BigBear.ai Holdings, Inc.BBAI
BigBear.ai Holdings, Inc. Goodwill & Intangibles Disclosure
Goodwill
As of December 31, 2022, the Company had two operating and reportable segments that were organized by sector: Cyber & Engineering and Analytics. During the first quarter of 2023, the Company reevaluated its operating and reportable segments under FASB ASC 280 - Segment Reporting, following an organizational and legal entity restructuring, which allowed the Company to align its operations with how the business will be managed. As a result of such changes, the performance of the Company’s operations are evaluated by the CODM using the consolidated financial results of the Company. As a result of this reevaluation, the Company determined it that it manages its operations as a single operating and reportable segment, which comprises a single reporting unit. The goodwill of the Cyber & Engineering and Analytics reporting units was combined into a single reporting unit during the first quarter of 2023.
The Company assessed if the reorganization was potentially masking a goodwill impairment by performing a quantitative goodwill impairment test of the Company’s reporting units immediately before and after the reorganization. The Company utilized a combination of the discounted cash flow (“DCF”) method of the Income Approach and the Market Approach. Under the Income Approach, the future cash flows of the Company’s reporting units were projected based on estimates of future revenues, gross margins, operating income, excess net working capital, capital expenditures, and other factors. The Company utilized estimated revenue growth rates and cash flow projections. The discount rates utilized in the DCF method were based on a weighted-average cost of capital (“WACC”) determined from relevant market comparisons and adjusted for specific reporting unit risks and capital structure. A terminal value estimated growth rate was applied to the final year of the projected period and reflected the Company’s estimate of perpetual growth. The Company then calculated the present value of the respective cash flows for each reporting unit to arrive at an estimate of fair value under the Income Approach. The Market Approach is comprised of the Guideline Public Company and the Guideline Transactions Methods. The Guideline Public Company Method focuses on comparing the Company to selected reasonably similar (or guideline) publicly traded companies. Under this method, valuation multiples were: (i) derived from the operating data of selected guideline companies; (ii) evaluated and adjusted based on the strengths and weaknesses of the Company relative to the selected guideline companies; and (iii) applied to the operating data of the Company to arrive at an indication of value. In the Guideline Transactions Method, consideration was given to prices paid in recent transactions that had occurred in the Company’s industry or in related industries. The Company then reconciled the estimated fair value of its reporting units to its total public market capitalization as of the valuation date. The fair value of the Company’s reporting units immediately before and after the reorganization exceeded its carrying values.
We performed our annual qualitative goodwill assessment during the fourth quarter of 2023, and based on our qualitative assessment, a quantitative assessment was necessary. Following the quantitative assessment, it was determined that no goodwill impairment would be recognized for the year ended December 31, 2023.
During the second and fourth quarters of the fiscal year ending December 31, 2022, the Company identified factors indicating that the fair value of both the Cyber & Engineering and Analytics reporting units, which comprised the previously reported Cyber & Engineering and Analytics reportable segments, may be less than their respective carrying amounts and performed a qualitative goodwill impairment assessment. These factors were related to a shift in the Federal Government’s focus to address immediate needs in Ukraine, causing a slowdown in the pace of contract awards. This resulted in lower revenues than anticipated during the period and caused future revenue projections to be revised. As a result, the Company determined that quantitative goodwill impairment assessments should be performed. The Company utilized a combination of the DCF method of the Income Approach and the Market Approach. The Company then reconciled the estimated fair value of its reporting units to its total public market capitalization as of the valuation date. The carrying value of the Cyber & Engineering and Analytics reporting units exceeded its fair value and accordingly the Company recorded a non-tax-deductible goodwill impairment charge of $35,252 and $18,292, respectively, which are included within the consolidated statements of operations for the year ended December 31, 2022.
The table below presents the changes in the carrying amount of goodwill:
| As of December 31, 2021 | $ | 91,636 | |||
| Goodwill arising from the ProModel Corporation acquisition | 10,591 | ||||
| Goodwill impairment | (53,544) | ||||
| As of December 31, 2022 | $ | 48,683 | |||
| As of December 31, 2023 | $ | 48,683 | |||
Accumulated impairment losses to goodwill were $53,544 as of December 31, 2023 and December 31, 2022.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2023 | Mar 15, 2024 | Showing above |
| 2022 | Mar 31, 2023 | |
| 2021 | Mar 31, 2022 | |
About Goodwill & Intangibles Disclosures
Goodwill and intangible asset disclosures reveal the premium paid in acquisitions and how management assesses whether that premium retains its value. Since goodwill is no longer amortized under US GAAP, the annual impairment test is the only mechanism that adjusts carrying values downward — making the assumptions behind that test critically important for investors.
Key signals: a history of goodwill impairments suggests management consistently overpays for acquisitions. Watch the gap between reporting unit fair value and carrying amount — when fair value exceeds carrying amount by less than 10-20%, a small decline in business performance could trigger a write-down. For finite-lived intangibles, examine useful life assumptions across customer relationships, technology, and trade names; aggressive estimates inflate near-term earnings. Compare total intangibles-to-total-assets ratios against peers to assess acquisition dependency. Rising goodwill as a percentage of equity can signal balance sheet fragility.