Earnings call transcript: MeridianLink Q4 2024 misses EPS, stock steady

MeridianLink Inc. (MLNK) reported its fourth-quarter 2024 earnings, revealing a notable miss on earnings per share (EPS), which came in at -$0.10 against a forecast of $0.08. Despite this, the company achieved a slight revenue beat with $79.4 million compared to the anticipated $78.73 million. The stock remained largely unchanged in aftermarket trading, closing at $18.43. According to InvestingPro analysis, the company’s current market capitalization stands at $1.38 billion, with the stock trading near its Fair Value, suggesting balanced market pricing amid challenging conditions.

Key Takeaways

• MeridianLink missed EPS expectations by $0.18.
• Revenue slightly exceeded forecasts, showing 7% year-over-year growth.
• The stock price remained stable post-earnings, despite the EPS miss.
• The company continues to innovate with new product partnerships and offerings.
• Market conditions for consumer lending remain challenging.

Company Performance

MeridianLink demonstrated resilience in revenue growth, achieving a 7% increase year-over-year for the fourth quarter of 2024. However, the significant miss on EPS highlights ongoing challenges in profitability, which may be attributed to the broader macroeconomic pressures affecting the consumer lending sector. The company’s strategic focus on digital transformation and operational efficiencies is evident, but profitability remains a concern.

Financial Highlights

• Revenue: $79.4 million, up 7% year-over-year.
• Full Year Revenue: $316.3 million, up 4% year-over-year.
• Adjusted EBITDA: $33.4 million with a 42% margin in Q4.
• Free Cash Flow: $12.1 million, representing 15% of Q4 revenue.
• Cash and Cash Equivalents: $92.8 million.

Earnings vs. Forecast

MeridianLink’s EPS of -$0.10 significantly missed the forecast of $0.08, a difference of $0.18, marking a substantial deviation from expectations. This miss contrasts with the company’s historical trend of meeting or slightly exceeding forecasts, suggesting potential operational difficulties or market challenges.

Market Reaction

The stock price showed minimal movement in aftermarket trading, closing at $18.43, a slight decrease from the previous close of $18.46. This stability aligns with InvestingPro analysis, which identifies MLNK as a stock that generally trades with low price volatility. The stock trades between its 52-week range of $16.49 to $25.33, with management actively buying back shares, potentially supporting the stock price despite ongoing market skepticism.

Outlook & Guidance

Looking ahead, MeridianLink has set a revenue guidance range of $326 million to $334 million for 2025, aiming for a 3-6% growth. The company expects Adjusted EBITDA between $131.5 million and $137.5 million. MeridianLink plans to continue investing in its product roadmap and go-to-market capabilities, focusing on long-term value creation.

Executive Commentary

CEO Nicholas Block emphasized the company’s commitment to long-term growth, stating, "We are focused on long-term growth, investing to meet our customers’ needs." President Larry Katz highlighted the industry’s shift towards digital transformation, noting, "Financial institutions are leaning into digital transformation." CFO Elias Olmeda remarked, "We believe annual guidance is the best lens for investors to evaluate our business."

Risks and Challenges

• Macroeconomic pressures affecting consumer lending.
• Potential profitability challenges due to the EPS miss.
• Flat consumer volumes expected in 2025.
• Dependence on successful integration of new technologies and partnerships.
• Competitive pressures in the digital lending platform market.

Q&A

During the earnings call, analysts inquired about the composition of the consumer loan origination system (LOS) business, with auto loans accounting for approximately 50%. The management also discussed potential mergers and acquisitions to expand the platform and adjacent markets, as well as continued investment in AI decisioning and fraud prevention technologies.

Full transcript - Meridianlink Inc (MLNK) Q4 2024:

Conference Operator: Ladies and gentlemen, thank you for standing by and welcome to MeridianLink’s Fourth Quarter and Fiscal Year two thousand and four Earnings Call. At this time, all participants are in listen only mode. I would now like to turn the conference over to first speaker today, Gianna Rottellini. Gianna, please go ahead.

Gianna Rottellini, Investor Relations, MeridianLink: Good afternoon, and welcome to MeridianLink’s fourth quarter and fiscal year twenty twenty four 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, Nicholas Block President, Larry Katz and Chief Financial Officer, Elias Olmeda. 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, 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 eight ks 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 Nicholas.

Nicholas Block, Chief Executive Officer, MeridianLink: Thank you, Gianna. Good afternoon, everyone, and thanks for joining us today. MeridianLink closed 2024 with a strong fourth quarter. We recorded revenue in excess of $79,000,000 or 7% growth year over year and adjusted EBITDA above $33,000,000 or a 42% adjusted EBITDA margin. I’m pleased with our results in a challenging and uncertain macro environment.

Most importantly, we continued our commitment to being the leading financial technology platform trusted by customers to execute winning lending strategies with Meridian Link One. Despite the headwinds of 2024, we executed well, controlling what we could control. Our sales team generated strong demand and delivered a second consecutive year of record bookings. Our services team accelerated time to revenue and achieved a high watermark in our subscription revenue activations, which we’ve previously referred to as ACV release. Our product teams continue to innovate by adding capabilities that strengthen Meridian Link One’s position as the leading digital lending platform for mid market financial institutions.

We significantly improved our operating efficiency, delivering over 400 basis points of adjusted EBITDA margin expansion. And we continued our disciplined approach to capital allocation, completing several transactions that strengthened our balance sheet and diversified our shareholder base. Looking forward, I would like to frame 2025 by sharing some industry observations based on conversations with credit union and bank executives. While economic uncertainty is high and consumer confidence is challenged, customers and prospects are increasingly prioritizing investment in lending technology. These investments are focused on platforms that enable omni channel client acquisition, touchless lending and seamless integrations with best of breed solutions.

To compete for digitally native consumers, financial institutions are prepared to increase their technology spend in lending platforms and we see a longer term trend benefiting MRIdian Link one, our market leading platform. I’m excited about what’s in store for MRIdian Link. There is no other digital lending platform with the breadth and depth of MRIdian Link One. While volumes have weighed on recent top line growth, we are focused on long term growth, investing to meet our customers’ needs and accelerating platform adoption. Go to market and service delivery investments have paid off with consecutive years of record bookings and activations.

Despite the current environment, we believe in our long term opportunity and plan to deploy capital into sales and marketing, product and infrastructure, which will further position us to capture share and volume when the market returns. I have great confidence in our ability to scale the business in 2025 and beyond. Before I turn it over to Larry, I want to update you on a change to our guiding practice. Going forward, we will provide quarterly updates to our annual guidance and we will no longer provide guidance for the following quarter. We are making this change because we are focused on delivering long term value and we firmly believe that annual guidance is the best lens for investors to evaluate our business.

Elias will share more in his remarks. I’d like to thank the entire Meridian Link team for our solid performance this year. With your expertise and education, I’m proud that we ended another year delivering on our commitments to customers and shareholders. Now, I will turn it over to Larry to review our business highlights.

Larry Katz, President, MeridianLink: Thanks, Nicholas. We finished the year with strong sales execution, posting record bookings for the second year in a row. Both new logo and cross sell bookings increased year over year as both credit unions and banks turned to MeridianLink as a trusted partner to accelerate their digital transformation. We had strong bookings performance in both cross sell and new logo. We also had a higher mix of mortgage and larger ACV platform wins.

A key driver of our sales performance is the breadth and depth of the MeridianLink One platform, which provides us a natural expansion opportunity across more than 1,500 lending software customers. Our ability to win is a testament to the deep expertise, best of breed platform functionality and market leading reputation that we’ve built over the past twenty five years. Since stepping into the presidency six months ago, I’ve had the opportunity to meet with dozens of customers, partners, prospects and industry experts. The messages I hear are consistent. We have a distinctive and compelling platform and our customers are committed to running their lending business on Radiant Link One.

At the same time, our customers are looking to us to continue to innovate, to deliver distinctive solutions that help them grow by acquiring and serving digitally made of consumers in an AI enabled world. They also look to us to continually make it easier to do business with us. The message is clear. We have done well over the years and we absolutely have an opportunity to do better. With all commercial functions now under one roof, I am focused on breaking down silos, ensuring that customer feedback more actively informs our product roadmap and streamlines our customer journey.

As we head into 2025, we are continuing to invest in sales and marketing to further optimize our land and expand strategy. We are adding to our solutions consulting team to help customers and prospects understand the value of our platform and how it meets their needs. And we are maturing our account based selling motions based on extensive white space analytics and enhanced demand generation strategies. Entering the year with a robust pipeline and solid foundation in place, I’m confident that our team is well positioned to generate increased demand more efficiently. With that, I will move to our business highlights for Q4.

We had a strong quarter of cross sell and up sell, demonstrating the resilient nature of our customers who continue to invest in innovative solutions even in a challenging market. For example, an existing consumer lending bank customer with $9,000,000,000 in assets recently added MeridianLink Access and MeridianLink Business and now deploys a total of six modules across the MeridianLink One platform. This customer also enabled MeridianLink’s automated decisioning capability to drive touchless lending. This is a great example of the opportunity that MeridianLink One presents to deepen and expand existing relationships. Of note, this access win was one of 15 in the fourth quarter, more than tripling customer wins year over year.

Turning to new logo wins. This was our best new logo quarter in two years, increasing new customer bookings nearly 40% year over year. This suggests that financial institutions are leaning into their digital transformation to prepare for a more robust demand environment. For example, we signed a bank with $8,000,000,000 in assets onto Meridian Link Mortgage and Meridian Link Consumer, enabling them to seamlessly execute a high value cross sell strategy. We won this competitive deal due to our feature rich functionality, speed of implementation and partner integrations.

This customer is also leveraging our patented debt optimization capability to increase visibility across the consumer debt wallet, which maximizes acceptance rates and deepens relationships with clients. We also delivered another solid quarter and year of subscription revenue activations or ACV release, showcasing our services team’s continued focus on streamlining delivery. We activated more subscription revenue dollars than in 2024. Heading into 2025, our plan is to release more ACV dollars while maintaining healthy backlog. Moving to products, we launched a new share of wallet add on for MeridianLink consumer and opening customers.

This unique data rich product supports our customers’ cross selling efforts by identifying financial products that consumers have with other financial institutions. Share of wallet helps our customers extend wallet share and increase lifetime value of their consumer relationships while reducing acquisition costs. FedChoice Federal Credit Union chose to implement our Share of Wallet product to drive more relevant cross sell. They ran campaigns for personal loans and HELOCs, which successfully shifted members towards money saving fixed rate products. With the new ability to deliver highly personalized offers to its members, FedChoice’s cross sell campaigns hit conversion rates of up to 9%.

Ending now with a great new partner ad, we announced a new partnership with Score Navigator, an advanced credit report analytic tool designed to help consumers better understand and manage their finances. Score Navigator integrates with our DBS solution and provides mortgage lenders with more efficient methods of assessing applicant creditworthiness. Through the Score Navigator platform, the loan officer can communicate with applicants to help them improve credit scores during the application process and consolidate debt, thereby increasing lender application approvals. Leading CRAs like CIC and Advantage Credit have used the integration for their lenders for strengthening consumer relationships and boosting retention. With that, I will now turn the call over to Elias to share our financial results in more detail and provide annual guidance for 2025.

Elias Olmeda, Chief Financial Officer, MeridianLink: Thank you, Larry, and good afternoon, everyone. We finished the year with a solid fourth quarter. Throughout 2024, Meridian Link achieved consistent revenue growth, expanded profitability and improved free cash flow conversion. Drilling into Q4, we achieved GAAP revenue of $79,400,000 or 7% growth year over year, which is at the high end of our guidance range. Adjusted EBITDA was $33,400,000 a 42% adjusted EBITDA margin, which exceeded the high end of our guidance range.

We generated $12,100,000 of free cash flow or 15% of revenue and ended the quarter with $92,800,000 in cash and cash equivalents. Before I further describe our revenue growth, in prior quarters, we have made reference to a large data verification customer down sell. We are in active litigation with this customer and have reached an agreement to mutually drop our claims with the parties entering into a three year agreement. We anticipate that going forward, annual customer revenue will be reduced by approximately $6,000,000 as a result of the down sell in the recent agreement. Revenue from this customer totaled $13,100,000 in 2024.

This down sell has been a headwind for data verification and total revenue growth in prior years. We anticipate that the identified adjustment in revenue from 2024 to 2025 will impact total revenue growth by approximately two twenty basis points. Now turning to our Q4 total year over year revenue performance of 7% growth in terms of the revenue algorithm. One, ACV release contributed mid single digits. Two, price and churn were in the low single digits each and essentially offset each other.

Three, volumes and onetime customer downsells combined were in the low single digits and mostly offset each other. Moving to our total revenue performance of 7% growth in Q4 by source. Subscription revenue grew 5% year over year, contributing significantly at 82% of our total revenue. This growth was driven by the successful activation and recognition of subscription revenue from our implemented software solutions for both new and existing customers, what we refer to as ACV release. Services revenue grew 6% year over year, primarily driven by higher implementation fees associated with software from additional bookings.

Other revenue grew 40% year over year, driven by onetime partner revenue share true ups. Now looking at our 7% total revenue growth in Q4 by solution type, total lending software revenue growth was 7% year over year and accounted for approximately 80% of revenue. Excluding revenue from the mortgage loan market, consumer lending revenue growth was 9% year over year and accounted for 89% of lending software revenue. This strong growth in uncertain macro demonstrates the power of our core franchise. Mortgage lending software solutions declined 7% year over year and accounted for the remaining 11% of lending software revenue.

The decline was attributable to customer downsell and churn. Turning to data verification software solutions. Revenue increased 4% year over year and accounted for 20% of total revenue. This increase was attributable to a 5% increase in mortgage related revenue, which represented 57% of total data verification software revenue in Q4. As we lapped the one time customer downsell from the customer I previously mentioned in Q3, revenue accelerated in the quarter.

Moving on to our profitability. Adjusted gross profit was $59,000,000 representing a 74% margin and a 37 basis point improvement in operating leverage year over year. Turning to operating expenses. R and D expense was $7,000,000 or 9% of revenue and declined 22% year over year, reflecting lower staffing due to our previously announced restructuring. Sales and marketing expense was $8,600,000 or 11 percent of revenue, up 2% year over year.

G and A expense increased 36% year over year to $11,100,000 or 14% of revenue, reflecting select discretionary investments made to position the company for scale. Adjusted EBITDA was $33,400,000 or 42% adjusted EBITDA margin. This is a 28 basis point improvement in operating leverage year over year. Finishing with our capital position. Cash flow from operations was $13,800,000 or 17% of revenue and free cash flow was $12,100,000 or 15% of revenue.

We ended the fourth quarter with cash and cash equivalents of $92,800,000 an increase of $10,500,000 from Q3. Now let’s look at full year 2024 results. We had a challenging operating environment, especially in the first half of the year. Notwithstanding, we achieved solid in year revenue growth. As Larry mentioned, record bookings and the highest adjusted EBITDA margin in three years.

Revenue increased 4% to $316,300,000 for the year. Describing the 4% revenue growth in terms of the revenue algorithm: 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 a onetime DVS customer down sell combined were a low single digit track. Now turning to our 4% year over year revenue growth by source. Subscription revenue grew 3% year over year, which contributed 84% of total revenue. Services grew 9% year over year, primarily driven by higher implementation fees associated with software from additional bookings.

Other revenue grew 17 year over year, driven by increased partner revenue. Now looking at our 4% total revenue by solution type, total lending software revenue grew 7% year over year and accounted for nearly 79% of total revenue. Excluding revenue from the mortgage market, consumer lending revenue growth was 9% year over year and accounted for 89% of lending software revenue. Achieving 9% year over year growth in our core business is a huge accomplishment, especially in the context of one of the most challenging lending environments. This highlights the value of our investments and the work and success of our go to market and services team over the last year.

Mortgage lending software solutions declined 7% year over year and accounted for the remaining 11% of lending software revenue. The decline was attributable to customer churn and down sell. Mortgage volumes were strong year over year and contracts below their minimum significantly improved from approximately two thirds to approximately one half by the end of Q4. Turning to data verification software solutions. Revenue declined 6% year over year and accounted for 21% of total revenue.

This decline was attributable to an 11% decrease in mortgage related revenue, which represented 56% of total data verification software revenue in the year. This decline in mortgage related data verification revenue was driven by the onetime down sell of a single large customer discussed previously. Moving on to our profitability. Adjusted gross profit was $232,000,000 a 73% adjusted gross margin. This is nearly 100 basis points of improvement in operating leverage year over year driven by continued productivity of our services team.

Turning to operating expenses. R and D expense was 29,400,000 or 9% of revenue and declined 27% year over year, reflecting lower staffing due to the previously mentioned restructuring. Sales and marketing expense was $35,900,000 or 11% of revenue, up 13% year over year. This increase is primarily due to investment in our go to market team and strategy. G and A expense increased 12% year over year to $40,800,000 or 13% of revenue, reflecting the previously mentioned select discretionary investments made to position the company for scale.

Adjusted EBITDA was $130,700,000 a 41% adjusted EBITDA margin. This is a 400 basis point improvement in operating leverage year over year. We made some purposeful discretionary investments in the year while maintaining disciplined cost management. Finishing with our capital position. Cash flow from operations was $77,800,000 or 25% of revenue and free cash flow was $70,300,000 or 22% of revenue.

Total debt was $472,700,000 and excluding debt issuing costs and cash, net debt was $375,800,000 representing net debt to LTM adjusted EBITDA of approximately 3x. Once again, we were disciplined allocating capital. We invested in the business and repurchased shares at a discount to intrinsic value, returning $105,400,000 of capital to stockholders through repurchases. We also engaged in several capital market activities such as the debt repricing and top up and two secondary offerings that broadened our shareholder base. Now I’ll provide guidance for 2025.

As Nicholas mentioned, going forward, we will only provide annual guidance updates on our quarterly calls. While we will no longer provide prospective quarterly guidance, where relevant, we will comment on and provide insights into anticipated trends. We have made this change because we want to improve the alignment between our guidance and how we run the business. Our approach is to deploy capital and to create long term value for our shareholders. We believe that shifting to annual guidance will help to focus our operating teams and the equity market on the long term progress that we are making rather than on quarterly variances.

Keep in mind that our variances are typically driven by volumes, which are less predictable and tend to obscure the more stable and important drivers of our business, which include ACV release. Moving on to 2025 guidance. Ongoing conversations with customers and recent economic data point to an uncertain environment for the consumer in 2025. As a result, we are cautious in our outlook for customer volumes and associated revenue. We expect total GAAP revenue to be between $326,000,000 and $334,000,000 compared to $316,300,000 for the full year of 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 the mortgage market to contribute approximately 18.5 of revenue for the full year 2025. To help investors understand our sensitivity to current volume levels in our mortgage lending business, we estimate that a 5% increase in our expected annual mortgage loan volumes will yield approximately a 1% increase in our annualized mortgage lending subscription revenue. There is not a one for one correlation between volumes and revenue growth because only the incremental volumes for customers above their minimums convert into overage revenue, and overage revenue is a fraction of the total revenue for the year. On the non mortgage side, we expect modest growth year over year in data verification revenue.

Understanding these dynamics, we expect consumer lending will grow approximately 7% in 2025, driven by releasing ACV at a steady pace. In a higher for longer interest rate environment, consumer volumes are expected to be flat year over year. I will now describe our 4% total revenue growth at the midpoint of our guidance in terms of the revenue algorithm. One, we expect ACV release to continue contributing mid single digits and be the single largest driver of our revenue growth in 2025. Two, we expect price and churn to continue to offset each other.

Three, we expect that volumes and the DVS customer renewal combined will be a low single digit drag. Excluding the customer down sell, total volumes across all our products will be slightly positive year over year and be a neutral contribution to revenue growth. Now focusing on the adjusted EBITDA guide. For the full year 2025, we expect our adjusted EBITDA range to be between $131,500,000 and $137,500,000 representing an adjusted EBITDA margin of approximately 41% at the midpoint. As revenue increases, we are investing in our product roadmap and go to market team to drive growth.

We continue to manage the business to eventually become a rule of 50 company and are investing appropriately. Given our visibility into Q1 trends, insight from customers and recent economic data, we anticipate normal seasonality in our revenue through 2025. Viridian Link’s high percentage of subscription revenue and strong quarterly ACV release give us confidence in our annual growth expectations with relatively stronger sequential revenue growth in the second half of the year. We 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.

Both R and 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 roadmap and go to market capabilities. As a result, we expect adjusted EBITDA margins to be the highest in the first quarter before slightly declining in the second half of the year. I’d like to end with how we are thinking about capital allocation going forward. To reiterate, our order of priorities is: first, investing in organic growth in areas that deliver repeatability and scale to the organization second, disciplined M and A. We remain ready to execute on the right deal at the right price and have recently invested in our corporate development team And third, repurchasing our shares when trading at a discount to intrinsic value.

I’m excited to announce that in February, our board authorized a new stock repurchase program to acquire up to 129,500,000 On this last point, I would like to comment on our stock based compensation philosophy. In 2024, we made larger than usual grants as we recruited new leadership to help us scale the organization. Our expectation is that share grants will come down in 2025. Finally, I’d like to reiterate how resilient the company has been, all thanks to the outstanding effort of our team. We ended the year strongly despite the challenges we faced because of the dedication and skill of our employees who work closely every day for the benefit of our customers.

Looking forward, we believe this is a year during which execution remains paramount while the macro takes time to recover. As that manifests itself, we will continue investing in technology, infrastructure and sales and marketing to support future growth and scale. With that, Nicholas, Larry and I are happy to take any of your questions, and I’ll turn it over to the operator.

Conference Operator: Thank Your first question comes from Chris Kennedy from William Blair. Please go ahead.

Chris Kennedy, Analyst, William Blair: Good afternoon and thanks for all the new disclosures and new detail. When you think about the volume component, you gave good color on the mortgage, the sensitivity of the mortgage side of the business. Is there any way to think about the sensitivity on the non mortgage component?

Elias Olmeda, Chief Financial Officer, MeridianLink: Hi, it’s Elias. Thanks for the question. You know, thank you and thank you for acknowledging that we’ve, you know, improved our disclosures and we are going to, continue to work on that. But at this point, I am I am not going to be providing, further disclosures around consumer. But that is something that we will keep in mind for future calls.

Chris Kennedy, Analyst, William Blair: Okay, understood. And then just talk briefly about the sustainability of your 41% EBITDA margin target going forward as the environment changes and as you continue to invest in sales and marketing? Thanks for taking the questions.

Elias Olmeda, Chief Financial Officer, MeridianLink: Yeah, of course. We feel good about the 41% as we talked about last quarter. The number to really anchor around is the 40% guidance. What’s really occurring though is as we ramp up some of the investments that I was referencing in my color commentary, those are going to come in into the second half of the year. So you’re going to see a slightly higher and more elevated set of margins in Q1, possibly even in the first half.

And as those investments roll onto the P and L, obviously, that’ll put a little bit of pressure on those margins. So, what you’re seeing in the 41% guidance is really is not us signaling that it’s going from 40 to 41 rather just simply acknowledging the timing around some of the investments that we’re undertaking. But, you know, we feel very good about it. We have good cost control in place and continue to be disciplined about how we deploy capital.

Chris Kennedy, Analyst, William Blair: Great. Thanks for taking the questions.

Conference Operator: All right. Your next question comes from Andrew Schmidt from Citi. Please go ahead.

Andrew Schmidt, Analyst, Citi: Hi, guys. Thank you for taking the questions this evening and good to see the stability here. Maybe just on the investments for 2025, I heard the detail around sales and marketing, but you also mentioned product infrastructure. So if you could put a finer point on where the investments are being made across the other categories outside of sales and marketing, that would be great. Thank you very much.

Nicholas Block, Chief Executive Officer, MeridianLink: Hey, Andrew. Thank you for the question. It’s Nicholas. We are going to invest let’s tackle the question in two sections. On the product side, our focus is on digital, digital interfaces.

It’s in partner infrastructure. It’s also around our mortgage business where we continue to see expanded opportunity. And then what I would call infrastructure which kind of spans out of our product and an internal business systems, but it’s around data engineering and scaling our systems to continue to scale the business in the future.

Andrew Schmidt, Analyst, Citi: Okay. Thank you for that, Nicholas. And then maybe just the next question on and just the pipeline that you’re seeing. Obviously, fourth quarter tends to be a higher watermark for bookings, but it was a very good quarter from a new logo perspective, so you called out with some larger bank wins. So maybe just talk a little bit about what you’re seeing in terms of the pipeline, the size and composition and whether you see that new logo momentum continuing?

Thank you very much.

Larry Katz, President, MeridianLink: Yes. Andrew, it’s Larry. I apologize for my voice here. Look, pipeline, we ended the year with a I apologize, we ended the year with a strong pipeline and feel good about the momentum coming into the first half of the year across the products.

Saket Kalia, Analyst, Barclays: Do you want

Nicholas Block, Chief Executive Officer, MeridianLink: me to grab it for you? Yes, that would be great. Great.

Conference Operator: Hello, everyone. This is the operator. I apologize for this inconvenience.

Nicholas Block, Chief Executive Officer, MeridianLink: Can you I’m sorry, we were muted here. I answered the question to myself.

Andrew Schmidt, Analyst, Citi: I can hear you now. No worries.

Nicholas Block, Chief Executive Officer, MeridianLink: Okay. Did you hear anything I said or do you want me to start at the beginning, Andrew?

Andrew Schmidt, Analyst, Citi: No, it cut out when you started talking. See if you could repeat what you said that’d be

Nicholas Block, Chief Executive Officer, MeridianLink: great. Okay. We had a great back half of the year in terms of pipeline build but also in sales momentum and we continue to see that momentum continue into the twenty five year and our expectation is this will continue to be very similar in the first half. We are seeing great success with our cross sell initiatives, specifically the momentum is building around mortgage for us and then some of our other modules on our platform. Specifically as we think about kind of what’s next and what’s happening in our business from an opportunity standpoint, what we’re hearing from customers and new prospects is folks are looking at making investments, especially, where it helps them grow and helps them find new customers.

So, from our perspective, growing pipeline means we are in lockstep with our customers that’s leaning in to grow members, to grow clients, grow deposits. And we’re pretty excited where the pipeline is at and where it’s going.

Andrew Schmidt, Analyst, Citi: Got it. Thank you so much, Nicholas. Appreciate the response.

Conference Operator: Thank you. And your next question comes from Saket Kalia from Barclays. Please go ahead.

Saket Kalia, Analyst, Barclays: Hey, it’s Saket from Barclays. Thanks for taking my questions here. Nicholas and Larry, maybe for you. Can we just maybe go one level deeper just into that core consumer LOS business? I think the growth there was about 9%, which is good to see it’s healthy.

Maybe the question is, how do you feel about the growth drivers in that business if you go, if you peel back the onion and the potential to sustain that growth in the future?

Nicholas Block, Chief Executive Officer, MeridianLink: Zagat, thank you. Great question. I think I’m going to speak, Larry has lost his voice, so he’s waving at me, with answers and numbers. But, we’re pretty proud of the 9% consumer lending growth. And if you just to use your term, peel back to onion, it was driven by solid ACV release in the setting we’re in.

We are in a challenging macro environment and today we control what we can control. We keep selling more. There’s customer demand for our product, our platform. And as we kind of land that and cross sell and accelerated new logo motion, we feel that and we believe that we can sustain the growth in that segment of the business. It’s the demand is there as well as the team is set up to continue to release ACV at the pace that we’re doing it today.

Saket Kalia, Analyst, Barclays: Got it. That’s very helpful. Maybe for my follow-up for you, Elias. I know you said we’re not going to talk about sort of new metrics here, but I was wondering just as an update, how do you kind of think about the different consumer loan types as a percentage of that LOS business? I think in the past, maybe, we’ve heard about sort of rough percentages coming from the overall auto loan market or used auto market.

Is there any detail you can give us just as we look back at ’24 in terms of the different loan types and how they contributed?

Elias Olmeda, Chief Financial Officer, MeridianLink: Yeah. I will happy to, I guess, give an update as relates to a couple of the loans in the consumer. Auto, auto is, of course, roughly half, so the single largest category within our consumer LOS. And within that, you break that down and roughly two thirds of that is used and one third of that is new. So more exposure obviously to the used car market.

Then our, non asset backed product categories, credit cards and personal loans are about a quarter. And then the remainder obviously makes up the balance of what’s in consumer and just by way of update that has not been shifting in any appreciable way.

Saket Kalia, Analyst, Barclays: Got it. Super helpful. Thanks guys.

Conference Operator: Thank you. Your next question is from Parker Lane from Stifel. Please go ahead.

Matthew Kickert, Analyst, Stifel: Hi. This is Matthew Kickert on for Parker. Thank you for taking my questions. To start, could you talk about your recent partnership with Zest AI? I’m curious what they’re bringing incrementally to the table for you and and then also maybe some broader thoughts on your fraud product lineup and opportunity in 2025.

Nicholas Block, Chief Executive Officer, MeridianLink: Sounds good. This is Nicholas again. Two questions, Zest and call it fraud. Zest has been a great partner in the marketplace for our customers and partnering with us. They’re one of our what I would call AI decisioning partnerships that bring value to our decisioning engine.

We’ve integrated them pretty deeply into our platform. It’s a pretty deep and wide integration with our customers. And the benefit is the customers have the ability to move to the next level of enhanced and automated decisioning if they choose to do so. And Zesa has been one of our foundation partners in bringing, kind of an AI approach to the platform and decisioning. In terms of fraud, we continue to find high interest in the fraud landscape.

We have a number of partnerships there, for example, SoCare and also on the Experian side. And our customers continue to lean in and they would like to move it more front of house. It’s not just fraud on the lending, application but it’s also fraud on when you onboard a new deposit and a new account. So we continue to invest, we continue to expand, also great partnerships with some real industry leaders on the fraud side.

Matthew Kickert, Analyst, Stifel: Okay. Thank you for that feedback. And then in your capital allocation strategy comments, you mentioned M and A second, before share repurchases. Do you have any comment on maybe like particular areas of the business or, you know, the market that you would be looking to strengthen through M and A?

Nicholas Block, Chief Executive Officer, MeridianLink: Volker, can you just repeat the question for a second?

Matthew Kickert, Analyst, Stifel: Sure. So, in the capital allocation comments that you made in the prepared remarks, you mentioned M and A is the second priority before share repurchases. So I was curious, maybe like is there a particular area that you’d be looking to make any M and A whether in the near to midterm that would strengthen your business?

Nicholas Block, Chief Executive Officer, MeridianLink: Yeah. Great question. You may get a winded answer from me here. We think of M and A in kind of a few different vectors. One is continue to expand the platform and continue to look at what I would call tuck in acquisitions that build out the platform breadth and depth and give our customers that ability to work with a single vendor.

And that’s a strong message we’re getting from our customer basis. They want to work with less vendors and they would like to have a single hand to shake and a single neck to break. And consolidating what is a great fit into, our platform is something that we’re spending quite a bit of time, looking at. And we’ve, invested in capacity and also building out our M and A muscle in the company, under Elias’ leadership, call it over the last three, four, five months. And we’ve seen quite a bit of activity evaluating opportunities in that area.

And it’s from kind of inbounds from bankers from us going out into the market as well as getting deeper into call it what I would call our partner marketplace where we have some tight integrations, with partners. There’s also great opportunity for us to build adjacent to our platform into areas that I would say is a natural, short arm extension and we’re also evaluating that. And then lastly, I would kind of say there’s transformational that you always need to take a look at, but it’s something that we would do if it truly makes sense from a strategy and growth perspective. Otherwise, you should expect us to be more focused on holding platform capacity through tuck ins and very near adjacencies.

Matthew Kickert, Analyst, Stifel: Okay. Thank you very much.

Conference Operator: Thank you. Your next question comes from Alex Skar from Raymond James. Please go ahead.

Jessica, Analyst, Raymond James: Hi. This is Jessica on for Alex. I just want to congratulate you on a great quarter and also just want to double check double click on NRR. It’s impressive to see the improvement in NRR you have also, of course, part of being strong fourth quarter bookings. I was just kind of curious about what are some of the drivers and factors you’re seeing for this improvement and how sustainable do you see these factors being going forward?

Thanks.

Elias Olmeda, Chief Financial Officer, MeridianLink: Thanks. A couple of things happening, as relates to, NRR. And, Larry and Nicholas made reference to these. One is obviously we are growing our bookings and we had a very strong ACV release year. And then on top of that, if you look at our customer accounts, our customer accounts, while coming down, it is coming down across a segment of very small customers.

And so that is pushing our NRR upwards. And as we head into 2025, I certainly think that is sustainable and they’re going to be growing as we continue to work on releasing, ACV and to the extent that there’s volume, there could be upside to that. But, those are really the drivers of our NRR.

Jessica, Analyst, Raymond James: Got it. And just like a really quick follow-up, do you kind of see churn as maybe having peaked already? Or do you still having more of a holding position on the situation as whatever develops in the macro environment?

Elias Olmeda, Chief Financial Officer, MeridianLink: Yeah, it’s going to be obviously the macro impacts it. And so we’re watching that very carefully. What I would point you to as I guess I’d make a few comments. One is that, churn as relates to consumer, we think is roughly where we would expect it to be mortgage relates remains slightly elevated. But as we head into 2025, you see the flip in our mortgage lending business, declining, sorry, changing, excuse me, flipping from negative seven to about eight.

And that is really just a function of the fact that, amongst other things, churn is going to be diminishing, as well as there was some one time items that we lapped in Q4 of twenty twenty three.

Jessica, Analyst, Raymond James: Got it. Thank you.

Elias Olmeda, Chief Financial Officer, MeridianLink: You’re welcome.

Conference Operator: All right. So, there are no further questions at this time. Ladies and gentlemen, today’s conference call has concluded. Thank you for your participation. You may now disconnect.

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