TechDogs-"MeridianLink Reports Second Quarter 2023 Results"

Financial Technology

MeridianLink Reports Second Quarter 2023 Results

By Business Wire

Business Wire
Overall Rating

Revenue of $75.4 million grows 3% year-over-year driven by lending software solutions revenue of $55.8 million growing 8% year-over-year

COSTA MESA, Calif.--(BUSINESS WIRE)--$MLNK--MeridianLink, Inc. (NYSE: MLNK), a leading provider of modern software platforms for financial institutions and consumer reporting agencies, today announced financial results for the second quarter ended June 30, 2023.

“We experienced strong demand for our software solutions in Q2, with solid bookings momentum and successful services delivery, both in-line with our strategic investment in our Go-To-Market engine and Services capabilities,” said Nicolaas Vlok, chief executive officer of MeridianLink. “Given the power of our configurable digital lending platform, we see customers continuing to choose MeridianLink® One to accelerate growth and best position their businesses to win.”

Quarterly Financial Highlights:

  • Revenue of $75.4 million, an increase of 3% year-over-year
  • Lending software solutions revenue of $55.8 million, an increase of 8% year-over-year
  • Operating income of $1.5 million, or 2% of revenue, and Non-GAAP operating income of $11.9 million, or 16% of revenue
  • Net loss of $(5.2) million, or (7)% of revenue, and Adjusted EBITDA of $27.1 million, or 36% of revenue
  • Cash flows from operations of $61.1 million and free cash flow of $51.4 million, in each case for the last twelve month period

Business and Operating Highlights:

  • Revenue of $75.4 million for the quarter included a one-time $2.3 million reduction in revenue related to a commercial dispute of a contract acquired through a past acquisition. Without this reduction, MeridianLink’s quarterly revenue would have been $77.7 million, growing 6% year-over-year and in-line with our guidance.
  • MeridianLink propelled the cross-sell momentum of MeridianLink One, signing fourteen MeridianLink® Consumer customers on to our MeridianLink® Mortgage solution in the first half of the year.
  • The Company announced the go-live of Space Coast Credit Union, the third largest credit union in Florida, on MeridianLink® Insight, our business intelligence tool. As a result, instant approvals at Space Coast Credit Union increased by over 25% and approximately 95% of all loan applications are now processed and decided within one day.
  • MeridianLink won its largest new logo platform customer in the last twelve months with a credit union looking to supercharge growth across their portfolio with the purchase of MeridianLink® Consumer, Opening, Auto, Home Equity, and Business.
  • The Company improved the innovative functionality of MeridianLink One by enhancing its Advanced Decisioning capabilities, adding a digital banking integration with MeridianLink® Engage, and automating loan and account cross-selling.
  • MeridianLink added a partner integration with PortX to rapidly integrate with other core providers, which accelerates our customers’ end-to-end lending process, driving automation for the lender and faster decisioning for the consumer.

Business Outlook

Based on information as of today, August 1, 2023, the Company issues third quarter financial guidance and updates full year 2023 financial guidance as follows:

Third Quarter Fiscal 2023:

  • Revenue is expected to be in the range of $76.0 million to $78.0 million
  • Adjusted EBITDA is expected to be in the range of $27.0 million to $29.0 million

Full Year 2023:

  • Revenue is expected to be in the range of $302.0 million to $306.0 million
  • Adjusted EBITDA is expected to be in the range of $104.0 million to $108.0 million

Conference Call Information

MeridianLink will hold a conference call to discuss our second quarter results today, August 1, 2023, at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time). The conference call can be accessed by dialing (888) 259-6580 from North America toll-free or the International number of (416) 764-8624 with Conference ID 93721775. A live webcast of the conference call can be accessed from the investor relations page of MeridianLink’s website at ir.meridianlink.com. 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 Tuesday, August 8, 2023, by dialing (877) 674-7070 from North America or the International number of (416) 764-8692 with Playback Passcode 721775.

About MeridianLink

MeridianLink® (NYSE: MLNK), headquartered in Costa Mesa, California, powers digital lending and account opening for financial institutions and provides data verification solutions for consumer reporting agencies. MeridianLink’s scalable, cloud-based platforms help customers build deeper relationships with consumers through data-driven, personalized experiences across the entire lending life cycle.

MeridianLink enables customers to accelerate revenue growth, reduce risk, and exceed consumer expectations through seamless digital experiences. Its partner marketplace supports hundreds of integrations for tailored innovation. For more than 20 years, MeridianLink has prioritized the democratization of lending for consumers, businesses, and communities. Learn more at www.meridianlink.com.

Operational Measures Definitions

We reference bookings, which is an internal operational measure of the business. Bookings is defined as the total of the minimum annual contracted value for newly sold capabilities of our software-as-a-service, or SaaS, products over a given time period, inclusive of any corresponding vendor fees owed to Third Parties.

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, restructuring related costs, and sponsor and third-party acquisition-related costs.
  • Non-GAAP net income (loss): GAAP net income (loss), excluding the impact of share-based compensation, employer payroll taxes on employee stock transactions, restructuring related costs, sponsor and 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%.

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 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: net income (loss) before interest expense, taxes, depreciation and amortization, share-based compensation expense, employer payroll taxes on employee stock transactions, restructuring related costs, sponsor and third-party acquisition related costs, and deferred revenue reductions from purchase accounting for acquisitions prior to the adoption of ASU 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers,” which we early adopted on January 1, 2022 on a prospective basis. As of June 30, 2023, the remaining deferred revenue from acquisitions prior to the adoption of ASU 2021-08 was less than $0.1 million, which will be recognized on a straight line basis through December 31, 2023.
  • 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: GAAP operating expenses, excluding the impact of share-based compensation, employer payroll taxes on employee stock transactions, and depreciation and amortization, as applicable.
  • Free cash flow: GAAP cash flow from operating activities less GAAP purchases of property and equipment (Capital Expenditures) and capitalized costs related to developed technology (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 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. 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, future economic and market conditions, our strategic initiatives, including anticipated benefits and integration of an acquisition, our restructuring plan, including expected associated timing, benefits, and costs, our ability to retain and attract customers and product partners, potential losses related to any commercial disputes, 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.

Condensed Consolidated Balance Sheets

(unaudited)

(in thousands, except share and per share data)

As of

June 30, 2023

December 31, 2022

Assets

Current assets:

Cash and cash equivalents

$

108,872

$

55,780

Accounts receivable, net

35,104

32,905

Prepaid expenses and other current assets

11,313

9,447

Escrow deposit

30,000

Total current assets

155,289

128,132

Property and equipment, net

3,491

4,245

Right of use assets

1,671

2,185

Intangible assets, net

274,208

297,475

Deferred tax assets, net

17,886

13,939

Goodwill

608,576

608,657

Other assets

5,003

4,524

Total assets

$

1,066,124

$

1,059,157

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

$

4,149

$

1,249

Accrued liabilities

30,783

32,500

Deferred revenue

26,302

16,945

Current portion of long-term debt, net of debt issuance costs

3,545

3,505

Total current liabilities

64,779

54,199

Long-term debt, net of debt issuance costs

421,808

423,404

Long-term deferred revenue

841

1,141

Other long-term liabilities

845

1,322

Total liabilities

488,273

480,066

Commitments and contingencies

Stockholders’ Equity

Preferred stock, $0.001 par value; 50,000,000 shares authorized; zero shares issued and outstanding at June 30, 2023 and December 31, 2022

Common stock, $0.001 par value; 600,000,000 shares authorized, 81,167,660 and 80,644,452 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively

132

128

Additional paid-in capital

636,193

621,396

Accumulated deficit

(58,474

)

(42,433

)

Total stockholders’ equity

577,851

579,091

Total liabilities and stockholders’ equity

$

1,066,124

$

1,059,157

Condensed Consolidated Statements of Operations

(unaudited)

(in thousands, except share and per share data)

Three Months Ended June 30,

Six Months Ended June 30,

2023

2022

2023

2022

Revenues, net

$

75,415

$

72,987

$

152,550

$

145,741

Cost of revenues:

Subscription and services

23,984

23,376

47,485

44,480

Amortization of developed technology

4,510

3,850

8,964

7,284

Total cost of revenues

28,494

27,226

56,449

51,764

Gross profit

46,921

45,761

96,101

93,977

Operating expenses:

General and administrative

24,409

20,806

46,964

38,993

Research and development

11,754

10,487

25,566

18,896

Sales and marketing

8,558

5,465

16,771

10,208

Acquisition related costs

103

2,386

Restructuring related costs

717

3,621

Total operating expenses

45,438

36,861

92,922

70,483

Operating income

1,483

8,900

3,179

23,494

Other (income) expense, net:

Other income

(784

)

(216

)

(1,254

)

(379

)

Interest expense, net

9,316

5,436

18,347

9,794

Total other expense, net

8,532

5,220

17,093

9,415

(Loss) income before (benefit from) provision for income taxes

(7,049

)

3,680

(13,914

)

14,079

(Benefit from) provision for income taxes

(1,819

)

1,508

(3,018

)

4,428

Net (loss) income

$

(5,230

)

$

2,172

$

(10,896

)

$

9,651

Net (loss) income per share:

Basic

$

(0.06

)

$

0.03

$

(0.13

)

$

0.12

Diluted

$

(0.06

)

$

0.03

$

(0.13

)

$

0.12

Weighted average common stock outstanding:

Basic

80,911,113

80,418,520

80,786,427

80,197,832

Diluted

80,911,113

82,223,181

80,786,427

82,251,322

Net Revenues by Major Source

(unaudited)

(in thousands)

Three Months Ended June 30,

Six Months Ended June 30,

2023

2022

2023

2022

Subscription fees

$

63,770

$

63,529

$

130,175

$

126,998

Professional services

9,002

6,665

17,437

13,777

Other

2,643

2,793

4,938

4,966

Total

$

75,415

$

72,987

$

152,550

$

145,741

Net Revenues by Solution Type

(unaudited)

(in thousands)

Three Months Ended June 30,

Six Months Ended June 30,

2023

2022

2023

2022

Lending software solutions

$

55,778

$

51,668

$

113,779

$

100,835

Data verification software solutions

19,637

21,319

38,771

44,906

Total (1)

$

75,415

$

72,987

$

152,550

$

145,741

% Growth attributable to:

Lending software solutions

6

%

9

%

Data verification software

(3

)%

(4

)%

Total % growth

3

%

5

%

(1) % Revenue related to mortgage loan market:

Lending software solutions

13

%

7

%

12

%

7

%

Data verification software

61

%

64

%

61

%

67

%

Total % revenue related to mortgage loan market

26

%

24

%

25

%

26

%

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

Six Months Ended June 30,

2023

2022

Cash flows from operating activities:

Net (loss) income

$

(10,896

)

$

9,651

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Depreciation and amortization

28,955

26,376

Provision for expected credit losses

441

Amortization of debt issuance costs

669

1,429

Share-based compensation expense

13,893

9,247

Loss on disposal of fixed assets

135

Deferred income taxes

(4,192

)

4,025

Changes in operating assets and liabilities, net of acquisitions:

Accounts receivable

(2,640

)

(8,806

)

Prepaid expenses and other assets

(2,395

)

661

Accounts payable

2,955

(1,059

)

Accrued liabilities

(1,663

)

(2,065

)

Deferred revenue

9,058

8,076

Net cash provided by operating activities

34,185

47,670

Cash flows from investing activities:

Acquisition, net of cash acquired – Beanstalk Networks L.L.C.

326

Acquisition, net of cash and restricted cash acquired – StreetShares, Inc.

(23,059

)

Return (payment) of escrow deposit

30,000

(30,000

)

Capitalized software additions

(4,562

)

(4,079

)

Purchases of property and equipment

(305

)

(480

)

Net cash provided by (used in) investing activities

25,459

(57,618

)

Cash flows from financing activities:

Repurchases of common stock

(5,145

)

(193

)

Proceeds from exercise of stock options

1,025

186

Proceeds from employee stock purchase plan

793

922

Taxes paid related to net share settlement of RSUs

(1,050

)

Principal payments of long-term debt

(2,175

)

(1,088

)

Payment of Regulation A+ investor note

(3,265

)

Net cash used in financing activities

(6,552

)

(3,438

)

Net increase (decrease) in cash and cash equivalents

53,092

(13,386

)

Cash and cash equivalents, beginning of period

55,780

113,645

Cash and cash equivalents, end of period

$

108,872

$

100,259

Supplemental disclosures of cash flow information:

Cash paid for interest

$

17,955

$

8,337

Cash paid for income taxes

2,577

762

Non-cash investing and financing activities:

Share-based compensation expense capitalized to software additions

$

136

$

188

Purchase price allocation adjustment related to income tax effects for StreetShares acquisition

245

Vesting of RSAs and RSUs

5

38

Purchases of property and equipment included in accounts payable and accrued expenses

3

93

Regulation A+ investor note assumed in business combination

3,265

Initial recognition of operating lease liability

3,372

Initial recognition of operating lease right-of-use asset

2,627

Reconciliation from GAAP to Non-GAAP Results

(unaudited)

(in thousands, except share and per share data)

Three Months Ended June 30,

Six Months Ended June 30,

2023

2022

2023

2022

Operating income

$

1,483

$

8,900

$

3,179

$

23,494

Add: Share-based compensation expense

9,367

5,439

14,556

9,247

Add: Employer payroll taxes on employee stock transactions

322

3

448

148

Add: Restructuring related costs

717

3,621

Add: Sponsor and third-party acquisition related costs

99

2,386

Non-GAAP operating income

$

11,889

$

14,441

$

21,804

$

35,275

Operating margin

2

%

12

%

2

%

16

%

Non-GAAP operating margin

16

%

20

%

14

%

24

%

Three Months Ended June 30,

Six Months Ended June 30,

2023

2022

2023

2022

Net (loss) income

$

(5,230

)

$

2,172

$

(10,896

)

$

9,651

Add: Share-based compensation expense

9,367

5,439

14,556

9,247

Add: Employer payroll taxes on employee stock transactions

322

3

448

148

Add: Restructuring related costs

717

3,621

Add: Sponsor and third-party acquisition related costs

99

2,386

Add: Income tax effect on non-GAAP items

(2,497

)

(1,330

)

(4,470

)

(2,827

)

Non-GAAP net income

$

2,679

$

6,383

$

3,259

$

18,605

Non-GAAP basic net income per share

$

0.03

$

0.08

$

0.04

$

0.23

Non-GAAP diluted net income per share

0.03

0.08

0.04

0.23

Weighted average shares used to compute Non-GAAP basic net income per share

80,911,113

80,418,520

80,786,427

80,197,832

Weighted average shares used to compute Non-GAAP diluted net income per share

83,487,132

82,223,181

82,994,599

82,251,322

Net (loss) income margin

(7

)%

3

%

(7

)%

7

%

Non-GAAP net income margin

4

%

9

%

2

%

13

%

Three Months Ended June 30,

Six Months Ended June 30,

2023

2022

2023

2022

Net (loss) income

$

(5,230

)

$

2,172

$

(10,896

)

$

9,651

Interest expense

9,316

5,436

18,347

9,794

Taxes

(1,819

)

1,508

(3,018

)

4,428

Depreciation and amortization

14,424

13,472

28,955

26,376

Share-based compensation expense

9,367

5,439

14,556

9,247

Employer payroll taxes on employee stock transactions

322

3

448

148

Restructuring related costs

717

3,621

Sponsor and third-party acquisition related costs

99

2,386

Deferred revenue reduction from purchase accounting for acquisitions prior to 2022

19

55

39

119

Adjusted EBITDA

$

27,116

$

28,184

$

52,052

$

62,149

Net (loss) income margin

(7

)%

3

%

(7

)%

7

%

Adjusted EBITDA margin

36

%

39

%

34

%

43

%

Reconciliation from GAAP to Non-GAAP Results

(unaudited)

(in thousands)

Three Months Ended June 30,

Six Months Ended June 30,

2023

2022

2023

2022

Cost of revenue

$

28,494

$

27,226

$

56,449

$

51,764

Less: Share-based compensation expense

1,157

1,251

2,009

2,215

Less: Employer payroll taxes on employee stock transactions

88

109

54

Less: Amortization of developed technology

4,510

3,850

8,964

7,284

Non-GAAP cost of revenue

$

22,739

$

22,125

$

45,367

$

42,211

Cost of revenue as a % of revenue

38

%

37

%

37

%

36

%

Non-GAAP cost of revenue as a % of revenue

30

%

30

%

30

%

29

%

Three Months Ended June 30,

Six Months Ended June 30,

2023

2022

2023

2022

General and administrative

$

24,409

$

20,806

$

46,964

$

38,993

Less: Share-based compensation expense

5,231

2,396

7,494

3,777

Less: Employer payroll taxes on employee stock transactions

107

158

33

Less: Depreciation expense

495

580

990

1,141

Less: Amortization of intangibles

9,419

9,042

19,001

17,951

Non-GAAP general & administrative

$

9,157

$

8,788

$

19,321

$

16,091

General and administrative as a % of revenue

32

%

29

%

31

%

27

%

Non-GAAP general and administrative as a % of revenue

12

%

12

%

13

%

11

%

Three Months Ended June 30,

Six Months Ended June 30,

2023

2022

2023

2022

Research and development

$

11,754

$

10,487

$

25,566

$

18,896

Less: Share-based compensation expense

1,875

1,288

3,658

2,365

Less: Employer payroll taxes on employee stock transactions

97

1

125

40

Non-GAAP research and development

$

9,782

$

9,198

$

21,783

$

16,491

Research and development as a % of revenue

16

%

14

%

17

%

13

%

Non-GAAP research and development as a % of revenue

13

%

13

%

14

%

11

%

Three Months Ended June 30,

Six Months Ended June 30,

2023

2022

2023

2022

Sales and marketing

$

8,558

$

5,465

$

16,771

$

10,208

Less: Share-based compensation expense

1,104

504

1,395

890

Less: Employer payroll taxes on employee stock transactions

30

2

56

21

Non-GAAP sales and marketing

$

7,424

$

4,959

$

15,320

$

9,297

Sales and marketing as a % of revenue

11

%

7

%

11

%

7

%

Non-GAAP sales and marketing as a % of revenue

10

%

7

%

10

%

6

%

Three Months Ended June 30,

Six Months Ended June 30,

2023

2022

2023

2022

Net cash provided by operating activities

$

6,104

$

12,807

$

34,185

$

47,670

Less: Capitalized software

2,638

2,557

4,562

4,079

Less: Capital expenditures

171

61

305

480

Free cash flow

$

3,295

$

10,189

$

29,318

$

43,111


Contacts

Press Contact
Becky Frost
(714) 784-5839
becky.frost@meridianlink.com

Investor Relations Contact
Gianna Rotellini
(714) 332-6357
InvestorRelations@meridianlink.com

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First published on Wed, Aug 2, 2023

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