FiscalNote (NOTE) Q2 Revenue Falls 20%

Key Points

• GAAP revenue was $23.3 million for Q2 2025, surpassing GAAP revenue guidance and analyst estimates by 2.1%, but declined 20% from the prior year.

• Adjusted EBITDA rose 58% year over year to $2.8 million, beating company guidance.

• Annual recurring revenue (ARR) and net revenue retention (NRR) declined further, reflecting ongoing customer and revenue challenges.

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FiscalNote (NYSE:NOTE), a provider of policy and regulatory intelligence software using artificial intelligence, released its second quarter 2025 earnings on August 7, 2025. The headline results showed GAAP revenue of $23.3 million, which was higher than the analyst consensus of $22.8 million (GAAP) and above the company’s own revenue guidance midpoint. While earnings per share (GAAP) met expectations at $(0.06), and adjusted EBITDA reached $2.8 million, Key subscription metrics, including subscription revenue, annual recurring revenue (ARR), and net revenue retention (NRR), continued to decline. For the quarter, the company reported effective cost controls and expanding profitability, but a sharp drop in total revenue and annual recurring revenue (ARR) poses ongoing questions about the pace of a potential turnaround.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Business Overview and Strategic Focus

FiscalNote (NYSE:NOTE) delivers software that tracks and analyzes legislation, regulations, and policy activity using artificial intelligence and data science. Its primary clients are large enterprises, governments, and non-profits requiring timely policy insights, regulatory tracking, and legislative forecasting on a subscription basis.

The company’s business hinges on technological innovation, particularly around its PolicyNote platform, which uses AI to help organizations navigate complex regulatory environments. Strategic acquisitions and international expansion have broadened the customer base. However, its success relies heavily on retaining clients through recurring subscriptions, growing ARR, and keeping its technology ahead of industry trends.

Quarter in Review: Financial and Operational Developments

GAAP revenue surpassed analyst estimates at $23.3 million, driven partly by strategic cost reductions and a more focused business portfolio following divestitures and discontinued operations. However, Revenue declined by 20% year-over-year, a direct result of selling non-core businesses and winding down legacy products. Subscription revenue (GAAP) was $21.4 million, which remains the core of the model, comprising 92% of total revenue but falling 21% year over year. On a pro forma basis that adjusts for these sales, core subscription revenue still dropped 8%, underscoring persistent pressure on customer spending and retention within the company's main offering.

Adjusted EBITDA increased 58% year-over-year to $2.8 million, exceeding guidance. This growth in profitability stems from improved operational efficiency and a sharp reduction in operating expenses. Sales and marketing expenses (GAAP) fell 26%, research and development dropped 29%, and editorial costs declined 22%. Only general and administrative costs (GAAP) increased, edging up by 1%. Gross profit margin (GAAP) also improved to 79% from 77% in Q2 2024, while adjusted gross margin reached 86%.

ARR and NRR both fell. Annual recurring revenue, a key metric showing the value of repeat contract streams, was $85.9 million, down 21% from $109.0 million last year as of June 30, 2025. After stripping out divestitures, ARR still declined 8%. Net revenue retention -- which tracks how much recurring revenue is retained from a year earlier among the same customers -- slipped to 96% from 98% last year. This decline is principally due to previously known execution challenges, customer engagement issues in the company’s legacy products, and instability in the US federal sector. Management blamed these declines on earlier execution gaps and instability in the US federal sector, specifically referencing the first half of 2025, but signaled potential improvement as more users adopt PolicyNote.

The PolicyNote platform, a policy-tracking and analysis product powered by AI, sits at the center of the company’s product strategy. Management reported that daily usage of PolicyNote surpassed the old FiscalNote platform. New features rolled out include a tariff tracker, legislative forecasting, AI-based legislative drafting, and a new tool for picking up early policy signals through social listening. Corporate customers are signing multi-year contracts at more than double the rate of the prior-year period as measured by ARR. These gains signal strong user interest and commercial momentum, although management did not provide specific adoption figures or user-growth rates.

Beyond the core platform, FiscalNote completed several portfolio changes to sharpen its operational focus. The company sold TimeBase (Australia) to Thomson Reuters for $6.5 million, following recent divestitures of Dragonfly Intelligence, Oxford Analytica, and Aicel. The company stated that most major divestitures are now complete, suggesting that future quarters will more cleanly reflect performance in its core market. The board is continuing a strategic review with outside advisors, leaving open the possibility of future structural changes or acquisitions, but no further specifics were provided.

Profitability (as measured by adjusted EBITDA, a non-GAAP metric) and cash position both improved. Total operating expenses declined 18% year over year. Gross profit margin (GAAP) increased to 79%, and adjusted gross margin (non-GAAP) to 86%. Net loss (GAAP) was $(13.3) million, only slightly higher than the prior year. Cash and short-term investments rose to $39.2 million. The balance sheet shows ongoing deleveraging, with long-term debt falling as asset sales free up capacity.

Looking Ahead: Guidance and Key Watch Areas

Management reaffirmed full-year 2025 guidance, projecting total revenues of $94 to $100 million and adjusted EBITDA of $10 to $12 million. The company expects total revenue between $22 and $23 million. The company guided that ARR will resume growth in the second half of 2025. However, no specific numeric ARR or retention targets for future quarters were disclosed.

Investor attention will remain on whether PolicyNote adoption can reverse downward trends in annual recurring revenue (ARR) and net revenue retention (NRR), and whether operational discipline continues converting into bottom-line improvement. Progress in migrating legacy customers to the new AI-driven platform, as well as updates from the ongoing board-led strategic review, are likely to be important news catalysts. Management acknowledged that macroeconomic volatility, particularly within the US federal sector, continues to pose risk for future sales cycles and customer expansions.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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