FiscalNote (NOTE) Q2 Revenue Falls 20%

FiscalNote (NYSE:NOTE) reported mixed Q2 2025 results, with GAAP revenue of $23.3 million surpassing estimates but declining 20% year-over-year due to divestitures, while core subscription revenue also fell 8% pro forma. Adjusted EBITDA surged 58% to $2.8 million, exceeding guidance, driven by significant cost reductions and operational efficiency. However, key subscription metrics, including annual recurring revenue (ARR) and net revenue retention (NRR), continued their decline, reflecting persistent customer challenges. The company is banking on its AI-powered PolicyNote platform and completed divestitures to drive future ARR growth in H2 2025, though macroeconomic volatility remains a risk.

Analysis

FiscalNote (NYSE:NOTE) presented a dichotomous Q2 2025 financial report, characterized by successful operational restructuring but deteriorating core growth metrics. While GAAP revenue of $23.3 million surpassed analyst estimates by 2.1%, it marked a significant 20.2% year-over-year decline, largely attributable to the divestiture of non-core assets. More concerning is the pro forma 8% drop in core subscription revenue, indicating persistent pressure beyond the portfolio changes. The highlight was a 58% year-over-year surge in adjusted EBITDA to $2.8 million, driven by aggressive cost-cutting measures that saw operating expenses fall 18%. However, fundamental SaaS indicators remain weak; Annual Recurring Revenue (ARR) fell 21% to $85.9 million (down 8% adjusted for divestitures), and Net Revenue Retention (NRR) slipped to 96% from 98%, signaling ongoing customer and revenue churn. Management is staking the company's recovery on its AI-powered PolicyNote platform, citing increased multi-year contract signings, though it provided no specific adoption metrics. The company's ability to meet its reaffirmed full-year guidance and achieve its projected ARR growth in the second half of 2025 will be a critical test of this turnaround strategy.

Key Decisions for Investors

• Investors should weigh the company's demonstrated operational discipline, which drove a 58% increase in adjusted EBITDA, against the persistent decline in core growth metrics like the 8% pro forma drop in ARR and a 96% NRR.
• The primary catalyst to monitor is the company's ability to deliver on its guidance for a return to ARR growth in the second half of 2025, which would validate the strategic pivot to the PolicyNote platform.
• Consider the ongoing strategic review as a potential source of significant change, while remaining cautious of macroeconomic risks, particularly instability in the US federal sector which management cited as a headwind.