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Core Viewpoint - FiscalNote Holdings, Inc. reported a quarterly loss of $0.11 per share, slightly worse than the Zacks Consensus Estimate of a loss of $0.10, indicating a 10% earnings surprise [1] - The company generated revenues of $29.44 million for the quarter ended September 2024, surpassing the Zacks Consensus Estimate by 1.47%, but down from $34.01 million a year ago [2] Financial Performance - The company has surpassed consensus EPS estimates two times over the last four quarters [2] - FiscalNote Holdings, Inc. shares have declined approximately 18% since the beginning of the year, contrasting with the S&P 500's gain of 25.8% [3] Future Outlook - The company's earnings outlook will be crucial for stock performance, with current consensus EPS estimates at -$0.11 for the coming quarter and $0.07 for the current fiscal year on revenues of $30.63 million and $121.02 million, respectively [7] - The estimate revisions trend for FiscalNote Holdings, Inc. is mixed, resulting in a Zacks Rank 3 (Hold), suggesting shares are expected to perform in line with the market in the near future [6] Industry Context - The Technology Services industry, to which FiscalNote belongs, is currently in the top 26% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [8] - Another company in the same industry, Skillsoft Corp., is expected to report a quarterly loss of $3.01 per share, with revenues projected to be $129.76 million, down 6.6% from the previous year [9]

Financial Performance - Total revenues for the three months ended September 2024 were $29,439,000, a decrease of 13.5% compared to $34,009,000 for the same period in 2023[8] - Subscription revenues decreased to $27,238,000 from $30,057,000, reflecting a decline of 9.3% year-over-year[8] - Operating loss for the three months ended September 2024 was $(6,811,000), an improvement from $(13,461,000) in the same quarter of 2023[8] - Net loss for the three months ended September 2024 was $(14,935,000), compared to $(14,467,000) for the same period in 2023[8] - The company reported a comprehensive loss of $(13,812,000) for the three months ended September 2024, compared to $(15,473,000) in the same quarter of 2023[8] - The company reported a net loss of $14.9 million for Q3 2024, an increase in loss of $468,000 or 3.2% compared to a net loss of $14.4 million in Q3 2023[201] Expenses - Research and development expenses for the three months ended September 2024 were $3,250,000, down from $4,540,000, a decrease of 28.3%[8] - General and administrative expenses decreased to $10,622,000 from $14,418,000, a reduction of 26.4% year-over-year[8] - Interest expense for the three months ended September 2024 was $5,585,000, down from $8,018,000, a decrease of 30.1%[8] - Total operating expenses for Q3 2024 were $36.3 million, a decrease of $11.2 million or 23.5% from $47.5 million in Q3 2023[201] Equity and Stock - As of September 30, 2023, total stockholders' equity stands at $83,569,000, a decrease from $140,434,000 at March 31, 2023[10] - The weighted average shares used in computing earnings per share increased to 135,050,093 from 128,832,502 year-over-year[8] - The balance of common stock shares decreased to 128,895,749 as of September 30, 2023, from 133,866,990 at March 31, 2023[10] - The Company has authorized the issuance of 1,809,000,000 shares, including Class A common stock, Class B common stock, and preferred stock[98] - As of September 30, 2024, the Company had 132,584,083 shares of Class A common stock issued and outstanding[99] Cash and Debt - Cash, cash equivalents, and restricted cash totaled $26.4 million at the end of the period, up from $17.3 million at the end of September 2023[11] - The company had a negative working capital balance of $45.8 million (excluding cash and short-term investments) as of September 30, 2024[16] - As of September 30, 2024, the total gross debt of the company is $155,886, down from $225,513 as of December 31, 2023, indicating a reduction of approximately 30.8%[64] - The company incurred cash interest of $11,165 for the nine months ended September 30, 2024, compared to $15,341 for the same period in 2023, reflecting a decrease of approximately 27.5%[71] Revenue Sources - Revenue from the U.S. Federal Government accounted for 17% of total revenue for the nine months ended September 30, 2024, up from 15% in the same period of 2023[27] - Approximately 90% of total revenues were subscription-based for the nine months ended September 30, 2024[183] - Annual Recurring Revenue (ARR) as of September 30, 2024, was $109.5 million, down from $126.1 million at December 31, 2023[173] - Run-Rate Revenue at September 30, 2024, was approximately $119.4 million, compared to $139.7 million at December 31, 2023[174] - Net Revenue Retention (NRR) was 99% for the three months ended September 30, 2024, down from 100% in the same period of 2023[175] Acquisitions and Sales - The Company completed the sale of Board.org for a total value of up to $103 million, recording a gain on sale of business of $71.6 million during the three months ended March 31, 2024[162] - The acquisition of Dragonfly Eye Limited was completed for a total consideration of $25.236 million, including $5.6 million in cash, 1,885,149 shares of Class A Common Stock, and $11.1 million in subordinated convertible promissory notes[47][48] - The company raised approximately $18.1 million in net cash proceeds from the sale of Board.org, which was retained for operating matters[16] Future Outlook - The company anticipates continued focus on organic growth and market expansion strategies moving forward[5] - The company expects significant ongoing operating and capital expenditures to continue implementing its business plan, including entering new markets and product development[16] - The company is assessing opportunities to acquire complementary businesses to expand its market presence[169] - The company has observed slower client decision-making and softer renewal rates, impacting ARR growth and expected revenue for the coming fiscal year[168] Stock-Based Compensation - Stock-based compensation expense for the quarter ending June 30, 2024, amounted to $4,181,000[10] - The company recognized stock-based compensation expenses of $3,853 and $5,709 for the three months ended September 30, 2024 and 2023, respectively, and $13,092 and $15,772 for the nine months ended September 30, 2024 and 2023, respectively[119] - The company recognized $17,712 of share-based compensation expense for vested Earnout Awards upon closing, with additional expenses of $106 and $278 for the three and nine months ended September 30, 2024, respectively[107] Impairments and Losses - The company incurred an impairment charge of $5.837 million for goodwill in its ESG reporting unit during the first quarter of 2023[62] - The company recognized an impairment of goodwill during the three months ended March 31, 2023, with no additional impairments identified for the periods ended September 30, 2024 and 2023[146]

FiscalNote Holdings, Inc. (NOTE) came out with a quarterly loss of $0.09 per share versus the Zacks Consensus Estimate of a loss of $0.13. This compares to loss of $0.23 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of 30.77%. A quarter ago, it was expected that this company would post a loss of $0.17 per share when it actually produced a loss of $0.12, delivering a surprise of 29.41%. Over the last four quarters, the company ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2024 FISCALNOTE HOLDINGS, INC. (Exact Name of Registrant as Specified in its Charter) (State or other jurisdiction of incorporation or organization) Delaware 001-396972 88-3772307 (Commission File Number) (I.R.S. Employer Identification No.) 1201 Pennsylvania Avenue NW, ...

Exhibit 99.1 FiscalNote Reports First Quarter 2024 Financial Results Outlines Accelerated AI Product Strategy and Roadmap WASHINGTON, D. C. – Thursday, May 9, 2024 – FiscalNote Holdings, Inc. (NYSE: NOTE) ("FiscalNote" or the "Company"), a leading information services company using AI-driven enterprise SaaS technology to provide global political, legislative and regulatory policy and market intelligence, today reported financial results for the first quarter ended March 31, 2024. The Company has also been a ...

Financial Performance - Total revenues for the year ended December 31, 2023, were $132.6 million, up from $113.8 million in 2022, representing a year-over-year growth of approximately 16.5%[20] - As of December 31, 2023, the company's run-rate revenue was $139.7 million, and $121.3 million when excluding discontinued products[48] - The company reported net losses of $115.5 million and $218.3 million for the years ended December 31, 2023 and 2022, respectively[83] - Approximately 90% of the company's revenues are subscription-based, highlighting the importance of maintaining high renewal rates[84] - The company acknowledges that its market opportunity estimates and growth forecasts are subject to significant uncertainty and may not prove accurate[142] Customer Base and Retention - Recurring revenues from the subscription-based model account for approximately 90% of total revenues, indicating strong customer loyalty and retention[20] - The net revenue retention (NRR) rate for subscription customers was approximately 99% for Q4 2023 and 94% for the year ended December 31, 2023[48] - The company maintains a diverse client base, including over half of the Fortune 100, which provides stability and mitigates business risks[38] - The company serves a diverse customer base, including over half of the Fortune 100, indicating strong market penetration[48] Growth Strategy and Market Expansion - The company has completed 16 acquisitions since 2017, enhancing its product portfolio and increasing its scale in the market[33] - The total addressable market for legal and regulatory information services was approximately $37 billion in 2021, with expectations for continued expansion in the coming years[34] - The sales optimization strategy aims to increase revenue growth by focusing on larger enterprise and government accounts, enhancing sales productivity and efficiency[30] - The company plans to leverage its core technology to expand into adjacent markets, including sectors like cybersecurity, telehealth, and the gig economy[32] - The company aims to expand its technology platform and services through strategic acquisitions, indicating a growth-oriented strategy[57] Research and Development - Ongoing investments in research and development are aimed at improving product offerings and customer experience, including new proprietary technology and data integrations[31] - The integration of AI, machine learning, and natural language processing is expected to enhance data analysis and decision-making capabilities, providing a competitive advantage[37] - The company holds 16 patents and has 9 patents pending, showcasing its commitment to innovation and intellectual property[55] - The company emphasizes the importance of adequate research and development resources to remain competitive and effectively introduce new features and capabilities[106] - Research and development projects are technically challenging and expensive, potentially leading to delays in generating revenue from new features[107] Operational Challenges - The company faces challenges in forecasting future revenue growth due to increased competition and market maturation[78] - The company may not successfully develop or acquire enhancements to its services, which could impair revenue growth[90] - The company’s sales cycles are lengthy and unpredictable, requiring significant resources without guaranteed sales[101] - The company may face challenges in accurately estimating the size of its total addressable market, potentially limiting future growth[102] - The company may experience fluctuations in foreign currency exchange rates that could adversely impact its results of operations as it expands internationally[164] Financial Management and Debt - As of December 31, 2023, the company had $239.9 million in total indebtedness, with $158.2 million secured by substantially all assets and $81.7 million unsecured[136] - The company entered into a new senior secured term loan facility providing for an aggregate principal amount of up to $150.0 million, which refinanced certain existing indebtedness[137] - Financial maintenance covenants under the senior term loan may restrict the company's operational flexibility and ability to incur additional debt[139] Cybersecurity and Risk Management - The cybersecurity risk management program is led by a Vice President with over 15 years of experience, indicating a strong focus on adapting to emerging threats[215] - The Company has obtained SOC-2 certification for many of its products, subjecting them to an annual compliance audit by a third party[216] - The Company requires all employees to participate in annual cybersecurity training, reviewed by the information security function[217] - The Audit Committee oversees the Enterprise Risk Management program, which includes monitoring cybersecurity risks[218] - The Company conducts quarterly reporting to the Audit Committee on the severity of material risks and mitigation measures[218] Legal and Regulatory Risks - The company is subject to various legal and regulatory risks that could adversely impact its operations and financial condition[135] - The company is subject to sanctions and anti-corruption laws, and non-compliance could result in significant penalties and harm its reputation[161] - The company may face risks related to government contracts, including unpredictable demand and compliance with regulatory requirements[117] Workforce and Talent Management - The company employs around 680 employees as of December 31, 2023, reflecting growth in workforce to support its expanding operations[23] - Attracting and retaining highly skilled personnel, particularly in AI and machine learning, is critical for the company's success and innovation[123] - There is a significant competition for skilled sales personnel, which may impact the company's ability to achieve revenue growth[129] Corporate Governance and Shareholder Structure - The company’s co-founders hold approximately 6.4% of the common stock but control about 54.0% of the voting power due to the dual-class stock structure[196] - The company is classified as a "controlled company" under NYSE rules, which may limit stockholders' corporate governance protections[197] - The issuance of additional shares may cause significant dilution of existing stockholders' ownership interests and potentially lower the market price of Class A Common Stock[202]

Financial Data and Key Metrics - Q3 adjusted EBITDA was positive $700,000, marking the first quarter of profitability on an adjusted EBITDA basis, one quarter ahead of initial guidance [45][64][85] - Q3 revenue was $34 million, a 17% year-over-year increase, with subscription revenue accounting for 90% of total revenue at $30.1 million, up 15% year-over-year [67][77] - Run-rate revenue reached $138 million, a 14% year-over-year growth, with organic run-rate revenue at $129 million, reflecting 7% growth on a pro forma basis [45][77] - Net Revenue Retention (NRR) increased to 100%, driven by strong performance in large enterprise customer segments, with NRR rates trending above the company average [45][77] - Q3 gross profit was $23.6 million, representing 69% margins, while non-GAAP adjusted gross profit was $28.4 million, representing 83% adjusted gross profit margins [78] Business Line Data and Key Metrics - Subscription revenue grew 15% year-over-year to $30.1 million, driven by strong demand for regulatory and policy data solutions, particularly among large enterprises [77] - Non-subscription revenue, typically strong in the second half of the year, underperformed due to budget uncertainty and underperforming products [48][24] - The company launched new products like Risk Connector and FiscalNoteGPT, which are gaining traction in the market, with Risk Connector securing its first anchor customer [69][73] Market Data and Key Metrics - Large enterprise customers remain the fastest-growing segment, with NRR rates well above the company average, driven by strong demand for regulatory and policy data [77][84] - The company is expanding geographically, particularly in Europe, through both organic growth and acquisitions, to bring new datasets to customers [50] - The federal government vertical remains a steady revenue driver, though budget pressures have had some impact [1] Company Strategy and Industry Competition - The company is shifting focus to re-accelerate growth after achieving adjusted EBITDA profitability, with a refined product strategy centered on AI Co-Pilot agents [49][51] - The AI Co-Pilot program leverages the company's decade-long investments in AI, ML, and NLP, with plans to roll out lightweight, user-driven applications for legal and regulatory professionals [51][52] - The company is pursuing adjacencies to core products, such as Risk Connector, which focuses on supply chain risk management, and has seen early momentum with large enterprises [73] - The company is transitioning to a product-led growth model for generative AI products, aiming for faster revenue generation through per-user pricing and reduced go-to-market friction [31][52] Management Commentary on Operating Environment and Future Outlook - Management highlighted the challenging macroeconomic environment, which has led to longer sales cycles and slower pipeline conversions, particularly for larger enterprise deals [24][71] - The company expects to see a bounce-back in cash balance in Q1 2024 due to seasonally strong collections, with a focus on achieving consistent free cash flow generation [19][21] - Management remains confident in the company's ability to drive growth, particularly in large enterprise accounts, and expects to see strong conversion of incremental revenue to adjusted EBITDA in the long term [47][79] Other Important Information - The company has achieved $20 million in annualized OpEx cost savings through cost management programs while continuing to invest in innovation and growth [56] - The company filed a shelf registration for $100 million, providing flexibility in its capital structure to support organic and inorganic growth opportunities [57] - The CEO has expressed interest in exploring a going-private transaction, with the board appointing a special committee to evaluate strategic options [76] Summary of Q&A Session Question: How is the sales realignment driving upsell and cross-sell opportunities? - The company has restructured its sales team to focus on upsell and cross-sell opportunities, particularly in large enterprise accounts, with a dedicated team and optimized commission plans [60] Question: What is the impact of the macro environment on deal flow and deal sizes? - The macro environment has led to longer sales cycles and increased scrutiny on larger deals, though demand for core products remains strong [82] Question: What are the expectations for cash burn in Q4 and cash balance in Q1 2024? - The company expects a bounce-back in cash balance in Q1 2024 due to seasonally strong collections, with cash interest expense and CapEx around $7 million per quarter [19][21] Question: How is the company leveraging AI to improve efficiencies? - The company is developing AI Co-Pilot products to automate tasks for legal and regulatory professionals, with plans to roll out lightweight, user-driven applications [31][52] Question: What is the impact of underperforming products on revenue growth? - Underperforming products and slower pipeline conversions have impacted revenue growth, particularly in non-subscription revenue, which typically sees strong seasonality in the second half of the year [24][48]

Financial Performance - Total revenues for Q3 2023 were $34,009,000, an increase of 17.5% compared to $29,071,000 in Q3 2022[12] - Subscription revenues reached $30,057,000, up from $26,075,000, reflecting a growth of 15.2% year-over-year[12] - Operating loss for Q3 2023 was $13,461,000, a significant improvement from the loss of $44,126,000 in Q3 2022[12] - Net loss for Q3 2023 was $14,467,000, compared to a net loss of $109,002,000 in Q3 2022[12] - For the nine months ended September 30, 2023, the net loss was $64.713 million, a significant improvement from a net loss of $175.713 million in the same period of 2022, representing a reduction of 63.2%[21] - For the nine months ended September 30, 2023, the company reported a net loss of $64,713 thousand, down from $175,713 thousand in the same period of 2022[163] - The basic net loss per share for Q3 2023 was $(0.11), compared to $(1.39) in Q3 2022, indicating a reduction in losses per share[163] Assets and Liabilities - Total assets decreased to $400,863,000 as of September 30, 2023, down from $433,157,000 at the end of 2022[11] - Cash and cash equivalents dropped to $16,489,000 from $60,388,000 at the end of 2022, indicating a decrease of 72.7%[11] - Long-term debt increased to $213,157,000 from $161,980,000, representing a rise of 31.6%[11] - Total stockholders' equity fell to $83,569,000 from $144,690,000, a decline of 42.2%[11] - As of September 30, 2023, the company's cash, cash equivalents, restricted cash, and short-term investments totaled $24.4 million, a decrease from $61.2 million at December 31, 2022[34] - The company reported a negative working capital balance of $41.4 million (excluding cash and short-term investments) and an accumulated deficit of $765.7 million as of September 30, 2023[34] Revenue and Deferred Revenue - The company reported a deferred revenue increase of $6.141 million, compared to an increase of $8.581 million in the prior year, indicating a slowdown in revenue recognition[21] - Subscription revenue for the nine months ended September 30, 2023, was $87.986 million, up from $73.186 million in 2022, indicating a year-over-year increase of about 20%[53] - Revenue from North America for the three months ended September 30, 2023, was $27.025 million, compared to $25.139 million in 2022, reflecting an increase of approximately 7.5%[54] - The balance of deferred revenue increased to $46,706 million as of September 30, 2023, up from $36,487 million at the end of 2022, with new deferrals of $39,551 million recognized in the current period[58] Cash Flow and Expenditures - The company reported net cash used in operating activities of $31.940 million, an improvement compared to $57.499 million in the prior year, indicating a 44.4% decrease in cash burn[21] - Capital expenditures for the nine months ended September 30, 2023, were $5.957 million, down from $8.859 million in 2022, reflecting a 32.5% reduction[21] - The company incurred stock-based compensation expenses of $18.212 million, down from $30.868 million in the previous year, a decrease of 41.0%[21] Acquisitions and Investments - The company completed the acquisition of Dragonfly for up to $25.2 million on January 27, 2023, which included cash, stock, convertible notes, and contingent payments[203] - The acquisition of Dragonfly includes an additional earnout payment of up to $4.3 million based on revenue targets for 2023[64] - The acquisition of Aicel Technologies was valued at $8,678 million, consisting of 859,016 Class A common shares and contingent consideration[69] - The company plans to invest in innovative products and complementary businesses to expand its leadership in the legal and regulatory information market[207] Stock and Equity - The company issued Class A common stock upon vesting of restricted share units amounting to 313,090 shares during the quarter[17] - The total number of shares outstanding increased to 128,895,749 as of September 30, 2023[17] - The balance of common stock as of June 30, 2023, was 128,575,130 shares, indicating a stable share count[17] - The Company had 120,604,828 shares of Class A common stock issued and outstanding as of September 30, 2023[132] Debt and Interest - The Company’s total debt as of September 30, 2023, is $213,157, an increase from $161,980 as of December 31, 2022, indicating a growth of approximately 31.6%[97] - The New Senior Term Loan has a principal amount of $157,825 as of September 30, 2023, with an annual interest rate based on the greater of Prime Rate plus 5.0% or 9.0%[98] - For the nine months ended September 30, 2023, the Company incurred $15,341 in cash interest on the New Senior Term Loan, reflecting a significant financial obligation[102] - The Company incurred total interest expense related to the New GPO Note of $868 million for the three and nine months ended September 30, 2023[110] Legal and Compliance - The company has expressed substantial doubt about its ability to continue as a going concern within one year from the date of the filing due to potential non-compliance with financial covenants[31] - Legal fees are recognized as incurred, and no loss contingency amounts are included in the financial statements[189] Market Strategy - The company is focused on leveraging AI technology to provide actionable legal and policy insights, enhancing its market intelligence offerings[23] - The company aims to deepen offerings for regulated industries and execute on its acquisition strategy to drive growth[206]

Financial Data and Key Metrics Changes - The company reported Q2 revenue of $32.8 million, representing a 21% year-over-year increase, consistent with previous guidance [65][79] - Adjusted gross profit margins for Q2 were 80%, reflecting the strength of the SaaS business model and AI capabilities [47][110] - The adjusted EBITDA loss for Q2 was $4.3 million, with expectations to achieve adjusted EBITDA profitability in Q3, a quarter earlier than previously anticipated [66][85] Business Line Data and Key Metrics Changes - Subscription revenue, which constitutes 90% of total revenue, was $29.5 million, marking a 21% increase year-over-year [108] - Annual recurring revenue (ARR) grew to $120 million, a 16% increase compared to the same period last year [109] - The company is focusing on optimizing product offerings, including sunsetting underperforming products to enhance long-term profitable growth [68][86] Market Data and Key Metrics Changes - Approximately 13% to 14% of revenue currently comes from the European market, indicating significant growth potential in Europe and Asia [8][9] - The company is experiencing strong demand for its products in Europe and Asia, with expectations for organic and inorganic growth in these regions [9][8] Company Strategy and Development Direction - The company aims to leverage its AI capabilities to create new revenue streams and enhance existing products, such as the launch of FiscalNoteGPT [5][72] - A strategic focus on profitability is driving the company to realign its sales and marketing efforts towards high-growth products and large enterprise accounts [75][143] - The company is committed to building a durable, profitable growth model, targeting significant revenue milestones in the future [78][117] Management's Comments on Operating Environment and Future Outlook - Management noted ongoing budget challenges and elongated sales cycles, particularly among enterprise customers, but highlighted resilience in core policy products [27][35] - The company expects to achieve industry-standard adjusted EBITDA and free cash flow margins over time, driven by strong recurring revenue and high gross margins [50][78] - Management expressed confidence in the growth opportunities presented by increasing regulatory complexity and geopolitical risks [96][105] Other Important Information - The company has a cash position of $38.1 million and $94 million of additional debt capacity, indicating sufficient capital to fund growth initiatives [48][113] - The company is actively pursuing selective M&A opportunities that are accretive to growth and profitability [87][117] Q&A Session All Questions and Answers Question: How is the pipeline coverage looking for the second half of the year? - The pipeline is promising, with changes in the sales organization expected to drive higher productivity [89] Question: Can you discuss the vertical mix in the pipeline? - The pipeline is broad and applicable across industries, with expectations for large deal sizes [121] Question: Is the emerging AI segment causing confusion or broadening the sales pipeline? - The AI-driven innovation is creating new revenue opportunities and expanding the total addressable market [124] Question: What are the specifics around sunsetting products? - The company reallocates capital to faster-growing products, which may create variability in run rate revenue [130] Question: What is the outlook for cash flow and cash burn in the second half? - The company feels confident about its cash position and expects to meet all operational requirements [135]