Good afternoon, ladies and gentlemen, and welcome to the FiscalNote Second Quarter 2024 Financial Results Conference Call. At this time, I would like to inform all participants that their lines will be in listen-only mode. After the speakers' remarks, there will be a question-and-answer session of the call. [Operator Instructions] I would now like to introduce your host for today's conference, Bob Burrows. Mr. Burrows. You may begin.

Good evening. My name is Bob Burrows. I'm with Western Avenue Advisers LLC, which was hired in April as an Investor Relations consultant to the company following Sara Buda's departure. I continue to act in that capacity and look forward to speaking to the company's investor stakeholders in the coming weeks and months ahead. Thank you for joining the call today as we discuss FiscalNote's second quarter 2024 financial results. With me on today's call with prepared comments are Tim Hwang, Chairman, CEO and Co-Founder; and Jon Slabaugh, CFO and Chief Investment Officer. Other members of the senior management team will be available during the Q&A session that will follow these prepared comments. Please note, copies of today's press release, the current report on Form 10-Q for the quarter as well as an updated version of the corporate overview presentation are all available on the company website. In terms of important housekeeping, it is important to mention 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 statements. 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-GAAP 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, both of which are available on the Investor Relations portion of our website for a 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 run rate revenue or RRR, annual recurring revenue or ARR and net retention revenue. Again, please refer to the earnings release or the updated corporate deck for definitions of these important metrics. And with that, I'd like to turn the call over to FiscalNote's Chairman, CEO and Co-Founder, Tim Hwang. Tim?

Thank you, Bob, for that introduction, and thank you all for joining us this afternoon. It's good to be with you today to discuss our second quarter 2024 results and provide an update on the state of our overall business. I always look forward to these opportunities to connect with our shareholders and share with you the exciting developments here at FiscalNote. First, let me take a few moments to remind you of some of the core fundamentals of FiscalNote. As you've heard from me many times before, 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 platform that aggregates and organizes regulatory, political and macroeconomic information and analyze the impacts on the organization overall. We are the market-leading AI platform for the regulatory legislative policy and geopolitical intelligence sectors, essentially the Bloomberg Terminal for regulatory and legislative and strategic risk, drawing upon a deep reservoir of technical expertise, proprietary data and analytical tools. Our proprietary high-quality and authoritative data on a range of aspects include international, federal, state and local legislation across 80,000 cities, all 50 states and every major federal regulatory agency as well as deep profiles of tens of thousands of policymakers, millions of legislative regulatory bodies and purpose-built analytical tools monitoring governments around the world that have enabled FiscalNote to build a market-leading position across thousands of customers. Many of our assets, including CQ, serve essentially at the Dow Jones of legislative and policy worlds, providing deep domain expertise with proprietary data. CQ, as an example, has been providing Washington with information about congressional votes, budgets and congressional information since 1945. We operate in a large and growing $40 billion addressable market driven by increasing global uncertainty as well as…

Thank you, Tim. My comments this afternoon will be brief, so let me jump right in and walk through the numbers for Q2 2024, starting with the income statement. Total revenue for Q2 2024 was $29.2 million, lower than the prior year period due primarily to the divestiture of Board.org. While down period-to-period, subscription revenue remains the cornerstone of our business, accounting for 93% of total revenue this quarter, in line with the company's historical trends. Digging deeper into revenue, let's look at our key performance metrics. As of Q2 2024, run rate revenue was $121 million and annual recurring revenue was $109 million. On a pro forma basis, adjusting for the impact of the Board.org divestiture, current year run rate revenue was level with the prior year second quarter and ARR was slightly higher than the prior year quarter. And as of Q2 2024, net revenue retention was 98%, level to the prior year. Overall, on a true apples-to-apples basis, revenue performance for the current period was on par with last year, in line with our revised forecast and indicative of our existing operational capacity. Turning to expenses. Principal operating expenses in Q2 2024 continued the trend of year-over-year decreases, reflecting the impact of cost-savings initiatives instituted in 2023 as well as the impact of the sale of Board.org and sunset products. Specifically, the cost of revenues decreased by over $2.5 million or 28%. R&D decreased by $1.3 million or 29%. Sales and marketing decreased by approximately $2.6 million or 23% and G&A decreased by nearly $5 million or 30%. In aggregate, total operating expenses in Q2 2024 fell over $11 million versus the prior year or 25%. On a pro forma basis, excluding amortization expense, stock-based compensation and the impact of the sale of Board.org, OpEx decreased approximately…

Thank you. [Operator Instructions] And your first question comes from the line of Zach Cummins with B. Riley Securities. Please go ahead.

Hi, this is Ethan Widell calling in for Zach Cummins. Just one from my end. So can you maybe elaborate a little bit on the factors behind the revs guidance? Is it mostly just churn based on macros you were talking about? Or is there anything else in play there? Thank you.

Yes, this is Josh. I can address that. So in terms of what we're seeing there, there's certainly the macro in play. We're seeing some slower decision-making, some softness on renewals as a result of the macro. We are very focused on driving improvements through what we can do in terms of the product improvements that Tim spoke about, and we are very confident in our ability to have a positive impact on customer engagement and retention, but macro is definitely playing a factor. And we're doing other things, too, around operational as well as we have continued to do over time, look at things like customer scoring models and the like that we think will drive improvement there as well.

Got it. Appreciate that.

Your next question comes from the line of Mike Latimore with Northland Capital Markets. Please go ahead.

Hi, this is Vijay Devar [ph] for Mike Latimore. Thanks for taking my questions. The first one is on the Board.org. You've got 7x revenue for that in terms of valuation. So wondering are there any other groups that could logically be independent. And if divestment strategies looked at for such groups, what valuations would be logical for those?

I'll take that. It's Jon Slabaugh. And I would say that we're not presently planning to make a divestiture that we were prepared to speak to at this time. And I think it's – I think we have a view of valuation in the underlying products that we own, and we think they're disconnected from where overall market value is, and we'll continue to explore ways to maximize shareholder value. But presently, nothing imminent.

All right. Got it. And secondly, on the majority of bookings tend to happen around the September-December time frame. So how are the leading indicators of bookings for that period? We talked about a little bit macro headwinds, but any commentary on the leading indicators for bookings? That will be helpful.

Sure. Yes, this is Josh. So I mean our forecast reflects what we expect to see from a bookings perspective for the second half. As I mentioned, we have seen some slowness from the macro, but we're taking steps that we need to do to address what we can control internally. We do have a healthy new logo pipeline. So we're feeling better about the second half.

Yes, thank you.

[Operator Instructions] There are no further questions. I will now turn the call back over to Bob Burrows for any closing remarks. Please go ahead.

Thank you, Angela. That concludes our call today. We appreciate everyone's participation on the call. And if there are any additional questions, obviously, feel free to reach out to any of us. Again, we really appreciate the time and thank you very much. We'll speak to you all soon.

That concludes today's call. Thank you all for joining. You may now disconnect.