Reiterates its 2023 Guidance and Expectations to be Profitable in the Fourth Quarter of 2023 on an Adjusted EBITDA Basis
WASHINGTON–(BUSINESS WIRE)–FiscalNote Holdings, Inc. (NYSE: NOTE) (“FiscalNote” or the “Company”), a leading AI-driven enterprise SaaS technology provider of global policy and market intelligence, today announced financial results for the first quarter ended March 31, 2023. These results mark another quarter of delivering on expected results driven by durable recurring revenue and high gross margins, which form the basis of its expected approximately breakeven adjusted EBITDA in Q3 2023 and positive adjusted EBITDA by Q4 2023. The results demonstrate the Company’s ongoing leadership in delivering AI-enabled policy and market information that empowers organizations to mitigate risk and more confidently navigate their businesses in an increasingly complex global geopolitical, economic, and regulatory environment.
First Quarter 2023 Financial Highlights
- Revenue increased 21% to $31.5 million, compared to revenue of $26.1 million in the first quarter of 2022 and consistent with the guidance range the Company previously provided. Subscription revenue, which comprises approximately 90% of total revenue, grew 25% year-over-year of which 14% was on an organic basis.
- Gross profit was $22.6 million representing 72% gross margin, and non-GAAP adjusted gross profit was $25.2 million(1) representing 80% non-GAAP adjusted gross margin.(1)
- GAAP net loss of $19.3 million.
- Adjusted EBITDA(1) loss of $7.0 million, including higher Q1 seasonal public company costs and consistent with previous guidance.
- Cash and cash equivalents of $47.5 million and approximately $94 million of additional debt capacity.* The Company continues to have sufficient capital to support its current growth plans, path to adjusted EBITDA profitability, and M&A opportunities, and does not require additional capital raises to achieve its plan.
First Quarter 2023 Operational Metrics
- Run-Rate Revenue(2) increased to $134 million as of March 31, 2023 inclusive of businesses acquired in 2022 and 2023. Organic Run-Rate Revenue(2)(3) increased to $124 million as of quarter end, a 9% increase from $114 million as of March 31, 2022 on a pro forma basis.
- Annual Recurring Revenue(2) (“ARR”) rose to $119 million at March 31, 2023 inclusive of businesses acquired in 2022 and 2023, representing 19% total growth year-over-year and a 10% growth over the prior year on a proforma basis. Organic ARR(2)(3) was approximately $112 million as of March 31, 2023 compared to organic ARR of $102 million at March 31, 2022, representing a 9% growth rate on a pro forma basis.
- Net Revenue Retention(2) was approximately 96% in the first quarter. Adjusted NRR was approximately 98% in the first quarter adjusting for the impact of the anticipated expiration of a legacy, non-core content licensing relationship that was inherited as part of a prior acquisition.
Financial Outlook
FiscalNote reiterates its revenue guidance for full year 2023 and its expectation to be Adjusted EBITDA positive in the fourth quarter of 2023 as the Company continues to grow revenue, maintains strong adjusted gross margins in the 80% range, and realizes the benefits of its planned cost management actions.
Guidance for the second quarter of 2023 is as follows:
- GAAP revenue of $32 million to $34 million, representing 18% to 25% year over year growth.
- Adjusted EBITDA(1)(5) loss of $4.5 million to $3.5 million for the quarter. The Company has implemented efficiency programs that leverage the Company’s prior investments in technology and sales and marketing to optimize operations, enhance the Company’s go to market strategy and reduce costs. These efficiency programs are expected to significantly benefit adjusted EBITDA starting in the second quarter.
The Company reiterated its full year 2023 guidance as follows:
- GAAP revenue of $136 to $141 million, representing 20% to 24% year over year growth – inclusive of the Company’s January 2023 acquisition of Dragonfly Eye, Ltd.
- Total run-rate revenue(2)(4) of $148 million to $155 million representing growth of 17% to 22% over the prior year – inclusive of the Company’s acquisition of Dragonfly Eye, Ltd. – and growth of 10% to 16% over the prior year on an organic basis.
- An adjusted EBITDA(1)(5) loss of $8 million to $6 million for the full year(5), marking an improvement of approximately 71% year-over-year.
FiscalNote expects to achieve approximately break-even Adjusted EBITDA in the third quarter and positive Adjusted EBITDA starting in the fourth quarter of 2023 with ongoing Adjusted EBITDA profitability growth moving forward.(5)
“This year, we are on target to reach and surpass a number of important milestones, both financially and operationally. We are on track to achieve our revenue and profitability goals. We are reaping the benefits of our previous investments in R&D and sales and marketing as we expand our global and diverse base of customers across the public and private sectors, and strengthen our legacy of AI leadership through new strategic partnerships, collaborations, and innovations. Most importantly, we continue to innovate for our customers and lead our sector as a category creator and the most trusted provider of essential data, intelligence, analysis, and workflows that allow organizations to navigate challenges, discover opportunities, and take action within the constantly evolving and complex global political and regulatory environment,” said Tim Hwang, Chairman, CEO, and Co-founder, FiscalNote. “With each quarter we are continuing to prove our model of building an enduring and resilient growth company with compounding subscription revenue growth, strong gross margins and, over time, an impressive free cash flow model.”
During the first quarter, FiscalNote continued to execute successfully on its strategy to lead its sector in global policy, risk mitigation, and market intelligence with a large number of notable operational and business achievements, including:
- Selected by OpenAI as an inaugural launch partner for OpenAI’s ChatGPT Plug-in. FiscalNote is the only launch partner in the legal, political, and regulatory domain chosen as part of a prominent group of global brands who are leaders in other industry verticals that include Airbnb, Expedia, Instacart, KAYAK, OpenTable, Shopify, Slack, and Stripe.
- Secured a series of wide-ranging customer agreements in the global public sector with diplomatic entities and embassies, agencies for international cooperation and defense, parliaments and councils, government-owned or funded finance and banking institutions, and various prominent ministries and cabinet offices in capitals around the world – including The Cabinet Office (UK), the European Parliament, the European Council of the EU, the Ministry of Foreign Affairs of France, NATO, The African Union, the Embassy of Germany in the U.S., and many others.
- Secured new customer agreements with the Georgia Legislature (State Senate), the Office of the Lieutenant Governor, and members of the DeKalb County Board of Commissioners who chose FiscalNote’s Fireside constituent relationship management (CRM) SaaS platform as their central hub for communications and relationship management with citizens.
- Announced wide-ranging new customer agreements and renewals with some of the largest and most prominent trade associations, non-profits, and advocacy organizations across a large number of industries, including the American Association of Retired Persons, NAACP, U.S. Chamber of Commerce, National Federation of Independent Business, U.S. Olympic & Paralympic Committee, American Federation of Teachers, Children’s Defense Fund, U.S. Travel Association, National Center for Missing & Exploited Children, and dozens of other leading groups.
- Continued to expand its enterprise customer accounts, which is the Company’s largest and fastest growing customer base, with new SaaS recurring revenue agreements in the first quarter with customers across a variety of sectors including social media, financial, transportation, healthcare, and energy.
- Appointed Richard Henderson as Chief Revenue Officer, who brings over two decades of successful global leadership and experience as a senior sales executive at high-growth, data-driven technology and advisory companies in the U.S. and Europe.
- Established a new partnership with Peraton – the world’s leading mission capability integrator for national security solutions. Through the agreement, Peraton will use Predata’s advanced AI-driven platform for analyzing online research patterns and integrate it with Peraton’s unparalleled mission expertise in the information domain to empower customers to address and tackle the adverse impacts of disinformation and the increasingly challenging and complex digital data ecosystem.
- Established an integration with Bloomberg to make FiscalNote’s Oxford Analytica Daily Brief ®, available directly from the Bloomberg Terminal – a seamlessly integrated solution delivering timely data, news, and analytics to influential decision makers in the global financial industry.
- Acquired Dragonfly Eye Ltd. (“Dragonfly”), a UK-based geopolitical and security intelligence provider of actionable data and analysis 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.
The Company also recently announced a number of developments that underscore its decade-long leadership in AI, and the depth of its expertise in aggregating data and training language models in the legal, risk, and political domain. In addition to the Company’s OpenAI launch partner announcement, in the past four weeks the Company has also announced:
- FiscalNote was named by data, analytics, and AI company, Databricks, to be an inaugural launch partner for Databricks’ new data marketplace, joining other leaders in their sectors such as Experian, S&P Global, Nasdaq, and others who are making select datasets available on the platform. With this partnership, FiscalNote will reach thousands of global Databricks customers who turn to the Databricks marketplace for data and insights designed to optimize their business objectives and better inform their decisions.
- Secured four new patents in the area of Artificial Intelligence (AI): a patent from the United States Patent & Trademark Office (USPTO) for the application of AI and machine Learning in creating custom advocacy campaigns; and three new patents awarded to the Company’s wholly-owned subsidiary and leading alternative data provider, Aicel Technologies, for the application of innovative AI and machine learning solutions in analyzing unstructured data. These four patents bring the Company’s total global intellectual property portfolio to 17 patents.
- The integration of FiscalNote’s proprietary, patented AI and ChatGPT into its award-winning VoterVoice advocacy platform, making it the first SaaS advocacy campaign platform in the industry to embed both proprietary AI and ChatGPT into its patented platform – a key differentiator that further positions FiscalNote as an innovator for new customers and brings unique value for existing customers.
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.”
Quarterly Conference Call
FiscalNote will host a conference call today, Wednesday May 10, at 8:00 a.m. Eastern Time (U.S.) to review the Company’s financial results for the first quarter ended March 31, 2023. To access this call, dial 1 (888) 660-6510 for the U.S. or Canada, or 1 (929) 203-0882 for callers outside the U.S. or Canada with the conference ID 1271923. A live webcast of the conference call will be accessible from the Investor Relations section of FiscalNote’s website at https://investors.fiscalnote.com/, and a recording will be archived and accessible at https://investors.fiscalnote.com/. An audio replay of this conference call will also be available through Saturday, June 10, 2023, 11:59pm ET, by dialing 1 (800) 770-2030 for the U.S. or Canada, or 1 (647) 362-9199 for callers outside the U.S. or Canada, and entering 1271923.
* In connection with its public listing, FiscalNote entered into a 5-year senior secured term loan of up to $250 million, including $150 million of committed financing at closing with an additional uncommitted accordion facility for $100 million, subject to certain conditions.
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(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. |
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(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. |
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(3) Organic run rate revenue and organic ARR for Q1 2023 include businesses acquired as of December 31, 2022, plus Aicel Technologies (for which a definitive acquisition agreement was signed as of December 31, 2021, with closing conditioned upon FiscalNote’s public listing). |
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(4) Total run rate revenue includes completed acquisitions but does not include any future acquisitions under consideration. |
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(5) 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 leading technology provider of global policy and market intelligence. By uniquely combining AI technology, actionable data, and expert and peer insights, FiscalNote empowers customers to manage policy, address regulatory developments, and mitigate global risk. Since 2013, FiscalNote has pioneered technology that delivers mission-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 approximately 5,000 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.
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; 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 U.S. and foreign governments and other highly regulated industries; FiscalNote’s ability to retain or recruit key personnel; FiscalNote’s ability to effectively maintain and grow its research and development team and conduct research and development; FiscalNote’s ability to adapt its products and services for changes in laws and regulations or public perception, or changes in the enforcement of such laws, relating to artificial intelligence, machine learning, data privacy and government contracts; adverse general economic and market conditions reducing spending on our products and services; the outcome of any known and unknown litigation and regulatory proceedings; FiscalNote’s ability to successfully establish and maintain public company-quality internal control over financial reporting; and the ability to adequately protect FiscalNote’s intellectual property rights.
These and other important factors discussed in FiscalNote’s SEC filings, including its most recent reports on Forms 10-K and 10-Q, particularly the “Risk Factors” sections of those reports, could cause actual results to differ materially from those indicated by the forward-looking statements made in this press release. These forward-looking statements are based upon estimates and assumptions that, while considered reasonable by FiscalNote and its management, are inherently uncertain. Nothing in this press release should be regarded as a representation by any person that the forward-looking statements set forth herein will occur or that any of the contemplated results of such forward-looking statements will be achieved. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. FiscalNote undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
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FISCALNOTE HOLDINGS, INC. Condensed Consolidated Balance Sheets (in thousands, except shares, and par value) (Unaudited) |
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March 31, 2023 |
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December 31, 2022 |
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Assets |
|
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|
|
|
|
||
|
Current assets: |
|
|
|
|
|
|
||
|
Cash and cash equivalents |
|
$ |
46,665 |
|
|
$ |
60,388 |
|
|
Restricted cash |
|
|
839 |
|
|
|
835 |
|
|
Accounts receivable, net |
|
|
17,280 |
|
|
|
14,909 |
|
|
Costs capitalized to obtain revenue contracts, net |
|
|
2,917 |
|
|
|
2,794 |
|
|
Prepaid expenses |
|
|
5,233 |
|
|
|
4,315 |
|
|
Other current assets |
|
|
3,137 |
|
|
|
2,764 |
|
|
Total current assets |
|
|
76,071 |
|
|
|
86,005 |
|
|
|
|
|
|
|
|
|
||
|
Property and equipment, net |
|
|
7,008 |
|
|
|
7,325 |
|
|
Capitalized software costs, net |
|
|
14,603 |
|
|
|
13,946 |
|
|
Noncurrent costs capitalized to obtain revenue contracts, net |
|
|
4,139 |
|
|
|
3,976 |
|
|
Operating lease assets |
|
|
19,129 |
|
|
|
21,005 |
|
|
Goodwill |
|
|
208,056 |
|
|
|
194,362 |
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Customer relationships, net |
|
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61,750 |
|
|
|
56,348 |
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|
Database, net |
|
|
20,455 |
|
|
|
21,020 |
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Other intangible assets, net |
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|
29,358 |
|
|
|
28,728 |
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Other non-current assets |
|
|
430 |
|
|
|
442 |
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Total assets |
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$ |
440,999 |
|
|
$ |
433,157 |
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|
|
|
|
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Liabilities and Stockholders’ Equity |
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Current liabilities: |
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Current maturities of long-term debt |
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$ |
68 |
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$ |
68 |
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Accounts payable and accrued expenses |
|
|
13,787 |
|
|
|
13,739 |
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Deferred revenue, current portion |
|
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48,444 |
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|
|
35,569 |
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Customer deposits |
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|
1,823 |
|
|
|
3,252 |
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Contingent liabilities from acquisitions, current portion |
|
|
1,080 |
|
|
|
696 |
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Operating lease liabilities, current portion |
|
|
3,376 |
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|
|
6,709 |
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Other current liabilities |
|
|
2,072 |
|
|
|
2,079 |
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Total current liabilities |
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70,650 |
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|
62,112 |
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Long-term debt, net of current maturities |
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176,678 |
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161,980 |
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Deferred tax liabilities |
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2,957 |
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|
714 |
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Deferred revenue, net of current portion |
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|
1,406 |
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|
|
918 |
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Contingent liabilities from acquisitions, net of current portion |
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|
1,710 |
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|
|
883 |
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Operating lease liabilities, net of current portion |
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|
28,347 |
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|
|
29,110 |
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Warrant liabilities |
|
|
4,915 |
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|
18,892 |
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Other non-current liabilities |
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|
13,902 |
|
|
|
13,858 |
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Total liabilities |
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300,565 |
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|
|
288,467 |
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Commitment and contingencies (Note 17) |
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Stockholders’ equity: |
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Class A Common stock ($0.0001 par value, 1,700,000,000 authorized, 125,576,069 and 123,125,595 issued and outstanding at March 31, 2023 and December 31, 2022, respectively) |
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12 |
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12 |
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Class B Common stock ($0.0001 par value, 9,000,000 authorized, and 8,290,921 issued and outstanding at March 31, 2023 and December 31, 2022) |
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1 |
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1 |
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Additional paid-in capital |
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861,793 |
|
|
|
846,205 |
|
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Accumulated other comprehensive loss |
|
|
(1,144 |
) |
|
|
(785 |
) |
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Accumulated deficit |
|
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(720,228 |
) |
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|
(700,743 |
) |
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Total stockholders’ equity |
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|
140,434 |
|
|
|
144,690 |
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Total liabilities and stockholders’ equity |
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$ |
440,999 |
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$ |
433,157 |
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FISCALNOTE HOLDINGS, INC. Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands, except shares and per share data) (Unaudited) |
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Three Months Ended March 31, |
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2023 |
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2022 |
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Revenues: |
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Subscription |
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$ |
28,467 |
|
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$ |
22,779 |
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Advisory, advertising, and other |
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3,062 |
|
|
|
3,292 |
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Total revenues |
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31,529 |
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|
|
26,071 |
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Operating expenses: (1) |
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|
|
|
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Cost of revenues |
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|
8,937 |
|
|
|
7,170 |
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Research and development |
|
|
5,120 |
|
|
|
6,018 |
|
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Sales and marketing |
|
|
12,298 |
|
|
|
9,497 |
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Editorial |
|
|
4,265 |
|
|
|
3,676 |
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General and administrative |
|
|
18,221 |
|
|
|
10,557 |
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Amortization of intangible assets |
|
|
2,814 |
|
|
|
2,608 |
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Impairment of goodwill |
|
|
5,837 |
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|
|
– |
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Transaction costs (gains), net |
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|
1,408 |
|
|
|
(1,045 |
) |
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Total operating expenses |
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|
58,900 |
|
|
|
38,481 |
|
|
Operating loss |
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|
(27,371 |
) |
|
|
(12,410 |
) |
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|
|
|
|
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Interest expense, net |
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|
6,681 |
|
|
|
22,523 |
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Change in fair value of financial instruments |
|
|
(14,680 |
) |
|
|
1,338 |
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|
Gain on PPP loan upon extinguishment |
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|
– |
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|
|
(7,667 |
) |
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Other (income) expense, net |
|
|
(129 |
) |
|
|
121 |
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|
Net loss before income taxes |
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|
(19,243 |
) |
|
|
(28,725 |
) |
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Provision (benefit) from income taxes |
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|
30 |
|
|
|
(374 |
) |
|
Net loss |
|
|
(19,273 |
) |
|
|
(28,351 |
) |
|
Other comprehensive (loss) gain |
|
|
(359 |
) |
|
|
85 |
|
|
Total comprehensive loss |
|
$ |
(19,632 |
) |
|
$ |
(28,266 |
) |
|
|
|
|
|
|
|
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|
Net loss |
|
$ |
(19,273 |
) |
|
$ |
(28,351 |
) |
|
Deemed contribution |
|
|
– |
|
|
|
8,395 |
|
|
Net loss used to compute loss per share |
|
$ |
(19,273 |
) |
|
$ |
(19,956 |
) |
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|
|
|
|
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Earnings per share attributable to common shareholders: |
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Basic and Diluted |
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$ |
(0.14 |
) |
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$ |
(1.06 |
) |
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Weighted average shares used in computing earnings per shares attributable to common shareholders: |
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|
|
|
|
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Basic and Diluted |
|
|
133,082,639 |
|
|
|
18,757,067 |
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Contacts
Media
Nicholas Graham
FiscalNote
[email protected]
Investors
Sara Buda
FiscalNote
[email protected]
