FiscalNote Announces Fourth Quarter and Full Year 2023 Financial Results; Exceeds Adjusted EBITDA Expectations
- FiscalNote divests Board.Org for up to $103 million, including $95 million in cash consideration.
- Strong financial results with 17% revenue growth in 2023 and positive adjusted EBITDA of $3 million in Q4 2023.
- Leadership in delivering AI-enabled policy and market information empowering organizations in a complex global environment.
- GAAP net loss of $51.0 million reported.
- Adjusted EBITDA loss of $5.2 million in Q4 2022.
- Approximately $17 million of annualized revenue not expected to recur after March 11, 2024.
Insights
The divestiture of Board.org by FiscalNote Holdings, Inc. represents a strategic financial maneuver that has considerable implications for the company's liquidity and leverage. The transaction, which resulted in a 9.5x cash-on-cash return, is a significant achievement, particularly given the less than three-year turnaround period. This move not only enhances FiscalNote's balance sheet by enabling the repayment of senior debt but also simplifies the company's product strategy, which could lead to more focused investments and potentially higher returns on capital in its core AI-driven enterprise SaaS technology offerings.
Furthermore, the amendment of the Credit Agreement to extend principal repayments augments the company's financial flexibility. The improved liquidity position, as evidenced by the $45 million in cash post-transaction, provides FiscalNote with a buffer to navigate market uncertainties and invest in growth initiatives. However, investors should monitor the company's ability to replace the divested revenue streams and maintain profitability, as the discontinued operations contributed approximately $17 million in annualized revenue.
FiscalNote's operational metrics, such as the 10% increase in Run-Rate Revenue and 11% rise in Annual Recurring Revenue (ARR), indicate a healthy growth trajectory in its core business areas. The company's focus on AI-driven policy and market intelligence aligns with the growing demand for advanced analytics in the complex global regulatory environment. The expansion of its European business and partnerships with significant players like OpenAI, Google and Microsoft position FiscalNote at the forefront of innovation in its sector.
However, the decision to sunset several non-core products will result in the elimination of $17 million in annualized revenue. This strategic refocusing may lead to short-term revenue contraction, but it could also streamline operations and improve long-term profitability. The expected return to double-digit growth rates in 2025 suggests confidence in the company's reallocation of resources and product development initiatives. Stakeholders should assess the potential impact of these changes on market share and competitive positioning within the SaaS industry.
The strategic review being conducted by FiscalNote's Board, with the assistance of independent advisors, is a critical process that could result in various outcomes, including potential transactions that may further alter the company's structure and strategy. It's crucial for stakeholders to understand that such reviews can create both opportunities and risks, depending on the strategic paths chosen. The lack of a set timetable and the commitment to non-disclosure of the review's progress add an element of uncertainty that investors should consider when evaluating FiscalNote's future prospects.
Moreover, the company's recent patent acquisitions and partnerships in the legal, political and regulatory space underline its commitment to protecting its intellectual property and expanding its technological capabilities. These efforts could enhance FiscalNote's competitive edge, but they also require careful monitoring of legal and regulatory compliance, particularly in various international jurisdictions where the company operates.
Divests Board.Org Community Engagement Platform for Total Consideration of up to
Enters the Year with Simplified Product Strategy for Continued Growth and Adjusted EBITDA Profitability
Special Committee and Strategic Review Ongoing
The Company’s financial results demonstrate FiscalNote’s strong fundamentals including revenue growth of
Fourth Quarter 2023 Financial Highlights
-
Revenue increased
9% to$34.3 million $31.4 million $31.5 -
Gross profit was
$22.9 million 67% gross margin, and non-GAAP adjusted gross profit was$28.3 million 83% non-GAAP adjusted gross margin.(1) -
GAAP net loss of
$51.0 million -
Adjusted EBITDA of
$3.0 million $2.5 million 157% or$8.2 million $5.2 million -
Cash and cash equivalents (inclusive of short-term investments) of
$24.4 million $15 million
The Company also announced today the divestiture of Board.org, a non-core product offering for up to
Board.org operated as an independent product offering of FiscalNote, and represented approximately
With this divestiture, the Company added approximately
Fourth Quarter 2023 Operational Metrics
-
Run-Rate Revenue(2) increased
10% to$140 million $130 million 4% increase on a pro forma basis. -
Annual Recurring Revenue(2) ("ARR") rose
11% to$126 million $119 million 6% growth on a pro forma basis. -
Quarterly Net Revenue Retention(2) was
99% in the fourth quarter.
Full Year 2023 Financial Highlights
-
Revenue increased
17% to$132.6 million $113.8 million $115.7 90% of total revenue, grew18% year-over-year of which9% was on an organic basis. -
Gross profit was
$92.4 million 70% gross margin, and non-GAAP adjusted gross profit was$108.3 million 82% non-GAAP adjusted gross margin.(1) -
GAAP net loss of
$115.5 million $72.8 million -
Adjusted EBITDA(1) loss of
$7.5 million 69% or$17 million $24.5 million
2023 Operational Highlights
During 2023, FiscalNote continued to execute successfully on its strategy to lead its sector in global policy and market intelligence with several operational and business achievements, including:
-
Signed large, six-figure new logos or expanded relationships with leading
U.S. and global brand leaders, including a world-leading search technology company, aU.S. auto manufacturer, a global energy company, a Japanese financial institution, a multinational pharmaceutical and chemical company and a brand-leading food and beverage company. -
Secured new public sector contract wins, expansions, and renewals of major departments and agencies across executive, legislative, and judicial branches of the
U.S. Government - as well as international public sector institutions - solidifying the Company’s role as an essential partner to the world’s most important and influential decision makers. - Expanded relationships and secured new agreements with some of the largest and most prominent trade associations, non-profits, and advocacy organizations.
-
Executed its cost reduction plan to align its operations and drive approximately
$25 million -
Grew its European business year-over-year, bringing its European revenue to approximately
15% of total. - Selected by OpenAI to collaborate as their only inaugural launch partner in the legal, political, and regulatory space for its ChatGPT Plug-in and secured similar partnerships with Bard (now Gemini) by Google and Microsoft Bing.
- Expanded its global policy and analysis coverage to include China’s national-level and provincial-level legislative and regulatory policy developments. The Company’s Global Policy Dashboard now covers more than 80 countries.
- Expanded its EUIT capabilities to provide stakeholder coverage and data for all 705 members of the European Parliament, as well as generate automated AI-powered meeting transcripts for all EU Parliament meetings.
- Established a new partnership with Peraton - the world’s leading mission capability integrator for national security solutions.
- Completed the acquisition of Dragonfly, a provider of geopolitical and security intelligence delivered through a SaaS-based, proprietary Security Intelligence and Analysis Service (SIAS) subscription platform and API — used by nearly half of the top 30 companies in the FTSE-500, and by the world’s top banks.
-
Launched a series of new innovative AI products, including:
- FiscalNote Risk Connector, a new, internally-developed risk intelligence solution that harnesses the power of the Company’s data and AI capabilities to reveal operational, relational, and reputational risk for enterprises and government organizations.
- FiscalNote GPT, the first proprietary platform incorporating generative AI and large language model (LLM) capabilities customized for legislative, regulatory, and policy workflows.
- FiscalNote AI CoPilots, a series of GPT-enabled verticalized solutions that FiscalNote will develop for policy and risk management professionals to facilitate the day-to-day work of creating legislation, advocacy outreach, constituent communications, regulatory responses, and global risk analysis using the power of large language models, FiscalNote’s trusted industry leading policy and geopolitical data, and customers’ data, all in a seamless workflow.
-
Obtained its 13th
U.S. patent, and received three additional AI-related patents inKorea , to expand its total global patent portfolio to 17. - Celebrated the 10 year anniversary of its founding in 2013, and its one year anniversary as a publicly traded company, by ringing the Opening Bell at the New York Stock Exchange.
-
Secured multiple awards recognizing the Company’s SaaS leadership, innovation and customer excellence:
- Reed Award for Best Advocacy Technology Platform (FiscalNote’s VoterVoice)
- Stevie Award for International Business (FiscalNote)
- Stevie Award for Sales and Customer Service (FiscalNote)
- Tim Hwang, Chairman, CEO, and Co-founder of FiscalNote, was named an Entrepreneur of the Year 2023 Mid-Atlantic Award winner by Ernst & Young US.
“Over the past 12-18 months we have been focused on driving Adjusted EBITDA profitability and rationalizing our cost structure. Now, as we pivot our focus to accelerating growth, we are transforming and simplifying our organization by aligning our sales teams, streamlining our product portfolio and optimizing our capital structure. Most importantly, we are driving new levels of innovation, combining AI and human intelligence to provide the data, intelligence, analysis, and workflows that our customers need to navigate and take action within the large and complex global political and regulatory environment,” said Tim Hwang, Chairman, CEO, and Co-founder, FiscalNote. “With an enhanced balance sheet and a simplified product portfolio, we are well positioned to drive ongoing profitability in 2024 and accelerate growth in 2025 and beyond.”
Outlook
Board.org contributed approximately
FiscalNote provided guidance for the full year 2024 reflecting the divestiture of Board.org and the discontinuation of sunset products as noted above.
-
GAAP revenue of
$123 $127 million -
Total Run-Rate Revenue(2) of
$126 $134 million -
Positive Adjusted EBITDA(1)(4) of
$7 $9 million
FiscalNote provided guidance for the first quarter of 2024 as follows:
-
GAAP revenue of approximately
$31 million -
Adjusted EBITDA(1)(4) of approximately
$1 million
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.
Additional information regarding the non-GAAP financial measures discussed in this release, including an explanation of these measures and how each is calculated, is included below under the heading “Non-GAAP Financial Measures.” A reconciliation of GAAP to non-GAAP financial measures has also been provided in the financial tables included below. Information regarding our key performance indicators is included below under “Key Performance Indicators.”
Strategic Review
Following the announcement of the Board’s formation of a Special Committee in November 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 until it deems further disclosure is appropriate or required.
As previously announced, Centerview Partners LLC and Skadden, Arps, Slate, Meagher & Flom LLP have been retained as independent advisors to the Special Committee.
Quarterly Conference Call
FiscalNote will host a conference call today, Tuesday, March 12, 2024, at 10:00 a.m. Eastern Time (
(1) Non-GAAP measure. Please see "Non-GAAP Financial Measures" in this earnings release for definitions and important disclosures regarding these financial measures, including reconciliations to the most directly comparable GAAP measure.
(2) “Run-Rate Revenue,” “Annual Recurring Revenue” or “ARR”, and “Net Revenue Retention” are key performance indicators (KPIs). Please see "Key Performance Indicators" in this earnings release for the definitions and important disclosures regarding these measures.
(3) Organic Run-Rate Revenue and ARR for 2022 includes businesses acquired as of December 31, 2021, plus Aicel Technologies (for which a definitive acquisition agreement was signed as of December 31, 2021, with closing conditioned upon FiscalNote’s public listing).
(4) 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.
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
Forward-Looking Statements
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 review of a potential go-private transaction on FiscalNote’s business and its ability to implement any such 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 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
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.
FiscalNote Holdings, Inc. Consolidated Statements of Operations (in thousands, except shares and per share data) |
||||||||||||||||
|
|
(Unaudited) |
|
|
|
|
|
|
|
|||||||
|
|
Three Months Ended December 31, |
|
|
Year Ended December 31, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Subscription |
|
$ |
31,096 |
|
|
$ |
27,336 |
|
|
$ |
119,082 |
|
|
$ |
100,522 |
|
Advisory, advertising, and other |
|
|
3,169 |
|
|
|
4,113 |
|
|
|
13,563 |
|
|
|
13,243 |
|
Total revenues |
|
|
34,265 |
|
|
|
31,449 |
|
|
|
132,645 |
|
|
|
113,765 |
|
Operating expenses: (1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of revenues |
|
|
11,388 |
|
|
|
8,356 |
|
|
|
40,251 |
|
|
|
31,937 |
|
Research and development |
|
|
4,016 |
|
|
|
5,298 |
|
|
|
18,186 |
|
|
|
20,736 |
|
Sales and marketing |
|
|
10,500 |
|
|
|
10,956 |
|
|
|
45,722 |
|
|
|
42,678 |
|
Editorial |
|
|
4,336 |
|
|
|
4,716 |
|
|
|
17,869 |
|
|
|
15,956 |
|
General and administrative |
|
|
16,737 |
|
|
|
18,266 |
|
|
|
65,550 |
|
|
|
77,801 |
|
Amortization of intangible assets |
|
|
2,895 |
|
|
|
2,633 |
|
|
|
11,509 |
|
|
|
10,451 |
|
Impairment of goodwill and long-lived assets |
|
|
26,227 |
|
|
|
- |
|
|
|
32,064 |
|
|
|
- |
|
Transaction (gains) costs, net |
|
|
(1,905 |
) |
|
|
1,138 |
|
|
|
(767 |
) |
|
|
2,395 |
|
Total operating expenses |
|
|
74,194 |
|
|
|
51,363 |
|
|
|
230,384 |
|
|
|
201,954 |
|
Operating loss |
|
|
(39,929 |
) |
|
|
(19,914 |
) |
|
|
(97,739 |
) |
|
|
(88,189 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense, net |
|
|
8,087 |
|
|
|
6,069 |
|
|
|
29,940 |
|
|
|
95,741 |
|
Change in fair value of financial instruments |
|
|
2,867 |
|
|
|
5,777 |
|
|
|
(15,983 |
) |
|
|
(12,747 |
) |
Gain on PPP loan upon extinguishment |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(7,667 |
) |
Loss on debt extinguishment, net |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
45,250 |
|
Loss on settlement |
|
|
- |
|
|
|
11,700 |
|
|
|
3,474 |
|
|
|
11,700 |
|
Other (benefit) expense, net |
|
|
(177 |
) |
|
|
(498 |
) |
|
|
68 |
|
|
|
1,045 |
|
Net loss before income taxes |
|
|
(50,706 |
) |
|
|
(42,962 |
) |
|
|
(115,238 |
) |
|
|
(221,511 |
) |
Provision (benefit) from income taxes |
|
|
42 |
|
|
|
(418 |
) |
|
|
223 |
|
|
|
(3,254 |
) |
Net loss |
|
|
(50,748 |
) |
|
|
(42,544 |
) |
|
|
(115,461 |
) |
|
|
(218,257 |
) |
Other comprehensive income (loss) |
|
|
1,200 |
|
|
|
1,623 |
|
|
|
163 |
|
|
|
(154 |
) |
Total comprehensive loss |
|
$ |
(49,548 |
) |
|
$ |
(40,921 |
) |
|
$ |
(115,298 |
) |
|
$ |
(218,411 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
|
$ |
(50,748 |
) |
|
$ |
(42,544 |
) |
|
$ |
(115,461 |
) |
|
$ |
(218,257 |
) |
Deemed dividend |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(26,570 |
) |
Net loss used to compute basic and diluted loss per share |
|
$ |
(50,748 |
) |
|
$ |
(42,544 |
) |
|
$ |
(115,461 |
) |
|
$ |
(244,827 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss per share attributable to common shareholders: |
|
|||||||||||||||
Basic and Diluted |
|
$ |
(0.39 |
) |
|
$ |
(0.32 |
) |
|
$ |
(0.88 |
) |
|
$ |
(3.68 |
) |
Weighted average shares used in computing loss per share attributable to common shareholders: |
|
|||||||||||||||
Basic and Diluted |
|
|
129,636,869 |
|
|
|
131,086,309 |
|
|
|
131,400,109 |
|
|
|
66,513,704 |
|
(1) Amounts include stock-based compensation expenses, as follows: |
|
|||||||||||||||
|
|
(Unaudited) |
|
|
|
|
|
|
|
|||||||
|
|
Three Months Ended December 31, |
|
|
Year Ended December 31, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Cost of revenues |
|
$ |
98 |
|
|
$ |
45 |
|
|
$ |
283 |
|
|
$ |
81 |
|
Research and development |
|
|
304 |
|
|
|
398 |
|
|
|
1,384 |
|
|
|
1,007 |
|
Sales and marketing |
|
|
339 |
|
|
|
(66 |
) |
|
|
2,057 |
|
|
|
762 |
|
Editorial |
|
|
108 |
|
|
|
43 |
|
|
|
400 |
|
|
|
603 |
|
General and administrative |
|
|
7,996 |
|
|
|
6,759 |
|
|
|
22,933 |
|
|
|
35,594 |
|
FiscalNote Holdings, Inc. Consolidated Balance Sheets (in thousands, except shares, and par value) |
||||||||
|
|
December 31, 2023 |
|
|
December 31, 2022 |
|
||
Assets |
|
|
|
|
|
|
||
Current assets: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
16,451 |
|
|
$ |
60,388 |
|
Restricted cash |
|
|
849 |
|
|
|
835 |
|
Short-term investments |
|
|
7,134 |
|
|
|
- |
|
Accounts receivable, net |
|
|
16,931 |
|
|
|
14,909 |
|
Costs capitalized to obtain revenue contracts, net |
|
|
3,326 |
|
|
|
2,794 |
|
Prepaid expenses |
|
|
2,593 |
|
|
|
4,315 |
|
Other current assets |
|
|
2,521 |
|
|
|
2,764 |
|
Total current assets |
|
|
49,805 |
|
|
|
86,005 |
|
|
|
|
|
|
|
|
||
Property and equipment, net |
|
|
6,141 |
|
|
|
7,325 |
|
Capitalized software costs, net |
|
|
13,372 |
|
|
|
13,946 |
|
Noncurrent costs capitalized to obtain revenue contracts, net |
|
|
4,257 |
|
|
|
3,976 |
|
Operating lease assets |
|
|
17,782 |
|
|
|
21,005 |
|
Goodwill |
|
|
187,703 |
|
|
|
194,362 |
|
Customer relationships, net |
|
|
53,917 |
|
|
|
56,348 |
|
Database, net |
|
|
18,838 |
|
|
|
21,020 |
|
Other intangible assets, net |
|
|
18,113 |
|
|
|
28,728 |
|
Other non-current assets |
|
|
633 |
|
|
|
442 |
|
Total assets |
|
$ |
370,561 |
|
|
$ |
433,157 |
|
|
|
|
|
|
|
|
||
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
||
Current liabilities: |
|
|
|
|
|
|
||
Current maturities of long-term debt |
|
$ |
105 |
|
|
$ |
68 |
|
Accounts payable and accrued expenses |
|
|
12,909 |
|
|
|
13,739 |
|
Deferred revenue, current portion |
|
|
43,530 |
|
|
|
35,569 |
|
Customer deposits |
|
|
3,032 |
|
|
|
3,252 |
|
Contingent liabilities from acquisitions, current portion |
|
|
130 |
|
|
|
696 |
|
Operating lease liabilities, current portion |
|
|
3,066 |
|
|
|
6,709 |
|
Other current liabilities |
|
|
2,878 |
|
|
|
2,079 |
|
Total current liabilities |
|
|
65,650 |
|
|
|
62,112 |
|
|
|
|
|
|
|
|
||
Long-term debt, net of current maturities |
|
|
222,310 |
|
|
|
161,980 |
|
Deferred tax liabilities |
|
|
2,178 |
|
|
|
714 |
|
Deferred revenue, net of current portion |
|
|
875 |
|
|
|
918 |
|
Contingent liabilities from acquisitions, net of current portion |
|
|
- |
|
|
|
883 |
|
Operating lease liabilities, net of current portion |
|
|
26,162 |
|
|
|
29,110 |
|
Public and private warrant liabilities |
|
|
4,761 |
|
|
|
18,892 |
|
Other non-current liabilities |
|
|
5,166 |
|
|
|
13,858 |
|
Total liabilities |
|
|
327,102 |
|
|
|
288,467 |
|
Commitment and contingencies (Note 18) |
|
|
|
|
|
|
||
Stockholders' equity: |
|
|
|
|
|
|
||
Class A Common stock ( |
|
|
11 |
|
|
|
12 |
|
Class B Common stock ( |
|
|
1 |
|
|
|
1 |
|
Additional paid-in capital |
|
|
860,485 |
|
|
|
846,205 |
|
Accumulated other comprehensive loss |
|
|
(622 |
) |
|
|
(785 |
) |
Accumulated deficit |
|
|
(816,416 |
) |
|
|
(700,743 |
) |
Total stockholders' equity |
|
|
43,459 |
|
|
|
144,690 |
|
Total liabilities and stockholders' equity |
|
$ |
370,561 |
|
|
$ |
433,157 |
|
FiscalNote Holdings, Inc. Consolidated Statements of Cash Flows (in thousands) |
||||||||
|
|
Years Ended December 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Operating Activities: |
|
|
|
|
|
|
||
Net loss |
|
$ |
(115,461 |
) |
|
$ |
(218,257 |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
||
Depreciation |
|
|
1,348 |
|
|
|
1,238 |
|
Amortization of intangible assets and capitalized software development costs |
|
|
27,369 |
|
|
|
19,545 |
|
Amortization of deferred costs to obtain revenue contracts |
|
|
3,617 |
|
|
|
2,786 |
|
Impairment of goodwill and other long-lived assets |
|
|
32,064 |
|
|
|
- |
|
Non-cash operating lease expense |
|
|
3,264 |
|
|
|
6,614 |
|
Stock-based compensation |
|
|
27,057 |
|
|
|
38,047 |
|
Non-cash earnout benefit |
|
|
(530 |
) |
|
|
(238 |
) |
Loss on settlement |
|
|
3,474 |
|
|
|
11,700 |
|
Bad debt expense |
|
|
423 |
|
|
|
142 |
|
Change in fair value of acquisition contingent consideration |
|
|
(2,043 |
) |
|
|
(2,121 |
) |
Change in fair value of financial instruments |
|
|
(15,983 |
) |
|
|
(12,747 |
) |
Deferred income tax provision (benefit) |
|
|
72 |
|
|
|
(3,076 |
) |
Paid-in-kind interest, net |
|
|
6,060 |
|
|
|
10,958 |
|
Other non-cash items |
|
|
32 |
|
|
|
260 |
|
Non-cash interest expense |
|
|
3,919 |
|
|
|
52,044 |
|
Loss on debt extinguishment, net |
|
|
- |
|
|
|
45,250 |
|
Gain on PPP Loan forgiveness |
|
|
- |
|
|
|
(7,667 |
) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable, net |
|
|
(287 |
) |
|
|
(3,941 |
) |
Prepaid expenses and other current assets |
|
|
3,421 |
|
|
|
422 |
|
Costs capitalized to obtain revenue contracts, net |
|
|
(4,443 |
) |
|
|
(4,129 |
) |
Other non-current assets |
|
|
(180 |
) |
|
|
(395 |
) |
Accounts payable and accrued expenses |
|
|
(6,426 |
) |
|
|
(2,113 |
) |
Deferred revenue |
|
|
4,123 |
|
|
|
4,780 |
|
Customer deposits |
|
|
(198 |
) |
|
|
93 |
|
Other current liabilities |
|
|
269 |
|
|
|
(1,938 |
) |
Contingent liabilities from acquisitions, net of current portion |
|
|
(39 |
) |
|
|
(1,567 |
) |
Lease liabilities |
|
|
(6,626 |
) |
|
|
(8,589 |
) |
Other non-current liabilities |
|
|
210 |
|
|
|
274 |
|
Net cash used in operating activities |
|
|
(35,494 |
) |
|
|
(72,625 |
) |
|
|
|
|
|
|
|
||
Investing Activities: |
|
|
|
|
|
|
||
Capital expenditures |
|
|
(7,938 |
) |
|
|
(11,367 |
) |
Cash paid for business acquisitions, net of cash acquired |
|
|
(5,010 |
) |
|
|
1,125 |
|
Purchases of short-term investments |
|
|
(7,369 |
) |
|
|
- |
|
Net cash used in investing activities |
|
|
(20,317 |
) |
|
|
(10,242 |
) |
|
|
|
|
|
|
|
||
Financing Activities: |
|
|
|
|
|
|
||
Proceeds from Business Combination |
|
|
- |
|
|
|
175,000 |
|
Issuance costs of Common Stock |
|
|
- |
|
|
|
(45,242 |
) |
Proceeds from long-term debt, net of issuance costs |
|
|
11,500 |
|
|
|
166,014 |
|
Principal payments of long-term debt |
|
|
(107 |
) |
|
|
(189,105 |
) |
Proceeds from exercise of public warrants |
|
|
- |
|
|
|
4,498 |
|
Proceeds from exercise of stock options and ESPP purchases |
|
|
684 |
|
|
|
453 |
|
Repurchase of common stock |
|
|
- |
|
|
|
(88 |
) |
Net cash provided by financing activities |
|
|
12,077 |
|
|
|
111,530 |
|
|
|
|
|
|
|
|
||
Effects of exchange rates on cash |
|
|
(189 |
) |
|
|
(449 |
) |
|
|
|
|
|
|
|
||
Net change in cash, cash equivalents, and restricted cash |
|
|
(43,923 |
) |
|
|
28,214 |
|
Cash, cash equivalents, and restricted cash, beginning of period |
|
|
61,223 |
|
|
|
33,009 |
|
Cash, cash equivalents, and restricted cash, end of period |
|
$ |
17,300 |
|
|
$ |
61,223 |
|
|
|
|
|
|
|
|
||
Supplemental Noncash Investing and Financing Activities: |
|
|
|
|
|
|
||
Issuance of Class A common stock upon redemption of preferred stock |
|
$ |
- |
|
|
$ |
475,781 |
|
Issuance of Class A common stock and Class B common stock in connection with Business Combination |
|
$ |
- |
|
|
$ |
346,797 |
|
Acquisition of warrant liabilities |
|
$ |
- |
|
|
$ |
34,947 |
|
Accretion of preferred stock to redemption value |
|
$ |
- |
|
|
$ |
26,570 |
|
Issuance of common stock in connection with business acquisitions |
|
$ |
9,539 |
|
|
$ |
8,590 |
|
Warrants issued in conjunction with long-term debt issuance |
|
$ |
178 |
|
|
$ |
436 |
|
Issuance of Class A common stock upon exercise of public warrants |
|
$ |
- |
|
|
$ |
265 |
|
Fees payable to debt holders settled through increase of debt principal |
|
$ |
- |
|
|
$ |
100 |
|
Property and equipment purchases in accounts payable |
|
$ |
161 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
||
Supplemental Cash Flow Activities: |
|
|
|
|
|
|
||
Cash paid for interest |
|
$ |
20,679 |
|
|
$ |
35,157 |
|
Cash paid for taxes |
|
$ |
55 |
|
|
$ |
55 |
|
Non-GAAP Financial Measures
In addition to financial measures prepared in accordance with
Adjusted Revenue
Adjusted revenue represents revenue adjusted to include amounts that would have been recognized if deferred revenue was not adjusted to fair value in connection with acquisition accounting. Adjusted revenue is presented because we use this measure to evaluate performance of our business against prior periods and believe it is useful for investors as an indicator of the underlying performance of our business. Adjusted revenue is not a recognized term under
Adjusted Gross Profit and Adjusted Gross Profit Margin
We define Adjusted Gross Profit as Adjusted 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 Adjusted 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 Adjusted 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.
Adjusted Revenues
The following table presents our calculation of Adjusted Revenues for the periods presented, and a reconciliation of this measure to our GAAP revenues for the same periods:
|
|
(Unaudited) |
|
|
|
|
|
|
|
|||||||
|
|
Three Months Ended December 31, |
|
|
Twelve Months Ended December 31, |
|
||||||||||
(In thousands) |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Subscription revenue |
|
$ |
31,096 |
|
|
$ |
27,336 |
|
|
$ |
119,082 |
|
|
$ |
100,522 |
|
Deferred revenue adjustment |
|
|
- |
|
|
|
43 |
|
|
|
- |
|
|
|
1,896 |
|
Adjusted subscription revenue |
|
|
31,096 |
|
|
|
27,379 |
|
|
|
119,082 |
|
|
|
102,418 |
|
Advisory, advertising, and other revenue |
|
|
3,169 |
|
|
|
4,113 |
|
|
|
13,563 |
|
|
|
13,243 |
|
Adjusted Revenues |
|
$ |
34,265 |
|
|
$ |
31,492 |
|
|
$ |
132,645 |
|
|
$ |
115,661 |
|
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:
|
|
(Unaudited) |
|
|
|
|
|
|
|
|||||||
|
|
Three Months Ended December 31, |
|
|
Twelve Months Ended December 31, |
|
||||||||||
(In thousands) |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Adjusted Revenues |
|
$ |
34,265 |
|
|
$ |
31,492 |
|
|
$ |
132,645 |
|
|
$ |
115,661 |
|
Costs of revenue |
|
|
(11,388 |
) |
|
|
(8,356 |
) |
|
|
(40,251 |
) |
|
|
(31,937 |
) |
Amortization of intangible assets |
|
|
5,407 |
|
|
|
2,430 |
|
|
|
15,861 |
|
|
|
9,094 |
|
Adjusted Gross Profit |
|
$ |
28,284 |
|
|
$ |
25,566 |
|
|
$ |
108,255 |
|
|
$ |
92,818 |
|
Adjusted Gross Profit Margin |
|
|
83 |
% |
|
|
81 |
% |
|
|
82 |
% |
|
|
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:
|
|
(Unaudited) |
|
|
|
|
|
|
|
|||||||
|
|
Three Months Ended December 31, |
|
|
Twelve Months Ended December 31, |
|
||||||||||
(In thousands) |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Net loss |
|
$ |
(50,748 |
) |
|
$ |
(42,544 |
) |
|
$ |
(115,461 |
) |
|
$ |
(218,257 |
) |
Provision (benefit) from income taxes |
|
|
42 |
|
|
|
(418 |
) |
|
|
223 |
|
|
|
(3,254 |
) |
Depreciation and amortization |
|
|
8,644 |
|
|
|
5,409 |
|
|
|
28,718 |
|
|
|
20,783 |
|
Interest expense, net |
|
|
8,087 |
|
|
|
6,069 |
|
|
|
29,940 |
|
|
|
95,741 |
|
EBITDA |
|
|
(33,975 |
) |
|
|
(31,484 |
) |
|
|
(56,580 |
) |
|
|
(104,987 |
) |
Deferred revenue adjustment (a) |
|
|
- |
|
|
|
43 |
|
|
|
- |
|
|
|
1,896 |
|
Stock-based compensation |
|
|
8,845 |
|
|
|
7,179 |
|
|
|
27,057 |
|
|
|
38,047 |
|
Change in fair value of warrant and derivative liabilities (b) |
|
|
2,867 |
|
|
|
5,778 |
|
|
|
(15,983 |
) |
|
|
(12,747 |
) |
Loss on debt extinguishment, net |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
45,250 |
|
Other non-cash (gains) charges (c) |
|
|
24,295 |
|
|
|
217 |
|
|
|
29,522 |
|
|
|
(9,069 |
) |
Acquisition related costs (d) |
|
|
- |
|
|
|
178 |
|
|
|
1,391 |
|
|
|
1,181 |
|
Employee severance costs (e) |
|
|
729 |
|
|
|
426 |
|
|
|
2,039 |
|
|
|
575 |
|
Non-capitalizable debt raising costs |
|
|
226 |
|
|
|
- |
|
|
|
542 |
|
|
|
403 |
|
Other infrequent costs (f) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
20 |
|
Costs incurred related to the transaction (g) |
|
|
- |
|
|
|
743 |
|
|
|
415 |
|
|
|
2,993 |
|
Loss contingency (h) |
|
|
- |
|
|
|
11,702 |
|
|
|
4,091 |
|
|
|
11,988 |
|
Adjusted EBITDA |
|
$ |
2,987 |
|
|
$ |
(5,218 |
) |
|
$ |
(7,506 |
) |
|
$ |
(24,450 |
) |
Adjusted EBITDA Margin |
|
|
9 |
% |
|
|
(17 |
)% |
|
|
(6 |
)% |
|
|
(21 |
)% |
| (a) | Reflects deferred revenue fair value adjustments arising from the purchase price allocation in connection with the 2021 Acquisitions. |
|
| (b) | Reflects the non-cash impact from the mark to market adjustments on our financial instruments. |
|
| (c) |
Reflects the non-cash impact of the following for fiscal year 2023: (i) impairment of goodwill of |
|
| (d) | Reflects the costs incurred to identify, consider, and complete business combination transactions consisting of advisory, legal, and other professional and consulting costs. |
|
| (e) | Severance costs associated with workforce changes related to business realignment actions. |
|
| (f) |
Costs incurred related to litigation we believe to be outside of our normal course of business totaling |
|
| (g) | Includes non-capitalizable transaction costs incurred within one year of the Business Combination. |
|
| (h) |
Reflects (i) |
Key Performance Indicators
We also 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
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 Acquisitions are not included in our NRR for the year ended December 31, 2022. 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.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240312521984/en/
Media
Nicholas Graham
FiscalNote
press@fiscalnote.com
Investors
Sara Buda
FiscalNote
IR@fiscalnote.com
Source: FiscalNote
FAQ
What is the total consideration for the divestiture of Board.org by FiscalNote?
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What was the adjusted EBITDA of FiscalNote in Q4 2023?
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What were FiscalNote's operational achievements in 2023?
What is FiscalNote's outlook for 2024 in terms of revenue and adjusted EBITDA?
