Announces FY 2022 Results With GAAP Revenue
at the Top End of Its Guidance Range
Expects Ongoing Revenue Momentum Throughout
2023 and Reiterates Adjusted EBITDA Profitability by the Fourth
Quarter of 2023
FiscalNote Holdings, Inc. (NYSE: NOTE) (“FiscalNote” or the
"Company"), a leading AI-driven enterprise SaaS technology provider
of global policy and market intelligence, today announced financial
results for the fourth quarter and fiscal year ended December 31,
2022.
The Company’s financial results demonstrate FiscalNote’s strong
fundamentals with durable, ongoing revenue growth of 37%
year-over-year in 2022 driven by its diversified blue chip customer
base, strong net retention and expansion of its recurring revenue
base, new logo acquisition and accretive strategic M&A that
extends the Company’s value to existing and prospective customers
in the government and enterprise markets, as well as high gross
margins, which form the basis of its expected positive adjusted
EBITDA by Q4 2023. The results also demonstrate the Company's
leadership in delivering AI-enabled policy and market information
that empowers organizations to mitigate risk and navigate their
businesses in an increasingly complex global geopolitical and
regulatory environment.
Fourth Quarter 2022 Financial Highlights
- Revenue increased 29% to $31.4 million, compared to
$24.5 million in Q4 2021. Non-GAAP adjusted revenue(1) was $31.5
million as compared to $25.7 million in the fourth quarter of
2021.
- Gross profit was $23.1 million representing 73% gross
margin, and non-GAAP adjusted gross profit was $25.6
million(1) representing 81% non-GAAP adjusted gross margin.(1)
- GAAP net loss of $42.5 million. GAAP net loss for the
quarter contains non-cash charges totaling $24.2 million, which
includes $11.7 million related to the loss contingency recognized
as a result of the previously-announced proposed terms of a lender
arrangement(2), $5.8 million related to the mark-to-market of the
public and private warrants liability the Company is required to
fair value at each reporting date, and $6.7 million of incremental
expense related to the accounting treatment of stock based
compensation related to the Company's public listing.
- Adjusted EBITDA(1) loss of $5.2 million.
- Cash and cash equivalents of $61.2 million and
approximately $94 million of additional debt capacity.* The Company
continues to have sufficient capital to support its current growth
plans, path to adjusted EBITDA profitability, and M&A
opportunities, and does not require additional capital raises to
achieve its plan.
Fourth Quarter 2022 Operational Metrics
- Run-Rate Revenue(3) increased to $127 million as of
December 31, 2022 inclusive of businesses acquired in 2022. Organic
Run-Rate Revenue(3)(4) increased to $125 million as of year end, a
14% increase from $110 million as of December 31, 2021 on a pro
forma basis.
- Annual Recurring Revenue(3) (“ARR”) rose to $113
million at December 31, 2022 inclusive of businesses acquired in
2022, representing 14% growth over the prior year and approximately
90% of total revenue. Organic ARR(3) was $112 million as of
December 31, 2022 compared to organic ARR of $98 million at
December 31, 2021, representing a 15% growth rate on a pro forma
basis.
- Net Revenue Retention(3) was 101% in the fourth quarter,
underscoring the Company’s ability to establish and maintain
long-term recurring revenue relationships by serving as an
essential, mission critical partner for customers across both the
commercial and public sectors as well as the predictability and
durability of the Company's business model.
Full Year 2022 Financial Highlights
- Revenue increased 37% to $113.8 million, at the top end
of the Company’s guidance range announced in November 2022,
compared to $82.9 million in FY 2021. Non-GAAP adjusted revenue(1)
was $115.7 million as compared to $85.7 million in 2021.
- Gross profit was $81.8 million representing 72% gross
margin, and non-GAAP adjusted gross profit(1) was $92.8
million representing 80% non-GAAP adjusted gross margin.(1)
- GAAP net loss of $218.3 million. GAAP net loss for the
year contains approximately $85.8 million of net non-cash items
which are primarily associated with the Company's public listing on
July 29, 2022, as detailed in the reconciliation of Adjusted EBITDA
to GAAP net loss provided below. GAAP net loss for FY 2022 also
includes a non-cash charge of $11.7 million related to the loss
contingency recognized as a result of the previously-announced
proposed terms of a lender arrangement(2).
- Adjusted EBITDA(1) loss of $24.4 million.
Full Year 2023 Financial Outlook
FiscalNote provided guidance for full year 2023 as follows:
- GAAP revenue of $136 to $141 million, representing 20% to 24%
year over year growth inclusive of the Company’s recent acquisition
of Dragonfly Eye, Ltd.
- Total run-rate revenue(3)(5) of $148 million to $155 million
representing growth of 17% to 22% over the prior year inclusive of
the Company’s recent acquisition of Dragonfly Eye, Ltd. and growth
of 10% to 16% over the prior year on an organic basis.
- An adjusted EBITDA(1) loss of $8 million to $6 million for the
year(6), marking an improvement of approximately 71%
year-over-year.
- FiscalNote reiterates that it expects to achieve positive
Adjusted EBITDA in the fourth quarter of 2023 and ongoing positive
adjusted EBITDA beyond this milestone.
FiscalNote provided guidance for the first quarter of 2023 as
follows:
- GAAP revenue of $31 to $32 million.
- Adjusted EBITDA(1) loss of $7 to $6 million for the quarter,
including higher Q1 seasonal public company costs. The Company has
implemented cost actions over the past few months which, in
combination with more normalized quarterly expenses, are expected
to significantly reduce adjusted EBITDA loss starting in the second
quarter, and enable the Company to become profitable on an Adjusted
EBITDA basis in the fourth quarter of 2023.
“Last year was transformational for FiscalNote, and our results
show significant momentum across our business. We are proving our
model of building an enduring and resilient growth company with
compounding subscription revenue growth, strong gross margins and,
over time, an impressive free cash flow model. The basis of our
strong fundamentals is driven by a combination of organic expansion
and strategic, accretive M&A as well as an ongoing operational
focus on our drive towards profitability. We are driving new levels
of innovation across our business, combining AI and human
intelligence to address our customers’ most pressing challenges in
this growing market, particularly in light of our customers’ needs
to respond to ongoing political and macroeconomic uncertainty.
Whether it’s our ongoing AI innovation, new ESG products, or our
recent acquisition of Dragonfly, we continue to deliver 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 Tim Hwang, Chairman,
CEO, and Co-founder, FiscalNote.
“This year, we will build on this momentum and deliver on our
profitability goals as we scale our revenue, leverage the
investments we’ve made in sales and marketing, drive ongoing
efficiencies throughout our organization, and continue to seek
strategic partnerships and AI collaborations - such as our new
trusted partner role with OpenAI on ChatGPT announced last week -
that add continued value for our customers, extend our competitive
leadership, and create a more profitable enterprise. All of this
positions us well to achieve our long term vision to become an
enduring, multi-billion dollar, profitable leader in information
services by empowering our customers with mission-critical insights
and the tools to turn those insights into action,” Hwang added.
During 2022, FiscalNote continued to execute successfully on its
strategy to lead its sector in global policy and market
intelligence with several operational and business achievements,
including:
- Signed new logos and renewed or expanded relationships with
leading U.S. and global brand leaders including American Express,
Amgen, Boeing, CGI Group, Chevron, Convergent Energy & Power,
Estée Lauder, InterContinental Hotels Group, Kimberly-Clark,
L’Oréal, Mediacom, Moderna, Owens Corning, Teleflex, Uber and
more.
- 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, such as the European
Parliament, NATO, and the Korean National Assembly.
- Unveiled a series of wide-ranging new customer agreements with
some of the largest and most prominent trade associations,
non-profits, and advocacy organizations across a large number of
industries, demonstrating its market leadership position in
Washington, D.C. and throughout the national advocacy and
association sectors.
- Expanded growth of the Company’s European business with the
relaunch of EU Issue Tracker, which is used by hundreds of
enterprises such as Intel, Nestlé, and PepsiCo, as well as regional
organizations such as the European Automobile Manufacturers
Association.
- Completed the acquisitions of Aicel Technologies, an
alternative data company based in Seoul, South Korea, and DT
Global, a Vienna, Austria subscription-based market intelligence
company. The Company also recently announced the acquisition of
Dragonfly Eye Ltd, a UK-based provider of geopolitical and security
intelligence data and analytics. These acquisitions expand the
scope and diversity of the Company’s business geographically,
provide new expansion opportunities in both the APAC and Europe
markets, and enable FiscalNote to offer its customers additional
data and analysis of macroeconomic, geopolitical, and
security-related information.
- Added new features, enhancements and additions to its
proprietary AI technology stack including a full rebuild of the
technology underpinning FiscalNote’s application; a modernized,
refreshed user interface to make policy data and information easier
to navigate, customize, organize, and take action on; a streamlined
news feed; a unified search experience; refreshed workspaces; and
new infrastructure to accelerate further innovation.
- Launched the AI-powered FiscalNote ESG Solutions’ Equilibrium
ESG360™ Benchmarking and Risk Intelligence platform, which uses AI
to interpret data in real time and convert it into actionable
insights for ESG leaders, enabling companies to have a holistic
view of their ESG performance and perception across operations,
suppliers, and competitors.
- Announced a technology integration between Asana, a leading
work management platform, and the FiscalNote Equilibrium ESG
platform to give customers one-click connection, decarbonization
support, ESG disclosure and reporting, and curated ESG reporting
playbooks from a single platform.
- Announced a strategic partnership with Korean consumer finance
leader Shinhan Card, leveraging FiscalNote’s AI, alternative data,
and Aicel Technologies and ESG Solutions offerings to provide
customers with unique data sets to drive actionable results and
power business decisions and outcomes.
- Amplified its Curate platform for civic intelligence and
monitoring services by extending its state and local coverage to
include hundreds of state boards across the U.S.
- Introduced Fireside State, the industry-leading, all-in-one
constituent relationship management (CRM) SaaS platform
specifically designed for lawmakers and staff at the State and
Local levels of government, and also announced the
first-of-its-kind integration of AI-powered Congressional speeches
and transcripts into the core Fireside SaaS platform for
customers.
- Secured three awards recognizing the Company’s SaaS leadership
and innovation:
- FiscalNote’s Curate platform for civic intelligence and
monitoring was declared the winner of the “Best Data Innovation in
a SaaS Product” category at the 2022 SaaS Awards. Curate was
recognized as the winner due to the platform’s superior Natural
Language Processing AI and its consistent positive customer
feedback.
- FiscalNote’s Equilibrium ESG platform was declared the winner
of the “Best SaaS Product for CSR or Sustainability” category at
the 2022 SaaS Awards. Equilibrium is an AI-powered platform which
helps organizations unify, manage, and benchmark carbon, climate,
and ESG data across their entire operations and supply chain.
- FiscalNote was named one of “America’s Best Startup Employers”
in a Forbes collaboration with market research company Statista,
which evaluated 2,500 U.S. businesses for review using over 8
million data points, and recognized 500 companies.
- Published the inaugural overview of FiscalNote’s sustainability
and social impact initiatives, which details the Company’s global
sustainability and ESG efforts and illustrates its commitment to a
more sustainable future.
- Completed its business combination with Duddell Street
Acquisition Corp. and began trading under the ticker symbol “NOTE”
on the New York Stock Exchange (NYSE) as the first and only
publicly-traded, AI-driven enterprise technology company dedicated
to global policy and market intelligence.
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.”
Quarterly Conference Call
FiscalNote will host a conference call today, Tuesday March 28,
at 10:00 a.m. Eastern Time (U.S.) to review the Company’s financial
results for the fourth quarter and year ended December 31, 2022. To
access this call, dial 1 (888) 660-6510 for the U.S. or Canada, or
1 (929) 203-0882 for callers outside the U.S. or Canada with the
conference ID 1271923. A live webcast of the conference call will
be accessible from the Investor Relations section of FiscalNote’s
website at https://investors.fiscalnote.com/, and a recording will
be archived and accessible at https://investors.fiscalnote.com/. An
audio replay of this conference call will also be available through
April 28, 2023, 11:59pm ET, by dialing 1 (800) 770-2030 for the
U.S. or Canada, or 1 (647) 362-9199 for callers outside the U.S. or
Canada, and entering 1271923.
* In connection with its public listing,
FiscalNote entered into a 5-year senior secured term loan of up to
$250 million, including $150 million of committed financing at
closing with an additional uncommitted accordion facility for $100
million, subject to certain conditions.
(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) Please refer to our Current Report on
Form 8-K filed on January 27, 2023 for more information.
(3) “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.
(4) Organic run rate revenue for 2022
includes businesses acquired as of December 31, 2021, plus Aicel
Technologies (for which a definitive acquisition agreement was
signed as of December 31, 2021, with closing conditioned upon
FiscalNote’s public listing).
(5) Total run rate revenue includes
completed acquisitions but does not include any future acquisitions
under consideration.
(6) 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 FiscalNote
FiscalNote (NYSE: NOTE) is a leading technology provider of
global policy and market intelligence. By uniquely combining AI
technology, actionable data, and expert and peer insights,
FiscalNote empowers customers to manage policy, address regulatory
developments, and mitigate global risk. Since 2013, FiscalNote has
pioneered technology that delivers mission-critical insights and
the tools to turn them into action. Home to CQ, FrontierView,
Oxford Analytica, VoterVoice, and many other industry-leading
brands, FiscalNote serves approximately 5,000 customers worldwide
with global offices in North America, Europe, Asia, and Australia.
To learn more about FiscalNote and its family of brands, visit
FiscalNote.com and follow @FiscalNote.
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 FiscalNote operates are
forward-looking statements. In some cases, you can identify
forward-looking statements by terminology such as “pro forma,”
“may,” “should,” “could,” “might,” “plan,” “possible,” “project,”
“strive,” “budget,” “forecast,” “expect,” “intend,” “will,”
“estimate,” “anticipate,” “believe,” “predict,” “potential” or
“continue,” or the negatives of these terms or variations of them
or similar terminology. Such forward-looking statements are subject
to risks, uncertainties, and other important factors that could
cause actual results to differ materially from those expressed or
implied by such forward-looking statements.
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; FiscalNote’s future capital requirements; demand for
FiscalNote’s services and the drivers of that demand; FiscalNote’s
ability to provide highly useful, reliable, secure and innovative
products and services to its customers; FiscalNote’s ability to
attract new customers, retain existing customers, expand its
products and service offerings with existing customers, expand into
geographic markets or identify areas of higher growth; FiscalNote’s
ability to successfully identify acquisition opportunities, make
acquisitions on terms that are commercially satisfactory,
successfully integrate potential acquired businesses and services,
and subsequently grow acquired businesses; risks associated with
international operations, including compliance complexity and
costs, increased exposure to fluctuations in currency exchange
rates, political, social and economic instability, and supply chain
disruptions; FiscalNote’s ability to develop, enhance, and
integrate its existing platforms, products, and services;
FiscalNote’s estimated total addressable market and other industry
and performance projections; FiscalNote's reliance on third-party
systems and data, its ability to integrate such systems and data
with its solutions and its potential inability to continue to
support integration; potential technical disruptions,
cyberattacks, security, privacy or data breaches or other technical
or security incidents that affect FiscalNote’s networks or systems
or those of its service providers; FiscalNote’s ability to obtain
and maintain accurate, comprehensive, or reliable data to support
its products and services; FiscalNote’s ability to introduce new
features, integrations, capabilities, and enhancements to its
products and services; FiscalNote’s ability to maintain and improve
its methods and technologies, and anticipate new methods or
technologies, for data collection, organization, and analysis to
support its products and services; competition and competitive
pressures in the markets in which FiscalNote operates, including
larger well-funded companies shifting their existing business
models to become more competitive with FiscalNote; FiscalNote’s
ability to protect and maintain its brands; FiscalNote’s ability to
comply with laws and regulations in connection with selling
products and services to U.S. and foreign governments and other
highly regulated industries; FiscalNote’s ability to retain or
recruit key personnel; FiscalNote’s ability to effectively maintain
and grow its research and development team and conduct research and
development; FiscalNote’s ability to adapt its products and
services for changes in laws and regulations or public perception,
or changes in the enforcement of such laws, relating to artificial
intelligence, machine learning, data privacy and government
contracts; adverse general economic and market conditions reducing
spending on our products and services; the outcome of any known
and unknown litigation and regulatory proceedings; FiscalNote’s
ability to successfully establish and maintain public
company-quality internal control over financial reporting; and the
ability to adequately protect FiscalNote’s intellectual property
rights.
These and other important factors discussed in FiscalNote’s SEC
filings, including its most recent reports on Forms 10-K and 10-Q,
particularly the "Risk Factors" sections of those reports, could
cause actual results to differ materially from those indicated by
the forward-looking statements made in this press release. These
forward-looking statements are based upon estimates and assumptions
that, while considered reasonable by FiscalNote and its management,
are inherently uncertain. Nothing in this press release should be
regarded as a representation by any person that the forward-looking
statements set forth herein will occur or that any of the
contemplated results of such forward-looking statements will be
achieved. You should not place undue reliance on forward-looking
statements, which speak only as of the date they are made.
FiscalNote undertakes no obligation to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise, except as may be required under
applicable securities laws.
FISCALNOTE HOLDINGS,
INC.
Consolidated Balance
Sheets
(in thousands, except shares, and
par value)
December 31, 2022
December 31, 2021
Assets
Current assets:
Cash and cash equivalents
$
60,388
$
32,168
Restricted cash
835
841
Accounts receivable, net
14,909
11,174
Costs capitalized to obtain revenue
contracts, net
2,794
2,787
Prepaid expenses
4,315
1,803
Other current assets
2,764
5,525
Total current assets
86,005
54,298
Property and equipment, net
7,325
7,509
Capitalized software costs, net
13,946
7,480
Noncurrent costs capitalized to obtain
revenue contracts, net
3,976
2,709
Operating lease assets
21,005
-
Goodwill
194,362
188,768
Customer relationships, net
56,348
61,644
Database, net
21,020
22,357
Other intangible assets, net
28,728
33,728
Other non-current assets
442
-
Total assets
$
433,157
$
378,493
Liabilities, Temporary Equity and
Stockholders' Equity (Deficit)
Current liabilities:
Current maturities of long-term debt
$
68
$
13,567
Accounts payable and accrued expenses
13,739
15,796
Deferred revenue, current portion
35,569
29,569
Customer deposits
3,252
3,568
Contingent liabilities from acquisitions,
current portion
696
1,088
Operating lease liabilities, current
portion
6,709
-
Other current liabilities
2,079
5,880
Total current liabilities
62,112
69,468
Long-term debt, net of current
maturities
161,980
299,318
Convertible notes - related parties
-
18,295
Deferred tax liabilities
714
3,483
Deferred revenue, net of current
portion
918
528
Deferred rent
-
8,236
Contingent liabilities from acquisitions,
net of current portion
883
4,016
Sublease loss liability, net of current
portion
-
2,090
Lease incentive liability, net of current
portion
-
4,440
Operating lease liabilities, net of
current portion
29,110
-
Warrant liabilities
18,892
-
Other non-current liabilities
13,858
1,453
Total liabilities
288,467
411,327
Commitment and contingencies (Note 18)
Temporary equity:
Redeemable, convertible preferred
stock
-
449,211
Stockholders' equity (deficit):
Class A Common stock ($0.0001 and $0.00001
par value, 1,700,000,000 and 117,592,400 authorized, 123,125,595
and 18,346,466 issued and outstanding at December 31, 2022 and
December 31, 2021, respectively)
12
-
Class B Common stock ($0.0001 and zero par
value, 9,000,000 and zero authorized, 8,290,921 and zero issued and
outstanding at December 31, 2022 and December 31, 2021)
1
-
Additional paid-in capital
846,205
-
Accumulated other comprehensive loss
(785
)
(631
)
Accumulated deficit
(700,743
)
(481,414
)
Total stockholders' equity (deficit)
144,690
(482,045
)
Total liabilities, temporary equity and
stockholders' equity (deficit)
$
433,157
$
378,493
FISCALNOTE HOLDINGS,
INC.
Consolidated Statements of
Operations and Comprehensive Loss
(in thousands, except shares and
per share data)
Three Months Ended December
31,
Years Ended December
31,
2022
2021
2022
2021
Revenues:
Subscription
$
27,336
$
20,904
$
100,522
$
74,002
Advisory, advertising, and other
4,113
3,558
13,243
8,910
Total revenues
31,449
24,462
113,765
82,912
Operating expenses: (1)
Cost of revenues
8,356
7,138
31,937
21,802
Research and development
5,298
6,346
20,736
24,017
Sales and marketing
10,956
8,418
42,678
29,676
Editorial
4,716
3,667
15,956
14,634
General and administrative
18,266
10,292
77,801
32,491
Amortization of intangible assets
2,633
2,708
10,451
9,359
Loss on sublease
-
455
-
1,817
Transaction costs, net
1,138
1,713
2,395
4,698
Total operating expenses
51,363
40,737
201,954
138,494
Operating loss
(19,914
)
(16,275
)
(88,189
)
(55,582
)
Interest expense, net
6,069
18,698
95,741
64,800
Change in fair value of warrant and
derivative liabilities
5,777
(12,811
)
(12,747
)
(3,405
)
Gain on PPP loan upon extinguishment
-
-
(7,667
)
-
Loss on debt extinguishment, net
-
-
45,250
-
Loss contingency
11,700
-
11,700
-
Other expense, net
(498
)
(51
)
1,045
333
Net loss before income taxes
(42,962
)
(22,111
)
(221,511
)
(117,310
)
Benefit from income taxes
(418
)
(1,152
)
(3,254
)
(7,889
)
Net loss
(42,544
)
(20,959
)
(218,257
)
(109,421
)
Other comprehensive income (loss)
1,623
(22
)
(154
)
(568
)
Total comprehensive loss
$
(40,921
)
$
(20,981
)
$
(218,411
)
$
(109,989
)
Net loss
$
(42,544
)
$
(20,959
)
$
(218,257
)
$
(109,421
)
Deemed contribution (dividend)
-
20,739
(26,570
)
(197,511
)
Net loss used to compute basic and diluted
loss per share
$
(42,544
)
$
(220
)
$
(244,827
)
$
(306,932
)
Earnings per share attributable to common
shareholders:
Basic and Diluted
$
(0.32
)
$
(0.01
)
$
(3.68
)
$
(19.80
)
Weighted average shares used in computing
earnings per shares attributable to common shareholders:
Basic and Diluted
131,086,309
18,020,727
66,513,704
15,503,829
(1) Amounts include stock-based
compensation expenses, as follows:
Three Months Ended December
31,
Years Ended December
31,
2022
2021
2022
2021
Cost of revenues
$
45
$
7
$
81
$
16
Research and development
398
61
1,007
277
Sales and marketing
(66
)
50
762
147
Editorial
43
22
603
89
General and administrative
6,759
323
35,594
481
FISCALNOTE HOLDINGS,
INC.
Consolidated Statements of
Cash Flows
(in thousands)
Years Ended December
31,
2022
2021
Operating Activities:
Net loss
$
(218,257
)
$
(109,421
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation
1,238
1,177
Amortization of intangible assets and
capitalized software development costs
19,545
15,203
Amortization of deferred costs to obtain
revenue contracts
2,786
2,610
Non-cash operating lease expense
6,614
-
Stock-based compensation
38,047
1,010
Non-cash earnout expense
(238
)
1,718
Loss contingency
11,700
-
Bad debt expense
142
254
Change in fair value of acquisition
contingent consideration
(2,121
)
434
Change in fair value of derivative
liabilities
3,090
(3,407
)
Change in fair value of warrant
liabilities
(15,837
)
-
Deferred income tax benefit
(3,076
)
(6,630
)
Paid-in-kind interest, net
10,958
37,345
Other non-cash expenses
260
-
Non-cash interest expense
52,044
21,692
Loss on debt extinguishment, net
45,250
-
Loss on sublease
-
1,817
Gain on PPP loan forgiveness
(7,667
)
-
Changes in operating assets and
liabilities:
Accounts receivable, net
(3,941
)
1,066
Prepaid expenses and other current
assets
422
(3,598
)
Costs capitalized to obtain revenue
contracts, net
(4,129
)
(4,199
)
Other non-current assets
(395
)
-
Accounts payable and accrued expenses
(2,113
)
3,953
Deferred revenue
4,780
2,770
Customer deposits
93
1,403
Other current liabilities
(1,938
)
291
Deferred rent
-
266
Contingent liabilities from acquisitions,
net of current portion
(1,567
)
-
Lease liabilities
(8,589
)
-
Sublease loss liability, net of current
portion
-
(2,480
)
Lease incentive liability, net of current
portion
-
(528
)
Other non-current liabilities
274
208
Net cash used in operating
activities
(72,625
)
(37,046
)
Investing Activities:
Capital expenditures
(11,367
)
(5,570
)
Cash paid for business acquisitions, net
of cash acquired
1,125
(43,626
)
Net cash used in investing
activities
(10,242
)
(49,196
)
Financing Activities:
Proceeds from Business Combination
175,000
-
Issuance costs of common stock
(45,242
)
-
Proceeds from long-term debt, net of
issuance costs
166,014
61,165
Principal payments of long-term debt
(189,105
)
-
Proceeds from exercise of public
warrants
4,498
-
Proceeds from exercise of stock
options
453
516
Repurchase of common stock
(88
)
-
Net proceeds from issuance of preferred
stock
12,626
Net cash provided by financing
activities
111,530
74,307
Effects of exchange rates on cash
(449
)
(76
)
Net change in cash, cash equivalents, and
restricted cash
28,214
(12,011
)
Cash, cash equivalents, and restricted
cash, beginning of period
33,009
45,020
Cash, cash equivalents, and restricted
cash, end of period
$
61,223
$
33,009
Non-GAAP Financial Measures
In addition to financial measures prepared in accordance with
GAAP, we use certain non-GAAP financial measures to clarify and
enhance our understanding, and aid in the period-to-period
comparison, of our performance. Where applicable, we provide
reconciliations of these non-GAAP measures to the corresponding
most closely related GAAP measure. Investors are encouraged to
review the reconciliation of each of these non-GAAP financial
measures to its most comparable GAAP financial measure. While we
believe that these non-GAAP financial measures provide useful
supplemental information, non-GAAP financial measures have
limitations and should not be considered in isolation from, or as a
substitute for, their most comparable GAAP measures. These non-GAAP
financial measures are not prepared in accordance with GAAP, do not
reflect a comprehensive system of accounting and may not be
comparable to similarly titled measures of other companies due to
potential differences in their financing and accounting methods,
the book value of their assets, their capital structures, the
method by which their assets were acquired and the manner in which
they define non-GAAP measures.
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 U.S. GAAP. Adjusted revenue does not
represent revenues, as that term is defined under GAAP, and should
not be considered as an alternative to revenues as an indicator of
our operating performance. Adjusted revenue as presented herein is
not necessarily comparable to similarly titled measures presented
by other companies.
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:
Three Months Ended December
31,
Years Ended December
31,
(In thousands)
2022
2021
2022
2021
Subscription revenue
$
27,336
$
20,904
$
100,522
$
74,002
Deferred revenue adjustment
43
1,225
1,896
2,758
Adjusted subscription revenue
27,379
22,129
102,418
76,760
Advisory, advertising, and other
revenue
4,113
3,558
13,243
8,910
Adjusted Revenues
$
31,492
$
25,687
$
115,661
$
85,670
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:
Three Months Ended December
31,
Years Ended December
31,
(In thousands)
2022
2021
2022
2021
Adjusted Revenues
$
31,492
$
25,687
$
115,661
$
85,670
Costs of revenue
(8,356
)
(7,138
)
(31,937
)
(21,802
)
Amortization of intangible assets
2,430
1,767
9,094
5,844
Adjusted Gross Profit
$
25,566
$
20,316
$
92,818
$
69,712
Adjusted Gross Profit Margin
81
%
79
%
80
%
81
%
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:
Three Months Ended December
31,
Years Ended December
31,
(In thousands)
2022
2021
2022
2021
Net loss
$
(42,544
)
$
(20,959
)
$
(218,257
)
$
(109,421
)
Benefit from income taxes
(418
)
(1,152
)
(3,254
)
(7,889
)
Depreciation and amortization
5,409
4,782
20,783
16,380
Interest expense, net
6,069
18,698
95,741
64,800
EBITDA
(31,484
)
1,369
(104,987
)
(36,130
)
Deferred revenue adjustment (a)
43
1,225
1,896
2,758
Stock-based compensation
7,179
463
38,047
1,010
Change in fair value of warrant and
derivative liabilities (b)
5,778
(12,811
)
(12,747
)
(3,405
)
Loss on debt extinguishment, net
-
-
45,250
-
Other non-cash (gains) charges (c)
217
1,562
(9,069
)
3,969
Acquisition related costs (d)
178
367
1,181
2,054
Employee severance costs
426
120
575
180
Non-capitalizable debt raising costs
-
-
403
584
Other infrequent costs (e)
-
29
20
1,484
Costs incurred related to the transaction
(f)
743
239
2,993
1,128
Loss contingency (g)
11,702
-
11,988
-
Adjusted EBITDA
$
(5,218
)
$
(7,437
)
$
(24,450
)
$
(26,368
)
Adjusted EBITDA Margin
(17
)%
(29
)%
(21
)%
(31
)%
(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 warrant and derivative
liabilities.
(c)
Reflects the non-cash impact of the
following: (i) gain of $1,320 in the first quarter of 2022, charge
of $271 in the second quarter of 2022, gain of $948 in the third
quarter of 2022, charge of $217 in the fourth quarter of 2022,
charge of $1,045 in the third quarter of 2021, and charge of $1,107
in the fourth quarter of 2021 from the change in fair value related
to the contingent consideration and contingent compensation related
to the 2021 Acquisitions, respectively, (ii) gain of $7,667 related
to the partial forgiveness of our PPP Loan during the first quarter
of 2022, (iii) $378 impairment charge recognized in the first
quarter of 2022 related to the abandonment of one of our leases
upon adoption of ASC 842 on January 1, 2022, and (iv) loss from
modification to a sub-lease in April 2021 for $1,362 and a loss
from a lease abandonment in the fourth quarter of 2021 for
$455.
(d)
Reflects the costs incurred to identify,
consider, and complete business combination transactions consisting
of advisory, legal, and other professional and consulting costs,
including $636 of costs incurred during the first three quarters of
2021 related to acquisitions we did not consummate and presented in
general and administrative expense. Includes a $500 charge we
recognized related to a discretionary bonus paid to certain
employees of Predata during the second quarter of 2022.
(e)
Reflects (i) costs incurred related to
litigation we believe to be outside of our normal course of
business totaling $246 during the first quarter of 2021, $372
during the second quarter of 2021, $251 during the third quarter of
2021, $29 during the fourth quarter of 2021, and $20 during the
first quarter of 2022, respectively, (ii) costs to satisfy sales
tax remittances incurred totaling $506 during the second quarter of
2021, and (iii) costs incurred related to our adoption of ASC 606
totaling $80 during the first quarter of 2021.
(f)
Includes non-capitalizable transaction
costs associated with the Business Combination.
(g)
Reflects (i) $11,700 non-cash loss
contingency recognized related to the previously disclosed term
sheet we entered into with GPO FN Noteholder LLC we recorded in the
fourth quarter of 2022 and (ii) $288 of legal costs incurred
related to the proposed term sheet with GPO FN Noteholder LLC, of
which $286 was recognized in the third quarter of 2022 and $2 was
recognized in the fourth quarter of 2022.
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. 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 December 31, 2022 and the 2021 Acquisitions
are not included in our NRR for the year ended December 31, 2021.
Our calculation of NRR for any fiscal period includes the positive
recurring revenue impacts of selling additional licenses and
services to existing customers and the negative recognized
recurring revenue impacts of contraction and attrition among this
set of customers. Our NRR may fluctuate as a result of a number of
factors, including the growing level of our revenue base, the level
of penetration within our customer base, expansion of products and
features, and our ability to retain our customers.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230327005602/en/
Media Nicholas Graham FiscalNote press@fiscalnote.com
Investors Sara Buda FiscalNote IR@fiscalnote.com
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