Business Overview and History
FiscalNote, the leading AI-driven enterprise SaaS technology provider of policy and global intelligence, has emerged as a crucial partner for organizations navigating the complex and ever-changing regulatory and geopolitical landscapes. With a rich history spanning over a decade, the company has established itself as the go-to resource for decision-makers seeking to anticipate and respond to the evolving policy environment.
FiscalNote was founded in 2012 by three entrepreneurs - Tim Hwang, Jonathan Chen, and Gerald Yao - who recognized the growing need for a comprehensive, data-driven platform to help organizations stay ahead of legislative and regulatory changes. The company's inception was driven by the founders' vision to transform the way businesses and governments access, analyze, and leverage policy information.
Starting with just a laptop in a Motel 6 in Silicon Valley, FiscalNote focused on building a robust database of legislative and regulatory data, leveraging cutting-edge technologies like machine learning and natural language processing to collect, organize, and extract insights from vast troves of information. This commitment to data aggregation and analysis laid the foundation for the company's core product offerings, which have since evolved to provide customers with unparalleled visibility and actionable intelligence.
In its early years, FiscalNote experienced significant milestones, including raising $12 million in Series A funding in 2014 and acquiring CQ Roll Call, a leading provider of legislative tracking and political news, in 2016. These investments allowed the company to expand its product offerings and customer base, which by 2018 included thousands of clients from the Fortune 100 to government entities like the White House and Department of Defense.
However, the company also faced challenges during its period of rapid growth. In 2019, FiscalNote underwent a restructuring that resulted in layoffs and the sunsetting of several non-core products. This streamlining effort was necessary to focus the business on its most promising areas and achieve profitability. The following year, the COVID-19 pandemic created additional headwinds, as some customers cut back on spending. FiscalNote responded by implementing further cost-saving measures and doubling down on serving its most strategic customers.
Despite these obstacles, FiscalNote continued to innovate and expand its capabilities. The company made several strategic acquisitions, including Dragonfly, a UK-based geopolitical intelligence provider, in 2023. It also invested heavily in developing new AI-powered products and features to enhance its core offerings and deliver even greater value to customers.
In 2022, FiscalNote made a significant stride in its growth journey by completing a business combination with Duddell Street Acquisition Corp., a special purpose acquisition company (SPAC). This transaction not only provided the company with additional capital to fuel its expansion but also elevated its profile as a publicly traded entity, further solidifying its position as a market leader.
Financial Performance and Outlook
FiscalNote's financial performance has been marked by consistent revenue growth, though the company has also navigated its fair share of challenges in recent years. In the fiscal year 2023, the company reported annual revenue of $132.65 million, a 16.5% increase from the previous year. However, the company also reported a net loss of $115.46 million during the same period, primarily due to increased operating expenses and the impact of strategic acquisitions.
The company's quarterly performance has shown signs of improvement, with FiscalNote reporting its fifth consecutive quarter of positive adjusted EBITDA in the third quarter of 2024. However, the most recent quarter (Q3 2024) saw revenue decrease by 13.4% compared to Q3 2023, primarily due to the sale of the Board.org business. Q3 2024 revenue came in at $29.44 million, with a net loss of $14.94 million.
For the full year 2024, FiscalNote has revised its guidance, now expecting to report total revenue of approximately $120 million, slightly down from the previous forecast of $121 million due to the divestiture of Aicel and lower advisory revenue. The company has increased its adjusted EBITDA guidance to approximately $9 million, up from the previous forecast of $8 million. For Q4 2024, FiscalNote provided guidance of approximately $29 million in total revenue and $2.5 million in adjusted EBITDA.
FiscalNote operates in one operating segment that provides global policy and market intelligence solutions. The company derives its revenues primarily from subscription-based arrangements as well as advisory, advertising, and other revenue streams.
Subscription revenue is FiscalNote's largest revenue stream, accounting for approximately 93% of total revenues for the nine months ended September 30, 2024. Subscription revenues consist of revenue earned from cloud-based software and content licensing, including access to the company's policy intelligence and analytics platforms. The company's subscription revenue decreased by $3.97 million, or 4.5%, for the nine months ended September 30, 2024 compared to the same period in 2023, primarily due to the divestiture of the Board.org business.
Advisory, advertising, and other revenue represented approximately 7% of total revenues for the nine months ended September 30, 2024. This revenue segment decreased by $3.61 million, or 34.8%, for the nine months ended September 30, 2024 compared to the same period in 2023, primarily due to the company's decision to discontinue certain unprofitable advisory and other service offerings.
Liquidity
As of Q3 2024, FiscalNote reported a debt-to-equity ratio of 5.79 and cash and short-term investments of $33.40 million. The company has a $150 million senior secured credit facility, of which $93.36 million was drawn as of Q3 2024. FiscalNote's current ratio and quick ratio both stand at 0.81 as of Q3 2024, indicating potential short-term liquidity challenges.
The company expects to continue driving deleveraging and improving its capital structure through 2024 and into 2025. FiscalNote is also focusing on reducing product portfolio complexity and strengthening customer experience and retention rates.
Competitive Landscape and Risks
FiscalNote operates in a competitive landscape, with several players vying for a share of the market for policy intelligence and regulatory compliance solutions. The company faces competition from both established players and emerging startups, each with its own unique approach to data collection, analysis, and product delivery.
One of the key risks facing FiscalNote is its ability to maintain its technological edge and continue innovating its product offerings to meet the evolving needs of its customers. The company's success is heavily dependent on its ability to anticipate industry trends, invest in research and development, and rapidly deploy new features and functionality.
Additionally, FiscalNote's reliance on a diverse customer base, ranging from global enterprises to government agencies, exposes the company to potential volatility in demand and revenue streams. The company's ability to effectively manage client relationships, retain existing customers, and expand its footprint within its target markets will be crucial to its long-term success.
Geopolitical and regulatory risks also pose a significant challenge for FiscalNote, as the company's operations and customer base are heavily influenced by the shifting policy landscape both domestically and globally. The company's ability to navigate these complex environments and provide timely, accurate, and actionable intelligence will be a key differentiator in the market.
The market for policy and regulatory intelligence solutions is growing rapidly, driven by the increasing complexity of the regulatory environment and the need for businesses to stay informed and compliant. Industry analysts estimate the market is growing at a CAGR of 15-20%, presenting significant opportunities for FiscalNote to expand its market share.
Conclusion
FiscalNote's journey as a leading provider of AI-driven policy intelligence has been marked by a relentless pursuit of innovation, a deep understanding of its customers' needs, and a commitment to delivering transformative solutions. As the company continues to navigate the evolving regulatory and geopolitical landscape, its ability to adapt, innovate, and maintain its technological edge will be crucial in cementing its position as the go-to partner for organizations seeking to make informed, strategic decisions.
Despite facing challenges such as declining revenue and negative cash flow in recent quarters, FiscalNote has taken steps to simplify its business, improve profitability, and strengthen its balance sheet. The successful divestiture of non-core assets and focus on its core policy intelligence offerings position the company for potential future growth in a fast-growing industry.
FiscalNote's performance in the coming quarters will be closely watched by investors and industry observers alike, as the company strives to achieve sustainable profitability and capitalize on the growing demand for policy intelligence solutions in an increasingly complex global regulatory environment.