WASHINGTON–(BUSINESS WIRE)–FiscalNote Holdings, Inc. (NYSE: NOTE), 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.”
Financial Highlights(2)
Q1 2024 vs. Q1 2023
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Three Months Ended March 31, |
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($ in millions) |
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2024 |
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2023 |
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% Change |
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Total Revenues (formerly “GAAP Revenue”) |
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$ |
32.1 |
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$ |
31.5 |
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2 |
% |
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Subscription Revenue as % of Total Revenues |
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~92 |
% |
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~90 |
% |
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Gross Profit |
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$ |
24.9 |
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$ |
22.6 |
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10 |
% |
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Gross Margin |
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77 |
% |
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72 |
% |
|
500 |
bps |
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Adjusted Gross Profit |
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$ |
27.3 |
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$ |
25.2 |
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8 |
% |
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Adjusted Gross Margin |
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85 |
% |
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80 |
% |
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500 |
bps |
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Net Income (Loss) |
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$ |
50.6 |
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$ |
(19.3) |
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* |
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Adjusted EBITDA |
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$ |
1.2 |
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$ |
(7.0) |
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* |
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Adjusted EBITDA Margin |
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4 |
% |
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(22) |
% |
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Cash and Cash Equivalents |
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$ |
43.6 |
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$ |
46.7 |
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bps – Basis Points |
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* – percentage change is greater than +/- 100% |
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First Quarter and Recent Operational Highlights
- Completed the divestiture of Board.org, a non-core product offering, for total consideration of up to $103.0 million, including $95.0 million in cash at close, $65.7 million of which was used to repay senior debt, delivering a strengthened balance sheet while also bolstering cash balances.
- Amended our Credit Agreement with our senior lenders to, among other things, extend the commencement of amortization payments to August 15, 2026, leaving the maturity date of July 2027 unchanged.
- Introduced the FiscalNote Global Intelligence Copilot, an AI-powered assistant 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. The Copilot is the first in a series of AI-powered copilots the Company will launch as it accelerates its roadmap of groundbreaking AI agents to transform legal, regulatory, and legislative workflows.
- Secured a six-figure, multi-year agreement with a major state legislature for FiscalNote’s Fireside constituent relationship management solution.
- Announced the launch of StressLens, a pioneering and innovative new AI product that equips FiscalNote customers with the real-time ability to quantify the behavioral impact of leading decision makers and influencers across the financial, regulatory, and government domains.
- European information, operational and security risk, and large enterprise business sectors showing strong, outperforming growth as Company invests behind growth.
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 $15.0 million to cash. It also is an indication of the substantial intrinsic value of our underlying assets.”
First Quarter Financial Performance
Revenue(2)
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Three Months Ended March 31, |
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($ in millions) |
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2024 |
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2023 |
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% Change |
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Subscription revenue |
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$ |
29.6 |
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$ |
28.5 |
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4 |
% |
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Advisory, advertising, and other revenue |
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2.5 |
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3.0 |
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(19 |
)% |
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Total revenues |
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$ |
32.1 |
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$ |
31.5 |
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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 $0.6 million, or 19% versus prior year, due primarily to the discontinuation of certain non-strategic products and related services.
Key Performance Indicators(3)
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As of March 31, |
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($ in millions) |
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2024 |
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2023 |
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% Change |
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Run-Rate Revenue (RRR) |
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$ |
122 |
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$ |
134 |
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(9 |
)% |
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Pro Forma RRR* |
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$ |
122 |
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$ |
121 |
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1 |
% |
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Annual Recurring Revenue (ARR) |
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$ |
110 |
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$ |
119 |
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(8 |
)% |
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Pro Forma ARR* |
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$ |
110 |
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$ |
107 |
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3 |
% |
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Net Revenue Retention (NRR) |
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96 |
% |
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96 |
% |
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*Pro forma RRR and Pro forma ARR adjusts prior periods for the impact of the divestiture of Board.org. |
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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 $3 million, or 3%, compared to Q1 2023.
For Q1 2024, NRR was 96%, level with the prior year.
Operating Expenses(2)
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Three Months Ended March 31, |
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($ in millions) |
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2024 |
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2023 |
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% Change |
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Cost of revenues |
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$ |
7.2 |
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$ |
8.9 |
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(19 |
)% |
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Research and development |
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3.5 |
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5.1 |
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(32 |
)% |
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Sales and marketing |
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9.4 |
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12.3 |
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(23 |
)% |
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Editorial |
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4.7 |
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4.3 |
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9 |
% |
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General and administrative |
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16.1 |
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18.2 |
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(12 |
)% |
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Amortization of intangible assets |
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2.7 |
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2.8 |
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(5 |
)% |
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Other# |
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0.0 |
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7.2 |
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NM |
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Total operating expenses |
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$ |
43.6 |
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$ |
58.9 |
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(26 |
)% |
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# – Q1 2023 includes goodwill impairment charge as well as transaction costs incurred related to our historical acquisitions |
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NM – Not meaningful |
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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.
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
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($ in millions) |
Current Range As of 05/09/2024 |
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Action |
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Previous Range As of 03/12/2024 |
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Total Revenues |
$123 – $127 |
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Unchanged |
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$123 – $127 |
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Total Run-Rate Revenue (3) |
$126 – $134 |
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Unchanged |
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$126 – $134 |
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Adjusted EBITDA (1) (4) |
$7 – $9 |
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Unchanged |
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$7 – $9 |
Q2 2024
|
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Current Range |
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($ in millions) |
As of 05/09/2024 |
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Total Revenues |
Approximately $29 |
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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.
Footnotes
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(1) |
Non-GAAP measure. See “Non-GAAP Financial Measures” and the reconciliation tables for the definitions and reconciliations of these non-GAAP financial measures to the most closely related GAAP financial measures. |
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(2) |
All financial information incorporated within this press release is unaudited. |
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(3) |
“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. |
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(4) |
Because of the variability of items impacting net income and the unpredictability of future events, management is unable to reconcile without unreasonable effort the Company’s forecasted adjusted EBITDA to a comparable GAAP measure. The unavailable information could have a significant impact on the non-GAAP measures. |
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.
