MeridianLink Inc (MLNK) Q1 2024 Earnings Call Transcript Highlights: Navigating Market ...

• GAAP Revenue: $77.8 million, 1% growth year-over-year

• Adjusted EBITDA: $31.8 million, 41% margin

• Lending Software Revenue: Grew 5% year-over-year, 78% of total revenue

• Non-Mortgage Lending Revenue: Grew 6% year-over-year, 89% of lending software revenue

• Mortgage-Related Revenue: Declined 1% year-over-year, 11% of lending software revenue

• Data Verification Software Solutions Revenue: Declined 12% year-over-year, 22% of total revenue

• GAAP Gross Margin: 66%

• Adjusted Gross Margin: 74%

• GAAP Operating Income: $3.4 million

• Non-GAAP Operating Income: $16.3 million

• GAAP Net Loss: -$5.3 million, -7% margin

• Free Cash Flow: $27.1 million, 35% of revenue

• Cash and Cash Equivalents: Ended Q1 with $62.3 million

Release Date: May 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• MeridianLink Inc (NYSE:MLNK) reported a solid first quarter with GAAP revenue of $77.8 million, showing a 1% growth year-over-year.

• Adjusted EBITDA was $31.8 million with a 41% margin, exceeding the top end of the company's guidance.

• MeridianLink Inc (NYSE:MLNK) demonstrated strong customer retention and growth through new logo and cross-sell wins, highlighting the effectiveness of its go-to-market strategy.

• The company launched MeridianLink Insight Live, enhancing data analytics and reporting tools for customers, which supports data-driven decision-making.

• MeridianLink Inc (NYSE:MLNK) hosted a successful annual conference, MeridianLink Live, with record attendance, leading to significant pipeline creation for new logos and cross-sell opportunities.

Negative Points

• MeridianLink Inc (NYSE:MLNK) faces significant volume headwinds due to a generational low in mortgage originations and a multi-year slowdown in auto lending.

• Subscription revenue declined year-over-year due to lower volumes, despite higher services and other revenue.

• The company's mortgage-related revenue within lending software solutions declined by 1% year-over-year.

• Data verification software solutions revenue declined by 12% year-over-year, primarily due to a decrease in mortgage-related revenue.

• Despite improving volumes, the recovery in mortgage market volumes is slow, and it will take time for these to reflect significantly in revenue.

Q & A Highlights

Q: Hey, guys, thanks for taking the questions. Hi, Larry. Nice to meet you on the call and looking forward to working with you. I've had a question around the minimum contract values and just thinking about all the contracts and in aggregate, is there a way to think about how far down or below the minimum contract values in aggregate, the customers are and we're ongoing with this is how much do overall volumes need to be made up. The four minimum contract thresholds are achieved A: Hey Koji. It's Larry Nice to meet you as well and look forward to working with you and to break down consumer versus mortgage. On the mortgage side, as we've talked about in the past, we are many of our contracts are well below there, their contractual minimums. And and that's why we're seeing even though mortgage volumes are starting to recover worse, it's not printing to revenue in the quarter. So it's going to take some time or no crystal ball when that'll happen, but it's going to take some time. Well, from my days in mortgage and I'm sure you know that you have when the mortgage market comes back, it tends to it tends to move quickly. So we can move through those floors pretty quickly, but it's going to take some time until that mortgage market comes back. On the consumer lending side, substantial part of our of our contract base is on is above the minimums today and a good chunk is relatively close to those minimums. And so we see we see more from them as volumes are returning. For example, in auto, those volumes are passing through and turn into revenue, and I'd expect that to continue as volumes recover.

Q: Got it. And thank you, Larry. And just a follow-up here on thinking about the new logos signing up, call. It within the last six months, how do those contract commitments for those new logos compare to, let's say, contracts signed a year ago? Or are they roughly the same rough roughly smaller I mean, any way to think about the commitments that are embedded with the new logos signed recently? A: Thanks, guys, and this is Chris. Over the last year, they're roughly the same and they can really vary institution to institution based on how much how aggressive they want to be in terms of their commitment versus their off-price. So we see these amount of variability. Our wishes remained consistent.

Q: Hey, guys. Congrats on the strong results and thanks for taking my question. My first one is for Nicolas. I was hoping you could provide additional color on the conversations you're having with customers at your most recent customer conference just in terms of their bank IT spending plans and more specifically on lending and also just how your sales pipeline is looking now relative to it was last year in the back of your customer conference. A: Okay. Yes, hello there, and thank you for the question. First of all, from a customer conversation standpoint, I don't feel like we're having different conversations with customers at our user event or nearly been then separate executive briefings and meetings. And those conversations are pretty positive. Folks are leaning into retooling. Folks are very interested in running on Lincoln Road Map. We did spend some time at the User Forum speaking about a digital progression model, which I'm going to ask Chris Malouf that's on the call here to take that on here in a little bit when I pass it to him. But it's something that our customers are really excited about. We feel it will help them on the curve of achieving more digital maturity on our platform, but also in the industry as a general. And a lot of conversation took place around that from another theme that we have I've had quite a bit of interaction with the user forum was some I know we've also had some Keynote folks and showed a product functionality that was pretty exciting to them. To the customer database. But generally speaking, I would say folks are starting to kind of look past '24 on one of the themes we heard back from some of our clients would be still a fairly constrained environment from a liquidity and deposit perspective. But hopefully folks are seeing' 25 being a more positive year on specifically on the credit union side, I would highlight. So Chris, maybe you can speak to the digital progression model, which was quite a highlight for us at the User Forum.

Q: Thanks for all the additional color. It's very helpful. And then my follow-up for Larry, it would be helpful if you could just provide some additional detail on the guidance assumptions for the remainder of the year for the consumer lending business, excluding mortgage, just across the various loan types such as like auto personal loans, credit cards, like what are you thinking from a volume perspective relative to Q1? Thanks. A: Hey Nic, nice to meet you, and thanks for the question. So in general, we are looking at we're cautiously optimistic in the second half than we are given the rate environment. We have pulled back on some of our assumptions in the second half from our prior guidance, and I'll just give you a little bit of color on it. And we're referencing industry sources and all the rest here. But looking at our own business and where our and how and how our segments are performing on the auto side. And we are expecting some modest recovery in the in the back half in line with in line with industry sources as the used market, which, as you know, represents the majority of our consumer lending business. And as that begins to recover, we'll see some pickup in the back half and similarly in other in other in other non asset-backed loan types account or band as well account opening had a relatively soft first quarter. But just given the comps to last year and we're expecting some pickup in that in the back half and other personal loans, credit cards have been remained pretty healthy and will and will be in a stable to positive through the back half, which is generally, I'd say it's pretty modest, modest recovery given our outlook, our rate outlook.

Q: Thanks for taking our questions. If I could just ask on ACV release, I mean, you guys have talked a lot about accelerating implementation and clearly UniFi AC viewers is benefiting results now. But could you kind of just talk about where we are in that journey and how that's kind of interesting. Thanks. A: Yes, Sam, it's Larry again. Thanks for the question. So my question is on ACV release from like we talked a lot in prior quarters around around acceleration of our of our ACV release, and we are seeing that in the quarter I'm sorry, in the quarter is that ACV? Our ACV release both new and cross-sell. That release is accelerating and it's offset by volumes. And so you don't see it as much in the numbers. But that's that's kind of the underlying trend and is really part of the coiled spring story that we've

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.