Executive Summary / Key Takeaways

• AI-Powered Transformation: FiscalNote is undergoing a significant product-led transformation, centered on its new AI-first PolicyNote platform, which is driving strong customer engagement and is expected to reverse historical retention challenges.
• Strengthened Financial Foundation: A substantial debt refinancing in August 2025 has significantly extended the company's maturity profile and enhanced operational flexibility, accelerating its clear path to positive free cash flow.
• Expanding Profitability: Through rigorous cost discipline and strategic divestitures, FiscalNote has achieved consistent adjusted EBITDA expansion, with full-year 2024 marking its first profitable year on this metric, and further margin growth projected for 2025.
• Growth Reacceleration: While the first half of 2025 saw ARR declines due to legacy product issues and federal sector instability, strong pipeline development, increased new logo win rates, and multi-year commitments signal an anticipated return to ARR growth in the second half of 2025, translating to GAAP revenue growth in 2026.
• Competitive Differentiation: FiscalNote leverages its specialized AI technology and proprietary global policy data to offer unique insights, positioning it as a critical intelligence provider in an increasingly complex regulatory landscape, despite facing larger, more diversified competitors.

FiscalNote's Vision: Powering Decisions in a Complex World

FiscalNote Holdings, Inc. ($NOTE), founded in 2013, has evolved from a startup vision into a market-leading AI platform for regulatory, legislative policy, and geopolitical intelligence. The company's core mission is to help customers make sense of an intricate and ever-changing world by delivering proprietary AI-enabled platforms that aggregate, organize, and analyze political, regulatory, and macroeconomic information. This positions FiscalNote as an essential intelligence provider, often described as the "Bloomberg terminal for regulatory, legislative and strategic risk."

The industry landscape is characterized by intensifying regulatory complexity and a growing demand for AI-driven efficiency across global enterprises, governments, trade groups, and nonprofits. FiscalNote operates within a competitive arena that includes large, well-funded information services companies. Key publicly traded competitors such as Thomson Reuters (TRI), RELX Group (RELX), and S&P Global (SPGI) offer broad data analytics and AI tools that overlap with FiscalNote's offerings. While these giants boast extensive data networks and diversified portfolios, FiscalNote carves out its niche through specialized focus and agile innovation.

Technological Edge: PolicyNote and AI Innovation

FiscalNote's competitive moat is built upon its unique combination of proprietary AI technology, comprehensive data, and decades of trusted analysis. The company's AI and data science capabilities ingest unstructured legislative and regulatory data, transforming it into structured, relevant, and actionable information. This enables efficient decision-making and helps customers manage political and business risk.

The cornerstone of FiscalNote's technological differentiation is the PolicyNote platform, publicly launched in January 2025. PolicyNote is an AI-first platform designed to consolidate all policy-related data and content into a single, intuitive user interface. This represents a fundamental transformation of the user experience, moving beyond simple iteration to create a centerpiece for efficient, scalable innovation.

The tangible benefits of PolicyNote are already evident. By June 2025, PolicyNote had surpassed the daily active user count of FiscalNote's legacy platform, a major milestone indicating rapid adoption. Engagement metrics are strong, with the average customer using the platform approximately 30% more at the end of their first quarter than at the midpoint. This suggests users are finding significant value, embedding PolicyNote into their workflows, and becoming "power users." New PolicyNote customers are also setting high-value alerts far sooner after account activation compared to the legacy platform, demonstrating immediate utility.

FiscalNote's commitment to rapid innovation is a key differentiator. In Q2 2025 alone, the company delivered over 10 major updates to PolicyNote. These included AI-powered capabilities for legislative drafting and bill outlook, significant upgrades to its AI alerts and AI assistant, and a new onboarding flow designed to drive engagement. A notable example of this agility was the launch of a new Tariff Tracker in PolicyNote on April 16, 2025, just two weeks after President Trump announced sweeping tariffs. This rapid response enabled customers to quickly identify, understand, and manage the business impact of these policy changes. This consistent, visible investment in PolicyNote inspires customer confidence, deepens engagement, and is expected to be the cornerstone for stronger customer retention and greater expansion opportunities.

Beyond PolicyNote, FiscalNote also launched Copilot programs earlier in 2024. The Copilot for Global Intelligence has seen "very, very broad uptake" among the customer base, with healthy metrics in terms of return visits and repeated inquiries. This tool provides end-users with a new way to interact with data and analysis, quickly getting to answers, and shows promise for driving upsell and cross-sell through product-led sales. These technological advancements collectively enhance FiscalNote's competitive moat by offering superior, specialized insights and workflow efficiencies that are difficult for broader competitors to replicate quickly.

Strategic Transformation: From Rightsizing to Profitable Growth

FiscalNote's journey since its business combination with DSAC in July 2022 has been one of deliberate strategic transformation. The company embarked on a multi-year initiative to "rightsize its cost structure," streamline operations, and focus on core profitable growth areas. This disciplined approach yielded significant results, with FiscalNote achieving five consecutive quarters of positive adjusted EBITDA by Q3 2024, surpassing initial expectations. Full-year 2024 marked a historic milestone as the company's first full calendar year of positive adjusted EBITDA, reaching $9.8 million, a $17 million year-over-year improvement.

A key aspect of this transformation has been strategic portfolio rationalization. FiscalNote divested several non-core businesses to reduce complexity, deleverage the balance sheet, and sharpen its focus. This included the sale of Board.org in March 2024 for $90.9 million, Aicel Technologies in October 2024 for $9.7 million, Dragonfly and Oxford Analytica in March 2025 for $40 million, and TimeBase in July 2025 for $6.6 million. Proceeds from these sales were strategically used to prepay senior term loans, significantly reducing the company's indebtedness.

In a notable leadership transition, co-founder Tim Hwang moved to the role of Executive Chair, with Josh Resnik assuming the CEO position effective January 1, 2025. This change reflects the company's need for new leadership and a fresh perspective to guide its next phase of growth, with Resnik focusing on delivering best-in-class product experiences and consolidating legacy platforms. The hiring of Can Babaoglu as Chief Product Officer in Q3 2024 further underscores this commitment to a product-led culture centered on rapid iteration and innovation.

Financial Performance: A Clear Path to Sustainability

FiscalNote's recent financial performance reflects both the ongoing transition and the positive impact of its strategic initiatives. For the second quarter of 2025, the company reported total revenues of $23.3 million, exceeding the guidance midpoint. Adjusted EBITDA for Q2 2025 was $2.8 million, also surpassing guidance, and representing an adjusted EBITDA margin of 12%, a significant increase from 4% in the same period last year.

Subscription revenue, the cornerstone of the business, accounted for 92% of total revenues in the first six months of 2025, totaling $46.6 million. However, subscription revenue for Q2 2025 decreased by 21.3% year-over-year to $21.4 million. This decline was primarily attributed to the impact of recent business divestitures (Dragonfly and Oxford Analytica) and organic challenges stemming from customer retention issues in legacy products and "atypical instability" in the U.S. federal sector.
Annual Recurring Revenue (ARR) stood at $85.9 million as of June 30, 2025, down from $93.6 million (pro forma) in the prior year. Net Revenue Retention (NRR) was 96% for the three months ended June 30, 2025, compared to 98% in the prior year. Management acknowledges this underperformance in ARR and NRR in the first half of 2025 but points to swift operational changes and product innovation as key drivers for future improvement.
Operating expenses have shown a consistent downward trend, reflecting the benefits of efficiency measures. In Q2 2025, cost of revenues decreased by 28%, research and development by 29%, and sales and marketing by 26% year-over-year. General and administrative expenses saw a slight increase, but this was largely due to non-cash M&A-related costs. Overall, total operating expenses fell by 17% in Q2 2025. Gross margin improved to 79% on a GAAP basis and 86% on an adjusted basis in Q2 2025, reflecting disciplined cost management and the impact of divested businesses.

The company's cash flow from operations has significantly improved, with cash used in operations decreasing by approximately $67 million when comparing the twelve months ended June 30, 2025, to the same period two years prior. Trailing 12-month free cash flow improved by more than $70 million for the period ending March 31, 2025, compared to two years earlier, bringing positive free cash flow "within reach."

Capital Structure and Liquidity: Refinancing for Long-Term Runway

FiscalNote has proactively addressed its capital structure to ensure long-term stability and operational flexibility. On August 12, 2025, the company completed a substantial refinancing of its legacy indebtedness. The Prior Senior Term Loan, totaling approximately $62.7 million, was retired and replaced with a new $75 million 2025 Senior Term Loan, maturing in August 2029. This new facility, provided by MGG Investment Group, ranks senior to all other debt and is secured by a first-priority lien on substantially all of the company's assets.

The 2025 Senior Term Loan bears variable interest rates (reference rate + 7% or SOFR + 8%), payable monthly in cash. Quarterly principal repayments will be approximately $0.47 million for the first year, increasing to $0.94 million thereafter. While annualized cash interest payments are expected to increase slightly by less than $2 million annually due to the higher balance on the new senior term loan, this incremental expense is anticipated to be more than offset by ongoing operational streamlining.
Further restructuring included the partial redemption of the GPO Convertible Note ($30 million principal for $27 million cash), with the remaining $20.4 million exchanged for a new 2025 GPO Note maturing in November 2029. The Amended Legacy Notes were fully retired with a $3.6 million cash payment. Additionally, FiscalNote issued an initial tranche of convertible debentures ($21 million principal for $18.9 million cash) to YA II PN, Ltd., with a second tranche expected to fund the repayment of the Third Era Convertible Note. These debentures mature in February 2027 and are convertible into Class A Common Stock.
As of June 30, 2025, the company held $39.2 million in cash, cash equivalents, restricted cash, and short-term investments. Despite a negative working capital balance of $27.9 million (excluding cash and short-term investments), management expects to maintain compliance with the new financial covenants (minimum cash balance, ARR, adjusted EBITDA, and capital expenditure limitation) and to have adequate cash flows for the next twelve months. The long-term goal is to reduce the leverage ratio to the "two to three times leverage range."

Competitive Dynamics: Standing Against Giants

FiscalNote operates in a competitive landscape dominated by larger, more diversified players. Comparing FiscalNote's latest TTM financial ratios to its larger rivals, Thomson Reuters (TRI), RELX Group (RELX), and S&P Global (SPGI), reveals distinct positioning. FiscalNote's TTM Gross Profit Margin of 83.81% is competitive, even exceeding TRI's 27% and SPGI's 69%, and comparable to RELX's 65%. This highlights the inherent profitability of its core subscription business. However, FiscalNote's TTM Operating Profit Margin of -30.75% and Net Profit Margin of -41.79% contrast sharply with the positive margins of its larger, more established competitors, reflecting its earlier stage of profitability and ongoing investment in transformation.

FiscalNote's Debt/Equity ratio of 1.48 is higher than TRI (0.26) and SPGI (0.36) but lower than RELX (1.88), indicating a more leveraged position than some, but not all, of its peers. The recent refinancing efforts are explicitly aimed at improving this.

FiscalNote's competitive strengths lie in its specialized AI technology and proprietary data focused on public policy. Its agility in product development, as demonstrated by the rapid deployment of features like the Tariff Tracker, allows it to address emerging regulatory challenges with speed that larger, more bureaucratic organizations might struggle to match. This specialization provides a distinct value proposition for government agencies, large enterprises, and advocacy groups seeking granular, real-time policy insights.

However, FiscalNote's smaller scale presents vulnerabilities. It faces higher customer acquisition costs and potentially narrower margins in certain segments compared to rivals who benefit from economies of scale. Its market reach is also more concentrated, making it potentially more susceptible to shifts in specific sectors or government spending priorities. The increasing energy demands of AI, a broader industry trend, could also impact FiscalNote's operational costs, potentially more so than for diversified competitors with larger resource bases.

Despite these challenges, high data acquisition costs and regulatory complexities act as significant barriers to entry in this industry, helping to protect FiscalNote's specialized market position. The company's strategy of focusing on product-led growth, driven by PolicyNote, aims to convert its technological advantages into improved customer loyalty, cross-sell, and upsell opportunities, thereby strengthening its financial resilience over time.

Outlook: Accelerating Momentum

FiscalNote is poised for a pivotal second half of 2025 and beyond. The company has reaffirmed its full-year 2025 revenue forecast in the range of $94 million to $100 million and adjusted EBITDA in the range of $10 million to $12 million. For Q3 2025, revenue is projected between $22 million and $23 million, with adjusted EBITDA of approximately $2 million.

Management's confidence in this outlook is underpinned by several key assumptions. The PolicyNote platform is expected to drive significant improvements in customer engagement and retention as more users migrate and new features are introduced. The company is seeing encouraging signs in its commercial momentum, with inbound leads for policy products up over 20% year-over-year in Q2 2025, and the corporate new logo pipeline increasing by 45% from Q1 to Q2 2025. Corporate win rates improved by 400 basis points quarter-over-quarter, and new private sector customers are committing to multi-year agreements at more than double the rate of a year ago, signaling anticipated gross retention improvements in 2026.

While acknowledging "atypical instability" in the U.S. federal sector and macroeconomic unpredictability in the private sector, management believes FiscalNote's solutions, which enhance government efficiency and provide critical insights, will continue to be in demand. The recent debt refinancing provides a crucial long-term runway and operational flexibility, with the incremental cash interest expense offset by ongoing operational streamlining. FiscalNote anticipates ARR growth to resume in the second half of 2025 and accelerate further in 2026, translating into sustained GAAP revenue growth.

Conclusion

FiscalNote Holdings, Inc. is in the midst of a profound strategic transformation, shedding non-core assets and aggressively paying down debt to sharpen its focus on its core AI-driven policy and market intelligence business. The successful refinancing of its senior debt provides a critical long-term runway, while rigorous cost discipline has already delivered consistent adjusted EBITDA profitability.

The investment thesis hinges on the successful rollout and adoption of the PolicyNote platform. Early engagement metrics and rapid innovation on PolicyNote are highly encouraging, suggesting it is the key to overcoming historical customer retention challenges and driving future growth. While facing formidable, larger competitors, FiscalNote's specialized AI technology and agile product development offer a differentiated value proposition. The company's ability to execute on its product roadmap, continue improving operational efficiencies, and convert strong pipeline metrics into sustained ARR and revenue growth will be paramount. FiscalNote is building a resilient foundation for durable, profitable growth, making it a compelling story for discerning investors.