FiscalNote — Third Quarter 2026 Earnings Summary

Financial Performance:

• Reported Q3 2026 total revenues of $18.7 million, a 17% decrease year-over-year from $22.4 million; pro forma revenue excluding the FrontierView divestiture was within the guidance range of $19 to $20 million.
• Adjusted EBITDA increased 65% to $3.6 million from $2.2 million in Q3 2025, with an adjusted EBITDA margin of 19% compared to 10% in the prior year.
• Net loss narrowed significantly to $5.9 million from $24.9 million in Q3 2025, a 76% improvement.
• Gross margin improved to 82% from 79% in the prior year, while adjusted gross margin expanded to 90% from 87%.
• Subscription revenue was $18.1 million (down 15% YoY), representing 97% of total revenues compared to 94% in the prior year.
• Non-subscription revenue declined 51% to $0.6 million, primarily due to reduced advertising and event revenue.
• Annual Recurring Revenue (ARR) was $67.7 million as of September 30, 2026, a 20% decline from $84.8 million in the prior year; pro forma ARR was $67.7 million, down 14% from $78.8 million.
• Quarterly net revenue retention (NRR) was 97% compared to 98% in Q3 2025; trailing twelve-month NRR was 79%.
• Total operating expenses decreased 39% to $19.7 million from $32.2 million, driven by reductions in stock-based compensation, transaction costs, and general and administrative expenses.
• Cash and cash equivalents were $10.8 million as of September 30, 2026, down from $31.8 million in the prior year period.
• Current maturities of long-term debt increased to $98.7 million from $2.8 million, while long-term debt net of current maturities decreased to $12.0 million from $125.6 million.
• Deferred revenue (current and non-current) totaled $24.7 million, down from $30.0 million in the prior period.

Guidance and Future Outlook:

• Reaffirmed full-year 2026 total revenue guidance of $74 to $76 million and adjusted EBITDA guidance of $8 to $10 million.
• Established Q4 2026 revenue forecast of $17.0 to $17.5 million and adjusted EBITDA forecast of approximately $2.5 million.
• Management indicated that midterm results will reshape the agenda for 2027, positioning policy intelligence as critical for customers to understand future developments.

Business Segments and Product Lines:

• Completed the divestiture of FrontierView to Oxford Economics on August 27, 2026, to sharpen focus on core policy and regulatory intelligence offerings and reduce balance sheet debt.
• Consolidated CQ, Roll Call, EU Issue Tracker, and professional services content teams under unified leadership to enhance proprietary content delivery.
• Advanced PolicyNote as the core delivery platform, with growing interest in PolicyNote APIs and Model Context Protocol (MCP) integrations for AI workflows.
• Secured the first Public Sector PolicyNote API / MCP client.
• Published the PolicyNote MCP in Anthropic's Claude Connectors Directory in August, expanding distribution alongside the existing OpenAI App Store listing.
• Public Sector business delivered strong new sales and renewals, reflecting the mission-critical demand for policy intelligence solutions among government customers.

Market and Competitive Landscape:

• Faced broader macroeconomic and geopolitical pressures contributing to elongated sales cycles and customer retention challenges in non-Public Sector segments.
• Management highlighted competition from larger, well-funded companies shifting business models and the risk that general-purpose generative AI platforms may compete with custom-built SaaS tools.
• The company relies on proprietary legislative and regulatory data and decades of policy journalism as key differentiators against competitors.

Risks and Challenges:

• Risks include potential creditor enforcement of rights to call an event of default based on existing indebtedness defaults and the ability to service repayment obligations.
• Potential for a future U.S. government shutdown to negatively affect public sector subscription contracts and advertising/event revenue.
• Concentration of revenues from U.S. government agencies and dependence on winning or renewing government contracts.
• Risks associated with the ongoing strategic review, including the possibility that no transaction results or that outcomes are disruptive to operations.
• Challenges in retaining or recruiting key personnel and adapting products to changes in AI, data privacy, and government contract regulations.

Management Commentary and Tone:

• CEO Key Compton emphasized a focus on maturing product delivery and realizing cost efficiencies that are now impacting profitability.
• Management stated that go-forward priorities center on proprietary assets, specifically the deep bank of verified policy data delivered through PolicyNote and its integrations into customer agentic workflows.
• The tone reflected confidence in the core Policy business and the strategic value of the divestiture in strengthening the balance sheet and sharpening focus.

Other Key Points:

• The Board of Directors is conducting a strategic review to evaluate value-maximizing options, including potential further divestitures of non-core assets and cost-savings measures, with no timetable for completion.
• The Company issued $7.5 million in common stock for the conversion of debt and interest during the nine months ended September 30, 2026.
• Goodwill impairment of $54.7 million was recorded in the first quarter of 2026.
• The Company signed a Transition Services Agreement with the acquirer of FrontierView.
• The Company's listing remains on the OTC Markets (OTC: NOTE).