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13-05-2025
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Q1 2025 MeridianLink Inc Earnings Call
Gianna Rotellini; Investor Relations; MeridianLink Inc Nicolaas Vlok; Chief Executive Officer, Director; MeridianLink Inc Larry Katz; President, Director; MeridianLink Inc Elias Olmeta; Chief Financial Officer; MeridianLink Inc Alex Sklar; Analyst; Raymond James Saket Kalia; Analyst; Barclays Nikolai Cremo; Analyst; UBS Natalie Howe; Analyst; BofA Securities Scott Wurtzel; Analyst; Wolfe Research Matthew Kikkert; Analyst; Stifel Nicolaus and Company, Incorporated Marc Feldman; Analyst; William Blair & Company Operator Ladies and gentlemen, thank you for standing by and welcome to MeridianLink's first-quarter 2025 earnings conference call. (Operator Instructions) Please be advised that today's conference is being recorded. I would now like to join the conference over to your first speaker today, Gianna Rotellini. Gianna, please go ahead. Gianna Rotellini Good afternoon, and welcome to MeridianLink's first quarter fiscal year 2025 earnings call. We will be discussing the results announced in our press release issued after the market closed today. With me today are MeridianLink's Chief Executive Officer, Nicolaas Vlok; President, Larry Katz; and Chief Financial Officer, Elias Olmeta. Before we begin, I'd like to remind you that today's conference call will include forward-looking statements based on the company's current expectations. These forward-looking statements are subject to a number of significant risks and uncertainties, and our actual results may differ materially. For a discussion of the risks, uncertainties, and other factors that could affect our future financial results and business, please refer to the disclosure in today's earnings release and the periodic reports and filings we file from time to time with the Securities and Exchange Commission. All of our statements are made based on information available to us as of today, and except as required by law, we assume no obligation to update any such statements. Please note that other than revenue, cash and cash equivalents, and cash flow from operations, all numbers in our remarks are on a non-GAAP basis unless otherwise stated. A reconciliation to comparable GAAP metrics can be found in today's earnings presentation, which is available on our Investor Relations website and as an exhibit to the Form 8-K furnished with the SEC just before this call. Our earnings presentation is available for you to download and reference throughout our prepared remarks. With that, let me turn the call over to Nicolaas. Nicolaas Vlok Thank you, Gianna. Good afternoon and thanks for joining us today. We are pleased with our first-quarter results. MeridianLink achieved $81.5 million in total revenue, or a 5% growth year over year; and adjusted EBITDA of $34.8 million, a 43% adjusted EBITDA margin. Our quarterly results highlight our focus and success operating the business in an increasingly uncertain macroeconomic environment. Earlier today we announced that Larry Katz, our President, will assume the role of CEO effective October 1. After six rewarding years at the helm of MeridianLink and multiple prior CEO roles, I intend to focus my time on private company Boards and investment activities. This transition has been carefully planned, and I look forward to continuing to work alongside Larry and the entire MeridianLink team over the next 4.5 months. I have enjoyed every moment of leading this great organization since I took the helm from Tim Nguyen, our Co-Founder, back in late 2019. As part of these changes, Tim has transitioned to a strategic advisor role and will continue to provide Larry with a strategic insight from which I greatly benefited. Together, we have expanded the business meaningfully, growing revenue from approximately $150 million in 2019 to $330 million at the midpoint of our guidance for 2025. We migrated our solutions from on-premise to the cloud and established our platform, MeridianLink One, as the market leader and we grew our customer base to nearly 2,000 financial institutions and CRAs. We have built our partner marketplace to be one of the most robust in the market, and today, over 600 partners are part of our growing ecosystem. We continue to innovate across both consumer and mortgage to automate more aspects of the lending process, helping our customers drive deposit growth, speed decisioning, fuel efficiency, and ultimately enable their workforce to focus on their core differentiator, fostering long-term relationships with their consumers. And we've made significant investments to transform and scale our go-to-market organization to deliver more value at greater speed. We've accomplished a lot over the years, but I firmly believe that MeridianLink's best days are ahead. Now, Larry will lead us into the next chapter for MeridianLink. He's an operator with deep experience in both consumer finance and SaaS and at companies that have operated at scale. He's a great cultural fit for our organization and highly aligned with our mission and values. In the last year, he had a big impact on several critical aspects of the business. First, he's brought up operational rigor to many parts of our business, driving the development and prioritization of our objectives for 2025. He has improved our financial discipline and transparency and he has further clarified our build-buy partner strategy. Second, he's invested the time and established strong relationships with all of our stakeholders, including customers, partners, shareholders, and the team. Over the last year, he's met with many of our customers across the country and reaffirmed our commitment to both customer success and making it easier to do business with us. Just last week, Larry successfully led the company through our annual user conference, MeridianLink LIVE!, welcoming over 1,300 customers, prospects, partners, and teammates in attendance. He hosted our first-ever Customer Advisory Board, and the feedback was overwhelmingly positive. Throughout the week, our customers shared our excitement regarding our platform and ecosystem growth, our product roadmap, and Larry's laser focus on driving better outcomes for our community banks, credit unions, and credit reporting agencies alike. And third, Larry is a recognized leader in our organization. Among other successes, he has helped bring greater focus and leadership to the commercial team, which became evident through our record annual bookings and new logo momentum we achieved closing out 2024. He has also been focused on the development of our talent. He's brought in key leadership that can scale and accelerate the business to meet the opportunities ahead, including outstanding hires like Elias and our new Chief Strategy Officer, Troy Coggiola. I wouldn't have made this decision now if I didn't have the confidence that Larry is the right person to lead the next chapter. He is ready now, and I know our employees will join me in my excitement for Larry to take on this role. I'm thrilled for him to start his journey as CEO, and I'll be there for the transition, just as Tim was for me. To close, I would like to thank you, our investors and analysts. I have enjoyed getting to know so many of you throughout my tenure. I've learned from you, and I'm working hard to use your input to make myself and our company significantly stronger and better. I'm excited to stay involved with the company as a Board member and significant shareholder. With that, I will turn it over to Larry. Larry Katz Thank you, Nicolaas. First, on behalf of the Board and our nearly 700 colleagues, I'd like to take a minute to applaud Nicolaas for everything this company has accomplished over the past six years under your leadership. MeridianLink is a very different business than it was when you became CEO. You transformed MeridianLink from a collection of on-premise solutions into a leading, cloud native loan origination platform for community financial institutions. You did a terrific job of building out our go-to-market team, expanding our customer base, growing our partner marketplace, and extending our product portfolio. Most importantly, you established a strong foundation to deliver long-term value to our customers, partners, and shareholders. I have tremendous respect for you, Nicolaas, both for what you have built and your capabilities as a leader. You have led with genuine care and appreciation for all stakeholders and created a powerful culture and an enduring legacy. Your impact on MeridianLink will be lasting, and I will miss your wisdom on a day-to-day basis. I'm grateful for your trust in me and I look forward to working alongside you during your transition, and then after October 1, in your continuing role as a MeridianLink Board member. I'm thrilled to have the opportunity to lead this company, and I'd like to share my perspective on where MeridianLink stands today and where we're headed. Today, MeridianLink is a growing and durable business of scale with many compelling strengths. These attributes drew me to MeridianLink one year ago and continue to inspire me today. MeridianLink delivers real value to our customers. We enable community banks and credit unions to support their communities by making lending more accessible and more efficient. We're the leading digital lending platform for community financial institutions. In 2024, we processed 28 million consumer loan applications and nearly $700 billion in application volume. We also served 50 million background checks and more than 40 million credit reports. At the core of our offering is Meridian Link One, our unified cloud native platform. It stands out in the market for three key reasons. One, our platform is the most comprehensive and scalable consumer lending platform in the market today, with the deepest partner network supporting a full range of loan products across the consumer debt wallet. Two, our platform's extensible multi-tenant architecture gives our customers the ability to compete with universal banks, challenger banks, and fintechs. And three, our platform has a proven track record of delivering results for customers, including loan and deposit growth, consumer acquisition growth, share of wallet expansion, and workflow efficiencies. Beyond our platform and product capabilities, we built a powerful, scalable, and effective go-to-market motion. As a vertical SaaS company, our land-and-expand model continues to prove itself effective, with significant opportunities for both new logo acquisition and cross sell across our product modules. We also have something that is harder to measure but just as important, and that's a strong culture rooted in customer success. Our Co-Founder, Tim Nguyen, made it clear from the beginning we only succeed when our customers succeed. That commitment is still core to who we are today. With this foundation, I'm excited to shape MeridianLink's next chapter. Today, we compete in a world that is changing quickly, in which the pace of innovation has accelerated, investment has increased, and opportunities abound. We will pursue initiatives over the next several years to build on our successes as well as pursue others that represent new, forward-looking initiatives that will be natural evolutions and extensions of our strategy. We've defined three strategic pillars that will guide us going forward: one, increasing our product portfolio; two, making it easier to do business with us; and three, strengthening our talent. First, we're focused on increasing the breadth and depth of our product portfolio and getting to market faster. We are committed to extending the range of our platform to meet our customers' needs through product delivery and innovation, partnerships, and acquisitions. To help lead this charge, I'm pleased to welcome Troy Coggiola as our new Chief Strategy Officer. Troy joined us in April and brings decades of experience, including 13 years at Ellie Mae, where he served as Senior Vice President of Product. I'm confident in Troy's ability to take us to the next level in product execution and innovation. Two, we will make it easier for customers to do business with us. Whether our customers interact with MeridianLink through our sales, services, support, or customer success teams, the experience should be simple, seamless, and consistent. Some parts of our customer experience today are where they need to be. Others are more complex than they need to be, and we're actively working to simplify these areas. Over time, we believe this focus on customer experience will drive strong product activation, higher renewals, and ultimately increased ARR. Three, we will strengthen our talent. The marketplace is competitive, and there is increasing pressure across the industry to attract and retain talent. As a company at the forefront of digital transformation in financial services, we believe we're well-positioned to attract top talent and intend to make investments to achieve our near- and long-term objectives. I want to highlight that while we are focused on delivering results in 2025, most of our efforts this year are about building a business that can deliver in 2026, 2027, and beyond. We are proud of the consistency of our execution, and our strategy and investments are intentionally formulated with a long-term horizon in mind. Let me close by offering a few final thoughts. MeridianLink is a great business. We have a platform our customers trust, a team that delivers in a market full of opportunity. I'm incredibly excited about what's ahead. It's an honor to lead this company alongside its executive team and nearly 700 talented colleagues. With that, let me turn the call over to Elias to talk about our first-quarter business and financial highlights. Elias Olmeta Thanks, Larry, and good afternoon, everyone, and congrats on your impending promotion. Let me also take a moment to recognize Nicolaas for his distinguished career and the exceptional leadership he displayed at MeridianLink. I, too, will miss you on a day-to-day basis. Turning to our results. MeridianLink achieved $81.5 million in total revenue, or 5% growth year over year; and adjusted EBITDA of $34.8 million, a 43% adjusted EBITDA margin. Our quarterly results underscore our ability to manage the business amidst the progressively unpredictable macro environment. Before reviewing our financials, I'd like to provide some business updates that showcase the demand for our platform, our commitment to product innovation, and our focus on customer success. In Q1, we benefited from a favorable demand environment as customers relied on MeridianLink for solutions that enhance their competitive edge. This resulted in continued healthy demand with an increased mix of larger deals, sustained cross-sell momentum, and increased demand for mortgage lending. Total bookings increased this quarter compared to the previous quarter and the same quarter of last year. Cross-sell and upsell continue to represent the majority of our bookings and significantly accelerated year over year. In Q1, an existing MeridianLink consumer Credit Union with nearly $600 million in assets expanded its relationship with us by purchasing MeridianLink Mortgage, our Socure marketplace integration, and MeridianLink Access. With a total of six modules on the MeridianLink One platform, this customer will achieve cross-sell benefits from covering more of the consumer's debt wallet and improving workflow efficiencies by lending through one seamless platform. Combining Socure with Access improves the digital experience for consumers, increases application volume, and reduces fraud risk. We also continue to see accelerated demand for our mortgage lending solutions in Q1. We completed 15 mortgage lending deals, up nearly 90% year over year and the highest count in over two years. Our continued momentum in mortgage highlights our fit-for-purpose lending capabilities for mid-market financial institutions and demonstrates our right to win in this market segment. On the new logo front, we secured a bank customer with $8 billion in assets. They will utilize MeridianLink Mortgage and Mortgage Access, which supports our M&A strategy by enabling more efficient vendor consolidation through one platform. The customer recognized our platform's ability to quickly onboard new users as they continue to acquire competitors, in turn, closing more loans faster. Our customers, in many cases, are gaining market share, benefiting us as well. As Larry mentioned, customers choose MeridianLink because we are the most comprehensive and scalable digital lending platform in the market today, and we drive a notable return on investment. By way of example, take Solarity Credit Union. We recently announced that Solarity, an existing MeridianLink consumer customer with around 50,000 members, selected MeridianLink Mortgage for its ability to streamline and centralize lending. They were able to consolidate 13 different mortgage products under MeridianLink One. As of Q1, Solarity had streamlined the application to funding process, reducing processing time by approximately a third and increasing operational efficiency. With respect to product updates, we are committed to prioritizing our customers' needs in our road map. In Q1, we enhanced MeridianLink One to streamline deposit account applications for consumers returning to their bank or credit union. Secondary account applications make up more than 75% of deposit application volumes at many financial institutions. By streamlining the workflow and auto-filling necessary data from the core, we reduced the total time for consumers to open a secondary account by approximately 70%. Our product capabilities were on full display for approximately 1,300 attendees at MeridianLink Live, our annual user conference held in Orlando last week. Customers had a great reaction to the continued progress we've made on MeridianLink Access. At the user conference, we spoke about the increased depth of our product over the last year, including six new partner integrations across fraud, identity verification, and credit verification to make it easy for customers to leverage value-added partner capabilities to create a more seamless digital account opening process for consumers. We also added over 10 new application flows, including business account opening, home equity, and bundled loan and account opening transactions. As part of our roadmap efforts, we will continue to invest in our point-of-sale and account opening capabilities. Overall, we are energized by the success of the conference, having achieved record attendance, generated a substantial pipeline, and built stronger customer relationships. In summary, we are heartened by the momentum and progress we have achieved starting off this year. Now on to the financials. In Q1, revenue growth accelerated, notably in our lending software solutions, profitability expanded, and we achieved solid free cash flow conversion. Reported GAAP revenue was $81.5 million, a 5% growth year over year, and adjusted EBITDA was $34.8 million, or a 43% adjusted EBITDA margin. We generated $40.6 million of free cash flow, or 50% of revenue, and ended the quarter with $128.9 million in cash and cash equivalents. Our Q1 total year-over-year revenue performance of 5% growth in terms of the revenue algorithm was as follows: one, ACV release contributed mid-single digits; two, price and churn were in the low single digits each and essentially offset each other; and three, volumes and one-time customer downsells combined were a low single-digit drag. Excluding the one-time customer downsells, volumes were a roughly neutral contributor to revenue growth. Moving to our total revenue performance of 5% growth by source, subscription revenue, which was 84% of our total revenue, grew 4% year over year. This growth was driven by the successful activation and recognition of subscription revenue from our implemented software solutions for both new and existing customers, which we refer to as ACV release. Services revenue declined 4% year over year, primarily driven by a one-time core upgrade program that spanned 2024 and Q1 of 2025. Excluding this one-time program, services revenue growth was flat year over year. Other revenue grew 41% year over year, driven by nonrecurring items that amount to approximately $600,000. Now, looking at our 5% total revenue growth by solution type. Total lending software revenue growth was 10% year over year and accounted for approximately 82% of revenue. Consumer lending revenue growth was 11% year over year and accounted for 90% of lending software revenue. We are encouraged by the acceleration in our core franchise and the fact that the primary driver continues to be one of our controllables, ACV release. In addition, consumer volumes grew year over year in Q1, driven by strength in auto and a one-time benefit from what we believe has been a partial pull forward in demand driven by consumers purchasing vehicles before tariffs became effective. Mortgage lending revenue growth was 7% year over year and accounted for the remaining 10% of our lending software revenue. This is the first quarter in a year that we have seen acceleration driven by improving churn and volume uplift, primarily from refinancing. I also want to highlight a few KPIs for our lending business that demonstrate its resilience and acceleration in Q1. Total lending ARR was $204.7 million and grew 7% year over year, driven by growth in both consumer and mortgage lending solutions. NRR was 106%, our highest rate since the second quarter of 2023, and a great proof point of the stickiness of our customers through a difficult operating environment. We also achieved 10% year-over-year growth in the average lending software ARR per customer, which has reached an all-time high of $135,000. This is the fourth quarter in a row of acceleration as lower-value customers churn, and we continue to find success with larger platform deals across both consumer and mortgage. Turning to data verification software solutions. Revenue declined 15% year over year and accounted for 18% of total revenue. This decline was driven by a 28% decrease in our mortgage-related revenue, which is nearly half of DBS and was primarily impacted by the large customer downsell. As we noted in Q4, the annual impact of that renewal will be approximately $6 million. Moving on to our profitability. Adjusted gross profit was $60.4 million, representing a 74% margin and a 54-basis-point improvement in operating leverage year over year. Our total operating expenses were $26.7 million, or 33% of revenue, and increased 1% year over year. R&D expense was $7.8 million, or 10% of revenue and declined 1% year over year. Sales and marketing expense was $9.4 million or 11% of revenue, up 2% year over year. G&A increased 1% year over year to $9.6 million or 12% of revenue. Adjusted EBITDA was $34.8 million, a 43% adjusted EBITDA margin. This is nearly 200 basis points of improvement in operating leverage year over year and demonstrates our continued cost discipline as we work towards our longer-term investments that will start in Q2 and increase in the second half of the year. Finishing with our capital position. Cash flow from operations was $42.4 million or 52% of revenue, and free cash flow was $40.6 million or 50% of revenue. We ended the first quarter with cash and cash equivalents of $128.9 million, an increase of $36.1 million from Q4. I'll now turn to guidance for 2025. We do not anticipate that our Q1 volumes are purely indicative of the longer-term trend, in particular as it relates to auto. We are of the view that what we likely experienced was some pull forward of demand as selected consumers sought to get ahead of the potential impact of tariffs on auto prices. We expect the net impact of this pull forward on the year to be neutral because with tariff-related price increases, prices should temper demand in future quarters. Ongoing conversations with our customers, recent economic data, and the potential impact of tariffs point to an increasingly uncertain environment for the consumer in 2025. As a result of that uncertainty, our 2025 outlook remains unchanged at this time. Once we are through the second quarter and assuming greater clarity on the impacts of tariffs and the macroeconomic environment, we may provide an update at that point. Total GAAP revenue is expected to be between $326 million and $334 million for 2025, compared to $316.3 million for the full-year 2024. This represents an estimated increase of 3% to 6% year over year. To provide more color on how revenue will trend by solution type at the midpoint of our guidance, we expect consumer lending will grow approximately 7% in 2025, driven by releasing ACV at a steady pace. In a higher for longer environment, consumer volumes are expected to be broadly flat year over year. We expect the mortgage market to contribute approximately 18.5% of revenue for the full-year 2025. On the non-mortgage side, we expect modest growth year over year in data verification revenue. I will now describe our 4% total revenue growth at the midpoint of our guidance in terms of the revenue algorithm. In this uncertain market, we are staying focused on the controllables. We have solid visibility into the drivers of our revenue, such as ACV release, churn, and price. As I mentioned, volume growth is less certain, and we are expecting a modest deceleration in the back half of the year. With that, one, we expect ACV release to continue contributing mid-single digits and to be the single largest driver of our revenue growth in 2025. Two, we expect the price to continue to offset churn for the full year. Three, we expect that volumes and the DBS customer renewal combined will be a low single-digit headwind. Excluding the customer downsell, total volumes across all of our products will be slightly positive year over year and a broadly neutral contribution to revenue growth. Now turning to the adjusted EBITDA guide. Costs are another factor we are focused on controlling. We are strategically reinvesting in our product road map and go-to-market team this year to drive future growth. For the full-year 2025, the adjusted EBITDA range is expected to be between $131.5 million and $137.5 million, representing adjusted EBITDA margins of approximately 41% at the midpoint. While the midpoint of our guidance implies a 41% margin, we are not changing our longer-term target of 40%. This is an instance where the timing of long-term investments can fluctuate. Nonetheless, we remain committed to such investments as the current environment presents an excellent opportunity to ready the business for what we see as an attractive growth runway ahead, as cyclical headwinds shift to tailwinds. To provide more clarity on the shape of the year, we anticipate seasonality in our total revenue throughout 2025 to be broadly in line with the seasonal pattern we saw in 2024. MeridianLink's high percentage of subscription revenue and strong quarterly ACV release give us confidence in our annual growth expectations. We continue to expect our expenses to be impacted by the timing of investments that will start in Q2. These will ramp up in the second half, and there will be a modest contraction in margins. We expect both R&D and sales and marketing as a percentage of revenue will increase approximately 100 bps for 2025 compared to 2024 as we invest in our product road map and go-to-market capabilities. We view these incremental investments as preparing the company for growth in the years ahead. As a result, we expect adjusted EBITDA margins to be highest in the first quarter before slightly declining in the second half of the year, exiting Q4 at a run rate margin slightly below 40%. We continue to manage the business to eventually become a Rule of 50 company and are investing appropriately. I would note that based on Q1 results, we are a Rule of 48 company. Finally, I'd like to reiterate how resilient the company has been through another quarter, all thanks to the outstanding effort of our team. Moving forward, we are remaining focused on strategically investing in and building a business for scale in 2026 and beyond. With that, Nicolaas, Larry, and I are happy to take any of your questions, and I'll turn it over to the operator. Thank you. Operator (Operator Instructions) Alex Sklar, Raymond James. Alex Sklar Larry, congratulations on the promotion and new role. Maybe just starting with you, you laid out some changes you're going to be embarking on as part of this next chapter. And I just wanted to get some more color. Is this more of an evolution on some of the things you've already been working on over the last couple of years? Are these brand-new initiatives that you're going to put into focus over the next couple of years? How meaningful are these changes in aggregate? Larry Katz Alex, it's Larry. Look, first of all, I'm excited to take on the role. And I view this as a continuation of our strategy, no real change. But there is a bit of focus that I'm bringing to my comments. Look, we've got a really strong and durable business. And over the past year that I've been here working with Nicolaas and the team, I've been focused on bringing discipline to the business and accelerating growth in the business. And this is what I'm highlighting are really strategies to drive acceleration and progress and momentum in the business around how we sell, how we go to market, how we deliver product, and how we deliver our services. And so, I mentioned a few of the areas that I'm focused on around products and breadth and depth of our product portfolio and product execution, and we have been working on that over the past year as well, and we'll continue to be focused on that around making it easier to do business with us. I've talked about the customer journey in the past, and we'll continue to bring focus to how we show up with the customer and listen to the customer voice. A good example of that was the cab that we talked about just hosting this last week. And then strengthening our talent, you've seen some of the additions that we brought to the team, Elias, and now Troy. But it's not just about bringing in new talent. It's also around supporting our existing talent and helping them develop their own skills and experiences to operate at this larger scale that we have today. So, continue to invest in our own team. So these are all strategies that I think are super important to our ability to scale and compete going forward, and we've been working on them for the past year, and we'll continue to. Alex Sklar And maybe a follow-up either for you, Larry, or for Elias. Just in terms of the backlog, you called out 1Q bookings that exceeded Q1 of last year and Q4 of last year. I know you've got high visibility on the ACV release. But just given some of the increased macro variability, how are you thinking about the demand backdrop and the ability to replace that mid-single-digit ACV release that you laid out for this year? Larry Katz This is Larry again. Our pipeline continues to be strong and healthy, and we feel really good about that. The demand environment continues to be robust, and demand across the platform, which we talked about, includes both cross-sell demand, new logo demand, and mortgage demand, which we highlighted. So we do feel good about it. When I think about the macro environment that we're operating in, we are seeing a bit of softness at the top end of the funnel. Hard to know if that's macro-related or not, but we're watching that carefully. And we have not yet seen any real changes in our sales cycles. As we talk to our sales leaders, we don't hear about that directly. But it's reasonable to expect that that could happen given the uncertainty and these investments that our customers are making. I think it's reasonable to expect that we could see a little more softness in the new logo because switching platforms is a bigger lift than cross-selling. So we're watching that carefully as well, but we haven't seen any changes as of yet. Operator Saket Kalia, Barclays. Saket Kalia Congrats, Nicolaas and Larry, on your new respective roles. Nicolaas and Larry, maybe for either of you, I'd love to dig into the consumer lending business specifically, a little bit, just given the growth, the acceleration there. And maybe zoom in a little bit on new business. And Larry, you touched on this a little bit in your prior response, but just to ask it specifically for consumer lending. Can we just talk a little bit about the new business environment there a little bit? And maybe zooming out, do you think the profile of the customer there is changing at all, whether it's banks versus credit unions or big versus small? Any color on whether that profile was changing as you continue to gain share? Larry Katz Sure. Saket, it's Larry again. Thanks for the congratulations. So, on the consumer side, first of all, Elias can build on this, but a lot of the growth is being driven by the ACV release. That's really what's showing up there. And that's both cross-selling and a new logo. To your question around new logo demand, look, it continues to be solid in the consumer space. We continue to have what we think is the most comprehensive and the most complete solution out there as a platform. And as I was talking to customers last week at live, it is recognized to be the leader in the space and to really be mission-critical. And so I feel good about our position there and the demand for consumer. I think in terms of the size of the clients that what I'd point to is that the average ARR, as Elias talked about, is going up. And I think that's really just demonstrates the power of the platform and how the value that we're delivering and what customers are willing to pay for that. So I think that's a part of it. We are seeing some additional success in larger AUM clients, and we talked about some of those on the call as well. And I think that just speaks to the scalability of the platform as well. So yes. So, anything you want to add, either Nicolaas or Elias? Elias Olmeta No. Well, let me just add that, of course, it was a tremendous quarter for the consumer, hitting 11% year over year. And just to echo, we're having success in all the areas that Larry mentioned. We're seeing that really in ACV release being the leader in driving that growth, but also on the back of some of the volumes that we saw, particularly in automotive, we benefited from some volume improvement as part of our revenue algorithm. So really, really nice quarter, in particular for the consumer, but for our lending business in general. Saket Kalia And actually, Elias, maybe for you just to follow up on that and in a similar vein, just on the consumer business specifically, I guess, how do you think about disaggregating this quarter's 11% growth in terms of, I don't know, maybe like a same-store sales metric, like volume growth from existing customers versus new customer contribution/ACV release? Is there a way that you have us think about that to map back to that 11%? Elias Olmeta Yes. I mean, the single ACV release it's one of two things. It's either new customers, new logos that we are bringing on board, or existing customers who are expanding their relationship with us. So that is what's driving the ACV release, which was the majority of what we were able to achieve in the quarter. So that I would consider -- if you want to think about that as new versus old, that's the way to think about new. And that's not all volume-driven. It's mostly driven by minimums, but nonetheless, that's new customers. And then, as I alluded to earlier, we had an uptick in volumes, and that's primarily our existing customers and volume that's being driven from their operations that is flowing through for revenue from us. And think of that really as volume that is piercing the minimums, and that we are getting some upside on. Operator Nik Cremo, UBS. Nikolai Cremo Congrats on the promotion, Larry. And Nicolaas, congrats on everything that you accomplished at MeridianLink as CEO over the last six, seven years. Larry, first question for you. So now that you've been with the company for a little over a year, just looking out over the next few years, can you just put a finer point on where you see the most opportunity to invest in the business organically, just in terms of the breadth and depth of MeridianLink's product portfolio? Larry Katz Yes, absolutely. Thanks, Nik. Look, as I talked about, let me talk about our buy, build, partner strategy here. One of the changes that we've made with Troy coming in is really pulling together buy, build, and partner under one leader. And I start there because that's really the continuum of capital allocation. So it's not just organic, but it's also partnership and it's also M&A that we're thinking about. And look, I think there are a number of areas where we're going to continue to invest. We're going to continue to invest in digital interfaces, both directly and via partnership. So that means digital point of sale, that means workflow digital interfaces. And we spent a lot of time talking about access, which is our organic point-of-sale at Access last week, and that will continue to be an area of investment, which we think is well-suited for a lot of our customers. We will continue to invest in automation in the platform. And we talked about areas last week, around things like rapid account opening, 90-second account opening, and Elias talked about the secondary account pickup. We talk about things like touchless credit card lending. Those kinds of initiatives that drive automation and efficiency and ultimately, conversion for our customers are areas of focus. We will continue to invest in partnerships and ease of integration with the platform. We've got a large portfolio of partnerships, and we'll continue to invest in those partners because, look, we don't intend to do everything ourselves. Some we will do ourselves, and some we will do through partnership. So the ease of integration and monetization of the partnerships is critical. And then the last one I'd highlight is AI. We're excited about the opportunities across the business in AI. From a product perspective, we think it's going to be a real enabler both for consumers as well as for the workforce. We can see opportunities ranging from AI powering dock capture in a much simpler way, demand generation strategies, decisioning and underwriting, collections, et cetera. All of those, we think, are going to be meaningfully changed with AI, and that's going to drive efficiency for our customers. It's going to drive velocity for our customers, meaning from conversion from the front of the applications through funding, which ultimately creates revenue for the customers. And it's going to deliver just better customer experiences and customer outcomes, which allows our clients, our customers, to compete with universal banks and challenger banks, and fintechs, and that competition is growing every day. So those are the areas that we're focused on, and we'll share more as Troy gets in the seat and he develops his buy-build partner strategy. Nikolai Cremo And for my follow-up, I had a question for Elias. I was hoping that you could just put a finer point on what your expectations are for the auto lending vertical in 2025, just given the uncertainty that part of the business is facing from any potential tariffs. So, are you assuming that business grows in line with the rest of consumer lending for the year? And what did it grow in Q1? Elias Olmeta Yes. We don't break out the individual components of the consumer. But as I mentioned, consumer growth was 11% in the quarter. And as we're not changing our guide for the year, I would point you to the fact that we're assuming 7% year-over-year growth. I acknowledge the uncertainty on the auto front. We did see some improvement there in terms of volumes. But again, we're assuming that, that is mostly a pull forward of stuff that we would have seen in Q2 and Q3. And so we are being, I think, prudent in the face of the significant uncertainty. And since we just provided guidance, which I think remains relevant, just eight weeks ago, we're going to hold. And if we have something more to give you, we'll look forward to doing so in Q2. Operator Koji Ikeda, Bank of America. Natalie Howe This is Natalie on for Koji. Larry, congrats on the promotion. You guys talked about improving churn in the mortgage business for the first time in a few quarters, which is great to hear. What would it take for you to say that retention has stabilized or inflected positively? And in the current environment, could you see that being a trend soon? Or would it be a little premature? Larry Katz Yes. Thanks for the question. I mean, we have seen retention improve. Whether that's a trend or not, I'm not going to venture a guess at this point. What I would say, which is in line with what we have said in prior quarters, is that the customers that we are losing tend to be very much at the small end of the scale. Similar to what I said last month, we classify them within buckets, and the average of all of the customers we lost was about 40,000, but over half of those had an ARR of less than [$10]. So as you can see, these aren't materially sized customers. These are just institutions that we don't think are able to either take advantage of the full benefits that the platform brings, or have just decided to drop for one reason or another. I guess what I would say is it's part of the reason why we're seeing ARR grow, and we feel good about where the business is trending and where churn is trending in the quarter. Operator Scott Wurtzel, Wolfe Research. Scott Wurtzel I wanted to go back to the comments you made about the mortgage demand being a little bit elevated. I'm wondering if you can maybe unpack that a little more and talk about the drivers of the increased demand. And with the number of mortgage wins up 90% year over year, how much of that is due to higher demand versus better internal sales execution also? Larry Katz Scott, it's Larry. I'll start, and Elias can follow on. Look, we have a really strong mortgage offering, and we believe we've got the right to win in the mid-market community banking and credit union space. We've got a terrific price value equation there, and I think that's showing up in our win rate. We have also invested in our sales team. And I think we're really having strong success across the board on mortgage win rates because of the strength of that team. So I think it's both of them. I think that there's also a macro here and a competitive dynamic. And the macro is that at some point, we're at lows in the mortgage market, but we know that at some point, that will turn. The smart players out there are looking ahead and saying this is the right time to invest. It's hard to invest when you're going 100 miles an hour. So this is the right time to make some of those transitions, and I think we're seeing the impact of that. I think we're also seeing some dislocation in the competitive set as well, whether it's the changes that others are making or just aging platforms. And so there's a real interest in our platform, and that's why you're seeing the positive trend. Elias Olmeta Yes. I would just add to that that in the quarter, we grew nicely in the quarter and again, mostly driven by ACV release, but there was some really nice impact from volumes in the mortgage market, primarily from refi. And we've been able to really take advantage of that. And if the market continues to perform and we're able to continue to be successful in the marketplace, I'm hoping that this is the beginning of a good trend, but too early to specifically call that out. Scott Wurtzel Then just as a follow-up, I wanted to see if you could talk about your appetite for M&A in this environment right now. You built a nice cash position on the balance sheet, leverage, I think, at around 2.5 turns now. So, just wondering if you can talk about M&A appetite at these levels here. Larry Katz I'll start again, it's Larry, and Elias can pick up. Look, since I joined, we've been talking about the opportunity in M&A, and it's core to our strategy. We've done a number of deals in the past, but we have to find the right deals at the right price. And of course, they have to be willing to sell as well. So we have to be patient and disciplined around it, which we are. But when we think about the M&A strategy, and I think we've talked about this in prior calls, there are three concentric circles around our business. One would be just tuck-ins to the platform, and that would likely be fishing within our partnership pool or businesses that we know well because we work with them, and they enhance the core LOS. The second would be near adjacencies, related to the LOS business, but maybe a circle out from just plug-ins. And then the third would really be transformational deals, and we look at them all the time. And I think we do have firepower, but I'll let Elias talk to the balance sheet. Elias Olmeta Yes. I mean, as you well point out, we have a strong balance sheet. I mean, we have almost $130 million in cash. We have all of our capacity under our revolver. You can see from the quarter, we had a very strong quarter from a free cash flow perspective. And so there's lots of room for us to do deals without having to go tap external capital that could reach possibly up to $200 million. That being said, if we were to do something larger, which I'm not handicapping that, I'm merely providing some color. We're in a good position to obtain leverage and foreign capital. So there's lots of activity. We continue to look at things. We continue to look at things in a very disciplined manner. We think prices are high. For the right deal, we may reach but we are being disciplined and thoughtful about how we approach this as we evaluate every opportunity that comes our way, and there are many. Operator Parker Lane, Stifel. Matthew Kikkert This is Matthew Kikkert on for Parker. First, congratulations to Nicolaas on the long tenure as CEO and also to Larry for the promotion. My first question, I'm curious as the non-mortgage lending improves, are there dynamics that would delay the revenue recognition at all, similarly to mortgage, the volume minimums there? Or would you see revenue bounce back more quickly in the non-mortgage segments in a better lending environment? Elias Olmeta Yes. I guess I would say a couple of comments. On the consumer side, there are two items that work to, at times, limit our ability to recognize all of the revenue associated with volumes, and I've talked about these in the past. So one is just simply global minimums. So our customers are subject on the consumer side to global minimums related to all of their products. So even though you might have a particular product do well in the quarter, their total product stack needs to do well for them to pierce their minimums. So if one product goes down, that offsets the improvement in a particular product. So you have to keep that in mind. The second is that as we are having success with ACV release and as we are having success cross-selling into our customer base, there is a slight drift in our minimums upward. So all of that is to say that the rate at which our consumer business needs to grow has increased for us to recognize some of that revenue. That doesn't mean we don't. We recognized a few points in the quarter. But that is different and distinct from our mortgage business, where it is just one minimum, one product. And as those customers pierce that, we recognize that revenue. Matthew Kikkert And then secondly, I know you're focused on investing in both the go-to-market and the product throughout the remainder of this year. I'm wondering if you could detail specific areas of the go-to-market that you're looking to invest in more? And if you're seeing any initial impact from these changes so far in 2Q? Larry Katz Sure. It's Larry. I think we talked about this a bit last quarter as well. We feel good about the size of our quota-carrying sales force. On sales and marketing, we've been investing in a couple of things. One is sales engineering and sales consulting. So helping existing and new customers really understand the value of the platform, understand how they can get the most out of the platform, and architect that from the beginning of the sales process. And so we've invested there and are starting to really get some great positive feedback there. Probably a little early to call wins there, but building momentum there, and I saw that and felt that at live. The second is in some of our demand generation investments and strategies to find top of the funnel, and we're swimming upstream there a little bit against a more challenging macro, but I expect that we will see benefits there, and it's certainly a worthwhile investment. That's about being in front of our customers and prospects when they are in market and when they're looking at opportunities, and we've identified a number of strategies to be more present and current with them. And I'm optimistic about the opportunities there. Operator Marc Feldman, William Blair. Marc Feldman I'm for Chris today. I just wanted to extend the congratulations on all the leadership changes going on. And I guess my first question is, you talked about the deposit account opening application and all the upgrades you're making there. Could you just put a finer point on the opportunities associated with that and how that can help you win, having a differentiated offering with your customer base? Larry Katz Yes, sure. Look, account opening has always been core to the offering. So it's always been very close to lending. And when you open a loan account, opening a deposit account at the same time, which ultimately strategically is important to our customers, because that's how they build their customer base and cross-sell around it. With the generational changes that we're seeing in the larger market, where we're shifting to Gen X and millennials and Gen Y, who are all very digitally savvy and digitally native customers, the digital applications and omnichannel account opening are really core to their success. And so our investment around access is about a more modern digital omnichannel set of capabilities that supports them. And we think that we've had account opening capabilities. We're just investing to improve those and accelerate those, and make those more seamless and elegant and efficient, and customer-friendly. And that's really what our investment strategy is. We also open our we believe that access is going to be very relevant to the majority of our customer base. For the more complex implementations, there are a number of other point of sales that we integrate to as well, and those are always options, and we want to be there to support our customers for whatever choices they need to make. But we think the seamless integration of our account opening with our LOS is really differentiated, and both from an implementation perspective, a data perspective, a security perspective, and also just ease of use for the customer. So we think it's important and will continue to be important. Marc Feldman I guess the second question here is, I appreciate the expectations given around churn. I just wanted to see if there's any way to break out the components of churn that are related to industry M&A, just given consolidation, a lot of what we're hearing is increases in industry consolidation, given the potentially softer regulatory landscape? Elias Olmeta Yes. We don't break that out. We may consider that. But at this point, we don't break that out or provide any further detail on that. Larry Katz And maybe beyond that, just the numbers as is talking to just from a regulatory perspective, I think you're also asking about what's going on in the macro, and how does the regulatory environment impact us. I would expect that there will continue to be consolidation in the space. And in a more accommodated regulatory stance, consolidation, I would expect, will accelerate. Our experience is that a lot of the acquirers are customers of ours, and that actually is a tailwind for us because it's no surprise that the larger institutions, who are the acquirers, also have invested in technology, and they're more able to scale via acquisition. And so we tend to win in those deals. So we're watching it carefully, but I'd expect it to be a positive for our business. Operator There are no further questions at this time. I will now turn the call over to Nicolaas for closing remarks. Please go ahead. Nicolaas Vlok Thank you, operator. As we wrap up, I know you'll join me in congratulating Larry as our incoming CEO. I know that he will continue to lead and accelerate our growth strategy and build on the trust placed in us by our customers, partners, and the team. Speaking of the team, I want to thank everyone at MeridianLink for a solid Q1 performance. I'm consistently impressed by our employees' dedication to innovation and customer success. I'm sure that the consistency and creativity we have demonstrated will undoubtedly continue in the years to come. Thank you. Operator Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Business Wire
12-05-2025
- Business
- Business Wire
MeridianLink Reports First Quarter 2025 Results
COSTA MESA, Calif.--(BUSINESS WIRE)-- MeridianLink, Inc. (NYSE: MLNK), a leading provider of modern software platforms for financial institutions and consumer reporting agencies, today announced financial results for the first quarter ended March 31, 2025. MeridianLink® also announced today that Larry Katz, MeridianLink's President, will succeed Nicolaas Vlok as Chief Executive Officer effective October 1, 2025. Mr. Vlok, who became Chief Executive Officer in 2019, will continue to serve on MeridianLink's Board of Directors after the transition. 'We are pleased with our first quarter results, which underscore our ability to manage our business amidst an unpredictable macro backdrop," said Larry Katz, current President and incoming Chief Executive Officer. 'We benefited from a favorable demand environment as customers turned to MeridianLink for solutions that serve their consumers and communities. Our solid bookings were driven by an increased mix of larger deals, continued cross-sell momentum, and accelerated demand for mortgage lending solutions. As the most trusted, comprehensive and scalable platform for community financial institutions, we remain committed to product innovation and customer success. With a strong foundation and a market-leading position, I'm honored and energized to shape MeridianLink's next chapter as we execute on strategic initiatives that will deliver long-term value to our customers, partners, and shareholders.' 'We've accomplished a lot over the last years, expanding the business meaningfully, growing revenue from approximately $150 million in 2019 to $330 million at the midpoint of guidance for 2025. We shifted our solutions from on-premise to the cloud, and established our platform, MeridianLink® One, as the market leader, today, and grew our customer base to nearly 2,000 financial institutions and CRAs,' said Nicolaas Vlok, Chief Executive Officer of MeridianLink. 'Now, Larry will lead us into MeridianLink's next chapter. He's an operator with deep experience in both consumer finance and SaaS, and at companies that have operated at scale. I couldn't be more confident in Larry as my successor, and together with the rest of our team, they will position the company to thrive in its next phase of profitable growth.' Quarterly Financial Highlights: Revenue of $81.5 million, an increase of 5% year-over-year Lending software solutions revenue of $67.1 million, an increase of 10% year-over-year Operating income of $3.6 million, or 4% of revenue, and non-GAAP operating income of $19.1 million, or 23% of revenue Net loss of $(4.7) million, or (6)% of revenue, and adjusted EBITDA of $34.8 million, or 43% of revenue Cash flows from operations of $42.4 million, or 52% of revenue, and free cash flow of $40.6 million, or 50% of revenue Business and Operating Highlights: MeridianLink welcomed Troy Coggiola as its new Chief Strategy Officer on April 21, 2025. Mr. Coggiola brings industry expertise and will help the Company meet customers' needs through product innovation, partnerships, and acquisitions. We achieved solid bookings momentum through our land and expand strategy, highlighted by continued strength in cross-sell and fifteen mortgage lending deals selected by new and existing customers. MeridianLink announced the go-live of Solarity Credit Union on MeridianLink® Mortgage, which enabled them to optimize their application to funding process, reduce processing time by a third, and increase operational efficiency. We enhanced MeridianLink One to streamline deposit account applications for returning consumers, reducing secondary account opening time by approximately 70%. Business Outlook Based on information as of today, May 12, 2025, financial guidance for 2025 remains unchanged and is as follows: Full Year 2025: Revenue is expected to be in the range of $326.0 million to $334.0 million Adjusted EBITDA is expected to be in the range of $131.5 million to $137.5 million Conference Call Information MeridianLink will hold a conference call to discuss its first quarter results today, May 12, 2025, at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time). The conference call can be accessed by dialing (800) 549-8228 from North America toll-free or the International number of (289) 819-1520 with Conference ID 69715. A live webcast of the conference call can be accessed from the investor relations page of MeridianLink's website at An archived replay of the webcast will be available at the same website following the conclusion of the call. A telephonic replay will be available until 8:59 p.m. Pacific Time (11:59 p.m. Eastern Time) on Monday, May 19, 2025, by dialing (888) 660-6264 from North America or the International number of (289) 819-1325 with Playback Passcode 69715. MeridianLink uses its investor relations website ( press releases, SEC filings, public conference calls and webcasts, blog posts on its website, as well as its social media channels, such as its LinkedIn page ( X (formerly Twitter) feed (@meridianlink), and Facebook page ( as a means of disclosing material information and for complying with its disclosure obligations under Regulation FD. Information contained on or accessible through the websites is not incorporated by reference into this release, and links for these websites are inactive textual references only. About MeridianLink MeridianLink® (NYSE: MLNK) empowers financial institutions and consumer reporting agencies to drive efficient growth. MeridianLink's cloud-based digital lending, account opening, background screening, and data verification software solutions leverage shared intelligence from a unified data platform, MeridianLink® One, to enable customers of all sizes to identify growth opportunities, effectively scale up, and support compliance efforts, all while powering an enhanced experience for staff and consumers alike. For more than 25 years, MeridianLink has prioritized the democratization of lending for consumers, businesses, and communities. Learn more at Operational Measures Definitions We reference bookings, which is an internal operational measure of the business. Bookings is defined as the minimum annual contracted value, or ACV, of newly sold capabilities of our software-as-a-service, or SaaS, products and professional services orders, inclusive of any corresponding fees owed to third parties. Bookings is a useful metric as it reflects the SaaS and services that have not been delivered. Management uses bookings to plan their go-to-market and services activities and inform product development efforts. We reference ACV and ACV release, which are internal operational measures of the business. In any given period, ACV represents the minimum annualized SaaS revenue commitment from fully activated contracts in effect for customers at the end of the applicable period. ACV release is the portion of ACV that is recognized as subscription revenue throughout the twelve-month period beginning on the date after our software solutions are fully implemented. ACV and ACV release are useful to investors in assessing the growth and trajectory of our business. ACV and ACV release are used by management in financial and operational decision-making. Non-GAAP Financial Measures To supplement the financial measures presented in accordance with generally accepted accounting principles, or GAAP, we provide certain non-GAAP financial measures, such as adjusted EBITDA and adjusted EBITDA margin; non-GAAP operating income (loss); non-GAAP net income (loss); non-GAAP cost of revenue; non-GAAP sales and marketing expenses; non-GAAP research and development expenses; non-GAAP general and administrative expenses; and free cash flow. The presentation of these financial measures is not intended to be considered in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with GAAP. Rather, we believe that these non-GAAP financial measures, when viewed in addition to and not in lieu of our reported GAAP financial results, provide investors with additional meaningful information to assess our financial performance and trends, enable comparison of financial results between periods, and allow for greater transparency with respect to key metrics utilized internally in analyzing and operating our business. The following definitions are provided: Non-GAAP operating income (loss): GAAP operating income (loss), excluding the impact of share-based compensation, employer payroll taxes on employee stock transactions, expenses associated with our public offering, restructuring related costs, expenses for services performed by third party consultants relating to efforts to remediate our material weakness, and third party acquisition related costs. Non-GAAP operating margin is Non-GAAP operating income (loss) divided by total GAAP revenue. Non-GAAP net income (loss): GAAP net income (loss), excluding the impact of share-based compensation, employer payroll taxes on employee stock transactions, expenses associated with our public offering, restructuring related costs, expenses for services performed by third party consultants relating to efforts to remediate our material weakness, third party acquisition related costs, and the effect of income taxes, on non-GAAP items. The effects of income taxes on non-GAAP items reflect a fixed long-term projected tax rate of 24%. Non-GAAP net income (loss) margin is Non-GAAP net income (loss) divided by total GAAP revenue. The Company employs a structural long-term projected non-GAAP income tax rate of 24% for greater consistency across reporting periods, eliminating effects of items not directly related to the Company's operating structure that may vary in size and frequency. This long-term projected non-GAAP income tax rate is determined by analyzing a mix of historical and projected tax filing positions, assumes no additional acquisitions during the projection period and does not include the impact from the partial deferred tax asset valuation allowance, and takes into account various factors, including the Company's anticipated tax structure, its tax positions in different jurisdictions, and current impacts from key U.S. legislation where the Company operates. We will reevaluate this tax rate, as necessary, for significant events such as significant alterations in the U.S. tax environment, substantial changes in the Company's geographic earnings mix due to acquisition activity, or other shifts in the Company's strategy or business operations. Adjusted EBITDA: GAAP net income (loss) before interest expense, provision for income taxes, depreciation and amortization of intangible assets, share-based compensation expense, employer payroll taxes on employee stock transactions, expenses associated with our public offering, restructuring related costs, expenses for services performed by third party consultants relating to efforts to remediate our material weakness, and third party acquisition-related costs. Non-GAAP cost of revenue: GAAP cost of revenue, excluding the impact of share-based compensation, employer payroll taxes on employee stock transactions, and amortization of developed technology. Non-GAAP operating expenses, including non-GAAP general and administrative, research and development, and sales and marketing costs: GAAP operating expenses, excluding the impact of share-based compensation, employer payroll taxes on employee stock transactions, expenses associated with our public offering, expenses for services performed by third party consultants relating to efforts to remediate our material weakness, third party acquisition related costs, and depreciation and amortization of intangible assets, as applicable. Free cash flow: GAAP cash flow provided by operating activities less GAAP purchases of property and equipment (Capital Expenditures) and GAAP capitalized software additions (Capitalized Software). Reconciliations to comparable GAAP financial measures are available in the accompanying schedules, which are posted as part of this earnings release on our website. No reconciliation to the most comparable GAAP measure is provided with respect to certain forward-looking non-GAAP financial measures as the GAAP measures are not accessible on a forward-looking basis. We cannot reliably predict all necessary components or their impact to reconcile such financial measures without unreasonable effort due to market-related assumptions that are not within our control as well as certain legal or advisory costs, tax costs or other costs that may arise. The events necessitating a non-GAAP adjustment are inherently unpredictable and may have a significant impact on our future GAAP financial results. Forward-Looking Statements This release contains, and our above-referenced conference call and webcast will contain, statements which are not historical facts and are considered forward-looking within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Generally, these statements can be identified by the use of words such as 'anticipates,' 'believes,' 'estimates,' 'expects,' 'intends,' 'may,' 'plans,' 'projects,' 'seeks,' 'should,' 'will,' and variations of such words or similar expressions, although not all forward-looking statements contain these identifying words. Further, statements describing our strategy, outlook, guidance, plans, intentions, or goals are also forward-looking statements. These forward-looking statements reflect our predictions, expectations, or forecasts, including, but not limited to, statements regarding, and guidance with respect to, our strategy, our future financial and operational performance, including financial guidance for 2025, future economic and market conditions, including with respect to the demand environment, our strategic initiatives, our Chief Executive Officer transition and leadership plans, our ability to drive demand, maintain bookings momentum, increase platform wins and lending deals, and accelerate revenue growth, our ability to scale, the strength of our pipeline, our ability to retain and attract customers and product partners, the benefit to us and our customers of integrations with our product partners, our development or delivery of new or enhanced solutions and anticipated results of those solutions for our customers, our ability to effectively implement, integrate, and service our customers, our market size and growth opportunities, our competitive positioning, projected costs, technological capabilities and plans, and objectives of management. Actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors that are beyond our control including, without limitation, risks related to our business and industry, as well as those set forth in Item 1A. Risk Factors, or elsewhere, in our Annual Report on Form 10-K for the most recently ended fiscal year, any updates in our Quarterly Reports on Form 10-Q filed for periods subsequent to such Form 10-K, and our other SEC filings. These forward-looking statements are based on reasonable assumptions as of the date hereof. The plans, intentions, or expectations disclosed in our forward-looking statements may not be achieved, and you should not rely upon forward-looking statements as predictions of future events. We undertake no obligation, other than as required by applicable law, to update any forward-looking statements, whether as a result of new information, future events, or otherwise. As of December 31, 2024 Assets Current assets: Cash $ 128,895 $ 92,765 Accounts receivable, net 35,412 34,422 Prepaid expenses and other current assets 11,300 10,973 Total current assets 175,607 138,160 Property and equipment, net 1,893 2,167 Right of use assets, net 849 1,095 Intangible assets, net 188,899 201,522 Goodwill 610,063 610,063 Other assets 9,647 8,326 Total assets $ 986,958 $ 961,333 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 5,796 $ 6,798 Accrued liabilities 29,821 29,383 Deferred revenue 39,727 17,170 Current portion of debt, net of debt issuance costs 3,678 3,678 Total current liabilities 79,022 57,029 Long-term debt, net of debt issuance costs 463,989 464,922 Deferred tax liabilities, net 11,598 11,287 Long-term deferred revenue — 75 Other long-term liabilities 412 527 Total liabilities 555,021 533,840 Commitments and contingencies Stockholders' Equity: Preferred stock, $0.001 par value; 50,000,000 shares authorized; zero shares issued and outstanding at March 31, 2025 and December 31, 2024 — — Common stock, $0.001 par value; 600,000,000 shares authorized, 76,659,145 and 76,049,681 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively 127 127 Additional paid-in capital 718,186 709,057 Accumulated deficit (286,376 ) (281,691 ) Total stockholders' equity 431,937 427,493 Total liabilities and stockholders' equity $ 986,958 $ 961,333 Expand Condensed Consolidated Statements of Operations (unaudited) (in thousands, except share and per share data) Three Months Ended March 31, 2025 2024 Revenues, net $ 81,488 $ 77,816 Cost of revenues: Subscription and services 22,827 21,344 Amortization of developed technology 4,896 4,729 Total cost of revenues 27,723 26,073 Gross profit 53,765 51,743 Operating expenses: General and administrative 27,685 25,179 Research and development 10,912 9,485 Sales and marketing 11,603 10,536 Restructuring related costs — 3,191 Total operating expenses 50,200 48,391 Operating income 3,565 3,352 Other (income) expense, net: Interest and other income (1,079 ) (956 ) Interest expense 8,712 9,582 Total other expense, net 7,633 8,626 Loss before provision for income taxes (4,068 ) (5,274 ) Provision for income taxes 617 32 Net loss $ (4,685 ) $ (5,306 ) Net loss per share: Basic $ (0.06 ) $ (0.07 ) Diluted $ (0.06 ) $ (0.07 ) Weighted average common stock outstanding: Basic 76,516,629 77,335,072 Diluted 76,516,629 77,335,072 Expand Net Revenues by Major Source (unaudited) (in thousands) Three Months Ended March 31, 2025 2024 Subscription fees $ 68,745 $ 65,912 Professional services 8,666 9,010 Other 4,077 2,894 Total $ 81,488 $ 77,816 Expand Net Revenues by Solution Type (unaudited) (in thousands) Three Months Ended March 31, 2025 2024 Lending software solutions $ 67,069 $ 60,903 Data verification software solutions 14,419 16,913 Total $ 81,488 $ 77,816 % Growth (decline) attributable to: Lending software solutions 8 % Data verification software (3 )% Total % growth 5 % ___________ Expand Percent Revenue Related to the Mortgage Loan Market (unaudited) Three Months Ended March 31, 2025 2024 Lending software solutions 10 % 11 % Data verification software 49 % 57 % Total % revenue related to mortgage loan market 17 % 21 % Expand Condensed Consolidated Statements of Cash Flows (unaudited) (in thousands) Three Months Ended March 31, 2025 2024 Cash flows from operating activities: Net loss $ (4,685 ) $ (5,306 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 383 376 Amortization of intangible assets 14,303 14,148 Amortization of costs capitalized to obtain revenue contracts 1,109 980 Provision for expected credit losses 555 234 Amortization of debt issuance costs 282 212 Share-based compensation expense 12,381 7,803 Deferred income taxes 311 (184 ) Changes in operating assets and liabilities: Accounts receivable (1,751 ) (4,444 ) Prepaid expenses and other current assets and other assets (2,146 ) (1,934 ) Accounts payable (1,021 ) (270 ) Accrued liabilities and other long-term liabilities 147 (2,501 ) Deferred revenue 22,482 19,924 Net cash provided by operating activities 42,350 29,038 Cash flows from investing activities: Capitalized software additions (1,620 ) (1,837 ) Purchases of property and equipment (96 ) (92 ) Net cash used in investing activities (1,716 ) (1,929 ) Cash flows from financing activities: Repurchases of common stock — (44,000 ) Proceeds from exercise of stock options 14 191 Taxes paid related to net share settlement of restricted stock units (3,326 ) (294 ) Principal payments of debt (1,192 ) (1,088 ) Net cash used in financing activities (4,504 ) (45,265 ) Net increase (decrease) in cash and cash equivalents 36,130 (18,156 ) Cash and cash equivalents, beginning of period 92,765 80,441 Cash and cash equivalents, end of period $ 128,895 $ 62,285 Expand Supplemental disclosures of cash flow information: Cash paid for interest $ 8,428 $ 9,365 Cash paid for income taxes 95 32 Non-cash investing and financing activities: Shares withheld with respect to net settlement of restricted stock units 3,326 294 Excise taxes payable included in repurchases of common stock — 377 Share-based compensation expense included in capitalized software additions 60 69 Purchases of property and equipment included in accounts payable and accrued liabilities 21 44 Expand Reconciliation from GAAP to Non-GAAP Results (unaudited) (in thousands, except share and per share data) Three Months Ended March 31, 2025 2024 Operating income $ 3,565 $ 3,352 Add: Share-based compensation expense 12,381 7,936 Add: Employer payroll taxes on employee stock transactions 625 422 Add: Expenses associated with public offering — 1,389 Add: Restructuring related costs (1) — 3,191 Add: Expenses associated with material weakness remediation (2) 2,063 — Add: Acquisition related costs 446 — Non-GAAP operating income $ 19,080 $ 16,290 Operating margin 4 % 4 % Non-GAAP operating margin 23 % 21 % Three Months Ended March 31, 2025 2024 Net loss $ (4,685 ) $ (5,306 ) Add: Share-based compensation expense 12,381 7,936 Add: Employer payroll taxes on employee stock transactions 625 422 Add: Expenses associated with public offering — 1,389 Add: Restructuring related costs (1) — 3,191 Add: Expenses associated with material weakness remediation (2) 2,063 — Add: Acquisition related costs 446 — Subtract: Income tax effect on non-GAAP items (3,724 ) (3,105 ) Non-GAAP net income $ 7,106 $ 4,527 Non-GAAP basic net income per share $ 0.09 $ 0.06 Non-GAAP diluted net income per share $ 0.09 $ 0.06 Weighted average shares used to compute Non-GAAP basic net income per share 76,516,629 77,335,072 78,972,794 80,479,008 Net loss margin (6 )% (7 )% Non-GAAP net income margin 9 % 6 % Three Months Ended March 31, 2025 2024 Net loss $ (4,685 ) $ (5,306 ) Interest expense 8,712 9,582 Provision for income taxes 617 32 Depreciation and amortization of intangible assets 14,686 14,524 Share-based compensation expense 12,381 7,936 Employer payroll taxes on employee stock transactions 625 422 Expenses associated with public offering — 1,389 Restructuring related costs (1) — 3,191 Expenses associated with material weakness remediation (2) 2,063 — Acquisition related costs 446 — Adjusted EBITDA $ 34,845 $ 31,770 Net loss margin (6 )% (7 )% Adjusted EBITDA margin 43 % 41 % _______________ Expand (1) Restructuring related costs for the three months ended March 31, 2024 are inclusive of forfeitures of share-based compensation associated with restructuring in the amount of $0.1 million. (2) Expenses for services performed by third party consultants related to efforts to remediate our previously identified material weakness. Expand Reconciliation from GAAP to Non-GAAP Results (unaudited) (in thousands) Three Months Ended March 31, 2025 2024 Cost of revenue $ 27,723 $ 26,073 Less: Share-based compensation expense 1,670 782 Less: Employer payroll taxes on employee stock transactions 112 48 Less: Amortization of developed technology 4,896 4,729 Non-GAAP cost of revenue $ 21,045 $ 20,514 Cost of revenue as a % of revenue 34 % 34 % Non-GAAP cost of revenue as a % of revenue 26 % 26 % Three Months Ended March 31, 2025 2024 General and administrative $ 27,685 $ 25,179 Less: Share-based compensation expense 5,597 4,393 Less: Employer payroll taxes on employee stock transactions 226 136 Less: Expenses associated with public offering — 1,389 Less: Expenses associated with material weakness remediation 2,063 — Less: Acquisition related costs 446 — Less: Depreciation expense 383 376 Less: Amortization of intangible assets 9,407 9,419 Non-GAAP general & administrative $ 9,563 $ 9,466 General and administrative as a % of revenue 34 % 32 % Non-GAAP general and administrative as a % of revenue 12 % 12 % Three Months Ended March 31, 2025 2024 Research and development $ 10,912 $ 9,485 Less: Share-based compensation expense 2,995 1,502 Less: Employer payroll taxes on employee stock transactions 158 121 Non-GAAP research and development $ 7,759 $ 7,862 Research and development as a % of revenue 13 % 12 % Non-GAAP research and development as a % of revenue 10 % 10 % Three Months Ended March 31, 2025 2024 Sales and marketing $ 11,603 $ 10,536 Less: Share-based compensation expense 2,119 1,259 Less: Employer payroll taxes on employee stock transactions 129 117 Non-GAAP sales and marketing $ 9,355 $ 9,160 Sales and marketing as a % of revenue 14 % 14 % Non-GAAP sales and marketing as a % of revenue 11 % 12 % Three Months Ended March 31, 2025 2024 Net cash provided by operating activities $ 42,350 $ 29,038 Less: Capitalized software 1,620 1,837 Less: Capital expenditures 96 92 Free cash flow $ 40,634 $ 27,109 Net cash provided by operating actives as a % of revenue 52 % 37 % Free cash flow as a % of revenue 50 % 35 % Expand
