FiscalNote Reports Third Quarter 2024 Financial Results
Exceeds Forecast and Raises Adjusted EBITDA For the Full Year
Continues to Deleverage Balance Sheet, Simplify and Reduce Complexity of Product Portfolio to Improve Customer Experience and Retention Rates, and Increase Operating Efficiency and Profitability
Announces Leadership Succession Plan to Drive Next Phase of Growth
-
Reports Q3 2024 total revenues of
$29.4 million $3.4 million - Records fifth consecutive quarter of positive adjusted EBITDA
-
Raises full year 2024 adjusted EBITDA to approximately
$9 million $8 million $120 million $121 million -
Provides Q4 2024 guidance of
$29 million $2.5 million - Recent divestiture of Aicel provides latest example of ongoing initiative to divest non-core businesses, reduce business complexity, delever the balance sheet, and invest in new products and product enhancements to drive higher customer engagement, retention rates, revenue growth, and operating leverage anticipated for 2025 and beyond
- New customer agreements demonstrate the expanding need and business model resiliency for policy and global intelligence software
- Board of Directors continues to review all strategic options available to the Company to maximize shareholder value
These most recent results mark another quarter of exceeding expectations driven by a blue chip public sector and commercial customer base, durable recurring revenue and high gross margins, which form the basis of the Company’s increasing adjusted EBITDA. The third quarter of 2024 represented a
“During the third quarter, we continued to make progress on strengthening our product strategy and roadmap, enhancing our leadership team with select key hires, and further extracting operating efficiencies across the enterprise,” said Tim Hwang, Chairman, CEO, and Co-founder of FiscalNote. “With the recent divestiture of Aicel Technologies, we remain committed to evaluating all options to realize shareholder value and to solidify our core business by leveraging our market leading political, legislative, and regulatory policy data sets for the benefit of our global customers and in so doing pursuing our long-term growth strategy of increasing market share and improving revenue growth and sustained profitability.”
Financial Highlights(2)
Q3 2024 vs. Q3 2023
[Note - All amounts for the three months ended September 30, 2023 include contributions from the Board.org business, which the Company divested on March 11, 2024.]
|
|
Three Months Ended September 30, |
|
|
|
|
||||||||
($ in millions) |
|
2024 |
|
|
2023 |
|
|
% Change |
|
|||||
Total Revenues (formerly "GAAP Revenue") |
|
$ |
29.4 |
|
|
|
$ |
34.0 |
|
|
|
(14 |
) |
% |
Subscription Revenue as % of Total Revenues |
|
|
~93 |
% |
|
|
~88 |
% |
|
|
|
|||
Gross Profit |
|
$ |
23.2 |
|
|
|
$ |
23.6 |
|
|
|
(2 |
) |
% |
Gross Margin |
|
|
79 |
|
% |
|
|
69 |
|
% |
|
1000 |
|
bps |
Adjusted Gross Profit (1) |
|
$ |
25.4 |
|
|
|
$ |
28.4 |
|
|
|
(10 |
) |
% |
Adjusted Gross Margin (1) |
|
|
86 |
|
% |
|
|
83 |
|
% |
|
300 |
|
bps |
Net Loss |
|
$ |
(14.9 |
) |
|
|
$ |
(14.5 |
) |
|
|
(3 |
) |
% |
Adjusted EBITDA (1) |
|
$ |
3.4 |
|
|
|
$ |
0.7 |
|
|
|
|
* |
|
Adjusted EBITDA Margin (1) |
|
|
12 |
|
% |
|
|
2 |
|
% |
|
1000 |
|
bps |
Cash and Cash Equivalents |
|
$ |
33.4 |
|
|
|
$ |
24.4 |
|
|
|
|
|
|
bps - Basis Points |
|
|
|
|
|
|
|
|
|
|
|
|||
* - percentage change is greater than +/- |
|
|
|
|
|
|
|
|
|
|||||
Third Quarter and Recent Operational Highlights
- Appointed Can Babaoglu as Chief Product Officer to lead the conceptualization, development, and growth of dynamic products and manage the Company’s overall product roadmap, strategy, and vision to drive profitable growth, including optimizing existing products and launching new ones.
- Continued product development efforts for FiscalNote Copilot for Global Intelligence push generative AI efforts forward by placing proprietary data from 50,000+ reports related to geopolitical, market, and security intelligence into the hands of clients excited to use the Company’s powerful new AI tools.
-
Announced the divestiture of its
South Korea subsidiary, Aicel Technologies, for a total consideration of$9.65 million
Commenting on the quarter, FiscalNote Chief Financial Officer, Jon Slabaugh, said, “Our performance in the third quarter reflects the strength of our core business. As we continue to implement our initiatives to further de-lever the balance sheet, simplify and reduce the complexity of our product mix, pursue improved customer experience and capture improved customer retention rates all while driving ongoing operational efficiencies, we remain well positioned for sustained profitability for the remainder of 2024 and, more importantly, expect improving growth rates and continued profitability into 2025 and beyond.”
Leadership Succession Announced on November 12, 2024
The Company today also announced a leadership succession whereby Tim Hwang, the company’s current Chairman, Chief Executive Officer, and Co-founder, will transition to Executive Chairman after nearly 12 years as Chief Executive Officer. The Board of Directors has appointed Hwang as Executive Chairman and appointed President and Chief Operating Officer Josh Resnik as Chief Executive Officer, effective January 1, 2025.
Third Quarter Financial Performance
Revenue(2)
|
|
Three Months Ended September 30, |
|
|
|||||||
($ in millions) |
|
2024 |
|
2023 |
|
% Change |
|||||
Subscription revenue |
|
$ |
27.2 |
|
|
$ |
30.1 |
|
|
(9 |
)% |
Advisory, advertising, and other revenue |
|
|
2.2 |
|
|
|
4.0 |
|
|
(44 |
)% |
Total revenues |
|
$ |
29.4 |
|
|
$ |
34.0 |
|
|
(13 |
)% |
For Q3 2024, subscription revenue declined
For Q3 2024, advisory, advertising, and other revenue decreased
Key Performance Indicators(3)
|
|
As of September 30, |
|
|
|
||||||
($ in millions) |
|
2024 |
|
2023 |
|
% Change |
|||||
Run-Rate Revenue |
|
$ |
119 |
|
|
$ |
138 |
|
|
(14 |
)% |
Pro Forma Run-Rate-Revenue* |
|
$ |
119 |
|
|
$ |
124 |
|
|
(4 |
)% |
Annual Recurring Revenue (ARR) |
|
$ |
109 |
|
|
$ |
123 |
|
|
(11 |
)% |
Pro Forma ARR* |
|
$ |
109 |
|
|
$ |
109 |
|
|
- |
% |
Net Revenue Retention (NRR) |
|
|
99 |
% |
|
|
100 |
% |
|
|
|
*Pro forma Run-Rate Revenue and Pro forma ARR adjusts prior periods for the impact of the divestiture of Board.org.
As of September 30, 2024, Run-Rate Revenue declined
As of September 30, 2024, ARR declined
For the nine months ended September 30, 2024, NRR was
Operating Expenses(2)
|
|
Three Months Ended September 30, |
|
|
|
||||||
($ in millions) |
|
2024 |
|
2023 |
|
% Change |
|||||
Cost of revenues, including amortization |
|
$ |
6.2 |
|
|
$ |
10.4 |
|
|
(40 |
)% |
Research and development |
|
|
3.3 |
|
|
|
4.5 |
|
|
(28 |
)% |
Sales and marketing |
|
|
9.1 |
|
|
|
11.2 |
|
|
(19 |
)% |
Editorial |
|
|
4.6 |
|
|
|
4.5 |
|
|
3 |
% |
General and administrative |
|
|
10.6 |
|
|
|
14.4 |
|
|
(26 |
)% |
Amortization of intangible assets |
|
|
2.4 |
|
|
|
2.9 |
|
|
(16 |
)% |
Other |
|
|
- |
|
|
|
(0.6 |
) |
|
NM |
|
Total operating expenses |
|
$ |
36.3 |
|
|
$ |
47.5 |
|
|
(24 |
)% |
NM - Not meaningful |
|
|
|
|
|
|
|
|
|
||
In Q3 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
Financial Forecast
With an increased focus on profitability and greater operating efficiencies as well as continuing the Company’s focus on simplifying the product mix, the Company has updated its financial forecast for full year 2024 and issued its forecast for Q4 2024. Both forecasts reflect management’s expectations based on the most recent information available.
Full Year 2024
|
|
|
|
|
|
($ in millions) |
Current Forecast Provided on 11/12/2024 |
|
Action |
|
Previous Forecast Provided on 08/08/2024 |
Total Revenues |
Approximately |
|
Updated |
|
Approximately |
Adjusted EBITDA (1) (4) |
Approximately |
|
Updated |
|
Approximately |
Q4 2024
|
|
|
Current Forecast |
|
|
($ in millions) |
|
|
Provided on 11/12/2024 |
|
|
Total Revenues |
|
|
$ |
29.0 |
|
Adjusted EBITDA (1) (4) |
|
|
$ |
2.5 |
|
The forecast for the full year 2024 reflects slower non-subscription growth and the divestiture of Aicel, offset by further operating efficiencies, the realization of improved operating leverage resulting from continued investments in product innovation and platform investments focused on enhanced customer experience to drive higher customer engagement and retention rates. Of note, the forecast of
The Company expects to continue to drive deleveraging of its capital structure, reduce complexity of its product portfolio, and strengthen customer experience and retention rates through the ongoing optimized product strategy and roadmap through to the end of 2024 and in 2025.
Strategic Investment
In addition, Era Global Technologies, LLC (“Era”), an investment firm backed by global family offices across multiple countries and markets, is investing
Strategic Review
The Company’s Board of Directors along with its 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.
Conference Call, Presentation Supplement, and Webcast Information
Company management will host a conference call at 5:00 pm ET today, Tuesday, November 12, 2024, to discuss these financial results.
LIVE
-
By phone
-
Dial for the
U.S. orCanada 1 (800) 715-9871 or for International 1 (646) 307-1963 and enter the conference ID 7871199.
-
Dial for the
-
By webcast
- Visit the Investor Relations section of the Company’s website.
REPLAY
-
By phone (available through Tuesday, November 26, 2024)
-
Dial for the
U.S. orCanada 1 (800) 770-2030 or for International 1 (609) 800-9909 and enter the conference ID 7871199.
-
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, Dragonfly, 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 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
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 September 30, |
|
Nine Months Ended September 30, |
||||||||||||
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
||||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Subscription |
|
$ |
27,238 |
|
|
$ |
30,057 |
|
|
$ |
84,015 |
|
|
$ |
87,986 |
|
Advisory, advertising, and other |
|
|
2,201 |
|
|
|
3,952 |
|
|
|
6,782 |
|
|
|
10,394 |
|
Total revenues |
|
|
29,439 |
|
|
|
34,009 |
|
|
|
90,797 |
|
|
|
98,380 |
|
Operating expenses: (1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of revenues, including amortization |
|
|
6,235 |
|
|
|
10,441 |
|
|
|
20,342 |
|
|
|
28,863 |
|
Research and development |
|
|
3,250 |
|
|
|
4,540 |
|
|
|
9,935 |
|
|
|
14,170 |
|
Sales and marketing |
|
|
9,068 |
|
|
|
11,235 |
|
|
|
27,484 |
|
|
|
35,222 |
|
Editorial |
|
|
4,639 |
|
|
|
4,516 |
|
|
|
13,752 |
|
|
|
13,533 |
|
General and administrative |
|
|
10,622 |
|
|
|
14,418 |
|
|
|
37,958 |
|
|
|
48,813 |
|
Amortization of intangible assets |
|
|
2,436 |
|
|
|
2,899 |
|
|
|
7,541 |
|
|
|
8,614 |
|
Impairment of goodwill |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
5,837 |
|
Transaction (gains) costs, net |
|
|
- |
|
|
|
(579 |
) |
|
|
(4 |
) |
|
|
1,138 |
|
Total operating expenses |
|
|
36,250 |
|
|
|
47,470 |
|
|
|
117,008 |
|
|
|
156,190 |
|
Operating loss |
|
|
(6,811 |
) |
|
|
(13,461 |
) |
|
|
(26,211 |
) |
|
|
(57,810 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gain on sale of business |
|
|
- |
|
|
|
- |
|
|
|
(71,599 |
) |
|
|
- |
|
Interest expense, net |
|
|
5,585 |
|
|
|
8,018 |
|
|
|
18,267 |
|
|
|
21,853 |
|
Change in fair value of financial instruments |
|
|
3,501 |
|
|
|
(7,157 |
) |
|
|
3,174 |
|
|
|
(18,850 |
) |
Loss on settlement |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,474 |
|
Other (income) expense, net |
|
|
(341 |
) |
|
|
207 |
|
|
|
(82 |
) |
|
|
245 |
|
Net (loss) income before income taxes |
|
|
(15,556 |
) |
|
|
(14,529 |
) |
|
|
24,029 |
|
|
|
(64,532 |
) |
(Benefit) provision from income taxes |
|
|
(621 |
) |
|
|
(62 |
) |
|
|
1,129 |
|
|
|
181 |
|
Net (loss) income |
|
|
(14,935 |
) |
|
|
(14,467 |
) |
|
|
22,900 |
|
|
|
(64,713 |
) |
Other comprehensive income (loss) |
|
|
1,123 |
|
|
|
(1,006 |
) |
|
|
1,062 |
|
|
|
(1,037 |
) |
Total comprehensive (loss) income |
|
$ |
(13,812 |
) |
|
$ |
(15,473 |
) |
|
$ |
23,962 |
|
|
$ |
(65,750 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earnings (loss) per share attributable to common shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic and Diluted |
|
$ |
(0.11 |
) |
|
$ |
(0.11 |
) |
|
$ |
0.17 |
|
|
$ |
(0.49 |
) |
Weighted average shares used in computing earnings (loss) per share attributable to common shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic and Diluted |
|
|
135,050,093 |
|
|
|
128,832,502 |
|
|
|
135,160,124 |
|
|
|
131,994,563 |
|
(1) Amounts include stock-based compensation expenses, as follows:
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
||||||||||||
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
||||||||
Cost of revenues, including amortization |
|
$ |
116 |
|
|
$ |
45 |
|
|
$ |
324 |
|
|
$ |
185 |
|
Research and development |
|
|
454 |
|
|
|
328 |
|
|
|
1,138 |
|
|
|
1,080 |
|
Sales and marketing |
|
|
486 |
|
|
|
1,041 |
|
|
|
1,182 |
|
|
|
1,718 |
|
Editorial |
|
|
200 |
|
|
|
120 |
|
|
|
465 |
|
|
|
292 |
|
General and administrative |
|
|
2,925 |
|
|
|
4,690 |
|
|
|
10,776 |
|
|
|
14,937 |
|
FiscalNote Holdings, Inc. |
||||||||
Condensed Consolidated Balance Sheets |
||||||||
(in thousands, except shares, and par value) |
||||||||
|
|
(Unaudited) |
|
|
||||
|
|
September 30, 2024 |
|
December 31, 2023 |
||||
Assets |
|
|
|
|
|
|
||
Current assets: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
25,688 |
|
|
$ |
16,451 |
|
Restricted cash |
|
|
683 |
|
|
|
849 |
|
Short-term investments |
|
|
7,040 |
|
|
|
7,134 |
|
Accounts receivable, net |
|
|
11,249 |
|
|
|
16,931 |
|
Costs capitalized to obtain revenue contracts, net |
|
|
3,078 |
|
|
|
3,326 |
|
Prepaid expenses |
|
|
3,210 |
|
|
|
2,593 |
|
Other current assets |
|
|
3,414 |
|
|
|
2,521 |
|
Total current assets |
|
|
54,362 |
|
|
|
49,805 |
|
|
|
|
|
|
|
|
||
Property and equipment, net |
|
|
5,444 |
|
|
|
6,141 |
|
Capitalized software costs, net |
|
|
14,895 |
|
|
|
13,372 |
|
Noncurrent costs capitalized to obtain revenue contracts, net |
|
|
3,347 |
|
|
|
4,257 |
|
Operating lease assets |
|
|
17,062 |
|
|
|
17,782 |
|
Goodwill |
|
|
165,964 |
|
|
|
187,703 |
|
Customer relationships, net |
|
|
44,164 |
|
|
|
53,917 |
|
Database, net |
|
|
17,208 |
|
|
|
18,838 |
|
Other intangible assets, net |
|
|
15,005 |
|
|
|
18,113 |
|
Other non-current assets |
|
|
498 |
|
|
|
633 |
|
Total assets |
|
$ |
337,949 |
|
|
$ |
370,561 |
|
|
|
|
|
|
|
|
||
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
||
Current liabilities: |
|
|
|
|
|
|
||
Current maturities of long-term debt |
|
$ |
10,018 |
|
|
$ |
105 |
|
Accounts payable and accrued expenses |
|
|
7,635 |
|
|
|
12,909 |
|
Deferred revenue, current portion |
|
|
40,257 |
|
|
|
43,530 |
|
Customer deposits |
|
|
1,136 |
|
|
|
3,032 |
|
Contingent liabilities from acquisitions, current portion |
|
|
114 |
|
|
|
130 |
|
Operating lease liabilities, current portion |
|
|
3,650 |
|
|
|
3,066 |
|
Other current liabilities |
|
|
3,976 |
|
|
|
2,878 |
|
Total current liabilities |
|
|
66,786 |
|
|
|
65,650 |
|
|
|
|
|
|
|
|
||
Long-term debt, net of current maturities |
|
|
142,152 |
|
|
|
222,310 |
|
Deferred tax liabilities |
|
|
1,266 |
|
|
|
2,178 |
|
Deferred revenue, net of current portion |
|
|
134 |
|
|
|
875 |
|
Operating lease liabilities, net of current portion |
|
|
23,982 |
|
|
|
26,162 |
|
Public and private warrant liabilities |
|
|
2,304 |
|
|
|
4,761 |
|
Other non-current liabilities |
|
|
2,808 |
|
|
|
5,166 |
|
Total liabilities |
|
|
239,432 |
|
|
|
327,102 |
|
Commitment and contingencies |
|
|
|
|
|
|
||
Stockholders' equity: |
|
|
|
|
|
|
||
Class A Common stock ( |
|
|
13 |
|
|
|
11 |
|
Class B Common stock ( |
|
|
1 |
|
|
|
1 |
|
Additional paid-in capital |
|
|
885,872 |
|
|
|
860,485 |
|
Accumulated other comprehensive income (loss) |
|
|
6,147 |
|
|
|
(622 |
) |
Accumulated deficit |
|
|
(793,516 |
) |
|
|
(816,416 |
) |
Total stockholders' equity |
|
|
98,517 |
|
|
|
43,459 |
|
Total liabilities and stockholders' equity |
|
$ |
337,949 |
|
|
$ |
370,561 |
|
FiscalNote Holdings, Inc. |
||||||||
Condensed Consolidated Statements of Cash Flows |
||||||||
(Unaudited) |
||||||||
(in thousands) |
||||||||
|
|
Nine Months Ended September 30, |
||||||
|
|
2024 |
|
2023 |
||||
Operating Activities: |
|
|
|
|
|
|
||
Net income (loss) |
|
$ |
22,900 |
|
|
$ |
(64,713 |
) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
||
Depreciation |
|
|
905 |
|
|
|
1,007 |
|
Amortization of intangible assets and capitalized software development costs |
|
|
14,699 |
|
|
|
19,068 |
|
Amortization of deferred costs to obtain revenue contracts |
|
|
2,795 |
|
|
|
2,602 |
|
Gain on sale of business |
|
|
(71,599 |
) |
|
|
- |
|
Impairment of goodwill |
|
|
- |
|
|
|
5,837 |
|
Non-cash operating lease expense |
|
|
1,567 |
|
|
|
2,885 |
|
Stock-based compensation |
|
|
13,885 |
|
|
|
18,212 |
|
Loss on settlement |
|
|
- |
|
|
|
3,474 |
|
Other non-cash expenses |
|
|
4 |
|
|
|
(688 |
) |
Bad debt expense |
|
|
201 |
|
|
|
267 |
|
Change in fair value of acquisition contingent consideration |
|
|
(4 |
) |
|
|
(138 |
) |
Unrealized loss on securities |
|
|
95 |
|
|
|
115 |
|
Change in fair value of financial instruments |
|
|
3,174 |
|
|
|
(18,850 |
) |
Deferred income taxes |
|
|
(838 |
) |
|
|
(80 |
) |
Paid-in-kind interest, net |
|
|
5,995 |
|
|
|
3,987 |
|
Non-cash interest expense |
|
|
2,244 |
|
|
|
3,035 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable, net |
|
|
4,149 |
|
|
|
2,560 |
|
Prepaid expenses and other current assets |
|
|
(1,429 |
) |
|
|
1,935 |
|
Costs capitalized to obtain revenue contracts, net |
|
|
(2,155 |
) |
|
|
(3,263 |
) |
Other non-current assets |
|
|
163 |
|
|
|
(119 |
) |
Accounts payable and accrued expenses |
|
|
(3,047 |
) |
|
|
(6,389 |
) |
Deferred revenue |
|
|
4,796 |
|
|
|
6,141 |
|
Customer deposits |
|
|
(928 |
) |
|
|
(2,182 |
) |
Other current liabilities |
|
|
1,082 |
|
|
|
(754 |
) |
Contingent liabilities from acquisitions, net of current portion |
|
|
(13 |
) |
|
|
(39 |
) |
Operating lease liabilities |
|
|
(2,538 |
) |
|
|
(5,844 |
) |
Other non-current liabilities |
|
|
(53 |
) |
|
|
(6 |
) |
Net cash used in operating activities |
|
|
(3,950 |
) |
|
|
(31,940 |
) |
|
|
|
|
|
|
|
||
Investing Activities: |
|
|
|
|
|
|
||
Capital expenditures |
|
|
(6,875 |
) |
|
|
(5,957 |
) |
Purchases of short-term investments |
|
- |
|
|
|
(7,369 |
) |
|
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 |
|
|
84,509 |
|
|
|
(18,336 |
) |
|
|
|
|
|
|
|
||
Financing Activities: |
|
|
|
|
|
|
||
Proceeds from long-term debt, net of issuance costs |
|
|
801 |
|
|
|
6,000 |
|
Principal payments of long-term debt |
|
|
(65,781 |
) |
|
|
(80 |
) |
Payment of deferred financing costs |
|
|
(7,068 |
) |
|
|
- |
|
Proceeds from exercise of stock options and employee stock purchase plan purchases |
|
|
474 |
|
|
|
650 |
|
Net cash (used in) provided by financing activities |
|
|
(71,574 |
) |
|
|
6,570 |
|
|
|
|
|
|
|
|
||
Effects of exchange rates on cash |
|
|
86 |
|
|
|
(184 |
) |
|
|
|
|
|
|
|
||
Net change in cash, cash equivalents, and restricted cash |
|
|
9,071 |
|
|
|
(43,890 |
) |
Cash, cash equivalents, and restricted cash, beginning of period |
|
|
17,300 |
|
|
|
61,223 |
|
Cash, cash equivalents, and restricted cash, end of period |
|
$ |
26,371 |
|
|
$ |
17,333 |
|
|
|
|
|
|
|
|
||
Supplemental Noncash Investing and Financing Activities: |
|
|
|
|
|
|
||
Issuance of common stock for conversion of debt and interest |
|
$ |
10,934 |
|
|
$ |
- |
|
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 |
|
$ |
74 |
|
|
$ |
323 |
|
|
|
|
|
|
|
|
||
Supplemental Cash Flow Activities: |
|
|
|
|
|
|
||
Cash paid for interest |
|
$ |
11,723 |
|
|
$ |
15,290 |
|
Cash paid for taxes |
|
$ |
277 |
|
|
$ |
16 |
|
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 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 September 30, |
|
Nine Months Ended September 30, |
||||||||||||
(In thousands) |
|
2024 |
|
2023 |
|
2024 |
|
2023 |
||||||||
Total revenues |
|
$ |
29,439 |
|
|
$ |
34,009 |
|
|
$ |
90,797 |
|
|
$ |
98,380 |
|
Costs of revenue, including amortization of capitalized software development costs and acquired developed technology |
|
|
(6,235 |
) |
|
|
(10,441 |
) |
|
|
(20,342 |
) |
|
|
(28,863 |
) |
Gross Profit |
|
$ |
23,204 |
|
|
$ |
23,568 |
|
|
$ |
70,455 |
|
|
$ |
69,517 |
|
Gross Profit Margin |
|
|
79 |
% |
|
|
69 |
% |
|
|
78 |
% |
|
|
71 |
% |
Gross Profit |
|
|
23,204 |
|
|
|
23,568 |
|
|
|
70,455 |
|
|
|
69,517 |
|
Amortization of intangible assets |
|
|
2,224 |
|
|
|
4,796 |
|
|
|
7,159 |
|
|
|
10,454 |
|
Adjusted Gross Profit |
|
$ |
25,428 |
|
|
$ |
28,364 |
|
|
$ |
77,614 |
|
|
$ |
79,971 |
|
Adjusted Gross Profit Margin |
|
|
86 |
% |
|
|
83 |
% |
|
|
85 |
% |
|
|
81 |
% |
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 September 30, |
|
Nine Months Ended September 30, |
||||||||||||
(In thousands) |
|
2024 |
|
2023 |
|
2024 |
|
2023 |
||||||||
Net loss |
|
$ |
(14,935 |
) |
|
$ |
(14,467 |
) |
|
$ |
22,900 |
|
|
$ |
(64,713 |
) |
Income tax (benefit) provision |
|
|
(621 |
) |
|
|
(62 |
) |
|
|
1,129 |
|
|
|
181 |
|
Depreciation and amortization |
|
|
4,961 |
|
|
|
8,030 |
|
|
|
15,604 |
|
|
|
20,074 |
|
Interest expense, net |
|
|
5,585 |
|
|
|
8,018 |
|
|
|
18,267 |
|
|
|
21,853 |
|
EBITDA |
|
|
(5,010 |
) |
|
|
1,519 |
|
|
|
57,900 |
|
|
|
(22,605 |
) |
Gain on sale of business (a) |
|
|
- |
|
|
|
- |
|
|
|
(71,599 |
) |
|
|
- |
|
Stock-based compensation |
|
|
4,181 |
|
|
|
6,224 |
|
|
|
13,885 |
|
|
|
18,212 |
|
Change in fair value of financial instruments (b) |
|
|
3,501 |
|
|
|
(7,157 |
) |
|
|
3,174 |
|
|
|
(18,850 |
) |
Other non-cash charges (c) |
|
|
17 |
|
|
|
(704 |
) |
|
|
93 |
|
|
|
5,227 |
|
Acquisition and disposal related costs (d) |
|
|
40 |
|
|
|
12 |
|
|
|
1,138 |
|
|
|
1,391 |
|
Employee severance costs (e) |
|
|
437 |
|
|
|
560 |
|
|
|
635 |
|
|
|
1,310 |
|
Non-capitalizable debt raising costs |
|
|
49 |
|
|
|
- |
|
|
|
527 |
|
|
|
316 |
|
Business Combination with DSAC (f) |
|
|
- |
|
|
|
81 |
|
|
|
- |
|
|
|
415 |
|
Loss contingency (g) |
|
|
- |
|
|
|
201 |
|
|
|
- |
|
|
|
4,091 |
|
Costs incurred related to the Special Committee (h) |
|
|
229 |
|
|
|
- |
|
|
|
682 |
|
|
|
- |
|
Adjusted EBITDA |
|
$ |
3,444 |
|
|
$ |
736 |
|
|
$ |
6,435 |
|
|
$ |
(10,493 |
) |
Adjusted EBITDA Margin |
|
|
11.7 |
% |
|
|
2.2 |
% |
|
|
7.1 |
% |
|
|
(10.7 |
)% |
(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 (i) |
(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
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 September 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.
View source version on businesswire.com: https://www.businesswire.com/news/home/20241112501819/en/
Media
Nicholas Graham
FiscalNote
press@fiscalnote.com
Investor Relations
Bob Burrows
FiscalNote
IR@fiscalnote.com
Source: FiscalNote
