Good afternoon. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the FiscalNote Holdings, Inc. Second Quarter 2025 Financial Results Conference Call. [Operator Instructions] With that, I would now like to turn it over to the company to begin the conference.

Good evening. My name is Bob Burrows, Investor Relations for FiscalNote, and we are pleased you all could join us. The purpose of today's call is to discuss FiscalNote's second quarter 2025 financial results and guidance for both the full year and third quarter of 2025. Joining me with prepared comments are Josh Resnik, CEO and President; and Jon Slabaugh, CFO and Chief Investment Officer. Other members of the senior management team will be available as needed during the Q&A session that will follow these prepared comments. Please note today's press release, related current report on Form 8-K 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 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 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 annual recurring revenue, or ARR, and net revenue retention, or NRR. With that, I'd like to turn the call over to FiscalNote's CEO and President, Josh Resnik. Josh?

Thank you, Bob, and thanks to everyone joining us today. I'm pleased to be here to share FiscalNote's second quarter 2025 results and update you on the progress we've made on our strategic priorities. We remain committed to the disciplined approach that has served us well, managing the business with rigor and focus. Our 3 core objectives remain the same. One, consistent expansion of adjusted EBITDA margins. Two, managing the company's balance sheet and achieving positive free cash flow. Three, building a durable foundation for profitable growth. As I've said on past calls, I'll walk you through where we stand on each, touching briefly on the first 2 and then focusing mainly on the company's growth. First, adjusted EBITDA. We delivered adjusted EBITDA of $2.8 million in Q2, exceeding guidance. This represents an adjusted EBITDA margin of 12%, an increase compared to 4% on a pro forma basis in the same period last year. This improvement reflects the ongoing benefits of our cost discipline, sharper prioritization of core growth initiatives and improving operating leverage. We expect to continue to expand margins over the long term as these improvements compound. As adjusted EBITDA margins further expand, our path to positive free cash flow remains clear. So with that, I'll turn to our second core objective: management of the balance sheet and achieving positive free cash flow. Managing the company's indebtedness as well as achieving and sustaining positive free cash flow remain among our highest priorities. Yesterday we announced the substantial refinancing of our senior term loan provided exclusively through funds managed by MGG Investment Group. Importantly, MGG is providing a new facility which will not mature until 2029. MGG conducted thorough diligence before making its commitment, including a deep review of FiscalNote's operational performance, market position and strategic plan. And I'm…

Thank you, Josh. Good evening, and thank you for joining FiscalNote's second quarter 2025 conference call. We are pleased to announce that we came in above the midpoint of our guidance range on revenue and exceeded guidance on adjusted EBITDA for the quarter. We are also reaffirming our full year forecast, evidence that our product-led growth strategy and disciplined operating approach is on track and gaining momentum. On top of that, our recent refinancing significantly expanded our runway and operational flexibility. In that regard, yesterday, we announced that FiscalNote entered into definitive agreements to refinance our senior debt and restructure substantially all of our subordinated debt. This series of transactions will provide FiscalNote with a clear long-term runway and operating flexibility to execute on driving efficient, product-led growth. These transactions are scheduled to close in mid-August, subject to customary closing conditions. Upon closing, we will replace our current senior credit facility with a new $75 million senior secured term loan with the maturity extended to 2029. This new loan is supported exclusively by funds managed by MGG Investment Group. Excess proceeds from the new facility together with new subordinated convertible debt will be used to pay off or refinance certain existing subordinated debt, including an amendment to our largest long-term subordinated creditor to extend the maturity of its remaining balance to 2029. In aggregate, this transaction serves as an important step for FiscalNote and for our ongoing efforts to stabilize and strengthen our capital structure while we accelerate execution of the product-led growth strategy. The transactions provide additional time to realize the full potential of the PolicyNote platform and manage our capital structure, supporting management's commitment to generating sustainable levels of growth, profitability and positive free cash flow. In light of the timing of these transactions, there are a few…

[Operator Instructions] Our first question will come from the line of Mike Latimore with Northland Capital Markets.

Congrats on all the progress this year. Looks good. You talked about returning to ARR growth in the second half. Is the -- do you assume a similar contribution from new logo improvement and NRR improvement, or is 1 or 2 of those variables more important to return to ARR growth?

Thanks, Mike, for the comment and the question. Appreciate it. So we're seeing good success with new logo, as I discussed just a few moments ago. We're seeing a lot of improvements in pipeline. We're seeing increased win rates. We're seeing ACVs go higher. So we're pleased with the progress on new logo. Of course, we'd like to see continued progress from here as well and continuing to grow those ACVs, improve win rates, et cetera. The difference really will come from our retention and expansion. So that's where we're still seeing those challenges with existing relationships on the legacy platform. And we expect to see gross and net retention improve, both as a result of PolicyNote, as we migrate more customers on to PolicyNote, and also with some of the offerings that we have in markets. So we've also put out some revamped global data packages as well, which we think will help with expansion in revenue too. We're seeing great success with those and those are helpful drivers when it comes to ACVs. We're seeing very good, healthy demand for that global data, which is really a strong differentiator for us in market. So long story short, we want to see continued progress on logo, but the biggest difference maker going forward will be those improvements to gross and net retention that we expect to see.

All right. Got it. That makes sense. And then I think you've -- in terms of additional product enhancements, I think you're planning on some enterprise-level features, I believe, and also integrating the last couple of data sets here. I guess, one, is that a correct assertion? And then second, if so, is that something planned for this year or is that kind of going to next year?

Sure. So we are still continuing to enhance PolicyNote, and you can think of it in a couple of different ways. So one is continuing to add core data sets and enterprise features. When we first launched PolicyNote, it was designed for the most straightforward use cases. And so we're continuing to add some of the more complex enterprise-grade features as we speak. And as we do that, we're migrating more and more enterprise customers onto the platform. So we're going to continue that work to build that out so that we can accelerate the migrations. And those migrations are going well and are actually ahead of schedule. We're also continuing to implement new kind of incremental features, things like our Tariff Tracker, things like some of our more advanced AI features like we have with now the ability to actually write draft legislation for you in the platform. And so features that are really accelerating the platform forward, leapfrogging the competition, so we're continuing to build those out as well from an innovation perspective. We're going to continue the migration over the course of this year and next year. So that's about what you can expect in terms of migrating all of our customers onto new platform. And like I said, what we're doing in parallel is both some of those core features to facilitate and accelerate those migrations, but also, at the same time, launching new innovations to make sure that we're propelling PolicyNote forward in parallel.

Great. And then I guess just last one for me. In terms of the federal and NGO verticals, can you just give a -- just maybe a little more color on how they're behaving, and has there been any change during the year?

Sure. So on federal, as we noted in our comments, we are seeing atypical instability in federal this year, which we've spoken to before just given all the changes in the federal government. That continues to be something that we monitor. It's kind of a continually shifting landscape. Even you had earlier in the year heavy activity from DOGE, which created a lot of volatility, and you still now are seeing just some shifts within federal, both in terms of some areas where there's increased stability and continuing to see relationships and contracts return, but also as there's just continued shifts within the government in terms of their own staffing and how that translates into their needs, licenses and so on. And as we've said before, the instability has obviously introduced some challenges; it also introduces opportunities for us as well. Our solutions, we believe, drive great efficiencies for all our customers, including federal. And so we think that there's a lot of need for our platforms. We offer unique proprietary content that's very informative for policymakers. So again, a need there as well. And so that's something we're just continuing to monitor the progress with the federal government throughout the year. So no significant changes from what we've spoken about before. It's just something that's continuing. NGOs, I would say the same. I assume your question kind of relates to how does federal funding changes impact NGOs. And I would say kind of same thing there. We're still seeing NGOs be actually fairly active with things like advocacy in this type of environment. And again we have a very strong advocacy platform for them to use as well. And so there's still -- we still see opportunity in that sector.

And our next question will come from the line of Zach Cummins with B. Riley Securities.

This is Ethan Widell calling in for Zach Cummins. I think to start with, it sounds like your retention metrics are kind of starting to trend well. I guess, what levers do you think you need to pull there from here to continue to improve retention? Is that primarily product-led as discussed on the call so far? Or is there anything else?

Sure, Ethan. Thanks for the question. So of course, from a long-term trending perspective, we talked mostly about the products and the introduction of PolicyNote. And we are seeing really strong engagement metrics there, which give us a tremendous amount of confidence in how PolicyNote will impact retention in the future. And one of the more interesting things, now that PolicyNote has been out in market for 6 months now, is we're able to look at some of that usage, not just a snapshot in a moment, but over time. So that's where -- I spoke earlier about how we're seeing user engagement increase as the relationship continues. That's a very strong sign and something that bodes very well for how PolicyNote will impact our retention going forward. But there's more -- but there's definitely more to it as well. So as I mentioned, there's also the opportunity, we've introduced new global data packages, which help with expansion revenue, and it's something that we're seeing great success with, especially within our enterprise segment. And so that's something that we see as something that's connecting very well with customers. We're also seeing great confidence from customers when they buy. So we talked about multi-years. So again, for the second quarter in a row, we've more than doubled the pace at which we're signing new corporate customers to multi-years for our policy data. That's significant in part because of the indicator of confidence that it gives, but also because that will translate directly into gross retention improvements in 2026. So we know just mathematically that that will have an impact as well. And then we've also talked about some of the changes that we've made operationally as well. So as Jon and I both mentioned in our remarks, the level of performance that we saw at the end of last year and heading into Q1 was just not acceptable. And so we've made operational changes as well. And that includes in areas that directly impact retention and cross-sell/upsell. And so we're excited with the progress we're making operationally there, and we believe that that will have an impact on all of our customer relationships and our ability to retain and grow those relationships over time. So product is certainly important, and it's certainly very encouraging what we're seeing there. But it's far from the only thing that we're seeing that will help drive improvements in gross and net retention.

Got it. That's super helpful. And then maybe to double-click on one of those points. You mentioned doubling the rate of signing multiyear commitments. I guess how do you view this as impacting the slope of revenue growth ultimately going forward?

So the increase in multi-years, as I said, will impact gross retention over time, right? So it's just less of that business coming up for renewal in any given quarter. What's most important to me when I think about long-term health is really, like I said, fundamentally, the product and the engagement that we have with our users on a day-to-day basis. That's why we focus so much on that, and I'm so encouraged by it. But obviously, with multi-years, the more we can decrease that frequency at which those relationships are coming up for renewal, the more we'll have stability in that business. And our success in new logo will then be additive to what we have instead of essentially replacing what we lose when our retention isn't where it should be.

And we have no further questions at this time. I'll hand the call back to Bob Burrows for any closing comments.

Thank you, Regina. That concludes our call this evening. We appreciate everyone's participation on the call. And we look forward to speaking with all of you again in the future. Goodbye.

This concludes today's conference call. Thank you for joining. You may now disconnect.