FiscalNote Reports Second Quarter 2024 Financial Results

Rhea-AI Summary

FiscalNote Holdings, Inc. (NYSE: NOTE) reported Q2 2024 financial results, exceeding previous forecasts with total revenues of $29.2 million and adjusted EBITDA of $1.8 million. This marks the fourth consecutive quarter of positive adjusted EBITDA. Key highlights include:

- Subscription revenue at ~93% of total revenues
- Gross margin improved to 77%
- Net loss reduced to $12.8 million, a 59% improvement
- Cash and cash equivalents at $31.3 million

The company raised its full-year 2024 adjusted EBITDA forecast to approximately $8 million, while revising total revenue expectations to approximately $121 million. FiscalNote continues to focus on profitability and invest in AI-driven products to drive future growth.

Positive

• Exceeded Q2 2024 forecast with total revenues of $29.2 million and adjusted EBITDA of $1.8 million
• Fourth consecutive quarter of positive adjusted EBITDA
• Improved gross margin to 77%, up 600 basis points year-over-year
• Reduced net loss by 59% to $12.8 million compared to Q2 2023
• Raised full-year 2024 adjusted EBITDA forecast to approximately $8 million
• Maintained high subscription revenue at ~93% of total revenues
• Launched new AI-powered products and partnerships to drive future growth

Negative

• Total revenues declined 11% year-over-year to $29.2 million
• Run-Rate Revenue (RRR) decreased 11% to $121 million compared to Q2 2023
• Annual Recurring Revenue (ARR) declined 9% to $109 million year-over-year
• Revised down full-year 2024 total revenue forecast to approximately $121 million
• Experienced lower than expected customer retention rates in recent months

Exceeds Previous Forecast and Reports Fourth Consecutive Quarter of Positive Adjusted EBITDA While Implementing Accelerated AI Product Strategy and Roadmap 

• Reports Q2 2024 total revenues of $29.2 million and adjusted EBITDA of $1.8 million⁽¹⁾, both exceeding previously provided forecast
• Records fourth consecutive quarter of positive adjusted EBITDA, FiscalNote’s first year of positive adjusted EBITDA on a trailing LTM basis
• Provides Q3 2024 forecast with total revenues of approximately $29 million and adjusted EBITDA of approximately $2 million; continued focus on profitability, raises and tightens full year adjusted EBITDA forecast, with higher expected full year adjusted EBITDA margins
• Maintains commitment to invest in new products and product enhancements to drive higher customer engagement, retention rates, revenue growth and operating leverage anticipated in 2025
• Board of Directors continues to review all strategic options available to the Company to maximize shareholder value

WASHINGTON--(BUSINESS WIRE)-- 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 second quarter ended June 30, 2024.

These quarterly results mark another quarter of exceeding expected results driven by a blue chip customer base, durable recurring revenue and high gross margins, which form the basis of the Company’s increasing adjusted EBITDA and ongoing leadership in delivering AI-enabled policy and market information. The second quarter of 2024 represented a $6.1 million improvement in adjusted EBITDA year over year and marked the fourth straight quarter of adjusted EBITDA profitability for FiscalNote – its first year of positive adjusted EBITDA on a trailing LTM basis. The enhanced adjusted EBITDA profitability and the improved cash position from the previous quarter divestiture of Board.org position the Company strongly for investment and growth in the future.

“During the second quarter, we continued to execute on our accelerated AI product strategy and roadmap, including a new Copilot launch and a successful and impactful AI Product Day that reached both current and prospective customers as well as stakeholders from the investment community,” said Tim Hwang, Chairman, CEO, and Co-founder of FiscalNote. “We continue to assess avenues to leverage our market leading political, legislative, and regulatory policy data sets for the benefit of our global customers while we pursue our long term growth strategy of increased market share and improving revenue growth and sustained profitability.”

Financial Highlights⁽²⁾

Q2 2024 vs. Q2 2023

[Note - All amounts for the three months ended June 30, 2023 include contributions from the Board.org business, which the Company divested on March 11, 2024.]

		Three Months Ended June 30,
($ in millions)		2024				2023				% Change
Total Revenues (formerly "GAAP Revenue")		$	29.2			$	32.8			(11)	%
Subscription Revenue as % of Total Revenues			~93	%			~90	%
Gross Profit		$	22.4			$	23.4			(4)	%
Gross Margin			77	%			71	%		600	bps
Adjusted Gross Profit (1)		$	24.9			$	26.4			(5)	%
Adjusted Gross Margin (1)			85	%			80	%		500	bps
Net Loss		$	(12.8)			$	(31.0)			59	%
Adjusted EBITDA (1)		$	1.8			$	(4.3)				*
Adjusted EBITDA Margin (1)			6	%			(13)	%
Cash and Cash Equivalents		$	31.3			$	38.1
bps - Basis Points
* - percentage change is greater than +/- 100%

Second Quarter and Recent Operational Highlights

• Showcased the next stage of AI leadership and innovation during the “AI Product Day 2024” event which highlighted the Company’s AI-powered products and accelerated product roadmap and strategy for 2024 and beyond.
• Introduced FiscalNote Copilot for Policy, the second innovative AI Copilot from the Company, designed to enable increased efficiency and impact on policy and legislative workflows for global government affairs professionals.
• Announced a new strategic partnership with Creolytix, integrating the Company’s Dragonfly offering with Creolytix’s platform to empower enterprises with world-class global intelligence in their risk management programs.
• Launched a new strategic partnership which will integrate FiscalNote’s Risk Connector, Dragonfly, and Global Intelligence Copilot products with Empowered Systems’ third-party risk management solution platform.
• Announced a series of new and expanded large customer contract agreements with a wide array of leading global corporate enterprises spanning diversified market sectors.
• Unveiled the integration of new AI enhancements to FiscalNote’s Fireside offering - the leading all-in-one constituent relationship management SaaS platform - to optimize and streamline the management and responsiveness of lawmaker communications and casework.
• Launched the EU Transposition Tracker to enable global customers to monitor and take action on the transposition of critical EU Directives across the various member states.
• Announced the expansion of its award-winning Roll Call media property to now include data from Factba.se - the go-to trusted AI database for historical and current Presidential remarks - as well as the integration of StressLens, a groundbreaking innovation that equips customers with the real-time ability to decode the human element, to provide users with instant, AI-driven analysis of the Presidential candidates during the 2024 election campaign.
• FiscalNote’s Dragonfly offering received Band 1 recognition for global-wide Political Risk in Chambers and Partners’ Crisis and Risk Management Guide 2024 for the third consecutive year - one of only two global intelligence companies to attain the highest level of recognition.
• Published its third annual corporate Sustainability Overview for fiscal year 2023, “Our Progress Toward a Sustainable Future: FiscalNote's Sustainability & Social Impact Efforts.”

Commenting on the quarter, FiscalNote Chief Financial Officer, Jon Slabaugh, said, “Our second quarter results exceeded our forecast, as we continued to both invest in our product strategy and extract operating efficiencies. Looking ahead, for the full year 2024 we raised and tightened our profitability forecast, reflecting the realization of continued operational efficiencies. At the same time, our results reflect the impact of our focus and reallocation of capital to higher returning products and customer segments to improve margins and profitability. To that end, we continue to make investments in new products and product enhancements, including those featured in our June AI Product Day, which we expect to drive higher customer engagement, retention rates, and revenue growth in 2025 and beyond.”

Second Quarter Financial Performance

Revenue⁽²⁾

		Three Months Ended June 30,
($ in millions)		2024				2023				% Change
Subscription revenue		$	27.1			$	29.5			(8)%
Advisory, advertising, and other revenue			2.1				3.4			(38)%
Total Revenues		$	29.2			$	32.8			(11)%

For Q2 2024, subscription revenue declined $2.4 million, or 8%, versus prior year, due primarily to the impact of the Board.org sale. Excluding the impact of Board.org, subscription revenue increased by $0.8 million, or 3%.

For Q2 2024, advisory, advertising, and other revenue decreased $1.3 million, or 38%, versus prior year, due primarily to the discontinuation of certain non-strategic products and related services. Excluding the impact of Board.org, advisory, advertising, and other revenue decreased $1.0 million, or 31%.

Key Performance Indicators⁽³⁾

		As of June 30,
($ in millions)		2024				2023				% Change
Run-Rate Revenue (RRR)		$	121			$	135				(11	)%
Pro Forma RRR*		$	121			$	121				0	%
Annual Recurring Revenue (ARR)		$	109			$	120				(9	)%
Pro Forma ARR*		$	109			$	107				2	%
Net Revenue Retention (NRR)			98	%			98	%

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

As of June 30, 2024, RRR declined $14 million, or 10%, versus prior year, principally due to the impact of the divestiture of Board.org. Excluding Board.org, RRR is flat compared to June 30, 2023.

As of June 30, 2024, ARR declined $11 million, or 9%, versus prior year, principally due to the impact of the divestiture of Board.org. Excluding Board.org, ARR increased approximately $2 million, or 2%, compared to June 30, 2023.

As of June 30, 2024, NRR was 98%, level with the prior year six month period as of June 30, 2023.

Operating Expenses⁽²⁾

		Three Months Ended June 30,
($ in millions)		2024				2023				% Change
Cost of revenues, including amortization		$	6.9			$	9.5				(28	)%
Research and development			3.2				4.5				(29	)%
Sales and marketing			9.0				11.7				(23	)%
Editorial			4.4				4.7				(6	)%
General and administrative			11.3				16.2				(30	)%
Amortization of intangible assets			2.4				2.9				(17	)%
Other			-				0.3			NM
Total operating expenses		$	37.2			$	49.8				(25	)%
NM - Not meaningful

In Q2 2024, operating expenses decreased versus prior year, primarily due to the sale of Board.org, ongoing operating efficiency measures instituted throughout 2023 and 2024, as well as the costs associated with sunset products. On a pro forma basis, excluding amortization expense, stock-based compensation, and the impact of the sale of Board.org, operating expenses decreased approximately $6 million, or 16%.

Financial Forecast

Continuing the Company’s focus on profitable growth, the Company has updated its financial forecast for full year 2024 and issued its initial forecast for Q3 2024. In both instances, such forecasts reflect management’s expectations based on the most recent information available. After FiscalNote marked the fourth straight quarter of adjusted EBITDA profitability, marking FiscalNote’s first year of positive adjusted EBITDA results on a trailing LTM basis, the Company expects 2024 to deliver its first full calendar year of adjusted EBITDA profitability in the Company’s history.

Full Year 2024

($ in millions)	Current Forecast Provided on 08/08/2024		Action		Previous Forecast Provided on 05/09/2024
Total Revenues	Approximately $121		Revised		$123 - $127
Adjusted EBITDA (1) (4)	Approximately $8		Revised		$7 - $9

Q3 2024

	Current Forecast
($ in millions)	Provided on 08/08/2024
Total Revenues	Approximately $29
Adjusted EBITDA (1) (4)	Approximately $2

The forecast raises and tightens full year Adjusted EBITDA as the Company continues to focus on reallocating resources towards higher returning sources of revenue and investments in improving retention rates, margins and profitability among our subscription customers. Additionally, the revision to total revenues for the full year reflects the impact to the second half of 2024 from recently experienced lower than expected rates of customer retention driven by a number of factors, including macroeconomic headwinds and delays in the launch of certain product enhancements. While these impacts have temporarily led to slower than expected ARR growth, the Company expects continued investments in product innovation and platform investments focused on improved customer experience to drive higher customer engagement, retention rates and, as a result, revenue growth and improved operating leverage as it progresses through the second half of 2024 and into 2025. The Company expects to accelerate growth rates in 2025 as it re-allocates sales and product resources to high-performing offerings and realizes the benefits of its recent product and organizational initiatives.

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

The Company management will host a conference call at 5:00 pm ET today, Thursday, August 8, 2024, to discuss these financial results.

LIVE

• By phone
• Dial for the U.S. or Canada 1 (800) 715-9871 or for International 1 (646) 307-1963 and enter the conference ID 2431537.
• By webcast
• Visit the Investor Relations section of the Company’s website.

REPLAY

• By phone (available through Thursday, August 22, 2024)
• Dial for the U.S. or Canada 1 (800) 770-2030 or for International 1 (647) 362-9199 and enter the conference ID 2431537.
• 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, Dragonfly, 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.

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 achieve and sustain organic growth; changes in FiscalNote’s strategy, future operations, financial position, estimated revenue and losses, forecasts, projected costs, prospects and plans; FiscalNote’s future capital requirements; FiscalNote’s ability to service its repayment obligations and maintain compliance with covenants and restrictions under its existing debt agreements; 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; any cost reduction initiatives undertaken by FiscalNote; FiscalNote’s ability to successfully integrate acquired businesses and services, and subsequently grow acquired businesses; risks associated with international operations, including compliance complexity and costs, increased exposure to fluctuations in currency exchange rates, political, social and economic instability, and supply chain disruptions; FiscalNote’s ability to develop, enhance, and integrate its existing platforms, products, and services; FiscalNote’s estimated total addressable market and other industry and performance projections; FiscalNote's reliance on third-party systems and data, its ability to integrate such systems and data with its solutions and its potential inability to continue to support integration; potential technical disruptions, cyberattacks, security, privacy or data breaches or other technical or security incidents that affect FiscalNote’s networks or systems or those of its service providers; FiscalNote’s ability to obtain and maintain accurate, comprehensive, or reliable data to support its products and services; FiscalNote’s ability to introduce new features, integrations, capabilities, and enhancements to its products and services; FiscalNote’s ability to maintain and improve its methods and technologies, and anticipate new methods or technologies, for data collection, organization, and analysis to support its products and services; competition and competitive pressures in the markets in which FiscalNote operates, including larger well-funded companies shifting their existing business models to become more competitive with FiscalNote; FiscalNote’s ability to protect and maintain its brands; FiscalNote’s ability to comply with laws and regulations in connection with selling products and services to U.S. and foreign governments and other highly regulated industries; FiscalNote’s ability to retain or recruit key personnel; FiscalNote’s ability to effectively maintain and grow its research and development team and conduct research and development; FiscalNote’s ability to adapt its products and services for changes in laws and regulations or public perception, or changes in the enforcement of such laws, relating to artificial intelligence, machine learning, data privacy and government contracts; adverse general economic and market conditions reducing spending on our products and services; the outcome of any known and unknown litigation and regulatory proceedings; FiscalNote’s ability to successfully establish and maintain public company-quality internal control over financial reporting; the ability to adequately protect FiscalNote’s intellectual property rights; and the possibility that the strategic review undertaken by the Board of Directors does not result in any transaction or other outcome or that any outcome is disruptive to operations and impacts financial performance.

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. Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (in thousands, except shares and per share data) (Unaudited)
		Three Months Ended June 30,								Six Months Ended June 30,
		2024				2023				2024				2023
Revenues:
Subscription		$	27,151			$	29,462			$	56,777			$	57,929
Advisory, advertising, and other			2,095				3,380				4,581				6,442
Total revenues			29,246				32,842				61,358				64,371
Operating expenses: (1)
Cost of revenues, including amortization			6,863				9,485				14,107				18,422
Research and development			3,205				4,510				6,685				9,630
Sales and marketing			9,001				11,689				18,416				23,987
Editorial			4,453				4,752				9,113				9,017
General and administrative			11,260				16,174				27,336				34,395
Amortization of intangible assets			2,420				2,901				5,105				5,715
Impairment of goodwill			-				-				-				5,837
Transaction costs (gains), net			-				309				(4	)			1,717
Total operating expenses			37,202				49,820				80,758				108,720
Operating loss			(7,956	)			(16,978	)			(19,400	)			(44,349	)
Gain on sale of business			-				-				(71,599	)			-
Interest expense, net			5,320				7,154				12,682				13,835
Change in fair value of financial instruments			(854	)			2,987				(327	)			(11,693	)
Loss on settlement			-				3,474				-				3,474
Other expense (income), net			18				167				259				38
Net (loss) income before income taxes			(12,440	)			(30,760	)			39,585				(50,003	)
Provision from income taxes			324				213				1,750				243
Net (loss) income			(12,764	)			(30,973	)			37,835				(50,246	)
Other comprehensive income (loss)			55				328				(61	)			(31	)
Total comprehensive (loss) income		$	(12,709	)		$	(30,645	)		$	37,774			$	(50,277	)
Earnings (Loss) per share attributable to common shareholders:
Basic and Diluted		$	(0.09	)		$	(0.23	)		$	0.28			$	(0.38	)
Weighted average shares used in computing earnings (loss) per share attributable to common shareholders:
Basic and Diluted			134,407,109				134,117,122				132,763,763				133,601,798

(1) Amounts include stock-based compensation expenses, as follows:
		Three Months Ended June 30,								Six Months Ended June 30,
		2024				2023				2024				2023
Cost of revenues, including amortization		$	107			$	82			$	208			$	140
Research and development			374				362				684				752
Sales and marketing			270				317				696				677
Editorial			165				106				265				172
General and administrative			2,613				4,615				7,851				10,247

FiscalNote Holdings, Inc. Condensed Consolidated Balance Sheets (in thousands, except shares, and par value)
		(Unaudited)
		June 30, 2024				December 31, 2023
Assets
Current assets:
Cash and cash equivalents		$	30,649			$	16,451
Restricted cash			678				849
Short-term investments			7,055				7,134
Accounts receivable, net			13,553				16,931
Costs capitalized to obtain revenue contracts, net			3,127				3,326
Prepaid expenses			3,198				2,593
Other current assets			3,690				2,521
Total current assets			61,950				49,805
Property and equipment, net			5,606				6,141
Capitalized software costs, net			14,222				13,372
Noncurrent costs capitalized to obtain revenue contracts, net			3,490				4,257
Operating lease assets			17,495				17,782
Goodwill			164,431				187,703
Customer relationships, net			45,241				53,917
Database, net			17,720				18,838
Other intangible assets, net			15,635				18,113
Other non-current assets			475				633
Total assets		$	346,265			$	370,561
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of long-term debt		$	67			$	105
Accounts payable and accrued expenses			7,813				12,909
Deferred revenue, current portion			43,920				43,530
Customer deposits			1,286				3,032
Contingent liabilities from acquisitions, current portion			114				130
Operating lease liabilities, current portion			3,517				3,066
Other current liabilities			4,656				2,878
Total current liabilities			61,373				65,650
Long-term debt, net of current maturities			145,825				222,310
Deferred tax liabilities			1,542				2,178
Deferred revenue, net of current portion			210				875
Operating lease liabilities, net of current portion			24,845				26,162
Public and private warrant liabilities			2,765				4,761
Other non-current liabilities			2,813				5,166
Total liabilities			239,373				327,102
Commitment and contingencies
Stockholders' equity:
Class A Common stock ($0.0001 par value, 1,700,000,000 authorized, 130,893,833 and 121,679,829 issued and outstanding at June 30, 2024 and December 31, 2023, respectively)			13				11
Class B Common stock ($0.0001 par value, 9,000,000 authorized, 8,290,921 issued and outstanding at June 30, 2024 and December 31, 2023, respectively)			1				1
Additional paid-in capital			880,435				860,485
Accumulated other comprehensive income ( loss)			5,024				(622	)
Accumulated deficit			(778,581	)			(816,416	)
Total stockholders' equity			106,892				43,459
Total liabilities and stockholders' equity		$	346,265			$	370,561

FiscalNote Holdings, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) (in thousands)
		Six Months Ended June 30,
		2024				2023
Operating Activities:
Net income (loss)		$	37,835			$	(50,246	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation			603				671
Amortization of intangible assets and capitalized software development costs			10,040				11,373
Amortization of deferred costs to obtain revenue contracts			1,885				1,648
Gain on sale of business			(71,599	)			-
Impairment of goodwill			-				5,837
Non-cash operating lease expense			1,147				2,366
Stock-based compensation			9,704				11,988
Loss on settlement			-				3,474
Other non-cash expenses			-				426
Bad debt expense			243				229
Change in fair value of acquisition contingent consideration			(4	)			(333	)
Unrealized loss on securities			80				-
Change in fair value of financial instruments			(327	)			(11,693	)
Deferred income taxes			(561	)			214
Paid-in-kind interest, net			3,964				2,042
Non-cash interest expense			1,469				2,130
Changes in operating assets and liabilities:
Accounts receivable, net			1,939				1,644
Prepaid expenses and other current assets			(1,628	)			2,284
Costs capitalized to obtain revenue contracts, net			(1,479	)			(1,910	)
Other non-current assets			183				18
Accounts payable and accrued expenses			(2,662	)			(4,914	)
Deferred revenue			8,974				9,595
Customer deposits			(774	)			(1,233	)
Other current liabilities			1,791				(797	)
Contingent liabilities from acquisitions, net of current portion			(13	)			(39	)
Operating lease liabilities			(1,737	)			(4,974	)
Other non-current liabilities			(61	)			(6	)
Net cash used in operating activities			(988	)			(20,206	)
Investing Activities:
Capital expenditures			(4,433	)			(4,086	)
Cash proceeds from the sale of business, net			91,384				-
Cash paid for business acquisitions, net of cash acquired			-				(5,010	)
Net cash provided by (used in) investing activities			86,951				(9,096	)
Financing Activities:
Proceeds from long-term debt, net of issuance costs			801				6,000
Principal payments of long-term debt			(65,754	)			(53	)
Payment of deferred financing costs			(7,068	)			-
Proceeds from exercise of stock options and ESPP purchases			196				617
Net cash (used in) provided by financing activities			(71,825	)			6,564
Effects of exchange rates on cash			(111	)			(383	)
Net change in cash, cash equivalents, and restricted cash			14,027				(23,121	)
Cash, cash equivalents, and restricted cash, beginning of period			17,300				61,223
Cash, cash equivalents, and restricted cash, end of period		$	31,327			$	38,102
Supplemental Noncash Investing and Financing Activities:
Issuance of common stock for conversion of debt		$	9,967			$	-
Warrants issued in conjunction with long-term debt issuance		$	-			$	178
Amounts held in escrow related to the sale of Board.org		$	285			$	-
Property and equipment purchases included in accounts payable		$	121			$	343
Supplemental Cash Flow Activities:
Cash paid for interest		$	8,509			$	9,924
Cash paid for taxes		$	172			$	49

Non-GAAP Financial Measures

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

Adjusted Gross Profit and Adjusted Gross Profit Margin

We define Adjusted Gross Profit as Total Revenues minus cost of revenues, including amortization of capitalized software development costs and acquired developed technology, 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 June 30,								Six Months Ended June 30,
(In thousands)		2024				2023				2024				2023
Total revenues		$	29,246			$	32,842			$	61,358			$	64,371
Costs of revenue, including amortization of capitalized software development costs and acquired developed technology			(6,863	)			(9,485	)			(14,107	)			(18,422	)
Gross Profit		$	22,383			$	23,357			$	47,251			$	45,949
Gross Profit Margin			77	%			71	%			77	%			71	%
Gross Profit			22,383				23,357				47,251				45,949
Amortization of intangible assets			2,507				3,061				4,935				5,658
Adjusted Gross Profit		$	24,890			$	26,418			$	52,186			$	51,607
Adjusted Gross Profit Margin			85	%			80	%			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 June 30,								Six Months Ended June 30,
(In thousands)		2024				2023				2024				2023
Net loss		$	(12,764	)		$	(30,973	)		$	37,835			$	(50,246	)
Provision from income taxes			324				213				1,750				243
Depreciation and amortization			5,226				6,297				10,643				12,044
Interest expense, net			5,320				7,154				12,682				13,835
EBITDA			(1,894	)			(17,309	)			62,910				(24,124	)
Gain on sale of business (a)			-				-				(71,599	)			-
Stock-based compensation			3,529				5,482				9,704				11,988
Change in fair value of financial instruments (b)			(854	)			2,987				(327	)			(11,693	)
Other non-cash charges (c)			31				58				76				5,931
Acquisition and disposal related costs (d)			394				157				1,098				1,379
Employee severance costs (e)			91				381				198				750
Non-capitalizable debt raising costs			224				110				478				316
Business Combination with DSAC (f)			-				150				-				334
Loss contingency (g)			-				3,722				-				3,890
Costs incurred related to the Special Committee (h)			253				-				453				-
Adjusted EBITDA		$	1,774			$	(4,262	)		$	2,991			$	(11,229	)
Adjusted EBITDA Margin			6.1	%			(13.0	)%			4.9	%			(17.4	)%

(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 $49 in the first quarter of 2024 and $31 in the second quarter of 2024 related to the unrealized loss on investments; (ii) gain of $4 in the first quarter of 2024 from the change in fair value related to the contingent consideration and contingent compensation related to the 2021, 2022, and 2023 Acquisitions; (iii) impairment of goodwill of $5,837 in the first quarter of 2023, (iv) loss from equity method investment of $34 in the first quarter of 2023 and $56 in the second quarter of 2023, and (v) charge of $2 in the first quarter of 2023 and $2 in the second quarter of 2023 from the change in fair value related to the contingent consideration and contingent compensation related to the 2021, 2022, and 2023 Acquisitions.
(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 (i) $3,474 non-cash loss contingency charge related to the settlement with GPO FN Noteholder LLC recorded in the second quarter of 2023 and (ii) accounting and legal costs incurred associated with the settlement with GPO FN Noteholder LLC totaling $168 in the first quarter of 2023 and $248 in the second quarter of 2023.
(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 of our business and serve as meaningful measures of our ongoing operational performance.

Annual Recurring Revenue (“ARR”)

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

Run-Rate Revenue

Management also monitors Run-Rate Revenue, which we define as ARR plus non-subscription revenue earned during the last 12 months. We believe Run-Rate Revenue is an instructive 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. 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 June 30, 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.

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Media

Nicholas Graham

FiscalNote

press@fiscalnote.com

Investor Relations

Bob Burrows

FiscalNote

IR@fiscalnote.com

Source: FiscalNote

FAQ

What were FiscalNote's Q2 2024 financial results?

FiscalNote (NYSE: NOTE) reported Q2 2024 total revenues of $29.2 million and adjusted EBITDA of $1.8 million, both exceeding previous forecasts. The company also recorded its fourth consecutive quarter of positive adjusted EBITDA.

How did FiscalNote's Q2 2024 results compare to Q2 2023?

Compared to Q2 2023, FiscalNote's total revenues decreased by 11% to $29.2 million. However, the company improved its gross margin to 77% (up 600 basis points) and reduced its net loss by 59% to $12.8 million.

What is FiscalNote's updated financial forecast for 2024?

FiscalNote raised its full-year 2024 adjusted EBITDA forecast to approximately $8 million, while revising total revenue expectations to approximately $121 million. The company also provided a Q3 2024 forecast with total revenues of approximately $29 million and adjusted EBITDA of approximately $2 million.

What new products or initiatives did FiscalNote announce in Q2 2024?

FiscalNote introduced several new AI-powered products and partnerships, including FiscalNote Copilot for Policy, a strategic partnership with Creolytix, and the integration of AI enhancements to its Fireside offering. The company also launched the EU Transposition Tracker and expanded its Roll Call media property.