FiscalNote Announces Fourth Quarter and Full Year 2023 Financial Results; Exceeds Adjusted EBITDA Expectations
Divests Board.Org Community Engagement Platform for Total Consideration of up to
Enters the Year with Simplified Product Strategy for Continued Growth and Adjusted EBITDA Profitability
Special Committee and Strategic Review Ongoing
The Company’s financial results demonstrate FiscalNote’s strong fundamentals including revenue growth of 17% year-over-year in 2023, high gross margins, a diversified blue chip customer base and positive adjusted EBITDA of approximately
Fourth Quarter 2023 Financial Highlights
-
Revenue increased 9% to
$34.3 million , within the Company's guidance range provided inNovember 2023 . This compares to revenue of$31.4 million and non-GAAP adjusted revenue of$31.5 (1) million in the fourth quarter of 2022. -
Gross profit was
$22.9 million representing 67% gross margin, and non-GAAP adjusted gross profit was$28.3 million (1) representing 83% non-GAAP adjusted gross margin.(1) -
GAAP net loss of
$51.0 million . -
Adjusted EBITDA of
$3.0 million (1),above the Company’s guidance range announced inNovember 2023 of approximately$2.5 million . This is an increase of 157% or$8.2 million year-over-year compared to an adjusted EBITDA loss of$5.2 million (1) in the fourth quarter of 2022. -
Cash and cash equivalents (inclusive of short-term investments) of
$24.4 million as ofDecember 31, 2023 , with approximately$15 million in cash added to the balance sheet onMarch 11, 2024 in connection with the divestiture of Board.org.
The Company also announced today the divestiture of Board.org, a non-core product offering for up to
Board.org operated as an independent product offering of
With this divestiture, the Company added approximately
Fourth Quarter 2023 Operational Metrics
-
Run-Rate Revenue
(2) increased 10% to
$140 million as ofDecember 31, 2023 in-line with previous guidance and inclusive of Dragonfly which was acquired in 2023. Organic Run-Rate Revenue(2)(3) increased to$130 million as of year end, a 4% increase on a pro forma basis. -
Annual Recurring Revenue
(2)
("ARR") rose 11% to
$126 million atDecember 31, 2023 inclusive of Dragonfly which was acquired in 2023. Organic ARR(2)(3) was$119 million as ofDecember 31, 2023 , representing 6% growth on a pro forma basis. - Quarterly Net Revenue Retention (2) was 99% in the fourth quarter.
Full Year 2023 Financial Highlights
-
Revenue increased 17% to
$132.6 million . This compares to GAAP revenue of$113.8 million and non-GAAP adjusted revenue of$115.7 (1) million in 2022. Subscription revenue, which comprises approximately 90% of total revenue, grew 18% year-over-year of which 9% was on an organic basis. -
Gross profit was
$92.4 million representing 70% gross margin, and non-GAAP adjusted gross profit was$108.3 million (1) representing 82% non-GAAP adjusted gross margin.(1) -
GAAP net loss of
$115.5 million . GAAP net loss for the year contains approximately$72.8 million of net non-cash items as detailed in the reconciliation of Adjusted EBITDA to GAAP net loss provided below. -
Adjusted EBITDA(1) loss of
$7.5 million . This marks an increase of 69% or$17 million year-over-year comparedto an Adjusted EBITDA loss of$24.5 million (1)in 2022. In the second half of 2023, the Company achieved its Adjusted EBITDA profitability goal one quarter ahead of plan, exceeding both initial Company-provided and market expectations.
2023 Operational Highlights
During 2023,
-
Signed large, six-figure new logos or expanded relationships with leading
U.S. and global brand leaders, including a world-leading search technology company, aU.S. auto manufacturer, a global energy company, a Japanese financial institution, a multinational pharmaceutical and chemical company and a brand-leading food and beverage company. -
Secured new public sector contract wins, expansions, and renewals of major departments and agencies across executive, legislative, and judicial branches of the
U.S. Government - as well as international public sector institutions - solidifying the Company’s role as an essential partner to the world’s most important and influential decision makers. - Expanded relationships and secured new agreements with some of the largest and most prominent trade associations, non-profits, and advocacy organizations.
-
Executed its cost reduction plan to align its operations and drive approximately
$25 million annualized expense improvement. - Grew its European business year-over-year, bringing its European revenue to approximately 15% of total.
-
Selected by
OpenAI to collaborate as their only inaugural launch partner in the legal, political, and regulatory space for its ChatGPT Plug-in and secured similar partnerships with Bard (now Gemini) byGoogle and Microsoft Bing. - Expanded its global policy and analysis coverage to include China’s national-level and provincial-level legislative and regulatory policy developments. The Company’s Global Policy Dashboard now covers more than 80 countries.
-
Expanded its EUIT capabilities to provide stakeholder coverage and data for all 705 members of the
European Parliament , as well as generate automated AI-powered meeting transcripts for all EU Parliament meetings. - Established a new partnership with Peraton - the world’s leading mission capability integrator for national security solutions.
-
Completed the acquisition of Dragonfly, a provider of geopolitical and security intelligence delivered through a SaaS-based, proprietary Security Intelligence and Analysis Service (SIAS) subscription platform and API — used by nearly half of the top 30 companies in the
FTSE -500, and by the world’s top banks. -
Launched a series of new innovative AI products, including:
- FiscalNote Risk Connector, a new, internally-developed risk intelligence solution that harnesses the power of the Company’s data and AI capabilities to reveal operational, relational, and reputational risk for enterprises and government organizations.
- FiscalNote GPT, the first proprietary platform incorporating generative AI and large language model (LLM) capabilities customized for legislative, regulatory, and policy workflows.
-
FiscalNote AI CoPilots, a series of GPT-enabled verticalized solutions that
FiscalNote will develop for policy and risk management professionals to facilitate the day-to-day work of creating legislation, advocacy outreach, constituent communications, regulatory responses, and global risk analysis using the power of large language models, FiscalNote’s trusted industry leading policy and geopolitical data, and customers’ data, all in a seamless workflow.
-
Obtained its 13th
U.S. patent, and received three additional AI-related patents inKorea , to expand its total global patent portfolio to 17. -
Celebrated the 10 year anniversary of its founding in 2013, and its one year anniversary as a publicly traded company, by ringing the Opening Bell at the
New York Stock Exchange . -
Secured multiple awards recognizing the Company’s SaaS leadership, innovation and customer excellence:
- Reed Award for Best Advocacy Technology Platform (FiscalNote’s VoterVoice)
-
Stevie Award for International Business (
FiscalNote ) -
Stevie Award for Sales and Customer Service (
FiscalNote ) Tim Hwang , Chairman, CEO, and Co-founder ofFiscalNote , was named an Entrepreneur of the Year 2023 Mid-Atlantic Award winner by Ernst & Young US.
“Over the past 12-18 months we have been focused on driving Adjusted EBITDA profitability and rationalizing our cost structure. Now, as we pivot our focus to accelerating growth, we are transforming and simplifying our organization by aligning our sales teams, streamlining our product portfolio and optimizing our capital structure. Most importantly, we are driving new levels of innovation, combining AI and human intelligence to provide the data, intelligence, analysis, and workflows that our customers need to navigate and take action within the large and complex global political and regulatory environment,” said
Outlook
Board.org contributed approximately
-
GAAP revenue of
$123 to$127 million -
Total Run-Rate Revenue(2) of
$126 to$134 million -
Positive Adjusted EBITDA(1)(4) of
$7 to$9 million
-
GAAP revenue of approximately
$31 million -
Adjusted EBITDA(1)(4) of approximately
$1 million , reflecting seasonal expenses in Q1 that do not reoccur in subsequent quarters during the year.
The Company expects to return to double digit growth rates in 2025 as the Company re-allocates sales and product resources to high performing offerings and as it realizes the benefits of its recent product and organizational initiatives including changes to sales coverage models for enhanced cross-sell, upsell and retention; further scaling of new products; and accelerated product development.
Additional information regarding the non-GAAP financial measures discussed in this release, including an explanation of these measures and how each is calculated, is included below under the heading “Non-GAAP Financial Measures.” A reconciliation of GAAP to non-GAAP financial measures has also been provided in the financial tables included below. Information regarding our key performance indicators is included below under “Key Performance Indicators.”
Strategic Review
Following the announcement of the Board’s formation of a Special Committee in November and receipt of inbound interest, the Board and the Committee along with their advisors continue to review the Company's ongoing plans and evaluate all strategic value-maximizing options available to the Company. There can be no assurance that the strategic review will result in any transaction or other outcome. The Company has not set a timetable for completion of the review and does not intend to disclose developments or provide updates on the progress or status of the review unless and until it deems further disclosure is appropriate or required.
As previously announced,
Quarterly Conference Call
(1) Non-GAAP measure. Please see "Non-GAAP Financial Measures" in this earnings release for definitions and important disclosures regarding these financial measures, including reconciliations to the most directly comparable GAAP measure.
(2) “Run-Rate Revenue,” “Annual Recurring Revenue” or “ARR”, and “Net Revenue Retention” are key performance indicators (KPIs). Please see "Key Performance Indicators" in this earnings release for the definitions and important disclosures regarding these measures.
(3) Organic Run-Rate Revenue and ARR for 2022 includes businesses acquired as of
(4) Because of the variability of items impacting net income and unpredictability of future events, management is unable to reconcile without unreasonable effort the Company's forecasted adjusted EBITDA to a comparable GAAP measure.
About
Forward-Looking Statements
Certain statements in this press release may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally relate to future events or FiscalNote’s future financial or operating performance. For example, statements regarding FiscalNote’s financial outlook for future periods, expectations regarding profitability, capital resources and anticipated growth in the industry in which
Factors that may impact such forward-looking statements include FiscalNote’s ability to effectively manage its growth; changes in FiscalNote’s strategy, future operations, financial position, estimated revenue and losses, forecasts, projected costs, prospects and plans; the terms of any proposal
These and other important factors discussed in FiscalNote’s
Consolidated Statements of Operations (in thousands, except shares and per share data) |
||||||||||||||||
|
|
(Unaudited) |
|
|
|
|
|
|
|
|||||||
|
|
Three Months Ended |
|
|
Year Ended |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Subscription |
|
$ |
31,096 |
|
|
$ |
27,336 |
|
|
$ |
119,082 |
|
|
$ |
100,522 |
|
Advisory, advertising, and other |
|
|
3,169 |
|
|
|
4,113 |
|
|
|
13,563 |
|
|
|
13,243 |
|
Total revenues |
|
|
34,265 |
|
|
|
31,449 |
|
|
|
132,645 |
|
|
|
113,765 |
|
Operating expenses: (1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of revenues |
|
|
11,388 |
|
|
|
8,356 |
|
|
|
40,251 |
|
|
|
31,937 |
|
Research and development |
|
|
4,016 |
|
|
|
5,298 |
|
|
|
18,186 |
|
|
|
20,736 |
|
Sales and marketing |
|
|
10,500 |
|
|
|
10,956 |
|
|
|
45,722 |
|
|
|
42,678 |
|
Editorial |
|
|
4,336 |
|
|
|
4,716 |
|
|
|
17,869 |
|
|
|
15,956 |
|
General and administrative |
|
|
16,737 |
|
|
|
18,266 |
|
|
|
65,550 |
|
|
|
77,801 |
|
Amortization of intangible assets |
|
|
2,895 |
|
|
|
2,633 |
|
|
|
11,509 |
|
|
|
10,451 |
|
Impairment of goodwill and long-lived assets |
|
|
26,227 |
|
|
|
- |
|
|
|
32,064 |
|
|
|
- |
|
Transaction (gains) costs, net |
|
|
(1,905 |
) |
|
|
1,138 |
|
|
|
(767 |
) |
|
|
2,395 |
|
Total operating expenses |
|
|
74,194 |
|
|
|
51,363 |
|
|
|
230,384 |
|
|
|
201,954 |
|
Operating loss |
|
|
(39,929 |
) |
|
|
(19,914 |
) |
|
|
(97,739 |
) |
|
|
(88,189 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense, net |
|
|
8,087 |
|
|
|
6,069 |
|
|
|
29,940 |
|
|
|
95,741 |
|
Change in fair value of financial instruments |
|
|
2,867 |
|
|
|
5,777 |
|
|
|
(15,983 |
) |
|
|
(12,747 |
) |
Gain on PPP loan upon extinguishment |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(7,667 |
) |
Loss on debt extinguishment, net |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
45,250 |
|
Loss on settlement |
|
|
- |
|
|
|
11,700 |
|
|
|
3,474 |
|
|
|
11,700 |
|
Other (benefit) expense, net |
|
|
(177 |
) |
|
|
(498 |
) |
|
|
68 |
|
|
|
1,045 |
|
Net loss before income taxes |
|
|
(50,706 |
) |
|
|
(42,962 |
) |
|
|
(115,238 |
) |
|
|
(221,511 |
) |
Provision (benefit) from income taxes |
|
|
42 |
|
|
|
(418 |
) |
|
|
223 |
|
|
|
(3,254 |
) |
Net loss |
|
|
(50,748 |
) |
|
|
(42,544 |
) |
|
|
(115,461 |
) |
|
|
(218,257 |
) |
Other comprehensive income (loss) |
|
|
1,200 |
|
|
|
1,623 |
|
|
|
163 |
|
|
|
(154 |
) |
Total comprehensive loss |
|
$ |
(49,548 |
) |
|
$ |
(40,921 |
) |
|
$ |
(115,298 |
) |
|
$ |
(218,411 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
|
$ |
(50,748 |
) |
|
$ |
(42,544 |
) |
|
$ |
(115,461 |
) |
|
$ |
(218,257 |
) |
Deemed dividend |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(26,570 |
) |
Net loss used to compute basic and diluted loss per share |
|
$ |
(50,748 |
) |
|
$ |
(42,544 |
) |
|
$ |
(115,461 |
) |
|
$ |
(244,827 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss per share attributable to common shareholders: |
|
|||||||||||||||
Basic and Diluted |
|
$ |
(0.39 |
) |
|
$ |
(0.32 |
) |
|
$ |
(0.88 |
) |
|
$ |
(3.68 |
) |
Weighted average shares used in computing loss per share attributable to common shareholders: |
|
|||||||||||||||
Basic and Diluted |
|
|
129,636,869 |
|
|
|
131,086,309 |
|
|
|
131,400,109 |
|
|
|
66,513,704 |
|
(1) Amounts include stock-based compensation expenses, as follows: |
|
|||||||||||||||
|
|
(Unaudited) |
|
|
|
|
|
|
|
|||||||
|
|
Three Months Ended |
|
|
Year Ended |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Cost of revenues |
|
$ |
98 |
|
|
$ |
45 |
|
|
$ |
283 |
|
|
$ |
81 |
|
Research and development |
|
|
304 |
|
|
|
398 |
|
|
|
1,384 |
|
|
|
1,007 |
|
Sales and marketing |
|
|
339 |
|
|
|
(66 |
) |
|
|
2,057 |
|
|
|
762 |
|
Editorial |
|
|
108 |
|
|
|
43 |
|
|
|
400 |
|
|
|
603 |
|
General and administrative |
|
|
7,996 |
|
|
|
6,759 |
|
|
|
22,933 |
|
|
|
35,594 |
|
Consolidated Balance Sheets (in thousands, except shares, and par value) |
||||||||
|
|
|
|
|
|
|
||
Assets |
|
|
|
|
|
|
||
Current assets: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
16,451 |
|
|
$ |
60,388 |
|
Restricted cash |
|
|
849 |
|
|
|
835 |
|
Short-term investments |
|
|
7,134 |
|
|
|
- |
|
Accounts receivable, net |
|
|
16,931 |
|
|
|
14,909 |
|
Costs capitalized to obtain revenue contracts, net |
|
|
3,326 |
|
|
|
2,794 |
|
Prepaid expenses |
|
|
2,593 |
|
|
|
4,315 |
|
Other current assets |
|
|
2,521 |
|
|
|
2,764 |
|
Total current assets |
|
|
49,805 |
|
|
|
86,005 |
|
|
|
|
|
|
|
|
||
Property and equipment, net |
|
|
6,141 |
|
|
|
7,325 |
|
Capitalized software costs, net |
|
|
13,372 |
|
|
|
13,946 |
|
Noncurrent costs capitalized to obtain revenue contracts, net |
|
|
4,257 |
|
|
|
3,976 |
|
Operating lease assets |
|
|
17,782 |
|
|
|
21,005 |
|
|
|
|
187,703 |
|
|
|
194,362 |
|
Customer relationships, net |
|
|
53,917 |
|
|
|
56,348 |
|
Database, net |
|
|
18,838 |
|
|
|
21,020 |
|
Other intangible assets, net |
|
|
18,113 |
|
|
|
28,728 |
|
Other non-current assets |
|
|
633 |
|
|
|
442 |
|
Total assets |
|
$ |
370,561 |
|
|
$ |
433,157 |
|
|
|
|
|
|
|
|
||
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
||
Current liabilities: |
|
|
|
|
|
|
||
Current maturities of long-term debt |
|
$ |
105 |
|
|
$ |
68 |
|
Accounts payable and accrued expenses |
|
|
12,909 |
|
|
|
13,739 |
|
Deferred revenue, current portion |
|
|
43,530 |
|
|
|
35,569 |
|
Customer deposits |
|
|
3,032 |
|
|
|
3,252 |
|
Contingent liabilities from acquisitions, current portion |
|
|
130 |
|
|
|
696 |
|
Operating lease liabilities, current portion |
|
|
3,066 |
|
|
|
6,709 |
|
Other current liabilities |
|
|
2,878 |
|
|
|
2,079 |
|
Total current liabilities |
|
|
65,650 |
|
|
|
62,112 |
|
|
|
|
|
|
|
|
||
Long-term debt, net of current maturities |
|
|
222,310 |
|
|
|
161,980 |
|
Deferred tax liabilities |
|
|
2,178 |
|
|
|
714 |
|
Deferred revenue, net of current portion |
|
|
875 |
|
|
|
918 |
|
Contingent liabilities from acquisitions, net of current portion |
|
|
- |
|
|
|
883 |
|
Operating lease liabilities, net of current portion |
|
|
26,162 |
|
|
|
29,110 |
|
Public and private warrant liabilities |
|
|
4,761 |
|
|
|
18,892 |
|
Other non-current liabilities |
|
|
5,166 |
|
|
|
13,858 |
|
Total liabilities |
|
|
327,102 |
|
|
|
288,467 |
|
Commitment and contingencies (Note 18) |
|
|
|
|
|
|
||
Stockholders' equity: |
|
|
|
|
|
|
||
Class A Common stock ( |
|
|
11 |
|
|
|
12 |
|
Class |
|
|
1 |
|
|
|
1 |
|
Additional paid-in capital |
|
|
860,485 |
|
|
|
846,205 |
|
Accumulated other comprehensive loss |
|
|
(622 |
) |
|
|
(785 |
) |
Accumulated deficit |
|
|
(816,416 |
) |
|
|
(700,743 |
) |
Total stockholders' equity |
|
|
43,459 |
|
|
|
144,690 |
|
Total liabilities and stockholders' equity |
|
$ |
370,561 |
|
|
$ |
433,157 |
|
Consolidated Statements of Cash Flows (in thousands) |
||||||||
|
|
Years Ended |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Operating Activities: |
|
|
|
|
|
|
||
Net loss |
|
$ |
(115,461 |
) |
|
$ |
(218,257 |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
||
Depreciation |
|
|
1,348 |
|
|
|
1,238 |
|
Amortization of intangible assets and capitalized software development costs |
|
|
27,369 |
|
|
|
19,545 |
|
Amortization of deferred costs to obtain revenue contracts |
|
|
3,617 |
|
|
|
2,786 |
|
Impairment of goodwill and other long-lived assets |
|
|
32,064 |
|
|
|
- |
|
Non-cash operating lease expense |
|
|
3,264 |
|
|
|
6,614 |
|
Stock-based compensation |
|
|
27,057 |
|
|
|
38,047 |
|
Non-cash earnout benefit |
|
|
(530 |
) |
|
|
(238 |
) |
Loss on settlement |
|
|
3,474 |
|
|
|
11,700 |
|
Bad debt expense |
|
|
423 |
|
|
|
142 |
|
Change in fair value of acquisition contingent consideration |
|
|
(2,043 |
) |
|
|
(2,121 |
) |
Change in fair value of financial instruments |
|
|
(15,983 |
) |
|
|
(12,747 |
) |
Deferred income tax provision (benefit) |
|
|
72 |
|
|
|
(3,076 |
) |
Paid-in-kind interest, net |
|
|
6,060 |
|
|
|
10,958 |
|
Other non-cash items |
|
|
32 |
|
|
|
260 |
|
Non-cash interest expense |
|
|
3,919 |
|
|
|
52,044 |
|
Loss on debt extinguishment, net |
|
|
- |
|
|
|
45,250 |
|
Gain on PPP Loan forgiveness |
|
|
- |
|
|
|
(7,667 |
) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable, net |
|
|
(287 |
) |
|
|
(3,941 |
) |
Prepaid expenses and other current assets |
|
|
3,421 |
|
|
|
422 |
|
Costs capitalized to obtain revenue contracts, net |
|
|
(4,443 |
) |
|
|
(4,129 |
) |
Other non-current assets |
|
|
(180 |
) |
|
|
(395 |
) |
Accounts payable and accrued expenses |
|
|
(6,426 |
) |
|
|
(2,113 |
) |
Deferred revenue |
|
|
4,123 |
|
|
|
4,780 |
|
Customer deposits |
|
|
(198 |
) |
|
|
93 |
|
Other current liabilities |
|
|
269 |
|
|
|
(1,938 |
) |
Contingent liabilities from acquisitions, net of current portion |
|
|
(39 |
) |
|
|
(1,567 |
) |
Lease liabilities |
|
|
(6,626 |
) |
|
|
(8,589 |
) |
Other non-current liabilities |
|
|
210 |
|
|
|
274 |
|
Net cash used in operating activities |
|
|
(35,494 |
) |
|
|
(72,625 |
) |
|
|
|
|
|
|
|
||
Investing Activities: |
|
|
|
|
|
|
||
Capital expenditures |
|
|
(7,938 |
) |
|
|
(11,367 |
) |
Cash paid for business acquisitions, net of cash acquired |
|
|
(5,010 |
) |
|
|
1,125 |
|
Purchases of short-term investments |
|
|
(7,369 |
) |
|
|
- |
|
Net cash used in investing activities |
|
|
(20,317 |
) |
|
|
(10,242 |
) |
|
|
|
|
|
|
|
||
Financing Activities: |
|
|
|
|
|
|
||
Proceeds from Business Combination |
|
|
- |
|
|
|
175,000 |
|
Issuance costs of Common Stock |
|
|
- |
|
|
|
(45,242 |
) |
Proceeds from long-term debt, net of issuance costs |
|
|
11,500 |
|
|
|
166,014 |
|
Principal payments of long-term debt |
|
|
(107 |
) |
|
|
(189,105 |
) |
Proceeds from exercise of public warrants |
|
|
- |
|
|
|
4,498 |
|
Proceeds from exercise of stock options and ESPP purchases |
|
|
684 |
|
|
|
453 |
|
Repurchase of common stock |
|
|
- |
|
|
|
(88 |
) |
Net cash provided by financing activities |
|
|
12,077 |
|
|
|
111,530 |
|
|
|
|
|
|
|
|
||
Effects of exchange rates on cash |
|
|
(189 |
) |
|
|
(449 |
) |
|
|
|
|
|
|
|
||
Net change in cash, cash equivalents, and restricted cash |
|
|
(43,923 |
) |
|
|
28,214 |
|
Cash, cash equivalents, and restricted cash, beginning of period |
|
|
61,223 |
|
|
|
33,009 |
|
Cash, cash equivalents, and restricted cash, end of period |
|
$ |
17,300 |
|
|
$ |
61,223 |
|
|
|
|
|
|
|
|
||
Supplemental Noncash Investing and Financing Activities: |
|
|
|
|
|
|
||
Issuance of Class A common stock upon redemption of preferred stock |
|
$ |
- |
|
|
$ |
475,781 |
|
Issuance of Class A common stock and Class B common stock in connection with Business Combination |
|
$ |
- |
|
|
$ |
346,797 |
|
Acquisition of warrant liabilities |
|
$ |
- |
|
|
$ |
34,947 |
|
Accretion of preferred stock to redemption value |
|
$ |
- |
|
|
$ |
26,570 |
|
Issuance of common stock in connection with business acquisitions |
|
$ |
9,539 |
|
|
$ |
8,590 |
|
Warrants issued in conjunction with long-term debt issuance |
|
$ |
178 |
|
|
$ |
436 |
|
Issuance of Class A common stock upon exercise of public warrants |
|
$ |
- |
|
|
$ |
265 |
|
Fees payable to debt holders settled through increase of debt principal |
|
$ |
- |
|
|
$ |
100 |
|
Property and equipment purchases in accounts payable |
|
$ |
161 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
||
Supplemental Cash Flow Activities: |
|
|
|
|
|
|
||
Cash paid for interest |
|
$ |
20,679 |
|
|
$ |
35,157 |
|
Cash paid for taxes |
|
$ |
55 |
|
|
$ |
55 |
|
Non-GAAP Financial Measures
In addition to financial measures prepared in accordance with
Adjusted Revenue
Adjusted revenue represents revenue adjusted to include amounts that would have been recognized if deferred revenue was not adjusted to fair value in connection with acquisition accounting. Adjusted revenue is presented because we use this measure to evaluate performance of our business against prior periods and believe it is useful for investors as an indicator of the underlying performance of our business. Adjusted revenue is not a recognized term under
Adjusted Gross Profit and Adjusted Gross Profit Margin
We define Adjusted Gross Profit as Adjusted Revenue minus cost of revenues, before amortization of intangible assets that are included in costs of revenues. We define Adjusted Gross Profit Margin as Adjusted Gross Profit divided by Adjusted Revenues.
We use Adjusted Gross Profit and Adjusted Gross Profit Margin to understand and evaluate our core operating performance and trends. We believe these metrics are useful measures to us and to our investors to assist in evaluating our core operating performance because they provide consistency and direct comparability with our past financial performance and between fiscal periods, as the metrics eliminate the non-cash effects of amortization of intangible assets and deferred revenue, which are non-cash impacts that may fluctuate for reasons unrelated to overall operating performance.
Adjusted Gross Profit and Adjusted Gross Profit Margin have limitations as analytical tools, and you should not consider them in isolation, or as a substitute for analysis of our results as reported under GAAP. They should not be considered as replacements for gross profit and gross profit margin, as determined by GAAP, or as measures of our profitability. We compensate for these limitations by relying primarily on our GAAP results and using non-GAAP measures only for supplemental purposes. Adjusted Gross Profit and Adjusted Gross Profit Margin as presented herein are not necessarily comparable to similarly titled measures presented by other companies.
EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin
EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP financial measures. EBITDA represents earnings before interest expense, income taxes, depreciation and amortization. Adjusted EBITDA reflects further adjustments to EBITDA to exclude certain non-cash items and other items that management believes are not indicative of ongoing operations. We define Adjusted EBITDA Margin as Adjusted EBITDA divided by Adjusted Revenue.
We disclose EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin herein because these non-GAAP measures are key measures used by management to evaluate our business, measure our operating performance and make strategic decisions. We believe that EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are useful for investors and others in understanding and evaluating our operating results in the same manner as management. EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are not financial measures calculated in accordance with GAAP and should not be considered as substitutes for net loss, net loss before income taxes, or any other operating performance measure calculated in accordance with GAAP. Using these non-GAAP financial measures to analyze our business would have material limitations because the calculations are based on the subjective determination of management regarding the nature and classification of events and circumstances that investors may find significant. In addition, although other companies in our industry may report measures titled EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin or similar measures, such non-GAAP financial measures may be calculated differently from how we calculate non-GAAP financial measures, which reduces their comparability. Because of these limitations, you should consider EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin alongside other financial performance measures, including net income and our other financial results presented in accordance with GAAP.
Adjusted Revenues
The following table presents our calculation of Adjusted Revenues for the periods presented, and a reconciliation of this measure to our GAAP revenues for the same periods:
|
|
(Unaudited) |
|
|
|
|
|
|
|
|||||||
|
|
Three Months Ended |
|
|
Twelve Months Ended |
|
||||||||||
(In thousands) |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Subscription revenue |
|
$ |
31,096 |
|
|
$ |
27,336 |
|
|
$ |
119,082 |
|
|
$ |
100,522 |
|
Deferred revenue adjustment |
|
|
- |
|
|
|
43 |
|
|
|
- |
|
|
|
1,896 |
|
Adjusted subscription revenue |
|
|
31,096 |
|
|
|
27,379 |
|
|
|
119,082 |
|
|
|
102,418 |
|
Advisory, advertising, and other revenue |
|
|
3,169 |
|
|
|
4,113 |
|
|
|
13,563 |
|
|
|
13,243 |
|
Adjusted Revenues |
|
$ |
34,265 |
|
|
$ |
31,492 |
|
|
$ |
132,645 |
|
|
$ |
115,661 |
|
Adjusted Gross Profit and Adjusted Gross Profit Margin
The following table presents our calculation of Adjusted Gross Profit and Adjusted Gross Profit Margin for the periods presented:
|
|
(Unaudited) |
|
|
|
|
|
|
|
|||||||
|
|
Three Months Ended |
|
|
Twelve Months Ended |
|
||||||||||
(In thousands) |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Adjusted Revenues |
|
$ |
34,265 |
|
|
$ |
31,492 |
|
|
$ |
132,645 |
|
|
$ |
115,661 |
|
Costs of revenue |
|
|
(11,388 |
) |
|
|
(8,356 |
) |
|
|
(40,251 |
) |
|
|
(31,937 |
) |
Amortization of intangible assets |
|
|
5,407 |
|
|
|
2,430 |
|
|
|
15,861 |
|
|
|
9,094 |
|
Adjusted Gross Profit |
|
$ |
28,284 |
|
|
$ |
25,566 |
|
|
$ |
108,255 |
|
|
$ |
92,818 |
|
Adjusted Gross Profit Margin |
|
|
83 |
% |
|
|
81 |
% |
|
|
82 |
% |
|
|
80 |
% |
EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin
The following table presents our calculation of EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin for the periods presented:
|
|
(Unaudited) |
|
|
|
|
|
|
|
|||||||
|
|
Three Months Ended |
|
|
Twelve Months Ended |
|
||||||||||
(In thousands) |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Net loss |
|
$ |
(50,748 |
) |
|
$ |
(42,544 |
) |
|
$ |
(115,461 |
) |
|
$ |
(218,257 |
) |
Provision (benefit) from income taxes |
|
|
42 |
|
|
|
(418 |
) |
|
|
223 |
|
|
|
(3,254 |
) |
Depreciation and amortization |
|
|
8,644 |
|
|
|
5,409 |
|
|
|
28,718 |
|
|
|
20,783 |
|
Interest expense, net |
|
|
8,087 |
|
|
|
6,069 |
|
|
|
29,940 |
|
|
|
95,741 |
|
EBITDA |
|
|
(33,975 |
) |
|
|
(31,484 |
) |
|
|
(56,580 |
) |
|
|
(104,987 |
) |
Deferred revenue adjustment (a) |
|
|
- |
|
|
|
43 |
|
|
|
- |
|
|
|
1,896 |
|
Stock-based compensation |
|
|
8,845 |
|
|
|
7,179 |
|
|
|
27,057 |
|
|
|
38,047 |
|
Change in fair value of warrant and derivative liabilities (b) |
|
|
2,867 |
|
|
|
5,778 |
|
|
|
(15,983 |
) |
|
|
(12,747 |
) |
Loss on debt extinguishment, net |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
45,250 |
|
Other non-cash (gains) charges (c) |
|
|
24,295 |
|
|
|
217 |
|
|
|
29,522 |
|
|
|
(9,069 |
) |
Acquisition related costs (d) |
|
|
- |
|
|
|
178 |
|
|
|
1,391 |
|
|
|
1,181 |
|
Employee severance costs (e) |
|
|
729 |
|
|
|
426 |
|
|
|
2,039 |
|
|
|
575 |
|
Non-capitalizable debt raising costs |
|
|
226 |
|
|
|
- |
|
|
|
542 |
|
|
|
403 |
|
Other infrequent costs (f) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
20 |
|
Costs incurred related to the transaction (g) |
|
|
- |
|
|
|
743 |
|
|
|
415 |
|
|
|
2,993 |
|
Loss contingency (h) |
|
|
- |
|
|
|
11,702 |
|
|
|
4,091 |
|
|
|
11,988 |
|
Adjusted EBITDA |
|
$ |
2,987 |
|
|
$ |
(5,218 |
) |
|
$ |
(7,506 |
) |
|
$ |
(24,450 |
) |
Adjusted EBITDA Margin |
|
|
9 |
% |
|
|
(17 |
)% |
|
|
(6 |
)% |
|
|
(21 |
)% |
(a) |
Reflects deferred revenue fair value adjustments arising from the purchase price allocation in connection with the 2021 Acquisitions. |
|
(b) |
Reflects the non-cash impact from the mark to market adjustments on our financial instruments. |
|
(c) |
Reflects the non-cash impact of the following for fiscal year 2023: (i) impairment of goodwill of |
|
(d) |
Reflects the costs incurred to identify, consider, and complete business combination transactions consisting of advisory, legal, and other professional and consulting costs. |
|
(e) |
Severance costs associated with workforce changes related to business realignment actions. |
|
(f) |
Costs incurred related to litigation we believe to be outside of our normal course of business totaling |
|
(g) |
Includes non-capitalizable transaction costs incurred within one year of the Business Combination. |
|
(h) |
Reflects (i) |
Key Performance Indicators
We also monitor the following key performance indicators to evaluate growth trends, prepare financial projections, make strategic decisions, and measure the effectiveness of our sales and marketing efforts. Our management team assesses our performance based on these key performance indicators because it believes they reflect the underlying trends and indicators of our business and serve as meaningful indicators of our continuous operational performance.
Annual Recurring Revenue (“ARR”)
Approximately 90% of our revenues are subscription based, which leads to high revenue predictability. Our ability to retain existing subscription customers is a key performance indicator that helps explain the evolution of our historical results and is a leading indicator of our revenues and cash flows for subsequent periods. We use ARR as a measure of our revenue trend and an indicator of our future revenue opportunity from existing recurring subscription customer contracts. We calculate ARR on a parent account level by annualizing the contracted subscription revenue, and our total ARR as of the end of a period is the aggregate thereof. ARR is not adjusted for the impact of any known or projected future customer cancellations, upgrades or downgrades, or price increases or decreases. The amount of actual revenue that we recognize over any 12-month period is likely to differ from ARR at the beginning of that period, sometimes significantly. This may occur due to timing of the revenue bookings during the period, cancellations, upgrades, or downgrades and pending renewals. ARR should be viewed independently of revenue as it is an operating metric and is not intended to be a replacement or forecast of revenue. Our calculation of ARR may differ from similarly titled metrics presented by other companies.
Run-Rate Revenue
Management also monitors Run-Rate Revenue, which we define as ARR plus non-subscription revenue earned during the last 12 months. We believe Run-Rate Revenue is an indicator of our total revenue growth, incorporating the non-subscription revenue that we believe is a meaningful contribution to our business as a whole. Although our non-subscription business is non-recurring, we regularly sell different advisory services to repeat customers. The amount of actual subscription and non-subscription revenue that we recognize over any 12-month period is likely to differ from Run-Rate Revenue at the beginning of that period, sometimes significantly.
Net Revenue Retention (“NRR”)
Our NRR, which we use to measure our success in retaining and growing recurring revenue from our existing customers, compares our recognized recurring revenue from a set of customers across comparable periods. We calculate our NRR for a given period as ARR at the end of the period minus ARR contracted from new clients for which there is no historical revenue booked during the period, divided by the beginning ARR for the period. For our federal government clients, we consider subdivisions of the same executive branch department or independent agency (for example, divisions of a single federal department or agency) to be a single customer for purposes of calculating our account-level NRR. For our commercial clients, we calculate NRR at a parent account level. Customers from acquisitions are not included in NRR until they have been part of our consolidated results for 12 months. Accordingly, the 2022 Acquisitions are not included in our NRR for the year ended
View source version on businesswire.com: https://www.businesswire.com/news/home/20240312521984/en/
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