8-K: FiscalNote Exceeds EBITDA Expectations, Divests Board.org for up to $103 Million

FiscalNote announced its fourth quarter and full year 2023 financial results, exceeding adjusted EBITDA expectations and divesting its Board.org platform for up to $103 million.

Summary

• FiscalNote reported a 17% year-over-year revenue growth in 2023, reaching $132.6 million.
• The company achieved positive adjusted EBITDA of approximately $3 million in the fourth quarter of 2023, surpassing their guidance of $2.5 million.
• FiscalNote divested its Board.org platform for up to $103 million, including $95 million in cash, resulting in a 9.5x cash-on-cash return.
• The divestiture of Board.org provided approximately $15 million in cash to the balance sheet and enabled the repayment of $65.7 million in senior debt.
• Run-rate revenue increased by 10% to $140 million as of December 31, 2023, while annual recurring revenue (ARR) rose by 11% to $126 million.
• The company's net loss for 2023 was $115.5 million, which includes $72.8 million of non-cash items.
• FiscalNote expects 2024 GAAP revenue to be between $123 and $127 million, with a positive adjusted EBITDA of $7 to $9 million.
• The company anticipates a return to double-digit growth rates in 2025.

Sentiment

Score: 7

Explanation: The document presents a mixed picture with strong revenue growth and positive adjusted EBITDA in Q4, but also a significant net loss for the year. The divestiture and debt repayment are positive, but the strategic review adds uncertainty. Overall, the sentiment is cautiously optimistic.

Positives

• FiscalNote achieved a 17% year-over-year revenue growth in 2023.
• The company exceeded its adjusted EBITDA guidance for Q4 2023.
• The divestiture of Board.org generated a significant cash return and strengthened the balance sheet.
• FiscalNote successfully reduced its senior debt by $65.7 million.
• The company's run-rate revenue and ARR showed solid growth.
• FiscalNote is projecting positive adjusted EBITDA for 2024.
• The company is streamlining its product portfolio to focus on core offerings.
• FiscalNote has secured partnerships with major technology companies like OpenAI, Google, and Microsoft.

Negatives

• FiscalNote reported a GAAP net loss of $115.5 million for 2023.
• The company's adjusted EBITDA for the full year 2023 was a loss of $7.5 million.
• The divestiture of Board.org and sunsetting of other products will result in a loss of approximately $17 million in annualized revenue.
• The company's net revenue retention was 99% in the fourth quarter, indicating some customer churn.

Risks

• The company's strategic review may not result in any transaction or other outcome.
• FiscalNote faces risks related to managing growth, competition, and international operations.
• The company's ability to maintain and improve its technology and data collection methods is crucial.
• Adverse economic conditions could reduce spending on FiscalNote's products and services.
• The company's reliance on third-party systems and data poses a risk.
• There are risks associated with potential technical disruptions, cyberattacks, and data breaches.

Future Outlook

FiscalNote expects 2024 GAAP revenue to be between $123 and $127 million, with a positive adjusted EBITDA of $7 to $9 million. The company anticipates a return to double-digit growth rates in 2025.

Management Comments

• Tim Hwang, Chairman, CEO, and Co-founder of FiscalNote, stated that the company is transforming and simplifying its organization by aligning sales teams, streamlining the product portfolio, and optimizing capital structure.
• He also mentioned that FiscalNote is driving new levels of innovation by combining AI and human intelligence to provide the data, intelligence, analysis, and workflows that customers need.
• Management believes the company is well-positioned to drive ongoing profitability in 2024 and accelerate growth in 2025 and beyond.

Industry Context

FiscalNote's focus on AI-driven policy and market intelligence aligns with the growing demand for technology solutions that help organizations navigate complex regulatory and geopolitical environments. The divestiture of Board.org and streamlining of the product portfolio reflects a broader trend of companies focusing on core competencies and profitability.

Comparison to Industry Standards

• FiscalNote's 17% revenue growth is solid compared to other SaaS companies in the policy and market intelligence space, although some high-growth tech companies may see higher rates.
• The achievement of positive adjusted EBITDA in Q4 2023 is a positive sign, as many SaaS companies struggle with profitability in their early stages.
• The divestiture of Board.org for a 9.5x cash-on-cash return is a strong result, indicating effective capital allocation.
• The company's focus on AI and partnerships with major tech companies like OpenAI, Google, and Microsoft positions them well against competitors.
• Compared to companies like Govini and Palantir, FiscalNote is more focused on policy and regulatory intelligence, while those companies have a broader focus on government data and analytics.

Stakeholder Impact

• Shareholders will benefit from the improved financial position and focus on profitability.
• Employees may experience changes due to the streamlining of the product portfolio and sales teams.
• Customers will benefit from a more focused product offering and continued innovation.
• Creditors will benefit from the repayment of senior debt.

Next Steps

• FiscalNote will continue to execute its strategy to lead in global policy and market intelligence.
• The company will focus on streamlining its product portfolio and optimizing its capital structure.
• FiscalNote will continue to review strategic value-maximizing options.
• The company will host a conference call to discuss the financial results and outlook.

Key Dates

Keywords

FiscalNote, SaaS, AI, Policy Intelligence, Market Intelligence, Adjusted EBITDA, Revenue, Divestiture, Board.org, ARR, Run-Rate Revenue, Debt Repayment, Strategic Review