Why did BBAI's Q4 earnings fall short of forecasts?

BigBear.ai Holdings (BBAI) experienced a significant decline in its stock price following the release of its fourth-quarter (Q4) 2024 earnings report. The company's Q4 earnings fell short of forecasts due to several key factors: 1. **Revenue Shortfall**: BigBear.ai reported a total revenue of $43.83 million for Q4 2024, which was below the analyst expectation of $35.9 million. This represented an 8% year-over-year increase, but the company had forecasted a higher revenue of $53.84 million. The revenue shortfall was a result of decreased volume from the Air Force EPASS program and higher interest expense, which offset the acquisition of Pangiam. 2. **Increased Losses**: The company reported a net loss of $108 million for Q4 2024, which was significantly higher than the loss of $26 million in the same quarter of the previous year. The increased losses were due to non-cash changes in fair value of $93.3 million from derivative liabilities related to the company's convertible debt and stock warrants. Despite a gross profit margin increase to 37.4%, the rising operating costs, particularly in research and development (15% increase) and selling, general, and administrative expenses (21% increase), contributed to the net loss. 3. **Missed Earnings Per Share (EPS) Target**: Analysts had anticipated an EPS of -$0.06 for the quarter, which would represent a 72.73% rise compared to the same quarter of the previous year. However, BigBear.ai reported an EPS of -$0.43, reflecting a wider-than-expected loss. 4. **Restatement of Financial Statements**: BigBear.ai announced plans to restate its financial statements for the years ended 2022, 2023, and 2024 due to prior inaccuracies. This development further contributed to the uncertainty surrounding the company's financial health and added to the negative market sentiment. In summary, BigBear.ai's Q4 earnings fell short of forecasts due to lower-than-expected revenue, increased losses, missed EPS target, and the need to restate financial statements. These factors combined to create a challenging environment for the company, leading to a significant decline in its stock price.