FiscalNote Holdings, Inc. Class A common stock

Thank you for standing by. My name is Brianna and I will be your conference operator today. At this time, I would like to welcome everyone to the fiscal note Q1 2023 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. I will now turn the call over to Sarah Buda, Vice President of Investor Relations.

You may begin your conference. Hi, everyone.

Welcome to the Fiscal Note Q1 2023 earnings call. During this call, we may make certain statements related to our business that are forward-looking statements under federal securities laws. These statements are not guarantees of future performance, but are rather subject to a variety of risks and uncertainties. Our actual results could differ materially from expectations reflected in any forward-looking statement. For a discussion of the material risks and other important factors that could affect our actual results, please refer to our SEC filings available on the SEC's EDGAR system and on our website, as well as the risks and other important factors discussed in today's earnings release. Additionally, non-GAAP financial measures and other KPIs will be discussed on this conference call. please refer to the tables in our earnings release and the investor relations portion of our website for a reconciliation of these measures to their most directly comparable GAAP financial measure. With that, I'd like to turn the call over to Fiscal Notes Chairman, CEO, and Co-Founder, Tim Huang.

Thank you, Sarah. On today's call, we'll review our first quarter. As always, I'll discuss our durable compounding revenue, strong gross margin, macro trends driving our business, and more. I'll also talk about our long-term opportunities for asymmetric upside as we innovate around new products and customer segments. I'll then turn it over to our CFO, John Slabaugh, to talk about the details of our financials as we quickly pivot to approximately breakeven adjusted EBITDA in Q3 and positive adjusted EBITDA profitability in Q4 and continue on our pathway as a profitable long-term growth compounder. Before I begin, let me start with a very brief overview of who we are and what we do for those new to the story. At FiscalNote, we're on a mission to help our customers make sense of the complicated and constantly changing world we live in by delivering a proprietary, AI-enabled SaaS platform that aggregates and organizes regulatory, political, and macroeconomic information and analyzes the impacts on their organizations. Changes in policies, regulations, and laws impact the decision-making of almost every organization around the world, from changes in regulatory requirements to mandatory reporting requirements that organizations must comply with, often on a global basis. Using cutting-edge machine learning and AI capabilities, we aggregate, synthesize, and analyze massive amounts of legislative, policy, regulatory, and macroeconomic data and information around the world, and provide actionable intelligence to customers in a subscription model. As such, we're building an enduring company for the world's most important and influential decision makers. These customers range from hundreds of government agencies and public sector customers from the Department of Defense, the White House, every member of the House and Senate in the U.S. Congress, the Federal Reserve, and public sector organizations in Europe and Asia, to major corporate customers, including half the Fortune 100, that need to stay on top of an ever-shifting regulatory, political, and geopolitical landscape in countries around the world. These customers rely on fiscal notes every day to help interpret the impact of policies, legislation, and macroeconomic shifts on their institutions. As a result, thousands of global customers in the commercial and public sectors depend on fiscal and staff platforms and analysis to discover, process, and navigate the impact of government policymaking on their organizations, and more importantly, take actions which achieve business objectives and minimize political and economic risk. This forms the basis of our durable and long-term growth. We have become an increasingly mission-critical and ubiquitous Bloomberg terminal of political, legislative, and regulatory information at the local, state, federal, and global level. The same way that other information companies, such as S&P Global, IHS Markit, Faxit, Morningstar, CoStar, and Avalara, have innovated in their respective information fields, Cisco continues to deliver mission-critical information that has a direct impact on our customers' operations. We've invested tens of millions of dollars and almost 10 years building a defensible combination of data, intelligence, and AI technology to collect, synthesize, and make sense of an exploding pace and volume of dynamic, unstructured, regulatory, political, and legal information around the world, as well as the software tools to help our customers respond. With that, let me start with a summary of our financial results that serves as a platform for our compounding profitable growth in 2023 and beyond. We clocked yet another quarter of compounding highly predictable revenue growth. Q1 revenue was $31.5 million, marking growth of 21% year over year, and in line with the guidance we provided on our last call. As we've demonstrated, we have a highly predictable recurring revenue stream from a diverse customer base of thousands of organizations that renew their contracts year after year. And we continue to secure new customers as well, from state governments to Fortune 100 enterprises. These customers rely on fiscal note every day to help interpret the impact of policies, legislation, and macroeconomic shifts on their institutions, and more importantly, to take actions which achieve their business objectives. We also continue to deliver consistently high gross profit margins. Q1 adjusted gross margins were 80% in the quarter. These margins are a hallmark of fiscal note and stem from our SaaS business model, AI pedigree, and data-rich products. all of which form the basis for strong cash flow in the future. On the bottom line, our adjusted EBITDA loss was in line with expectations of approximately $7 million. And as we'll detail, through a combination of an ongoing ARR growth and a diligent focus on cost, we are reiterating our plan to reduce our adjusted EBITDA loss, notably starting in Q2, and to be approximately breakeven in Q3 and profitable in Q4 on an adjusted EBITDA basis. John will walk you through the details. Our cash position at the end of the quarter was $47.5 million, and we have an additional $94 million of debt capacity subject to conditions. We continue to have sufficient capital to fund our growth, and as we've stated, we are capitalized fully and do not require any additional capital raises to achieve our plan of adjusted EBITDA profitability and, over time, free cash flow. Turning to managing KPIs. We delivered run rate revenue of $134 million, including our late January acquisition of Dragonfly. Excluding at Dragonfly, organic run rate revenue was $126 million. Our annual recurring revenue was $119 million, marking pro forma growth of 10% year-over-year and 9% on an organic basis, excluding Dragonfly. This is in line with our expectations, and we expect ARR to continue to ramp through the year as it usually does. Also, internally, we are seeing benefits from the operational and organizational changes we have been implementing, and we expect to see benefits of those improvements reflected in our accelerating second half growth. For the quarter, net revenue retention was 96%, and adjusted NRR was approximately 98% in the first quarter, adjusting for the impact of the anticipated expiration of a legacy non-core content licensing relationship that was inherited as part of a prior acquisition. On a trailing 12-month basis, our net revenue retention was 97%. Overall, net revenue retention remains strong, a strong reflection of our successful cross-sell and up-sell model and the must-have mission-critical solutions we deliver for our customers. We reiterated our guidance for 2023 with GAAP revenue of $136 million to $141 million, marking growth of 20% to 24% year-over-year. We also expect run rate revenue of $148 million to $155 million for the year, And as you mentioned, our path to profitability remains on track. Our guidance and continued performance are driven by our predictable compounding revenue growth, strong recurring revenue, high revenue retention, and high gross margin profile. As a result of these fundamentals, we continue to reiterate our guidance for positive adjusted EBITDA profitability in Q4 that will translate into free cash flow in the future. Now let me touch on some of the macro trends that serve as a backstop for our growth. Our market is driven by political events and a regulatory environment that continues to increase in complexity at an unprecedented pace. In the US alone, in the 2022 legislative session, the combined state houses introduced more than 84,000 bills and acted 24,000 of them. Each of these legislative bodies are supplemented by tens of thousands of regulatory bodies across the country that consistently pass a myriad of rules and regulations that impact every single industry. From healthcare access to funding, to consumer data privacy, to labor and employment regulation. The legislation and regulations vary greatly from state to state and city to city, creating a myriad of compliance and operational issues for organizations who market, sell, and operate their businesses across the U.S., as well as government agencies who legislate, track, and act on those regulations. On a global level, regulation and policymaking is also at an all-time high. New EU legislative acts have increased 13% since 2020 alone. Moreover, new regulations from the EU to China often quickly extend from local to global, creating large regulatory complexity that spreads globally, particularly around issues such as semiconductors that transition to the new energy economy, crypto assets, the Data Act, and climate change legislation, with significant variation in how and when each region adopts and implements these regulations. Regulatory risk is closely tied to geopolitical, macroeconomic, and operational risk, as issues such as military conflicts and civil unrest spur politicians around the world to respond with new regulations, which in turn creates uncertainty for all organizations and significant top-line and bottom-line impact for companies that operate globally. This is having a direct and significant impact on our customers. In a recent PwC survey of CEOs, more than half of global CEOs reported that changes in regulation will have the biggest impact on profitability in their industry in the next 10 years. Last year alone, corporations faced $6.4 billion in penalties from SEC enforcement actions, suffered $59 billion in losses from sanctions against Russia, and supply chain disruptions may have caused over $4 trillion in lost revenues in a single year. This backstop is the underpinning of our business. Without fiscal note, organizations face a manual, complex, expensive, and inefficient process for tracking, assessing, and taking action on regulations and geopolitical issues. From the day we signed the fiscal note, we saw a tremendous underserved opportunity to use AI to structure, normalize, analyze, and digitize vast amounts of regulatory, legal, macroeconomic, and geopolitical information, and to embed software workflows that make data useful and actionable for our customers. We believe that this remains a large global market opportunity. We now have the breadth of data and the depth of AI that is unparalleled in our market. As a result, fiscal is now positioned better than ever and better than anyone to build a category creator which constantly innovates to turn insights into actions, convert challenges into opportunities, and mitigate risk to protect operations. As one of our larger multinational enterprise customers stated, Fiscalint empowers us to be at the forefront of the issues that matter most for our business. Another client referred to the current regulatory environment as chaotic and pointed to Fiscalint as a critical source of truth at a time of constant misinformation. With that context, let me talk briefly about the underpinnings of our growth model and the opportunities for potential asymmetric upside in the long term. Every day, our team focuses on allocating capital to the areas of our business with the greatest return and the highest upside. As leaders, we think in terms of both evolutionary growth and revolutionary growth. So let me start with evolutionary growth. Quarter after quarter, we continue to deliver strong organic growth supplemented by creative token acquisition, that facilitate cross-sell and upsell opportunities among our customers across sectors. The model is simple. We take our customers from the previous year, renew them, and upsell those customers with new products and capabilities to grow our business while simultaneously adding new customers each year. The durability of our recurring revenue model reflects the strength of our products and the deep customer relationships that we've built. This drives a high level of revenue predictability for our business, as you've seen. Further, because of our 80% adjusted gross margin profile and our ongoing focus on OpEx cost management, the model also drives significant operating leverage, leading to adjusted EBITDA profitability in Q4 and free cash flow soon thereafter. Looking ahead at scale, we expect to deliver the margin and cash flow model similar to other sector-specific leaders in information services, which on average typically drive free cash flow margins well north of 20%. So the evolutionary, Clockwise, foundational organic revenue growth and margin profile of our business is very strong. Every single quarter, we will continue to expand our business incrementally, but continue to renew our base of customers at a high rate, adding to our annuity-like recurring revenue base, and maintaining a disciplined strategy to maintain high gross margin and positive adjusted EBITDA. In terms of additional growth opportunities, as I mentioned in previous calls, the European market stands as one of the most heavily regulated markets on the planet. And yet, only 13% of revenue comes from this market. We are at the beginning stages of our European expansion, and I believe that similar to other large-scale information services leaders, we can build a business that can rival the size of our North American business with just our current products today. Another market segment that we believe to display strong incremental growth is the state and local government market. According to the US Census Bureau, there are approximately 90,000 local governments in the US alone. Each of these jurisdictions make decisions about everything from property taxes, education funding, zoning, et cetera, and need to understand the relationship to state and federal policymakers, as well as maintain their own relationships with their constituencies. This quarter, as an example, we announced a major deal with the Georgia Legislature and the State Senate, the Office of the Lieutenant Governor, and members of DeKalb County Board of Commissioners to do just that. We believe there are opportunities like this in every state in the country. Now let me touch on revolutionary growth opportunities to accelerate our business and drive outperformance near-term and long-term. These are incubated opportunities that we have been cultivating as a management team that could at any moment take us beyond our clock-like fundamental compounding growth and deliver asymmetric upside. One area of focus for us is leveraging partnerships for larger and broader customer development and more efficient product development. As you've seen, we are starting to gain recognition as the preeminent leader in AI and data for managing regulatory, geopolitical, and operational risk. Earlier this year, we announced a partnership with Paraton, a large integrator for national security solutions. By embedding and integrating our AI and data solutions with Paraton's national security technologies, we bring mutual value to customers in the intelligence, defense, security, health, and state government sectors who need large-scale trusted solutions that keep people safe and secure. Federal agencies and large government organizations have been fiscal note customers for a very long time. Through our own strategic growth initiatives and through partnerships such as Paraton, and other defense contractors, we see long-term opportunities to secure large-scale, multi-year government contracts that can be transformative to our growth. Our leadership in AI and data is leading to other partnerships and integrations as well. In March, OpenAI selected Fiscalint as one of the 14 inaugural trusted partners and the sole provider of legal, political, and regulatory data information to collaborate with AI research and to provide select content for users of OpenAI's ChatGPT platform. Just two weeks ago, AI and data analytics leader Databricks also selected FiscalNote to provide regulatory and geopolitical data and information for their new data marketplace, which is accessed by more than 9,000 customers. And other AI industry leaders are reaching out to us about additional collaborations as well. These new partnerships are testament to the importance of our sector and demonstrate FiscalNote's clear leadership in our market. Another catalyst for our upside is pure new product development. which is, of course, also driven by our decade-long investment in AI. We see compelling and timely opportunities to organically extend our innovation to new areas of risk that have direct and overarching impact on our customers. We will continue to launch new products that leverage our core competitive advantage here. Advancements in AI, such as ChatGPT and GPT-4, when combined with the unique and defensible combination of data, AI, and human intelligence that we hold, should result in faster time to market and more efficient product innovation. that enables us to create new products in record time at an incredibly low cost. As an example, many of the world's largest enterprises are increasingly concerned about risks in their businesses and supply chains, risks that are operational in nature and impacted by the types of legal, political, regulatory, and security issues that we track today. We are uniquely positioned to bring new innovative solutions to market that directly address their biggest and most pressing concerns because of our longstanding leadership in AI, as well as our deep and regulatory data sets that empower businesses to predict, understand, quantify other types of risk that have tremendous impact on their operations. This is just one of many internally driven product development opportunities that allow us to broaden and deepen our customer relationships, push fiscal into new areas of growth for our customers, and provide new lines of revenue that provide significant expansion opportunities for future growth. Stay tuned for more information in this area soon. And finally, M&A remains a catalyst for incremental growth as well. we continue to pursue selective MAA targets that can facilitate strong cross-sell among our base of customers. We've had great success with the majority of our acquisitions as we scale their solutions, catalyze their growth, and add incremental value for our customers. Our January acquisition of Dragonfly is already generating opportunities as our customers look at security and operational risk in the markets they operate in. In this environment, we continue to be selective in our acquisition target and structure. but we remain opportunistic when we see clear opportunities for outsized growth. In sum, as leaders, we are constantly innovating around new customer segments, new product lines, and new offerings, so we can expand the value we deliver for thousands of customers every day. We continue to grow, continue to maintain strong relationships with our customers through our retention and subscription model, continue to support a high gross margin and long-term free cash flow generation. And we continue to innovate for the future by expanding our product suite and geographic footprint with a capital model that supports us profitably and beyond. With these strong fundamentals, we remain focused on strategies that allow us to deliver our evolutionary growth and profitability goals while positioning us for revolutionary asymmetric upside in the future. We will continue to allocate our time and capital on the activities and innovations that generate the strongest returns and maintain our steadfast commitment to delivering superior customer value. In summary, We are executing on the opportunities in front of us today, improving our compounding growth model. Our business is driven by macro trends that continue to create a large amount of uncertainty from a policy perspective. Our foundation of recurring revenue, high adjusted gross profit margins, and strong operational leverage will drive our business to adjust to deep enough profitability in Q4 and strong free cash flows soon thereafter. Strategically, we have a unique and defensible combination of data, AI, and human intelligence that provides unparalleled value for our customers and a sustainable competitive advantage for fiscal note. While the strengths of our fundamentals are not yet reflected in our stock price today, we are confident that long-term our valuation will align with the fundamentals of our business. As leaders, we are 100% focused on building a durable, profitable compounding growth company that provides unique value to the world's most important decision makers and scaling this business to $200, $300, $500, and $1 billion in recurring revenue and beyond. Now let me turn it over to John for details on our financials and our outlook going forward.

Thank you, Tim, and good morning. I'm going to spend some time providing further details on the quarter. I'll also discuss what to expect in terms of financial performance for this year and walk through our path to positive adjusted EBITDA and, over time, positive free cash flow. Let me first start with revenue. First quarter revenue was $31.5 million, marking growth of 21% year-over-year in total and 10% growth on an organic basis. We are executing on our strategy to deliver compounding growth, driven by strong organic growth and complemented by accretive, strategic tuck-in acquisitions. This has been our track record, and we expect to continue this revenue performance moving forward. First quarter subscription revenue, which makes up 90% of our total revenue, was $28.5 million. This is an increase of 25% from a year ago and 14% on an organic basis, once again showing our strong recurring revenue model. Our advisory and other revenue was $3.1 million, a slight $200,000 decline year over year. We exited Q1 with run rate revenue of $134 million in total, marking 10% growth year over year. Run rate revenue is defined as ARR plus non-subscription revenue earned during the last 12 months. It is a key management metric and serves as a baseline for the subsequent quarters and beyond. On an organic basis, run rate revenue is $126 million, reflecting 9% growth on a pro forma basis as defined in our press release. NRR, or net revenue retention, for the quarter was approximately 96%. On a trailing 12-month basis, NRR was 97%. NRR rates can fluctuate slightly from quarter to quarter. This quarter, our NRR was affected by the anticipated conclusion of a large licensing contract that Fiscal Note inherited through an acquired business. Excluding this contract roll-off, NRR would have been 98% for the quarter. We do find that NRR rates are highest among our large enterprise and public sector accounts and lower among midsize companies and trade associations. Enterprise and strategic accounts now represent our largest, fastest growing, highest retention customer group and will continue to drive increasing total NRR. We are continuing to scale our strategic and enterprise accounts teams and reallocating our sales resources accordingly. We grew our total annual recurring revenue, or ARR, to $119 million as of March 31st, an increase of 19% compared to the same period in 2022. Organic revenue, as we defined, was $113 million as of quarter end. This represents a 9% growth rate when compared to our ARR and Q1 of last year on a pro forma basis. This is consistent with our expectations for the year. as we anticipate most ARR growth will take place in the second half of the year, consistent with prior years. Looking at gross profit, we continue to enjoy strong margins. Our Q1 gross profit was $22.6 million, representing a 72% margin. Our first quarter non-GAAP gross profit was $25.2 million, representing an 80% gross margin after adjusting for amortization. Sales and marketing costs were $12.3 million for the quarter, an increase of $2.8 million year over year. R&D expenses were $5.1 million, a reduction of about $1 million from a year ago, due in part to increased deficiencies in the completion of certain rebuild projects. Editorial content costs were approximately $4.3 million, a modest increase year over year. G&A expense for the quarter was $18 million. This includes approximately $5.6 million related to the accounting treatment of non-cash stock-based compensation expenses. Excluding these non-cash charges, G&A was approximately $12.7 million, an increase of about $2 million year over year, largely due to public company costs. The operating loss for Q1 was $27 million in total. This includes $6.5 million of stock-based compensation, a $5.8 million goodwill impairment charge related to the performance of our equilibrium software product versus its forecast, and $1.4 million of transaction costs largely related to the accounting treatment of the acquisition of Dragonfly. Our total interest expense was $6.7 million. Of this, cash interest expense was $4.7 million, which is a good proxy for our quarterly cash interest expense going forward, depending on interest rates. The GAVNet loss of Q1 was $19 million, which is reconciled to our adjusted EBITDA loss of $7 million in our press release. Our balance sheet remained solid with $47.5 million of cash and cash equivalents as of March 31st. We have sufficient capital to support our growth initiatives and fund our path to positive adjusted EBITDA in Q4 of this year. As we stated in our last call, we are taking steps to reduce our operating expenses, which should result in $6 to $7 million of in-year cost savings. These cost reduction steps include actions we've already taken and will continue to take this year, including adjusting our talent allocation models. aligning our sales teams to focus on the highest potential clients and segments, using technology to improve our internal processes and workflows, consolidating product development groups and R&D teams, and vendor consolidation and elimination. These actions will start to benefit our adjusted EBITDA in Q2 and will continue in the second half of the year. Lower costs combined with higher second-half revenue will drive us to be approximately breakeven on an adjusted EBITDA basis in Q3 and generate positive adjusted EBITDA in Q4. This brings me to our guidance. For Q2, we expect revenue of $32 to $34 million. Our adjusted EBITDA is expected to be a loss of $4.5 to $3.5 million, depending on revenue and the timing to realize the benefit of certain cost reductions. For the full year, we are reiterating all of our guidance previously provided, including a run rate revenue of $148 to $155 million, inclusive of the recent Dragonfly acquisition, and excluding any future acquisitions we may make. GAAP revenue of $136 to $141 million, marking growth of 20 to 24% year over year, including the acquisition of Dragonfly. We expect adjusted gross margins to continue at approximately 80%. And we are reiterating our guide for adjusted EBITDA loss between $8 and $6 million for the full year. We are also providing new visibility to our plan to be adjusted EBITDA breakeven in Q3. Given our guidance for the year, this clearly means solid adjusted EBITDA profitability in Q4 of approximately $3 to $5 million. resulting from the cost action we discussed previously and our seasonally stronger second half revenue. As we continue to deliver strong 80% adjusted gross margins, leverage the operating platform we have in place, and continue to manage our costs, we expect to drive strong conversion of incremental revenue to adjusted EBITDA. As we reach the inflection point of adjusted EBITDA profitability in the short term, We expect this operating leverage will enable us to deliver strong free cash flow margins in the long term. We have approximately $94 million of debt capacity subject to certain conditions. Our lenders remain flexible and are supportive of the company's focused strategic acquisition program. As Tim discussed, we will continue to pursue selective M&A opportunities that are accretive to our profitability. and that drive cross-sale opportunities within our stable and growing base of thousands of customers. And of course, given our stock price, we are focused on transaction structures heavily weighted towards earn-out and structured stock consideration with terms that give long-term upside with minimal dilution. In closing, we are delivering on top-line growth. As we execute on our strategy to build a compounding growth, profitable business that drives mission-critical solutions to the world's most important decision makers. There are secular trends propelling our business and creating sustainable demand. From increasing regulation to geopolitical threats to macroeconomic uncertainty, only Fiscal Note has the breadth of AI-enhanced data and human intelligence to help customers navigate this increasing operational complexity. We continue to leverage our investments in AI to to drive new growth opportunities and drive efficiencies throughout the organization. With highly predictable recurring revenue, strong gross margins, and ongoing cost management, our path to profitability is clear. And we have the operational structure and capital we need to scale this business and drive long-term value. With that, we will now open up the call to questions. Operator?

At this time, I would like to remind everyone, in order to ask a question, please press star followed by the number one on your telephone keypad. Your first question comes from Mike Lattimore with Northland Capital Market. Your line is open.

Great. Good morning. Yeah, congrats on the results and strong outlook there. John, I just want to make sure I got the number down correctly. Did you say that you're expecting positive EBIT of $3 to $5 million in the fourth quarter?

That's right, Mike. We mentioned that we're approaching breakeven in the third quarter and the expectation of $3 to $5 in the fourth quarter.

Okay, great. And then just on the strategic account strategy, can you elaborate a little bit more on that you know what are what are the resources you're devoting to that and you know what's the pipeline bill look like and maybe what percent of the pipeline is in this category at this point um i have josh resnick our president here with us and i'll let him answer that question yeah hey mike um uh thanks for taking the time today um so we don't disclose down to those level of metrics uh down to that specific line but i'll tell you um

But generally speaking, we see a tremendous opportunity there as we can bring our full portfolio products to larger enterprises and really leverage what we've built across the portfolio of the entire company. And we've seen our ability to do it kind of case by case within our enterprise approach generally. And we believe that by applying resources to focus on this, we can drive growth in that area going forward.

Great. And then just in terms of the environment and overall company, any change in sales cycles or deal sizes this year relative to the end of last year?

Yeah, Mike, this is Josh. So we're still, you know, we're continuing to see essentially the same issues in macro that we've been talking about for the past couple of quarters where we see

some elongation of buying cycles um some uh budget pressure from uh uh clients and we're continuing to work our way through that um and that's built into our forecast for the year right but no no change in those dynamics you know no no no significant change okay i just last on um you know you talked about some uh asymmetric upside potential and i think one of the categories was you know, kind of the federal space, you know, is that a, are those opportunities sort of longer term at this point, or are you tracking a few, you know, like task orders today that could be meaningful?

Hey, Mike, this is Tim. So, we have not actually forecast any of that upside that we've been talking about. I think a lot of the foundational elements that we're laying down right now are anticipation of some new upside in the future, but they have not fixed the forecast. But obviously, we have people spending time on them. We have people investing resources into them because we do think that there's a substantial upside in the areas that lay down.

Great. Okay. Thank you. Best of luck.

Your next question comes from Matt VanVleet with BTIG.

Your line is open.

Hey, good morning. Thanks for taking the question. I guess digging in a little more on the enterprise and strategic account side of things. I wonder if you could just walk us through kind of what percentage or how many of the modules that you're selling do you feel like are appropriate for a number of those customers? Sort of the first part of the question. The second part, what is sort of the the typical average of maybe the larger cohort of customers that have taken on the platform, maybe expanded a couple times as sort of a near-term opportunity with the first part of the question being sort of the upper bound as you look at that opportunity?

Yeah, Matt. This is Josh. Let me try to answer it and let me know if I captured it or not. I mean, again, we don't break down into specifics among the segments. But in terms of your question about what share of our products do we think are applicable there, generally speaking, if you think about it from the perspective of a large multinational, you need to manage to a significant number of issues that range from legal and regulatory to political and policy to security, cybersecurity issues. message resonance and the like. And so we have solutions really across our various lines of business that span those needs. So I think that the use case depends on this particular business in terms of what their specific problems to be solved are. But generally speaking, we think that we have the opportunity to present

bundles from amongst all our products that will meet the needs of those larger enterprises okay and and then just any any help on sort of what what that near-term opportunity like how many customers are using you know say half of the the platform talking about you know they're all a lot of them are willing and maybe capable of using it do you have customers that are already using a number of modules where it gives you the encouragement to say, all right, let's put more resources. Let's make this our highest priority area. Just trying to gauge kind of what the true near-term opportunity is here and understanding why the resources are maybe even being diverted to that component.

Sure. I mean, what I can tell you is we do see a significant portion of customers that are using multiple products already. The number of products per customer are increasing. So in other words, within our existing sales structure or previous sales structure, we were able to create those bundles and do the right upsell and cross-sell to meet the needs that we're seeing from those larger multinationals. And so we believe that by taking these resources and focusing more on creating those broader bundles and being more intentional about what we actually bring to market, we can drive the growth in that way so again you know we don't disclose um specifics um to that segment but we're seeing um like i said we're seeing users who buy on to these bundled offerings we're seeing the number of products per customer increase and so we know the trends are there and with that focus we think we can drive that further okay very helpful there and then um

I guess maybe for John, as you look at the in-process cost savings initiatives you have there, what could potentially push those later into the year, the ones maybe not yet taken? Or what would give you maybe the internal confidence that the top line is growing at a faster clip? You're seeing more uptake, especially as you incorporate more of these AI functionality. maybe you would start to hire a little bit sooner. So maybe it boils down to, you know, how much is headcount related of those in process and yet to be taken cost initiatives, and how much are more kind of structural costs around different vendors or, you know, paring back on certain internal spend?

Thanks, Matt. So headcount accounts for vast majority of our total operating expenses. So from an efficiency standpoint, that's going to be the primary source of efficiency as we drive forward and look at leveraging our staff in each functional line of the business. We've already identified and taken actions and will continue to kind of think about ways to be more efficient down the road. We've also been very aggressive on the vendor side. We've specifically looked at areas where you know where we're spending the most and and you know focus on those contracts but we've also eliminated a lot of contracts that just um you know we made the decision we didn't no longer need it um as it relates to the revenue growth and matching revenue growth with the with the cost reductions we're we're on a bi-weekly basis looking at the pipelines making sure that we're pacing towards uh what we expect in terms of um revenue growth and revenue ramp. And we'll continue to kind of monitor that, but stay committed to all aspects of our guidance, both the revenue and the EBITDA that have a lot of levers to pull along the way if we, you know, see adjustments are necessary or opportunities to accelerate, present themselves in one segment or another.

Okay, great. Thank you.

Your next question comes from Rudy Kessinger with DA Davidson.

Your line is open.

Hey, guys. Just one question for me. Understanding your years are back half-loaded from a new business standpoint, the guide clearly implies greater sequential growth Q2 to Q3 and Q3 to Q4 on both a dollar basis and a percent basis than last year. And just what gives you the confidence to hit those numbers. Most companies at this time are guiding to smaller sequentials and smaller dollar growth back up this year versus last year.

Thanks, Rudy. First of all, we look at the productivity of the sales team coming out of last year and some slight changes we've made to the team coming into this year. Our first quarter of performance is in line with expectations it's in line with prior years we did have kind of the exceptional event that we mentioned that had a an impact on the net retention rate in the first quarter but um but for that i think you know our first quarter is uh performs very much like prior years so i think that we're kind of in line for the type of ramp that we've seen in prior years and we have a broader product selection that we have in prior years we've got more kind of innovation and of new features to cross out as well. So there are a couple of new things that we'll be focused on and feel like, as I said, we've monitored the pipeline biweekly with all of the teams just to make sure they remain on pace for the expectations for the year and move resources around where we see growth opportunities so we take opportunities to accelerate where we can.

There are no further questions at this time.

I will now turn the call back over to Tim.

All right. Thank you, everybody. Appreciate everybody jumping on the call here. We've got another great quarter and really looking forward to delivering on the results that we've guided towards here and really continue to execute on the business.

So appreciate the time. Thank you, everybody.

This concludes today's conference call. You may now disconnect.