Hello, and welcome to the BigBear.ai Pangiam Acquisition Investor Presentation webcast. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to CFO Julie Peffer. Julie, please go ahead.
Hello, everyone, and thank you for joining today's call. This is Julie Peffer, CFO of BigBear.ai, and today we'll be discussing our definitive merger agreement to acquire Pangiam, a leader in vision AI for the global trade, travel, and digital identity industries. I'm joined on the call today by Mandy Long, CEO of BigBear.ai. While we're not taking any questions today, additional information can be found in the definitive proxy that was filed with the SEC on January 29th, and this presentation and a recording of this call will be made available afterwards. We've also included a link to the proxy at the end of the presentation. The matters that we will be discussing today may include forward-looking statements and, as such, are subject to risk and uncertainties.
These risks and uncertainties include the risk factors discussed in the most recent reports on Forms 10-Q and 10-K filed by BigBear.ai, as well as those discussed in the press release announcing the acquisition. These and other risks and uncertainties could cause actual results to differ materially from those contained in our forward-looking statements. I would like to remind the audience that today's call will pertain strictly to BigBear.ai's definitive merger agreement to acquire Pangiam. None of the comments on this call should be viewed as an update on BigBear.ai's current or recent completed quarter. Now, I'll turn it over to Mandy to provide some insight into Pangiam and the deal rationale.
Hello, everyone. I'm going to start by talking about the key drivers of the deal and the global landscape influencing an acceleration strategy for BigBear.ai. We've talked in the past about the reality of a global AI arms race. This race is not just about developing advanced artificial intelligence capabilities, but it is about delivering these capabilities in highly complex, distributed, mission-based operating environments. In other words, making them real and relevant to the warfighter. BigBear.ai is not merely a participant in this race. We are at its forefront, playing a pivotal role in how these capabilities will be harnessed for the men and women that protect and serve our country. Our strategic decisions, investments, and innovations are aligned towards ensuring that we remain a leader and trusted partner in our mission to create clarity for the world's most complex decisions.
With the addition of Pangiam, BigBear.ai accelerates and evolves in three core focus areas: national security, supply chain management, and digital identity. The decision to acquire Pangiam is rooted in a strategy to bolster our portfolio through both organic and inorganic tactics, accelerate our growth in adjacent market categories and customers, and deliver increased value to our shareholders. This acquisition also enables both companies to realize greater economies of scale as a combined entity. Together, we will establish one of the industry's most comprehensive Vision AI portfolios, positioning us to lead and innovate in this market category. As you've seen from our financial results over the past year, we have continued to improve our operating posture by rapidly streamlining and focusing the business.
This takes a diverse and experienced leadership team like the one we now have in place, and we have positioned BigBear.ai to begin to scale in 2024 and beyond. The acquisition of Pangiam doesn't change our operating philosophy. While we expect to incur some upfront costs, transaction fees, and other costs associated with the integration during the first year after closing, we do not believe that Pangiam will have a significant impact on our liquidity or cash from operations as we successfully execute on our integration plan and realize the anticipated synergies. One of the most important synergies to highlight is what we're going to be able to do for our customers, both existing and new. Pangiam brings an international footprint and leading capabilities in facial recognition, image-based anomaly detection, and advanced biometrics.
These technologies are relevant to BigBear.ai's national security and supply chain management customers and broadens the impact that we can have on those missions. For Pangiam, their customers gain access to technologies like ProModel and ArcGIS that support their missions at the Department of Homeland Security. The fentanyl crisis is an example of a mission that both Pangiam and BigBear.ai have been focused on as standalone entities. Imagine the impact that we can have together as we bring everything we have to a national priority of this magnitude. I'm now going to spend some time talking about Pangiam and its history. Pangiam was established in 2020, and in the few short years since they were founded, they are on track to post revenues of roughly $40 million for FY2023. In 2020 and 2021, they made strategic acquisitions of Linkware, VeriScan, and Trueface.
These acquisitions, paired with their own organic investments over the past few years into solutions like Dartmouth and their strategic consulting practice, have laid the foundation to differentiate and address market challenges in the trusted and secure movement of people and goods. Pangiam's customers span the public and private sectors, including U.S. Customs and Border Protection, U.S. Transportation Security Administration, and the U.K. and Australian Transportation Ministries, as well as more than 50 airlines: Clear, Entain, and Toyota. Their current projections and pipeline indicate a substantial upside and revenue acceleration over the next five years, particularly as international airports and airlines move to enhance security and improve operational efficiencies. The level of trust that they have earned and continue to earn across their customers indicates a high degree of cultural alignment with BigBear.ai.
Pangiam is a team of exceptional people who, like our employees at BigBear.ai, come from the customer environments that they support. Kevin McAleenan, the CEO of Pangiam and former Acting Secretary of the Department of Homeland Security, has been nationally recognized for his service and leadership, receiving our nation's highest civil service award, the Presidential Rank Award, as well as the Service to America Medal and the Call to Service Award. Kevin has experience operating in the public and private sectors, and I'm looking forward to partnering with him to lead our combined company into the future. Since our announcement of the definitive merger agreement, Pangiam has not stopped hitting milestones on its journey to scale and margin expansion. I'd like to highlight a few examples from the past few months.
In November, the team completed an exploratory assessment of Project Dartmouth's threat detection capability, using computer vision to screen carry-on bags with the potential to significantly improve operations at security checkpoints. A successful pilot and EU regulatory compliance would pave the way for full-scale implementation. In December, Pangiam was awarded a project for the application of AI-assisted anomaly detection in vehicle and cargo screening by U.S. Customs and Border Protection. The application of imaging AI to these types of use cases has the potential to improve the efficiency and the accuracy of these processes. And in January, VeriScan hit another milestone in its expansion at DFW Airport, who, with Pangiam's technology, is on track to become the largest gate implementation of biometrics in North America. Pangiam's investment thesis is gaining traction in market, and we see indications of product-market fit across the business.
We're excited for what the future holds for Pangiam and BigBear.ai together. I'm now going to turn it back to Julie to talk through some of Pangiam's financial highlights and their projected trajectory looking into the future.
Thanks, Mandy. Before I dive into the financials, I want to reiterate something that we mentioned earlier in this presentation. What excites us about Pangiam is not only the remarkable organization that they've built, but also our opportunity to accelerate and scale in market together while driving operating efficiencies. This equity-based acquisition allows us to mitigate a cash outlay that would otherwise be needed to build these capabilities in-house. We expect to see accelerating growth once we integrate Pangiam as we collectively begin to scale the business in 2024 and beyond. Now, let me provide some insight into Pangiam's historical performance. Since year-end results are still in audit, we provided financial comparisons through the third quarter in the recently issued proxy. In the first chart, when you compare September year-to-date results to the previous year, you'll notice healthy overall year-over-year growth of 14%.
You'll also see the combination of SaaS and software licenses are accelerating with 134% combined year-over-year growth. Government services revenue also grew by 11% in this period as they have consistently achieved double-digit growth over the last two years. As you move to the second chart, you'll see that the percentage of revenue related to SaaS and software licenses has increased to 11% of total revenues as compared to only 2% in 2021. This increase in software revenue is driving significant gross margin expansion of 290 basis points through the third quarter, with year-to-date gross margins at 32.7% compared to 29.8% last year.
Now, moving to the growth projections, you will notice the government services business continues to project healthy double-digit growth with a CAGR of 11% over the five-year period, but you'll also see a dramatic expansion of commercial revenues related to software sales as the travel industry moves to implement enhanced security and operating efficiency. This expansion in commercial revenues would result in a significant mix shift with a 50/50 balance between commercial and government revenues by 2025, based on current market forecasts, which will further support gross margin expansion. Now, let's walk through the financial aspects of the deal. When we signed the definitive agreement to acquire Pangiam on November 4, 2023, we agreed that approximately 49.5 million shares would be issued immediately at closing, with the remainder to be issued following the finalization of a customary post-closing purchase price adjustment.
The 49.5 million share count was based on the 20-day VWAP at the time of the signed agreement, which was approximately $1.34 per share. Once we finalize the post-closing purchase price adjustment, any remaining shares to be issued to the seller will be calculated based on the 20-day VWAP when the holdback is settled a few months after closing. The total number of shares issued will be reported in future SEC filings. The stockholder vote is scheduled for February 27th, and we expect the deal to close very soon after the stockholder meeting, pending necessary approvals. As a reminder, Pangiam's financial results will not be included in BigBear's consolidated financial results until the transaction has closed. Pangiam's results will be included in our consolidated results on a go-forward basis, which we believe will be March, so our Q1 results would include approximately one month of Pangiam performance.
As we have shared today, we believe in the combination of these two businesses, and the all-stock nature of this deal aligns all parties to drive toward our combined goals. The ability to create one streamlined operational structure to support the combined entities will enable us to continue to reduce operational expenses and position us to scale as the company grows, and we expect to see our gross margins expand as commercial revenues continue to accelerate. As we prepare to close in the next month, we're using this time to refine our integration plans so that we can focus on unlocking the synergies between the two companies. Finally, we believe that Pangiam is an incredible cultural fit with BigBear.ai. Both companies have incredibly talented teams, and we share deep-rooted values around innovation, customer success, trust, transparency, and inclusion.
Coming together with a shared vision and a common belief will drive greater innovation for our customers and stronger growth. Now, let me turn it back over to Mandy.
Thank you, Julie. We are bullish on the future as we look to welcome Pangiam to the BigBear.ai family. We believe that combining our companies will bring more capabilities to our shared customers, will position us for accelerated growth, will increase the value we create for our stockholders, and will allow us to invest where the market is going. BigBear.ai and Pangiam together will create one of the industry's most comprehensive vision AI portfolios, combining facial recognition, image-based anomaly detection, and advanced biometrics with BigBear.ai's computer vision and predictive analytics capabilities to spearhead the vision AI industry. This will position us as a foundational leader in one of the fastest-growing categories for the application of AI.
Each of the three markets that we're talking about, national security, supply chain management, and digital identity, are expected to see double-digit growth in the coming years as they embrace and operationalize advanced technologies like artificial intelligence. On January 11, the Department of Defense released its inaugural National Defense Industrial Strategy, defining priorities for industry to realize a national modernized defense industrial ecosystem. It is a call to action for companies like BigBear.ai and Pangiam, as we are a part of the defense industrial base, which must provide the required capabilities at the speed and scale necessary for the U.S. military to engage and prevail in a near-peer conflict. In alignment with the National Defense Strategy released in 2022, the federal government is focused on fortifying our supply chains and enabling international interoperability and collaboration to deter adversarial entities from impacting the critical infrastructure that fuels our great nation.
This mission is at the center of who BigBear.ai is and what we do, and we're committed to playing a role in positioning the United States and our allies to orchestrate an ecosystem of trusted and secure collaboration. Our anticipated acquisition of Pangiam bolsters our ability to answer this call to action. Thank you again for your time today, and we look forward to talking with you again post-deal close.