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
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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240808256841/en/
Media Nicholas Graham FiscalNote press@fiscalnote.com
Investor Relations Bob Burrows FiscalNote
IR@fiscalnote.com
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