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01/10 20:16
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call summary presents mixed signals. Financial performance shows improved EBITDA margins and cost discipline, but revenue and ARR have declined due to divestitures and sector instability. Product development is promising with PolicyNote innovations, yet legacy platform transitions pose challenges. Market strategy is unclear due to federal sector instability. Expenses are managed well, but financial health is pressured by economic uncertainties. Shareholder return plans are not discussed. The Q&A reveals concerns about retention and federal instability, but also highlights potential from multiyear contracts. Overall, the sentiment is balanced, leading to a neutral prediction.
Adjusted EBITDA $2.8 million in Q2 2025, representing a margin of 12%, up from 4% in the same period last year. The improvement is attributed to cost discipline, prioritization of core growth initiatives, and improving operating leverage.
Revenue $23.3 million for Q2 2025, above the guidance midpoint. This is $6 million lower than the prior year, primarily due to the divestiture of Aicel, Oxford Analytica, and Dragonfly.
Subscription Revenue $21.4 million for Q2 2025, $5.7 million lower than the prior year, largely due to divestitures. Subscription revenue accounted for 92% of total revenues.
Annual Recurring Revenue (ARR) $85.9 million as of Q2 2025, down from $93.6 million in 2024 on a pro forma basis, a decline of $7.7 million. The decline is due to underperformance in new logo and sales funnel execution, legacy platform retention issues, and instability in the public sector.
Net Revenue Retention (NRR) 96% in Q2 2025, down from 98% in the prior year. The decline reflects underperformance at the end of 2024, which the company believes has been addressed.
Gross Margin 79% in Q2 2025, up 200 basis points from the prior year on a GAAP basis, primarily due to the impact of divested businesses and sunset products. Adjusted gross margin was 86%, compared to 85% in the prior year.
Operating Expenses Total operating expenses in Q2 2025 decreased by $6.5 million or 17% year-over-year. On a pro forma basis, excluding noncash and other nonrecurring charges, operating expenses decreased by approximately $4 million or 15%.
Free Cash Flow Improvement Improved by more than $68 million over the trailing 12 months compared to the same period two years prior. This improvement is attributed to rightsizing the business.
PolicyNote Engagement: PolicyNote now has more daily active users than the legacy FiscalNote platform. Engagement metrics such as search frequency and use of the AI assistant remain strong. New features include AI-powered legislative drafting, bill outlook, and enhanced AI alerts.
PolicyNote Usage Trends: Usage increases steadily over time, with customers using the platform 30% more at the end of their first quarter than at the midpoint. New customers are setting alerts sooner after account activation compared to the legacy platform.
New Logo Sales: Corporate new logo pipeline increased by 45% from Q1 to Q2. Inbound leads for policy products rose by over 20% year-over-year. Corporate win rates improved by 400 basis points quarter-over-quarter.
Multiyear Commitments: The rate of new private sector customers signing multiyear commitments for policy data more than doubled year-over-year.
Adjusted EBITDA: Achieved $2.8 million in Q2, exceeding guidance, with a margin of 12%, up from 4% in the same period last year.
Cost Management: Operating expenses decreased by $6.5 million (17%) year-over-year. Cost of revenues fell by 28%, R&D by 29%, and sales and marketing by 26%.
Debt Refinancing: Refinanced senior term loan with MGG Investment Group, extending maturity to 2029. Improved free cash flow by over $68 million compared to two years prior.
Product-Led Growth Strategy: Focused on transitioning to PolicyNote from legacy platforms. Migration is ahead of schedule, with plans to deprecate at least one large legacy platform this year.
Revenue and ARR Growth: Revenue for Q2 was $23.3 million, above guidance midpoint. ARR expected to grow in the second half of 2025, driven by PolicyNote adoption and customer engagement.
ARR growth: ARR growth has not yet resumed, with declines attributed to execution challenges, customer retention and expansion issues in legacy products, and instability in the U.S. federal sector. This poses a risk to revenue and long-term growth.
Customer retention: Retention issues in legacy products and challenges in gross and net retention rates are impacting revenue stability and growth. These issues are critical to address for future performance.
Debt refinancing: The company has refinanced its senior term loan, extending maturity to 2029. However, cash interest expense will increase by $2 million annually, which could strain financials despite operational streamlining.
Public sector instability: Instability in the U.S. federal sector has negatively impacted revenue and ARR, posing a challenge to the company's performance in this segment.
Legacy platform transition: The transition from legacy platforms to PolicyNote is ongoing, with retention and revenue challenges persisting during the migration period. This could delay the return to stable growth.
Economic uncertainties: The company faces broader economic uncertainties that could impact customer spending and demand for its products.
Revenue Expectations: FiscalNote reaffirms its full-year 2025 revenue forecast in the range of $94 million to $100 million. For Q3 2025, revenue is projected to be between $22 million and $23 million.
Adjusted EBITDA: The company expects adjusted EBITDA for the full year 2025 to be in the range of $10 million to $12 million. For Q3 2025, adjusted EBITDA is forecasted to be approximately $2 million.
ARR Growth: Annual recurring revenue (ARR) growth is anticipated to resume in the second half of 2025 and accelerate further in 2026 and beyond.
PolicyNote Platform: The company expects PolicyNote to drive improvements in customer retention and expansion opportunities, with ARR and revenue growth returning in the second half of 2025. Migration to PolicyNote is ahead of schedule, and at least one large legacy platform is expected to be deprecated by the end of 2025.
Customer Engagement: PolicyNote is showing strong engagement metrics, with increasing usage trends and multiyear commitments from customers. This is expected to improve gross retention and net retention over time.
Capital Structure: FiscalNote has refinanced its senior term loan, extending the maturity to 2029, and restructured subordinated debt to provide operational flexibility and support long-term growth.
The selected topic was not discussed during the call.
The earnings call presents mixed signals: while revenue and EBITDA met expectations, year-over-year declines due to divestitures and public sector disruptions weigh on sentiment. Positive developments include PolicyNote's traction, improved customer metrics, and refinancing efforts. However, unclear responses on ARR growth and federal shutdown impacts add uncertainty. The overall sentiment is balanced, leading to a neutral prediction.
The earnings call summary presents mixed signals. Financial performance shows improved EBITDA margins and cost discipline, but revenue and ARR have declined due to divestitures and sector instability. Product development is promising with PolicyNote innovations, yet legacy platform transitions pose challenges. Market strategy is unclear due to federal sector instability. Expenses are managed well, but financial health is pressured by economic uncertainties. Shareholder return plans are not discussed. The Q&A reveals concerns about retention and federal instability, but also highlights potential from multiyear contracts. Overall, the sentiment is balanced, leading to a neutral prediction.
The earnings call presents mixed signals. Financial performance is mixed with improved EBITDA and reduced debt, but revenue and ARR declines due to divestitures. Positive aspects include reduced interest expenses and cash flow improvements. However, uncertainties in customer retention with the new platform and unclear strategic responses from management in Q&A are concerning. Despite optimistic guidance, the lack of strong catalysts like partnerships or shareholder returns, coupled with market transition risks, suggests a neutral stock price movement.
The earnings call presents a mixed outlook. While there are positive signs like debt reduction, improved EBITDA, and multiyear contracts, concerns persist with declining revenue, ARR, and gross margin. The Q&A reveals execution issues and unclear management responses, which could cause uncertainty. The company's focus on restructuring and product innovation offers hope, but the lack of immediate ARR growth and specific guidance tempers optimism. Overall, the neutral sentiment reflects balancing these factors.
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