FiscalNote Q1 2025 Earnings Call Transcript

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Provided by Quartr
May 12, 2025

There are 8 speakers on the call.

Operator

Evening. My name is Pam, and I will be your conference operator today. At this time, I would like to welcome everyone to the FiscalNote Holdings Incorporated First Quarter twenty twenty five Financial Results Conference Call. Thank you. With that, I would now like to turn it over to the company to begin the conference.

Speaker 1

Good evening. My name is Bob Burrows, Investor Relations for FiscalNote, and we are pleased you all could join us. The purpose of today's call is to discuss FiscalNote's first quarter twenty twenty five financial results and guidance for both the full year and second quarter of twenty twenty five. Joining me with prepared comments are Josh Resnick, CEO and President and John Slabaugh, CFO and Chief Investment Officer. Other members of the senior management team will be available as needed during the Q and A session that will follow these prepared comments.

Speaker 1

Please note today's press release and related current report on Form eight ks are available on the company website. In terms of important housekeeping, please take note of the following. During this call, we may make certain statements related to our business that are forward looking statements under federal securities laws. These statements are not guarantees of future performance, but rather are subject to a variety of risks and uncertainties. Our actual results could differ materially from the expectations reflected in any forward looking statements.

Speaker 1

For a discussion of the material risks and important factors that could affect our actual results as well as the risks and other important factors discussed in today's earnings release, please refer to our SEC filings, which are available either on our company website or the Securities and Exchange Commission's EDGAR system. Additionally, non GAAP financial measures will be discussed on this conference call. Please refer to the tables in our earnings release or the updated version of the corporate overview presentation, both of which are available on the Investor Relations portion of our website, for a reconciliation of these measures to their most directly comparable GAAP financial measure. Finally, we use key performance indicators or KPIs in evaluating the performance of our business. These include annual recurring revenue or ARR and net revenue retention or NRR.

Speaker 1

Once again, I refer you to the earnings release or the updated corporate deck for definitions of these important metrics. And with that, I'd like to turn the call over to FiscalNotes' CEO and President, Josh Resnick. Josh?

Speaker 2

Thank you, Bob, for that introduction. Thank you to everyone joining us this evening. I'm pleased to be here to provide key updates on fiscal note, including our first quarter twenty twenty five financial results and insights on what lies ahead. We're maintaining the disciplined approach we established last quarter, staying focused on managing the business with clarity and rigor. As the business evolves, our core pillars remain unchanged, even as we shift emphasis between them to best support our growth and overall performance.

Speaker 2

As a reminder, we are guided by three key objectives: one, consistent and rapid expansion of adjusted EBITDA margins two, prudent management of debt and a sustained acceleration towards positive free cash flow and three, building a resilient foundation for profitable, durable growth. Let me walk you through where we stand on each. First, regarding adjusted EBITDA. We are pleased to report adjusted EBITDA of $2,800,000 in the first quarter of this year, exceeding expectations. Our continued focus on streamlining the business, prioritizing initiatives that are primed for sustainable growth and driving efficiency across the organization is improving operating leverage and driving expanded adjusted EBITDA margins and adjusted EBITDA.

Speaker 2

Notably, our adjusted EBITDA margin in Q1 was 10% as compared with 4% for the same period one year earlier. These consistent gains reflect our disciplined, steadfast approach, and we expect to consistently grow adjusted EBITDA over time. Second, on managing our debt and accelerating the path to positive free cash flow. Achieving sustainable free cash flow is a top priority and we are fully committed to reaching that goal consistently and reliably just as we've done with adjusted EBITDA. In addition to our operational improvements, we've made deleveraging a central focus, reducing our senior term loan by $96,000,000 since 12/31/2023.

Speaker 2

As a result, our cash interest expense has declined from $5,000,000 per quarter to $2,000,000 The combined impact of greater efficiency and significant debt reduction is propelling us rapidly towards positive free cash flow. For the twelve months ending 03/31/2025, as compared with the same period two years earlier, we have improved trailing twelve month free cash flow by more than $70,000,000 This has been a steady improvement regardless of circumstance, and as a result, positive free cash flow is within reach. The third pillar, growth, is where we're in the midst of a meaningful transition. I'll briefly recap where we've been, explain where we are now, and highlight what that means for where we're going. And as I did last quarter, I'll also provide more context and metrics to show what's driving our outlook and why we remain confident in future growth despite recent challenges.

Speaker 2

Q1 results tell two stories. We beat revenue expectations for the quarter with $27,500,000 However, as anticipated, we have not yet resumed ARR growth. I want to be clear, we are reaffirming our full year revenue guidance. As we've said before, the first half of twenty twenty five was expected to be a period of transition. Two months ago, on our twenty twenty four year end call, I explained that our guidance for full year 2025 reflected a slow start to the year, partly due to execution shortfall at the end of twenty twenty four.

Speaker 2

So it's no surprise to see this reflected in our Q1 ARR. On that same call, I also shared that we had taken swift action and implemented key management changes. Since then, hands on leadership has driven real progress, particularly in better pipeline development and operational focus. Pipeline grew notably in Q1 following these changes and that momentum has accelerated significantly over the past ten weeks. I'll point to a couple of interesting highlights within that.

Speaker 2

First, as I noted in March, inbound demand has been strong. In Q1, total inbound pipeline rose 20% compared to the same period last year, driven by intensifying regulatory complexity and strong interest in policy note. Second, we're seeing strong traction in Europe, where targeted investments and management changes helped us double pipeline creation in Q1 compared to the same period in 2024. Of course, that pipeline needs to move through the funnel and convert, and that takes time. But these are clear encouraging signs for the trajectory of the business.

Speaker 2

Moreover, the work we're doing to accelerate product innovation will support conversion and retention over time. To that point, we remain extremely confident in the strength of the new policy note platform and in how our commitment to product led growth is shaping how we operate. We publicly announced PolicyNotes in January. With PolicyNotes, we're not simply iterating. We'll be fundamentally transforming the user experience by consolidating our global to local data, proprietary insights, and AI into one powerful platform.

Speaker 2

The response so far has been exciting, and we're already seeing a clear positive impact on the user experience. As an example, for an initial cohort of highly at risk customers that we migrated from our legacy platforms, engagement levels have increased significantly. 75% of those accounts are now healthy in light of significantly higher levels of activity, and more than a third are what we consider power users. Beyond that cohort, I also wanna offer a deeper look at how we evaluate usage across all accounts. For instance, we track how frequently customers are using the platform to get the core information they need.

Speaker 2

One key metric here is search frequency, how often users are actively searching for information. And we're seeing results that not only surpass our legacy platforms, but also exceed or meet relevant industry benchmarks. We also look at how effectively the platform moves beyond information and into insights. This includes tracking how customers engage with our AI tools to derive deeper insights. And, again, we're seeing strong adoption and very high levels of activity.

Speaker 2

We closely monitor these and many other metrics in great depth. While there's a limit to the level of detail I can offer in the context of today's call, I wanted to highlight how we think about engagement and the type of results that we're seeing because these are very promising signals, and these behaviors are critical drivers of long term retention and renewals. As encouraging as our usage data is, the product led transformation at FiscalNote extends well beyond the engagement metrics. We've meaningfully accelerated our pace of innovation, consistently rolling out new features and enhancements that improve the user experience and expand the value of the platform. Since launching PolicyNote, we've rolled out numerous additional enhancements and 15 major new features, including an executive orders widget with automated AI powered insights, intelligent alert management, a bill similarity algorithm, and more.

Speaker 2

This is integral to how our product and engineering teams are now operating under new leadership, increasing productivity, rearchitecting sprint structures, and implementing and tracking key velocity metrics. This pace of innovation is critical. It demonstrates to customers and prospects that PolicyNote is not only powerful, but it's evolving quickly to meet their needs in the midst of a rapidly changing environment. Here's a clear example. On April 2, President Trump announced sweeping tariffs with significant implications for global trade.

Speaker 2

Organizations of all types and sizes needed a way to assess the ramifications and respond. Just two weeks later, on April 16, we launched a new tariff tracker in policy note, enabling customers to identify, understand, and manage the business impact. That's an exceptionally fast turnaround for a feature of this complexity and importance. Equally important, this level of execution extends beyond product and engineering. It reflects tighter, more aligned execution across the business.

Speaker 2

Our go to market teams were fully in sync with product. And on the very day we launched the tariff tracker, they set nearly 200 meetings and generated close to $1,000,000 in new pipeline, which already is turning into new wins. This is how we will drive growth, consistent, high velocity product innovation paired with disciplined, high impact go to market execution. We're encouraged by the engagement we're seeing with Policy Note and, more broadly, by the tangible impact of our accelerated pace of innovation. A strong indicator of customer confidence is the growing volume of multiyear deals.

Speaker 2

Clients won't commit to multiyear contracts unless they have conviction in the quality of the insights, the strength of the platform and the credibility of the product roadmap. In Q1, even in the midst of a volatile economic environment, new corporate customers committed to multiyear agreements for our policy insight at more than doubled the rate of a year ago as measured by ARR. Mathematically, this will have a direct impact on gross retention and revenue in 2026. Beyond that, it's a clear signal of trust, not just in what we've built today, but in our ability to keep delivering meaningful innovation in the long run. In summary, we continue to excel at the operational discipline that has driven consistent growth in adjusted EBITDA, accelerated our path to positive free cash flow, and laid the groundwork for sustained growth in the future.

Speaker 2

Where stronger execution has been needed, we've acted decisively and the improvements are already taking hold. We're thrilled with the progress with Palicino, the rapid acceleration of product innovation and our success in translating that into real commercial momentum. These are the building blocks of long term success. We are reaffirming our full year guidance, even notwithstanding our latest asset sale, because we see clear progress and have strong conviction in our execution. Looking beyond this year, I remain deeply confident in the future we're building at FiscalNotes.

Speaker 2

With that, I'll turn the call over to John to take us through our Q1 twenty twenty five financial results. John?

Speaker 3

Thank you, Josh. Good evening and thank you for joining FiscalNotes first quarter twenty twenty five conference call. As Josh mentioned, we're pleased to announce that we exceeded both our revenue and adjusted EBITDA guidance for the quarter. Let me dive into some of the key drivers behind our performance. Total revenue for Q1 twenty twenty five was $27,500,000 above our forecast of 26,000,000 to $27,000,000 When compared to the prior year, revenue was $4,000,000 lower, primarily due to the divestiture of Board.org and ASIL in 2024.

Speaker 3

Subscription revenue remains the cornerstone of our business. It accounted for 92% of our total in quarter revenue consistent with our historical trends. Our focus on the core policy business together with the launch of the migration to policy notes should help maintain these high contributions from subscription revenues going forward. Turning to our key performance metrics, as of Q1 twenty twenty five, annual recurring revenue was $88,000,000 versus $94,000,000 in 2024 on a pro form a basis after adjusting for the impact of the AASL, Word dot org, Oxford Analytica and Dragonfly divestitures. As Josh said previously, we expect policy note to have a meaningful positive impact on 2025 as it unfolds.

Speaker 3

We are planning for ARR growth from this level in the second half of twenty twenty five. For the first quarter twenty twenty five, net revenue retention was 93% versus 96% in the prior year. While a disappointing outcome, it reflects the underperformance at the end of twenty twenty four that we have previously discussed and believe have addressed going forward. We remain focused on improving this important metric over time through continued product innovation. Principal operating expenses in Q1 twenty twenty five continued the trend of year over year decreases, reflecting the continuing benefits of ongoing efficiency measures initiated in 2023, advanced in 2024 and continuing into 2025.

Speaker 3

We also realized cost savings following the 2024 divestiture of Board.org and AASL and anticipate realizing further cost savings in 2025 from the Oxford and Dragonfly divestitures. We also realized additional savings from sunsetting a few additional non core products. Factoring in the impact of those various initiatives, Q1 twenty twenty five cost of revenues decreased by $200,000 or 3% versus prior year. R and D decreased by $400,000 or 11% and sales and marketing decreased by $1,600,000 or 18%. As for G and A, while we saw a slight increase of $200,000 or 1%, it's important to point out that approximately $3,000,000 of non cash M and A related costs were recorded in G and A during the quarter.

Speaker 3

Excluding these one time non cash items, G and A would have reflected a reduction. Taken together, total Q1 twenty twenty five operating expenses fell by $2,300,000 or 5% versus the prior year. On a pro form a basis, excluding non cash charges and the impact of the 2024 divestitures, OpEx decreased by approximately $4,000,000 or 14%. Gross margins in Q1 twenty twenty five was 75%, two hundred basis points lower than prior year on a GAAP basis, primarily due to Sunset products in the quarter and higher amortization expenses related to the new policy note platform, adjusted gross margins improved to 87% in Q1 twenty twenty five as compared to 85% in the prior comparable quarter. The GAAP net loss for Q1 twenty twenty five was $4,300,000 and not meaningfully comparative to prior year due in part to the large Board.org gain on sale recognized in Q1 of twenty twenty four.

Speaker 3

Adjusted EBITDA was a positive $2,800,000 higher than the prior year, above our guidance of approximately $2,000,000 in the seventh consecutive quarter of positive performance for this important profitability metric. The improvement to adjusted EBITDA even after the pro form a impact of the divestiture of Board.org and Asyl is the result of actions we've taken to improve operating efficiency, streamline the product portfolio and reduce the overall cost structure of the business. In the coming quarters, we will continue to focus on increasing operating leverage and realizing additional efficiencies across the business, while steadily expanding the top line to our product led revenue strategy that we just initiated this quarter. Cash and cash equivalents, including short term investments at the end of Q1 twenty twenty five was $46,900,000 This is an increase over both prior year and year end 2024 balances, driven primarily to the influx of cash stemming from seasonality in the Oxford Analytic and Dragonfly divestiture, which closed on March 31. In Q1, we continued reducing overall indebtedness and ended the quarter with a senior term loan balance of $62,000,000 versus the year end 2024 balance of $89,000,000 a significant reduction and one reflecting our commitment to delever the capital structure through a deliberate and targeted campaign to simplify the product mix and focus on our core 4,000 top tier customers across the globe.

Speaker 3

The senior term loan will be further reduced by the recently announced sale of our Australian based subsidiary, TymeBase. Finally, let me provide guidance. We are reaffirming our full year 2025 revenue forecast in the range of 94,000,000 to $100,000,000 and adjusted EBITDA in the range of 10,000,000 to $12,000,000 As Josh referenced, we are not making reductions to our guidance as the result of the pending sale of our Australian subsidiary. This speaks to the resilience of our streamlined and effective operating model and product led growth strategy. And for continued pacing across the year, we are forecasting second quarter twenty twenty five revenues in the range of $22,000,000 to $24,000,000 and adjusted EBITDA of approximately $2,000,000 In summary, our business continues to reflect increasing strength and resilience.

Speaker 3

Our streamlined and disciplined operating plan is focused on innovation that will become increasingly valuable to our customers in navigating today's complex political landscape. As we continue to drive to stabilize the business and return to a path of sustainable growth and customer retention, we are also working to expand operating leverage and therefore adjusted EBITDA both in absolute dollars and on a margin basis. Finally, we continue our efforts to prudently manage our cash by controlling CapEx, reducing cash interest expense and managing operating expenses, all in pursuit of accelerating the path to positive free cash flow and sustainable growth. 2025 is an important year for this company and thus far we are tracking across the board towards reestablishing a clear and definitive path for durable growth and profitability and value creation. That concludes my prepared remarks.

Speaker 3

I'll turn it over to the operator to begin the question and answer session. Operator?

Operator

Your first question comes from the line of Glenn Mattson with Ladenburg Thalmann. Please go ahead.

Speaker 4

Yes. Hi, everybody. Thanks for taking the question and congrats on the results. So I was just curious about the just the sales force and the sales function. You mentioned in the back half of '24, there was some disruption to that process perhaps due to some cuts in that area.

Speaker 4

It seems like it's getting back on track now. Can you just give us a sense of the of the go to market and and how that's evolving over time?

Speaker 2

Sure, Glenn. This is Josh. I can address that. So, yeah, the changes that we're talking about, in towards end of q four were less about reductions that we've made, and more really just about execution issues that we saw, out of management. So we've, restructured, and replaced management, And what we're seeing now is, much better execution, and it's really much better execution, throughout the funnel.

Speaker 2

So, in addition to what we're seeing from the inbound where I mentioned that we've seen, increased interest in demand, Our outbound is functioning much better. We're building much stronger pipeline. And we're seeing that connection point, as I mentioned, between, the go to market teams and the product teams as well. So as we're bringing the product along, as we're driving more product innovation, we're turning that in innovation into commercial results much more quickly as well. So that that's really, what we're talking about there.

Speaker 4

Great. That's helpful. And on on policy note, you you pointed to a lot of, interesting anecdotal evidence around the, acceptance and uptake. Can you give us

Speaker 5

a sense of, you know,

Speaker 4

what what sample size you're talking about and, and just the expectation still over the of the time frame for when you hope to have everyone converted over to that platform.

Speaker 2

Yeah. Sure. Glenn, have him do that as well. So we are working to migrate our core customers over time. We expect to have all of our core customers, the ones who are using us for, you know, policy data insights, etcetera, on the new platform sometime next year.

Speaker 2

We're accelerating migration as much as possible now in light of the early results. We plan to be in position to start deprecating, at least actually, to start deprecating platforms this year for sure, to be in position to deprecate at least one of the larger legacy platforms later this year. So we're working on, getting those customers on there at scale, right now. And like I mentioned, we've been really encouraged by the progress that we're seeing. We've, migrated, so I mentioned a couple different cohorts that we've done.

Speaker 2

I can't give you exact numbers in terms of number of customers, but we're really confident in the the share of customers that we have right now. Meaning, we're confident that what we see represents a a broad enough slate of the types of customers who should be on there, that, they're using them at high enough scale where we understand validity of the data, and such, and where we're, really starting to have an impact on what we can do from, both a new logo standpoint and a retention standpoint as well.

Speaker 4

Great, Justin. It's very helpful. Thanks. I'll jump back

Speaker 5

in the queue. Thank you.

Operator

Your next question comes from Jesse Sopelsen with D. Borrow Capital. Please go ahead.

Speaker 6

Hey, guys. Really just want to reiterate, this is a great quarter. The reiteration of guidance is really great news here. We can really see the ship turning, it sounds like policy and it's really gaining some great traction to help drive this confidence in the second half ARR rebound. I just wanted to kind of ask on a clarification piece here.

Speaker 6

On the numbers piece, the revenue guidance for second quarter is 22,000,000 to $24,000,000 and so a little bit below Q1 levels. I just wanted to confirm that the primary driver of this sequential decline was the recent transactions that you've done with Dragonfly and Oxford. Is that correct?

Speaker 5

Sure. John, do you wanna address that?

Speaker 2

Do we have John?

Speaker 3

Hi, Jesse. I'm sorry about that. I was having phone phone problem. Josh, do you answer the question?

Speaker 5

No, John. You can go ahead.

Speaker 3

Okay. Thanks for the question, Jesse. It's John. You're you're correct. We The difference would be solely attributable to the revenue that we recognized in the first quarter from the divested businesses Dragonfly and Oxford.

Speaker 3

And there'll be details breaking out the pro form a in the filings that are coming out later.

Speaker 2

Great. Great. Yeah. Just confirming, it

Speaker 6

sounds like the business is is, stabilizing here. Another housekeeping one for me is just when it comes to the balance sheet, there was this additional sale of a I think it's a time policy. I apologize for the exact name. I don't have it in front of me. But just, what where exactly are we with the balance sheet today and any anticipated cash that's supposed to come in from transactions and what the debt balance is?

Speaker 6

Just to make sure on a pro form a basis, I'm in the right ballpark here.

Operator

Sure.

Speaker 3

So from the, from the balance sheet that will be coming out, shortly, we did announce a transaction. We entered into, a transaction with Thomson Reuters to sell a division operating in Australia. It is a smaller division, and we do disclose the purchase price to be in the neighborhood of 6 and a half million dollars. And I would pencil in about half of that going to reduce, debt after taxes, fees, and expenses related to the transaction.

Speaker 5

Okay. Great. Okay. Great.

Speaker 6

And then just a a bigger picture here. You know, it seems that the board, you know, continually reviews some strategic options to maximize shareholder value. I was kind of curious if you guys can share any updates on framework criteria being used to evaluate any outcomes and, you know, if there's there's anything if we're still considering asset sales here or if, you know, the the product portfolio is is where we should expect it to be today? Thank you.

Speaker 3

Josh, your answer, Yes.

Speaker 2

Yeah. I can take that. So, yeah. Thanks for the question on on that, Jesse. I I would just say there, you know, there's not too much we can say about board activity beyond, what's been said publicly.

Speaker 2

So, you know, I'll just essentially reiterate that, you know, the board, you know, is, of course, constantly, you know, considering ways in which to maximize value of the company. And so that's really the long and short at the end of the day, in terms of, what I can say there. In terms of future divestitures, I would say that, you know, you've seen a majority of what there is from a portfolio. That's not to say that there wouldn't be future opportunities as well. And, again, we'll consider, you know, what opportunities there may be down the road as well.

Speaker 5

Great. Cool. Thank you for taking my questions.

Operator

Your next question comes from Mike Latimore with Northland Capital Markets. Please go ahead.

Speaker 5

Great. Thank you. Yeah. Congrats on the great results there. Nice to hear the pipeline is growing here.

Speaker 5

I guess, can you give a little more detail on what you're seeing in the pipeline? Is that coming from upsells, cross sells, new logos, any particular verticals? And is it yeah. I guess that that would be a starting point.

Speaker 2

Sure, Mike. Happy to address that. So when I'm talking about the increase in pipeline, really, what I'm talking about is two different pieces to it. So one is inbound pipeline, so new logo, and that would be across sectors, and that's reflecting, you know, I think, you know, a higher focus in light of regulatory complexity as well as, interesting policy note. And then, in terms of outbound pipeline, again, what I'm referring to there is around new logo.

Speaker 2

And, again, it it actually cuts across, different sectors as well, so it's not just one particular area. We are seeing, you know, as I've mentioned, in my remarks, but also we've talked about on previous calls, we are seeing, you know, continued high level of interest and demand in Europe in particular. But what I'm referring to when I'm talking about pipeline is really across the board, but, mostly focused on new logo.

Speaker 5

Got it. Okay. Got it. And then in terms of the, just the, you know, federal sector for the US government, you know, a lot of changes there. It seems like you quickly can, you know, also offer new products that, enable your customers to understand those changes at the same time.

Speaker 5

But can you just can you just talk a little bit about, you know, the the health of the the federal vertical here? And, yeah. I guess, just to give you on the health of the federal vertical.

Speaker 2

Sure, Mike. Having to do that. So, yeah. I mean, certainly, as you're alluding to, right, there's volatility, in the federal market unlike, you know, unlike anything that has been previously. We've had, we've seen some of

Speaker 5

that

Speaker 2

volatility, nothing material for us. Where we have had issues, it's been unrelated to our specific products, just part of some of the shifts within government itself, restaffing, budgets being in question, etcetera. There's been we do see opportunity, in the federal sector as well. You know, our products do help organizations be more efficient. So we estimate that, you know, the government saves $10 for every dollar that they spend with us.

Speaker 2

So we actually think there's opportunity, to drive more value over time. And then we also see, you know, again, as you alluded to as well, a need for the type of information and insights that we provide. And and, again, especially if there's more and more interest in platforms and AI as a focus to drive efficiency and drive insights and information, we we believe that's something that, plays to our favor in the long run.

Speaker 5

Great. And just one last one, I guess, kind of on a similar topic. You announced you hired an adviser, that came from Palantir. I'm just kinda curious, you know, what what is he focused on?

Speaker 2

So, yeah, we we actually, did engage him, to focus on federal government. So, you know, as someone who has driven significant, federal contracting, leveraging AI platforms, in the past, we brought him in, to provide advice and support for our commercial teams as we think much more about our, opportunities in that sector. So and he's provided our teams with some helpful insights.

Speaker 5

Okay. There we go. Congrats again. Thanks a lot.

Speaker 2

Thanks, Mike.

Operator

The next question comes from Zach Cummins with B. Riley Securities. Please go ahead.

Speaker 7

Hi, good afternoon. Thanks for taking my questions. Really, Josh, my one question is just focused on your confidence in a lot of this new pipeline continuing to progress and getting across the finish line in terms of new deals. I'm just curious on kind of the typical pace we should be expecting and how you're making those assumptions when making a return to year over year ARR growth in the coming quarters?

Speaker 2

Sure. Zach, thanks for the question. Yeah. We look. We feel very confident.

Speaker 2

Yeah. We and this is why we're starting to be more transparent about things like pipeline, about things like product engagement, etcetera. We're very confident that we understand what the drivers have been for some of, you know, past underperformance, and we're very confident that we're doing the right things to address those. So that, goes to things like the go to market execution, which, you know, we look at data very deeply, and, you know, we see that pipeline and see the opportunities that we have against it. We know, about the product, and we know that, our customers and prospects need this information.

Speaker 2

It's they recognize the importance of it to their organization. So we see that level of demand out there. And, that's partly reflected in the inbound, that we're seeing as well. And we know, that the product that we have, can really address those needs in a way that's really powerful for the organizations who we're working with. And we see that reflected in the product metrics that we look at and the level of engagement that we see.

Speaker 2

So we feel very confident in terms of what we're doing, the execution against it, and what that means for the long term. And then, you know, we're looking at things like, you know, sales cycles, quality of the funnel, etcetera, as we think about the second half of this year. And, again, that's why we're reaffirming guidance is we feel confident in what we're gonna deliver the second half of the year. There's obviously, risk points out there that we see as much as anybody else, you know, including, you know, economic volatility, etcetera. But we've built that in in terms of how we think about the opportunities here.

Speaker 2

And, you know, like I said, we feel very good about what we're building and pipeline, you know, certainly, it needs to convert. We gotta push it through. But with, how we're managing the business, with what we're seeing from an execution standpoint, and with what we're seeing from, engagement with our customers, engagement with prospects, and the level of demand, we feel very good.

Speaker 7

Understood. That's that's helpful. And and just my one follow-up question is is around the level of multiyear deals that that you're now seeing. I mean, you can you us a little more insight into that? And is that part of the new go to market transformation?

Speaker 7

Do you have a bigger emphasis on on trying to secure these multiyear contracts with customers?

Speaker 2

So yeah. That's that's a great question, Zach. So we actually, along with the introduction of policy note, we felt very, solid and confident in the product. We know that, you know, one of the challenges we've had, obviously, has been the product, which translates into, being able to speak to customers and prospects about what is your vision, how are you innovating. You know, you need customers to believe not just in what you're doing today, but what you'll be doing, you know, tomorrow, twelve months from now, twenty four months from now, and so on.

Speaker 2

And so with the introduction of policy note and market, we did, make it a point about emphasis to start to seek multiyear commitments. And that's where we're really pleased to see, that pay off and see, prospects engaged and sign on to multiyears at the levels that I mentioned. You know? So for the new corporate logos being, you know, more than double the rate of what we saw a year ago. That's really incredible.

Speaker 2

And so to be clear, it's not driven by, you know, aggressive discounting for multi years or anything like that. So it's a it was a a point of our strategy to seek the multi years, but we're not doing anything artificial to achieve it. We're achieving it because, of the confidence that, prospects have in the fact that they're gonna need this data. They're, confident that they're gonna wanna get it from us. They're confident that, you know, our product is the one that they wanna bet on for multi year commitment.

Speaker 2

So we feel very good about that and what that says about their confidence in us for the long run.

Speaker 7

Understood. Well, thanks for taking my questions and best of luck with the rest of the quarter.

Speaker 2

Thank you, Zach.

Operator

There are no further questions at this time. Mr. Barrows, I turn the call back over to you for any closing remarks.

Speaker 1

Thank you, Pam. That concludes our call this evening. We appreciate everyone's participation on today's call. With any additional questions, please contact any of us. Again, all materials related to the company's first quarter twenty twenty five financial results are available on the fiscal note website.

Speaker 1

We look forward to speaking with all of you again in the future. Goodbye.

Operator

This concludes today's conference call. You may now disconnect.

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Key Takeaways

  • Adjusted EBITDA reached $2.8 million in Q1 with margins expanding to 10% from 4% a year ago, exceeding expectations.
  • The company has reduced its senior term loan by $96 million since year-end 2023 and cut cash interest expense to $2 million per quarter, improving trailing-12-month free cash flow by over $70 million.
  • Q1 revenue was $27.5 million, beating guidance, while ARR declined to $88 million; management reaffirmed full-year revenue guidance of $94 million to $100 million.
  • Inbound pipeline grew 20% year-over-year and European pipeline creation doubled in Q1, driven by intensifying regulatory complexity and strong interest in the new PolicyNote platform.
  • The PolicyNote rollout has driven a 75% health rate among migrated at-risk customers and delivered 15 major new features—such as a tariff tracker launched within two weeks—while multiyear deal ARR more than doubled year over year.
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Earnings Conference Call
FiscalNote Q1 2025
00:00 / 00:00