Sign in

You're signed outSign in or to get full access.

FH

FiscalNote Holdings, Inc. (NOTE)·Q1 2024 Earnings Summary

Executive Summary

  • Q1 2024 revenue was $32.1M (+2% YoY) and adjusted EBITDA was $1.2M (4% margin), slightly exceeding prior guidance; GAAP net income was $50.6M, driven by the gain on the Board.org divestiture .
  • Gross margins strengthened: GAAP gross margin rose to 77% (from 72% YoY), and adjusted gross margin to 85% (from 80% YoY), reflecting sunset products and efficiency gains .
  • FY 2024 guidance was reaffirmed (revenue $123–$127M, RRR $126–$134M, adjusted EBITDA $7–$9M); Q2 2024 guidance introduced at ~$29M revenue and ~$$1M adjusted EBITDA .
  • Strategic review remains active with Centerview and Skadden advising; management highlighted accelerated AI roadmap (StressLens, Global Intelligence Copilot, Copilot Creator) as key catalysts for growth and retention .

What Went Well and What Went Wrong

What Went Well

  • Adjusted EBITDA positive for the third consecutive quarter ($1.2M), an $8.2M YoY improvement, evidencing cost rationalization and efficiency gains .
  • Gross margin expansion (GAAP 77%, adjusted 85%) on product sunsets and operating efficiencies; CFO emphasized continued pursuit of efficiencies .
  • Accelerated AI product strategy: launched StressLens and Global Intelligence Copilot; unveiled Copilot Creator Reasoning Engine and FiscalNoteGPT, with early customer uptake and retention benefits expected .
    • “Building the most powerful legal, regulatory, and geopolitical AI assistant and eventually the world’s most powerful AI lawyer” .
    • “We are well positioned to… continue launching innovative AI products… and deliver on our profitability plans” .

What Went Wrong

  • KPIs declined due to Board.org divestiture: RRR fell to $122M (from $134M YoY) and ARR to $110M (from $119M YoY); NRR held at 96% .
  • Non-subscription revenue declined 19% YoY (to $2.5M) from discontinuation of certain non-strategic products and services .
  • Consensus estimates could not be retrieved; thus, direct beat/miss vs Wall Street is unavailable at time of writing (S&P Global data not accessible) [GetEstimates unavailable—Values retrieved from S&P Global*].

Financial Results

Consolidated Performance vs Prior Year and Prior Quarter

MetricQ1 2023Q4 2023Q1 2024
Revenue ($USD Millions)$31.529 $34.265 $32.112
Diluted EPS ($USD)$(0.14) $(0.39) $0.37
Gross Margin (%)72% 67% 77%
Adjusted Gross Margin (%)80% 83% 85%
Adjusted EBITDA ($USD Millions)$(6.967) $2.987 $1.217
Adjusted EBITDA Margin (%)(22)% 9% 4%
Net Income (Loss) ($USD Millions)$(19.273) $(50.748) $50.599
Cash and Equivalents ($USD Millions)$46.7 $24.4 (incl. short-term investments) $43.6

Notes:

  • Q1 2024 net income includes the gain on sale of Board.org; CFO highlighted this as the primary driver of the GAAP profit .

Segment Revenue Breakdown

MetricQ1 2023Q4 2023Q1 2024
Subscription Revenue ($USD Millions)$28.467 $31.096 $29.626
Advisory, Advertising, Other ($USD Millions)$3.062 $3.169 $2.486
Total Revenues ($USD Millions)$31.529 $34.265 $32.112

KPIs

KPIQ1 2023Q4 2023Q1 2024
Run-Rate Revenue (RRR) ($USD Millions)$134 $140 $122
Annual Recurring Revenue (ARR) ($USD Millions)$119 $126 $110
Net Revenue Retention (NRR) (%)96% 99% 96%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Revenues ($USD Millions)FY 2024$123–$127 $123–$127 Maintained
Run-Rate Revenue ($USD Millions)FY 2024$126–$134 $126–$134 Maintained
Adjusted EBITDA ($USD Millions)FY 2024$7–$9 $7–$9 Maintained
Total Revenues ($USD Millions)Q2 2024N/A~$29 New
Adjusted EBITDA ($USD Millions)Q2 2024N/A~$1 New

Reference for prior quarter guidance:

  • Q1 2024 guidance (issued 3/12): revenue ~ $31M; adjusted EBITDA ~ $1M .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2: Q3 2023; Q-1: Q4 2023)Current Period (Q1 2024)Trend
AI/technology initiativesIntroduced AI Co-pilot program and FiscalNoteGPT; highlighted AI partnerships Launched StressLens and Global Intelligence Copilot; unveiled Copilot Creator Reasoning Engine; accelerated AI roadmap and licensing exploration Strengthening and expanding
Strategic reviewSpecial Committee formed to evaluate potential go-private; advisors retained Review ongoing with Centerview and Skadden; no timetable; updates only as appropriate Ongoing
Profitability and cost structureFirst adjusted EBITDA-positive quarter ($0.7M) Q4 adjusted EBITDA $3.0M; executed ~$25M annualized expense improvement Sustained adj. EBITDA; efficiency gains
Geographic/regional trendsEUIT enhancements; Europe ~15% of revenue European policy and security risk businesses growing >20% YoY; Europe ~15% Expanding
Product performance and bundlingRisk Connector anchor customer; product portfolio refinement underway Bundling offerings; PLG approach to broaden reach; deeper workflow integration Ramping go-to-market
Regulatory/data licensing—Approached by LLM providers and service firms for data licensing and co-selling; exploring embedded partnerships Emerging channel

Management Commentary

  • “We are well positioned to further execute on our growth strategy, continue launching innovative AI products… and deliver on our profitability plans across the remainder of 2024 and beyond” (Tim Hwang) .
  • “Building the most powerful legal, regulatory, and geopolitical AI assistant and eventually the world’s most powerful AI lawyer” (AI master plan) .
  • “GAAP net income for Q1 2024 was $50 million… reflecting the substantial positive impact of the gain on the sale of Board.org” (CFO) .
  • “We have sufficient cash resources to fund our operations and we do not see any immediate, or intermediate need for additional capital” (CFO) .
  • “Our European policy business and security intelligence and risk businesses… growing north of 20% a year” (CEO) .

Q&A Highlights

  • Estimate bridge for Board.org revenue contribution will be disclosed with the 10‑Q; subscription client count decline largely tied to the divestiture .
  • Go-to-market balance: embedding generative AI into core products, using PLG for Copilots while maintaining focus with a refined portfolio; commercial restructuring improved productivity .
  • Partner/embedded channels: in discussions with LLM platforms, services integrators, and point-solution providers to license data and embed Copilot features .
  • M&A posture: slowed to integrate prior deals; will pursue selective consolidation where valuation/liquidity align with strategy .
  • Bookings outlook: pipeline supports H2 acceleration, aided by sales realignment and bundling; ACVs trending favorably .
  • Copilot sales cycles expected to be shorter under PLG motions; no granular breakdown by customer type shared .
  • Strategic review: no added color; reiteration that shares are undervalued vs peers and transaction multiples .

Estimates Context

  • Wall Street consensus (S&P Global) for Q1 2024 revenue/EPS/EBITDA was unavailable at time of writing due to data access limits. As a result, beat/miss vs consensus cannot be quantified here (Values retrieved from S&P Global*).
  • Management indicated Q1 results “slightly exceeding previously provided guidance” and reaffirmed FY 2024 ranges; Q2 2024 introduced at ~$29M revenue and ~$$1M adjusted EBITDA .

Key Takeaways for Investors

  • Profitability turning point sustained: third consecutive adjusted EBITDA-positive quarter with margin expansion, validating the 2023 cost actions and product sunsets .
  • Reported GAAP net income was atypically high due to Board.org gain; underlying operating metrics (adj. gross margin, adj. EBITDA) are the better lens for recurring performance .
  • Near-term growth headwinds from divestiture and product discontinuations weigh on RRR/ARR and non-subscription revenue, but management expects a return to double-digit growth in 2025 via AI Copilots, bundling, and PLG .
  • AI roadmap is the key narrative driver: StressLens, Global Intelligence Copilot, and Copilot Creator could lift retention, usage, and create licensing revenue; watch for partner announcements (LLM/data licensing) and an AI showcase day .
  • Strategic review remains a potential catalyst for valuation; no timing commitments, but advisors are engaged and management highlights asset value vs market pricing .
  • Balance sheet de-risking: ~$66M senior debt repaid and cash improved post-divestiture; maturities extended for amortization, supporting investment and operating flexibility .
  • Trading setup: 2H 2024 bookings acceleration, Q2 seasonal bias, and AI product adoption pace are near-term indicators; absence of consensus comparisons limits beat/miss visibility, but guidance reaffirmation reduces downside risk .

Footnote:
*Estimates unavailable—values normally sourced from S&P Global (Capital IQ) but could not be retrieved at time of writing.