NOTE FiscaNote Holdings Inc

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 9, 2024

 

 

 

 

 

 

 

 

 

 

 

 

FISCALNOTE HOLDINGS, INC.

(Exact name of Registrant as Specified in Its Charter)

 

 

Delaware			001-39672	88-3772307
(State or Other Jurisdiction of Incorporation)			(Commission File Number)	(IRS Employer Identification No.)
1201 Pennsylvania Avenue NW 6th Floor
Washington, District of Columbia				20004
(Address of Principal Executive Offices)				(Zip Code)

 

Registrant’s Telephone Number, Including Area Code: (202) 793-5300

 

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Class A common stock, par value $0.0001 per share		NOTE		The New York Stock Exchange
Warrants to purchase one share of Class A common stock, each at an exercise price of $11.50 per share		NOTE.WS		The New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

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Item 2.02 Results of Operations and Financial Condition.

Item 7.01 Regulation FD Disclosure.

Financial Results for the Quarter Ended March 31, 2024

On May 9, 2024, FiscalNote Holdings, Inc. (the “Company”) issued a press release announcing its financial results for the quarter ended March 31, 2024. A copy of the press release, a supplemental presentation accompanying the press release and related conference call, and management’s prepared remarks for the related conference call is furnished as Exhibit 99.1, Exhibit 99.2 and Exhibit 99.3, respectively, to this Current Report on Form 8-K.

The information disclosed under Items 2.02 and/or Item 7.01, as applicable, including the exhibits hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, and shall not be deemed to be incorporated by reference in any filing made by the Company under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits. The following exhibits are furnished with this report:

99.1			Press release dated May 9, 2024, reporting financial results for the quarter ended March 31, 2024.
99.2			Supplemental presentation accompanying press release and related conference call.
99.3			Prepared remarks to be delivered by Mr. Tim Hwang, the Company's Chairman and Chief Executive Officer, and Mr. Jon Slabaugh, the Company's Chief Financial Officer.
104			Cover Page Interactive Data File (formatted as Inline XBRL).

 

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

			FISCALNOTE HOLDINGS, INC.
Date:	May 9, 2024	By:	/s/ Jon Slabaugh
			Name: Jon Slabaugh Title: Chief Financial Officer

 

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Exhibit 99.1

 

FiscalNote Reports First Quarter 2024 Financial Results

Outlines Accelerated AI Product Strategy and Roadmap

 

WASHINGTON, D. C. – Thursday, May 9, 2024 – FiscalNote Holdings, Inc. (NYSE: NOTE) (“FiscalNote” or the “Company”), a leading information services company using AI-driven enterprise SaaS technology to provide global political, legislative and regulatory policy and market intelligence, today reported financial results for the first quarter ended March 31, 2024.

 

These results mark another quarter of delivering on expected results driven by a blue chip customer base, durable recurring revenue and high gross margins, which form the basis of its increasing adjusted EBITDA and ongoing leadership in delivering AI-enabled policy and market information. The first quarter of 2024 represented an $8.2 million improvement in adjusted EBITDA year over year and marked the third straight quarter of adjusted EBITDA profitability for FiscalNote.

 

The Company also unveiled an accelerated AI product strategy and roadmap that leverages the decade-long investment in collecting legislative, regulatory, and geopolitical information in 80 different countries as well as partnerships with OpenAI, Google, and Microsoft to launch FiscalNoteGPT, the company’s verticalized large language model, and Copilot Creator Reasoning Engine. These investments in AI are expected to drive an acceleration in generative AI Agents and Copilot products that have already begun to be sold in the market beginning in Q1 2024 (including StressLens and the Global Intelligence Copilot) and expected to continue through the remainder of 2024 and into 2025 and beyond to build the most powerful legal, regulatory, and geopolitical AI assistant and eventually the world’s most powerful AI lawyer.

 

The Company has also been approached by both existing and new business partners to explore data licensing and/or co-selling the Company’s Copilots and AI Agents. As a result, the Company is exploring working with several large language model companies to potentially license portions of the Company’s data and AI portfolio with the goal of exposing a larger universe of users to its data.

 

“The performance in the first quarter was a good start to the year and reflects initial progress following our strategic initiatives throughout 2023 to rationalize our cost structure, divest non-core assets, and tighten the focus of our product mix,” said Tim Hwang, Chairman, CEO, and Co-founder of FiscalNote. “The Company continues to solidify its leadership position in the global policy, risk mitigation, and market intelligence sector and, year to date, we have realized a large number of impactful operational and business successes, most notably our recent series of new product launches and updates. We are well positioned to further execute on our growth strategy, continue launching innovative AI products - including our recently-announced FiscalNote Global Intelligence Copilot - that deliver deep insights to our customers, and deliver on our profitability plans across the remainder of 2024 and beyond.”

 

 

 

 

 

 

 

 

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Financial Highlights(2)

Q1 2024 vs. Q1 2023

			Three Months Ended March 31,
($ in millions)			2024				2023			% Change
Total Revenues (formerly "GAAP Revenue")		$	32.1			$	31.5			2	%
Subscription Revenue as % of Total Revenues			~92	%			~90	%
Gross Profit		$	24.9			$	22.6			10	%
Gross Margin			77	%			72	%		500	bps
Adjusted Gross Profit		$	27.3			$	25.2			8	%
Adjusted Gross Margin			85	%			80	%		500	bps
Net Income (Loss)		$	50.6			$	(19.3)				*
Adjusted EBITDA		$	1.2			$	(7.0)				*
Adjusted EBITDA Margin			4	%			(22)	%
Cash and Cash Equivalents		$	43.6			$	46.7
bps - Basis Points
* - percentage change is greater than +/- 100%

 

First Quarter and Recent Operational Highlights

 

Commenting on highlights from the first quarter, FiscalNote Chief Financial Officer, Jon Slabaugh, said, “During the quarter, we completed an important transaction with the divestiture of Board.org, a non-core product offering that represented approximately 10% of our prior year total revenue. Total consideration for the transaction was up to $103.0 million and represented approximately a 7x revenue multiple based on 2023 annual recurring revenue (ARR). Acquired by FiscalNote in 2021 for $10.0 million in cash and $4.3 million in convertible securities ($14.3 million in total consideration), the divestiture by FiscalNote represents a 9.5x cash-on-cash (125% IRR) return for FiscalNote in less than three years. The transaction enabled us to enhance our capital structure by reducing senior debt by approximately $66.0 million while adding approximately $15.0 million to cash. It also is an indication of the substantial intrinsic value of our underlying assets.”

 

 

 

 

 

 

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First Quarter Financial Performance

 

Revenue(2)

		Three Months Ended March 31,
($ in millions)		2024				2023				% Change
Subscription revenue		$	29.6			$	28.5				4	%
Advisory, advertising, and other revenue			2.5				3.0				(19	)%
Total revenues		$	32.1			$	31.5				2	%

 

For Q1 2024, subscription revenue increased $1.1 million, or 4% versus the prior year, due principally to the full quarter impact of Dragonfly, which was acquired in January 2023 and did not have a full impact on the prior year period.

 

For Q1 2024, advisory, advertising, and other revenue decreased $0.6 million, or 19% versus prior year, due primarily to the discontinuation of certain non-strategic products and related services.

 

Key Performance Indicators(3)

		As of March 31,
($ in millions)		2024				2023				% Change
Run-Rate Revenue (RRR)		$	122			$	134				(9	)%
Pro Forma RRR*		$	122			$	121				1	%
Annual Recurring Revenue (ARR)		$	110			$	119				(8	)%
Pro Forma ARR*		$	110			$	107				3	%
Net Revenue Retention (NRR)			96	%			96	%

*Pro forma RRR and Pro forma ARR adjusts prior periods for the impact of the divestiture of Board.org.

 

For Q1 2024, Run-Rate Revenue declined $12 million, or 9%, versus prior year, principally due to the impact of the divestiture of Board.org. Excluding Board.org, Run-Rate Revenue increased approximately $1 million, or 1%, compared to Q1 2023.

 

For Q1 2024, ARR declined $9 million, or 8%, versus prior year, principally due to the impact of the divestiture of Board.org. Excluding Board.org, ARR increased approximately $3 million, or 3%, compared to Q1 2023.

 

For Q1 2024, NRR was 96%, level with the prior year.

 

Operating Expenses(2)

		Three Months Ended March 31,
($ in millions)		2024				2023				% Change
Cost of revenues		$	7.2			$	8.9				(19	)%
Research and development			3.5				5.1				(32	)%
Sales and marketing			9.4				12.3				(23	)%
Editorial			4.7				4.3				9	%
General and administrative			16.1				18.2				(12	)%
Amortization of intangible assets			2.7				2.8				(5	)%
Other#			0.0				7.2			NM
Total operating expenses		$	43.6			$	58.9				(26	)%
# - Q1 2023 includes goodwill impairment charge as well as transaction costs incurred related to our historical acquisitions
NM - Not meaningful

 

In Q1 2024, operating expenses decreased versus prior year, primarily as a result of cost control measures instituted throughout 2023 as well as the impact of sunset products, partially offset by a full quarter of Dragonfly expenses in Q1 2024 vs Q1 2023.

 

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Financial Forecast

 

The Company reaffirms prior financial forecasts for full year 2024 and issues financial forecasts for Q2 2024, in both instances reflecting management’s expectations based on the most recent information available, including factors such as the impact of the divestiture of Board.org and the discontinuation of certain non-strategic products. The Company expects 2024 to deliver its first full year of adjusted EBITDA profitability in the Company’s history.

 

Full Year 2024

 

($ in millions)	Current Range As of 05/09/2024		Action		Previous Range As of 03/12/2024
Total Revenues	$123 - $127		Unchanged		$123 - $127
Total Run-Rate Revenue (3)	$126 - $134		Unchanged		$126 - $134
Adjusted EBITDA (1) (4)	$7 - $9		Unchanged		$7 - $9

 

Q2 2024

 

	Current Range
($ in millions)	As of 05/09/2024
Total Revenues	Approximately $29
Adjusted EBITDA (1) (4)	Approximately $1

 

The Company expects to return to double digit growth rates in 2025 as the Company re-allocates sales and product resources to high-performing offerings and as it realizes the benefits of its recent product and organizational initiatives – including changes to sales coverage models for enhanced cross-sell, upsell and retention, further scaling of new products, and accelerated product development.

 

Strategic Review

 

As previously announced, following the formation by the Company’s Board of Directors (the Board) of a Special Committee (the Committee) in November 2023, and receipt of inbound interest, the Board and the Committee along with their advisors continue to review the Company’s ongoing plans and evaluate all strategic value-maximizing options available to the Company. There can be no assurance that the strategic review will result in any transaction or other outcome. The Company has not set a timetable for completion of the review and does not intend to disclose developments or provide updates on the progress or status of the review unless and/or until it deems further disclosure is appropriate or required. Centerview Partners LLC and Skadden, Arps, Slate, Meagher & Flom LLP continue to be retained by the Company as independent advisors to the Committee.

 

Conference Call, Presentation Supplement, and Webcast Information

 

Company management will host a conference call, with an accompanying presentation supplement, at 10:00 am ET today, Thursday, May 9, 2024, to discuss financial results.

 

LIVE

REPLAY

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Footnotes

 

About FiscalNote

 

FiscalNote (NYSE: NOTE) is a leader in policy and global intelligence. By uniquely combining data, technology, and insights, FiscalNote empowers customers to manage political and business risk. Since 2013, FiscalNote has pioneered technology that delivers critical insights and the tools to turn them into action. Home to CQ, FrontierView, Oxford Analytica, VoterVoice, and many other industry-leading brands, FiscalNote serves thousands of customers worldwide with global offices in North America, Europe, Asia, and Australia. To learn more about FiscalNote and its family of brands, visit FiscalNote.com and follow @FiscalNote.

 

Contacts:

Media

Nicholas Graham

FiscalNote

press@fiscalnote.com

Investor Relations

FiscalNote

IR@fiscalnote.com

 

Safe Harbor Statement

 

Certain statements in this press release may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally relate to future events or FiscalNote’s future financial or operating performance. For example, statements regarding FiscalNote’s financial outlook for future periods, expectations regarding profitability, capital resources and anticipated growth in the industry in which FiscalNote operates are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “pro forma,” “may,” “should,” “could,” “might,” “plan,” “possible,” “project,” “strive,” “budget,” “forecast,” “expect,” “intend,” “will,” “estimate,” “anticipate,” “believe,” “predict,” “potential” or “continue,” or the negatives of these terms or variations of them or similar terminology. Such forward-looking statements are subject to risks, uncertainties, and other important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements.

Factors that may impact such forward-looking statements include FiscalNote’s ability to effectively manage its growth; changes in FiscalNote’s strategy, future operations, financial position, estimated revenue and losses, forecasts, projected costs, prospects and plans; the terms of any proposal FiscalNote may receive for a go-private transaction; the impact of the previous announcement of the formation of the Special Committee and its strategic review on FiscalNote’s business and its ability to implement any transaction; FiscalNote’s future capital requirements; demand for FiscalNote’s services and the drivers of that demand; FiscalNote’s ability to provide highly useful, reliable, secure and innovative products and services to its customers; FiscalNote’s ability to attract new customers, retain existing customers, expand its products and service

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offerings with existing customers, expand into geographic markets or identify areas of higher growth; FiscalNote’s ability to successfully identify acquisition opportunities, make acquisitions on terms that are commercially satisfactory, successfully integrate potential acquired businesses and services, and subsequently grow acquired businesses; risks associated with international operations, including compliance complexity and costs, increased exposure to fluctuations in currency exchange rates, political, social and economic instability, and supply chain disruptions; FiscalNote’s ability to develop, enhance, and integrate its existing platforms, products, and services; FiscalNote’s estimated total addressable market and other industry and performance projections; FiscalNote's reliance on third-party systems and data, its ability to integrate such systems and data with its solutions and its potential inability to continue to support integration; potential technical disruptions, cyberattacks, security, privacy or data breaches or other technical or security incidents that affect FiscalNote’s networks or systems or those of its service providers; FiscalNote’s ability to obtain and maintain accurate, comprehensive, or reliable data to support its products and services; FiscalNote’s ability to introduce new features, integrations, capabilities, and enhancements to its products and services; FiscalNote’s ability to maintain and improve its methods and technologies, and anticipate new methods or technologies, for data collection, organization, and analysis to support its products and services; competition and competitive pressures in the markets in which FiscalNote operates, including larger well-funded companies shifting their existing business models to become more competitive with FiscalNote; FiscalNote’s ability to protect and maintain its brands; FiscalNote’s ability to comply with laws and regulations in connection with selling products and services to U.S. and foreign governments and other highly regulated industries; FiscalNote’s ability to retain or recruit key personnel; FiscalNote’s ability to effectively maintain and grow its research and development team and conduct research and development; FiscalNote’s ability to adapt its products and services for changes in laws and regulations or public perception, or changes in the enforcement of such laws, relating to artificial intelligence, machine learning, data privacy and government contracts; adverse general economic and market conditions reducing spending on our products and services; the outcome of any known and unknown litigation and regulatory proceedings; FiscalNote’s ability to successfully establish and maintain public company-quality internal control over financial reporting; and the ability to adequately protect FiscalNote’s intellectual property rights.

 

These and other important factors discussed in FiscalNote’s SEC filings, including its most recent reports on Forms 10-K and 10-Q, particularly the "Risk Factors" sections of those reports, could cause actual results to differ materially from those indicated by the forward-looking statements made in this press release. These forward-looking statements are based upon estimates and assumptions that, while considered reasonable by FiscalNote and its management, are inherently uncertain. Nothing in this press release should be regarded as a representation by any person that the forward-looking statements set forth herein will be achieved or that any of the contemplated results of such forward-looking statements will be achieved. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. FiscalNote undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

 

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FiscalNote Holdings, Inc.

Consolidated Statements of Operations

(Unaudited)

(in thousands, except shares and per share data)

 

		Three Months Ended March 31,
		2024				2023
Revenues:
Subscription		$	29,626			$	28,467
Advisory, advertising, and other			2,486				3,062
Total revenues			32,112				31,529
Operating expenses: (1)
Cost of revenues			7,244				8,937
Research and development			3,480				5,120
Sales and marketing			9,415				12,298
Editorial			4,660				4,265
General and administrative			16,076				18,221
Amortization of intangible assets			2,685				2,814
Impairment of goodwill			-				5,837
Transaction (gains) costs, net			(4	)			1,408
Total operating expenses			43,556				58,900
Operating loss			(11,444	)			(27,371	)
Gain on sale			(71,599	)			-
Interest expense, net			7,362				6,681
Change in fair value of financial instruments			527				(14,680	)
Other expense (income), net			241				(129	)
Net income (loss) before income taxes			52,025				(19,243	)
Provision from income taxes			1,426				30
Net income (loss)			50,599				(19,273	)
Other comprehensive income (loss)			5,591				(359	)
Total comprehensive income (loss)		$	56,190			$	(19,632	)
Earnings (Loss) per share attributable to common shareholders (Note 14):
Basic		$	0.39			$	(0.14	)
Diluted		$	0.37			$	(0.14	)
Weighted average shares used in computing earnings (loss) per share attributable to common shareholders:
Basic			130,712,032				133,082,639
Diluted			146,027,085				133,082,639
(1) Amounts include stock-based compensation expenses, as follows:

		Three Months Ended March 31,
		2024				2023
Cost of revenues		$	101			$	58
Research and development			310				390
Sales and marketing			426				360
Editorial			100				66
General and administrative			5,238				5,632

 

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FiscalNote Holdings, Inc.

Consolidated Balance Sheets

(Unaudited)

(in thousands, except shares, and par value)

 

		March 31, 2024				December 31, 2023
Assets
Current assets:
Cash and cash equivalents		$	36,464			$	16,451
Restricted cash			852				849
Short-term investments			7,134				7,134
Accounts receivable, net			14,381				16,931
Costs capitalized to obtain revenue contracts, net			3,156				3,326
Prepaid expenses			4,000				2,593
Other current assets			3,679				2,521
Total current assets			69,666				49,805
Property and equipment, net			5,859				6,141
Capitalized software costs, net			13,762				13,372
Noncurrent costs capitalized to obtain revenue contracts, net			3,790				4,257
Operating lease assets			18,070				17,782
Goodwill			164,334				187,703
Customer relationships, net			46,720				53,917
Database, net			18,274				18,838
Other intangible assets, net			16,786				18,113
Other non-current assets			499				633
Total assets		$	357,760			$	370,561
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of long-term debt		$	67			$	105
Accounts payable and accrued expenses			11,101				12,909
Deferred revenue, current portion			45,034				43,530
Customer deposits			839				3,032
Contingent liabilities from acquisitions, current portion			113				130
Operating lease liabilities, current portion			3,395				3,066
Other current liabilities			3,212				2,878
Total current liabilities			63,761				65,650
Long-term debt, net of current maturities			152,962				222,310
Deferred tax liabilities			2,062				2,178
Deferred revenue, net of current portion			389				875
Operating lease liabilities, net of current portion			25,845				26,162
Public and private warrant liabilities			3,840				4,761
Other non-current liabilities			2,805				5,166
Total liabilities			251,664				327,102
Commitment and contingencies (Note 17)
Stockholders' equity:
Class A Common stock ($0.0001 par value, 1,700,000,000 authorized, 122,749,497 and 121,679,829 issued and outstanding at March 31, 2024 and December 31, 2023, respectively)			11				11
Class B Common stock ($0.0001 par value, 9,000,000 authorized, 8,290,921 issued and outstanding at March 31, 2024 and December 31, 2023, respectively)			1				1
Additional paid-in capital			866,932				860,485
Accumulated other comprehensive income ( loss)			4,969				(622	)
Accumulated deficit			(765,817	)			(816,416	)
Total stockholders' equity			106,096				43,459
Total liabilities and stockholders' equity		$	357,760			$	370,561

 

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FiscalNote Holdings, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

		Three Months Ended March 31,
		2024				2023
Operating Activities:
Net income (loss)		$	50,599			$	(19,273	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation			304				336
Amortization of intangible assets and capitalized software development costs			5,113				5,411
Amortization of deferred costs to obtain revenue contracts			1,009				832
Gain on sale of business			(71,599	)			-
Impairment of goodwill			-				5,837
Non-cash operating lease expense			297				1,832
Stock-based compensation			6,175				6,506
Other non-cash expenses			-				190
Bad debt expense			29				156
Change in fair value of acquisition contingent consideration			(4	)			(156	)
Unrealized loss on securities			49				-
Change in fair value of financial instruments			527				(14,680	)
Deferred income taxes			(71	)			(218	)
Paid-in-kind interest, net			2,035				970
Non-cash interest expense			737				1,074
Changes in operating assets and liabilities:
Accounts receivable, net			1,320				(696	)
Prepaid expenses and other current assets			(1,924	)			619
Costs capitalized to obtain revenue contracts, net			(932	)			(1,126	)
Other non-current assets			148				27
Accounts payable and accrued expenses			460				(3,225	)
Deferred revenue			10,436				10,002
Customer deposits			(1,239	)			(1,923	)
Other current liabilities			318				(1,222	)
Contingent liabilities from acquisitions, net of current portion			(13	)			(39	)
Operating lease liabilities			(969	)			(4,052	)
Other non-current liabilities			(64	)			(8	)
Net cash provided by (used in) operating activities			2,741				(12,826	)
Investing Activities:
Capital expenditures			(1,692	)			(1,869	)
Cash proceeds from the sale of business, net			90,884				-
Cash paid for business acquisitions, net of cash acquired			-				(5,010	)
Net cash provided by (used in) investing activities			89,192				(6,879	)
Financing Activities:
Proceeds from long-term debt, net of issuance costs			801				6,000
Principal payments of long-term debt			(65,727	)			(27	)
Payment of deferred financing costs			(7,068	)			-
Proceeds from exercise of stock options and ESPP purchases			196				264
Net cash (used in) provided by financing activities			(71,798	)			6,237
Effects of exchange rates on cash			(119	)			(251	)
Net change in cash, cash equivalents, and restricted cash			20,016				(13,719	)
Cash, cash equivalents, and restricted cash, beginning of period			17,300				61,223
Cash, cash equivalents, and restricted cash, end of period		$	37,316			$	47,504
Supplemental Noncash Investing and Financing Activities:
Warrants issued in conjunction with long-term debt issuance		$	-			$	178
Amounts held in escrow related to the sale of Board.org		$	785			$	-
Property and equipment purchases included in accounts payable		$	124			$	121
Supplemental Cash Flow Activities:
Cash paid for interest		$	5,303			$	4,740
Cash paid for taxes		$	2			$	112

 

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Non-GAAP Financial Measures

In addition to financial measures prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), we use certain non-GAAP financial measures to clarify and enhance our understanding, and aid in the period-to-period comparison, of our performance. Where applicable, we provide reconciliations of these non-GAAP measures to the corresponding most closely related GAAP measure. Investors are encouraged to review the reconciliation of each of these non-GAAP financial measures to its most comparable GAAP financial measure. While we believe that these non-GAAP financial measures provide useful supplemental information, non-GAAP financial measures have limitations and should not be considered in isolation from, or as a substitute for, their most comparable GAAP measures. These non-GAAP financial measures are not prepared in accordance with GAAP, do not reflect a comprehensive system of accounting and may not be comparable to similarly titled measures of other companies due to potential differences in their financing and accounting methods, the book value of their assets, their capital structures, the method by which their assets were acquired and the manner in which they define non-GAAP measures.

Adjusted Gross Profit and Adjusted Gross Profit Margin

We define Adjusted Gross Profit as Total Revenue minus cost of revenues, before amortization of intangible assets that are included in costs of revenues. We define Adjusted Gross Profit Margin as Adjusted Gross Profit divided by Total Revenues.

We use Adjusted Gross Profit and Adjusted Gross Profit Margin to understand and evaluate our core operating performance and trends. We believe these metrics are useful measures to us and to our investors to assist in evaluating our core operating performance because they provide consistency and direct comparability with our past financial performance and between fiscal periods, as the metrics eliminate the non-cash effects of amortization of intangible assets that may fluctuate for reasons unrelated to overall operating performance.

Adjusted Gross Profit and Adjusted Gross Profit Margin have limitations as analytical tools, and you should not consider them in isolation, or as a substitute for analysis of our results as reported under GAAP. They should not be considered as replacements for gross profit and gross profit margin, as determined by GAAP, or as measures of our profitability. We compensate for these limitations by relying primarily on our GAAP results and using non-GAAP measures only for supplemental purposes. Adjusted Gross Profit and Adjusted Gross Profit Margin as presented herein are not necessarily comparable to similarly titled measures presented by other companies.

EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin

EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP financial measures. EBITDA represents earnings before interest expense, income taxes, depreciation and amortization. Adjusted EBITDA reflects further adjustments to EBITDA to exclude certain non-cash items and other items that management believes are not indicative of ongoing operations. We define Adjusted EBITDA Margin as Adjusted EBITDA divided by Total Revenues.

We disclose EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin herein because these non-GAAP measures are key measures used by management to evaluate our business, measure our operating performance and make strategic decisions. We believe that EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are useful for investors and others in understanding and evaluating our operating results in the same manner as management. EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are not financial measures calculated in accordance with GAAP and should not be considered as substitutes for net income (loss), net income (loss) before income taxes, or any other operating performance measure calculated in accordance with GAAP. Using these non-GAAP financial measures to analyze our business would have material limitations because the calculations are based on the subjective determination of management regarding the nature and classification of events and circumstances that investors may find significant. In addition, although other companies in our industry may report measures titled EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin or similar measures, such non-GAAP financial measures may be calculated differently from how we calculate non-GAAP financial measures, which reduces their comparability. Because of these limitations, you should consider EBITDA, Adjusted EBITDA, and

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Adjusted EBITDA Margin alongside other financial performance measures, including net income and our other financial results presented in accordance with GAAP.

Adjusted Gross Profit and Adjusted Gross Profit Margin

The following table presents our calculation of Adjusted Gross Profit and Adjusted Gross Profit Margin for the periods presented:

		Three Months Ended March 31,
(In thousands)		2024				2023
Total revenues		$	32,112			$	31,529
Costs of revenue			(7,244	)			(8,937	)
Amortization of intangible assets			2,428				2,597
Adjusted Gross Profit		$	27,296			$	25,189
Adjusted Gross Profit Margin			85	%			80	%

 

EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin

The following table presents our calculation of EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin for the periods presented:

		Three Months Ended March 31,
(In thousands)		2024				2023
Net loss		$	50,599			$	(19,273	)
Provision from income taxes			1,426				30
Depreciation and amortization			5,417				5,747
Interest expense, net			7,362				6,681
EBITDA			64,804				(6,815	)
Gain on disposal of Board.org (a)			(71,599	)			-
Stock-based compensation			6,175				6,506
Change in fair value of financial instruments (b)			527				(14,680	)
Other non-cash charges (c)			45				5,873
Acquisition and disposal related costs (d)			704				1,222
Employee severance costs (e)			107				369
Non-capitalizable debt raising costs			254				206
Business Combination with DSAC (f)			-				184
Loss contingency (g)			-				168
Costs incurred related to the Special Committee (h)			200				-
Adjusted EBITDA		$	1,217			$	(6,967	)
Adjusted EBITDA Margin			3.8	%			(22.0	)%

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Key Performance Indicators

We monitor the following key performance indicators to evaluate growth trends, prepare financial projections, make strategic decisions, and measure the effectiveness of our sales and marketing efforts. Our management team assesses our performance based on these key performance indicators because it believes they reflect the underlying trends and indicators of our business and serve as meaningful indicators of our continuous operational performance.

Annual Recurring Revenue (“ARR”)

Approximately 90% of our revenues are subscription based, which leads to high revenue predictability. Our ability to retain existing subscription customers is a key performance indicator that helps explain the evolution of our historical results and is a leading indicator of our revenues and cash flows for subsequent periods. We use ARR as a measure of our revenue trend and an indicator of our future revenue opportunity from existing recurring subscription customer contracts. We calculate ARR on a parent account level by annualizing the contracted subscription revenue, and our total ARR as of the end of a period is the aggregate thereof. ARR is not adjusted for the impact of any known or projected future customer cancellations, upgrades or downgrades, or price increases or decreases. The amount of actual revenue that we recognize over any 12-month period is likely to differ from ARR at the beginning of that period, sometimes significantly. This may occur due to timing of the revenue bookings during the period, cancellations, upgrades, or downgrades and pending renewals. ARR should be viewed independently of revenue as it is an operating metric and is not intended to be a replacement or forecast of revenue. Our calculation of ARR may differ from similarly titled metrics presented by other companies.

Run-Rate Revenue

Management also monitors Run-Rate Revenue, which we define as ARR plus non-subscription revenue earned during the last 12 months. We believe Run-Rate Revenue is an indicator of our total revenue growth, incorporating the non-subscription revenue that we believe is a meaningful contribution to our business as a whole. Although our non-subscription business is non-recurring, we regularly sell different advisory services to repeat customers. The amount of actual subscription and non-subscription revenue that we recognize over any 12-month period is likely to differ from Run-Rate Revenue at the beginning of that period, sometimes significantly.

Net Revenue Retention (“NRR”)

Our NRR, which we use to measure our success in retaining and growing recurring revenue from our existing customers, compares our recognized recurring revenue from a set of customers across comparable periods. We calculate our NRR for a given period as ARR at the end of the period minus ARR contracted from new clients for which there is no historical revenue booked during the period, divided by the beginning ARR for the period. For our federal government clients, we consider subdivisions of the same executive branch department or independent agency (for example, divisions of a single federal department or agency) to be a single customer for purposes of calculating our account-level NRR. For our commercial clients, we calculate NRR at a parent account level. Customers from acquisitions are not included in NRR until they have been part of our consolidated results for 12 months. Accordingly, the 2022 and 2023 Acquisitions are not included in our NRR for the three months ended March 31, 2023. Our calculation of NRR for any fiscal period includes the positive recurring revenue impacts of selling additional licenses and services to existing customers and the negative recognized recurring revenue impacts of contraction and attrition among this set of customers. Our NRR may fluctuate as a result of a number of factors, including the growing level of our revenue base, the level of penetration within our customer base, expansion of products and features, and our ability to retain our customers.

Source: FiscalNote

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Disclaimer Forward Looking Statements Certain statements herein may be considered forward-looking statements within the meaning of the federal securities laws. Forward-looking statements generally relate to future events or FiscalNote’s future financial or operating performance. Statements regarding FiscalNote’s financial outlook for future periods, expectations regarding profitability, capital resources and anticipated growth in the industry in which FiscalNote operates are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “pro forma,” “may,” “should,” “could,” “might,” “plan,” “possible,” “project,” “strive,” “budget,” “forecast,” “expect,” “intend,” “will,” “estimate,” “anticipate,” “believe,” “predict,” “potential” or “continue,” or the negatives of these terms or variations of them or similar terminology. Such forward-looking statements are subject to risks, uncertainties, and other important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Factors that may impact such forward-looking statements include FiscalNote’s ability to effectively manage its growth; changes in FiscalNote’s strategy, future operations, financial position, estimated revenue and losses, forecasts, projected costs, prospects and plans; the terms of any proposal FiscalNote may receive for a go-private transaction; the impact of the previous announcement of the formation of the Special Committee and its strategic review on FiscalNote’s business and its ability to implement any transaction; FiscalNote’s future capital requirements; demand for FiscalNote’s services and the drivers of that demand; FiscalNote’s ability to attract and retain customers, and expand its offerings with existing customers; FiscalNote’s ability to successfully execute its acquisition strategy; FiscalNote’s ability to develop, enhance, and integrate its existing platforms, products, and services; risks associated with international operations; potential technical disruptions, cyberattacks, security, privacy or data breaches or other technical or security incidents; competition and competitive pressures; FiscalNote’s ability to retain or recruit key personnel; the outcome of any known and unknown litigation and regulatory proceedings; and FiscalNote’s ability to adequately protect its intellectual property rights. These and other factors discussed in FiscalNote’s SEC filings, including its most recent reports on Forms 10-K and 10-Q, particularly the "Risk Factors" sections of those reports, could cause actual results to differ materially from those indicated by the forward-looking statements made herein. These forward-looking statements are based upon estimates and assumptions that, while considered reasonable by FiscalNote and its management, are inherently uncertain. Nothing herein should be regarded as a representation by any person that the forward-looking statements set forth herein will occur or that any of the contemplated results of such forward-looking statements will be achieved. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. FiscalNote undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. Trademarks FiscalNote owns or has rights to various trademarks, service marks and trade names it uses in connection with the operation of its businesses. This presentation may also contain trademarks, service marks, trade names and copyrights of third parties, which are the property of their respective owners. The use or display of third parties’ trademarks, service marks, trade names or products in this presentation is not intended to, and does not imply, a relationship with FiscalNote or an endorsement or sponsorship by or of FiscalNote. Solely for convenience, the trademarks, service marks, trade names and copyrights referred to in this presentation may appear without the TM, SM, * or © symbols, but such references are not intended to indicate, in any way, that FiscalNote will not assert, to the fullest extent under applicable law, its rights or the right of the applicable licensor to these trademarks, service marks, trade names and copyrights. Use of Data This presentation contains information concerning FiscalNote’s products, services and industry, including market size and growth rates of the markets in which FiscalNote participates, that are based on industry surveys and publications or other publicly available information, other third-party survey data and research reports. This information involves many assumptions and limitations; therefore, there can be no guarantee as to the accuracy or reliability of such assumptions and you are cautioned not to give undue weight to this information. Further, no representation is made as to the reasonableness of the assumptions made within or the accuracy or completeness of any projections or modeling or any other information contained herein. Any data on past performance or modeling contained herein is not an indication as to future performance. This modeling data is subject to change. FiscalNote has not independently verified this third-party information. Similarly, other third-party survey data and research reports commissioned by FiscalNote, while believed by FiscalNote to be reliable, are based on limited sample sizes and have not been independently verified by FiscalNote. In addition, projections, assumptions, estimates, goals, targets, plans and trends of the future performance of the industry in which FiscalNote operates, and its future performance, are necessarily subject to uncertainty and risk due to a variety of factors, including those described above. These and other factors could cause results to differ materially from those expressed in the estimates made by independent parties and by FiscalNote. FiscalNote assumes no obligation to update such information.

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Q1 2024 Financials

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Q1 2024 Financial Summary (1) Non-GAAP measure. Please see "Non-GAAP Financial Measures" for definitions and important disclosures regarding these financial measures, including reconciliations to the most directly comparable GAAP measure. (2) As of March 31, 2024 and inclusive of short-term investments. $32.1M(+2% YoY) TotalRevenues $1.2M(4% adjusted EBITDA margin) AdjustedEBITDA1 $27.3M(85% adjusted gross margin) AdjustedGross Profit1 $24.9M (77% gross margin) Gross Profit Cash2 $43.6M $50.6M Net Income FINANCIAL HIGHLIGHTS

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Q1 2024 Financial Summary (1) “Run-Rate Revenue,” “Annual Recurring Revenue,” and “Net Retention Revenue” are key performance indicators (KPIs). See “Key Performance Indicators” for the definitions and important disclosures related to these measures. $122M Run-RateRevenue(RRR) $110M Annual Recurring Revenue(ARR) Net Revenue Retention 96% KEY PERFORMANCE INDICATORS1

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Forecast (1) Run-Rate Revenue is a key performance indicators (KPI). See “Key Performance Indicators” for the definitions and important disclosures related to these measures (2) Non-GAAP measure. Please see "Non-GAAP Financial Measures" for definitions and important disclosures regarding these financial measures. (3) Because of the variability of items impacting net income and unpredictability of future events, management is unable to reconcile without unreasonable effort the Company's forecasted adjusted EBITDA to a comparable GAAP measure. Metric Forecast as of May 9, 2024 Vs. Prior Guidance Provided on March 12, 2024 Total Revenue $123M to $127M UNCHANGED Run-Rate Revenue1 $126M to $134M UNCHANGED Adjusted EBITDA2,3 $7M to $9M UNCHANGED Full Year 2024 Metric Initial Range as of May 9, 2024 Total Revenue ~ $29M Adjusted EBITDA2,3 ~ $1M Q2 2024

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AI Product Strategy Building the most powerful legal, regulatory, and geopolitical AI assistant and eventually the world’s most powerful AI lawyer

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Accelerating Our AI Products to Drive Growth FN AI and LLM Technology Platform Copilot Creator FiscalNoteGPT Proprietary Aggregation of Content and Data Sets StressLens Global Intelligence Copilot Legislative Copilot(Beta) Future Copilots and Agents Data and AI Agent Licensing  Developed proprietary technology and deep expertise in aggregating and creating valuable global content and data sets Created Reasoning Platform to facilitate creation of AI Agents adapted for legal, regulatory, and geopolitical Launched AI Agents and Copilots blending AI with authoritative information    Exploring licensing opportunities to broaden impact Partnerships with OpenAI, Microsoft, Google International, federal, state, and local legislation/regulations across 80 countries, 80,000+ cities, all 50 states, every major federal regulatory agency; deep profiles of tens of thousands of policymakers, millions of legislative and regulatory votes, geopolitical and risk information from around the world

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Constellation of Skills Policy Impact Assessment Geopolitical Risk Assessment Communication Drafting Document Q&A Regulatory Analysis Legislative Analysis Contract Review & Analysis Compliance Monitoring Issue & Trend Reporting Sample present and future AI skills powering FiscalNote’s products to perform domain-specific workflows using generative AI Building a powerful legal, regulatory, and geopolitical AI assistant, powered by Generative AI

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Why FiscalNote Can Win AI and Workflow Expertise: FiscalNote is already the leading provider of AI-powered software for people to understand policy, legislation, and regulations. We have been investing in AI since 2013 with deep embedded workflows and already announced partnerships in 2023 with OpenAI, Microsoft, and Google with FiscalNote’s world class AI team. Decade of Data Accumulation and Content Creation: Developed proprietary technology and deep expertise in aggregating global policy, regulatory, geopolitical, economic and related data sets. Acquired, created and continue to add to our library of proprietary, high quality, and authoritative data for legal, regulatory and global intelligence. Deep Market Insight and Distribution: Leveraging FiscalNote distribution of Fortune 500s, governments, and NGO’s to bring new customer-driven AI capabilities. Over a decade of building a unique global dataset and AI capabilities

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FiscalNote’s AI Master Plan Build the Data Foundation: Aggregate, clean, and structure a massive repository of legislative, regulatory, and geopolitical information Develop and Launch AI Solutions: Create AI Copilots and Agents that integrate this data to drive customer value and enhance decision-making for existing customers. Develop and Launch More AI Solutions: Expand AI Copilots and Agents to new markets and sectors. License and Co-Sell AI Technology: Partner with other industry players to extend the reach and functionality of our AI solutions. Building the future of AI solutions for law and strategic risk

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Key Takeaways FiscalNote already a leading provider of AI-powered sector-specific, information, and analytics for the legal, regulatory, and policy industry Invested the last 10 years to create a deep reservoir of technical expertise, world-class team, proprietary data and analytical tools Launched FiscalNoteGPT and Co-Pilot Creator to rapidly accelerate creation of AI Agents and Co-Pilots without incremental R&D expenses Exploring opportunity to license data to LLMs and white label AI Co-Pilots to other verticals Accelerating our AI offerings to broad distribution of thousands of customers / extensive sales and customer support in N. America, Europe, and APAC to accelerate revenue growth and improve retention 1 2 3 4 5 Building the most powerful legal, regulatory, and geopolitical AI assistant and eventually the world’s most powerful AI lawyer

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APPENDIX

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In addition to financial measures prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), we use certain non-GAAP financial measures to clarify and enhance our understanding, and aid in the period-to-period comparison, of our performance. Where applicable, we provide reconciliations of these non-GAAP measures to the corresponding most closely related GAAP measure. Investors are encouraged to review the reconciliation of each of these non-GAAP financial measures to its most comparable GAAP financial measure. While we believe that these non-GAAP financial measures provide useful supplemental information, non-GAAP financial measures have limitations and should not be considered in isolation from, or as a substitute for, their most comparable GAAP measures. These non-GAAP financial measures are not prepared in accordance with GAAP, do not reflect a comprehensive system of accounting and may not be comparable to similarly titled measures of other companies due to potential differences in their financing and accounting methods, the book value of their assets, their capital structures, the method by which their assets were acquired and the manner in which they define non-GAAP measures. Adjusted Gross Profit and Adjusted Gross Profit Margin We define Adjusted Gross Profit as Total Revenue minus cost of revenues, before amortization of intangible assets that are included in costs of revenues. We define Adjusted Gross Profit Margin as Adjusted Gross Profit divided by Total Revenues. We use Adjusted Gross Profit and Adjusted Gross Profit Margin to understand and evaluate our core operating performance and trends. We believe these metrics are useful measures to us and to our investors to assist in evaluating our core operating performance because they provide consistency and direct comparability with our past financial performance and between fiscal periods, as the metrics eliminate the non-cash effects of amortization of intangible assets and deferred revenue, which are non-cash impacts that may fluctuate for reasons unrelated to overall operating performance. Adjusted Gross Profit and Adjusted Gross Profit Margin have limitations as analytical tools, and you should not consider them in isolation, or as a substitute for analysis of our results as reported under GAAP. They should not be considered as replacements for gross profit and gross profit margin, as determined by GAAP, or as measures of our profitability. We compensate for these limitations by relying primarily on our GAAP results and using non-GAAP measures only for supplemental purposes. Adjusted Gross Profit and Adjusted Gross Profit Margin as presented herein are not necessarily comparable to similarly titled measures presented by other companies. EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP financial measures. EBITDA represents earnings before interest expense, income taxes, depreciation and amortization. Adjusted EBITDA reflects further adjustments to EBITDA to exclude certain non-cash items and other items that management believes are not indicative of ongoing operations. We define Adjusted EBITDA Margin as Adjusted EBITDA divided by Total Revenue. We disclose EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin herein because these non-GAAP measures are key measures used by management to evaluate our business, measure our operating performance and make strategic decisions. We believe that EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are useful for investors and others in understanding and evaluating our operating results in the same manner as management. EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are not financial measures calculated in accordance with GAAP and should not be considered as substitutes for net loss, net loss before income taxes, or any other operating performance measure calculated in accordance with GAAP. Using these non-GAAP financial measures to analyze our business would have material limitations because the calculations are based on the subjective determination of management regarding the nature and classification of events and circumstances that investors may find significant. In addition, although other companies in our industry may report measures titled EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin or similar measures, such non-GAAP financial measures may be calculated differently from how we calculate non-GAAP financial measures, which reduces their comparability. Because of these limitations, you should consider EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin alongside other financial performance measures, including net income and our other financial results presented in accordance with GAAP. Non-GAAP Financial Measures

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Reconciliation Table - Adjusted Gross Profit and Adjusted Gross Profit Margin Three Months Ended March 31, ($ in thousands) 2024 2023 Total Revenue $ 32,112 $ 31,529 Costs of revenue (7,244) (8,937) Amortization of intangible assets 2,428 2,597 Adjusted Gross Profit $ 27,296 $ 25,189 Adjusted Gross Margin 85% 80%

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Reconciliation Table - EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin Three Months Ended March 31, ($ in thousands) 2024 2023 Net loss $ 50,599 $ (19,273) Income tax provision / (benefit) 1,426 30 Depreciation and amortization 5,417 5,747 Interest expense, net 7,362 6,681 EBITDA 64,804 (6,815) Gain on sale (a) (71,599) - Stock-based compensation 6,175 6,506 Change in fair value of financial instruments (b) 527 (14,680) Other non-cash charges (gains) (c) 45 5,873 Acquisition and disposal related costs (d) 704 1,222 Employee severance costs (e) 107 369 Non-capitalizable debt raising costs 254 206 Business Combination with DSAC (f) - 184 Loss contingency (g) - 168 Costs incurred related to the Special Committee (h) 200 - Adjusted EBITDA $ 1,217 $ (6,967) Adjusted EBITDA Margin 4% (22)% Reflects the gain on disposal from the sale of Board.org on March 11, 2024. Reflects the non-cash impact from the mark to market adjustments on our financial instruments. Reflects the non-cash impact of the following: charge of $49 in the first quarter of 2024 related to the unrealized loss on investments; gain of $4 in the first quarter of 2024 from the change in fair value related to the contingent consideration and contingent compensation related to the 2021, 2022, and 2023 Acquisitions impairment of goodwill of $5,837 in the first quarter of 2023, loss from equity method investment of $34 in the first quarter of 2023; and charge of $2 in the first quarter of 2023 from the change in fair value related to the contingent consideration and contingent compensation related to the 2021, 2022, and 2023 Acquisitions. In 2024 reflects the costs incurred related to the sale of Board.org, principally consisting of accounting, tax, and legal fees. In 2023 reflects the costs incurred to identify, consider, and complete business combination transactions consisting of advisory, legal, and other professional and consulting costs. Severance costs associated with workforce changes related to business realignment actions. Includes non-capitalizable transaction costs incurred within one year of the Business Combination with DSAC. Reflects accounting and legal costs incurred associated with the settlement with GPO FN Noteholder LLC totaling $168 in the first quarter of 2023. Reflects costs incurred related to the Special Committee..

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Glossary Agents An AI agent refers to a system or software that performs automated tasks, often with some degree of autonomy, on behalf of a user or another program. It is designed to make inferences and decisions based on its programming and the data it receives, often having the ability to learn and improve over time. AI Artificial intelligence (AI) refers to the simulation of human intelligence in machines that are programmed to think like humans and mimic their actions. ARR Annual Recurring Revenue (ARR) is the value of the contracted recurring revenue components of term subscriptions normalized to a one-year period. NRR Net Revenue Retention (“NRR”) is calculated as ARR at the end of the period minus ARR contracted from new clients for which there is no historical revenue booked during the period, divided by the beginning ARR for the period. We calculate NRR at a parent account level. Customers from acquisitions are not included in NRR until they have been part of our consolidated results for 12 months. LLM A Large Language Model (LLM) is a type of deep learning model used in natural language processing (NLP) tasks. It typically consists of millions or even billions of parameters and is trained on massive text corpora to understand and generate human-like text. LLMs use techniques like self-attention mechanisms and transformer architectures to process and generate text data. ML Machine learning (ML) is a branch of artificial intelligence and computer science which focuses on the use of data and algorithms to imitate the way that humans learn, gradually improving its accuracy. Run-rate revenue ARR (as defined above) plus non-subscription revenue earned during the last twelve months.

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Contact ir@fiscalnote.com

FiscalNote, Inc. (NYSE: NOTE)

First Quarter 2024 Financial Results Conference Call

Pre-Recorded Prepared Comments

 

 

Speaker 1: Bob Burrows, Founder, Western Avenue Advisers LLC
(Investor Relations Consultant to the Company)

 

Good morning.

 

My name is Bob Burrows. I am with Western Avenue Advisers LLC, which was hired in April as an investor relations consultant to the Company following Sara Buda’s recent departure. I look forward to speaking to, and being a resource for, the Company’s investor stakeholders in the days, weeks and months ahead.

 

Thank you for joining the call today as we discuss FiscalNote’s first quarter 2024 financial results.

 

With me on today’s call with prepared comments are: Tim Hwang, Chairman, CEO and Co-Founder; and Jon Slabaugh, CFO and Chief Investment Officer. Other members of the senior management team will be available during the Q&A session that will follow these prepared comments.

 

Please note, a slide deck specific to the first quarter 2024 results and intended as a supplement to the earnings release as well as the forthcoming prepared comments from management, is available on the Company website.

 

In terms of important housekeeping, it is important to mention the following. During this call, we may make certain statements related to our business that are forward-looking statements under federal securities laws. These statements are not guarantees of future performance but, rather, are subject to a variety of risks and uncertainties. Our actual results could differ materially from expectations reflected in any forward-looking statements. For a discussion of the material risks and important factors that could affect our actual results as well as the risks and other important factors discussed in today's earnings release, please refer to our SEC filings which are available either on our Company website or the Securities and Exchange Commission’s EDGAR system.

 

Additionally, non-GAAP financial measures will be discussed on this conference call. Please refer to the tables in our earnings release or the accompanying slide deck for this call, both of which are available on the Investor Relations portion of our website, for a reconciliation of these measures to their most directly comparable GAAP financial measure.

 

Finally, we use key performance indicators or KPIs in evaluating the performance of our business. These include: run-rate revenue or RRR, annual recurring revenue or ARR, and net retention revenue. Again, please refer to the earnings release or the accompanying slide deck for this call for definitions of these important metrics.

 

With that, I'd like to turn the call over to FiscalNote's Chairman, CEO and Co-Founder, Tim Hwang.

 

Tim?

 

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Speaker 2: Tim Hwang, Chairman, CEO and Co-Founder, FiscalNote, Inc.

 

 

 

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Thank you, Bob, for that introduction and thank you all for joining us this morning. It’s great to be with you today to discuss our first quarter 2024 results and provide an update on the state of our overall business. We will also offer some perspective on our strengthened balance sheet position and profitable growth with the recent divestiture of a non-core business as well as elaborate on our product strategy and our commitment to driving strong return on invested capital. I always look forward to these opportunities to connect with our shareholders and share with you the exciting developments at FiscalNote.

 

First, let me remind you of some of the core fundamentals of FiscalNote:

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With that as a backdrop, let me turn to some of the exciting developments that are happening at FiscalNote.

 

We kicked off 2024 with a solid start, delivering total revenues of $32 million, which was slightly above our previously provided guidance, and Adjusted EBITDA of just over $1 million, marking an important improvement in profitability versus the prior year and in line with previous guidance. This also marks our third straight quarter of Adjusted EBITDA profitability as a company.

 

These results reflect the hard work and dedication of the entire FiscalNote team as we continue to execute on our mission to deliver critical insights to the world’s most important decision makers. Whether it’s a Fortune 100 company navigating complex regulatory landscapes or a government agency seeking to understand the impact of policy changes, FiscalNote is there, providing the data, tools and expertise they need to make informed decisions.

 

As we entered this year, we did so as a leaner, more focused organization with a relentless commitment to leveraging our decade-long investment in Artificial Intelligence. We have launched new products and are optimizing our go-to market approaches to maximize the impact of our AI technologies married with our product strategy. This is providing enormous benefit to our customers through enhanced access to our sizable, unique and curated datasets. And while the rest of the industry is just now catching on to the power of AI, it’s been at the core of what we do at FiscalNote since our founding. To our benefit, we also believe the current generation of AI tools will help us unlock faster, easier and more scalable access to our vast collection of unique data assets.

 

Our proprietary AI capabilities - built on a foundation of vast high quality and trusted data sets and deep domain expertise - continues to strengthen and amplify our leadership position and drive unparalleled value for our customers. From automating the analysis of complex documents and data sets – from our foundation in legal and regulatory, to our expansion into macro and microeconomic data, geopolitical information, and operational security, to predicting the impact of policy changes and identifying unmaterialized risks in global finance, security, and supply chains – our AI is transforming the way organizations navigate an increasingly uncertain and highly complex world. We believe FiscalNote's strategy of investing in proprietary content and deep AI workflows will ultimately become the dominant way that customers will come to navigate legislative, regulatory, and political risk in the future. In short, we believe that we are in the right place at the right time.

 

In the first quarter, we made significant progress on several fronts. Most notably, we successfully completed the divestiture of Board.org, a strategic move that enabled us to reduce our debt by $65 million and strengthen our cash position by approximately $15 million– two outcomes that positively impacted our balance sheet. This transaction not only enhances our financial flexibility but also allows us to focus our resources on our core markets and on offerings where we see the greatest potential for long-term growth and shareholder value creation.

 

This divestiture is also a reflection of FiscalNote’s focus on strong and expanding product-level margins. As we gain revenue scale against our fixed operating costs, we anticipate realizing substantial incremental compounded growth in Adjusted EBITDA.

 

Having achieved Adjusted EBITDA profitability in 2023, we now turn to driving sustained growth in the business. I will elaborate on this in two parts. The first is in talking in depth about our AI and product strategy and the second is discussing our operational improvements which are driving profitable growth.

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Our FiscalNote team has done an excellent job, particularly in new green shoot areas of growth, including our European policy business and our security risk businesses; and we expect double-digit growth from both. As these growth areas of our business continue to scale and become a larger proportion of our business, we expect their impact to start pushing up our overall growth rates.

 

So, let’s spend a few moments talking about AI. Understanding our AI strategy is critical to understanding where we are going and where some of our growth will come from. I will first talk about where we are and then I will focus on where we are going with respect to our product strategy and our investments in AI. As recognized by OpenAI, Google, and Microsoft through our AI partnerships with each of these industry leaders, we are now focused on ensuring that we can surface our AI strategy to as many clients as possible with the goal of driving growth in the future. Our trusted content and information, married with deep subject matter expertise, a leading AI organization, and access to thousands of existing customers spanning corporate and government agencies enable FiscalNote to be at the forefront of generative AI. This represents a compelling opportunity to surface our product and data capabilities to more users and through even more use cases.

 

With the goal of providing a deeper dive into our AI investments, I’d like to outline three stages of development that have allowed us to embark upon our journey into the current generation of AI. Some of these stages are a bit technical, but I believe they are important to outline in order to understand the foundation we have created and what it will enable.

 

For simplicity, I am going to classify our past 10 years as Stage 1. FiscalNote has spent the past decade aggregating, cleansing, and building a massive repository of legislative, regulatory, and geopolitical information from over 80 different countries. We have spent a considerable amount of resources in developing and maintaining proprietary technology and deep expertise in building a market leadership position in these information fields. We have leveraged a range of technologies including data ingestion, ETL pipelines, pre-processing, metadata tagging, taxonomy creation, machine translation, data schema creation, etc. and we have pointed and geared these technologies towards our industry vertical. We have built a powerful data ingestion platform. We have pioneered a new category. And this market leading position has enabled us to service thousands of customers from Fortune 500 companies to government agencies. Our products analyze political and policy trends and provide us with a unique and unparalleled view into understanding the most pressing regulatory, legal and policy challenges that our clients face every single day. The information services market has been making investments in AI at this stage for years, but now with generative AI we will also see substantial advancements in the use technologies such as AI-assisted coding to accelerate the acquisition of new information sets and consequently an acceleration in the addition of new product lines.

 

Moving to Stage 2, In August of 2023, we announced the creation of FiscalNoteGPT, the first proprietary platform incorporating generative AI and large language model capabilities customized for legislative, regulatory, and policy workflows. FiscalNoteGPT takes public and proprietary legal, regulatory, and policy data, processes it using some of the most powerful large language model and AI technologies and applies FiscalNote’s long standing expertise in AI and data collection, normalizing it in order to provide users with a reliable, trusted, and secure product experience customized to meet the specific needs of the legal, policy, and regulatory domain.

 

The initial capabilities that FiscalNoteGPT was built to enable include assisting customers by identifying pressing policy and regulatory concerns, generating new insights and recommendations, summarizing timely and relevant issues, and finding pertinent answers and information from FiscalNote’s proprietary databases, consisting of thousands of trusted internal and external sources, which form the basis of FiscalNote’s award-winning, incisive, and actionable content.

 

Launching this product in 2023 was an important milestone and it has set the stage for our next set of product releases. Critical for our clients is the need for domain-specific AI systems that are based on known and accurate data sources. Also critical for our clients is the need for concise responses that do

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not include hallucinations induced by models trained on data assets that could provide misleading or incorrect responses. Despite the many major advances in AI and the use of LLMs in the technology industry, further domain-specific systems are needed to advance the expert use case that our clients require to perform their day-to-day legal and regulatory analysis. FiscalNote has developed a domain-specific approach in building our FiscalNoteGPT product and we consequently address the unique complexity that exists in the legal and regulatory world and believes that, as we further develop FiscalNoteGPT, it will become a mission critical service for customers across the legal, policy and regulatory industry.

In Stage 3, FiscalNote in the first quarter of this year successfully completed the creation of a Copilot and Reasoning Platform that leverages the data from Stage 1 and the verticalized LLM in Stage 2 to build extensible and repeatable AI Agents and Copilots. As you may know from following other AI industry developments, the ability to deploy agent technology in combination with large language models is fueling significant improvements, especially where deep domain expertise is required.

 

As such, our new platform enables us to do two things. First, our product teams can rapidly develop AI agents and AI-driven chat interfaces capable of marrying our AI technology, including FiscalNoteGPT, with FiscalNote's authoritative content and insights to bring significant productivity benefits for the industry. In other words, we created an AI Copilot and Agent Creator. This Copilot Creator allows our developers to create AI Agents and enables us to leverage our content and information and language models to accelerate our ability to bring Generative AI capabilities to our portfolio and markets without the added cost of rebuilding our core infrastructure every time we want to release a new product or address a new AI Agent or CoPilot use case. We have consequently updated our product roadmap to accelerate the launch of these new AI Copilot products, leveraging various parts of our AI Copilot Creator that can launch new products on substantially the same code base. In other words, new AI Copilots and AI Agents will not be contingent on a massive investment in R&D and we believe this will drive a substantial increase in our ability to launch dozens of domain specific AI Copilots.

 

The second thing that our Copilot Creator enables is that because the Copilot Creator relies on authoritative information, we are also able to control substantially for hallucinations and other problems with the generative AI space that cannot be obtained from off-the-shelf AI models such as GPT-4, Anthropic, Mistral, and others. In effect, we’ve created a reasoning engine in the legislative and regulatory categories. Our methodology and reasoning engine allow for fact-checking of information and limits the exposure of proprietary company data into third party large language models, when we leverage them in limited cases, enabling deeper trust of generative AI in our space. Unlike other platforms in the industry that leverage other people's data and other people's AI models, FiscalNote has built its own engine for collecting information and its own AI models adapted for the legal, legislative, and regulatory professions. FiscalNote is consequently best positioned to provide AI leadership in the legislative, regulatory, and policy fields. Given that we have been in the market since 2013 with our products, given our comprehensive global client base, and given that we made the conscious decision to develop deep expertise in data aggregation, AI modeling, and key areas like summarization and machine translation, we believe that we are in the right place and at the right time to capture the upside that sits in front of us.

 

Today and going forward, FiscalNote will leverage the data from Stage 1, the AI models from Stage 2, and the Copilot and Reasoning Platform as a Service from Stage 3 to begin launching a series of AI Copilots and Agents that collectively will build a powerful legal, regulatory, and geopolitical AI assistant, and eventually the world’s most powerful AI lawyer. Similarly, we will do the same to support adjacent personas across the span of strategic risk and opportunity. The goal here is to capitalize on our decades of data aggregation and deep domain knowledge and launch dozens of these new point solution AI Copilots in and around the legal, regulatory and strategic risk industries and thereby radically transform the work and productivity of our customers. FiscalNote’s new AI Copilots will be revolutionary new AI agents fine-tuned for regulatory and risk management professionals to facilitate their day-to-day work on key tasks related to legislation, regulatory compliance, advocacy, constituent communications, and global risk. With this, we are launching what we see as an incredibly powerful Generative AI platform that can

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create and rapidly deploy a series of Copilots that can expertly perform time consuming domain-specific tasks, free up substantial amounts of time for our customers, and provide unique and valuable insights that were not possible before. These AI agents are not static and, importantly, will rapidly improve over time as our technology continues to develop and as we deploy our AI-based products and services to our extensive client base.

 

We launched our first AI Agent, StressLens, with the real-time ability to quantify the behavioral impact of leading decision makers and influencers across the financial, regulatory, and government domains. StressLens includes an innovative AI agent capable of detecting changes in tone, cadence, and physical movements, deciphering the intricate language of human emotions and the intentions with unparalleled accuracy and showcases a groundbreaking leap in technology that will revolutionize the way humans interact with machines. StressLens’ leading AI technology can now help us understand whether an executive on an earnings call is uncomfortable with their numbers, whether a policymaker is nervous, or whether there is a heightened level of discomfort or disagreement on a specific topic among a group conversation. Whether in business negotiations or public speaking engagements, StressLens serves as a trusted ally, providing real-time insights into the underlying emotions driving human interactions. As the world marches towards a future where human-AI collaboration becomes ubiquitous, StressLens stands at the forefront, spearheading a paradigm shift in how we perceive and interact with technology. FiscalNote has filed a patent on this technology and has also begun exploring making the technology available beyond the legislative, regulatory, and risk spaces to expand the use of StressLens in other AI markets where detecting human emotion is important such as Public Relations and Media Training, witness preparation for litigation, etc.

 

The second AI Agent, our global intelligence AI Copilot, was launched last week. The Global Intelligence AI-powered assistant was designed to help customers assess the shifting global landscape, manage emerging developments, and mitigate risk involved with the world’s most pressing geopolitical, macroeconomic, security, and regulatory challenges. Providing macroeconomic and country risk analysis, the Global Intelligence Copilot spans expert content across our geopolitical, macroeconomic, and security and risk portfolio — featuring Oxford Analytica, FrontierView, and Dragonfly — and enables FiscalNote users to ask questions related to a wide-range of issues, such as: geopolitical and market analysis, forecasts on inflation and other key macroeconomic indicators, travel risk and advisory, ongoing military conflicts, emerging risks by country, and views on the policy impacts of a national election. We’ve begun to turn on this AI capability for our existing customers who are purchasing our geopolitical and macroeconomic intelligence products with an increasing percentage of our users leveraging our AI capabilities each passing week. We expect that these new capabilities will not only drive improved usage, but also increased customer retention and growth in those products as well.

 

Using the data from Stage 1, the AI models from Stage 2, the AI Copilot Creator from Stage 3, we are rapidly bringing to market several AI Copilots with various skills. Generative AI is creating a substantial step change in opportunity for our customers to automate large portions of their workflows and drive substantial efficiency. Our Copilot vision through 2024 and into 2025 and beyond encompasses skills such as the ability to summarize changing legislation regulations from multiple different markets, conduct analysis of changing laws and regulations, create research memos, search existing databases of information, review documents for compliance and risk analysis, and various skills that we plan to bring to market over the next several quarters. Developing these skills from negotiating, market analysis, legislative and regulatory drafting and compliance, drafting memos, etcetera will collectively enable FiscalNote to build the most powerful legal, regulatory, and geopolitical AI assistant and eventually the world’s most powerful AI lawyer, and, similarly, will do the same to support adjacent personas across the span of strategic risk and opportunity.

 

We are already in market with the first of these solutions and expect to see accelerated development combining our proprietary data and information with our AI investments to bring these capabilities to our customers faster. From a go-to-market perspective, we are leveraging our substantial customer base of thousands of customers to drive Copilot adoption overall and drive a deeper level of workflow integration

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with our customers. To make our Copilots more accessible and broaden the lower end of our market reach we are also introducing a product-led-growth approach designed to engage individual users regardless of whether or not they are with a small business or inside of a large enterprise. Our overall goal is to accelerate getting our AI technologies into the hands of our existing and new customers while expanding the use cases for which our products are used. By way of example, there are almost 500,000 elected officials in the United States from the President to the local city council member and they all need to understand pending legislation and regulations and could consequently benefit from the use of FiscalNote AI in their day-to-day jobs. That segment alone is potentially a $1billion dollar a year recurring revenue opportunity. Most importantly, the early response for our recently launched AI products has been extremely positive and we continue to see significant potential to expand these offerings in the coming quarters.

 

In short, we are developing and will be accelerating the use of AI Copilots, leveraging the thousands of existing customers we have including government clients such as the United States Congress, the White House, and the DOD as well as our corporate clients including many of the Fortune 500 and their legal, legislative, regulatory, and policy departments. In the long run, our goal is to broaden adoption of our AI-enabled technologies by anyone that is in need of global policy and market intelligence.

 

We believe that over the long-term all information services companies from Thomson Reuters, Wolters Kluwer, to LexisNexis and others will need to eliminate and transform their existing cloud-based workflow solutions to adapt to the changing customer demands of leveraging AI agents to query their systems. No longer will it take 15 clicks on a web app to find an answer to a question. People will be able to simply query the ask, get the result, and leverage an AI agent to generate a report or run analysis. This is the future of AI-driven information services.

 

Additionally, we have been approached by both existing and new business partners to explore data licensing and/or co-selling our Copilots and AI Agents. For instance, we are exploring working with some of the large language model companies to potentially license portions of our data with the goal of exposing a larger universe of users to our data. Many similar such deals have been struck and announced in the press in recent weeks and we believe it is a trend we can leverage to expand our market opportunity. In particular, we anticipate that our proprietary data assets are uniquely valuable for such partnerships and our ability to help our clients see around the corner on regulatory and policy matters will allow us to strike uniquely valuable partnerships.

 

We are also exploring opportunities to leverage our AI Agents into various adjacent sectors ranging from earnings calls to PR agencies to investment banks to provide an ever-expanding universe of uses for our AI capabilities. I mentioned for instance the ability to use StressLens in the witness preparation process or in preparation for giving public remarks in front of Congress, regulatory investigations, or the press or in the analysis of earnings calls with various earnings call transcripts and financial data providers.

 

Within the next quarter, we will be showcasing our AI platform and Copilots at an AI Showcase Day that we will be announcing in the near term. There, we will further elaborate on the future multi-year roadmap we have established as we build the most powerful legal, regulatory, and geopolitical AI assistant and eventually the world’s most powerful AI lawyer, and, similarly, we’ll do the same to support adjacent personas across the span of strategic risk and opportunity. Having spent the last 10 years in training, gathering, and building data for our vertical, we are accelerating the use of these tools to bring new value for our customers. We are incredibly excited about the future of automation and autonomy and believe FiscalNote is leading the way for an AI-driven future for our customers across all of the numerous sectors we cover.

 

We expect the combination of improved operating performance, which I will further elaborate on, reallocation of our resources post-Board.org divestiture, and the launch of our new AI Copilots to return the company to a run rate revenue growth rate of low to mid-teens, as we have enjoyed in prior years.

 

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Having elaborated on our AI growth strategy, let me now turn to our operational improvements. Our focus on upsell and cross-sell initiatives is ongoing. By aligning our teams and leveraging our AI prowess, we’ve enhanced the effectiveness of these strategies which drive higher contract values and deepen our relationships with key accounts. We’ve also made key updates to our CRM and other software tools to better support these efforts, giving our sales and customer success teams the visibility and insights they need to identify and capitalize on growth opportunities.

 

We continue to add new data and intelligence to expand our customer value. In the past several quarters we added new geopolitical and security intelligence capabilities through the integration of Dragonfly. We also expanded our EUIT offering, providing stakeholder coverage and data for all 705 members of the European Parliament. And finally, we expanded our global policy and analysis coverage to over 80 countries - most recently to include China’s national-level and provincial-level legislative and regulatory policy developments, positioning FiscalNote as one of the only providers of Chinese national and provincial regulatory and policy intelligence.

 

Our European business now constitutes 15% of our revenues and our European policy business and security intelligence and risk businesses remain some of our fastest growing in our overall product portfolio, growing north of 20% a year. We continue to explore doubling down in areas of accelerated growth to drive overall growth in the business.

 

Our large Enterprise business also continues to grow with meaningful new customers added in the last quarter. As we have doubled down and more heavily invested in larger, more strategic accounts for our line salespeople to go after, we expect bookings growth to accelerate in the second half of the year to align with traditional seasonality in software buying cycles.

To that end, we're streamlining and simplifying our sales process, positioning FiscalNote as a unified provider of geopolitical and market intelligence solutions. By bundling our offerings in this way, we believe we can drive higher customer retention and more durable revenue streams. This is allowing us to bring together our various data sets, analytical tools, and workflow solutions into cohesive packages aligned to the key use cases and pain points of our customers. It's about making it easier for them to access the full value of our overall platform and building deeper, more strategic relationships over time.

 

As we look ahead, our path to reaching and maintaining low to mid-mid-teens compounded annual growth for 2025 and beyond remains clear. We're committed to executing on our long-term growth strategy, which centers on deepening and widening our penetration across core customers with our core offerings. This means continuing to innovate and expand our portfolio of AI-powered solutions, while also investing in sales and marketing to drive new logo acquisition and expand our presence in key markets like Europe, where we have a still nascent foothold but see significant untapped potential. FiscalNote pushed the industry to combine cloud software and international information; we pushed the market to include point solutions like advocacy software bundled with legislative information; we pushed the market to include a larger and larger amount of information from countries around the world - we have been pushing and leading product innovation for years and we will continue to do so in the future on the AI front.

 

On the strategic front, I want to briefly touch on the ongoing review process. Our recent divestiture unlocked significant value and our Board will consequently continue to evaluate all such strategic opportunities given the continued view that our overall business remains undervalued in this market. The Board.org transaction delivered a tremendous return on our initial investment and is a testament to the significant value of but one component of our overall business. The transaction also demonstrates our disciplined approach to M&A and our ability to create value through both strategic acquisitions encompassing both purchases and divestitures. We remain laser-focused on driving shareholder value by building a durable and profitable business for the long term, but the Board will also continue to evaluate all options to realize value for our shareholders. We have a clear AI leadership position in our industry, and it generates consistent recurring revenues from a premier base of global customers. Our

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business drives consistent, 80% adjusted gross margins and has an operational foundation with high operating leverage. We have been profitable on an Adjusted EBITDA basis for 3 quarters now and our go-forward focus remains equally weighted on driving both bottom line profitability and top line growth.

 

In closing, I'm incredibly proud of what the FiscalNote team has accomplished, not just in the first quarter, but over the past year. We've emerged as a leaner, more agile organization, with a strengthened foundation for long-term durable growth. Our investments in AI, our focus on operational excellence, and our commitment to customer success have positioned us to capitalize on the vast opportunities ahead. I believe that the new AI-driven future will mean that the old way of analyzing legislative, regulatory, and geopolitical risk will become obsolete and will drive enormous opportunities for FiscalNote.

 

As we move through 2024, we view it as the first step in a multi-year journey to earning our place in the history books and becoming the dominant player in our industry. Our strategy is simple: deep and wide penetration across our core customer base with our core offerings, translating into higher revenues and accelerating Adjusted EBITDA margins, as we realize incremental operating leverage. It's a powerful formula, and one that I believe will create significant value for all of our stakeholders in the years ahead.

 

With that, I'll turn it over to Jon Slabaugh, our CFO, for a detailed review of our numbers. Jon?

 

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Speaker 3: Jon Slabaugh, CFO and Chief Investment Officer, FiscalNote, Inc.

 

Thank you, Tim.

 

My comments this morning will be brief. So let me jump right in and walk through the numbers for Q1 2024, starting with the income statement.

 

Looking at revenues, total revenue for Q1 2024 was $32.1 million dollars, slightly higher than the prior year period. Subscription revenue during the quarter accounted for 92% of revenue, in line with the Company’s historical trends.

 

Digging deeper into revenue, with respect to our key performance metrics we experienced some comparison challenges this quarter due to the divestiture of Board.org.

 

Overall, revenue performance in the quarter reflects increases from organic growth and acquisitions during the prior twelve months, offset by decreases resulting from both dispositions and product discontinuations.

 

Turning to expenses, principal operating expenses in Q1 2024 decreased versus the prior year. Specifically, the cost of revenue decreased by approximately $2 million dollars or 19%, R&D decreased by approximately $2 million dollars or 32%, Sales & Marketing decreased by approximately $3 million dollars or 23%, and G&A decreased by approximately $2 million dollars or 12%. Generally speaking, the reductions in operating expenses principally reflect cost control measures instituted across 2023 as well as the impact of the sale of board.org and sunset products.

 

Looking at our profitability during the quarter, let’s start above the line. Gross margins remained strong in the quarter, with Q1 2024 coming in at 77% on a GAAP basis and 85% on an adjusted basis, both

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increases over the prior year period. These improvements primarily reflect the impact of sunset products and improved efficiencies. We continue to pursue incremental efficiencies in our operations.

 

Transitioning to below the line, GAAP net income for Q1 2024 was $50 million dollars, an increase of over $68 million dollars and reflecting the substantial positive impact of the gain on the sale of Board.org during the period. EBITDA for Q1 2024 was $65 million dollars, an increase versus the prior year and primarily reflecting the impact of the gain from the sale of Board.org. Adjusting for non-cash and other non-recurring or one-time items, primarily the gain from the sale of board.org, Adjusted EBITDA was over $1 million dollars, a significant improvement year-over-year, and importantly the third consecutive quarter of positive performance for this key profitability metric.

 

Turning to the balance sheet, at quarter end we had cash and cash equivalents of $44 million dollars, sequentially higher than year-end 23 and slightly lower than the prior-year period. As we’ve reported recently, the divestiture of Board.org enabled us to materially improve our capital structure with the addition of $15 million dollars to cash. Period-end cash also reflects our ongoing initiatives to control spending across the Company, and prudently allocate capital to investments in the business with the potential for high growth and positive return characteristics. We have sufficient cash resources to fund our operations and we do not see any immediate, or intermediate need for additional capital.

 

At quarter end, our total debt stood at $177 million dollars, significantly lower sequentially than the level recorded at year-end 2023. This amount includes $93 million dollars related to our senior term loan after giving effect of our $66 million dollars principal repayment made during the quarter following the sale of Board.org. Simultaneous to that, we also amended our Credit Agreement with our senior lenders to, among other things, extend principal amortization payments for an additional 12 months, now beginning in August of 2026. We continue to manage our debt service levels balanced by ongoing investments in capex and opex.

 

Turning to guidance, today we have reaffirmed our full year forecast for:

 

We also today provided the following forecast for Q2 2024:

 

As a reminder, forecasts for both the quarter and full year reflect the impact of the Board.org divestiture among other considerations.

 

In summary, the overall performance of Q1 2024 was as expected. Our forecast for the second quarter indicates a slight bias toward the second half of the year in terms of our full-year ranges, in line with prior years’ seasonality. As we’ve stated previously, 2024 is a year of transformation and a bridge to revenue and margin expansion beginning in 2025 and leading eventually to our long-term run-rate revenue targets. The business remains strong. We continue to execute our operational efficiency initiatives in concert with our product strategy, all in pursuit of further strengthening our established position as a critical partner to our expansive, global customer base.

 

That concludes my prepared remarks. I'll turn it over to the operator to begin the question-and-answer session. Operator?

 

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Document and Entity Information	May 09, 2024
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Document Period End Date	May 09, 2024
Entity Registrant Name	FISCALNOTE HOLDINGS, INC.
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Document And Entity Information [Line Items]
Security 12b Title	Warrants to purchase one share of Class A common stock, each at an exercise price of $11.50 per share
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