Machine Learning

ML-driven BigBear.ai’s Merger With GigCapital4

BigBear.ai
  • BigBear.ai is a leader in data-driven decision dominance and advanced analytics with roots in the national security and defense community; rapidly expanding into the growing commercial sector
  • Provides end-to-end data analytics platform operationalizing artificial intelligence (“AI”) and machine learning (“ML”) at scale, delivering information superiority and decision support for customers in defense, intelligence, and commercial sectors
  • Global AI/ML market projected to grow from $58 billion in 2021 to $310 billion by 2026, at 40% CAGR
  • Transaction values BigBear.ai at a pro forma enterprise value of approximately $1.57 billion, implying 5.6x EV / FY2022E revenue multiple
  • Transaction expected to deliver approximately $330 million in net cash to the BigBear.ai balance sheet at closing
  • Proceeds will fuel commercial growth projects, expand sales and marketing, and fund research and development to accelerate product offerings and inorganic growth through accretive M&A
  • Projected 2021 revenue of $182 million and 43% 2021E – 2025E revenue CAGR, with positive and growing Adj. EBITDA and cash flow
  • Robust backlog of approximately $500 million contracted and near-term opportunities providing substantial growth visibility
  • Transaction includes $200 million oversubscribed convertible senior unsecured debt offering, convertible at $11.50/share, which includes investments by funds managed by affiliates of Fortress Investment Group, LLC (“Fortress”), Marathon Asset Management, LP (“Marathon”), and certain funds managed by Highbridge Capital Management, LLC (“Highbridge”)
  • Investor call scheduled for Tuesday, June 8, 2021 at 8:30am ET

BigBear.ai (“the Company”), a leading provider of artificial intelligence, machine learning, cloud-based big data analytics, and cyber engineering solutions, and GigCapital4, Inc. (“GigCapital4”; Nasdaq: GIGGU, GIG, GIGGW), a private-to-public equity (PPE)TM entity also known as special purpose acquisition company (“SPAC”), announced today that they have entered into a definitive merger agreement that will result in BigBear.ai becoming a publicly traded company. The transaction is expected to be completed in the third quarter of 2021, at which time the combined company will be named BigBear.ai, Inc., and is expected to be listed on the Nasdaq. The transaction values the Company, which had $140 million in revenues in 2020, at an enterprise value of approximately $1.57 billion.

Mission-Critical Solutions for Decision Dominance: BigBear.ai, fueled by machine-driven analytics, enables decision-making dominance in real-time. The Company’s solutions enable customers in the defense, intelligence, and commercial sectors to ingest real-time data, generate actionable insights and make informed decisions in complex situations. The Company’s suite of products and capabilities is comprised of three agile modules that can be used on their own or grafted onto a customer’s existing technology: Observe (data ingestion and conflation), Orient (composable machine learning at scale), and Dominate (visual anticipatory intelligence and optimization).

Dr. Reggie Brothers, Chief Executive Officer of BigBear.ai, said: “Our end-to-end data-driven decision dominance technology provides clarity and insight in complex environments – we empower customers to make the best decisions fast through exploratory analytics and anticipatory intelligence. This is an absolutely mission critical service for our defense and intelligence customers, who trust BigBear.ai in situations where there is little margin for error. We also see a ripe opportunity in the growing commercial market, as companies dedicate their budget to technology that allows them to harness the power of AI and ML for predictive analytics and forecasting capabilities to manage risk and capitalize on opportunities. In GigCapital4, we found a like-minded strategic partner that shares our vision for the future of data-driven decision dominance, and this business combination will help us drive growth as a public company. We have momentum and multiple paths for growth, and we are excited to be embarking on this next chapter.”

“We are thrilled to partner with the BigBear.ai team to use our unique TMT focused, Private-to-Public Equity (PPE)™ platform to bring such an exceptionally strong company to the public markets,” said Dr. Raluca Dinu, Founding Managing Partner of GigCapital Global and CEO of GigCapital4. “As a public company, BigBear.ai will have a stronger capital structure to invest in additional technology development, expand commercial R&D and business development teams, and accelerate growth both organically and through acquisitions. The combination of BigBear.ai and GigCapital4 brings unique, attractive, and promising opportunities to all stockholders and stakeholders, while substantiating our commitment to support artificial intelligence and machine learning technologies, which we believe is one of the highest-impact technology verticals of our lifetime.”

Jeffrey Hart, Principal at AE Industrial Partners, said: “In a world where the complexity and variety of data is increasing exponentially, the Company’s AI-powered technology allows its customers to make sense of the world around them. With a truly differentiated position and platform in the market, we believe this transaction will provide the necessary resources for the team at BigBear.ai to fully realize its vision and potential.”

Kirk Konert, Partner at AE Industrial Partners, said: “We are excited to continue our partnership with the BigBear.ai team in this next phase of their growth. As agencies and companies across the world deal with the proliferation of data and cyber threats, BigBear.ai will be able to leverage its deep customer intimacy and technology to pursue an even broader range of contracts and penetrate new targeted industry verticals.”

  • Client-Focused, Specialized Management and Workforce: The executive team will continue to be led by Dr. Reggie Brothers, Chief Executive Officer. The BigBear.ai team has decades of experience as science and technology innovators and deep public sector experience in artificial intelligence, machine learning and big data analytics. The team has direct experience working in high pressure, critically important situations, with 92% of the Company’s workforce possessing secret-level or higher U.S. government security clearance levels, which has cemented the Company’s position as a critical partner among the most vital defense and intelligence organizations.
  • Large and Rapidly Growing Addressable Market: BigBear.ai has robust opportunities in the global AI/ML market, which is projected to grow from $58 billion in 2021 to $310 billion by 2026. The Company expects its addressable market to grow as it expands into critical and high-growth adjacent market arenas. BigBear.ai is targeting growth in select commercial verticals, including infrastructure, energy, transportation and logistics in the near term, followed by the media, healthcare and financial services verticals. BigBear.ai will continue to consider M&A targets to strategically build its capabilities and accelerate penetration into target markets. Growth through M&A has not been factored into the Company’s financial projections.
  • Proven “Land and Expand” Customer Strategy: BigBear.ai has executed a successful “land and expand” strategy with its customers and has a proven record of growing customer relationships with new products and solutions. With a 93% new business win rate and a 100% recompete win rate, the Company’s existing contracts provide secure growth and position BigBear.ai for future wins through proven performance.
  • Robust Backlog and Pipeline Driving Projected Growth; Adjusted EBITDA and Cash Flow Positive: The Company’s current contracted backlog is approximately $500 million, with a robust pipeline of near-term opportunities of approximately $4.5 billion. Revenue is projected to grow from $182 million in 2021 to $764 million in 2025, a 43% compound annual growth rate (“CAGR”). Adjusted EBITDA is projected to grow from $23 million in 2021 to $159 million in 2025, a 63% CAGR, driven by high margin commercial revenue. Free cash flow is projected to grow from $18 million in 2021 to $120 million in 2025, a 60% CAGR.

Transaction Overview

Upon closing of the transaction, the Company is expected to have approximately $330 million in cash, providing the capital flexibility needed to support organic and inorganic growth.

The cash component of the purchase price to be paid to the equity holders of BigBear.ai is expected to be funded by GigCapital4’s cash in trust (minus any redemptions by public stockholders), and a $200 million convertible senior unsecured note private placement with institutional investors including Fortress, Marathon, and Highbridge. The 5-year unsecured convertible notes, which shall bear interest at a rate of 6% per annum, are convertible into common shares of the combined company at a conversion price of $11.50.

Assuming no GigCapital4 public stockholders elect to redeem their shares, existing BigBear.ai stockholders, including AE Industrial Partners, an investment firm specializing in the aerospace, defense & government services, space, power generation, and specialty industrial markets, are expected to own approximately 73% of the combined company, with GigCapital4 sponsors expected to own 6% and public stockholders 21% of the combined company, respectively. AE Industrial Partners will remain a significant stockholder in BigBear.ai following the completion of the proposed merger.

The transaction, which has been unanimously approved by GigCapital4’s Board of Directors, is expected to close in the third quarter of 2021, subject to, among other things, the approval by GigCapital4 stockholders, regulatory approvals, and the satisfaction or waiver of other customary closing conditions, including a minimum cash condition of $300 million.

Investor Conference Call and Webcast

Management of BigBear.ai and GigCapital4 will host an investor webcast and conference call on Tuesday, June 8, 2021, at 8:30am ET to discuss the proposed transaction and review an investor presentation. For those investors who wish to participate, the conference call can be accessed by calling (800) 891-3968 or (785) 424-1675 and providing the Conference ID: 59513. The webcast can be accessed by visiting https://www.gigcapital4.com or https://bigbear.ai. For materials and information, visit https://www.gigcapital4.com.

Advisors

William Blair is serving as exclusive financial advisor, Kirkland and Ellis LLP is serving as legal counsel, and Grant Thornton is serving as auditor to BigBear.ai. Oppenheimer & Co Inc. is serving as Capital Markets Advisor and Placement Agent, and BMO Capital Markets is serving as Exclusive Financial Advisor, DLA Piper LLP (US) is serving as legal counsel, and BPM LLP is serving as auditors to GigCapital4. Mayer Brown LLP is serving as legal counsel to Oppenheimer & Co Inc., BMO Capital Markets and William Blair.

For more such updates and perspectives around Digital Innovation, IoT, Data Infrastructure, AI & Cybsercurity, go to AI-Techpark.com.

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