FiscalNote Holdings Inc

Previous wording

As a result of our acquisitions, respectively, we have, and will continue to incur, significant non-cash amortization expense related to the amortization of purchased intangibles, which have reduced our operating income by approximately $1.0 million and $1.2 million during the three months ended March 31, 2024 and 2023, respectively.

Current wording

As a result of our acquisitions, we have, and will continue to incur, significant non-cash amortization expense related to the amortization of purchased intangibles, which have reduced our operating income by approximately $0.8 million and $1.3 million during the three months ended June 30, 2024 and 2023, respectively, and $1.8 million and $2.4 million during the six months ended June 30, 2024 and 2023, respectively.

Previous wording

subscription revenue of approximately $0.2 million and $0.3 million during the three months ended March 31, 2024 and 2023; and

Current wording

subscription revenue of approximately $0.1 million and $0.3 million during the three months ended June 30, 2024 and 2023 and approximately $0.3 million and $0.6 million during the six months ended June 30, 2024 and 2023; and

Previous wording

Non-subscription advisory revenue of approximately $0.1 million and $0.8 million during the three months ended March 31, 2024 and 2023.

Current wording

Non-subscription advisory revenue of approximately $0.5 million during the three months ended June 30, 2023 and approximately $1.3 million during the six months ended June 30, 2023.

Previous wording

Subscription revenue of approximately $2.8 million and $3.0 million during the three months ended March 31, 2024 and 2023;

Current wording

Subscription revenue of approximately $3.2 million during the three months ended June 30, 2023 and approximately $2.8 million and $6.2 million during the six months ended June 30, 2024 and 2023;

Previous wording

Run-rate revenue of approximately $15.2 million at December 31, 2023 and $12.7 million at March 31, 2023; and

Current wording

Run-rate revenue of approximately $15.2 million at December 31, 2023 and $13.6 million at June 30, 2023; and

Previous wording

Annual Recurring Revenue ("ARR") of approximately $14.7 million at December 31, 2023 and $12.7 million at March 31, 2023.

Current wording

Annual Recurring Revenue ("ARR") of approximately $14.7 million at December 31, 2023 and $13.2 million at June 30, 2023.

Previous wording

At the end of the first quarter of 2023 the Company had approximately 825 employees. In conjunction with the Company's product rationalization, business simplification, and cost takeout actions, the Company's full-time equivalent headcount reduced by approximately 150 from the end of the first quarter of 2023 through December 31, 2023. As a result, the Company has seen a reduction in overall costs across all operating expenses. We continue to invest for future growth. We are focused on several key growth levers, including cross-selling and upselling opportunities at existing clients, expanding our client base with a focus on enterprise and government customers, expansion into adjacent markets and deepening our offerings for regulated industries or sectors, and continuing to execute on our acquisition strategy. Several of these growth drivers require investment in and refinement of our go-to-market approach and, as a result, we may continue to incur additional costs upfront to obtain new customers and expand our relationships with existing customers, including additional sales and marketing expenses specific to subscription revenue.

Current wording

At the end of the second quarter of 2023 the Company had approximately 760 employees. In conjunction with the Company's product rationalization, business simplification, and cost takeout actions, the Company's full-time equivalent headcount reduced by approximately 145 from the end of the second quarter of 2023 through June 30, 2024. As a result, the Company has seen a reduction in overall costs across all operating expenses. Management will continue evaluating the Company's product portfolio for additional rationalization opportunities, both to further reduce the complexity of the business and ongoing operating expenses and to raise capital through opportunistic divestitures where appropriate.

Previous wording

In addition to our GAAP results further described and discussed below in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” we 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.

Current wording

In addition to our GAAP results further described and discussed below in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” we 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 of our business and serve as meaningful measures of our ongoing operational performance.

Previous wording

Our ARR at March 31, 2024 and December 31, 2023, was $109.6 million and $126.1 million, respectively. Excluding Board.org, our ARR at December 31, 2023 and March 31, 2023 was $111.4 and $106.2, respectively.

Current wording

Our ARR at June 30, 2024 and December 31, 2023, was $109.0 million and $126.1 million, respectively. Excluding Board.Org, our ARR at December 31, 2023 and June 30, 2023 was $111.4 million and $107.0 million, respectively.

Previous wording

Management also monitors Run-Rate Revenue, which we define as ARR plus non-subscription revenue earned during the last twelve 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. Our Run-Rate Revenue at March 31, 2024 and December 31, 2023, was $122.0 million and $139.7 million, respectively. Excluding Board.org, our Run-Rate Revenue at December 31, 2023 and March 31, 2023 was $124.5 and $120.9 million, respectively.

Current wording

Management also monitors Run-Rate Revenue, which we define as ARR plus non-subscription revenue earned during the last twelve months. We believe Run-Rate Revenue is an instructive 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. Our Run-Rate Revenue at June 30, 2024 and December 31, 2023, was approximately $120.6 million and $139.7 million, respectively. Excluding Board.org, our Run-Rate Revenue at December 31, 2023 and June 30, 2023 was $124.5 million and $121.4 million, respectively.

Previous wording

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 our parent account level. Customers from acquisitions are not included in NRR until they have been part of our condensed consolidated results for 12 months. Accordingly, the 2022 and 2023 Acquisitions are not included in our NRR for the three months ended March 31, 2023. 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, the timing of renewals, and our ability to retain our customers. Our calculation of NRR may differ from similarly titled metrics presented by other companies. NRR was 96% for the three months ended March 31, 2024 and 2023, respectively.

Current wording

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 our parent account level. Customers from acquisitions are not included in NRR until they have been part of our condensed consolidated results for 12 months. Accordingly, the 2023 and 2022 Acquisitions are not included in our NRR for the three months ended June 30, 2023. 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 level of our revenue base, the level of penetration within our customer base, expansion of products and features, the timing of renewals, and our ability to retain our customers. Our calculation of NRR may differ from similarly titled metrics presented by other companies. NRR was 98% for the three months ended June 30, 2024 and 2023, respectively.

Previous wording

We define Adjusted Gross Profit as Total 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 Total Revenues.

Current wording

We define Adjusted Gross Profit as Total revenues minus cost of revenues, including amortization of capitalized software development costs and acquired developed technology, before amortization of intangible assets that are included in costs of revenues. We define Adjusted Gross Profit Margin as Adjusted Gross Profit divided by Total revenues.

Previous wording

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 Total Revenue.

Current wording

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 Total revenues.

Previous wording

We disclose EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin in this Quarterly Report on Form 10-Q 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 income (loss), net income (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 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 otherwise 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.

Current wording

We disclose EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin in this Quarterly Report on Form 10-Q 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 income (loss), net income (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 otherwise 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.

Previous wording

We derive our revenues from subscription revenue arrangements and advisory, advertising and other revenues. Subscription revenues accounted for approximately 92% and 90% of our total revenues for the three months ended March 31, 2024 and 2023.

Current wording

We derive our revenues from subscription revenue arrangements and advisory, advertising and other revenues. Subscription revenues accounted for approximately 93% and 90% of our total revenues for the six months ended June 30, 2024 and 2023.

Previous wording

Cost of revenues primarily consists of expenses related to hosting our service, the costs of data center capacity, amortization of developed technology and capitalized software development costs, certain fees paid to various third parties for the use of their technology, services, or data, costs of compensation, including bonuses, stock compensation, benefits and other expenses for employees associated with providing professional services and other direct costs of production. Also included in cost of revenues are our costs related to the preparation of contracted advisory deliverables, as well as costs to develop, publish, print and deliver our publications underlying our books revenue.

Current wording

Cost of revenues, including amortization primarily consists of expenses related to hosting our service, the costs of data center capacity, amortization of developed technology and capitalized software development costs, certain fees paid to various third parties for the use of their technology, services, or data, costs of compensation, including bonuses, stock compensation, benefits and other expenses for employees associated with providing professional services and other direct costs of production. Also included in cost of revenues, including amortization are our costs related to the preparation of contracted advisory deliverables, as well as costs to develop, publish, print and deliver our publications underlying our books revenue.

Previous wording

Goodwill is tested for impairment when indicators are present, and if impaired are written down to fair value. An impairment of goodwill has been identified for the three months ended March 31, 2023 and is included in our accompanying condensed consolidated financial statements.

Current wording

Goodwill is tested for impairment when indicators are present, and if impaired are written down to fair value. An impairment of goodwill was identified during the three months ended March 31, 2023 and is included in our accompanying condensed consolidated financial statements.

Previous wording

Comparison of the Consolidated Results for the Three Months Ended March 31, 2024 and March 31, 2023

Current wording

Comparison of the Consolidated Results for the Three and Six Months Ended June 30, 2024 and June 30, 2023

Previous wording

The comparability of our revenues between periods was impacted by the Acquisitions described under “Factors Impacting the Comparability of Our Results of Operations” above. The table below presents the primary items that impacted the comparability of our subscription revenues between periods.

Current wording

The comparability of our revenues between periods was impacted by the Board.org sale and the 2023 Acquisition described under “Factors Impacting the Comparability of Our Results of Operations” above. The table below presents the primary items that impacted the comparability of our subscription revenues between periods.

Previous wording

Advisory, advertising, and other revenue was $2.5 million for the three months ended March 31, 2024, as compared to $3.1 million for the three months ended March 31, 2023. The decrease of $0.6 million, or 19%, was primarily due to timing of revenue recognition for certain contracts combined with movement away from certain product lines.

Current wording

Advisory, advertising, and other revenue was $2.1 million for the three months ended June 30, 2024, as compared to $3.4 million for the three months ended June 30, 2023. The decrease of $1.3 million, or 38%, was primarily due to timing of revenue recognition for certain contracts.

Previous wording

Revenues by geography are determined based on the region of the FiscalNote contracting entity, which may be different than the region of the customer. North America revenues decreased primarily for the reasons stated above. Revenues outside of North America increased primarily due to our acquisitions of Dragonfly (included in Europe).

Current wording

Revenues by geography are determined based on the region of the FiscalNote contracting entity, which may be different than the region of the customer. North America revenues decreased primarily for the reasons stated above. Revenues outside of North America increased primarily due to our acquisition of Dragonfly on January 27, 2023 (included in Europe).

Previous wording

Cost of revenues was $7.2 million for the three months ended March 31, 2024, as compared to $8.9 million for the three months ended March 31, 2023. The decrease of $1.7 million, or 19%, was primarily attributable to a decrease of $0.8 million from sunset products, and $0.7 million decrease from workforce planning actions made primarily throughout the second half of 2023.

Current wording

Cost of revenues, including amortization was $6.9 million for the three months ended June 30, 2024, as compared to $9.5 million for the three months ended June 30, 2023. The decrease of $2.6 million, or 28%, was primarily attributable to the sale of Board.org on March 11, 2024 combined with a decrease from workforce planning actions made primarily throughout the second half of 2023 combined with decreases in amortization expense of $0.6 million and $0.4 million related to data center costs.

Previous wording

Research and development expense was $3.5 million for the three months ended March 31, 2024 as compared to $5.1 million for the three months ended March 31, 2023. The decrease of $1.6 million, or 32%, was primarily attributable to workforce planning actions made throughout the second half of 2023.

Current wording

Research and development expense was $3.2 million for the three months ended June 30, 2024 as compared to $4.5 million for the three months ended June 30, 2023. The decrease of $1.3 million, or 29%, was primarily attributable to a decrease of $1.2 million of workforce planning actions made throughout the second half of 2023 combined with a decrease of $0.1 million attributable to the sale of Board.org on March 11, 2024.

Previous wording

Editorial expense was relatively flat at $4.7 million for the three months ended March 31, 2024 as compared to $4.3 million for the three months ended March 31, 2023.

Current wording

Editorial expense was relatively flat at $4.5 million for the three months ended June 30, 2024 as compared to $4.8 million for the three months ended June 30, 2023.

Previous wording

Impairment of goodwill was $5.8 million recognized during the first quarter of 2023 related to the impairment of goodwill in the ESG reporting unit.

Current wording

Impairment of goodwill was $5.8 million recognized during the first quarter of 2023 related to the impairment of goodwill in the ESG reporting unit. No impairment of goodwill was recorded in the three or six months ended June 30, 2024.

Previous wording

Transaction gains were $0.0 million for the three months ended March 31, 2024, as compared to transaction costs of $1.4 million for the three months ended March 31, 2023. The change of $1.4 million relates to a decrease of $1.2 million in non-capitalized costs related to business acquisitions primarily related to the acquisition of Dragonfly combined and $0.2 million from non-capitalizable business combination costs.

Current wording

Transaction gains were $0.0 million for the three months ended June 30, 2024, as compared to transaction costs of $0.3 million for the three months ended June 30, 2023. The change of $0.3 million relates to the acquisition of Dragonfly in 2023.

Previous wording

Interest expense was $7.4 million for the three months ended March 31, 2024 as compared to $6.7 million for the three months ended March 31, 2023. The increase in interest expense of $0.7 million was primarily attributable to the new GPO note partially offset by interest income attributable to our investments.

Current wording

Interest expense was $5.3 million for the three months ended June 30, 2024 as compared to $7.2 million for the three months ended June 30, 2023. The decrease in interest expense of $1.8 million was primarily due to the repayment of the Senior Term Loan.

Previous wording

Change in fair value of financial instruments was a $0.5 million loss for the three months ended March 31, 2024 as compared to a $14.7 million gain for the three months ended March 31, 2023. The change in financial instruments of $15.2 million is primarily related to $13.2 million of less gain resulting of the fair value adjustment of the warrant liabilities that were assumed in connection with the Business Combination combined with the changes of $2.0 million in the Dragonfly Seller Convertible Notes, New GPO Note, and the Era Convertible Notes.

Current wording

Change in fair value of financial instruments was a $0.9 million gain for the three months ended June 30, 2024 as compared to a $3.0 million loss for the three months ended June 30, 2023. The change in financial instruments of $3.9 million is primarily related to the change in the fair value adjustment of the warrant liabilities that were assumed in connection with the Business Combination combined with the changes in the Dragonfly Seller Convertible Notes, New GPO Note, and the Era Convertible Notes.

Previous wording

Reflects the non-cash impact of the following: (i) charge of $49 in the first quarter of 2024 related to the unrealized loss on investments; (ii) gain of $4 in the first quarter of 2024 from the change in fair value related to the contingent consideration and contingent compensation related to the 2021, 2022, and 2023 Acquisitions (iii) impairment of goodwill of $5,837 in the first quarter of 2023, (iv) loss from equity method investment of $34 in the first quarter of 2023; and (v) charge of $2 in the first quarter of 2023 from the change in fair value related to the contingent consideration and contingent compensation related to the 2021, 2022, and 2023 Acquisitions.

Current wording

Reflects the non-cash impact of the following: (i) charge of $49 in the first quarter of 2024 and $31 in the second quarter of 2024 related to the unrealized loss on investments; (ii) gain of $4 in the first quarter of 2024 from the change in fair value related to the contingent consideration and contingent compensation related to the 2021, 2022, and 2023 Acquisitions; (iii) impairment of goodwill of $5,837 in the first quarter of 2023, (iv) loss from equity method investment of $34 in the first quarter of 2023 and $56 in the second quarter of 2023,and (v) charge of $2 in the first quarter of 2023 and $2 in the second quarter of 2023 from the change in fair value related to the contingent consideration and contingent compensation related to the 2021, 2022, and 2023 Acquisitions.

Previous wording

Reflects accounting and legal costs incurred associated with the settlement with GPO FN Noteholder LLC totaling $168 in the first quarter of 2023.

Current wording

Reflects (i) $3,474 non-cash loss contingency charge related to the settlement with GPO FN Noteholder LLC recorded in the second quarter of 2023 and (ii) accounting and legal costs incurred associated with the settlement with GPO FN Noteholder LLC totaling $168 in the first quarter of 2023 and $248 in the second quarter of 2023.

Previous wording

Historically the Company’s cash flows from operations have not been sufficient to fund its current operating model and the Company funded operations through raising equity and debt. At March 31, 2024, the Company’s cash, cash equivalents, restricted cash, and short-term investments was $44.5 million compared to $24.4 million at December 31, 2023.

Current wording

Historically the Company’s cash flows from operations have not been sufficient to fund its current operating model and the Company funded operations through raising equity and debt. At June 30, 2024, the Company’s cash, cash equivalents, restricted cash, and short-term investments was $38.4 million compared to $24.4 million at December 31, 2023.

Previous wording

The Company had a negative working capital balance of $38.5 million (excluding cash and short-term investments) at March 31, 2024 and had an accumulated deficit of $765.8 million and $816.4 million as of March 31, 2024 and December 31, 2023, respectively, and has incurred net losses of $21.0 million (excluding the gain on sale from business) and $19.3 million for the three months ended March 31, 2024 and 2023, respectively. Management expects that significant on-going operating and capital expenditures will be necessary to continue to implement the Company’s business plan of entering new markets, future acquisitions, and infrastructure and product development.

Current wording

The Company had a negative working capital balance of $37.8 million (excluding cash and short-term investments) at June 30, 2024 and had an accumulated deficit of $778.6 million and $816.4 million as of June 30, 2024 and December 31, 2023, respectively, and has incurred net losses of $33.8 million (excluding the gain on sale of business) for the six months ended June 30, 2024 and $50.2 million for the six months ended June 30, 2023, respectively. Management expects that significant on-going operating and capital expenditures will be necessary to continue to implement the Company’s business plan of entering new markets, acquiring new businesses and technologies, and investing in infrastructure and product development.

Previous wording

While the Company’s future projections indicate that the Company will have sufficient liquidity to meet its obligations in the normal course of business within one year from the date of this filing, our ability to maintain our minimum cash requirement, fund our future cash interest requirements under our senior term loan and fund our operating expenses and capital expenditure requirements will depend in part on general economic, financial, competitive, legislative, regulatory and other conditions that may be beyond our control. The Company has implemented various cost saving measures throughout 2023 and into 2024 and is actively seeking additional sources of capital. Volatility in the credit markets may have an adverse effect on our ability to obtain debt financing. If we raise additional funds through the issuance of equity, equity-linked or debt securities, those securities may have rights, preferences or privileges senior to the rights of our common stock, or may require us to agree to unfavorable terms, and our existing stockholders may experience significant dilution.

Current wording

Our ability to maintain our minimum cash requirement, fund our future cash interest requirements under our senior term loan and fund our operating expenses and capital expenditure requirements will depend in part on general economic, financial, competitive, legislative, regulatory and other conditions that may be beyond our control. The Company has implemented various cost saving measures throughout 2023 and into 2024 and is actively seeking additional sources of capital. Volatility in the credit markets may have an adverse effect on our ability to obtain debt financing. If we raise additional funds through the issuance of equity, equity-linked or debt securities, those securities may have rights, preferences or privileges senior to the rights of our common stock, or may require us to agree to unfavorable terms, and our existing stockholders may experience significant dilution.

Previous wording

In connection with the closing of the business combination with DSAC, FiscalNote entered into a $150.0 million senior credit agreement (the “Credit Agreement”) with Runway Growth Finance Corp., ORIX Growth Capital, LLC, Clover Orochi LLC, and ACM ASOF VIII SaaS FinCo LLC (together the “Senior Lenders”). The Credit Agreement also provides for an uncommitted incremental loan facility totaling $100.0 million available upon notice if the Company meets certain financial growth criteria and other customary requirements (the “Incremental Term Facility”) (collectively the “Senior Credit Facility”). The annual interest of the Senior Term Loan consists of two components: a cash interest component of (a) the greater of (i) Prime Rate plus 5.0% per annum and (ii) 9.0% payable monthly, and (b) interest payable in kind component of 1.00% per annum, payable in kind monthly. The Senior Credit Facility will mature on July 29, 2027. Pursuant to Amendment No. 4, beginning on August 15, 2026, the Senior Term Loan must be repaid in even amounts on a monthly basis over the remaining 12 months, with the final balance due on July 15, 2027. Borrowings under our Senior Credit Facility are collateralized by substantially all assets of the borrowers and guarantors party thereto.

Current wording

In connection with the closing of the business combination with DSAC, FiscalNote entered into a $150.0 million senior credit agreement (the “Credit Agreement”) with Runway Growth Finance Corp., ORIX Growth Capital, LLC, Clover Orochi LLC, and ACM ASOF VIII SaaS FinCo LLC (together the "Senior Lenders”). The Credit Agreement also provides for an uncommitted incremental loan facility totaling $100.0 million available upon notice if the Company meets certain financial growth criteria and other customary requirements (the “New Incremental Term Facility”) (collectively the “Senior Credit Facility”). The annual interest of the Senior Term Loan consists of two components: a cash interest component of (a) the greater of (i) Prime Rate plus 5.0% per annum and (ii) 9.0% payable monthly, and (b) interest payable in kind component of 1.00% per annum, payable in kind monthly. The Senior Credit Facility will mature on July 29, 2027. Pursuant to Amendment No. 4, beginning on August 15, 2026, the Senior Term Loan must be repaid in even amounts on a monthly basis over the remaining 12 months, with the final balance due on July 15, 2027. Borrowings under our Senior Credit Facility are collateralized by substantially all assets of the borrowers and guarantors party thereto.

Previous wording

During the three months ended March 31, 2024 and 2023, we made cash interest payments totaling $5.3 million and $4.7 million related to the Senior Term Loan.

Current wording

During the six months ended June 30, 2024, we made cash interest payments totaling $8.5 million related to the Senior Term Loan.

Previous wording

The Senior Term Loan is senior to all other debt and has a first priority lien on substantially all of the Company’s assets. The Senior Term Loan contains customary negative covenants related to borrowing, events of default and covenants, including certain non-financial covenants and covenants limiting the Company’s ability to dispose of assets, undergo a change in control, merge with or acquire stock, and make investments, in each case subject to certain exceptions. In addition to the negative covenants, there were four financial covenants in place at March 31, 2024: a minimum cash balance requirement, minimum ARR requirement, an adjusted EBITDA requirement (as defined in the Credit Agreement, as amended) and a capital expenditure limitation. At March 31, 2024, the Company was in compliance with all of the covenants. Upon the occurrence of an event of default, in addition to the lenders being able to declare amounts outstanding under the Senior Term Loan due and payable the lenders can elect to increase the interest rate by 5.0% per annum.

Current wording

The Senior Term Loan is senior to all other debt and has a first priority lien on substantially all of the Company’s assets. The Senior Term Loan contains customary negative covenants related to borrowing, events of default and covenants, including certain non-financial covenants and covenants limiting the Company’s ability to dispose of assets, undergo a change in control, merge with or acquire stock, and make investments, in each case subject to certain exceptions. In addition to the negative covenants, there were four financial covenants in place at June 30, 2024: a minimum cash balance requirement, minimum annual recurring revenue requirement, an adjusted EBITDA requirement (as defined in the Credit Agreement, as amended) and a capital expenditure limitation. At June 30, 2024, the Company was in compliance with all of the covenants. Upon the occurrence of an event of default, in addition to the lenders being able to declare amounts outstanding under the Senior Term Loan due and payable the lenders can elect to increase the interest rate by 5.0% per annum.

Previous wording

The New GPO Note is subordinate to the Company’s obligations under its New Senior Term Loan which limits certain actions that the Company and the Investor may take under the New GPO Note. At any time prior to the July 3, 2028, the Investor is entitled to convert all or any portion of the principal amount of the New GPO Note and accrued interest thereon into shares of Class A Common Stock at $8.28 per share (adjusted to $6.89 on April 11, 2024 pursuant to the terms of the New GPO Note as a result of the issuance of the Additional Fee Shares to Era as described in Note 18, "Subsequent Events"). The New GPO Note is subject to customary anti-dilution adjustments for stock splits and similar transactions and, subject to standard exceptions, weighted average anti-dilution protection. The principal amount, together with accrued interest thereon, of the New GPO Note is redeemable by the Company in whole or in part based on certain conditions as defined in the New GPO Note.

Current wording

The New GPO Note is subordinate to the Company’s obligations under its New Senior Term Loan which limits certain actions that the Company and the Investor may take under the New GPO Note. At any time prior to the July 3, 2028, the Investor is entitled to convert all or any portion of the principal amount of the New GPO Note and accrued interest thereon into shares of Class A Common Stock at $7.92 per share. The New GPO Note is subject to customary anti-dilution adjustments for stock splits and similar transactions and, subject to standard exceptions, weighted average anti-dilution protection. The principal amount, together with accrued interest thereon, of the New GPO Note is redeemable by the Company in whole or in part based on certain conditions as defined in the New GPO Note.

Previous wording

The Company elected to account for the New GPO Note using the fair value option. The New GPO Note was recorded at its June 30, 2023 acquisition date fair value of $36.6 million. The Company initially recorded a loss contingency of $11.7 million in its fiscal year 2022 financial statements representing the difference between the fair value of the shares returned by the Investor and the fair value of the New GPO Note on the date of exchange. With the execution of the Exchange and Settlement Agreement and New GPO Note, the Company recorded an additional loss on settlement with GPO of $3.5 million in the condensed consolidated statement of operations for the year ended December 31, 2023.

Current wording

The Company elected to account for the New GPO Note using the fair value option. The New GPO Note was recorded at its June 30, 2023 acquisition date fair value of $36.6 million. The Company initially recorded a loss contingency of $11.7 million in its fiscal year 2022 financial statements representing the difference between the fair value of the shares returned by the Investor and the fair value of the New GPO Note on the date of exchange. With the execution of the Exchange and Settlement Agreement and New GPO Note, the Company recorded an additional loss on settlement with GPO of $3.5 million in the condensed consolidated statement of operations for the three and six months ended June 30, 2023.

Previous wording

Capital expenditures primarily consist of purchases of capitalized software costs and property and equipment. Our capital expenditures program includes discretionary spending, which we can adjust in response to economic and other changes in our business environment to grow our business. We typically fund our capital expenditures through cash flow from operations and external financing. In the event that we are unable to obtain the necessary funding for capital expenditures, our long-term growth strategy could be significantly affected. Our total capital expenditures were $1.6 million and $1.9 million for the three months ended March 31, 2024 and 2023, respectively.

Current wording

Capital expenditures primarily consist of purchases of capitalized software costs and property and equipment. Our capital expenditures program includes discretionary spending, which we can adjust in response to economic and other changes in our business environment to grow our business. We typically fund our capital expenditures through cash flow from operations and external financing. In the event that we are unable to obtain the necessary funding for capital expenditures, our long-term growth strategy could be significantly affected. Our total capital expenditures were $4.1 million and $4.1 million for the six months ended June 30, 2024 and 2023, respectively.

Previous wording

Cash used in operating activities consists of net loss adjusted for certain non-cash items including depreciation and amortization, stock based compensation, changes in fair value of warrant liabilities, non-cash interest expense, and gain on disposal, as well as the effect of changes in working capital and other activities.

Current wording

Cash used in operating activities consists of net loss adjusted for certain non-cash items including depreciation and amortization, stock based compensation, changes in fair value of warrant liabilities, non-cash interest expense, and loss on debt extinguishment, as well as the effect of changes in working capital and other activities.