FiscalNote Holdings, Inc. (NOTE) Earnings Call Transcript & Summary

Okay. Well, let's go ahead and kick it off. I want to thank everybody for being here for the 2023 Citi Technology Conference, especially pleased to be joined today by FiscalNote management, Tim Hwang, Founder and CEO; and Jon Slabaugh, CFO. I think we've got 40 minutes scheduled here, so we'll lead some Q&A and topics that we'd like to explore together. And then once we get towards the end, we'd be happy to open it up for some audience questions. With that said, why don't we go ahead and dive in.

Tim and Jon, maybe if we can just start at a high level, coming up on, I think, 1 year being a public company. And so for folks who are not as familiar with the story, maybe you can just give a little bit of background on FiscalNote. Maybe tell us a little bit about what does the company do? Who are your typical customers? Would love to just level set with everyone in the room.

Yes. Well, I appreciate everybody listening in. And of course, happy to be here at the conference. So in a nutshell, FiscalNote, what we are is we are effectively the Bloomberg Terminal for laws and regulations. So the same way you log into your CapIQ or Morningstar or CoStar platforms or your Icon Terminal, whatever the case may be, to look up private company data, equities, fixed income, commodities, whatever the case may be. We actually are an information terminal that enables our customers to be able to look up legislation, regulations, government policy updates from around the world, from 70-plus different countries. So if there is a environmental regulatory change in the Mexican parliament, if there's a data privacy lock going through parliament for the National Assembly in South Korea, if regulators in Australia have enforced some new cryptocurrency regulation, we'll be picking that information up and servicing it into an information platform that our customers can essentially use to understand what the regulatory obligations are and what the government obligations are. And so, you can imagine the kind of use cases for this type, this platform were quite broad, and so we have primarily 3 different customer segments. So the first customer segment are large government agencies. So we service the White House, the DoD, the FBI, the CIA, 100% United States Congress. So every single member of the U.S. Congress and every single member in the House and the Senate is a customer of ours. And they're trying to understand things like diplomacy, foreign policy, trade negotiations, military appropriations, whatever the case may be. The second segment of the customers that we have are large corporates. So about half the Fortune 100 today, ranging from New York Life, ExxonMobil, Microsoft, Amtrak, FedEx, Blue Cross Blue Shield, leverage FiscalNote every single day to understand things like Medicare reimbursement rates or environmental regulations or data privacy legislation. And so typically, we're selling into kind of a Chief Legal Officer, Chief Compliance Officer function. And then the last segment of customers that we have, I would say, are Case 3 customers. So Planned Parenthood, Sierra Club, Koch Institute, NRA, both political parties in the U.S. every major presidential candidate, congressional candidate using our platform, to really stay on top of political issues. So if you ever wondered after some major Supreme Court case comes down or if there is a lot -- if there's a million-person March in Washington, the way that people organize around that information is primarily probably through the FiscalNote platform. And so, we are powering both the relationship between public sector and other public sector institutions, but also really the intersection between the public sector and our democratic institutions that really interact with voters and citizens around the world. Primarily, and of course, in the Democratic countries today.

Interesting. And as you think about those different customer segments, are they varying different value propositions as you go to market? When you call a Fortune 100, they're buying for the same or different reasons than a government agency might be.

Well, I mean, obviously, everyone has different use cases because the government is so vast in terms of its operations, right? So why does the DoD use FiscalNote? I mean, you've got hundreds, if not thousands, of people in the Pentagon tracking every word that every member of Congress is saying, because that determines the outcome of their next fighter jet program, or whether or not they're going to get military appropriations for some skirmish they're trying to operate on in some far part of the world, or whatnot. So multiply that across the Department of Education that's dealing with education funding standards or curriculum standards or whatever the case may be, you basically have this massive amount of complexity that they're trying to deal with. Similarly, on the corporate side, it's not too dissimilar, I would say, but corporations have different sets of stakeholders, shareholders and customers and employees and partners and whatever the case may be. And so if you were a large retail company trying to deal with labor regulations, if you are a large oil company trying to deal with environmental regulations. Whatever the case is, you have to understand what those obligations are. And that's, I think, a critical part of running a business. You can't just operate a business in a vacuum, you operate within the context of a regulatory framework in addition to political institutions that sort of operate in and around a particular industry overall.

Yes. It makes a lot of sense. And maybe talk a little bit about this opportunity. Obviously, regulation is as big as it gets, but kind of where was the genesis for you to come together to put FiscalNote? Take it as an idea out of your head and put into a real business.

Also, just kind of give you a little bit of background, so FiscalNote is not some like private equity backed thing that was sort of morphed out of nothing. We are a venture-backed company. We started in Silicon Valley. I started this company with 2 other buddies -- 2 friends of mine from college, and we basically just bought a 1 way ticket to Silicon Valley and started coding, open up our laptops about 10 years ago. And so my experience has been that prior to starting FiscalNote, I actually was in government, so I was very young, 16 years old. I worked for Senator Obama, who ended up running for President, and of course, ended up being very successful. And then at the age of 17, I decided to do something really stupid and run for political office. And so ended up winning, served there for 1 term on the Board of Education in Maryland. And I thought that was a pretty interesting experience, kind of going from federal politics to local politics and state politics, especially as a very young -- I was a teenager at the time. But I think that the ability to sort of take that experience and then really understand the frustrations around government and private sector actors, right? So let's say, as an example, the President says he wants to change the minimum wage law in the country. Well, the reality is that there's probably 90,000 minimum wage laws in the country. There is a federally-mandated minimum wage law, and then you have 50 different states, and then every single city and county in America is probably debating some version of minimum wage. And so if you're a Starbucks or McDonald's or a Walmart or an Amazon, how are you supposed to operate in such a complex environment? And so we sort of took that insight from my experience in government and the experience that I had. Post that, I worked in the technology industry a little bit after that, studied Computer Science at Princeton, went to HBS, and sort of combined those 2 interests together to really start this company at the intersection of technology and politics afterwards.

Great. Really helpful background. I think 1 of my bigger question is also foundational. But all of the data sets you have access to, you talked about some of the financial data companies. I think we all understand stocks trade, and we see prices and those get published. Your data sets, I think, broadly assume to be more difficult to get access to. How have you built your unique access, the big data sets that you do have? And how then do you -- are you able to make that available to your broader customer base?

Yes, so it's interesting. Wall Street has been -- obviously has gone through multiple different iterations of technology innovation in the last -- several decades. Going back to the paper and pencil and then the [ coltro ] machines. And then obviously, the Bloomberg Terminal and then the Internet, and so on and so forth. And so -- now, the reality is that the data sets that Wall Street operates off of is actually extremely easy to get, just plug in a pipe into the exchanges and just download the data and obviously cleanse the information, and so on and so forth. But it's largely structured, quantitative data. Now I think over the last 20 years, what we've seen is the advancements in natural language processing and artificial intelligence have enabled a whole universe of data sets to exist in addition to those structured data sets, right? So in the late '90s and early 2000s, you saw the rise of companies like CoStar, which increasingly looked at things like real estate information and the like. Over the course of the last 10 or 15 years, alternative data has been a huge hit on Wall Street. So things like processing, social media sentiment or whatever the case may be for algorithm trading, whatever the case may be. So there's been quite a tremendous amount of developments in terms of information that's been going into both Wall Street and the broader kind of information category. Now, legal is actually just as large a category as the financial space. You do have, in the financial side, quite a bit of market concentration in companies like S&P Global, recent merged IHS market, certainly Bloomberg, Thomson Reuters, so on and so forth. And increasing, of course, the exchanges like Nasdaq and the London Stock Exchange and others that have been jumping into the space. On the legal side, what we've seen actually is a handful of mid-sized players like LexisNexis or Wolters Kluwer and the like, and then a very, very long tail of fragmented players. And so what's been happening over the course of the last couple of years has been quite a large amount of private equity activity in the space. I would say almost every major private equity firm on the street has a pretty substantial investment in the legal information business in some different iterations, or it could be bankruptcy court filings or tax filings or whether it's Avalara, for instance on tax side, which has just taken private or Reorg Research, which is just traded out by Warburg and the like. These are multibillion-dollar businesses that operate at the long tail end of legal information services market. So it's a long-winded way of saying there's been a lot of activity in the space. One of the things that we're very proud of is the fact that we have, I would say, probably the most advanced technology stack among any information services provider in the legal space. And that's because we've been investing in artificial intelligence, natural language processing for over a decade now. And so obviously, the buzzwords are all the rage these days, but I kid you not. If you open up our C deck from 2013, when we were 3 people, the first -- within the first 5 words is the AI in the legal industry, because we've been investing in AI for almost 10 years. And so what does that exactly mean? It means that we have advanced technologies in aggregating legal information, and structuring it and classifying it and summarizing it, and being able to sort of take that information and actually build structured taxonomies, increasingly, things like generative models, which we just launched about 6 weeks ago. These are very, very cutting-edge technologies that we've invested in to sort of build this very, very defensible moats around legal information and the like. And so, that's why we've been so quick to be able to add multiple different countries around the world, be able to push the boundaries of analysis and summarization in the context of legal and regulatory information. So I think that we're very well positioned as a company, from a technology perspective, to continue to drive innovation and continue to drive value for our customers overall.

Great. And let's keep going on that AI theme. You're obviously ahead of the curve, but this year, AI has been maybe news topic 1, 2 and 3. Would love it if you could kind of go into a little more depth on what you were doing? Been a lot of announcements in terms of partnerships with some -- with OpenAI and some of the big LLMs. You've also had a lot of announcements around some of your organically-developed things like FiscalNoteGPT. Could you give us a little bit more color on your strategy around those offerings?

Well, so look. I think just to be very clear, I think there are -- 2 things are true. The first thing is that we do have, I would say, the market-leading technology in legal AI, and that's not just something that we just made up, right? I mean, it is now validated by the fact that we have partnerships with OpenAI, ChatGPT, Google Bard, Microsoft, that have all partnered with FiscalNote in some form or fashion on the legal AI side. So this is third-party validated by the biggest players in the AI space. The second thing is that, to be totally frank, customers don't care about AI. They care about value that we can deliver to them, right? So what do customers care about? They care about getting information very quickly. They care about getting reports very quickly. They care about saving time and saving energy on mundane tests. Now whether that's delivered through AI or not, they don't really care. Now that -- what I would say that beyond that is because of the expectations of customers are changing, every other information services company needs to catch up, right? So it's not just us. It's also S&P Global, Thomson Reuters, FactSet, Morningstar, so on and so forth. At some point in 5 or 10 or 15 years, customers will no longer be okay with having a janky, 1990s level of user experience where people can sort of Boolean search their way into searching information. They're going to want natural language information. They're going to want natural language searches. They're going to want categorized information. They're going to want automated summaries that are automatically generated. These are like table stakes. So we think that us pushing the boundaries of innovation in the legal AI space isn't just like, we're playing at the edges of AI. We're actually doing things that customers are going to expect in the next 2 to 5 to 10 years. And that -- how does that translate into actual business terms? It means that we actually win more customers. We win a broader range of customers, that customers stick with us for a longer period of time, and you're going to see it in our income statement. So you're going to see it in the growth of our ARR, you're going to see it in terms of the improvements in our adjusted EBITDA, you're going to see it in our improvements in retention rates. Because the technology advantage is so wide and continues to widen as we continue to invest in our R&D.

Got it. Super helpful. And as you continue to talk about investing in R&D and some of the other technology innovation, I think 1 of the other partnerships we recently saw aligns with Databricks and how you're working with them. Can you share a little bit of color on how that continues to unlock value for your customers as well?

So in addition to our R&D partnerships, we are also partnering very deeply on distribution agreements as well, right? So I'd point to 3 distribution agreements that we've released in the last year. The first is our strategic partnership with S&P Global. So S&P has been a strategic investor of ours since, I don't know, when we are 20 people as a company. And they continuously backed us, continuously supported us. And of course, I think about a 1 year, 1.5 years ago, we launched a distribution agreement onto S&P's data exchange, enabling us to be able to sell our data sets as an alternative data set to buy-side institutions, private equity firms, Investor Relations teams and the like that are leveraging fiscal in some form or fashion to deal with regulatory issues. The second, of course, is the Databricks partnership and being able to package our data alongside some other form of -- something that people are trying to do, right? So it could be layering our information against other -- some compliance standards, being able to run sort of national security analysis, or whatever the case may be. And then the third to that point is we partnered with Peraton, which was the old Northrop Grumman Software division that was spun out. And in that partnership, Peraton salespeople are going out there and selling to different divisions of the DoD, to 3-letter agencies, the CIA, to NSA, DIA, whatever the case may be, layering in FiscalNote data alongside some form of whatever they're working on when it comes to the misinformation campaigns or national security analysis, or whatever the case be. So we are, as sort of the next phase of our business, trying to expand the scope of our distribution beyond just the 4 walls of our sales teams. And I think that that's really showing up, again, not just in terms of the biggest and the biggest players in R&D in AI, but also on the sales and marketing side. Going literally 1 by 1 by 1, customer segment by customer segment and say, in the government sector, who is the biggest player we can partner with to actually distribute our products? It's probably the old Northrop Grumman Software division, so let's go call them up and do a partnership. And so that is literally what we're doing 1 by 1 in executing, and we're putting those partnerships out 1 by 1 right now.

Yes. How much -- just going a little deeper on that, how much of your kind of business today is coming from these channel partnerships? And sort of where do you expect that to go over time?

Well, we haven't given any definitive guidance on that. But I would say that a very, very small percentage of our current revenue comes from channel partners, at something like low single-digit percentages. So -- and it's because we're so early in the stages of our growth in the business, right? We're only doing about $120 million in recurring revenue. I think that, frankly, there's a lot of room for growth. Even if we just stopped innovating completely and just stopped building any more additional products, and we just expanded, let's say, state and local government presence as well as our European market presence, we could probably triple the size of the business. And so I think a lot of it is just figuring out the sort of blocking and tackling of where do we invest sales and marketing dollars? Do we try and partner here on the channel partnership? Or are we willing to give up economics here on a revenue share agreement? And that's -- those are things that we're obviously making decisions on every single day today.

Got it. And I like that, good lead into my next question. You talked about within your base opportunity to triple business, for example, so that ties in with retention and upside and growth. How do you think about sort of the retention story that can come from a lot of different directions? That can come from big business buys, that 1 division goes to another, sort of seed upsell? It can also just come from new product cross-sell and with 1 -- and move on to other SKUs. How does that shape up for FiscalNote?

Well, so let me tell you the sort of story of FiscalNote over the last several years. So when we were a 20-person start-up, we are going out there trying to win any customer who could get. I mean literally, hospital, credit union, the Colorado Fisheries Association or whatever. Just trying to win business, right? Because you're trying to drive revenue, you're trying to get scale, you're trying to get the next round of venture capital, whatever it is. At some point, I don't know when exactly it was. Probably like 2018 or something like that. We said, all right. Let's take a look at our business and where are we getting the biggest customers today, and where are the biggest opportunities for growth. And so there, we actually stood up a government practice. We stood up a dedicated enterprise practice, focused on big business. And the way that we interact, for instance, with large enterprise is actually very simple, right? A [ fan ] customer will come to us and say, hey, we have this data privacy issue in Mexico. Can you help us? And so, great. Like we'll give you $15,000 subscription to the Mexican data set. And then they'll say, great, thank you for helping us out. By the way, we also had a similar issue in the rest of Latin America, so 20-something countries. Can you help us expand into these countries? And so great, we'll take that $15,000 customer and turn them into a $0.25 million customer. And they say, our European team heard about what you did for us in Latin America. Can you kind of expand to the European market, and so on and so forth? And so that's how we drive a $15,000 customer into $1 million customer. So at $120 million in recurring revenue, let's sort of paint the picture to get to $0.25 billion or $0.5 billion recurring revenue. There's multiple different ways to get that, right? So 1 pathway could be, you just keep winning $20,000 accounts, one-off accounts with non-profits or hospitals or credit unions that are domestically focused. That's definitely an approach, and we have a team, a small team focused on doing that. But the more kind of efficient approach that we're taking right now is to win $100 million contracts or $200.5 million contracts either by taking our existing relationships and expanding them or by landing very large accounts. So that is the current strategy that we have today. And so I think if you look at the percentage of our revenue that's being sort of allocated towards government versus enterprise versus non-profits, right now, it's maybe like 30% government, 50% enterprise and then 20% non-profits. You should actually see the enterprise portion of our business can continue to get larger and probably dwarf the other portions of our business. Maybe not the government portion, but certainly the non-profit portion. And so there's a series of metrics that will probably start to shift beyond that, right? So our net dollar retention rates, given the fact that we're driving aggressive upselling enterprise, will continue to drive upwards on a blended basis. And so you're going to sort of see that mix of change, I would say, over the course of the next couple of years. And that's -- we've already see that -- we've already started to see that kind of clock through over the last, call it, 8 quarters or so as a business.

Very good. Okay. Very helpful. And then maybe we move on. Another part of your growth story there's the organic story. You've also done M&A as a part of building out your product functionality. Maybe you can talk a little bit more about the M&A strategy and how you think about that?

Yes. So maybe I can talk high level, and then I'll pass it over to Jon, kind of talk about the structure and kind of cost of capital and things like that as well. But at a high level, our strategy is very, very simple. So our biggest asset as a company beyond our technology is the fact that we have these relationships with 5,000 customers. DoD, Blue Cross Blue Shield, the U.S. Chamber of Commerce, whatever it is. So the question is, what more do these customers need? So oftentimes, what we'll do is we'll find a tiny little business, let's say, a $2 million a year Australian regulatory data business. We'll fared out that business. We'll buy the business for a fairly structured deal currently today. We'll bolt it on to our product base and then go to our 5,000 customers and say, how many of you guys want Australian regulatory data? And so maybe 800 of them will raise their hand, and we turn a $2 million sales company into a $10 million sales company over a 3 or 4-year period. And so I think that we've been very successful at driving high rate of cross-sell between our acquired businesses. And if you actually look at our disclosures, the rate of growth on acquired business is extremely high. And so a lot of that is because we're basically just taking our 5,000 customers and we're just slamming up these data sets over and over and over again, right? So it could be Australian data sets. Couple of years ago -- beginning of this year, we bought a terrorism data tracker because people are, particularly with a lot of physical assets, are very interested in these data sets and the like. And so we're constantly looking for these like single-digit million recurring revenue businesses that we can double, triple, quadruple, and then basically harvest the free cash flow, and then do that over and over again. So what does that look like at scale? And I'm sure we'll get into this. FiscalNote generates X amount in free cash flow. We basically do a couple of bolt-on acquisitions, drive cross-sell, drive free cash flow generation on an accretive basis, and then use that cash flow to do that over and over and over again to drive growth on a non-dilutive basis. So that is where we're getting to, and I think that as we continue to find great accretive acquisitions, it'll just come down to finding great product fits and then structuring the deals appropriately, and of course, driving the current operating strategy that we have. But Jon, if there's anything else you want to add there?

I think you covered it really well. I think 1 of the things I'd point out is we have 2 aspects of our M&A program that are pretty important. We really look at our existing lines of business with strategy and the line of business managers to understand white space and where our customers' needs are, and where their points of pain that are unsolved are or may be solved by a point solution. It's really failed to achieve scale on its own. So our corporate development team does a really good job of kind of sourcing those transactions on a proprietary basis. Our pipeline is robust. We have conversations with 20 to 50 kind of endpoint solutions at any given point in time, and they're not transactions that are necessarily under the time pressure of third-party auction process. So we can kind of move through those transactions at our own pace. And it's part and parcel of our analysis. We're always thinking about kind of the buy, build strategy, and do we want to allocate internal resources up against the project versus making the acquisition. And what are the trade-offs between customer acquisition, technology, content acquisitions versus the ROI to do it internally?

Got it. And you talked a little bit about sourcing, and maybe just double click on that. But as you think about your end market, you know where a lot of these companies live and so you organically source those. I imagine you probably get a lot of reverse at your scale and your -- as a public company, folks calling you and saying, hey, you'd be a good fit. I guess, of those different categories, like, what is kind of keeping the funnel full for you guys?

Well, we have a full fledged corporate development team that does everything from sourcing, diligence, structuring. I mean, it's a full-fledged investment team. And so we do evaluate deals, as Jon said, on a weekly basis. Frankly, candidly, not that different from running a [ PE ] shop. I mean literally, this investment committee that we sort of evaluate different deals every week and the like. I think a lot of the deals that we end up doing are sourced through binary proprietary relationships that we have with targets that we developed over many years. So it might start off with a revenue share agreement to sell their products across our base or something, and sort of doing very soft diligence on the demand signals that we're seeing among our customer base. So those types of things, we do have very strong relationships in, and I think -- and the supplement, to Jon's point, by kind of a deal sourcing team that's constantly out there and looking for companies.

We -- because we've done so many of these acquisitions, people kind of have read about us, they know about us, and we can engage in kind of discussions pretty easily. People will respond to us. They'll spend time helping us get to know their companies because to the extent that there is a planned exit now or in the future, they know as well as we do that it's good to start building that bridge early on.

Got it. And maybe moving to a different topic, but on your last call, you had announced -- on the topic of path to profitability, the getting EBITDA profitability, I think, a quarter sooner than originally planned. Can you talk a little bit about maybe what's happening in your business? Or what have you changed to be able to pull forward profitability and be on the path that you're now on?

Well, so we are 3 weeks away from the end of the quarter, so we are -- I mean, I can say that obviously, we're very excited to hit profitability this quarter. And so there's a couple of things that we've done. And let me just walk you through some real numbers, right? So the first quarter of this year, we clocked minus 7% on adjusted EBITDA basis. Our guidance for this quarter is between $200,000 and $1 million of positive adjusted EBITDA. That is a swing of approximately plus $8 million within the year on a quarter-to-quarter basis. And so 2 things have happened in the business, right? So the first thing is that we've done a cost efficiency program in the organization to reduce expenses, eliminate management lines to kind of consolidate different functions and really drive a much more efficient organization. That alone resulted in a couple of million dollars in your savings. But the second thing is, and I think this is really important for people to understand, is the operating leverage the business has on an 80% gross margin, right? So now, let's walk through the exact numbers here, right? So for every $1,000 of incremental revenue that comes in our business, we have said, as an organization, that gross margin is going to stay relatively stable, that R&D is going to stay flat to declining on a gross and percentage basis, that G&A was also going to stay flat to declining on a percentage and gross basis. And that net sales and marketing may slightly tick upwards, just given you want some more salespeople and customers support people. And so for every $1,000 of incremental sales, you're going to get somewhere between $600 to $700 of straight EBITDA accretion. And so multiply that by $1 million, by $10 million, by $20 million of growth, and you're going to get a pretty tremendous rate of earnings growth in the business. And so what you're effectively seeing is us flatlining OpEx and driving growth upwards, and having all of that basically drop straight to the bottom line. And so now, we've also given guidance for the fourth quarter and to say that we expect somewhere between 7% to 12% adjusted EBITDA margin in the fourth quarter, right? And so now, think about that. Going from a minus 7% to a plus 7% to plus 12% adjusted EBITDA margin within 4 quarters means that the management team here has taken a very tremendously hard look at the cost base of our business and then also driven a very high rate of operating leverage against the organization, and we expect that EBITDA margin to continue to grow as we scale the business and grow the business over time.

Very good. And on -- I think on that topic of efficiency, you've taken a lot of cost out of the business in a short amount of time. Can you do that without having impact on the top line and the growth? How do you balance these things together?

Well, I think that -- so a couple of areas that were very low-level lifts, right? So you mentioned that we're 1 year post being a publicly-traded company. Our biggest OpEx line item -- 1 of the biggest OpEx line item is probably our D&O insurance, just very -- in the week stuff. And so that's pretty -- a couple of million dollars out of G&A right there. We've acquired a decent number of companies in the last couple of years, and so we've got overlapping management teams in some cases, or R&D technology stacks that need to get consolidated and the like, and so we have made investments to consolidate technology platforms to kind of consolidate different business functions to really drive a much tighter focus on management, but we have not changed our focus on delivering top line growth expectations. And so for instance, 1 of the big areas that we talked about in our last earnings call is fundamentally, what is the big challenges? How do you deliver the same revenue growth with less resources? And so 1 way to do that, of course, is by driving towards higher accounts, larger accounts, right? So focusing on accounts with 6-figure average contract values, with the same base of customer -- with the same base of salespeople. And so what you do is you just start turning people off of the non-profit elements of the business, off the low level kind of $15,000, $20,000 accounts and focus people upmarket on the $50,000, $100,000, $200,000 accounts. And there, you can sort of get some additional leverage as well. So we're doing everything we can to essentially operate within a more constrained OpEx to drive top line growth, and of course, that just comes with more strategy and more tactical sort of prioritization of how we spend our time and our resources.

Got it. Got it. Let's see. Maybe just looking at the clock, we had a couple of minutes left before we lose time. In the audience, any questions that if I opened up, that you'd like to put to the management team? Okay, and then we'll move on. If anyone changes their mind, just shout. But let just maybe talk about -- I don't want to get into new guidance, but obviously, 3 weeks away from the end of Q3, turning the corner into Q4, and it's going to be 2024 before you know it. What's ahead? Kind of, what are you most excited about, are you looking forward to as we get into next year?

Well, so the first thing is we, obviously, we're looking forward to very high rate of profitability. And so that's obviously a lot of work that people have done over the last couple of quarters. And so that profitability, as we talked about, is going to compound on the future, right? So we're not something like widget company or some transactional business, transactional fintech business. This is a subscription recurring revenue business with a durable nature of its business revenue, right? Driven by 5,000 diversified customers, Blue Chip, across DoD, Fortune 100, whatever the case may be. So those 5,000 customers, of course, renew at a very high rate, close to 100%. 80% gross margins, and of course, that operating leverage that I was talking about, $0.65, $0.70 on the dollar. So you're going to see compounding EBITDA growth in the business, and I think that's obviously very exciting because it opens up a range of possibilities in terms of corporate actions, profitability for the business, whatever your creativity can allow in terms of what we're going to do with this company. I think the second thing is we have pushed on innovation very heavily. And so to your earlier question, even as we've made cost efficiency decisions, we have still released FiscalNoteGPT. We launched Risk Connector, which is our recent product in the supply chain management space. So applying regulatory analysis around export controls and things like that into the supply chain market. And so we are continuing to push our total addressable market and provide more organic avenues for our customers to be cross-sold and upsold. That's, I think, powerful in and of itself because it shows that even in a constrained environment, we can continue to build out these additional products. And so very excited to sort of see those new additional products to take off. I think the last thing is, we talked about this very briefly, but we are making inroads in new customer segments. So namely 2 ones that I would point out, national security. Those are areas where we are seeing a shift in defense spending, away from sort of antiterrorism related attacks to things like sort of a broader kind of great powers war, which implies information about what countries are doing. So it's no longer we're fighting terrorists in caves and the like, we're now fighting actual other countries that have political processes, regulatory processes and the like. And so those things, of course, are very, very important to get information on. And, of course, our continued efforts in expanding in the European market. So over the last couple of years, our European -- the percentage of our business coming from Europe has grown quite a bit, probably from single digits to now sort of mid-double digits and the like. And so if you look at our comparable peers, Bloomberg, Thomson Reuters, LexisNexis, Wolters Kluwer, they have comparable businesses in the European markets and the North American markets. And so we do expect that it is possible, for instance. I'm not saying that we're going to get there, but it's possible that over the next couple of years, we see a convergence to 20%, 30%, 40% of our revenue coming from the European market, and that requires no additional growth on the R&D side.

Yes?

[indiscernible]

So most of our customers are working off legacy systems. So I don't want to call out any financial institutions but most financial institutions for instance, let's say, you want to do diligence on a particular company in the medical device space. Your first instinct probably isn't to use an information platform. Your first instance is to call GLG, maybe you can do a $100,000 engagement with PwC or [ Kolstad ] or something, and so there's an existing network of people that are doing this work. And so I don't think that there's ever like a bake-off because for us, there's no competition that's right on our heels. The percentage of deals that we're seeing in our pipeline that are keenly contested is probably less than like 5%, and that's with other consultancies or whatever some -- maybe some series APAC company, or whatever the case is. And so a lot of what we do is evangelizing to our customers and saying there's a better, more digital, more automated way to actually get information about this medical device industry or this pharmaceutical industry or this chemical industry, whatever it is. As far as sort of what the business looks like in 3 to 5 years, financially speaking, I think we're very clear, right? So the revenue continues to compound in the future. Recurring revenue compounds at a very high rate. Durable recurring revenue, I don't think gross margin is going to change that much. I think we'll be substantially more profitable on an adjusted EBITDA basis. I think that -- and so that's sort of the walk to the income statement. On the product side, we're just going to have more data sets. We're going to have more countries. We're going to be operating in what we call these regulated sectors in the future. So doubling down on things like carbon emissions information, labor, wages, inflation, other alternative data that intersects with regulatory information. We're looking at things like central bank monitoring or municipal bond monitoring. Other areas where there's a lot of government information that needs to be monitored and analyzed for our customers. And so -- and I'd say a good example of this is the supply chain product we just released. Almost every manufacturing company on the planet right now is going through a complete realignment of their supply chains, given export controls and other regulations. And so layering FiscalNote data alongside core informational challenges around supply chain is something that we made a decision that, that would be a very big growth of market for us. And so we're constantly looking at these opportunities and trying to make better product decisions around as well.

Looking at the red dot down there. But any other questions before we wrap?

Before you wrap up, can you talk about balance sheet?

Yes. So our balance sheet. First thing -- first and foremost, we are fully capitalized. And so we do not raise -- we don't not need to raise any additional capital. I only laugh because I get this question in every -- almost every investor meeting. And I said this in our last 4 earnings calls, probably like 15x, that we do not need to raise any additional capital. And so that's just a function of our increasing EBITDA margin or the durability of our recurring revenue, 80% gross margins. We do have a senior credit facility that we have outstanding, but the term is 2027, I think, Jon? Yes. And so there's a long sort of duration on the current facility that we have. Obviously, we think that as we increase our adjusted EBITDA profitability and drive a higher rate of profitability that, that facility, as well as our additional options for lower cost of capital, we should be able to access that as well. And so in a nutshell, we feel very comfortable about our balance sheet today.

Great. Well, thank you, everybody, and thank you, Tim and Jon.

Thank you. Appreciative.