FiscalNote Holdings, Inc. (NOTE) Q4 2025 Earnings Call Transcript
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Overview
The earnings call reveals a mixed picture: strong gross margins and improved EBITDA margins, but declining revenue and ARR due to strategic divestitures. The Q&A section highlights some uncertainties, like the sustainability of margins and enterprise churn. However, optimistic guidance and new market opportunities, such as agentic AI, offer potential upside. The lack of clear guidance on gross margins and the impact of divestitures balance the positives, leading to a neutral sentiment.
Key Financial Performance
Total Revenue (Q4 2025) $22.2 million, within guidance range. Subscription revenue represented approximately 93% of total revenue for the full year, reinforcing the durability and predictability of the recurring revenue model.
Annual Recurring Revenue (ARR) (Q4 2025) $84.1 million, relatively stable compared to the third quarter, reflecting stabilization in the core business following product fund setting and divestiture activities earlier in the year.
Net Revenue Retention (Q4 2025) Approximately 96%, in line with expectations as clients migrate onto the PolicyNote platform.
GAAP Net Loss (Q4 2025) $22.9 million, includes a noncash goodwill impairment charge of $12.4 million recorded in the quarter.
Adjusted EBITDA (Q4 2025) $2.5 million, exceeding recent guidance of approximately $2 million and representing the tenth consecutive positive quarter for this metric.
Total Revenue (Full Year 2025) $95.4 million compared with $120.3 million in 2024, within previous full year guidance range. The decline was largely driven by strategic divestitures of several noncore businesses.
Annual Recurring Revenue (ARR) (Full Year 2025) $84.1 million versus $107.5 million at the end of 2024. The year-over-year decline was largely driven by strategic divestitures of several noncore businesses.
Adjusted EBITDA (Full Year 2025) $10.3 million, slightly above previous full year guidance, demonstrating continued progress in improving the company's operating leverage.
Adjusted EBITDA Margin (Full Year 2025) 10.8%, up from 8.1% in 2024, driven by operating leverage improvements.
Gross Margin (Full Year 2025) Approximately 78%, consistent with the prior year. Adjusted gross margin was approximately 87%, highlighting strong underlying economics of the subscription platform.
Cost of Revenue (Full Year 2025) $21.2 million compared with $25.6 million in 2024, representing a decrease of $4.4 million or approximately 17% year-over-year, reflecting the impact of divested businesses and platform consolidation efficiencies.
Sales and Marketing Expense (Full Year 2025) $26.6 million compared with $35.1 million in 2024, a reduction of $8.5 million or approximately 24% year-over-year, reflecting the impact of divested businesses and a more focused go-to-market strategy.
Editorial Expense (Full Year 2025) $14.9 million compared with $18.5 million in 2024, representing a decrease of $3.6 million or approximately 19% year-over-year, reflecting the impact of divested businesses.
Research and Development Expense (Full Year 2025) $9.6 million compared with $12.8 million in 2024, representing a decline of $3.2 million or 25% year-over-year, with investments focused on the PolicyNote platform and AI-driven policy intelligence capabilities.
General and Administrative Expenses (Full Year 2025) $52.1 million compared with $50.2 million in 2024, an increase of $1.9 million or approximately 4% year-over-year. After adjustments, costs decreased by approximately $6.5 million or 21%, reflecting cost discipline and organizational simplification.
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Operating Highlights
PolicyNote: PolicyNote has transitioned customers off the legacy platform, showing increased user engagement and retention. New features like AI legislative drafting and social listening have been added.
API and MCP Expansion: FiscalNote has modernized APIs and introduced MCP support, enabling integration with AI platforms like OpenAI and Google Gemini. This expands market reach and supports scalable growth.
Prediction Markets: Entered the political prediction market, leveraging proprietary data and expertise. The market grew from $9 billion in 2024 to $44 billion in 2025, with potential to reach $150 billion in 2026.
Cost Reduction: Reduced cash operating expenses by over 19% and headcount by 25% year-over-year. Leveraged AI to improve efficiency in R&D, marketing, and content operations.
AI Integration: Deployed AI across the organization, achieving 3x faster development cycles and 70% more R&D output. AI adoption in engineering reached 100%.
Operational Transformation: Streamlined operations, divested non-core assets, and focused on core policy intelligence platform. Achieved adjusted EBITDA margin improvement and positive free cash flow trajectory.
New Market Opportunities: Positioned to grow in AI-driven consumption and prediction markets, leveraging unique data and expertise for scalable growth.
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Risk or Challenges
Workforce Reduction: The company plans to reduce headcount by approximately 25% year-over-year, which could lead to potential operational disruptions and loss of institutional knowledge.
Customer Cancellations: A small number of large enterprise customers chose to cancel without migrating to the new PolicyNote platform, indicating potential dissatisfaction or challenges with the transition.
Macroeconomic Pressures: Broader macroeconomic pressures are influencing client budgeting decisions, which could impact revenue stability.
Platform Transition Challenges: The transition to the PolicyNote platform has faced headwinds, including some customers not migrating and ongoing platform refinement needs.
Revenue Decline: GAAP revenue and ARR declined year-over-year, partly due to divestitures and nonrenewals from legacy products.
Prediction Market Uncertainty: The prediction market initiative is in its early stages, with uncertain timing of revenue contribution and adoption.
Regulatory and Geopolitical Complexities: Geopolitical and regulatory complexities are cited as factors influencing customer decisions and market dynamics.
Dependence on AI Adoption: The company’s operational transformation heavily relies on AI adoption, which may face resistance or implementation challenges.
Economic Headwinds: Seasonal cancellations and economic headwinds are impacting revenue pacing and customer retention.
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Guidance & Outlook
Adjusted EBITDA: Guiding to approximately $1 million of adjusted EBITDA in the first quarter of 2026 and $14 million to $16 million for the full year. Margins are expected to exceed 20% in the remaining three quarters of 2026.
Free Cash Flow: Expecting to generate positive free cash flow for the 12 months ending March 31, 2027.
Revenue: Forecasting GAAP revenue in a range of $80 million to $83 million for full year 2026 and $20 million to $21 million for the first quarter of 2026.
Cost Reductions: Plan to reduce cash operating expenses by over 19% through workforce transformation and in-sourcing third-party spend. This includes a 25% reduction in headcount year-over-year.
PolicyNote Platform: Continuing to invest in improving the core user experience and adding new AI-powered enhancements. Early trends indicate potential for stronger customer retention and engagement.
API and MCP Business: Expanding API capabilities and native MCP support to position FiscalNote as an infrastructure layer provider for enterprise AI ecosystems. Expected to become a growing contributor as adoption expands.
Prediction Markets: Entering the political prediction markets, which are expected to grow significantly, with a focus on providing intelligence layers rather than operating exchanges. Monetization will scale over time.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:Should we view the strong gross margins as sustainable, or are they influenced by cost initiatives?
A:Jon Slabaugh stated that over time, they will find ways to improve margins further, driven by technology and incremental savings. However, he did not provide specific guidance on sustainability.
Q:Are there incremental savings or cross-sell opportunities now that all customers are migrated to PolicyNote?
A:Joshua Resnik clarified that while they migrated all customers from the legacy FiscalNote platform in 2025, additional migrations and data set expansions are ongoing. He mentioned cost savings from deprecating the FiscalNote platform backend in the first half of the year, which is included in their operating plan.
Q:Can you provide insights into the pipeline health for enterprise, government, and NGO sectors, and the impact of agentic AI capabilities?
A:Joshua Resnik highlighted that agentic AI presents a significant opportunity, enabling data consumption through custom platforms and AI agents. He noted growth in mid-market and public sector pipelines, with recovery from a challenging 2025.
Q:What is the go-to-market plan for prediction market opportunities like tip sheets and fantasy leagues?
A:Joshua Resnik mentioned that these initiatives are among the earlier ones to be launched, focusing on content generation, engagement, and potential transactional revenue. More updates are expected in the coming weeks.
Q:Is the initial 2026 revenue guidance based on the current run rate, and does it account for non-core business exits?
A:Jon Slabaugh explained that the guidance reflects the current run rate and seasonal cadence, with 93-95% of revenue expected from subscriptions. He noted a slight ARR drop in Q1, which is typical.
Q:Can you provide details on enterprise customer churn during the PolicyNote migration?
A:Joshua Resnik explained that some churn occurred due to migration timing and macroeconomic factors. He emphasized high engagement levels on PolicyNote and plans to expand data sets to improve retention over time.
Q:How confident are you in driving growth with a product-led approach and transitioning to a usage-based model?
A:Joshua Resnik expressed confidence, citing the unique value of their proprietary data and analysis. He highlighted opportunities in volume-based and hybrid pricing models, expecting revenue growth as customers realize the data's value.
Q:Review of Unclear Management Responses
A:Management avoided providing a direct answer regarding the sustainability of gross margins, as Jon Slabaugh did not commit to specific guidance on this matter.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI agent
API
FiscalNote today
MCP
adoption
advantage
analysis
application
asset
base
capability
category
consumption
decision
delivery mechanism
developer
domain expertise
ecosystem
enterprise
evolution
exchange
expense basis
extension
governance
inflection point
infrastructure
initiative
insight
layer
model
partnership
party
policy intelligence
potential
prediction market
role
scale
set
tool
value FiscalNote
workflow
world
NOTE Transcript
FiscalNote Holdings, Inc. (NOTE) Q4 2025 Earnings Call Transcript
Unknown3-19
The earnings call reveals a mixed picture: strong gross margins and improved EBITDA margins, but declining revenue and ARR due to strategic divestitures. The Q&A section highlights some uncertainties, like the sustainability of margins and enterprise churn. However, optimistic guidance and new market opportunities, such as agentic AI, offer potential upside. The lack of clear guidance on gross margins and the impact of divestitures balance the positives, leading to a neutral sentiment.
FiscalNote Holdings, Inc. (NOTE) Q3 2025 Earnings Call Transcript
Unknown11-7
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.
FiscalNote Holdings, Inc. (NOTE) Q2 2025 Earnings Call Transcript
Unknown8-9
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.
FiscalNote Holdings, Inc. (NOTE) Q1 2025 Earnings Call Transcript
Unknown5-12
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.
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