million. In consideration for the immediate and full exercise of the PIPE warrants, the PIPE Investor received a new unregistered common stock purchase warrant to purchase up to an aggregate of 9,000,000 shares of the Company’s common stock (the “2024 PIPE warrant”) in a private placement. The 2024 PIPE warrant

68

Table of Contents

became exercisable six months after issuance and had a five-year term, with an exercise price per share equal to $4.75. These warrants were fully exercised during the first quarter of 2025. The gross proceeds to the Company from the exercise were $42.8 million, prior to deducting estimated offering expenses.

Global Economic and Geopolitical Environment

The majority of our revenue is derived from federal government contracts. Funding for U.S. Government programs is subject to a variety of factors that can affect our business, including the administration’s budget requests and procurement priorities and policies, annual congressional budget authorization and appropriation processes, and other U.S. Government domestic and international priorities. U.S. Government spending levels, particularly defense spending, and timely funding thereof can affect our financial performance over the short and long term.

On September 30, 2025, the continuing resolution (“CR”) allowing U.S. government departments and agencies to operate through the end of the government fiscal year expired and the U.S. government shut down. As a result of the U.S. government shutdown, our business and results of operations were insignificantly impacted by the disruptions to federal government offices, workers and operations, including funding of certain programs, stop work orders, delay in contract awards, new program starts, payments for work performed, and other actions. On November 12, 2025, Congress passed a funding extension through January 30, 2026 for nine of the twelve bills and a full-year appropriations for three bills. On February 3, 2026, the President signed into law a bill to end the partial government shutdown that began on January 31. The bill provides full-year appropriations for several programs, including the Pentagon and State departments. The impact of the January shutdown did not have a meaningful impact on our results.

We anticipate the federal budget, debt ceiling, regulatory environment, and potential tax reform will continue to be subject to debate and compromise shaped by, among other things, the current Administration and Congress, heightened political tensions, the global security environment, inflationary pressures, and macroeconomic conditions. The result may be shifting funding priorities, which could have material impacts on defense spending broadly and our programs. Additionally, the administration continues to take steps to evaluate government-wide and defense-specific staffing and procurement, which includes assessing mission priorities, procurement methods, program performance, and other factors and then potentially taking action based on those assessments. Those actions remain uncertain and could result in impacts to both our current and future business prospects and financial performance.

Additionally, the President of the United States has issued multiple Executive Orders

[Excerpt truncated for page length; the complete text is on the linked full-MD&A page.]