Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2024

Cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable, short-term debt, including the current portion of long-term debt, accrued liabilities and other current liabilities are reflected on the consolidated balance sheets at amounts that approximate fair value because of the short-term nature of these financial assets and liabilities.

Certain warrants that were issued at BigBear.ai’s initial public offering (“IPO Private Warrants”), warrants issued in BigBear.ai’s 2023 and 2024 private placement warrants (“PIPE Warrants”), and warrants issued in BigBear.ai’s 2023 and 2024 registered direct offering warrants (“RDO Warrants”) are valued using a modified Black-Scholes option pricing model (“OPM”). The conversion options of the 2026 Convertible Notes (“2026 Notes Conversion Option”) and 2029 Convertible Notes (“2029 Notes Conversion Option”) are valued using a binomial lattice convertible bond model and discounted cash flow method, considering the traded price of the 2026 Convertible Notes and 2029 Convertible Notes, respectively, and other unobservable input assumptions. The 2026 Notes Conversion Option, 2029 Notes Conversion Option, RDO Warrants,PIPE warrants, and IPO private warrants are considered to be Level 3 fair value measurements. See Note 18—Derivatives for information on the Level 3 inputs used to value the IPO Private Warrants, PIPE Warrants, RDO Warrants, 2026 Notes Conversion Option, and the 2029 Notes Conversion Option.

The table below presents the financial assets and liabilities measured at fair value :



		December 31, 2024
	Balance Sheet Caption	Level 1		Level 2		Level 3		Total
Recurring fair value measurements:
2023 PIPE warrants	Derivative liabilities	$	—	$	—	$	—	$	—
2023 RDO warrants	Derivative liabilities	—		—		—		—
IPO private warrants	Derivative liabilities	—		—		290		290
2026 Notes Conversion Option	Derivative liabilities	—		—		322		322

2024 PIPE warrants	Derivative liabilities	—		—		32,760		32,760
2024 RDO warrants	Derivative liabilities	—		—		21,634		21,634
2029 Notes Conversion Option	Derivative liabilities	—		—		115,831		115,831
Total recurring fair value measurements:		—		—		170,837		170,837
Nonrecurring fair value measurement:
Goodwill(1)	Goodwill	—		—		119,081		119,081


		December 31, 2023 (as restated)
	Balance Sheet Caption	Level 1		Level 2		Level 3		Total
2023 PIPE warrants	Derivative liabilities	$	—	$	—	$	22,778	$	22,778
2023 RDO warrants	Derivative liabilities	—		—		15,018		15,018
2026 Notes Conversion Option	Derivative liabilities	—		—		491		491

IPO private warrants	Derivative liabilities	—		—		66		66
2024 PIPE warrants	Derivative liabilities	—		—		—		—
2024 RDO warrants	Derivative liabilities	—		—		—		—
2029 Notes Conversion Option	Derivative liabilities	—		—		—		—
Total recurring fair value measurements:		—		—		38,353		38,353
Nonrecurring fair value measurement:
Goodwill	Goodwill	—		—		48,683		48,683

(1) As of March 31, 2024, in accordance with Subtopic 350-20, goodwill with a carrying amount of $204.8 million was written down to its implied fair value of $119.8 million, resulting in an impairment charge of $85.0 million, which was included in earnings during the first quarter. Differences between the implied fair value of $119.8 million and the balance as of December 31, 2024 relate to subsequent measurement period adjustments.

The changes in the fair value of the Level 3 liabilities are as follows:



	2023 PIPE warrants		2023 RDO warrants		IPO private warrants		2026 Notes Conversion Option		2024 PIPE warrants		2024 RDO warrants		2029 Notes Conversion Option












December 31, 2022 (as restated)	$	—	$	—	$	9	$	554	$	—	$	—	$	—
Additions	14,893		15,536		—		—		—		—		—
Changes in fair value	7,885		(518)		57		(63)		—		—		—
Settlements	—		—		—		—		—		—		—
December 31, 2023 (as restated)	$	22,778	$	15,018	$	66	$	491	$	—	$	—	$	—
Additions	—		—		—		—		27,990		15,196		61,402
Changes in fair value	37,361		15,551		227		(169)		4,770		6,438		54,429
Settlements	(60,139)		(30,569)		(3)		—		—		—		—
December 31, 2024	$	—	$	—	$	290	$	322	$	32,760	$	21,634	$	115,831

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References

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+ Details