10-Q: FiscalNote Faces Going Concern Amid Revenue Decline, Refinances Debt

FiscalNote Holdings, Inc. reported a significant net loss and revenue decline for Q3 2025, raising substantial doubt about its ability to continue as a going concern, despite completing a major debt refinancing.

Summary

• FiscalNote reported a net loss of $24.9 million for the three months ended September 30, 2025, a 66.4% increase from a $14.9 million net loss in the prior year period.
• Total revenues decreased by 23.8% to $22.4 million for the three months ended September 30, 2025, compared to $29.4 million in the same period last year.
• Subscription revenue, which accounts for approximately 93% of total revenues, decreased by 22.2% to $21.2 million for the three months ended September 30, 2025.
• The company completed a significant debt refinancing in August and September 2025, replacing its Prior Senior Term Loan with a new $75.0 million 2025 Senior Term Loan and issuing $33.3 million in Convertible Debentures.
• Annualized cash interest payments are expected to be approximately $9.0 million based on current SOFR rates, with principal repayments of $1.9 million in year one and $3.8 million thereafter.
• Management identified a material weakness in internal control over financial reporting related to the independent review and approval of manual journal entries.
• The company's cash, cash equivalents, restricted cash, and short-term investments stood at $31.8 million as of September 30, 2025, down from $35.3 million at December 31, 2024.
• A negative working capital balance of $31.3 million (excluding cash and short-term investments) was reported as of September 30, 2025.
• The accumulated deficit increased to $849.3 million as of September 30, 2025, from $806.9 million at December 31, 2024.
• The company completed several business dispositions in 2024 and 2025, including Oxford Analytica, Dragonfly, TimeBase, Aicel Technologies, and Board.org, generating significant cash proceeds and gains on disposal.
• A 1-for-12 reverse stock split was approved on August 22, 2025, and became effective on September 2, 2025.
• Workforce headcount was reduced by approximately 27 from the beginning of Q3 2025 through September 30, 2025, as part of cost reduction initiatives.

Sentiment

Score: 3

Explanation: The sentiment is predominantly negative due to significant financial deterioration (widening net losses, declining revenues), a formal 'going concern' warning, and the identification of a material weakness in internal controls. While debt refinancing provides some short-term relief and cost-saving measures are in place, the underlying business challenges and risks are substantial.

Positives

• Successfully refinanced a substantial amount of legacy indebtedness, including a new $75.0 million Senior Term Loan maturing in August 2029, which provides financial flexibility.
• Completed several business dispositions (Oxford Analytica, Dragonfly, TimeBase, Aicel, Board.org) which generated significant cash proceeds of $46.9 million in the nine months ended September 30, 2025, and reduced debt.
• Reduced annualized cash interest payments to approximately $9.0 million (based on current SOFR rates) following the debt refinancing.
• Improved cash used in operations by approximately $35.0 million when comparing the twelve months ended September 30, 2025, to the twelve months ended September 30, 2023, due to cost-saving measures.
• Adjusted EBITDA for the nine months ended September 30, 2025, increased to $7.8 million from $6.4 million in the prior year period, and Adjusted EBITDA Margin improved to 10.6% from 7.1%.

Negatives

• Net loss significantly widened to $24.9 million for the three months ended September 30, 2025, from $14.9 million in the prior year, and to $42.4 million for the nine months ended September 30, 2025, from a net income of $22.9 million in the prior year.
• Total revenues decreased by 23.8% for the three months and 19.4% for the nine months ended September 30, 2025, primarily due to business dispositions and organic business decline.
• Subscription revenue decreased by 22.2% for the three months and 19.3% for the nine months ended September 30, 2025, impacted by business sales, discontinued products, and customer retention challenges.
• Operating loss worsened by 43.0% for the three months and 18.0% for the nine months ended September 30, 2025.
• The company has a negative working capital balance of $31.3 million (excluding cash and short-term investments) and an accumulated deficit of $849.3 million as of September 30, 2025.
• Cash used in operating activities increased to $11.2 million for the nine months ended September 30, 2025, from $4.0 million in the prior year period.
• A loss on debt extinguishment of $6.2 million was recognized for the three months ended September 30, 2025, and $8.0 million for the nine months ended September 30, 2025.
• General and administrative expenses increased by 31% for the three months and 10% for the nine months ended September 30, 2025, primarily due to legal and accounting costs associated with the debt transaction.
• The change in fair value of financial instruments resulted in a $7.0 million loss for the three months and $7.9 million loss for the nine months ended September 30, 2025, significantly worsening from prior year losses.

Risks

• Substantial doubt exists about the company's ability to continue as a going concern within one year due to negative working capital, accumulated deficit, net losses, and potential non-compliance with debt covenants.
• A protracted U.S. government shutdown could negatively affect the company's ability to enter into or renew public sector subscription contracts and generate advertising and events revenue.
• Concentration of revenues from U.S. government agencies, changes in spending priorities, dependence on winning/renewing contracts, and funding delays pose significant risks.
• The company's ability to successfully execute its strategy for organic growth, including developing, enhancing, and integrating platforms, attracting new customers, and expanding offerings, faces risks.
• Future capital requirements, ability to service repayment obligations, and maintain compliance with covenants and restrictions under existing debt agreements are critical challenges.
• Risks associated with international operations include compliance complexity, currency exchange rate fluctuations, political/social/economic instability, and potential new taxes on digital sales.
• Potential technical disruptions, cyberattacks, security, privacy or data breaches, or other technical/security incidents could affect networks or systems.
• Competition and competitive pressures in the markets, including larger well-funded companies, could adversely impact the business.
• The company's ability to comply with laws and regulations in connection with selling products and services to U.S. and foreign governments and other highly regulated industries is a risk.
• Adverse general economic and market conditions could reduce spending on the company's products and services.
• The outcome of any known and unknown litigation and regulatory proceedings could be unfavorable.
• The company's ability to adequately protect and maintain its brands and other intellectual property rights is crucial.
• A material weakness in internal control over financial reporting was identified, which could affect the accuracy and timeliness of financial reporting and investor confidence.

Future Outlook

The company expects annualized cash interest payments of approximately $9.0 million based on current SOFR rates, with principal repayments of $1.9 million during the first year and $3.8 million thereafter. Management will continue evaluating additional rationalization opportunities to further reduce business complexity and ongoing operating expenses. The company plans to invest in innovative products, attract new customers, and expand its leadership role in the legal and regulatory information market to drive organic growth. Strategic acquisitions in complementary businesses may also be pursued. However, the company has concluded that there is substantial doubt about its ability to continue as a going concern within one year from the date of this filing, and its ability to maintain compliance with financial covenants depends on current expectations regarding revenues, improved net retention, collections, cost structure, and other operating assumptions.

Management Comments

• "The Company has implemented various cost saving measures throughout 2023, 2024 and 2025 to rationalize its cost structure."
• "Accordingly, the Company has improved its cash used in operations by approximately $35.0 million when comparing its cash used in operations for the twelve months ended September 30, 2025 to the cash used in operations for the twelve months ended September 30, 2023."
• "Management will continue evaluating for additional rationalization opportunities to further reduce the complexity of the business and reduce ongoing operating expenses."
• "We continue to invest for future growth. We are focused on several key growth levers, including cross-selling and upselling opportunities at existing clients, expanding our client base with a focus on enterprise and government customers, expansion into adjacent markets and deepening our offerings for regulated industries or sectors."
• "We plan to invest a portion of our available capital resources in building innovative products, attracting new customers and expanding our leadership role in the legal and regulatory information market to drive growth organically."
• "We may also evaluate acquisitions and investment opportunities in complementary businesses to supplement our existing platform, enable us to enter new markets and ensure that we are well positioned to provide critical insights to the regulated sectors of the future."
• "The Company believes it will maintain future compliance with all of its covenants."
• "Based on that evaluation, our chief executive officer and chief financial officer concluded that, as of September 30, 2025, our disclosure controls and procedures were not effective as of September 30, 2025 due to the material weakness in internal control over financial reporting described below."
• "As of the date of this Form 10-Q, management does not believe this design deficiency resulted in any identified misstatements in the Companys financial statements and management has concluded that the consolidated financial statements included in this Form 10-Q are fairly stated in all material respects, although the control design deficiency represents a material weakness in the Companys internal control over financial reporting."

Industry Context

FiscalNote operates in the AI-driven policy and regulatory intelligence solutions market. The company's performance reflects challenges in customer retention and impacts from U.S. federal government cuts, suggesting a potentially difficult operating environment within its core public sector and enterprise client base. The focus on AI technology and expanding offerings for regulated industries aligns with broader trends in leveraging technology for risk management and compliance, but the company's financial struggles indicate it may be facing intense competition or slower-than-expected market adoption for its solutions, especially given the significant revenue decline despite strategic dispositions.

Comparison to Industry Standards

• NA

Management Changes

Corporate Governance

Legal Proceedings

• The company is not currently a party to any litigation or regulatory proceeding that it expects to have a material adverse effect on its business, results of operations, financial conditions, or cash flows.

Related Party Transactions

• The company entered into a redemption and exchange agreement with GPO FN Noteholder LLC (a GPO Investor) on August 5, 2025, leading to the redemption of $30.0 million of the Prior GPO Convertible Note and the issuance of a new $20.4 million 2025 GPO Convertible Note.
• The company entered into a securities purchase agreement with YA II PN, Ltd (YA) on August 5, 2025, for the issuance of convertible debentures totaling $33.3 million in principal amount for a cash purchase price of $30.0 million.

Stakeholder Impact

• Shareholders face potential significant dilution if the company raises funds in the future by issuing equity securities, and the stock price may decline due to the going concern warning and material weakness.
• Employees have been impacted by workforce planning actions, including headcount reductions, as part of cost-saving measures.
• Creditors (lenders) are affected by the debt refinancing, which includes new covenants and repayment schedules, and the company's going concern status raises concerns about its ability to satisfy future obligations.
• Customers may experience impacts from customer retention challenges and the effects of U.S. federal government cuts on public sector contracts, potentially affecting service continuity or offerings.

Next Steps

• Management will continue evaluating additional rationalization opportunities to further reduce the complexity of the business and ongoing operating expenses.
• The company plans to invest a portion of its available capital resources in building innovative products, attracting new customers, and expanding its leadership role in the legal and regulatory information market to drive organic growth.
• The company may evaluate acquisitions and investment opportunities in complementary businesses to supplement its existing platform and enter new markets.
• Remediation measures are being implemented to address the material weakness in internal controls over financial reporting, specifically a review process for manual journal entries and enhanced documentation/monitoring.

Key Dates

Recommendation

The filing presents a highly concerning financial picture, with significant widening of net losses, substantial revenue decline, and a formal disclosure of "substantial doubt about its ability to continue as a going concern." Additionally, the identification of a material weakness in internal control over financial reporting undermines confidence in financial reporting reliability. While debt refinancing provides some liquidity, the underlying operational challenges, including customer retention issues and government spending cuts, persist. These factors collectively indicate a high level of risk and a deteriorating financial position, making the stock a 'sell' for a seasoned investor.

Keywords

FiscalNote, 10-Q, SEC Filing, Financial Results, Net Loss, Revenue Decline, Debt Refinancing, Going Concern, Material Weakness, Subscription Revenue, Adjusted EBITDA, Corporate Governance, Risk Factors, AI-driven solutions, Policy Intelligence, Regulatory Intelligence, Government Contracts, Stock Split