The projected 40% CAGR reflects an acceleration through 2025 as a
result of our investments in sales & marketing, and
penetration into additional markets.
The percentage of analytics and software sales mix is certainly
impacting our gross margins as well. This change toward software
sales, isn’t a wholly new projection as much as it is a
continuation of a multi-year trend. A few years ago, less than 10%
of our sales were from software analytics sales; in 2020 it was
north of 50%. As software sales increase, it will be north of 75%
by 2025. This, in turn, is expanding our Gross Margins as you’ll
see in a few slides.
And lastly, on EBITDA: BigBear.ai has always been EBITDA positive,
and it’s accelerated through 2020. In fact, we ended 2020 north of
18%. The 13% projection you see for 2021 reflects our
sales & marketing and R&D spends that Reggie just
spoke about and is really driving our expansion into new markets.
By 2025, we’ll see EBITDA rebound and will be north of 20%.
REVENUE BY TYPE
AND END MARKET:
So as I said previously, more than 50% of our revenue in 2020 was
from analytics and software sales, up from 10% just a few years
prior to that. The balance is coming from service-based contracts
in our cyber and engineering sector. So it’s clear that we are in
the midst of a significant change in terms of how our products are
sold to both government and commercial customers, and this will
continue through 2025.
The Cyber & Engineering component, which is largely
services-based, won’t disappear entirely. It’s really shaped our
R&D, and our innovation, and our customer intimacy, but it will
make up a smaller component moving forward. The increased growth
here is really just a simple projection of our historical growth
rates for this sector – but it could easily exceed these
And note that by 2025, we are still very early in the move into
commercial markets with only about a third of our revenue coming
from commercial sources. That means there is still considerable
upside beyond 2025.
GROSS PROFIT BY
SEGMENT: SLIDE 31
So I hit on this already, a significant portion of our historical
revenue has come through Government contracts where they’ve
requested our data scientists and software engineers to sit with
them, assess their needs, and design and develop the technical
solutions, etc. So, on the downside, that labor component has
historically impacted our Gross Margins. On the plus side, however,
it means that nearly all of our historical R&D spend was
informed by and funded through these government contracts.
That means new government engagements have considerably higher
gross margins due to the fact that a majority of the non-recurring engineering (or R&D)
expense has already been incurred. We are focused on deploying now
a fully mature software capabilities that require minimal tweaking
So now that we’ve seen this change, many of our software sales,
even the government customers, are achieving gross margins north of
60%. And while that’s a great margin on the government side, on the
commercial side, we’re seeing gross margins that can exceed 80% and
getting up to 90%.