FiscalNote Holdings, Inc.

Ladies and gentlemen, good afternoon. My name is Abby and I'll be your conference operator today. At this time, I would like to welcome everyone to the Fiscal Note Holdings Incorporated fourth quarter and full year 2025 financial results conference 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, press star one a second time. Thank you. And with that, I would now like to turn the call over to the company to begin the conference.

Good evening. My name is Yojin, Investor Relations for Fiscal Notes, and we are pleased you could join us this evening. The purpose of today's call is to discuss Fiscal Notes fourth quarter and full year 2025 financial results and guidance for 2026. Joining me with prepared remarks are Josh Resnick, Chief Executive Officer and President, and John Slabaugh, Chief Financial Officer and Chief Investment Officer. Other members of the senior management team will be available as needed during the Q&A session that will follow. Please note, today's press release related current report on Form 8K and updated version of the corporate overview presentation are all available on the investor relations portion of the company website. In terms of important housekeeping, please take note of the following. 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 rather are 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 important factors that could affect our actual results, as well as the risks and other important factors discussed in today's earnings release, please refer to our SEC filings, which are available either on our company website or the Securities and Exchange Commission's EDGAR system. Additionally, non-DAP financial measures will be discussed on this conference call. Please refer to the tables in our earnings release or the updated version of the corporate overview presentation for reconciliation of these measures to their most directly comparable GAAP financial measure. Finally, we use key performance indicators, or KPIs, in evaluating the performance of our business. These include annual recurring revenue, or ARR, and net revenue retention, or NRR. With that, I'd like to turn the call over to Fiscal Notes CEO and President, Josh Resnick.

Thank you, Yojin, and thanks to everyone for joining us. I'm glad to be here to discuss FiscalNote's full year 2025 results and to share our strategic vision for 2026 and beyond. Over the past year, and including the recent market expansions and the additional streamlining that we announced today, we've made significant changes to strengthen our foundation and align our strategy with evolving customer needs and market opportunities. The FiscalNote you see today is more profitable, more agile, and better positioned for the future. As outlined in today's press release, we are guiding to approximately $1 million of adjusted EBITDA in the first quarter, and reflecting the cost actions announced today, $14 million to $16 million for the full year. This implies adjusted EBITDA of roughly $13 million to $15 million across the remaining three quarters, with margins expected to exceed 20% in that same period. That represents a meaningful step change in profitability and approximately doubles our adjusted EBITDA margin profile compared to the same period in 2025. Separate from adjusted EBITDA, what's vitally important is that after implementing the changes announced today and excluding one-time costs associated with the restructuring, we expect Fiscal Note will generate positive free cash flow for the 12 months ending March 31, 2027. This is a significant inflection point and represents the start of a promising new chapter in fiscal notes evolution. These efforts have provided the company with a much stronger foundation, and we are now taking a new leap forward to positive free cash flow while also positioning the company to take advantage of opportunities in two new high growth markets. Today, we announced a plan to reduce our cash operating expenses by over 19% significantly accelerating our ongoing operational transformation through changes to personnel as well as insourcing third-party spend. More specifically, we're implementing a workforce transformation plan that will reduce headcount by approximately 25% year-over-year. This is a continuation of our operational discipline that is now being accelerated by rapid advancements in generative and agentic AI. As you know, we have already eliminated more than $35 million in annual cash operating expenses over the past three years. We've done this through applying a clear strategic focus and ensuring that our operating structure and cadence reflects that focus, reducing investment in non-core and unprofitable areas. And as an organization that was born during the age of big data, when AI was known as machine learning and natural language processing, we have always operated at the leading edge of what we now call artificial intelligence. We've been deploying the most recent forms of generative and agentic AI over the past year with the greatest focus in our R&D organization to strong results. We now have 100% adoption of AI tooling across our engineering organization, which is translating directly into development cycles that are now approximately three times faster than before with work that previously took months now often completed in weeks, and work that took weeks increasingly delivered in days. In Q4, our R&D teams used AI in 88% of their completed development work, enabling them to accomplish 70% more than they did in the same period one year prior. This is a clear example of what becomes possible when these tools are deployed effectively at scale. The bulk of reductions tied to today's announcement are in our commercial teams, content generation, and G&A. I'll walk you through how we're doing this and what that means for what you can expect going forward. We are reducing our commercial organization by approximately 24% on an expense basis and approximately 18% on a headcount basis as we continue to align our go-to-market structure with how customers increasingly discover, evaluate, and adopt our products. These actions include eliminating certain highly compensated senior roles, and increasing automation of our outbound marketing activities, allowing us to operate more efficiently without reducing capacity. We also are deploying agentic AI workflows to significantly increase the speed, customization, and scalability of client support, enabling higher service levels with a leaner team while maintaining coverage. In parallel, we are accelerating our transition toward product-led growth by expanding our API offerings and exploring additional low-friction purchasing mechanisms, including credit card-based self-serve onboarding and emerging agentic AI payment models, allowing customers to access and scale usage of our data without traditional sales engagement. We also are improving the efficiency of our content operations by approximately 20% on an expense basis and approximately 33% on a headcount basis. by leveraging generative AI for segments of our content production and deploying agentic workflows to automate certain routine editorial and publishing tasks, including managing publication workflows into our CMS. These initiatives reduce manual effort and lower value activities, while increasing speed and consistency of output. Importantly, we are minimizing changes in our highest value areas, including bespoke monitoring and analytical services for clients. as well as the CQ Roll Call Newsroom's core reporting capabilities. Overall, our objective is to use AI to enhance productivity and scalability while preserving the human expertise and differentiated coverage that define our premium offerings. In G&A, we're reducing by approximately 12% on an expense basis through targeted and aggressive vendor savings. In parallel with the rapid advancement of agentic AI capabilities in recent months, we are deploying these tools at scale across the broader organization. This initiative combines targeted top-down transformation initiatives along with organic adoption at the team level to improve productivity and execution across a broad set of functions. As part of this effort, we are beginning to pair managers and team members with AI platforms, effectively creating human plus AI operating dyads that expand individual capacity and enable higher impact work. We view this as a strategic evolution in how modern companies are built and run, recognizing that AI tools are increasingly becoming true force multipliers and that incremental adoption alone will not be sufficient to capture their full value. Taken together, these actions are designed to structurally improve our operating leverage while preserving the drivers of retention, expansion, and long-term growth. Our relative investment in product and R&D has increased, with a larger share of capital allocated to investment in policy note and emerging growth initiatives, while reducing lower return cost areas. By simplifying workflows, reducing manual effort, and reallocating capital towards scalable product capabilities, we expect to support both margin expansion and more efficient revenue generation over time. This is what gives us increased confidence in achieving consistent positive free cash flow while continuing to invest in the strategic initiatives that will define fiscal notes next phase. Importantly, we believe this transformation positions the company to grow more efficiently as customer consumption models continue to evolve. This transformation comes at a pivotal moment as we sit at an inflection point in how policy intelligence is consumed, trusted, and acted on. This creates new avenues for Fiscal Note to apply its data, expertise, and relationships, and Fiscal Note is well positioned for these new growth opportunities. Our company has a uniquely valuable set of assets. Global to local data spanning more than 100 countries and over 16,000 local districts assembled from highly fragmented and unstructured sources. Award-winning proprietary analysis that is widely recognized for its expertise and objectivity. deep domain expertise built over many years, and thousands of trusted relationships with leading institutions across the private sector, public sector, and NGO community. The problem in our core business has not been the assets. Even setting aside our proprietary data and analysis, the public datasets are highly fragmented, unstructured, and difficult to collect at scale. And making them decision-ready requires extensive normalization, context, and domain expertise, which is where Fiscal Note creates differentiated value. And while Fiscal Note started doing this more than a decade ago, I think it has now become clear to everyone how important this data is to organizations around the world, making this valuable data even more ripe for consumption. The challenge with our core business then has not been the data. The problem has been the delivery mechanisms. Our valuable data sets have been constrained by legacy platforms that were siloed and increasingly unable to keep pace with technology. That created a gap between the value we had and the value that we were able to deliver to our customers. And beyond our own platform challenges, those interested in the data were limited in their ability to maximize value by combining our insights with their own internal data set, as well as accessing our data through other platforms of their choosing. In short, The policy intelligence that we provide is highly valuable to organizations of all types around the world. And with the right delivery mechanisms, we believe Fiscal Notes can build a growing, thriving, and highly profitable business. We've responded by rethinking delivery end-to-end, strengthening our platform while ensuring our intelligence can flow into new channels that are opening up meaningful, scalable growth opportunities. The launch of PolicyNote a year ago was our first step in changing our own delivery mechanism. We knew that the impact of PolicyNote would take some time to develop, and in a moment I'll explain where we are on that path. But beyond PolicyNote itself, because we focused on our strengths in policy and have done the foundational work to ensure that our valuable insights can be leveraged outside our own platforms, we also placed ourselves in the path of significant new opportunities as the world around us is changing. As a result, at this new inflection point for information consumption, fiscal note is uniquely positioned to take advantage of the growing demand for political and policy intelligence through new markets that barely existed a year ago, specifically prediction markets and AI-driven consumption. These are transformative new areas with the potential to scale quickly. First, I'll touch on policy notes. In 2025, we executed the first phase of the PolicyNote migration, completely transitioning customers off of the legacy fiscal note platform. Usage metrics on PolicyNote remained strong throughout 2025, with key activity adoption and frequency of use higher in PolicyNote compared to the legacy fiscal note platform over a similar time period, indicating that a greater share of users have made PolicyNote part of their regular workflow. For example, The share of users viewing legislation rose by 250%, and the share viewing alerts increased by 88%. These stats and others indicate both broader usage and repeat engagement. In addition, as we continue to build a longer track record of customer performance on PolicyNote, we're seeing signs of improved retention compared with legacy platform cohorts. While PolicyNote currently represents only a portion of our overall customer base, and broader factors such as budget constraints, Prior customer experience on legacy systems and ongoing platform refinement continue to influence results. We believe that these early trends point to the potential for stronger underlying customer health over time as the platform matures and adoption expands. In that vein, as John will discuss in more depth, we have experienced some headwinds that are worth addressing directly. A small number of large enterprise customers chose to cancel without migrating to PolicyNote and therefore did not have the opportunity to evaluate the new platform. In addition, broader macroeconomic pressures continue to influence client budgeting decisions across parts of our customer base. Looking ahead, PolicyNote is not standing still, and we still have more work to do. From a product development standpoint, we continue to invest in improving the core user experience as well as adding new AI-powered enhancements. I'm confident in the work our product and R&D teams are doing, building on the more than 35 major features we launched in 2025, including AI legislative drafting, social listening for early policy signals, bill comparison, and AI-generated tariff impact reports. Going forward, we plan to focus on creating a differentiated experience that is heavy on the Gentic workflow, tied to our unique and proprietary mix of specialized data and insights. When PolicyNote is complete, it will be an all-in-one platform for customers who want to leverage an AI-native, policy-specific, vertical platform with trusted data and expertise. On the PolicyNote backend, we are leveraging best-in-class AI technology so that our customers get the benefit of advancements by the industry's leading platforms. But our in-depth prompt engineering and our ability to leverage continually updated, accurate data sets and proprietary analysis give PolicyNote customers an important edge over what they can get from AI agents built on top of general purpose platforms. Nonetheless, we also embrace the fact that the world is rapidly changing and the ways in which users want to consume our trusted information has and will continue to change. Users have more options for information discovery and consumption. The barriers to creating their own custom platforms are coming down. Third party AI platforms are getting better and the use of agents is proliferating. This creates new opportunities for us, and I'll now turn to discussion of our policy intelligence as the infrastructure for AI-driven consumption outside of our PolicyNote platform. The world is changing rapidly, and customers increasingly will want to consume authoritative policy intelligence inside their own environments, embedded directly into their own enterprise tools, workflows, and AI agents, rather than through a standalone platform. Alongside the emergence of new contexts, such as prediction markets, which I'll discuss shortly, this shift has the potential to unlock a significant expansion in demand for fiscal mode's unique blend of data and expertise. We believe this represents a large and durable growth opportunity and one where we are well positioned to lead, defining the infrastructure layer for how policy intelligence is operationalized in AI-driven environments. Over the past year, as part of the PolicyNote transformation, we completed foundational work to modernize and enhance our APIs. More recently, we extended that capability by introducing native support for the Model Context Protocol, or MCP. And for those of you for whom MCP is a new term, it's an emergent standard with extremely high adoption rates within the agentic AI community. Earlier this month, we formally announced the expansion of the PolicyNote API alongside the launch of these MCP wrappers. This enables MCP-compatible AI agents and platforms, including those built on Cloud, OpenAI, Google Gemini, or Microsoft ecosystems, to discover, query, and integrate fiscal notes legislative, regulatory, and stakeholder intelligence. as a first-class, trusted, and verified operational data layer within their workflows. Importantly, the value of Fiscal Mode does not reside in any single delivery interface. It resides in the depth and breadth of our data, our domain expertise, our governance processes, our commitment to accuracy, and the trust we've built with customers over many years. As intelligence increasingly moves into automated systems, These capabilities position fiscal note as a critical operating layer or infrastructure that enables AI agents and enterprise workflows to function with confidence in high-stakes policy environments. This shift significantly expands our total addressable market. By making our intelligence programmatically accessible, we can attract a broader ecosystem of developers, partners, and third-party platforms that may never have purchased a traditional software product. but are highly willing to embed and rent trusted infrastructure. This creates the potential for Fiscal Note to scale alongside the growth of AI-native enterprise applications and agentic AI decision support systems globally. This is already live in market. We have enterprise customers actively using our APIs today, including organizations such as Lumen Technologies and ICE Data Services. a subsidiary of Intercontinental Exchange, which operates multiple futures markets and stock exchanges. These deployments are generating revenue and represent early proof points for what we believe can become a meaningful and scalable growth engine. Strategically, this approach opens ThistleNote to new categories of customers, including enterprises, building internal decision tools, smaller organizations seeking targeted on-demand access, and developers creating AI-native products who need appropriately sourced and verified data. It also supports a true product-led growth motion where teams can provision API keys, explore documentation, and begin integrating our intelligence without a lengthy custom sales or onboarding process. Over time, as more third-party applications and automated workflows rely on our infrastructure, FiscalMote can benefit from an additional strategic advantage the creation of richer, longitudinal data and usage signals. This continuous feedback loop can further strengthen our internal models, improve product quality, and reinforce our data mode in ways that are difficult for competitors to replicate. From a commercial perspective, we're exploring both consumption-based pricing models and hybrid structures that allow customers to shift spend between seat-based licenses and API usage credits. Given the scarcity and mission-critical nature of governed policy intelligence and the real-world financial and operational outcomes it influences, we believe we can maintain pricing integrity across delivery models. Finally, this expanding business model is expected to be highly profitable. The core infrastructure has already been built, incremental cost of delivery is low, and the absence of perceived scaling constraints allows revenue to grow efficiently as usage expands. In summary, making our intelligence programmatically accessible allows Fiscal Note to participate more directly in new ecosystems where high-quality policy insight is becoming mission critical. And now, I'd like to discuss a second major application of our capabilities, and one where we see particularly compelling growth potential, political prediction markets. Our entry into this space is exciting, highly relevant, and extremely adjacent. It is a high conviction extension of the same foundational assets that define fiscal note today. The proprietary data that we've assembled, our domain expertise, our predictive modeling capabilities, and our deep understanding of regulatory and geopolitical dynamics all translate naturally into the needs of participants in prediction markets. The market itself has undergone a structural transformation. In the United States, Prediction market volume expanded from approximately $9 billion in 2024 to roughly $44 billion in 2025, a fourfold increase in just one year. And current trends suggest the market could approach a $150 billion annualized run rate in 2026. Institutional validation is also accelerating. Bloomberg has integrated prediction market signals into the terminal, major trading firms are beginning to establish dedicated prediction market desks at the regulatory level the cftc's future proof initiative has signaled a meaningful shift toward treating political event contracts as legitimate derivatives rather than speculative wagering instruments and its recent announcement regarding potential rulemaking indicates a desire to mature the applicable regulatory frameworks and bring greater trust and transparency to these markets taken together These developments point to the early stages of what we believe could become a significant new category within institutional financial markets. Longer term, event-based derivatives tied to policy and geopolitical outcomes could represent a market measured in the hundreds of billions and potentially approaching a trillion in annual volume as they become embedded in brokerage platforms, corporate risk management frameworks, and macro trading strategies. Even a modest participation in this ecosystem would represent a meaningful opportunity relative to fiscal note's current revenue base. Our role in this market is distinct. We are not seeking to build or operate an exchange. Instead, we are focused on providing the differentiated intelligence layer that improves market quality and usability, including proprietary political risk data, contract design insights, and analytical overlays that help market participants interpret signals more effectively. This approach allows us to leverage our core strengths while avoiding the capital intensity associated with exchange infrastructure. To support this strategy, we're partnering with specialized infrastructure providers, including 365 Prediction, founded by Dr. Leila Mentas. These partnerships enable us to access exchange, clearing, and distribution capabilities while concentrating our investment on areas where we believe we can create the most value. We also believe FiscalNote is uniquely positioned to help raise the bar for market integrity. Factors such as accuracy, governance, transparency, and trusted resolution criteria will determine whether prediction markets evolve into institutional-grade financial infrastructure. These are precisely the areas where FiscalNote has built credibility over many years. Our structured legislative datasets and domain expertise, which span decades and cover multiple jurisdictions, provide a foundation for more precise contract specification and more defensible resolution frameworks, advantages that new entrants may find difficult to replicate. In parallel with these efforts, we also are developing and testing a portfolio of related products, some of which are previewed at politicalpredictions.com, aimed at other elements of this new ecosystem. From a capital perspective, the prediction market opportunity is attractive because the primary inputs, our data assets, analytical models, and institutional relationships already exist. As a result, we can pursue meaningful participation in this market without requiring significant incremental investment. We recognize that investors will naturally focus on three areas as this initiative progresses. First, timing of revenue contribution. While prediction markets represent a large and rapidly growing opportunity, monetization will scale over time as partnerships mature and products gain traction. Second, margin profile. Given the infrastructure light nature of our role, we believe incremental revenue in this area has the potential to be highly attractive from a profitability standpoint. And third, early indicators of success. In the first year, we will be focused on metrics such as product adoption, partner integrations, user engagement, and the development of new revenue streams tied to transactional activity and content distribution. Taken together, We view prediction markets as a logical and potentially transformative extension of FiscalNote's capabilities, one that allows us to participate in the evolution of how policy risk is priced, hedged, and acted upon globally. Stepping back, the FiscalNote you see today is fundamentally different from the company that existed just a year ago. First, we have reshaped the core business. PolicyNote is now a modern AI-forward policy intelligence platform that is driving strong engagement. With the transition well underway and operational efficiencies taking hold, we see a clear path for this business to become a high-margin, free cash flow generative engine over time. Second, we are opening meaningful new growth vectors that leverage the same underlying assets. Our expanded API capabilities and native MCP support position FiscalNote as an infrastructure layer provider of authoritative policy intelligence for the enterprise AI ecosystem. This represents a large, highly scalable product-led opportunity, one that allows us to expand total addressable market while requiring relatively modest incremental capital. Third, our entry into political prediction markets reflects another natural extension of our capabilities into one of the fastest growing financial market categories globally. By focusing on the intelligence layer, data analytics, contract design, and governance, we can participate in this ecosystem in a capital efficient way while helping to raise the quality and credibility of market signals. Underpinning all of this is a deliberate operational transformation. We are deploying AI at scale across the organization to simplify workflows, automate routine work, and increase productivity. This allows us to pursue new opportunities with a reduced cost base, strengthening operating leverage as we grow, and achieving positive free cash flow on a defined near-term timeline. As a result, while Fisconote is a more focused company today, we believe we are also a more profitable and more strategically positioned company. We have worked to make the core business structurally stronger, and we are entering large emerging markets with meaningful tailwinds, without taking balance sheet risk or making capital-intensive bets. Looking ahead over the next 12 to 18 months, investors should expect to see continued progress across all three dimensions. We expect BiscoNote to be free cash flow positive by the end of Q1 2027. We expect the API and MCP business to become a growing contributor as adoption expands across enterprise and developer ecosystems. And we expect the prediction markets initiative to demonstrate early commercial traction through partnerships, product launches, and expanding engagement. We also will continue to explore opportunities to optimize our portfolio through the strategic divestiture of non-core assets. Taken together, we believe these actions position Fiscal Note to grow more efficiently, participate in new categories of demand, and create long-term shareholder value. With that, I'll turn it over to John to walk through the financials in more detail. John?