MeridianLink Reports First Quarter 2022 Results

Revenue of $72.8 million grows 7% year-over-year

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, 2022. Additionally, MeridianLink’s Board of Directors has approved a stock repurchase program with authorization to purchase up to $75 million of common stock.

“We saw a strong start to 2022, once again exceeding guidance in Q1, with GAAP revenue up 7% year-over-year to $72.8 million, lending software solutions revenue up 14% year-over-year to $49.2 million and 47% adjusted EBITDA margins,” said Nicolaas Vlok, chief executive officer of MeridianLink. “We are seeing positive returns on our continued investments in our products and our people. In addition, we are increasing the pace of deployments going live on our platforms, while broadening our capabilities to deliver incremental value to our customers. The ongoing strong performance of our business enables us to continue to invest in value-creating projects, while opportunistically returning cash to stockholders.”

Quarterly Financial Highlights:

  • Revenue of $72.8 million, an increase of 7% year-over-year
  • Operating income of $14.6 million, or 20% of revenue and Non-GAAP operating profit of $20.8 million, or 29% of revenue
  • Adjusted EBITDA of $34.0 million, or 47% of revenue
  • Cash flow from operations of $34.9 million, and Free Cash Flow of $32.9 million

Business and Operating Highlights:

  • MeridianLink completed the previously announced acquisition of StreetShares® on April 1, 2022, to enhance our ability to provide digital small business lending services to our customers.
  • The Company is building a strong sales pipelines for MeridianLink Engage on the basis of triple-digit realized ROI for early adopters.
  • MeridianLink released the next phase of its consumer debt optimization functionality, expanding the loan types that can be offered through these unique capabilities.
  • The Company welcomed Liz Rieveley to our executive leadership team as MeridianLink’s new Chief People Officer. We expect to see acceleration in a number of people initiatives with the addition of Liz’s energy and proven leadership.

Stock Repurchase Program

Our board of directors has authorized a new stock repurchase program to acquire up to $75 million of the Company’s common stock. The program is effective immediately. Stock repurchases are subject to the Company’s discretion based on various factors, including market conditions.

Business Outlook

Based on information as of today, May 12, 2022, the Company issues second quarter financial guidance and updates full year 2022 financial guidance as follows:

Second Quarter Fiscal 2022:

  • Revenue is expected to be in the range of $71.5 million to $73.5 million
  • Adjusted EBITDA is expected to be in the range of $25.0 million to $27.0 million

Full Year 2022:

  • Revenue is expected to be in the range of $289.0 million to $293.0 million
  • Adjusted EBITDA is expected to be in the range of $112.0 million to $116.0 million

Conference Call Information

MeridianLink will hold a conference call to discuss our first quarter results today, May 12, 2022, at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time). The conference call can be accessed by dialing (877) 284-4396 from the United States and Canada or (873) 415-0298 internationally with conference ID 1295945. 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 approximately 8:59 p.m. Pacific Time (11:59 p.m. Eastern Time) on Thursday, May 19, 2022, at (800) 585-8367 from the United States and Canada or (416) 621-4642 internationally with conference ID 1295945.

About MeridianLink

MeridianLink® (NYSE: MLNK) is a leading provider of cloud-based software solutions for financial institutions, including banks, credit unions, mortgage lenders, specialty lending providers and consumer reporting agencies. Headquartered in Costa Mesa, California, MeridianLink provides services to more than 1,900 customers, including a majority of the financial institutions on Forbes’ 2021 lists of America’s Best Credit Unions and Banks. Further information can be found at www.meridianlink.com.

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:

  • Adjusted EBITDA: net income (loss) before interest expense, taxes, depreciation, amortization, share-based compensation expense, employer payroll taxes on employee stock transactions, certain expenses associated with our IPO, sponsor and third-party acquisition related costs, losses resulting from early repayment of debt, lease termination charges, and deferred revenue reductions from purchase accounting
  • Non-GAAP operating income: GAAP income (loss) from operations, excluding the impact of share-based compensation, employer payroll taxes on employee stock transactions, and sponsor and third-party acquisition-related costs
  • Non-GAAP net income: GAAP net income (loss), excluding the impact of share-based compensation, employer payroll taxes on employee stock transactions, and sponsor 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: GAAP operating expenses, excluding the impact of share-based compensation and employer payroll taxes on employee stock transactions
  • Free cash flow: GAAP cash flow from operating activities plus 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 future financial and operational performance, our strategic initiatives, including anticipated benefits and integration of an acquisition, our stock repurchase program, including the execution and amount of repurchases, our development or delivery of new or enhanced solutions, our market size and growth opportunities, and our competitive positioning. 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 year ended December 31, 2021, and our other SEC filings. Any forward-looking statement contained herein or provided on the related conference call is based on reasonable assumptions as of the date hereof. 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

(in thousands, except share and per share data)

 

 

March 31, 2022

(unaudited)

 

December 31, 2021

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

146,746

 

 

$

113,645

 

Accounts receivable, net of allowance for doubtful accounts

 

32,160

 

 

 

24,913

 

Prepaid expenses and other current assets

 

10,010

 

 

 

9,398

 

Total current assets

 

188,916

 

 

 

147,956

 

Property and equipment, net

 

5,613

 

 

 

5,989

 

Right of use assets

 

2,311

 

 

 

 

Intangible assets, net

 

287,854

 

 

 

298,597

 

Deferred tax assets, net

 

1,608

 

 

 

4,286

 

Goodwill

 

564,799

 

 

 

564,799

 

Other assets

 

4,089

 

 

 

4,266

 

Total assets

$

1,055,190

 

 

$

1,025,893

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

2,555

 

 

$

2,335

 

Accrued liabilities

 

25,872

 

 

 

24,667

 

Deferred revenue

 

29,293

 

 

 

14,707

 

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

 

3,256

 

 

 

2,139

 

Total current liabilities

 

60,976

 

 

 

43,848

 

Long-term debt, net of debt issuance costs

 

424,712

 

 

 

425,371

 

Deferred rent

 

 

 

 

396

 

Other long-term liabilities

 

1,647

 

 

 

 

Total liabilities

 

487,335

 

 

 

469,615

 

Commitments and contingencies

 

 

 

 

 

 

 

Stockholders’ Equity

 

 

 

Preferred stock, $0.001 par value; 50,000,000 shares authorized; zero shares issued and outstanding at March 31, 2022 and December 31, 2021

 

 

 

 

 

Common stock, $0.001 par value; 600,000,000 shares authorized, 80,325,231 and 79,734,984 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively

 

120

 

 

 

88

 

Additional paid-in capital

 

600,608

 

 

 

596,542

 

Accumulated deficit

 

(32,873

)

 

 

(40,352

)

Total stockholders’ equity

 

567,855

 

 

 

556,278

 

Total liabilities and stockholders’ equity

$

1,055,190

 

 

$

1,025,893

 

Condensed Consolidated Statements of Operations

(unaudited)

(in thousands, except share/unit and per share/unit data)

 

 

Three Months Ended March 31,

 

2022

 

2021

 

 

 

 

Revenues, net

$

72,754

 

 

$

67,811

 

Cost of revenues:

 

 

 

Subscription and services

 

21,104

 

 

 

16,614

 

Amortization of developed technology

 

3,434

 

 

 

2,862

 

Total cost of revenues

 

24,538

 

 

 

19,476

 

Gross profit

 

48,216

 

 

 

48,335

 

Operating expenses:

 

 

 

General and administrative

 

18,187

 

 

 

17,595

 

Research and development

 

8,409

 

 

 

6,986

 

Sales and marketing

 

4,743

 

 

 

3,599

 

Acquisition related costs

 

2,283

 

 

 

750

 

Total operating expenses

 

33,622

 

 

 

28,930

 

Operating income

 

14,594

 

 

 

19,405

 

Other (income) expense, net:

 

 

 

Other income

 

(163

)

 

 

(20

)

Interest expense, net

 

4,358

 

 

 

10,062

 

Total other expense, net

 

4,195

 

 

 

10,042

 

Income before provision for income taxes

 

10,399

 

 

 

9,363

 

 

 

 

 

Provision for income taxes

 

2,920

 

 

 

2,132

 

Net income

$

7,479

 

 

$

7,231

 

 

 

 

 

Class A preferred return

 

 

 

 

(8,932

)

Net income (loss) attributable to common stockholders

$

7,479

 

 

$

(1,701

)

 

 

 

 

Net income (loss) per share:

 

 

 

Basic

$

0.09

 

 

$

(0.03

)

Diluted

 

0.09

 

 

 

(0.03

)

Weighted average common stock outstanding:

 

 

 

Basic

 

79,974,071

 

 

 

51,551,231

 

Diluted

 

82,228,936

 

 

 

51,551,231

 

Net Revenues by Major Source

(unaudited)

(in thousands)

 

 

Three Months Ended March 31,

 

2022

 

2021

Subscription fees

$

63,469

 

$

60,316

Professional services

 

7,112

 

 

 

5,491

 

Other

 

2,173

 

 

 

2,004

 

Total

$

72,754

 

 

$

67,811

 

Net Revenues by Solution Type

(unaudited)

(in thousands)

 

 

Three Months Ended March 31,

 

2022

 

2021

Lending software solutions

$

49,167

 

 

$

43,134

 

Data verification software solutions

 

23,587

 

 

 

24,677

 

Total (1)

$

72,754

 

 

$

67,811

 

% Growth attributable to:

 

 

 

Lending software solutions

 

9

%

 

 

Data verification software

 

(2

)%

 

 

Total % growth

 

7

%

 

 

 

 

 

 

(1) % Revenue related to mortgage loan market:

 

 

 

Lending software solutions

 

7

%

 

 

9

%

Data verification software

 

70

%

 

 

70

%

Total % revenue related to mortgage loan market

 

28

%

 

 

30

%

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

 

 

Three Months Ended March 31,

 

2022

 

2021

Cash flows from operating activities:

 

 

 

Net income

$

7,479

 

 

$

7,231

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

Depreciation and amortization

 

12,905

 

 

 

12,351

 

Amortization of debt issuance costs

 

484

 

 

 

1,072

 

Share-based compensation expense

 

3,808

 

 

 

643

 

Loss on disposal of fixed assets

 

135

 

 

 

76

 

Loss on sublease liability

 

 

 

 

384

 

Deferred income taxes

 

2,679

 

 

 

2,064

 

Changes in operating assets and liabilities:

 

 

 

Accounts receivable

 

(7,248

)

 

 

(8,958

)

Prepaid expenses and other assets

 

(460

)

 

 

(1,637

)

Accounts payable

 

301

 

 

 

195

 

Accrued liabilities

 

194

 

 

 

107

 

Deferred revenue

 

14,586

 

 

 

15,195

 

Deferred rent

 

 

 

 

(26

)

Net cash provided by operating activities

 

34,863

 

 

 

28,697

 

Cash flows from investing activities:

 

 

 

Acquisition, net of cash acquired – TazWorks, LLC

 

 

 

 

(85,646

)

Capitalized software additions

 

(1,522

)

 

 

(804

)

Purchases of property and equipment

 

(419

)

 

 

(245

)

Net cash used in investing activities

 

(1,941

)

 

 

(86,695

)

Cash flows from financing activities:

 

 

 

Repurchases of Class A Units

 

 

 

 

(54

)

Repurchases of Class B Units

 

 

 

 

(1,887

)

Proceeds from exercise of stock options

 

179

 

 

 

 

Proceeds from long-term debt

 

 

 

 

100,000

 

Principal payments of long-term debt

 

 

 

 

(1,295

)

Payments of debt issuance costs

 

 

 

 

(1,970

)

Payments of Class A cumulative preferred return

 

 

 

 

(12

)

Payments of deferred offering costs

 

 

 

 

(1,013

)

Net cash provided by financing activities

 

179

 

 

 

93,769

 

Net increase in cash, cash equivalents and restricted cash

 

33,101

 

 

 

35,771

 

Cash, cash equivalents and restricted cash, beginning of period

 

113,645

 

 

 

39,881

 

Cash, cash equivalents and restricted cash, end of period

$

146,746

 

 

$

75,652

 

Reconciliation of cash, cash equivalents, and restricted cash

 

 

 

Cash and cash equivalents

$

146,746

 

 

$

73,510

 

Restricted cash

 

 

 

 

2,142

 

Cash, cash equivalents, and restricted cash

$

146,746

 

 

$

75,652

 

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

 

 

Three Months Ended March 31,

 

2022

 

2021

Supplemental disclosures of cash flow information:

 

 

 

Cash paid for interest

$

3,869

 

$

8,973

Cash paid for income taxes

 

44

 

 

 

11

 

Non-cash investing and financing activities:

 

 

 

Initial recognition of operating lease liability

$

3,372

 

 

$

 

Initial recognition of operating lease right-of-use asset

 

2,627

 

 

 

 

Share-based compensation expense capitalized to software additions

 

79

 

 

 

 

Vesting of restricted stock awards and RSUs

 

32

 

 

 

 

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

 

 

 

 

13

 

Deferred offering costs included in accounts payable and accrued expenses

 

 

 

 

222

 

Vesting of Class B Units

 

 

 

 

38

 

Reconciliation from GAAP to Non-GAAP Results

(unaudited)

(in thousands, except share/unit and per share/unit data)

 

 

Three Months Ended March 31,

 

2022

 

2021

 

 

 

 

Operating income

$

14,594

 

 

$

19,405

 

Add: Share-based compensation expense

 

3,808

 

 

 

643

 

Add: Employer payroll taxes on employee stock transactions

 

145

 

 

 

 

Add: Sponsor and third-party acquisition related costs

 

2,288

 

 

 

1,373

 

Non-GAAP operating income

$

20,835

 

 

$

21,421

 

Non-GAAP operating margin

 

29

%

 

 

32

%

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

2022

 

2021

 

 

 

 

Net income

$

7,479

 

 

$

7,231

 

Add: Share-based compensation expense

 

3,808

 

 

 

643

 

Add: Employer payroll taxes on employee stock transactions

 

145

 

 

 

 

Add: Sponsor and third-party acquisition related costs

 

2,288

 

 

 

1,373

 

Non-GAAP net income

$

13,720

 

 

$

9,247

 

Non-GAAP basic net income per share

$

0.17

 

 

$

0.18

 

Non-GAAP diluted net income per share

$

0.17

 

 

$

0.17

 

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

 

79,974,071

 

 

 

51,551,231

 

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

 

82,228,936

 

 

 

54,238,306

 

Non-GAAP net income margin

 

19

%

 

 

14

%

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

2022

 

2021

 

 

 

 

Net income

$

7,479

 

 

$

7,231

 

Interest expense

 

4,358

 

 

 

10,062

 

Taxes

 

2,920

 

 

 

2,132

 

Depreciation and amortization

 

12,905

 

 

 

12,351

 

Share-based compensation expense

 

3,808

 

 

 

643

 

Employer payroll taxes on employee stock transactions

 

145

 

 

 

 

Expenses associated with IPO

 

 

 

 

194

 

Sponsor and third-party acquisition related costs

 

2,288

 

 

 

1,373

 

Deferred revenue reduction from purchase accounting

 

62

 

 

 

324

 

Adjusted EBITDA

$

33,965

 

 

$

34,310

 

Adjusted EBITDA margin

 

47

%

 

 

51

%

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

2022

 

2021

 

 

 

 

Cost of revenue

$

24,538

 

 

$

19,476

 

Less: Share-based compensation expense

 

965

 

 

 

72

 

Less: Employer payroll taxes on employee stock transactions

 

54

 

 

 

 

Less: Amortization of developed technology

 

3,434

 

 

 

2,862

 

Non-GAAP cost of revenue

$

20,085

 

 

$

16,542

 

As a % of revenue

 

28

%

 

 

24

%

Reconciliation from GAAP to Non-GAAP Results

(unaudited)

(in thousands)

 

 

Three Months Ended March 31,

 

2022

 

2021

 

 

 

 

General & administrative

$

18,187

 

 

$

17,595

 

Less: Share-based compensation expense

 

1,381

 

 

 

353

 

Less: Employer payroll taxes on employee stock transactions

 

32

 

 

 

 

Less: Depreciation expense

 

561

 

 

 

583

 

Less: Amortization of intangibles

 

8,910

 

 

 

8,906

 

Non-GAAP general & administrative

$

7,303

 

 

$

7,753

 

As a % of revenue

 

10

%

 

 

11

%

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

2022

 

2021

 

 

 

 

Research and development

$

8,409

 

 

$

6,986

 

Less: Share-based compensation expense

 

1,077

 

 

 

82

 

Less: Employer payroll taxes on employee stock transactions

 

40

 

 

 

 

Non-GAAP research and development

$

7,292

 

 

$

6,904

 

As a % of revenue

 

10

%

 

 

10

%

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

2022

 

2021

 

 

 

 

Sales and marketing

$

4,743

 

 

$

3,599

 

Less: Share-based compensation expense

 

385

 

 

 

136

 

Less: Employer payroll taxes on employee stock transactions

 

19

 

 

 

 

Non-GAAP sales and marketing

$

4,339

 

 

$

3,463

 

As a % of revenue

 

6

%

 

 

5

%

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

2022

 

2021

 

 

 

 

Net cash provided by operating activities

$

34,863

 

 

$

28,697

 

Less: Capital expenditures

 

419

 

 

 

245

 

Less: Capitalized software

 

1,522

 

 

 

804

 

Free cash flow

$

32,922

 

 

$

27,648

 

 

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