FiscalNote Holdings, Inc. Q2 FY2022 earnings

FiscalNote's second quarter paired healthy top-line growth with a deeper GAAP loss. Total revenue for the quarter ended June 30, 2022 was $27.2 million, up 41% from the prior-year quarter. Revenue for the first six months reached $53.2 million. The bottom line went the other way. Net loss for the quarter was $2.66 million, a swing from net income of $1.96 million in the second quarter of 2021. Year-to-date net income of $4.58 million was down 16.2% from $5.46 million in the prior-year period. Diluted loss per share was $2.57 for the quarter and $3.65 for the six months.

Operating performance was already negative and slipped a little further. The operating loss for the quarter was $2.11 million against $2.03 million a year earlier, 3.5% wider, and the operating margin was -7.8%. For the six months, the operating loss was $4.03 million compared with $2.28 million, 76.3% wider, with an operating margin of -7.6%. The gap between the net result and the operating result comes from items below the operating line. The 10-Q discussion points to non-cash movements in the fair value of warrant and derivative liabilities, which flipped from a gain in the prior-year quarter to a charge this time, along with interest expense on the debt stack. Those swings sit outside the core business, but they still flow into reported earnings.

Cash generation stayed thin. Operating cash flow was an outflow of $0.2 million in the quarter, deeper than the $0.04 million outflow a year earlier, and the six-month outflow of $0.6 million compared with $0.12 million in the first half of 2021. Capital expenditures were $3.9 million for the quarter and $6.0 million for the six months as the company kept building capitalized software. Deferred revenue stood at $42.8 million on June 30, 2022. The business combination closed on July 29, 2022, and the listing left roughly $92 million of cash, $150 million of gross debt and $100 million of additional borrowing capacity. That funds more acquisitions, and it also brings covenants and interest costs that management will have to manage.

Non-GAAP adjusted EBITDA loss narrowed to $5.0 million from $6.6 million in the prior-year quarter. Net revenue retention was 99%, up 100 basis points from the prior quarter, which implies the installed base is holding steady rather than expanding. Guidance for full-year 2022 was reaffirmed: a run-rate revenue target by the end of the year, organic growth within that recurring base, and an adjusted EBITDA loss of approximately $23 million. Management also reiterated that positive adjusted EBITDA should arrive within the fourth quarter of 2023.

Commercially, the quarter brought new, renewed or expanded relationships with Nestle, Boeing, Paycom and several U.S. and international government institutions. FiscalNote's VoterVoice platform launched Topics, an AI-powered feature for measuring advocacy campaigns, and Curate extended its monitoring to school boards, now covering more than 4,000 school districts and about 98% of districts with enrollment above 5,000 students. The risk list is standard for a consolidating software vendor: integrating the businesses it buys, competing with larger and better funded rivals, reliance on third-party systems and data, privacy and security exposure, compliance obligations tied to government contracts, and a softer economy that could slow customer spending. Growth leans on the deal pipeline, and a 99% net retention figure alongside a widening operating loss is the balance to watch.