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FiscalNote Holdings, Inc. (NOTE)·Q3 2024 Earnings Summary

Executive Summary

  • FiscalNote’s Q3 2024 delivered $29.4M revenue and $3.4M adjusted EBITDA, exceeding its Q3 forecast and marking a fifth consecutive quarter of adjusted EBITDA profitability .
  • Full-year guidance was updated: revenue lowered to ~$120M (from ~$121M) while adjusted EBITDA was raised to ~$9M (from ~$8M) — a mix of top-line pressure and stronger profitability; Q4 was guided to $29.0M revenue and $2.5M adjusted EBITDA .
  • Gross margin expanded materially YoY to 79% GAAP and 86% adjusted, supported by portfolio simplification (Board.org divestiture, advisory deemphasis) and operational efficiencies; management signaled sustainability given subscription mix .
  • Strategic actions continued: sale of Aicel Technologies ($9.65M total consideration) with proceeds used to further delever, and leadership succession naming President/COO Josh Resnik as CEO effective Jan 1, 2025; Board’s strategic alternatives review remains active .
  • Catalysts: raised FY EBITDA guidance, Q3 EBITDA beat, margin durability commentary, Aicel divestiture deleveraging, and CEO transition; consensus estimates from S&P Global were unavailable, limiting beat/miss vs Street context (see Estimates Context).

What Went Well and What Went Wrong

What Went Well

  • Five straight quarters of adjusted EBITDA profitability; Q3 adjusted EBITDA of $3.4M vs ~$2M prior Q3 forecast, trailing 4-quarter total ~$9.4M (per CFO) — margin discipline and efficiencies evident .
  • Gross margin expanded to 79% GAAP and 86% adjusted; management said higher-margin subscription mix and deemphasized advisory support sustainability: “as we... triple down on our core policy and global insights business, those are subscription businesses with really great margin profiles” (CFO) .
  • Portfolio simplification and deleveraging: Board.org divestiture earlier year, Aicel sale in Q4 with net cash applied to senior debt prepayment; total debt declined sequentially to ~$168M at Q3 end (incl. accrued interest) .

What Went Wrong

  • Top-line pressure: Q3 revenue down YoY to $29.4M (vs $34.0M) largely from Board.org sale; FY revenue forecast reduced to ~$120M (from ~$121M), and commentary on slower advisory/non-subscription growth and macro renewal softness .
  • Net loss remained elevated: Q3 GAAP net loss of $(14.9)M (vs $(14.5)M prior year), and Q2 diluted EPS was $(0.09); Q1’s positive EPS reflected the Board.org gain, not underlying lift .
  • ARR and RRR moderated YoY due to divestitures; NRR dipped to 99% YTD vs prior year 100%, reflecting churn/macro impacts (with management working retention via product improvements) .

Financial Results

MetricQ1 2024Q2 2024Q3 2024
Total Revenues ($USD Millions)$32.1 $29.2 $29.4
Gross Margin (%)77% 77% 79%
Adjusted Gross Margin (%)85% 85% 86%
Adjusted EBITDA ($USD Millions)$1.2 $1.8 $3.4
Adjusted EBITDA Margin (%)4% 6% 12%
Diluted EPS (GAAP) ($USD)$0.37 $(0.09) $(0.11)
Total Operating Expenses ($USD Millions)$43.6 $37.2 $36.3

Segment revenue mix:

MetricQ1 2024Q2 2024Q3 2024
Subscription revenue ($USD Millions)$29.6 $27.1 $27.2
Advisory, advertising, other ($USD Millions)$2.5 $2.1 $2.2
Subscription % of total (%)~92% ~93% ~93%

KPIs (point-in-time):

KPIAs of Mar 31, 2024As of Jun 30, 2024As of Sep 30, 2024
Run-Rate Revenue ($USD Millions)$122 $121 $119
Annual Recurring Revenue ($USD Millions)$110 $109 $109
Net Revenue Retention (%)96% 98% 99%

Notes:

  • Non-GAAP measures are defined and reconciled in the press release; adjusted margins exclude amortization and other items .
  • Q1 GAAP EPS and net income benefitted from the ~$71.6M Board.org gain; adjusted metrics strip this effect .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Revenues ($USD Millions)FY 2024~$121 (8/8/2024) ~$120 (11/12/2024) Lowered
Adjusted EBITDA ($USD Millions)FY 2024~$8 (8/8/2024) ~$9 (11/12/2024) Raised
Total Revenues ($USD Millions)Q4 2024—$29.0 (11/12/2024) New
Adjusted EBITDA ($USD Millions)Q4 2024—$2.5 (11/12/2024) New

Q3 guidance vs actual (company forecast and delivery):

MetricQ3 2024 Guidance (8/8/2024)Q3 2024 ActualResult
Total Revenues ($USD Millions)~$29 $29.4 Beat
Adjusted EBITDA ($USD Millions)~$2 $3.4 Beat

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
AI/technology initiativesLaunched FiscalNoteGPT and Copilot Creator; AI Product Day; introduced StressLens and Global Intelligence Copilot; product-led growth strategy Expanded Copilot adoption; strong usage/engagement; product consolidation under new CPO to drive experiences and upsell/cross-sell Improving adoption; accelerating roadmap
Portfolio simplification/divestituresBoard.org sale; refocus on high-return offerings Aicel divestiture with proceeds to debt prepayment; continued evaluation to reduce complexity Ongoing simplification
Profitability focusTransitioned to adjusted EBITDA profitability; raised/tightened FY EBITDA Fifth consecutive positive adjusted EBITDA; FY EBITDA raised to ~$9M Strengthening
Gross margin77% GAAP and 85% adjusted; efficiencies and mix 79% GAAP and 86% adjusted; CFO said sustainable given subscription Sustained/expanding
Capital structure/deleveragingSenior debt repayment from Board.org; lower debt sequentially at Q2 Debt ~$168M at Q3 end; further deleveraging post-Aicel; focus on reducing cost of capital Deleveraging continues
Macro/retentionFY revenue revised lower due to churn/macro; NRR ~98% NRR 99%; commentary on slower advisory growth and macro renewal softness; product work to improve retention Mixed near term; improvement efforts underway
Government segmentSeasonally important bookings“Good government performance in Q3” (COO) Stable/positive
Strategic review/leadershipSpecial Committee reviewing strategic alternatives CEO transition to Resnik; Board continues to review alternatives Governance transition; review ongoing

Management Commentary

  • “We raised our full year profitability forecast for adjusted EBITDA to $9 million… [and] lowered our full year revenue forecast… to $120 million… [reflecting] divested and sunset products and continued trends” — CFO .
  • “Gross margins increased by virtue of the Board.org divestiture… and as we deemphasized advisory... subscription businesses [have] really great margin profiles” — CFO .
  • “We launched 2 Copilots earlier this year… [Global Intelligence Copilot] gives end users a new way to interact with our data… We’ve seen very broad uptake… promising upsell and cross-sell” — COO .
  • “We will focus on delivering best-in-class product experiences… consolidating and deprecating legacy platforms… to drive higher growth and retention” — COO .
  • “We will continue to try to find ways to deleverage and reduce the overall debt profile of the company… [and] reduce our overall cost of capital” — CFO (Q&A) .

Q&A Highlights

  • Capital structure: Management reiterated intent to deleverage and lower cost of capital; debt level will be informed by cash flow planning and budgeting over coming years .
  • AI Copilots traction: Broad uptake and strong engagement metrics for Global Intelligence Copilot; Policy Copilot serving as learnings and tech feeding into core product experiences .
  • Gross margin sustainability: CFO expects sustainability given subscription-heavy mix and reduced advisory; Board.org divestiture changed cost profile favorably .
  • Growth drivers: Focus on product experiences to improve retention, upsell/cross-sell; optimism in international (EU policy analysis, global intelligence) and enterprise/mid-market corporates .
  • Government bookings: Q3 government performance characterized as good, supporting seasonal expectations .
  • Portfolio actions: Management declined to quantify non-core share but emphasized substantial revenue in long-term core areas; evaluation continues .

Estimates Context

  • Street consensus estimates (S&P Global) for Q3 2024 revenue and EPS were unavailable at the time of this analysis due to access limits; as a result, formal comparison to analyst consensus cannot be provided. Values would ordinarily be retrieved from S&P Global.

Key Takeaways for Investors

  • Profitability execution is outpacing top-line: Q3 adjusted EBITDA beat and FY EBITDA guidance raised — favor margin/FCF sensitivity over near-term revenue growth; expect ongoing operational leverage .
  • Margin durability appears credible: Expanded gross margins and management’s subscription-mix commentary suggest resilience; watch advisory deemphasis impact on total revenue .
  • Narrative shift to simplification: Aicel sale and earlier Board.org divestiture reduced complexity and debt; continued review of non-core products could further tighten focus .
  • Product-led retention and growth: Copilot adoption and core product improvements are central to improving NRR/ARR through FY25; monitor engagement metrics and upsell activity .
  • Governance change: New CEO (Resnik) with product/operational emphasis; Executive Chair (Hwang) to focus on strategy/AI initiatives; assess execution continuity into 2025 .
  • Balance sheet watchpoints: Debt ~$168M at Q3 end with ongoing deleveraging; cash and short-term investments around ~$33.4M; track refinancing/cost-of-capital actions .
  • Strategic review remains a wildcard: Board continues to evaluate alternatives; consider potential corporate actions alongside operational trajectory .

Sources: Q3 2024 8‑K earnings press release and exhibits ; Q3 2024 earnings call transcript ; Q2 2024 8‑K and call ; Q1 2024 8‑K and prepared remarks ; Aicel sale 8‑K/press release ; leadership succession 8‑K .