FiscalNote (NOTE) 8 Aug 242024 Q2 Earnings call transcript

Good afternoon, ladies and gentlemen, and welcome to the FiscalNote Second Quarter 2024 Financial Results Conference Call. [Operator Instructions]

I would now like to introduce your host for today's conference, Bob Burrows. Mr. Burrows.

begin. may You

departure. and the speaking to name look Advisers quarter My an Burrows. with we FiscalNote's Sara call in today investor the Thank ahead. XXXX I'm Relations act to and Good second weeks which is was Avenue as Buda's following coming company months LLC, to forward financial as you continue hired capacity Western to consultant in evening. the Bob I company's stakeholders in that Investor the for results. joining discuss April

session comments. overview today's Tim today's an Chairman, Slabaugh, With with Officer. follow available are senior report during me on quarter that call Please Chief the Q&A will current and and for prepared of corporate Other Form Jon as on will comments as company well and note, the team release, are presentation of the copies available management on of Hwang, press XX-Q Co-Founder; the members website. Investment all CEO the version be CFO these updated prepared the

housekeeping, federal is statements not of our uncertainties. important are rather, statements variety guarantees risks that future a to of following: statements may make it call, and These terms important certain related the to business forward-looking performance but are During securities In laws. this under mention we of are subject to

results materially in Our forward-looking from differ could statements. reflected actual expectations any

available company SEC that as the release, and risks earnings factors are Securities EDGAR factors the to in important Exchange material could other as refer our and discussed Commission's the of please system. which and important either discussion website a our risks actual affect our For results or well on filings, today's

these the refer website available portion GAAP on of version directly most measures of this are updated measures which both a comparable earnings will to of on or release be for Please Relations financial of the Additionally, non-GAAP tables our corporate to the presentation, in their measure. financial overview our the reconciliation call. conference discussed Investor

in evaluating we revenue and revenue business. to Finally, corporate or metrics. the deck Again, definitions include These of or use run or for recurring annual key our release revenue. retention earnings of performance refer indicators please net the KPIs the updated or these rate important ARR performance RRR,

that, CEO the to with Co-Founder, And I'd turn over call FiscalNote's like Tim? Hwang. to Chairman, Tim and

to that and you the joining for you and XXXX Thank to us these introduction, second results quarter and our of here on good for connect business. state an It's look you, provide our today I all to forward always this share the discuss at Bob, thank be developments overall with shareholders to with afternoon. our you update with FiscalNote. exciting opportunities

take FiscalNote. a the of few to some moments fundamentals me let of remind First, of core you

help many times changing from to constantly and mission heard live As the analyze we're organization overall. me customers you've on we a world impacts information and delivering make the AI-enabled and aggregates the before, platform our sense proprietary of macroeconomic that on political regulatory, organizes by a and complicated in

the regulatory for proprietary expertise, of geopolitical essentially Terminal and policy and Bloomberg platform the and tools. data regulatory intelligence market-leading We analytical for reservoir technical are drawing legislative risk, AI the deep a strategic and upon legislative sectors,

and FiscalNote that across as have as of on legislative federal, around enabled the data legislation high-quality a agency all tens of thousands to bodies monitoring of purpose-built market-leading well regulatory millions profiles regulatory major Our local position and tools across a of world build of cities, thousands aspects analytical and customers. XX,XXX governments policymakers, proprietary every and authoritative international, deep states of include state federal range XX

Washington as including the policy expertise worlds, with been proprietary and providing congressional deep data. information Jones CQ, assets, CQ, providing about essentially budgets Dow with XXXX. and Many congressional since domain information example, legislative at of our serve of votes, has an

in and driven regulated as nonprofit operational global as $XX increasing impacts organizations operate by a and enterprises well large regulatory environment. governments organization, uncertainty who in through We addressable a almost large global market highly billion and every growing from operate complexity that

strong moat, in decade-long We and underpinned have enduring a our human and competitive intelligence. AI by data, investment

in Our AI Google. broad portfolio AI platforms by is Microsoft and AI OpenAI supported AI is leadership world's deep both and generative the from preeminent recognized and to patent domain-specific by the

risk. policies, government We of products political, sets, success. conflicts, recurring and customers rely We to revenue economic offering the coupled interpret that annual enhance shifts experience and agencies XXX incremental about and the help forms to basis organizations their growth. importantly, the take global and and corporate major value. minimize elections, expand operational and macroeconomic customers by day subscription impact durable business organizations on objectives long-term same compounding of opportunities cross-sell and to This passionate to customers our and the are therefore, upsell sector customer data of their Thousands achieve to ongoing the of public Fortune renewals, of basis on streams from institutions more our legislation, capabilities overall ranging enjoy in every actions FiscalNote with and, in their

as nature, and in XX% retention Driving success degree high in on net has provides record our us behalf market the on and strong the Our customers. recurring enabled our be and a team with push revenue balance in dollar to high success, innovation product approximately a of stayed stream of our which of basis, visibility. which, innovative for XXs of a has a consistent the management turn, is

build company support provides world's most growth to value the our allocation compounding unique capital that important relentlessly decision-makers. a have We on goal to that focus profitable durable, strategies

margins at expect in business, deliver long-term free other services we line flow As cash scale to we the leaders with information scale.

array we have are position our entirely FactSet, an data, information the within and trusted Global, that is path respective unique of a lead our Just established global innovated IHS market With for what CoStar Avalara in and fields, intelligence has direct operations. in our impact delivering on mission-critical by to a regulatory as information S&P pedigree forging industry. is political, category their validated services customers' information and AI Markit, FiscalNote new Morningstar, and vast new legislative policy

We to outcome. have on a deliver this clear competitive advantage

With the a me to let as of backdrop, state company. that current turn our

the positive to business macroeconomic headwinds. see continue signs We through despite

have margins an We returning improving reallocated increased focus rates, we profitability. where higher have of resources retention our business, towards segments towards and

year, continue that our maintain to a product profitability focus our our Although is portfolio of we profitability This regardless our full meet testament streamlined revenues, tracking operational still improved EBITDA increase revised year the and highlights discipline, for margin expectations and and is have profile. our to to which circumstance. we on ensuring adjusted

line Ultimately, we growth XXXX, right improve and more leverage further. to we revenue operating we through as progress drop the expect bottom to to revenue as accelerate

security. to on also Dragonfly we and operational our regards risk from acquisition, modest In see growth still in revenue, growth focused incremental European our and market

for new We other and continue including increased to in testimony speeches, the Copilot volume affairs June, key for highlighted Global to for decode drove Policy Copilot CEOs, received users in Copilot products which to legislative impact and and with government higher launches pioneering and in innovative the policymakers, equips the many which transforms designed Intelligence, second new calls, agent given analysts sign-ups our build positively workflows which workflows, particular. for the AI AI had We enable growth a Policy, regulatory decision at for these second professionals. new Day by and foundation customers and on significant efficiency policy, of future. and our and quarter, element We remarks product StressLens, was makers. regulators by mission-critical for in exciting legislative human of policy help Copilot

we've for launches an enhancements prior the velocity enduring increasing the foundation calls, As are noted we and this sustainable on our as of product and year, growth.

future strong announce our and with have I've to this made enhancements launches overall. have the of progress retention offerings. bringing well. have positive industry The client market, AI which that regarding growth know and already in the lead that is our later retention in engagement as We important to science are on data We take to increasing will impact this will we'll and more core to a we advantage date noted year

changes returning client focus rates, have the ongoing improving earlier, retention to forecast our the calendar higher towards reflect mentioned segments, resources profitability. reallocated and we XXXX I margins where on business As for

focused are environment. challenging productivity and efficiencies increasing on our We in macroeconomic of the business light in

on focused are will further engagement. we quarters customer through development efforts set growth addition, in increased product the discussed, I've accelerating product and drive In future differentiate which that our

Intelligence, potential our in are early Global leads. for cross-sell is Copilot indicators We driving which new of seeing this already

on of We year, our for other enhancements additional road will portfolio. product our and later areas impact this have which map development

in a expect tailwind We efforts XXXX. to growth these provide revenue to our

our of wrap the saying into we XXXX To to XXXX. second across we business to look bridging about state by execute continue remain half current and excited and conclude up,

position Our on geopolitical enormous investments become drive focus success risk new excellence on operational opportunities and FiscalNote. in us regulatory and mean customer the our of legislative, AI, will that to believe opportunities AI-driven to will our the that I capitalize the ahead. ways old feature analyzing and obsolete will for vast commitment

it move our on books XXXX, said view and earning in become place journey multiyear as May, history we and I'll the step say I dominant again, as it the to industry. first As a quarter in our player through we our first call in in

accelerating our believe in penetration customer that our translating wide core stakeholders and will incremental with higher core into I one and significant all value ahead. as and leverage. deep simple: for adjusted formula EBITDA is a power margins years strategy It's Our across realize we our the create operating of revenues offerings, base

Slabaugh, it Jon turn I'll our our that, detailed over With numbers. CFO, a of to Jon? for review

brief, with My statement. jump will and income numbers be walk QX me in Tim. for this XXXX, the comments through you, starting let afternoon Thank right the so

Total $XX.X Board.org. the year million, than primarily prior revenue the due was lower for XXXX divestiture to period QX of

with While company's of of remains business, this trends. period-to-period, in our historical for accounting revenue revenue quarter, cornerstone line total the down the subscription XX%

key into deeper at Digging metrics. our let's revenue, performance look

million. was with As basis, as prior second of quarter. to adjusting level QX XX%, for quarter and of pro the XXXX, revenue was ARR revenue prior was was $XXX of a retention level prior year higher Board.org run the current QX rate slightly revenue run recurring than $XXX year. On divestiture, was XXXX, And year revenue and million annual the the the impact forma year net rate

for capacity. period last with the revenue true apples-to-apples in forecast revised current a our performance existing was on our indicative year, of par on line and basis, with Overall, operational

decreases, expenses. impact continued year-over-year the cost-savings and operating QX XXXX in expenses the as products. of XXXX trend Principal the Board.org as of to Turning sale of of reflecting the sunset well impact in instituted initiatives

or XX%. marketing in decreased XX%. and In and over Sales $X.X or million G&A of $X.X expenses the $X of of or the by $XX Specifically, a XX%. decreased R&D cost Board.org, fell versus operating total the OpEx by million revenues decreased decreased sale year approximately XX% excluding forma QX aggregate, or million expense, stock-based or prior by nearly $X.X On approximately million compensation amortization XX%. decreased pro million by impact 'XX $X million over basis, XX%. or and the

the both and the year sunset improved our of strong the These let's profitability on QX quarter, XXXX impact of products in increases adjusted an start and quarter the reflect GAAP period. Looking during focus and basis, growth our XX% above over with EBITDA the a consistent improvements prior sale margins in Gross on on the at efficiencies. at remained line. adjusted basis XX% primarily coming Board.org,

calls, continue further said efficiencies. operating we've we in As to past pursue incremental

was for net GAAP EBITDA was year an approximately the $X year. And line. adjusted loss for for approximately was prior on the quarters million profitability prior million quarter, adjusted positive the total a below With $XX basis. a a QX negative XXXX XXXX X-quarter X of million million, EBITDA over a versus positive of prior brings $X improvement an QX positive for also the a metric, million, this the trailing that versus consecutive to EBITDA period. improvement performance $X year. to Transitioning for negative FiscalNote key $X

cash Period-end of ongoing had and the by end, potential equivalents $XX capital business return. continuing of across which reflects to in initiatives sale attention the to At balance quarter with and company we and was cash allocate the cash Turning for highest growth bolstered also Board.org million, efficiencies the positive to to investments in improve prudently our the March. sheet. the

end principal at the first interest, debt Additionally, end, million, outstanding, lower $XXX total accrued than our quarter. including and at sequentially stood of the quarter

customer for million, operational revenues Turning and adjusted $XXX of of to to year weaker our for driven the headwinds continued recent quarters product we profitability the to and efficiencies. enhancements. higher experienced in $X launch million, full total guidance. client slower retention factors, has including by churn, approximately forecast time, of approximately reflecting certain the our At a same recently rates raised we tightened Today, year growth. lowered impact experienced revenue The in of macroeconomic to delays reflecting number ARR the EBITDA forecast full led

progress through of growth and innovation XXXX into customer rates as product a AI drive we our in retention operating as featured on the However, half should improved and investments result, higher and experience, including XXXX, those second enhancements continued our engagement, Day, revenue leverage. in Product customer improved focused and June

We approximately EBITDA million, far we've of provided $XX XXXX also reflecting this guidance approximately QX year. our total both initial of today $X million adjusted for experienced and trends revenues thus

available that the continues Finally, company wanted to value to the to note I shareholders. strategic all review alternatives maximize for Board to

until to required. is intend further review on As we outcome this provide do updates stated not of and disclosure the appropriate before, we

the the well year through remains impact to and of Our positioned business success. further midpoint drive

to as a We while partner a on executing initiatives our solidify global we product efficiency our diverse base. to the implement critical position further strategy operational continue as customer

That concludes remarks. prepared begin I'll turn session. the operator over the to to it question-and-answer Operator? my

from Securities. question B. comes line Zach with Riley Instructions] your of the And [Operator first Cummins

Zach is This Cummins. in calling Widell for Ethan

from my end. one Just

behind can macros on just about? little the play in mostly is maybe were you based you Or bit guidance? else talking there? it factors Is elaborate So a the on anything there churn revs

I this Yes, can Josh. is that. address

macro. softness of terms in renewals result seeing play. a certainly seeing in some decision-making, slower the of as the we're some So macro We're there's there, what on

driving do operational and definitely that Tim customer retention, are on that macro continued is on as what things models we our but factor. very there very improvements to are too, ability have look at focused the well well. we like over a confident engagement in of will product spoke terms scoring about, as through can And the and playing improvements doing a time, we positive and do to impact we're We things, as improvement we other think customer around drive like have in

line Latimore from question the with next of comes Capital Your Mike Markets. Northland

[ Vijay Mike for ] is This Devar Latimore.

is the The first Board.org. on one

valuation. got terms that revenue in You've for Xx of

And So independent. there such valuations if other any what that logically groups for strategies logical wondering could groups, are would be those? divestment for at be looked

to view of shareholder that we I products planning a underlying at this I'll Slabaugh. I own, take maximize valuation It's think prepared a we'll make they're Jon market in overall we think speak that presently, we're we value I were presently have that. we is, the value. to to And to imminent. ways -- would and that it's continue say to disconnected divestiture from think And But not nothing where time. explore and

frame. of All majority the right. Got it. happen And bookings tend the time September-December secondly, to around on

bookings the So commentary helpful. bit will for how on are little indicators any about the of We that be for leading That period? bookings? headwinds, leading talked but a indicators macro

Josh. Sure. is Yes, this

we to for bookings half. perspective what second the forecast our see expect mean reflects I a So from

macro, from can pipeline. healthy address we that We we're new some taking do to control need have what mentioned, to I do slowness we we have but internally. a the As seen logo steps

So we're feeling about half. the better second

no [Operator questions. Please now turn back the over Instructions] remarks. any to There I closing for call are Bob go further Burrows ahead. will

all any additional any We you thank to Angela. there much. us. really call appreciate today. We'll on of out time, call. That very to concludes the reach And we you questions, you, are if Thank soon. free feel appreciate the everyone's speak our participation Again, obviously, and to

call. Thank today's all for joining. That you concludes

now disconnect. may You