FiscalNote's Contrarian Opportunity: Margin Power and AI-Driven Turnaround Ignite a Buying Catalyst

The market’s focus on near-term macroeconomic volatility has overshadowed a critical inflection point at FiscalNote (NYSE: NOTE). Beneath the noise of divestitures and geopolitical uncertainty lies a company executing a textbook turnaround: margin expansion, product-led growth, and balance sheet discipline are aligning to create a compelling contrarian opportunity.

Margin Expansion: The Turnaround’s Bedrock

FiscalNote’s Q1 2025 results revealed a stark shift toward profitability. With adjusted EBITDA of $2.8 million—surpassing estimates—the company demonstrated that its cost discipline is no flash in the pan. Year-over-year operating expenses fell by $2.3 million (5%), excluding divestiture impacts, as the firm slashed non-core expenditures while prioritizing high-ROI initiatives.

This is no accident. By exiting non-core businesses like Oxford Analytica and Dragonfly Intelligence (sold for $40 million in March 2025), FiscalNote has redirected capital toward its core AI-driven policy intelligence platform, PolicyNote. The strategic pruning of TimeBase (to be sold to Thomson Reuters for $6.5 million) further cleansed the balance sheet, reducing debt and sharpening focus on its high-margin software-as-a-service (SaaS) model.

The results are clear: adjusted EBITDA margins have expanded sequentially for three consecutive quarters. With full-year 2025 guidance of $10–$12 million, FiscalNote is on track to achieve its $15 million adjusted EBITDA target by 2026, a 50% margin improvement from 2024 levels.

Product-Led Growth: PolicyNote’s AI Edge

The company’s crown jewel, PolicyNote, is now firing on all cylinders. Q1 saw the launch of an AI-powered presidential actions widget, an EU Defense and Space Policy vertical, and a Tariff Tracker—tools that capitalize on escalating demand for real-time geopolitical analysis. These enhancements aren’t just features; they’re revenue accelerators.

Critically, these upgrades are low-cost to deploy thanks to the company’s shift to a product-led growth (PLG) model. By automating client onboarding and reducing reliance on high-touch sales teams, FiscalNote is lowering customer acquisition costs while expanding its addressable market. Early indicators suggest this is working: Q1’s $27.5 million in revenue included strong adoption from enterprise clients in energy, finance, and defense—sectors with sticky, high-margin contracts.

Divestitures: A Contrarian’s Dream

While the market fixated on the “loss” of non-core assets, FiscalNote’s divestitures were masterstrokes. The $46.5 million in proceeds (from Oxford/Dragonfly and TimeBase) have already begun to reduce debt, with more to come once TimeBase’s sale closes. Meanwhile, the company has eliminated $1.3 million in annualized revenue from its books—intentionally.

This might sound counterintuitive, but it’s a brilliant move. By jettisoning low-margin, non-strategic businesses, FiscalNote has created a pure-play AI policy intelligence platform. Its core SaaS business now faces far less competition, while its customer base becomes more concentrated in high-growth verticals. The reaffirmed guidance—$94–$100 million in 2025 revenue—assumes this focus pays off, and I see no reason to doubt it.

The Contrarian Case: Why Now is the Time to Buy

The skeptics will point to macro risks: federal budget delays, private sector spending cuts, and lingering geopolitical uncertainty. But these are precisely the conditions that make FiscalNote’s valuation compelling.

At current levels, NOTE trades at just 3.5x 2025 revenue guidance, a discount to peers like S&P Global (SPGI) and Bloomberg LP. Meanwhile, its $2.8 million Q1 EBITDA beat suggests the market has yet to price in the full impact of its turnaround.

The catalysts are clear:
1. PolicyNote’s product momentum will drive enterprise renewals and upsells.
2. Debt reduction will unlock flexibility for M&A or share buybacks.
3. Margin expansion will validate the bull case, even in a slow-growth environment.

Risks and Reality Checks

No investment is without risk. A prolonged federal budget impasse or a sharp private sector downturn could pressure revenue. Additionally, antitrust delays on TimeBase’s sale could stall balance sheet improvements. Yet these are all manageable headwinds for a company now operating with $40 million in net cash and a $500 million market cap.

Conclusion: A Turnaround with Momentum

FiscalNote is at a pivotal juncture. Its Q1 results and strategic divestitures have positioned it as a lean, focused AI powerhouse in a market hungry for geopolitical insights. With margins expanding, cash flows improving, and a product pipeline that’s just warming up, the stock represents a once-in-a-cycle contrarian opportunity.

For investors tired of overhyped tech stocks, here’s a chance to buy a turnaround story with visible progress, tangible catalysts, and a valuation that rewards patience. The time to act is now—before the market catches on.

Gary’s Call: Buy the dip. Hold for the margin miracle.