BigBear.ai Holdings, Inc. Q4 FY2022 Earnings Call

Thank you for joining the BigBear.ai Fourth Quarter and Full Year 2022 Conference Call. This call is being recorded. I will now turn the call over to Shane Karp, Vice-President of Marketing and Communications. Please go ahead, Mr. Karp.

Good afternoon, everyone, and welcome to BigBear.ai's 2022 Fourth Quarter and Full Year Earnings Conference Call. I’m joined by Mandy Long, our Chief Executive Officer; and Julie Peffer, our Chief Financial Officer. During the call today, we may make certain forward-looking statements. Listeners are cautioned not to put undue reliance on the forward-looking statements and BigBear.ai specifically disclaims any obligation to update the forward-looking statements that may be discussed during this call. Many factors could cause actual events to differ materially from the forward-looking statements made on the call. These statements are based on current expectations and assumptions, and as a result, are subject to risks and uncertainties. For more information about these risks and uncertainties, please refer to the forward-looking statements section of the earnings press release issued today and our SEC filings. We will also discuss some non-GAAP financial measures during the call today. These non-GAAP financial measures should not be considered a replacement for and should be read together with GAAP results. You can find the GAAP and non-GAAP reconciliations within our earnings release. Now I'd like to turn the call over to Mandy.

Thank you, Shane, and thank you all for joining today's call. In the fourth quarter, we achieved our 2022 financial outlook and took significant steps to bolster our fundamentals and set the stage for long-term growth. As discussed in previous calls, we have continued to take material steps forward in reducing our recurring operating expenses and improving our liquidity position. Less than six months into my role as CEO, we are much healthier. We've cleaned up our operating structure within the company in a very tough market and completed a comprehensive technology assessment to baseline our portfolio. We now have a clearer understanding of our capabilities and how they can be applied to the markets that we serve. I see 2023 as a critical foundational year for us, as we support some of the challenging things that are happening in the world right now, and strive to deliver clarity for the world's most complex decisions. We are in the midst of an unprecedented wave of excitement around artificial intelligence. Key decision makers and leaders across governments and industry are recognizing the necessity of large-scale production and adoption of AI-powered decision support. BigBear’s capabilities and decades-long heritage in this field give us a competitive advantage in delivering a reliable, scalable decision intelligence solution. We're seeing an explosion of interest in what we provide, and we are continuing to foster our innovation pipeline to adapt and extend our capabilities to serve our markets. We will continue to focus on delivering solutions in three core markets: complex global supply chains and logistics, autonomous systems, and cyber. We anticipate that government investment in AI solutions will continue to grow. In November 2022, the U.S. Department of Defense released its National Defense Strategy, which stated that the government would continue to invest in AI and aggressively seek to fill technology gaps in its AI specialization. In December 2022, the U.S. National Defense spending bill was passed allotting over $800 billion in funding to our national security and recommending increased spending on AI solutions to protect our nation from increasingly sophisticated cyber threats. And just last week, President Biden put forward his 2024 defense budget proposal, which included a record amount of $145 billion for research and development. At BigBear.ai, we are uniquely positioned and view the unfolding global market dynamics as an opportunity for us to be a catalyst. There will be millions of models that might play a role in the orchestra of how we will achieve true augmented decision intelligence in high-stakes environments and there will not be a single company that provides all of these models; an organization needs to step up for production-grade AI adoption to happen at scale. In other words, this orchestra will need a conductor. That is the role that we will play; we will be the conductor. We have been a trusted partner to critical government agencies for decades. Throughout 2022, we deepened these relationships and see examples of this and selections such as the $900 million 10-year multiple award Air Force IDIQ contract vehicle, where we will have the opportunity to compete for task orders. With the integration of our legacy companies, we have the capabilities to compete in a more substantial contracting space and have a seat at the table as an established prime contractor for innovative government and defense work. We are showcasing our strengths in complex global supply chains and logistics through our Global Force Information Management, or GFIM, Phase 2 work, where our solutions are empowering senior leaders and combatant commanders to man, equip, train, ready, and resource the army more effectively by transitioning 14 legacy systems into a single solution to provide real-time holistic data for 160,000 users. This phase 2 work is significant in that it builds on our successful fee from prototype efforts during phase 1 and accelerated what was supposed to be a $2 million award for a second prototype into a $14.8 million award to deliver a minimum viable product. Additionally, the phase 2 award accelerates the program timeline while naming BigBear as the sole prime contractor to deliver this critical capability and puts us in a strong position to receive the phase 3 production award. We are continuing to demonstrate our expertise in autonomous systems through our participation in the digital horizon event series, which supports the Navy's efforts to integrate AI technologies in unmanned surface vessels. We look forward to showcasing our threat intelligence and situational awareness capabilities at IMX 23, the largest maritime exercise in the Middle East. Our experience and lessons learned through these events set us up to be a premier partner with the Department of Defense as they tackle their broader Debt 2 strategy, a multibillion-dollar effort to use AI, ML, and predictive analytics to better sense, make sense, and act at the speed of relevance. We are also providing cyber solutions across sectors. Our spacecraft partnership with Red Wire is delivering a suite of phased cybersecurity solutions to support the development of an advanced satellite communications program sponsored by DARPA. Our specialized reverse engineering capabilities provide critical insights to our customers as they look to manage the increasingly complex and threat-heavy environment of cybersecurity. We are continuing to build our pipeline in the complex manufacturing, shipping, and shipbuilding industries, and we are making significant progress. Our process simulation and modeling solutions help companies manage massive and complex physical and information environments, delivering clarity on facility, equipment, and personnel systems, forecasting requirements, and simulating real-world situations. Another focus area for us in the back half of 2022 was the implementation of the cost savings initiatives we discussed on our last two calls and began implementing in the third quarter. The fourth quarter was our first full quarter to benefit from our restructuring and we are pleased to have delivered on our revenue and adjusted EBITDA targets despite a continued challenging macro environment. We continued our cost reduction actions in Q4 and Q1 2023, taking additional steps to reduce our overhead spend and improve our financial position. Additionally, in the first quarter of 2023, we closed a private placement for $25 million in a very challenging market, bolstering our balance sheet and providing us with sufficient liquidity to execute our strategy in 2023. We are in a solid position and will continue to keep an open eye towards opportunities to grow our portfolio and organically in the coming quarters as well. With that, I will turn the call to Julie for a detailed review of our financials.

Thank you, Mandy. Now let's turn to our fourth quarter and full year results. Revenue for the quarter was $40.4 million compared to $33.5 million in the fourth quarter of 2021, which was 21% year-over-year growth, primarily driven by our analytics segment at $23.1 million in the quarter, an increase of $6.5 million, or 39%, compared to the same period in 2021. This growth was driven by key program wins in 2022, including the phase 2 award for the global force information management or GPM program with the U.S. Army that Mandy walked through earlier. Revenue in our C&E segment was $17.2 million in the quarter, compared to $16.8 million in Q4 2021. For full year revenue, we achieved our guidance target with revenue of $155 million representing 6% year-over-year growth versus 2021. The gross margin was 29% in the quarter, an increase from 11% in Q4 2021, driven by the growth in our analytics segment. Turning to segment adjusted gross margins, we are continuing to see growth in our higher margin analytics segment, which includes our commercial business that outpaces our C&E segments. We anticipate that this trend will contribute to increasing segment adjusted margins going forward. The segment adjusted gross margin was 35% in Q4 2022, compared to 31% in Q4 2021. Segment adjusted gross margin in Analytics was 47% in Q4 2022, compared to 34% for Q4 2021, driven by prior investments that were successful in winning and executing higher margin follow-on awards. Segment adjusted margin for C&E was 20% compared to 28% in Q4 2021, primarily driven by a one-time year-to-date fringe rate true-up adjustment that was recorded in the fourth quarter of 2021, resulting in a higher than typical segment adjusted gross margin in that period. Now turning to backlog. Backlog was $222 million at year-end, which is down 23% or $66 million compared to the third quarter. This was largely driven by contracts converting into Q4 revenue of $40 million, as well as a couple of contracts that expired their period of performance in the quarter. For those types of material contracts, the customer did not spend to their contractual limits. So our backlog was reduced for any remaining funds when the period of performance was completed. In most cases, we simply roll into the next option year of the contract and we continue to work with these customers to extend these contracts at the end of their option years to recapture these funds. In addition, backlog was impacted by one government contract where we switched to a subcontractor role. This change in the contract vehicle type does not impact the revenue associated with this work but impacts when we receive funding from the prime. As a reminder, when comparing our backlog in prior quarters, we made a change in our methodology of measuring backlog to take a more conservative approach that does not include anticipated follow-on awards, and also updated estimates as it related to unpriced, unexercised backlog. Now turning to expenses, for Q4, operating expenses were $38.2 million, or $19.9 million excluding the non-cash goodwill impairment charge. Q4 operating expenses included R&D expenses of $1.2 million and SG&A expenses of $15.6 million or $16.8 million in total. This represents a 43% reduction from R&D and SG&A expenses in Q2 of $29.4 million prior to initiating our cost reduction action plan. Excluding the impact of stock-based compensation and non-recurring integration expenses in both periods, Q4 expenses still reflect a 27% decrease in spending compared to Q2, driven by a full quarter benefit of cost savings initiatives we implemented in the back half of the year. While we believe the actions we took in the third and fourth quarters of 2022 and the first quarter of 2023 have positioned us to operate efficiently going forward, we will continue to be disciplined in our expense management as we grow and we will be focused on implementing scalable processes, operating rigor, and driving overall efficiency across our business. Looking ahead, we are also focused on ways to improve the efficiency of contracting processes and timeliness of payments. Net loss was $29.9 million in the quarter versus $114.8 million in Q4 of last year when we had $60.5 million of stock-based compensation expense related to the merger transaction. The net loss in the fourth quarter of 2022 was impacted by a non-cash goodwill impairment charge of $18.3 million in our analytics segment. We reviewed goodwill for impairment in the fourth quarter and while we saw improved financial results in our analytics segment this quarter relative to fourth quarter of 2021, we concluded that our goodwill was impaired due to several factors, including current macroeconomic headwinds and previously anticipated growth rates. Adjusted EBITDA was a loss of $2.5 million in Q4 compared to adjusted EBITDA loss of $3.9 million in the third quarter and $7.7 million in the second quarter. Our total adjusted EBITDA loss for the second half of 2022 was $6.5 million as we forecasted, compared to the $10.6 million in the first half of 2022. With our cost-saving actions in the second half of the year, we now have a foundational baseline for future profitable growth. In review of the balance sheet, at the end of the fourth quarter, we had cash and cash equivalents of approximately $12.6 million. Of the $9 million operational cash usage in Q4, $6 million was our biannual interest payments. The remaining operational cash burn of $3 million was significantly less than previous quarters as a result of the cost initiatives we executed beginning in the third quarter. In January, we took steps to address liquidity with a $25 million private placement, which provides us with sufficient liquidity to execute our 2023 strategy. Following the actions we took to right-size our operational cost structure in the second half of 2022 and early 2023, we expect to continue the trend toward a much lower cash burn in 2023. We are focused on achieving positive operational cash flow in the second half of 2023, which excludes non-recurring and non-operational items, including interest payments, transaction fees, tax payments for stock, vesting, and severance costs associated with a reduction in force. And finally, I wanted to provide additional context on the material weakness that we described in our earnings release related to our internal IT control. Following a thorough review of our financial statements, we have not identified any material errors in our financial results or our consolidated financial statements, but we have discovered gaps in our internal control processes and IT-related controls that resulted in a material weakness in our internal controls. We are addressing the issues, including enhancing segregation of duties, implementing additional IT general controls, and increasing monitoring and oversight activities. We are implementing a comprehensive remediation plan in coordination with our auditor and expect the remediation work to be completed this year. Turning to Outlook, we are expecting 2023 revenues to be in the range of $155 million to $170 million. We are projecting single-digit negative adjusted EBITDA in millions for 2023. We have several significant expected contract awards in our pipeline, which, given their size and timing of award, could have a significant impact on our FY 2023 revenue. Additionally, as Mandy said in her opening remarks, it's clear that the race for AI dominance will continue in 2023. As we execute our strategy this year, we will undoubtedly have to make certain investments that we believe will be catalysts in accelerating our success as an industry leader in AI. Looking ahead, we remain disciplined in managing costs and focused on areas to drive operational efficiency. Following our cost reduction initiative, we anticipate substantially lower cash burn, particularly in the second half of 2023 as we saw in the fourth quarter of 2022. After improving our near-term liquidity position, we will make targeted investments to efficiently drive sustainable growth. We are well positioned to deliver increasing gross margins and steady revenue growth driven by increasing demand for offerings in federal markets and our ramp-up in commercial go-to-market efforts, as well as a continued shift in our business mix in favor of the higher margin analytics segment.

Thank you, Julie. I am proud of the BigBear.ai team and the work that we have done to deliver on our commitments and begin to capitalize on the evolving market opportunities we discussed. That is the pattern that you will always see here. We will say what we are going to do, and then we will do it. We know what we are capable of. We aren't afraid to learn fast and work hard, and we see the long game. 2023 will be an important year of growth and stability for BigBear.ai as we deliver clarity for the world's most complex decisions. We're very excited about the year ahead. Operator, we're ready for questions. Thank you.

Thank you. We will now begin the question-and-answer session. Our first question comes from Louie DiPalma with William Blair. Please go ahead with your question.

Mandy and Julie. Good evening.

Hi, Louie.

Hi there. There has been a great deal of investor excitement associated with ChatGPT and its impact on AI innovation. Can you provide a quick overview of how your solutions may differ from ChatGPT and your use of tensor completion as part of your AI solution? And also related to this, will ChatGPT developments translate into contracts for BigBear.ai over the long term, or how should we in general think about the recent excitement for AI solutions? Thanks.

Thank you, Louie. It is an incredibly fair question, and I think one that many wonder about. ChatGPT, as a whole, is derived from large language models, which is a capability that's actually existed for a very long time and has been applied. BigBear uses LLMs; a lot of companies do. But I think that this particular instance is the first time we've seen a degree of democratization and consumer-facing access to the capabilities that exist within training on such a large spectrum of data. Now, in terms of how that pulls forward for us, it’s important to know that BigBear has more than a couple of decades of experience working even in the early days of machine learning. As deep learning has progressed, we leverage a wide variety of training tools and methodologies to meet customer needs. And sometimes that, to your point, may require different types of artificial intelligence, whether it's the work we do in predictive analytics, computer vision, or the underlying tools we use to accomplish those things; we have skill sets that tap into each of them. But what I would note in terms of the tensor, right, is that AI is a tool; it is a spectacular tool. And it can be applied in a way that, even five years ago, we couldn’t really tap into because of the limitations around compute. But at the end of the day, as a technology provider and a solution provider, our job is to use the right tools to solve the customer problem. And we’re going to lean into things like tensor, as an example. It does a pretty spectacular job, and we’ve been working in that for quite a while around weak link correlation, so dirty datasets. We do use that in some of our solutions that are deployed with the federal government as we look forward into 2023, as well as beyond. Unquestionably, we are seeing an unbelievable amount of interest in the application of artificial intelligence in both the federal sector, as well as the commercial sector. What's setting us apart in these conversations, and what gets us excited about the future is that we're not new to the table. We’ve been doing this for a very long time, and we have a lot of production examples of the types of tools I just talked about. And so I would expect, and when we look at our pipeline, I see a lot of promise associated with where we're headed. It's really on us to execute and then keep sharing it as we go. Does that answer your question, Louie?

Yes, definitely. Thanks, Mandy. And you were just talking about production examples. Last quarter, you discussed how your Med model and FutureFlow Rx platforms have been gaining some traction with hospital customers. I’m wondering how that platform has progressed since last quarter in terms of customer adoption? And what does the pipeline look like?

So it's a great question. And I do want to note that the commercial side of our business, which does include the FutureFlow Rx solution, we don't break out separately in terms of recording, but the pediatric care crisis continues. There is an unbelievable challenge happening in the world that I spent many years in across hospitals and health systems associated with staffing shortages, and incredible optics in particular types of illnesses that we just haven't seen in this kind of volume for a very long time. Our tools are incredibly well-situated to help design patient flow solutions and optimization solutions for how to get patients to the right place at the right time and do prioritization. We are continuing to see interest in that, and our pipeline is reflective. Does that answer your question?

Yes. And one more on your business prospects. The U.S. Army at an industry conference in January announced that it is looking to multisource its vantage data analytics dashboard program, and in your prepared remarks and over the past year, you've discussed the success that you've had with the GFIM program, which is also with the U.S. Army data analytics office. I was wondering if this vantage multisourcing represents an opportunity for BigBear, given its strong relationship with the U.S. Army, and what other potential defense prospects you may have in your pipeline? Thanks.

Sure. I think probably the best way to answer it was to maybe talk about some of the things we're seeing as it relates to the consolidation of federal contracts, because that is absolutely happening. We are seeing multiple contracts consolidated into larger contract infrastructures, in certain cases, which allows the government to manage properties more efficiently and streamline the work. We are definitely having these conversations. Now we've seen that in other instances as it relates to the general federal market and how we position ourselves and what we're seeing in terms of opportunity. I think, in all three of the vectors that we have strengthened, whether it's complex global supply chain logistics, autonomous systems like our work at IMX 23, or cyber, particularly with a focus on cybersecurity and risk, right and reverse engineering, I see our pipeline growing. This is the short summary, and I think it has, in no small part to do with the fact that there is a level of geopolitical unrest that is pretty unprecedented right now and leadership that is in the seats, and we are doing our best to help.

Great. And for Julie, following the cost reduction initiatives, what should we expect for the ballpark cash burn for 2023 when taking into account the interest and different tax payments that you mentioned? And also what is the total company liquidity pro forma for the $25 million raise?

Specifically to your first question, Louie. We feel like we have done a really good job of improving our liquidity profile, obviously. But when we look at our cash burn with the cost reductions that we've taken starting in Q3, and again in Q4 and Q1, we do expect the cash burn to be significantly lower. Now, you're already aware of our interest payments that do happen in the second and fourth quarters. So you already kind of know where those are placed. I would tell you that we are targeting to be operationally cash flow positive in the second half of the year. Again, to be clear on what we mean by operational cash flow positive, we're focused on ongoing day-to-day business. This includes everything that would be normal operating expenses that you would see in the business, as well as inflow of customer payments. It doesn't include, as I said, interest payments, which you know where those are, or transaction fees for severance costs and things like that. We're going to be much more positive, we believe, in the second half of the year. In the first half of the year, just to be clear, we had some startup costs in the fourth quarter and early Q1 in advance of a contract that was awarded in late Q1. The timing of those customer payments is probably going to flow into Q2. We do think that early in the year cash is going to look a little bit worse than it will in the back half of the year. But we still think that we're comfortable with our liquidity position where we are and that we have plenty of liquidity to support our growth strategy and deliver on the promises we've made.

Great. Thanks, Julie and thanks, Mandy. That's it for me.

Thank you, Louie.

And our next question comes from the line of Param Singh with Oppenheimer. Please proceed with your question.

Hi, thank you. This is Param Singh filling in for Ittai Kidron from Oppenheimer. First, I wanted to gain a clearer understanding of your overall revenue guidance. You’ve shared some notable successes with various contracts, including GFIM and IDIQ. However, I'm curious about how this relates to your DACA projections. It appears there's not much growth anticipated. Could you clarify why that is, or if there’s a level of conservatism in your guidance?

Hello, first of all, hi, thanks for joining. Second, I can make a couple of comments, and then I'll hand it to Julie to add some color. When we looked at kind of the year we had in 2022, and then we looked forward into 2023. The way we are approaching guidance is really to be balanced. In really establishing and sharing what we have line of sight to, what we see as reasonable, given certainly a continued challenging macroeconomic environment. To reinforce what Julie shared, as well as what I shared earlier, for many companies, ourselves included, January opened up a lot of conversations that we are seeing accelerate. I’ll continue to be optimistic about how those conversations will progress. But as you also know, the federal contracting process can be a long one. While we are pushing and being extremely responsive and adapting and extending our solutions to meet those needs, our guidance reflects what I think is a very appropriate and measured approach for 2023. Julie, anything to add on your side?

Yes, I would say yes, maybe say most of everything that I would have said. The only thing I would add is that there are a couple of things that I would add to emphasize. We're trying to ensure that we don't get ahead of ourselves. We saw some challenges last year, as we experienced a shifting and funding from various different contracts that we had in terms of the timing of how those were going to be funded, or specifically some of the funding that was reprioritized to be associated with the war in Ukraine. We want to make sure that what we have in our guidance is what we believe is in front of us and that we can deliver. It's important to understand that in the government world, even with this heightened excitement around AI and capabilities, there are typically three major stages that we have to go through in order to get these contracts awarded. There's a prototype phase, which is small and typically breakeven; there's an MVP stage, which has to prove things out; and then we get into production. That takes a long time. Even with the excitement around everything that we're seeing, and we're excited about what we’re seeing, it's just going to take a while for people to move through that process and that curve. That’s why our guidance is where it is; we want to make sure that we're measured about how we're communicating and what we're committing to and how fast we can get there.

That's really helpful. Thank you so much for the call, Mandy and Julie. Maybe if I could, on the GFIM part obviously did much better on phase 2. Phase 3, I mean, what do you expect what's embedded in your guidance in terms of the dollar portion of the contract? Obviously, the revenue piece was much higher than you had previously anticipated. Is there now a higher output for Phase 3 as well?

It's a fair question. When we think about the phases, as we move from where we are in phase 2 and compete for phase 3, we continue to believe we are very well positioned for this because of our execution and delivery in the phase 2 process. Ultimately, the shift to production means that it’s larger because you're talking about putting it into the real world and doing it at scale. In terms of price and right, I think ultimately it's up to the customer to make that determination and to make the award as appropriate. But Julie, definitely weigh in, because we’re spending a lot of time talking about it.

Yes, for sure. Everything's going very well on the program. It was announced back in September of last year for phase 2 and we’re still working toward the next phase. Everything's going exactly as we hoped, and maybe even better than we hoped. We just don't want to overcommit to how quickly they are going to move into production. Although we do believe it is coming as part of the 2024 budget.

Now, that's really helpful. Thank you so much. Maybe we could talk a little bit more about the cybersecurity opportunity. I don't think that's been discussed as much. So when we understand what you're doing, one of the new avenues of revenue that could potentially affect the upcoming years.

Sure, I can talk a little bit about that. It's important to note first that this is actually not a new capability for us; we have a pretty mature and long-standing cyber competency. The area that I was referring to is really part of our business that we're seeing mature quickly, which is in spacecraft solutions. We're not only able to do realistic reverse engineering work and vulnerability analysis on componentry, but also to do simulation and modeling associated with potential, whether it be offensive or defensive security postures and monitor that. As we all know, cybersecurity continues to be one of the great challenges for a wide variety of industries as we go through the fourth industrial revolution. A lot of these systems and sets of hardware were just not set up with the level of rigor needed as the threat landscape continues to mature. We're doing more in what I would describe as vulnerability assessments as a service. There is a large platform manufacturer that we've worked with on that and we're seeing additional chances. But the key aspect is that we have a unique competency in performing end-to-end reverse engineering and a full scope of vulnerability work. That is not something I have seen in a lot of other companies all the way through the process of being able to work with physical hardware; we have superpowers there.

If you compete with traditional defense contractors or cybersecurity companies, would you be displacing them more often in this vertical?

It's a good question. In the space that we work, particularly focused on spacecraft solutions, that's a pretty distinct solution that we have partnered with Red Wire. As for the broader vulnerability work that I mentioned, I would say we do see a level of competition from both sides. Most of this is pretty specialized services work, requiring highly talented and skilled individuals who live along the technology pipeline that we’re using for it. We do see some competition in the traditional contractor world too. Does that answer your question?

Yes, absolutely. That's really helpful. Thank you. Maybe one last question. The commercial revenue, I know you haven't broken it down, but previously, there was an outline on the percentage of revenue that would come from commercial; that would increase over time? Is there some sort of guideline or number embedded in your 2023 guidance? As you think you can add 10% would be coming from commercial; is that a better number for that piece of the business?

It's a great question. We continue to see the commercial business show promise; our pipeline is great, and we’re continuing to see that grow. We have not broken it out specifically because we're still below that 10% threshold for us. But I think 2023 is going to be a great year for it.

And then just on the margin front, I'm looking at a number that seems like you're seeing the margins drop lower. Maybe you can give me some clarity on why that’s taking a little bit of pressure here?

Actually, let me take that one for you, Mandy. I would say honestly, what you saw in Q4 was pretty close to what we've been running slightly below what we've run all year. The anomaly is the year-over-year comparison. Last year, there was a one-time year-to-date catch-up that happened in Q4 that caused the margins to look a little out of sync with everything else in the fourth quarter of last year. When you look at the comparison, it looks odd. But what you see in Q4, although right at that 2021 level, is what we consistently ran through the C&E segments.

Got it. Okay, that's really helpful. Thank you so much. And then at what level of revenue do you think you could probably get to EBITDA breakeven?

It's a great question. Our guidance is that we're targeting between $155 million and $170 million on revenue. We think that will align with our guidance of negative single-digit EBITDA in millions. We're going to do everything we can to focus on our cost structure and be very diligent in how we can take costs out and focus on that where we can, but we're not going to do the wrong thing. We're going to make sure we have enough investment opportunities so we can take advantage of this really unique opportunity in our lifecycle to make those investments as necessary. That’s our guidance for the year.

Got it. Thank you so much, guys. I'll get back in line.

Thank you.

Our next question comes from Vivek Balani with Northland Capital. Please go ahead with your question.

Hi, I'm Vivek on for Mike Lattimore. I have three questions. The first one is how many salespeople do you have? And do you expect that number to grow this year?

I just want to make sure I heard the question right. Are you asking how many salespeople we have?

Yes.

We don't specifically give guidance out on headcount, and specifically not within one area. But I would say we are really focused on where we think we need to invest both on the standing side as well as on the analytics in terms of opportunities with the best customer sets. We’re looking to do two things. One is to pursue opportunities into adjacent customers that we haven't had a position in. Our business development resources are critically important to that growth opportunity. We're also looking to continue to grow within customers that we already have. That often falls on the program manager side of the house as well. I think the way we handle that growth is a two-part answer, but it's not something that we typically give guidance on.

The only other note I would make, in addition to just the comments that everybody sells, is that we have a strong partner channel as well. It's a space that we're growing. When we think about sales, I encourage you to think about it from an indirect standpoint and channel; we have a growing degree of interest in some established relationships already there. So for us, it’s not just about direct sales. I hope that helps.

Yes, thank you. And my second question is, should we assume the first quarter will be the lowest revenue for the whole year, and then it builds from there?

Julie, do you want to go ahead and take that one?

I would not make that assumption. But again, we don’t give quarterly guidance. The nature of our business is that sometimes it is lumpy. When we give guidance for the year, there's a reason why we don't give that quarterly guidance; we want to make sure that we're offering the best perspective we have on the year, but it can be lumpy, and it can move around. As I mentioned, we had contracts that got delayed at the end of Q4 that came in in Q1. That’s going to cause some lumpiness in our cash flow. The bottom line is it’s just not something we’re comfortable yet. We may get to a point where we start to give quarterly guidance, but we're not quite there yet.

All right. My last question is about whether you see analytical cyber engineering growing faster this year?

To make sure I understand, are you talking about a comparison between the two which will grow more?

Yes.

We've been talking about this for the past several quarters. Our analytics business, which is a higher margin business for us, is an area where we’re seeing growth, continues to drive a lot of growth for us overall. That being said, C&E is projected to have a good year as well. But Julie, I don’t know if you’d add anything or not?

I would just say, I would point to our performance, which you've seen recently. We've clearly been focusing on a shift of our revenue mix toward that higher margin analytics segment. We are pleased to see that in Q4, we had 39% growth in that analytics segment. We expect that to continue into 2023, so yes, we do expect the analytics segment to grow faster.

Thanks a lot, guys. Thank you.

Thank you.

And we have reached the end of the question-and-answer session. I will now turn the call back over to Mandy Long for closing remarks.

Thank you all so much for joining today. I appreciate the questions and the discussion. As I shared, I continue to be genuinely excited about BigBear.ai, our potential, and our future. We are doing all the right things and have a very clear focus on long-term and sustainable growth for the business. We appreciate all of your time, and we look forward to speaking with you again next quarter.

And this concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.