10-Q: FiscalNote Holdings Reports Q1 2025 Results: Revenue Declines Amid Strategic Divestitures

FiscalNote Holdings' Q1 2025 results reveal a revenue decrease primarily due to strategic business dispositions and customer retention challenges, despite cost-saving measures and debt reduction efforts.

Summary

• FiscalNote Holdings reported a net loss of $4.25 million for Q1 2025, compared to a net income of $50.599 million in Q1 2024.
• Total revenue decreased by 14.3% to $27.511 million, down from $32.112 million in the same period last year.
• Subscription revenue declined by 14.8% to $25.232 million, impacted by the sale of businesses and customer retention issues.
• The company sold Dragonfly and Oxford Analytica for $40 million, recording a pre-tax gain of $15.743 million.
• Annual Recurring Revenue (ARR) was $87.7 million at March 31, 2025, compared to $107.5 million at December 31, 2024.
• Net Revenue Retention (NRR), excluding the impact of recent divestitures, was 93%.
• Operating expenses decreased by 5.2% to $41.273 million.
• The company prepaid $27.136 million of term loans using proceeds from the sale of Dragonfly and Oxford Analytica.
• FiscalNote is implementing cost-saving measures and evaluating strategic alternatives to improve its financial position.
• The company is actively evaluating additional cost saving opportunities and sources of capital.

Sentiment

Score: 4

Explanation: The sentiment is slightly negative due to declining revenue, a net loss, and concerns about the company's ability to continue as a going concern. However, cost-saving measures and debt reduction efforts provide some positive signals.

Positives

• The sale of Dragonfly and Oxford Analytica generated $40 million in cash, which was used to reduce debt by $27.136 million.
• Operating expenses decreased by 5.2% to $41.273 million, reflecting cost-saving measures.
• The company is actively evaluating additional cost saving opportunities and sources of capital.
• Amendment No. 5 waived their rights upon default retroactive to December 31, 2024.

Negatives

• Total revenue decreased by 14.3% to $27.511 million, down from $32.112 million in the same period last year.
• Subscription revenue declined by 14.8% to $25.232 million, impacted by the sale of businesses and customer retention issues.
• The company reported a net loss of $4.25 million, a significant shift from the $50.599 million net income in Q1 2024.
• ARR decreased to $87.7 million as of March 31, 2025, from $107.5 million at the end of 2024.
• The company has a negative working capital balance of $32.5 million (excluding cash and short-term investments) at March 31, 2025.
• The company has an accumulated deficit of $811.1 million as of March 31, 2025.

Risks

• The company's ability to maintain compliance with financial covenants is based on expectations regarding revenues, collections, and cost structure, which depend on general economic conditions.
• There is substantial doubt about the company's ability to continue as a going concern within one year from the date of this filing.
• The company may not be able to obtain additional financing on acceptable terms, or at all.
• The company's cash flows from operations have not been sufficient to fund its current operating model.
• The company is subject to certain financial covenants, and failure to comply with these covenants could lead to lenders declaring amounts outstanding due and payable.
• The company's ability to maintain its minimum cash requirement, fund its future cash interest requirements under its senior term loan and fund its operating expenses and capital expenditure requirements will depend in part on general economic, financial, competitive, legislative, regulatory and other conditions that may be beyond our control.

Future Outlook

The company expects that significant on-going operating and capital expenditures may be necessary to continue to implement the Company's business plan of entering new markets, future acquisitions, and infrastructure and product development. The Company may execute other strategic alternatives to maximize stakeholder value, including further expense reductions, sale of all or portions of the business, corporate capital restructuring or formal reorganization, or liquidation of assets.

Industry Context

The company operates in the competitive market intelligence industry, facing competition from larger, well-funded companies. The company is focused on 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.

Comparison to Industry Standards

• It's difficult to directly compare FiscalNote's results to industry standards without knowing the specific composition of its revenue and the performance of its direct competitors.
• Companies like Bloomberg Government, Thomson Reuters, and RELX Group (LexisNexis) offer similar services but have broader product portfolios and different financial structures.
• FiscalNote's ARR of $87.7 million is relatively small compared to the overall market size, suggesting it has significant room for growth if it can address its customer retention challenges.
• The NRR of 93% (excluding divestitures) indicates some success in retaining existing customers, but it's below the best-in-class SaaS companies that often achieve NRR of 110% or higher.

Stakeholder Impact

• Shareholders may be concerned about the declining revenue and net loss.
• Employees may be affected by cost-saving measures and potential workforce reductions.
• Customers may experience changes in product offerings due to product rationalization.
• Creditors are exposed to increased risk due to the company's financial challenges and going concern uncertainty.

Next Steps

• The company expects to close the TimeBase sale promptly following receipt of clearance/approval by the Australian competition authorities and satisfaction or waiver of other customary closing conditions.
• The company will continue to evaluate additional rationalization opportunities to further reduce the complexity of the business and reduce ongoing operating expenses.
• The company will continue to reassess its approach to manage the risk relating to fluctuations in currency rates.

Key Dates

Keywords

FiscalNote, financial results, Q1 2025, revenue, ARR, net loss, debt, divestitures, cost savings, going concern