Divests Board.Org Community Engagement
Platform for Total Consideration of up to $103 Million
$95 Million Cash Consideration Enables
Repayment of Senior Debt and Enhances Balance Sheet
Enters the Year with Simplified Product
Strategy for Continued Growth and Adjusted EBITDA
Profitability
Special Committee and Strategic Review
Ongoing
FiscalNote Holdings, Inc. (NYSE: NOTE) (“FiscalNote” or the
“Company”), a leading AI-driven enterprise SaaS technology provider
of global policy and market intelligence, today announced financial
results for the fourth quarter and fiscal year ended December 31,
2023.
The Company’s financial results demonstrate FiscalNote’s strong
fundamentals including revenue growth of 17% year-over-year in
2023, high gross margins, a diversified blue chip customer base and
positive adjusted EBITDA of approximately $3 million(1) in the
fourth quarter of 2023. The results also underscore the Company's
leadership in delivering AI-enabled policy and market information
that empowers organizations to mitigate risk and navigate their
businesses in an increasingly complex global regulatory and
geopolitical environment.
Fourth Quarter 2023 Financial Highlights
- Revenue increased 9% to $34.3 million, within the
Company's guidance range provided in November 2023. This compares
to revenue of $31.4 million and non-GAAP adjusted revenue of
$31.5(1) million in the fourth quarter of 2022.
- Gross profit was $22.9 million representing 67% gross
margin, and non-GAAP adjusted gross profit was $28.3
million(1) representing 83% non-GAAP adjusted gross margin.(1)
- GAAP net loss of $51.0 million.
- Adjusted EBITDA of $3.0 million(1), above the Company’s
guidance range announced in November 2023 of approximately $2.5
million. This is an increase of 157% or $8.2 million
year-over-year compared to an adjusted EBITDA loss of $5.2
million(1) in the fourth quarter of 2022.
- Cash and cash equivalents (inclusive of short-term investments)
of $24.4 million as of December 31, 2023, with approximately $15
million in cash added to the balance sheet on March 11, 2024 in
connection with the divestiture of Board.org.
The Company also announced today the divestiture of Board.org, a
non-core product offering for up to $103 million total
consideration of which $95 million is cash consideration, subject
to customary adjustments. Acquired by FiscalNote in 2021 for $10
million in cash and $4.3 million in convertible securities ($14.3
million in total consideration), the divestiture by FiscalNote
represents a 9.5x cash-on-cash (125% IRR) return for
FiscalNote in less than three years. The total consideration
represents approximately a 7x revenue multiple based on 2023
ARR.
Board.org operated as an independent product offering of
FiscalNote, and represented approximately 10% of FiscalNote’s 2023
GAAP revenue. The divestiture of Board.org provides FiscalNote with
a bolstered capital structure, and a focused product portfolio in
its core policy and global intelligence businesses, and furthers
the Company’s ability to build upon its decade-long leadership and
innovation in AI-enabled intelligence solutions.
With this divestiture, the Company added approximately $15
million in cash to its balance sheet and used $65.7 million of
proceeds to repay senior debt. The Company also amended its Credit
Agreement with its senior lenders to, among other matters, extend
principal repayments a full year to August 2026. The Company had
approximately $45 million of cash as of March 11, 2024 upon the
closing of these transactions and after the payment of related fees
and expenses. Details of sources and uses related to the proceeds
can be found in the Company's Investor Presentation dated March 12
which can be found on the Company’s investor relations website.
Fourth Quarter 2023 Operational Metrics
- Run-Rate Revenue(2) increased 10% to $140 million as of
December 31, 2023 in-line with previous guidance and inclusive of
Dragonfly which was acquired in 2023. Organic Run-Rate
Revenue(2)(3) increased to $130 million as of year end, a 4%
increase on a pro forma basis.
- Annual Recurring Revenue(2) ("ARR") rose 11% to
$126 million at December 31, 2023 inclusive of Dragonfly which was
acquired in 2023. Organic ARR(2)(3) was $119 million as of December
31, 2023, representing 6% growth on a pro forma basis.
- Quarterly Net Revenue Retention(2) was 99% in the fourth
quarter.
Full Year 2023 Financial Highlights
- Revenue increased 17% to $132.6 million. This compares
to GAAP revenue of $113.8 million and non-GAAP adjusted revenue of
$115.7(1) million in 2022. Subscription revenue, which comprises
approximately 90% of total revenue, grew 18% year-over-year of
which 9% was on an organic basis.
- Gross profit was $92.4 million representing 70% gross margin,
and non-GAAP adjusted gross profit was $108.3 million(1)
representing 82% non-GAAP adjusted gross margin.(1)
- GAAP net loss of $115.5 million. GAAP net loss for the
year contains approximately $72.8 million of net non-cash items as
detailed in the reconciliation of Adjusted EBITDA to GAAP net loss
provided below.
- Adjusted EBITDA(1) loss of $7.5 million. This marks
an increase of 69% or $17 million year-over-year compared to an
Adjusted EBITDA loss of $24.5 million(1) in 2022. In the second
half of 2023, the Company achieved its Adjusted EBITDA
profitability goal one quarter ahead of plan, exceeding both
initial Company-provided and market expectations.
2023 Operational Highlights
During 2023, FiscalNote continued to execute successfully on its
strategy to lead its sector in global policy and market
intelligence with several operational and business achievements,
including:
- Signed large, six-figure new logos or expanded relationships
with leading U.S. and global brand leaders, including a
world-leading search technology company, a U.S. auto manufacturer,
a global energy company, a Japanese financial institution, a
multinational pharmaceutical and chemical company and a
brand-leading food and beverage company.
- Secured new public sector contract wins, expansions, and
renewals of major departments and agencies across executive,
legislative, and judicial branches of the U.S. Government - as well
as international public sector institutions - solidifying the
Company’s role as an essential partner to the world’s most
important and influential decision makers.
- Expanded relationships and secured new agreements with some of
the largest and most prominent trade associations, non-profits, and
advocacy organizations.
- Executed its cost reduction plan to align its operations and
drive approximately $25 million annualized expense
improvement.
- Grew its European business year-over-year, bringing its
European revenue to approximately 15% of total.
- Selected by OpenAI to collaborate as their only inaugural
launch partner in the legal, political, and regulatory space for
its ChatGPT Plug-in and secured similar partnerships with Bard (now
Gemini) by Google and Microsoft Bing.
- Expanded its global policy and analysis coverage to include
China’s national-level and provincial-level legislative and
regulatory policy developments. The Company’s Global Policy
Dashboard now covers more than 80 countries.
- Expanded its EUIT capabilities to provide stakeholder coverage
and data for all 705 members of the European Parliament, as well as
generate automated AI-powered meeting transcripts for all EU
Parliament meetings.
- Established a new partnership with Peraton - the world’s
leading mission capability integrator for national security
solutions.
- Completed the acquisition of Dragonfly, a provider of
geopolitical and security intelligence delivered through a
SaaS-based, proprietary Security Intelligence and Analysis Service
(SIAS) subscription platform and API — used by nearly half of the
top 30 companies in the FTSE-500, and by the world’s top
banks.
- Launched a series of new innovative AI products, including:
- FiscalNote Risk Connector, a new, internally-developed risk
intelligence solution that harnesses the power of the Company’s
data and AI capabilities to reveal operational, relational, and
reputational risk for enterprises and government
organizations.
- FiscalNote GPT, the first proprietary platform incorporating
generative AI and large language model (LLM) capabilities
customized for legislative, regulatory, and policy workflows.
- FiscalNote AI CoPilots, a series of GPT-enabled verticalized
solutions that FiscalNote will develop for policy and risk
management professionals to facilitate the day-to-day work of
creating legislation, advocacy outreach, constituent
communications, regulatory responses, and global risk analysis
using the power of large language models, FiscalNote’s trusted
industry leading policy and geopolitical data, and customers’ data,
all in a seamless workflow.
- Obtained its 13th U.S. patent, and received three additional
AI-related patents in Korea, to expand its total global patent
portfolio to 17.
- Celebrated the 10 year anniversary of its founding in 2013, and
its one year anniversary as a publicly traded company, by ringing
the Opening Bell at the New York Stock Exchange.
- Secured multiple awards recognizing the Company’s SaaS
leadership, innovation and customer excellence:
- Reed Award for Best Advocacy Technology Platform (FiscalNote’s
VoterVoice)
- Stevie Award for International Business (FiscalNote)
- Stevie Award for Sales and Customer Service (FiscalNote)
- Tim Hwang, Chairman, CEO, and Co-founder of FiscalNote, was
named an Entrepreneur of the Year 2023 Mid-Atlantic Award winner by
Ernst & Young US.
“Over the past 12-18 months we have been focused on driving
Adjusted EBITDA profitability and rationalizing our cost structure.
Now, as we pivot our focus to accelerating growth, we are
transforming and simplifying our organization by aligning our sales
teams, streamlining our product portfolio and optimizing our
capital structure. Most importantly, we are driving new levels of
innovation, combining AI and human intelligence to provide the
data, intelligence, analysis, and workflows that our customers need
to navigate and take action within the large and complex global
political and regulatory environment,” said Tim Hwang, Chairman,
CEO, and Co-founder, FiscalNote. “With an enhanced balance sheet
and a simplified product portfolio, we are well positioned to drive
ongoing profitability in 2024 and accelerate growth in 2025 and
beyond.”
Outlook
Board.org contributed approximately $14 million of revenue and
approximately $5 million of EBITDA in 2023. In addition to the
divestiture of Board.org, the Company announced that it will sunset
several non-core, smaller products to provide a more focused
product portfolio and to position the company for ongoing
profitability growth. The divestiture of Board.org, combined with
the sunset products total approximately $17 million of annualized
revenue in 2023 that the Company does not expect to reoccur after
March 11, 2024.
FiscalNote provided guidance for the full year 2024 reflecting
the divestiture of Board.org and the discontinuation of sunset
products as noted above.
- GAAP revenue of $123 to $127 million
- Total Run-Rate Revenue(2) of $126 to $134 million
- Positive Adjusted EBITDA(1)(4) of $7 to $9 million
FiscalNote provided guidance for the first quarter of 2024 as
follows:
- GAAP revenue of approximately $31 million
- Adjusted EBITDA(1)(4) of approximately $1 million, reflecting
seasonal expenses in Q1 that do not reoccur in subsequent quarters
during the year.
The Company expects to return to double digit growth rates in
2025 as the Company re-allocates sales and product resources to
high performing offerings and as it realizes the benefits of its
recent product and organizational initiatives including changes to
sales coverage models for enhanced cross-sell, upsell and
retention; further scaling of new products; and accelerated product
development.
Additional information regarding the non-GAAP financial measures
discussed in this release, including an explanation of these
measures and how each is calculated, is included below under the
heading “Non-GAAP Financial Measures.” A reconciliation of GAAP to
non-GAAP financial measures has also been provided in the financial
tables included below. Information regarding our key performance
indicators is included below under “Key Performance
Indicators.”
Strategic Review
Following the announcement of the Board’s formation of a Special
Committee in November and receipt of inbound interest, the Board
and the Committee along with their advisors continue to review the
Company's ongoing plans and evaluate all strategic value-maximizing
options available to the Company. There can be no assurance that
the strategic review will result in any transaction or other
outcome. The Company has not set a timetable for completion of the
review and does not intend to disclose developments or provide
updates on the progress or status of the review unless and until it
deems further disclosure is appropriate or required.
As previously announced, Centerview Partners LLC and Skadden,
Arps, Slate, Meagher & Flom LLP have been retained as
independent advisors to the Special Committee.
Quarterly Conference Call
FiscalNote will host a conference call today, Tuesday, March 12,
2024, at 10:00 a.m. Eastern Time (U.S.) to review the Company's
financial results for the fourth quarter and year ended December
31, 2023 and its outlook. To access this call, dial 1 (888)
660-6510 for the U.S. or Canada, or 1 (929) 203-0882 for callers
outside the U.S. or Canada with the conference ID 1271923. A live
webcast of the conference call will be accessible from the Investor
Relations section of FiscalNote's website at
https://investors.fiscalnote.com/, and a recording will be archived
and accessible at https://investors.fiscalnote.com/. An audio
replay of this conference call will also be available through March
26, 2024, by dialing 1 (800) 770-2030 for the U.S. or Canada, or 1
(609) 800-9909 for callers outside the U.S. or Canada, and entering
1271923.
(1) Non-GAAP measure. Please see "Non-GAAP Financial Measures"
in this earnings release for definitions and important disclosures
regarding these financial measures, including reconciliations to
the most directly comparable GAAP measure.
(2) “Run-Rate Revenue,” “Annual Recurring Revenue” or “ARR”, and
“Net Revenue Retention” are key performance indicators (KPIs).
Please see "Key Performance Indicators" in this earnings release
for the definitions and important disclosures regarding these
measures.
(3) Organic Run-Rate Revenue and ARR for 2022 includes
businesses acquired as of December 31, 2021, plus Aicel
Technologies (for which a definitive acquisition agreement was
signed as of December 31, 2021, with closing conditioned upon
FiscalNote’s public listing).
(4) Because of the variability of items impacting net income and
unpredictability of future events, management is unable to
reconcile without unreasonable effort the Company's forecasted
adjusted EBITDA to a comparable GAAP measure.
About FiscalNote
FiscalNote (NYSE: NOTE) is a leader in policy and global
intelligence. By uniquely combining data, technology, and insights,
FiscalNote empowers customers to manage political and business
risk. Since 2013, FiscalNote has pioneered technology that delivers
critical insights and the tools to turn them into action. Home to
CQ, FrontierView, Oxford Analytica, VoterVoice, and many other
industry-leading brands, FiscalNote serves thousands of customers
worldwide with global offices in North America, Europe, Asia, and
Australia. To learn more about FiscalNote and its family of brands,
visit FiscalNote.com and follow @FiscalNote.
Forward-Looking Statements
Certain statements in this press release may be considered
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements generally relate to future events or FiscalNote’s future
financial or operating performance. For example, statements
regarding FiscalNote’s financial outlook for future periods,
expectations regarding profitability, capital resources and
anticipated growth in the industry in which FiscalNote operates are
forward-looking statements. In some cases, you can identify
forward-looking statements by terminology such as “pro forma,”
“may,” “should,” “could,” “might,” “plan,” “possible,” “project,”
“strive,” “budget,” “forecast,” “expect,” “intend,” “will,”
“estimate,” “anticipate,” “believe,” “predict,” “potential” or
“continue,” or the negatives of these terms or variations of them
or similar terminology. Such forward-looking statements are subject
to risks, uncertainties, and other important factors that could
cause actual results to differ materially from those expressed or
implied by such forward-looking statements.
Factors that may impact such forward-looking statements include
FiscalNote’s ability to effectively manage its growth; changes in
FiscalNote’s strategy, future operations, financial position,
estimated revenue and losses, forecasts, projected costs, prospects
and plans; the terms of any proposal FiscalNote may receive for a
go-private transaction; the impact of the previous announcement of
the formation of the Special Committee and review of a potential
go-private transaction on FiscalNote’s business and its ability to
implement any such transaction; FiscalNote’s future capital
requirements; demand for FiscalNote’s services and the drivers of
that demand; FiscalNote’s ability to provide highly useful,
reliable, secure and innovative products and services to its
customers; FiscalNote’s ability to attract new customers, retain
existing customers, expand its products and service offerings with
existing customers, expand into geographic markets or identify
areas of higher growth; FiscalNote’s ability to successfully
identify acquisition opportunities, make acquisitions on terms that
are commercially satisfactory, successfully integrate potential
acquired businesses and services, and subsequently grow acquired
businesses; risks associated with international operations,
including compliance complexity and costs, increased exposure to
fluctuations in currency exchange rates, political, social and
economic instability, and supply chain disruptions; FiscalNote’s
ability to develop, enhance, and integrate its existing platforms,
products, and services; FiscalNote’s estimated total addressable
market and other industry and performance projections;
FiscalNote's reliance on third-party systems and data, its ability
to integrate such systems and data with its solutions and its
potential inability to continue to support integration; potential
technical disruptions, cyberattacks, security, privacy or data
breaches or other technical or security incidents that affect
FiscalNote’s networks or systems or those of its service providers;
FiscalNote’s ability to obtain and maintain accurate,
comprehensive, or reliable data to support its products and
services; FiscalNote’s ability to introduce new features,
integrations, capabilities, and enhancements to its products and
services; FiscalNote’s ability to maintain and improve its methods
and technologies, and anticipate new methods or technologies, for
data collection, organization, and analysis to support its products
and services; competition and competitive pressures in the markets
in which FiscalNote operates, including larger well-funded
companies shifting their existing business models to become more
competitive with FiscalNote; FiscalNote’s ability to protect and
maintain its brands; FiscalNote’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;
FiscalNote’s ability to retain or recruit key personnel;
FiscalNote’s ability to effectively maintain and grow its research
and development team and conduct research and development;
FiscalNote’s ability to adapt its products and services for
changes in laws and regulations or public perception, or changes in
the enforcement of such laws, relating to artificial intelligence,
machine learning, data privacy and government contracts; adverse
general economic and market conditions reducing spending on our
products and services; the outcome of any known and unknown
litigation and regulatory proceedings; FiscalNote’s ability to
successfully establish and maintain public company-quality internal
control over financial reporting; and the ability to adequately
protect FiscalNote’s intellectual property rights.
These and other important factors discussed in FiscalNote’s SEC
filings, including its most recent reports on Forms 10-K and 10-Q,
particularly the "Risk Factors" sections of those reports, could
cause actual results to differ materially from those indicated by
the forward-looking statements made in this press release. These
forward-looking statements are based upon estimates and assumptions
that, while considered reasonable by FiscalNote and its management,
are inherently uncertain. Nothing in this press release should be
regarded as a representation by any person that the forward-looking
statements set forth herein will be achieved or that any of the
contemplated results of such forward-looking statements will be
achieved. You should not place undue reliance on forward-looking
statements, which speak only as of the date they are made.
FiscalNote undertakes no obligation to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise, except as may be required under
applicable securities laws.
FiscalNote Holdings,
Inc.
Consolidated Statements of
Operations
(in thousands, except shares and
per share data)
(Unaudited)
Three Months Ended December
31,
Year Ended December
31,
2023
2022
2023
2022
Revenues:
Subscription
$
31,096
$
27,336
$
119,082
$
100,522
Advisory, advertising, and other
3,169
4,113
13,563
13,243
Total revenues
34,265
31,449
132,645
113,765
Operating expenses: (1)
Cost of revenues
11,388
8,356
40,251
31,937
Research and development
4,016
5,298
18,186
20,736
Sales and marketing
10,500
10,956
45,722
42,678
Editorial
4,336
4,716
17,869
15,956
General and administrative
16,737
18,266
65,550
77,801
Amortization of intangible assets
2,895
2,633
11,509
10,451
Impairment of goodwill and long-lived
assets
26,227
-
32,064
-
Transaction (gains) costs, net
(1,905
)
1,138
(767
)
2,395
Total operating expenses
74,194
51,363
230,384
201,954
Operating loss
(39,929
)
(19,914
)
(97,739
)
(88,189
)
Interest expense, net
8,087
6,069
29,940
95,741
Change in fair value of financial
instruments
2,867
5,777
(15,983
)
(12,747
)
Gain on PPP loan upon extinguishment
-
-
-
(7,667
)
Loss on debt extinguishment, net
-
-
-
45,250
Loss on settlement
-
11,700
3,474
11,700
Other (benefit) expense, net
(177
)
(498
)
68
1,045
Net loss before income taxes
(50,706
)
(42,962
)
(115,238
)
(221,511
)
Provision (benefit) from income taxes
42
(418
)
223
(3,254
)
Net loss
(50,748
)
(42,544
)
(115,461
)
(218,257
)
Other comprehensive income (loss)
1,200
1,623
163
(154
)
Total comprehensive loss
$
(49,548
)
$
(40,921
)
$
(115,298
)
$
(218,411
)
Net loss
$
(50,748
)
$
(42,544
)
$
(115,461
)
$
(218,257
)
Deemed dividend
-
-
-
(26,570
)
Net loss used to compute basic and diluted
loss per share
$
(50,748
)
$
(42,544
)
$
(115,461
)
$
(244,827
)
Loss per share attributable to common
shareholders:
Basic and Diluted
$
(0.39
)
$
(0.32
)
$
(0.88
)
$
(3.68
)
Weighted average shares used in computing
loss per share attributable to common shareholders:
Basic and Diluted
129,636,869
131,086,309
131,400,109
66,513,704
(1) Amounts include stock-based
compensation expenses, as follows:
(Unaudited)
Three Months Ended December
31,
Year Ended December
31,
2023
2022
2023
2022
Cost of revenues
$
98
$
45
$
283
$
81
Research and development
304
398
1,384
1,007
Sales and marketing
339
(66
)
2,057
762
Editorial
108
43
400
603
General and administrative
7,996
6,759
22,933
35,594
FiscalNote Holdings,
Inc.
Consolidated Balance
Sheets
(in thousands, except shares, and
par value)
December 31, 2023
December 31, 2022
Assets
Current assets:
Cash and cash equivalents
$
16,451
$
60,388
Restricted cash
849
835
Short-term investments
7,134
-
Accounts receivable, net
16,931
14,909
Costs capitalized to obtain revenue
contracts, net
3,326
2,794
Prepaid expenses
2,593
4,315
Other current assets
2,521
2,764
Total current assets
49,805
86,005
Property and equipment, net
6,141
7,325
Capitalized software costs, net
13,372
13,946
Noncurrent costs capitalized to obtain
revenue contracts, net
4,257
3,976
Operating lease assets
17,782
21,005
Goodwill
187,703
194,362
Customer relationships, net
53,917
56,348
Database, net
18,838
21,020
Other intangible assets, net
18,113
28,728
Other non-current assets
633
442
Total assets
$
370,561
$
433,157
Liabilities and Stockholders'
Equity
Current liabilities:
Current maturities of long-term debt
$
105
$
68
Accounts payable and accrued expenses
12,909
13,739
Deferred revenue, current portion
43,530
35,569
Customer deposits
3,032
3,252
Contingent liabilities from acquisitions,
current portion
130
696
Operating lease liabilities, current
portion
3,066
6,709
Other current liabilities
2,878
2,079
Total current liabilities
65,650
62,112
Long-term debt, net of current
maturities
222,310
161,980
Deferred tax liabilities
2,178
714
Deferred revenue, net of current
portion
875
918
Contingent liabilities from acquisitions,
net of current portion
-
883
Operating lease liabilities, net of
current portion
26,162
29,110
Public and private warrant liabilities
4,761
18,892
Other non-current liabilities
5,166
13,858
Total liabilities
327,102
288,467
Commitment and contingencies (Note 18)
Stockholders' equity:
Class A Common stock ($0.0001 par value,
1,700,000,000 authorized, 121,679,829 and 123,125,595 issued and
outstanding at December 31, 2023 and December 31, 2022,
respectively)
11
12
Class B Common stock ($0.0001 par value,
9,000,000 authorized, 8,290,921 issued and outstanding at December
31, 2023 and December 31, 2022, respectively)
1
1
Additional paid-in capital
860,485
846,205
Accumulated other comprehensive loss
(622
)
(785
)
Accumulated deficit
(816,416
)
(700,743
)
Total stockholders' equity
43,459
144,690
Total liabilities and stockholders'
equity
$
370,561
$
433,157
FiscalNote Holdings,
Inc.
Consolidated Statements of
Cash Flows
(in thousands)
Years Ended December
31,
2023
2022
Operating Activities:
Net loss
$
(115,461
)
$
(218,257
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation
1,348
1,238
Amortization of intangible assets and
capitalized software development costs
27,369
19,545
Amortization of deferred costs to obtain
revenue contracts
3,617
2,786
Impairment of goodwill and other
long-lived assets
32,064
-
Non-cash operating lease expense
3,264
6,614
Stock-based compensation
27,057
38,047
Non-cash earnout benefit
(530
)
(238
)
Loss on settlement
3,474
11,700
Bad debt expense
423
142
Change in fair value of acquisition
contingent consideration
(2,043
)
(2,121
)
Change in fair value of financial
instruments
(15,983
)
(12,747
)
Deferred income tax provision
(benefit)
72
(3,076
)
Paid-in-kind interest, net
6,060
10,958
Other non-cash items
32
260
Non-cash interest expense
3,919
52,044
Loss on debt extinguishment, net
-
45,250
Gain on PPP Loan forgiveness
-
(7,667
)
Changes in operating assets and
liabilities:
Accounts receivable, net
(287
)
(3,941
)
Prepaid expenses and other current
assets
3,421
422
Costs capitalized to obtain revenue
contracts, net
(4,443
)
(4,129
)
Other non-current assets
(180
)
(395
)
Accounts payable and accrued expenses
(6,426
)
(2,113
)
Deferred revenue
4,123
4,780
Customer deposits
(198
)
93
Other current liabilities
269
(1,938
)
Contingent liabilities from acquisitions,
net of current portion
(39
)
(1,567
)
Lease liabilities
(6,626
)
(8,589
)
Other non-current liabilities
210
274
Net cash used in operating
activities
(35,494
)
(72,625
)
Investing Activities:
Capital expenditures
(7,938
)
(11,367
)
Cash paid for business acquisitions, net
of cash acquired
(5,010
)
1,125
Purchases of short-term investments
(7,369
)
-
Net cash used in investing
activities
(20,317
)
(10,242
)
Financing Activities:
Proceeds from Business Combination
-
175,000
Issuance costs of Common Stock
-
(45,242
)
Proceeds from long-term debt, net of
issuance costs
11,500
166,014
Principal payments of long-term debt
(107
)
(189,105
)
Proceeds from exercise of public
warrants
-
4,498
Proceeds from exercise of stock options
and ESPP purchases
684
453
Repurchase of common stock
-
(88
)
Net cash provided by financing
activities
12,077
111,530
Effects of exchange rates on cash
(189
)
(449
)
Net change in cash, cash equivalents, and
restricted cash
(43,923
)
28,214
Cash, cash equivalents, and restricted
cash, beginning of period
61,223
33,009
Cash, cash equivalents, and restricted
cash, end of period
$
17,300
$
61,223
Supplemental Noncash Investing and
Financing Activities:
Issuance of Class A common stock upon
redemption of preferred stock
$
-
$
475,781
Issuance of Class A common stock and Class
B common stock in connection with Business Combination
$
-
$
346,797
Acquisition of warrant liabilities
$
-
$
34,947
Accretion of preferred stock to redemption
value
$
-
$
26,570
Issuance of common stock in connection
with business acquisitions
$
9,539
$
8,590
Warrants issued in conjunction with
long-term debt issuance
$
178
$
436
Issuance of Class A common stock upon
exercise of public warrants
$
-
$
265
Fees payable to debt holders settled
through increase of debt principal
$
-
$
100
Property and equipment purchases in
accounts payable
$
161
$
-
Supplemental Cash Flow
Activities:
Cash paid for interest
$
20,679
$
35,157
Cash paid for taxes
$
55
$
55
Non-GAAP Financial Measures
In addition to financial measures prepared in accordance with
U.S. generally accepted accounting principles (“GAAP”), we use
certain non-GAAP financial measures to clarify and enhance our
understanding, and aid in the period-to-period comparison, of our
performance. Where applicable, we provide reconciliations of these
non-GAAP measures to the corresponding most closely related GAAP
measure. Investors are encouraged to review the reconciliation of
each of these non-GAAP financial measures to its most comparable
GAAP financial measure. While we believe that these non-GAAP
financial measures provide useful supplemental information,
non-GAAP financial measures have limitations and should not be
considered in isolation from, or as a substitute for, their most
comparable GAAP measures. These non-GAAP financial measures are not
prepared in accordance with GAAP, do not reflect a comprehensive
system of accounting and may not be comparable to similarly titled
measures of other companies due to potential differences in their
financing and accounting methods, the book value of their assets,
their capital structures, the method by which their assets were
acquired and the manner in which they define non-GAAP measures.
Adjusted Revenue
Adjusted revenue represents revenue adjusted to include amounts
that would have been recognized if deferred revenue was not
adjusted to fair value in connection with acquisition accounting.
Adjusted revenue is presented because we use this measure to
evaluate performance of our business against prior periods and
believe it is useful for investors as an indicator of the
underlying performance of our business. Adjusted revenue is not a
recognized term under U.S. GAAP. Adjusted revenue does not
represent revenues, as that term is defined under GAAP, and should
not be considered as an alternative to revenues as an indicator of
our operating performance. Adjusted revenue as presented herein is
not necessarily comparable to similarly titled measures presented
by other companies.
Adjusted Gross Profit and Adjusted Gross Profit Margin
We define Adjusted Gross Profit as Adjusted Revenue minus cost
of revenues, before amortization of intangible assets that are
included in costs of revenues. We define Adjusted Gross Profit
Margin as Adjusted Gross Profit divided by Adjusted Revenues.
We use Adjusted Gross Profit and Adjusted Gross Profit Margin to
understand and evaluate our core operating performance and trends.
We believe these metrics are useful measures to us and to our
investors to assist in evaluating our core operating performance
because they provide consistency and direct comparability with our
past financial performance and between fiscal periods, as the
metrics eliminate the non-cash effects of amortization of
intangible assets and deferred revenue, which are non-cash impacts
that may fluctuate for reasons unrelated to overall operating
performance.
Adjusted Gross Profit and Adjusted Gross Profit Margin have
limitations as analytical tools, and you should not consider them
in isolation, or as a substitute for analysis of our results as
reported under GAAP. They should not be considered as replacements
for gross profit and gross profit margin, as determined by GAAP, or
as measures of our profitability. We compensate for these
limitations by relying primarily on our GAAP results and using
non-GAAP measures only for supplemental purposes. Adjusted Gross
Profit and Adjusted Gross Profit Margin as presented herein are not
necessarily comparable to similarly titled measures presented by
other companies.
EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin
EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP
financial measures. EBITDA represents earnings before interest
expense, income taxes, depreciation and amortization. Adjusted
EBITDA reflects further adjustments to EBITDA to exclude certain
non-cash items and other items that management believes are not
indicative of ongoing operations. We define Adjusted EBITDA Margin
as Adjusted EBITDA divided by Adjusted Revenue.
We disclose EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin
herein because these non-GAAP measures are key measures used by
management to evaluate our business, measure our operating
performance and make strategic decisions. We believe that EBITDA,
Adjusted EBITDA and Adjusted EBITDA Margin are useful for investors
and others in understanding and evaluating our operating results in
the same manner as management. EBITDA, Adjusted EBITDA and Adjusted
EBITDA Margin are not financial measures calculated in accordance
with GAAP and should not be considered as substitutes for net loss,
net loss before income taxes, or any other operating performance
measure calculated in accordance with GAAP. Using these non-GAAP
financial measures to analyze our business would have material
limitations because the calculations are based on the subjective
determination of management regarding the nature and classification
of events and circumstances that investors may find significant. In
addition, although other companies in our industry may report
measures titled EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin
or similar measures, such non-GAAP financial measures may be
calculated differently from how we calculate non-GAAP financial
measures, which reduces their comparability. Because of these
limitations, you should consider EBITDA, Adjusted EBITDA, and
Adjusted EBITDA Margin alongside other financial performance
measures, including net income and our other financial results
presented in accordance with GAAP.
Adjusted Revenues
The following table presents our calculation of Adjusted
Revenues for the periods presented, and a reconciliation of this
measure to our GAAP revenues for the same periods:
(Unaudited)
Three Months Ended December
31,
Twelve Months Ended December
31,
(In thousands)
2023
2022
2023
2022
Subscription revenue
$
31,096
$
27,336
$
119,082
$
100,522
Deferred revenue adjustment
-
43
-
1,896
Adjusted subscription revenue
31,096
27,379
119,082
102,418
Advisory, advertising, and other
revenue
3,169
4,113
13,563
13,243
Adjusted Revenues
$
34,265
$
31,492
$
132,645
$
115,661
Adjusted Gross Profit and Adjusted Gross Profit
Margin
The following table presents our calculation of Adjusted Gross
Profit and Adjusted Gross Profit Margin for the periods
presented:
(Unaudited)
Three Months Ended December
31,
Twelve Months Ended December
31,
(In thousands)
2023
2022
2023
2022
Adjusted Revenues
$
34,265
$
31,492
$
132,645
$
115,661
Costs of revenue
(11,388
)
(8,356
)
(40,251
)
(31,937
)
Amortization of intangible assets
5,407
2,430
15,861
9,094
Adjusted Gross Profit
$
28,284
$
25,566
$
108,255
$
92,818
Adjusted Gross Profit Margin
83
%
81
%
82
%
80
%
EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin
The following table presents our calculation of EBITDA, Adjusted
EBITDA, and Adjusted EBITDA Margin for the periods presented:
(Unaudited)
Three Months Ended December
31,
Twelve Months Ended December
31,
(In thousands)
2023
2022
2023
2022
Net loss
$
(50,748
)
$
(42,544
)
$
(115,461
)
$
(218,257
)
Provision (benefit) from income taxes
42
(418
)
223
(3,254
)
Depreciation and amortization
8,644
5,409
28,718
20,783
Interest expense, net
8,087
6,069
29,940
95,741
EBITDA
(33,975
)
(31,484
)
(56,580
)
(104,987
)
Deferred revenue adjustment (a)
-
43
-
1,896
Stock-based compensation
8,845
7,179
27,057
38,047
Change in fair value of warrant and
derivative liabilities (b)
2,867
5,778
(15,983
)
(12,747
)
Loss on debt extinguishment, net
-
-
-
45,250
Other non-cash (gains) charges (c)
24,295
217
29,522
(9,069
)
Acquisition related costs (d)
-
178
1,391
1,181
Employee severance costs (e)
729
426
2,039
575
Non-capitalizable debt raising costs
226
-
542
403
Other infrequent costs (f)
-
-
-
20
Costs incurred related to the transaction
(g)
-
743
415
2,993
Loss contingency (h)
-
11,702
4,091
11,988
Adjusted EBITDA
$
2,987
$
(5,218
)
$
(7,506
)
$
(24,450
)
Adjusted EBITDA Margin
9
%
(17
)%
(6
)%
(21
)%
(a)
Reflects deferred revenue fair value
adjustments arising from the purchase price allocation in
connection with the 2021 Acquisitions.
(b)
Reflects the non-cash impact from the mark
to market adjustments on our financial instruments.
(c)
Reflects the non-cash impact of the
following for fiscal year 2023: (i) impairment of goodwill of
$5,837 in the first quarter and $20,004 in the fourth quarter, (ii)
impairment of other long-lived assets of $6,223 in the fourth
quarter, (iii) loss of $34 in the first quarter, loss of $56 in the
second quarter, gain of $147 in the third quarter, and gain of $9
in the fourth quarter from our equity method investment, (iv)
charge of $2 in the first quarter, charge of $2 in the second
quarter, gain of $672 in the third quarter, and gain of $1,905 in
the fourth quarter from the change in fair value related to the
contingent consideration and contingent compensation related to the
Acquisitions; and (iv) unrealized loss of $115 in the third quarter
and unrealized gain of $18 in the fourth quarter from our
investments. Reflects the non-cash impact of the following for
fiscal year 2022: (i) gain of $1,320 in the first quarter, charge
of $271 in the second quarter, gain of $948 in the third quarter,
charge of $217 in the fourth quarter from the change in fair value
related to the contingent consideration and contingent compensation
related to the 2021 Acquisitions, (ii) gain of $7,667 related to
the partial forgiveness of our PPP Loan during the first quarter,
(iii) $378 impairment charge recognized in the first quarter
related to the abandonment of one of our leases upon adoption of
ASC 842 on January 1, 2022.
(d)
Reflects the costs incurred to identify,
consider, and complete business combination transactions consisting
of advisory, legal, and other professional and consulting
costs.
(e)
Severance costs associated with workforce
changes related to business realignment actions.
(f)
Costs incurred related to litigation we
believe to be outside of our normal course of business totaling $20
in the first quarter of 2022.
(g)
Includes non-capitalizable transaction
costs incurred within one year of the Business Combination.
(h)
Reflects (i) $3,474 non-cash loss contingency charge related to
the settlement with GPO FN Noteholder LLC recorded in the second
quarter of 2023 and $11,700 non-cash loss contingency recognized
related to the previously disclosed term sheet we entered into with
GPO FN Noteholder LLC recorded in the fourth quarter of December
31, 2022 and (ii) accounting and legal costs incurred associated
with the settlement with GPO FN Noteholder LLC totaling $168 in the
first quarter of 2023, $248 in the second quarter of 2023, $201 in
the third quarter of 2023, $286 in the third quarter of 2022 and $2
in the fourth quarter of 2022.
Key Performance Indicators
We also monitor the following key performance indicators to
evaluate growth trends, prepare financial projections, make
strategic decisions, and measure the effectiveness of our sales and
marketing efforts. Our management team assesses our performance
based on these key performance indicators because it believes they
reflect the underlying trends and indicators of our business and
serve as meaningful indicators of our continuous operational
performance.
Annual Recurring Revenue (“ARR”)
Approximately 90% of our revenues are subscription based, which
leads to high revenue predictability. Our ability to retain
existing subscription customers is a key performance indicator that
helps explain the evolution of our historical results and is a
leading indicator of our revenues and cash flows for subsequent
periods. We use ARR as a measure of our revenue trend and an
indicator of our future revenue opportunity from existing recurring
subscription customer contracts. We calculate ARR on a parent
account level by annualizing the contracted subscription revenue,
and our total ARR as of the end of a period is the aggregate
thereof. ARR is not adjusted for the impact of any known or
projected future customer cancellations, upgrades or downgrades, or
price increases or decreases. The amount of actual revenue that we
recognize over any 12-month period is likely to differ from ARR at
the beginning of that period, sometimes significantly. This may
occur due to timing of the revenue bookings during the period,
cancellations, upgrades, or downgrades and pending renewals. ARR
should be viewed independently of revenue as it is an operating
metric and is not intended to be a replacement or forecast of
revenue. Our calculation of ARR may differ from similarly titled
metrics presented by other companies.
Run-Rate Revenue
Management also monitors Run-Rate Revenue, which we define as
ARR plus non-subscription revenue earned during the last 12 months.
We believe Run-Rate Revenue is an indicator of our total revenue
growth, incorporating the non-subscription revenue that we believe
is a meaningful contribution to our business as a whole. Although
our non-subscription business is non-recurring, we regularly sell
different advisory services to repeat customers. The amount of
actual subscription and non-subscription revenue that we recognize
over any 12-month period is likely to differ from Run-Rate Revenue
at the beginning of that period, sometimes significantly.
Net Revenue Retention (“NRR”)
Our NRR, which we use to measure our success in retaining and
growing recurring revenue from our existing customers, compares our
recognized recurring revenue from a set of customers across
comparable periods. We calculate our NRR for a given period as ARR
at the end of the period minus ARR contracted from new clients for
which there is no historical revenue booked during the period,
divided by the beginning ARR for the period. For our federal
government clients, we consider subdivisions of the same executive
branch department or independent agency (for example, divisions of
a single federal department or agency) to be a single customer for
purposes of calculating our account-level NRR. For our commercial
clients, we calculate NRR at a parent account level. Customers from
acquisitions are not included in NRR until they have been part of
our consolidated results for 12 months. Accordingly, the 2022
Acquisitions are not included in our NRR for the year ended
December 31, 2022. Our calculation of NRR for any fiscal period
includes the positive recurring revenue impacts of selling
additional licenses and services to existing customers and the
negative recognized recurring revenue impacts of contraction and
attrition among this set of customers. Our NRR may fluctuate as a
result of a number of factors, including the growing level of our
revenue base, the level of penetration within our customer base,
expansion of products and features, and our ability to retain our
customers.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240312521984/en/
Media Nicholas Graham FiscalNote press@fiscalnote.com
Investors Sara Buda FiscalNote IR@fiscalnote.com
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