As BigBear.ai (NYSE: BBAI) entered the public market by merging with a special purpose acquisition company (SPAC) in December 2021, it drew comparisons to the well-known Palantir Technologies (NYSE: PLTR), which had gone public through a direct listing in September 2020. Both companies specialized in analytics and data aggregation for government and enterprise clients, but BigBear.ai has faced a different trajectory since its IPO.
How BigBear.ai Differs from Palantir
BigBear.ai sets itself apart from Palantir in three key ways:
- Service Delivery: While Palantir offers its services through specific platforms dedicated to government and commercial customers, BigBear.ai provides standalone modules that can be integrated into existing software systems.
- Company Size: BigBear.ai is smaller in revenue and growth compared to Palantir. In 2023, BigBear.ai generated $155 million in revenue, while Palantir reported $2.23 billion. Additionally, BigBear.ai has been growing at a slower rate than its counterpart.
- Profitability: BigBear.ai is still operating at a loss on a generally accepted accounting principles (GAAP) basis, whereas Palantir has consistently generated GAAP profits over the past five quarters. This disparity raises concerns about BigBear.ai’s ability to compete with industry leaders.
Why Did BigBear.ai Disappoint the Market?
One of the primary reasons for BigBear.ai’s disappointment in the market lies in its overly optimistic long-term estimates, which it failed to meet. Prior to its merger, the company projected a compound annual growth rate of 40% in revenue, an expansion of its gross margin, and high-teens margin on adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). However, the company fell short of these targets.
Metrics for 2020-2023 (in millions):
| Metric | 2020 | 2021 | 2022 | 2023 |
|---|---|---|---|---|
| Revenue | $140 | $146 | $155 | $155 |
| Revenue Growth | 15% | 4% | 6% | 0% |
| Gross Margin | 30% | 23% | 28% | 26% |
| Adjusted EBITDA Margin | 18% | 3% | -11% | -2% |
BigBear.ai attributed its underperformance to macro headwinds, slower government spending, and the bankruptcy of a major customer, Virgin Orbit. The company experienced significant changes, including the resignation of CEO Reggie Brothers in October 2022. Mandy Long, his successor, focused on cost-cutting measures and optimizing the business, leading to positive adjusted EBITDA margins and cash flow in the second half of 2023.
The recent acquisition of Pangiam, a near-field vision AI technology developer, aims to boost BigBear.ai’s revenue. However, the all-stock deal will dilute the company’s existing shares. Long expects revenue to increase by 26%-39% in 2024, primarily driven by the acquisition of Pangiam. Analysts predict a 31% revenue growth in 2024 but only a 12% growth in 2025 after the impact of the acquisition diminishes.
Can BigBear.ai Become the Next Palantir?
While Palantir continues to experience steady growth and profitability, the same cannot be said for BigBear.ai. Palantir’s revenue rose by 17% in 2023, with expectations of organic growth in the coming years. BigBear.ai, on the other hand, faces challenges and uncertainties. The company’s stock price remains low, trading at around 3 times this year’s sales, indicating a lack of investor confidence.
Becoming the next Palantir seems unlikely for BigBear.ai. However, the company could carve out its own niche in the market or attract acquisition interest from larger players. For now, significant improvements are necessary for BigBear.ai to regain market trust and recover from its declining stock performance.
FAQs
Q: What differentiates BigBear.ai from Palantir?
A: BigBear.ai offers standalone modules that can be integrated into existing software, while Palantir provides services through dedicated platforms for government and commercial customers.
Q: Why did BigBear.ai disappoint the market?
A: The company set overly bullish long-term estimates but failed to meet them, citing macro headwinds, slower government spending, and the bankruptcy of a major customer as contributing factors.
Q: Can BigBear.ai become as successful as Palantir?
A: It is unlikely that BigBear.ai will achieve the same level of success as Palantir, but the company may find its own niche or attract acquisition interest from larger players.
Sources: The Motley Fool
Industry Overview
The industry that BigBear.ai operates in is the analytics and data aggregation industry, specifically catering to government and enterprise clients. This industry involves providing advanced analytics and data integration solutions to help organizations make data-driven decisions and optimize their operations.
Market Forecasts
According to market research, the global analytics market is expected to grow at a compound annual growth rate (CAGR) of around 20% from 2021 to 2028. The increasing demand for data-driven insights, the rising adoption of big data analytics, and the need for advanced data integration solutions are driving the growth of the market.
Furthermore, the government analytics market is also projected to witness significant growth. The increasing need for efficient and effective governance, the rising adoption of data-driven decision-making in the public sector, and the emphasis on security and intelligence are key factors driving the demand for analytics solutions among government organizations.
Issues Related to the Industry
One prominent issue related to the analytics industry, including BigBear.ai, is data privacy and security. As organizations collect and analyze vast amounts of data, there is a growing concern about the protection of sensitive information and compliance with privacy regulations. Ensuring data security and addressing privacy concerns are critical for organizations operating in this industry.
Additionally, the analytics industry also faces challenges with data quality and data integration. Organizations deal with diverse data sources and formats, making it challenging to integrate and analyze data effectively. Ensuring the accuracy, cleanliness, and consistency of data is crucial for the success of analytics solutions.
Another notable issue faced by the industry is the need for skilled data analysts and data scientists. As organizations increasingly rely on analytics to gain insights and drive decision-making, there is a high demand for professionals with expertise in data analysis, machine learning, and statistical modeling. The shortage of skilled professionals poses a challenge for both organizations and the industry as a whole.
Additional Information
For more information about the analytics industry, market forecasts, and related issues, you can refer to the following sources:
1. The Motley Fool: Provides insights and analysis on various industries, including the analytics industry.
2. Gartner: A leading research and advisory company that offers reports and insights on the analytics market and trends.
3. Forbes: Publishes articles and analysis on the analytics industry, market forecasts, and emerging trends.
4. Statista: Provides statistics, market research, and industry reports on the analytics market.
5. IDC: Offers research and analysis on the analytics industry, including market forecasts and trends.
The source of the article is from the blog papodemusica.com