FiscalNote Reports First Quarter 2024 Financial Results
FiscalNote Holdings, Inc. (NYSE: NOTE) reported Q1 2024 total revenues of $32.1 million and adjusted EBITDA of $1.2 million, exceeding guidance. They completed Board.org divestiture for up to $103.0 million, accelerating AI product strategy, and roadmap. FiscalNote focuses on delivering AI-enabled policy and market information, aiming for profitability in 2024. The company reaffirmed FY 2024 forecast and issued Q2 2024 forecast.
Q1 2024 total revenues of $32.1 million and adjusted EBITDA of $1.2 million, exceeding guidance
Completed Board.org divestiture for up to $103.0 million, strengthening balance sheet
Accelerated AI product strategy and roadmap, launching FiscalNoteGPT and Copilot Creator Reasoning Engine
Expected profitability in FY 2024, focusing on delivering AI-enabled policy and market information
Reaffirmed FY 2024 forecast and issued Q2 2024 forecast
Operating expenses decreased by 26% in Q1 2024 compared to the previous year
Run-Rate Revenue declined by 9% in Q1 2024 due to the impact of divestiture of Board.org
ARR declined by 8% in Q1 2024, mainly due to the divestiture of Board.org
Insights
Outlines Accelerated AI Product Strategy and Roadmap
-
Reports Q1 2024 total revenues of
$32.1 million $1.2 million - Reaffirms forecast for FY 2024 and issues forecast for Q2 2024
-
Successfully completes Board.org divestiture for a total consideration of up to
$103.0 million - Accelerates its strategy of developing revolutionary AI Copilots to transform Legal, Regulatory, and Policy workflows using a new, proprietary modular framework
- Board of Directors continues to review all strategic options available to the Company to maximize shareholder value
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
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
|
|
|
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 +/- |
|||||||||||
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 $95.0 million $65.7 million - Amended our Credit Agreement with our senior lenders to, among other things, extend the commencement of amortization payments to August 15, 2026, leaving the maturity date of July 2027 unchanged.
- Introduced the FiscalNote Global Intelligence Copilot, an AI-powered assistant to help customers assess the shifting global landscape, manage emerging developments, and mitigate risk involved with the world’s most pressing geopolitical, macroeconomic, security, and regulatory challenges. The Copilot is the first in a series of AI-powered copilots the Company will launch as it accelerates its roadmap of groundbreaking AI agents to transform legal, regulatory, and legislative workflows.
- Secured a six-figure, multi-year agreement with a major state legislature for FiscalNote’s Fireside constituent relationship management solution.
- Announced the launch of StressLens, a pioneering and innovative new AI product that equips FiscalNote customers with the real-time ability to quantify the behavioral impact of leading decision makers and influencers across the financial, regulatory, and government domains.
- European information, operational and security risk, and large enterprise business sectors showing strong, outperforming growth as Company invests behind growth.
Commenting on highlights from the first quarter, FiscalNote Chief Financial Officer, Jon Slabaugh, said, “During the quarter, we completed an important transaction with the divestiture of Board.org, a non-core product offering that represented approximately
First Quarter Financial Performance
Revenue(2)
|
|
Three Months Ended March 31, |
|
|
|
|
||||||
($ 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
For Q1 2024, advisory, advertising, and other revenue decreased
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
For Q1 2024, ARR declined
For Q1 2024, NRR was
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.
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 |
|
|
Unchanged |
|
|
Total Run-Rate Revenue (3) |
|
|
Unchanged |
|
|
Adjusted EBITDA (1) (4) |
|
|
Unchanged |
|
|
Q2 2024
|
Current Range |
($ in millions) |
As of 05/09/2024 |
Total Revenues |
Approximately |
Adjusted EBITDA (1) (4) |
Approximately |
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
-
By phone
-
Dial for the
U.S. orCanada 1 (888) 660-6510 or for International 1 (929) 203-0882 and use the conference ID 1271923.
-
Dial for the
-
By webcast
- Visit the Investor Relations section of the Company’s website.
REPLAY
-
By phone (available through Thursday, May 23, 2024)
-
Dial for the
U.S. orCanada 1 (800) 770-2030 or for International 1 (609) 800-9909 and enter the conference ID 1271923.
-
Dial for the
-
By webcast
- Visit the Investor Relations section of the Company’s website.
Footnotes
(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. |
|
(2) |
All financial information incorporated within this press release is unaudited. |
|
(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. |
|
(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
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 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 (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 |
|
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 ( |
|
|
11 |
|
|
|
11 |
|
Class B Common stock ( |
|
|
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 |
|
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 |
|
Non-GAAP Financial Measures
In addition to financial measures prepared in accordance with
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 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 |
)% |
(a) |
Reflects the gain on disposal from the sale of Board.org on March 11, 2024. |
|
(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: (i) charge of |
|
(d) |
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. |
|
(e) |
Severance costs associated with workforce changes related to business realignment actions. |
|
(f) |
Includes non-capitalizable transaction costs incurred within one year of the Business Combination with DSAC. |
|
(g) |
Reflects accounting and legal costs incurred associated with the settlement with GPO FN Noteholder LLC totaling |
|
(h) |
Reflects costs incurred related to the Special Committee. |
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
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.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240509418117/en/
Media
Nicholas Graham
FiscalNote
press@fiscalnote.com
Investor Relations
FiscalNote
IR@fiscalnote.com
Source: FiscalNote
FAQ
What were FiscalNote's Q1 2024 total revenues and adjusted EBITDA?
What was the total consideration for Board.org divestiture?
What AI products did FiscalNote launch in Q1 2024?
What financial forecasts did FiscalNote provide for FY 2024?
What was the change in Run-Rate Revenue for Q1 2024 compared to the previous year?
