10-Q: FiscalNote Refinances Debt, Aims for Stability

FiscalNote Holdings, Inc. completed a significant debt refinancing, securing new loans and convertible debentures to improve liquidity and extend maturities, despite reporting continued net losses and revenue declines.

Summary

• FiscalNote Holdings, Inc. reported a net loss of $13.271 million for the three months ended June 30, 2025, compared to a net loss of $12.764 million for the same period in 2024.
• Total revenues for the three months ended June 30, 2025, decreased by 20.5% to $23.264 million from $29.246 million in the prior year period.
• Subscription revenue, which accounts for approximately 92% of total revenues, declined by 21.3% to $21.380 million for the quarter.
• The company completed a major debt refinancing on August 12, 2025, securing a new $75.0 million Senior Term Loan maturing in August 2029.
• Proceeds from the new Senior Term Loan and initial convertible debentures were used to retire approximately $62.7 million of the Prior Senior Term Loan, $3.6 million of Amended Legacy Notes, and $30.0 million of the GPO Convertible Note.
• The company issued new convertible debentures totaling approximately $33.3 million in aggregate principal amount to YA II PN, Ltd., with an initial tranche of $21.0 million issued on August 12, 2025.
• A new $20.4 million senior subordinated convertible promissory note was issued to GPO FN Noteholder, LLC, maturing in November 2029.
• Annualized cash interest payments are expected to be approximately $9.0 million under the new debt structure, with principal repayments of approximately $1.9 million in year one and $3.8 million thereafter.
• The company's Annual Recurring Revenue (ARR) was $85.9 million at June 30, 2025, down from $107.5 million at December 31, 2024, primarily due to business dispositions.
• Net Revenue Retention (NRR), excluding the impact of dispositions, was 96% for the three months ended June 30, 2025.
• Cash used in operating activities increased to $2.895 million for the six months ended June 30, 2025, from $988 thousand in the prior year period.
• The company reduced its full-time equivalent headcount by approximately 17 from the beginning of Q2 2025 through June 30, 2025, as part of cost reduction initiatives.

Sentiment

Score: 6

Explanation: While the company continues to report net losses and declining revenue, the successful and substantial debt refinancing significantly improves its financial structure, extends maturities, and reduces future cash interest payments. This strategic move provides a crucial lifeline and a clearer path towards long-term sustainability, despite ongoing operational challenges.

Positives

• Successfully refinanced a substantial amount of legacy indebtedness, improving liquidity and extending debt maturities to August 2029.
• Expected annualized cash interest payments reduced to approximately $9.0 million, providing financial relief.
• Implemented various cost-saving measures, contributing to a $67 million improvement in cash used in operations over the past two years (12 months ended June 30, 2025 vs. 12 months ended June 30, 2023).
• Operating loss slightly improved for the three months ended June 30, 2025, compared to the same period in 2024, indicating some operational efficiency gains.

Negatives

• Continued to incur net losses, with a net loss of $13.271 million for Q2 2025 and $17.521 million for H1 2025.
• Significant decline in total revenues by 20.5% for Q2 2025 and 17.2% for H1 2025, primarily due to business dispositions and customer retention challenges.
• Annual Recurring Revenue (ARR) decreased to $85.9 million at June 30, 2025, from $107.5 million at December 31, 2024.
• Net Revenue Retention (NRR) declined to 96% for Q2 2025 from 98% for Q2 2024 (excluding dispositions), indicating some churn or contraction from existing customers.
• Negative working capital balance of $27.9 million (excluding cash and short-term investments) at June 30, 2025.
• Accumulated deficit increased to $824.4 million at June 30, 2025.

Risks

• Sales of a substantial number of Class A Common Stock into the public market or the perception of such sales could cause the market price to decline and dilute existing stockholders.
• The issuance of shares from convertible notes (Third Era Convertible Note Underlying Shares, Third Era Convertible Note Fee Shares, Third Era Convertible Note Additional Shares, Broker Shares, GPO Shares, and Debenture Conversion Shares) may cause significant dilution.
• Reliance on U.S. government agencies for a concentration of revenues (18% for H1 2025), exposing the company to changes in spending priorities and contract risks.
• Ability to maintain compliance with financial covenants (minimum cash balance, minimum ARR, minimum adjusted EBITDA, capital expenditure limitation) under the new 2025 Senior Term Loan is crucial; non-compliance could lead to acceleration of debt.
• Potential technical disruptions, cyberattacks, security, privacy or data breaches could affect networks or systems.
• Competition and competitive pressures in the markets, including larger well-funded companies, pose a risk.
• Ability to retain or recruit key personnel is vital for operations and growth.

Future Outlook

The company expects to maintain compliance with its new financial covenants (minimum cash balance, minimum ARR, minimum adjusted EBITDA, and capital expenditure limitation) and to have adequate cash and cash flows to support its operating, investing, and financing activities for at least the next twelve months. It plans to continue evaluating additional rationalization opportunities to reduce business complexity and ongoing operating expenses, while also investing in innovative products, attracting new customers, and expanding its leadership role in the legal and regulatory information market to drive organic growth. Strategic acquisitions may also be a component of future growth.

Management Comments

• We have implemented various cost saving measures throughout 2023, 2024 and 2025 to rationalize our cost structure.
• We have improved our cash used in operations by approximately $67 million when comparing its cash used in operations for the twelve months ended June 30, 2025 to the cash used in operations for the twelve months ended June 30, 2023.
• We believe the impact of these actions provides us the flexibility to fund future operations and provide a path toward generating positive cash flows from operations.

Industry Context

FiscalNote operates in the AI-driven policy and regulatory intelligence solutions market, a sector increasingly vital for organizations navigating complex political, regulatory, and macroeconomic environments. The company's focus on combining AI technology with comprehensive data and expert analysis positions it within a growing trend of leveraging technology for risk management and strategic decision-making. The recent dispositions of non-core assets and the emphasis on cost reduction suggest a strategic pivot towards streamlining operations and focusing on core profitability in a competitive landscape, where larger, well-funded companies may also be shifting their business models.

Management Changes

Legal Proceedings

• No material litigation or regulatory proceedings are currently expected to have a material adverse effect on the business, results of operations, financial conditions, or cash flows.

Stakeholder Impact

• Shareholders: Potential for significant dilution due to issuance of new shares from convertible debt and warrants, which could impact share price. However, the debt refinancing aims to stabilize the company and provide a path to long-term value.
• Creditors: The debt refinancing has restructured obligations, providing new senior secured debt and subordinated notes, which clarifies repayment schedules and security interests.
• Employees: Headcount reductions indicate ongoing business simplification and cost-cutting measures, potentially impacting employee morale and job security.
• Customers: Product rationalization and focus on core policy business may lead to improved offerings in key areas, but discontinuation of non-core products could affect some customers.

Next Steps

• Issuance of the remaining $12.3 million of convertible debentures upon effectiveness of a resale registration statement.
• Repayment of outstanding obligations under the Third Era Convertible Note using proceeds from the second tranche of debentures.
• Quarterly principal repayments on the 2025 Senior Term Loan, starting September 30, 2025.
• Quarterly installment payments on the 2025 GPO Note, starting April 1, 2026.
• Continued evaluation of additional rationalization opportunities to reduce business complexity and operating expenses.
• Investment in innovative products, attracting new customers, and expanding leadership in the legal and regulatory information market.

Key Dates

Recommendation

While FiscalNote continues to face significant challenges, including ongoing net losses and declining revenues, the recent comprehensive debt refinancing is a critical step towards stabilizing its financial position. The new debt structure extends maturities and reduces immediate cash interest burdens, providing the company with more runway to execute its strategy. However, the operational performance remains weak, and the potential for significant shareholder dilution from convertible instruments is high. The stock is a 'hold' for investors who believe in the long-term strategic vision and the company's ability to achieve positive cash flows from operations, but it carries substantial risk given the current financial results and competitive landscape.

Keywords

Financial Technology, AI, Policy Intelligence, Regulatory Intelligence, SaaS, Convertible Debt, Debt Refinancing, SEC Filing, Quarterly Report, Corporate Finance, Risk Management