FiscalNote(NOTE) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenue for Q3 2025 was $22.4 million, aligning with guidance, but $7 million lower compared to the prior year due to divestitures [14] - Adjusted EBITDA was $2.2 million, exceeding guidance, translating to a margin of 10%, marking the fifth consecutive quarter of adjusted EBITDA margins at or above 10% [4][17] - Annual recurring revenue (ARR) was $84.8 million, down from $92.2 million year-over-year, but showed a modest quarter-to-quarter increase of $100,000 [14][15] Business Line Data and Key Metrics Changes - Subscription revenue for Q3 2025 was $21.2 million, accounting for 94% of total revenue, slightly higher than the historical trend of 92% [14] - Corporate multi-year contracts for policy data now account for approximately 50% of new logo ARR, up from about 20% in early 2024, indicating a significant increase in revenue visibility [8] Market Data and Key Metrics Changes - Net revenue retention was 98%, level with the prior year and up 200 basis points over the second quarter on a pro forma basis [15] - The federal sector experienced volatility due to an extended government shutdown, with an estimated impact of $2 million to $3 million for the full year [32][33] Company Strategy and Development Direction - The company is focused on a product-led growth strategy, emphasizing the transition to the Policy Note platform and enhancing customer engagement through product innovation [9][10] - Management highlighted the importance of automation in operations to drive productivity and improve overall efficiency, with expectations for significant improvements in 2026 [25][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver sustainable growth and expanding profitability, despite ongoing challenges in the federal sector [11][19] - The company is encouraged by early traction and stabilization in the core business, with a focus on improving gross and net retention through enhanced product offerings [31] Other Important Information - The company updated its full-year revenue guidance to a range of $95-$96 million, with adjusted EBITDA projected to be approximately $10 million [12][18] - Cash and cash equivalents at the end of Q3 2025 were $31.8 million, providing sufficient liquidity to support ongoing operations and growth initiatives [17] Q&A Session Summary Question: Can you provide more color on the increase in average contract values (ACV)? - The increase in ACVs is primarily driven by leveraging global data more effectively, which has extended use cases through the enterprise [21] Question: Has there been any change in churn during the migration to Policy Note? - There has not been any meaningful migration-related churn, with positive experiences reported during the transition [22] Question: What are the expectations for renewed year-over-year ARR growth? - Specific guidance on ARR was not provided, but management is encouraged by the progress and transformation seen through Policy Note [30] Question: Can you quantify the impact of the federal government shutdown? - The estimated overall impact of the shutdown is between $2 million and $3 million for the full year [33]