Q2 2021 Meridianlink Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to Meridian linked second quarter 2021 earnings call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session. Please be advised that today's fund trends is being recorded.
I would now like to turn the conference over to your first speaker today, Eric Schneider head of Investor Relations. Please go ahead.
Good afternoon, and welcome to Meridian linked second quarter 2021 earnings call.
We will be discussing the results announced in our press release issued after the market closed today with.
With me are Meridian links Chief Executive Officer, Nicholas Clark, and Chief Financial Officer, Chad Martin.
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 factors that could affect our future financial results and business. Please.
Please refer to the disclosure in today's earnings release, and the other reports and filings we file from time to time with the Securities and Exchange Commission.
All 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.
During the call. We will also refer to both GAAP and non-GAAP financial measures.
You can find a reconciliation of our GAAP to non-GAAP measures included in our press release, which is posted to the Investor Relations section of our website.
With that let me turn the call over to Nicholas.
Thank you Eric and good afternoon, everyone.
Thank you all for joining us on our first earnings call as a public company.
During today's call Chad and I will provide details on our Q2 results as well as that of Q2024 guidance.
We will also spend time covering the business market and opportunity since many of you may be newer to the mood of the Enlink story.
But first I'll kick this off with a few of the highlights of our financial results.
As you can see where they didn't link exhibited strong performance in Q2.
Which exceeded our previously communicated guidance.
Driven by continued growth in consumer lending volumes for all customers and high levels of mortgage activity driven by still historically low interest rates.
I am pleased to report that Q2, GAAP revenue was $73.0 million.
38% year over year, and we delivered this impressive growth while continuing to demonstrate out high levels of profitability with adjusted EBITDA margin in the quarter of 49%.
I couldnt be prouder of all of these results, which showcased both our strong growth.
And based on class margins.
I'm honored to be part of such a strong organization and leadership team.
One of Meridian links clear differentiate us is the passion and commitment of our people and our dynamic culture of acceleration and inclusion.
Many of our employees have 10 or more years in the lending market place and its their domain expertise it balance out industry, leading innovation and product development.
I would like to acknowledge all meridian Lincoln employees for their performance in the first half of the year.
But it didn't link is a leading provider of a cloud base consumer lending platform for financial institutions, including banks.
Credit unions mortgage lenders speciality lending provide us and consumer reporting agencies and our platform is an important revenue and growth engine for our customers.
We are well positioned in our markets and have a strong growth trajectory.
Our lending solutions include cloud based consumer and mortgage loan origination point.
Point of sale account opening.
Sure.
And analytic software that simplify the transport of capital between consumers and financial institutions.
Our solution is a leader in led market financial institutions.
Our key customers, our consumer lenders mortgage lenders and consumer reporting agencies or cra's.
Our target financial institution customer has between the $100 million and 10 billion of assets under management.
In total we work with over 1900 customers, including 63 of the leading one on the upgraded unions and over 50% of Forbes as 2020 based credit unions and banks.
Our data verification software solutions include cloud based platforms full pouting created reporting in.
Floyd and income verification.
Asset verification.
Throw detection and background screening.
Our mortgage created link and Patchworks data verification products empower cra's with an operational platform and data and we are lead us wasn't the CRA software market.
We have a history of providing measurable ROI to our customers in the areas of revenue growth cost reductions efficiency improvements and the risk reduction decisioning.
Together, our suite of mission critical software solutions allows our customers to successfully compete against tier one banks and large financial institutions.
We are a critical revenue and growth engine for our customers and as our customers continued to grow and succeed we do sell alongside them.
The financial services industry is in relatively early stages of digital transformation.
The global pandemic accelerated financial institutions in the basement in digital leaning software.
And we believe our industry still has five to 10 years of digitalization ahead.
The United States is the largest consumer debt market in the world and financial institutions in the U S are currently investing billions in software to compete for business.
Cornerstone advisors independently estimates out domestic total addressable market.
At over $10 billion in International data Corporation estimates that SaaS pain from the banking sector will nearly doubled to 19 billion by 2024.
Our platform replaces outdated legacy products and less capable point solutions to enable more efficient account opening loan origination reporting and risk management from anywhere and at any time.
We expect the meridian linked to continue to win in the market for three key reasons.
First our platform is comprehensive.
To date too many financial institutions struggled to keep up with increasing consumer experience expectations, because they rely on numerous disparate legacy technologies that still put me in the industry.
In contrast, but I didn't link helps our customers compete and win by addressing nearly all consumer lending categories, including mortgage.
Caught personal auto home equity and small business loans.
By selling all these loan types, we accelerate our customers' digital transformation and we remain the only met market complete unified learning solution originating consumer and mortgage loans.
Second our platform is efficient.
Speed and intelligence method and our platform enables real time, Decisioning and rapid access to data and a deeply complex market plagued with this organization.
Because our platform integrated suite of solutions that span the digital lending journey, we can drive more meaningful and personalized interactions.
This is essential as consumers increasingly expect a more thoughtful and customized experience across their lending needs.
Third.
Platform is modular.
Our clients can select one or many of our integrated products to facilitate growth as well as streamline processes.
The extensive mud enlink marketplace is a game changer for our customers as it allows our customers to extend our platform to meet their specific strategic requirements.
Several key initiatives drove the company's solid performance in Q2.
Our 2021 virtual user forum for our lending clients took place in May and had a total of 80 stations over three days.
They were more than 2100 unique attendees and over 13000 cumulative attendees for all sessions to engage with and learned more about meridian links offerings.
And when it comes to offerings the company continues to expand in.
In fact in April the organization completed the acquisition of silent.
Silent contributes key data and marketing capabilities to our Meridian link one platform.
We will continue to enhance and integrate.
And finally, the company had another strong quarter of new logo wins, including key signings in speciality lending.
Continued bank and credit Union expansion and also several new customers for data verification solutions.
We are proud of our recent growth and accomplishments and even more excited about executing further on several key growth opportunities.
We believe consumer lending will continue to grow and as the volume of our customer lending increases we expect to share in that growth.
Even our position on the market.
Our operational execution and the positive market dynamics, we are confident in our growth trajectory.
We see multiple growth vectors.
First expanding our target market.
We have historically focused on the middle market regional banks community banks credit unions speciality lending provide us.
However, our solutions also resonate well with larger and smaller financial institutions and we believe we can successfully expand our target market to include both.
Our newly packaged offering targeting smaller prospective customers is quickly gaining traction.
Second.
Adding new logos.
Our high powered sales capabilities, our bolt to acquire high value new logo wins.
We are making investments in sales and marketing to continue securing new clients.
Particularly as financial institutions seek to digitally transform by purchasing more effective and scalable technologies and our go to market team continues to win new customers and I'll talk with market.
Third.
Continuing to land and expand.
The critical nature of our solutions facilitates exceptional retention.
Embedded cross sell growth within our existing client base.
We have a demonstrated ability to both retain customers and to upsell and cross sell more of the features and functionality we offered inside their existing installed products and new products.
As demonstrated by our record attendance at our recent user forum. They remain strong interest in our customer base to learn more about our additional integrated products and services.
Fourth.
Monetizing our partner network.
Our vibrant partner marketplace provides our customers with the vendors and solutions are they choosing and offers us a substantial actionable monetization opportunity.
Alice Solutions Act as a gateway for our extensive network of third party partners to access our financial institution and CRM customers.
We are able to capitalize on one time service fees annual integration fees and transaction based revenue share income via the Meridian link market place.
We expect to work with current and new partners to enhance the opportunities for our customers to upwardly position themselves in the market and when our customers win we win.
Finally strategic M&A.
In addition to developing our own solutions organically, we will continue to selectively pursue acquisitions that provide additional capabilities or customers or both.
M&A continues to be a significant area of opportunity for growth consolidation and technology enhancement.
In the past 12 months, we have increased platform adoption and capabilities through three acquisitions D.
D C I, which improved our indirect lending offering.
That's works, which established a leading position in adjacent areas CRA market.
And silent which brings data analytics and marketing capabilities in house for our clients.
I will now turn the call over to Chad to talk about our financial results.
Thanks, Nicholas and thanks, again to everyone for joining us today.
This is our first earnings call I'll start by providing a brief overview of our financial model and then I'll go through our second quarter results in detail before moving onto guidance for the third quarter and full year 2021.
As Nicolas mentioned in the second quarter, we generated total revenue of $73.0 million up 38% year over year.
88% of our second quarter revenues were subscription fees with the balance coming from the professional services and other.
We have a usage based SaaS recurring revenue model that drives our healthy financial position and growth profile.
It is resilient and provides visibility into our future financial performance.
Our customers sign long term contracts, usually three years that are noncancelable without penalty.
Typically customers commit to annual fees and monthly purchases of applications.
In exchange for higher monthly commitments, they receive lower per application pricing and any transaction over the monthly minimum commitment.
Incremental charge.
Our platform's ability to make our customers more efficient and effective at lending.
Naturally drives more volume once it is installed and used.
We like this model is we can grow with our customers and we are aligned with their success.
We provide both lending software and data verification software solutions.
In the second quarter lending software solution revenues accounted for approximately two thirds of our total revenue and grew 38% year over year.
The other one third of our revenues comes from the data verification software solutions, which increased 39% year over year, largely due to a still heightened level of mortgage refinancing activity, including associated credit reports driven by lower interest rates.
Second quarter revenues from the mortgage loan market generated 8% of our lending software solution revenues.
71% of our data verification software solutions revenues.
Of the 38 points of year over year revenue growth in the second quarter 'twenty.
24 points were contributed by the acquisitions of <unk> Paas works, while the remaining 14 points came primarily through the addition of new customers increased module penetration of existing customers and increased volume from both new and existing customers.
Our strong unit economics continued in the second quarter as our gross margin was nearly 70%.
We continue to invest in our sales and marketing and research and development efforts to drive organic growth acceleration.
We are investing significantly to build robust sales and marketing capabilities.
Compared to the second quarter last year, we spent 94% more in sales and marketing and 54% more in research and development.
Even with this additional spend our adjusted EBITDA margin was 49% and our adjusted EBITDA grew by approximately $13.0 million to $37.0 million.
While we continue to invest for growth. We will also carefully controlled expenses and convert increased revenues into profit.
Turning to the balance sheet and cash flow statement. We ended the second quarter with $31.0 million in unrestricted cash and cash equivalents down $47.0 million from the end of the first quarter.
After the close of the quarter, we used $200 million of our IPO proceeds to pay down debt.
Extinguishing, our second lien debt and reducing the first lien by $75 million and reducing our quarterly interest expense to around $14.0 million.
As part of this paydown of debt in Q3, we incurred a debt extinguishment charge of $8.0 million.
Operating cash flow in the second quarter was $23.0 million compared to $18.0 million a year ago.
Free cash flow was $24.0 million in the second quarter, a 28% free cash flow margin compared to $17.0 million and a 20% free cash flow margin a year ago.
The 8% improvement in free cash flow margin was driven by converting incremental revenue into operating cash flow.
I will now conclude the call by providing guidance for Q3 and for the full year of 2021.
Overall, we continue to see strong business momentum and our pipeline remains robust.
For the third quarter estimated total revenue is expected to be between $71.0 million and $68.0 million compared to $55.0 million for the same period in 2020.
This represents an estimated increase of 20% to 22% year over year.
On a non-GAAP basis, our third quarter estimated adjusted EBITDA is expected to be between $25 million and $31.0 million, representing EBITDA margins of approximately 40% at the midpoint of the range.
For the full year 2021 estimated total revenue is expected to be between $263.0 million and $266.0 million compared to $202.0 million for the same period in 2020.
This represents an estimated increase of 29% year over year.
On a non-GAAP basis, our full year 2021 estimated adjusted EBITDA is expected to be between $115.0 million and $118.0 million, representing EBITDA margins of approximately 44% at the midpoint of the range.
PCI and passwords are expected to continue contributing at levels in line with recent performance accounting for typical seasonality in both Q3 and the remainder of the year.
Lending software is expected to suffer a modest drag from slow in mortgage lending activity, while data verification, we'll be facing difficult comps in the quarters ahead, given the elevated mortgage refinancing activity in the year ago quarters.
With that Nicholas and I are happy to take any of your questions operator.
Thank you Chad as a reminder to ask your question just press Star and then the number one on your telephone keypad and if you need to withdraw your question press. The pound key we will pause for a moment to compile the Q&A roster.
Your first question comes from the line of Koji Ikeda from Bank of America. Please go ahead.
Hey, guys, Hey, Niccolo, Hey, Chad Congrats on a nice first quarter as a public company and thank you for taking my questions a couple from me.
Just to start off on the mortgage versus consumer mortgage now being 8% of lending software solutions is that the right way to think about that mix going forward.
Koji. Thank you and appreciate the initial comments on the question Chad why don't you respond to that for US. Please.
Sure. Thanks Koji.
So we broke out the mortgage exposure for both the lending software solutions in the data verification software part of our solutions.
So that was 8% on lending and 71% on data verification, 30% overall for the quarter and so that 8%.
As the market for mortgage re normalizes and as the market grows for the consumer side will potentially come down through time.
Based on just the overall market trend.
Got it got it Okay, and then looking at the mortgage software solutions revenue and the data verification software revenue for the mortgage market both down sequentially.
Overall rates have been holding pretty steady at low rates and you did mentioned some commentary that there could be some gradual decline here I mean is this really the indication that the refi tailwind that your business saw in the past is mostly now behind and a decline in the refi volumes and the revenue model has really begun here.
So the way, we forecast or more of the impact of mortgage on our on our both both basically the lending and the data verification side of the business as we leverage kind of the third party industry views on the market.
So we don't have a team of economists. So we're relying upon the mortgage bankers Association, Fannie Freddie et cetera to see what they're forecasting around the timing of the reach the slowdown in refinancing activity.
Our forecast we believe is in line with that view.
Obviously as adjusted for how that that forecast impacts kind of our stream of revenues.
Got it got it Okay last question from me.
I'm just trying to work the math here, so with the <unk> 24 points of growth contribution so that implies about $12 million in contribution from <unk> is that right.
And that's all in consumer correct.
So both <unk> and passwords.
Hi to mortgage and yes, the math the math.
I presume youre doing your math right, 24% of the growth and the growth in the quarter.
24 of the 38% was tied to test works and PCI and neither of those are focus on mortgage so guests in terms of the breakdown PCI is in our lending software solutions.
A focus on auto and indirect auto.
And <unk> is in our data verification part of our business and Theyre focused on employment and tenant screening.
Got it got it so backing that out of the consumer side that does imply the consumer loan market grew about 15% organically.
That in the ballpark and I guess if it is that's that's really great organic growth can you can you talk a little bit about what's going on the consumer side, that's driving that mid teens growth there.
Yes, so what's growing what's driving growth on that part of the business is a combination of customers who are on our platform who are utilizing more either more of the solution because we've cross sold or up sold into them other parts of the of the.
<unk> platform that we have or if you remember we also have a volume based pricing model. So for those customers who are big.
Beyond their monthly commitment as they see additional volume on their in their institution, we participate in that and then obviously, we also have new customers who come onto the platform during the year and this.
So it's kind of broken between growth from existing customers and growth from new customers, combining two to drive perhaps board.
Got it got it. Thanks, so much for taking my questions I appreciate it Nicolas and chat and congrats again first quarter as a public company. Thank you so much.
Thanks Koji.
Thank you your next comes.
Next question comes from the line of Stephen Ju from Credit Suisse. Your line is open.
Great. Thank you so much so similar first congratulations again on the first quarter as a public company and also a similar question. So in our model, we we tend to or attempt to back into the core consumer L. O S business, where we're backing out the mortgage we're backing out acquisition and it does.
Seem like it wasn't really just this quarter. It does seem like that business has been growing mid to high teens, maybe even higher in certain quarters, depending on some of the assumptions we have in the back.
Ears of our model, it's been growing at a nice rate for some time now and it's not really just did this quarter, saying was hoping you could put some quantitative just a framework around the components of that so you mentioned a few right. There are new modules theres, new customers Theres, maybe a little bit of churn and then of course, there's increasing usage or underlying end market.
When we think about that growth going forward what is the quantitative our growth algorithm that investors should think about for that business, which makes up on our estimates roughly 60% of total.
Yes, Tim good question.
Similar to the conversation there was just having around the growth. So I think of it in those pieces that you outlined and it's not much more complex than that right. We have existing customers right and we have a lot of our go to market activity is focused on selling back into that existing customer base.
So getting them to use more of the features and functions that we're selling that we're providing them to get more value out of the solution.
Some of the solutions, we've introduced like collection data analytics.
Account opening important the portal right point of sale, so selling that back into the existing customer base, which drives incremental revenue to us for using those additional modules and then if there are pushing more volume through the platform right. So they add account opening or portal or something that drives more more loans to the institution again, if they are above.
That you if you are above the minimum that incremental volume that the institution seeing because they are leveraging more of the power of the platform, having a more better.
Offering for their customers to go in and.
And lend against so they're seeking out.
Lending solutions from our from our customers. So the more that they have more volume that accrues to us as well and then there is price increases and other things on top of that from the existing customer base and then yeah on the new customers or new customer.
The way, we talk about it as net but of course, there is churn right, which we kept every customer.
But then on top of that and as Nicolas referred to in his remarks earlier and he may want to jump in here and talk about kind of what we're doing on the sales side, we're seeing success in adding new customers to the platform that really just kind of then again they come in then the same motion that we're doing into our existing customer base. We immediately start with those new customers right, making sure.
Sure that theyre, having getting all of the advantage of all the solutions, we have on the platform and again trying to get them to where they are seeing success in their solution and pushing their loan applications over and above their minimum volume.
Excellent.
<unk>.
Oh go ahead please.
Oh not to overstate it but.
I think churn chat answered it beautifully but just think about the focus that we've created in the business and the go to market over the last 12 to 18 months. There is a dedicated team of new logo.
Individuals' that's driving.
And focus on expanding our footprint.
A team that's really focused on driving what we call cross sell upsell basically from an account management standpoint.
And both of those teams had a good quarter on both of those teams are accelerating.
All of that with real funnel management.
On the marketing side.
Solid progress and kind of accelerating.
Bundle progression.
And it's enabling the sales team to go into market more confidently.
What we haven't spoken about on the school year. This is also a partner marketplace.
Way, we are enabling.
Optionality and customized.
Customized implementations for customers that really want to configure a specific environment or a specific integration and that part of the marketplace is accelerating for us.
We kind of think roughly that out of a.
$1 of new SaaS revenue there is about 25 <unk> of.
Revenue associated with a partner in a marketplace, which I think in years to come will be a great playbook for us to continue to bolt in face and expand on as well.
Excellent. Thank you so much for that additional color really appreciate it.
Minor follow up is.
I believe the first half contributions from GCI Patchworks inorganic contributions was in the $22 million to $23 million and we just referenced and it was roughly $12 million or so during Q2, we had been modeling something in sort of a $35 million range for the full year and you mentioned.
Earlier that you do expect those inorganic contributions to continue to perform in line, but all along with their typical seasonality should we still be thinking about a roughly $35 million figure or will that be slightly higher now for the full year, given maybe some of the strength in Q2.
Yes, Tim so not specific what what you have in your model I think you're kind of backing into where those businesses have been based upon the reports.
And the analysis, we have and as I mentioned on the call right. So we think they'll continue.
And kind of their current trajectory.
But for the seasonality right, which we expect to see kind.
Kind of impacting in the fourth quarter, so that hopefully.
Hopefully that gives you some some guidance there.
Okay definitely helpful really appreciate it thanks, a lot for taking the questions.
Thank you. Your next question comes from the line of socket Telia from Barclays. Your line is open.
Okay, Great, Hey, Nicholas Hey, Chad Thanks for taking my questions here and I Echo my congrats on becoming a public company.
Nicholas maybe maybe first for you just zoom out a little bit I was wondering if you could just talk a little bit about the competitive environment in your lending solutions business, particularly that that non mortgage piece.
Maybe just be helpful. Since this is our first call. If you could just recap sort of the competitive backdrop, there and how it has changed if at all.
Thank you Kate and thank you for your congratulations to its pretty exciting being being public yeah.
Yes, not a whole lot has changed but let's let's kind of look at meridian links history, a little bit and also wind Meridian Ling historically focused on the way we go in.
We've always been focused on enabling the met market to compete more effective with large banks large financial institutions.
In the field and our solutions have been tailored.
The platform that we've built the integrations, we've done really enabled the met market to punch well above their weight in lending.
Over the last call it two years or so we've seen ourselves getting into larger and larger transactions where customers are not looking for full on customization, but configure ability in the solution.
As well as the ability to.
Integrate into our partner network and those partners, that's part of the motor the Enlink ecosystem.
That helped us kind of keep winning larger and larger accounts.
And we typically compete with with competitors in that space that would would be more focused on customization and custom development, which we don't do but we recognize that there is a ceiling at some point, but we keep kind of moving up market with new logo wins there.
On the Downmarket side.
We tend to replace legacy solutions.
Point to point solutions, and even an array of instance at the real low end something thats, even more manual than than that and how.
How we go to market there is much more of a pre packaged offering where our solution has a set implementation.
Hum.
Playbook.
Integrations are pretty much defined that we bring to market for those kind of lower end.
Institutions.
And it's.
It's been great for us in terms of new logo wins traction and even pipeline bolt so.
From from our perspective, we haven't seen much change in the consumer lending side.
Typically what you would expect on the higher end and then kind of more of the point solutions or more legacy which are typically more electronic workflow approval, then real integration automated decisioning.
What noted enlink platform bring to those institutions.
Got it.
Very helpful.
<unk>, maybe maybe just for my follow up for you will keep it to two.
And maybe just to switch gears, a bit and zoom in to margins I.
I think EBITDA margins here.
In the first half at least have been sort of in the high four he's almost 50% I think the guide for Q3 is about 40%.
Public company costs are at least a little bit of the culprit. There, but you also talked a little bit about investing in sales and marketing can you just talk a little bit about high level sort of how you think about some of the puts and takes to sort of that margin in the second half does that makes sense.
Sure, Yeah, and I referenced in.
Earlier, we did accelerate our spend on a year over year basis for our sales and marketing and R&D right. This Nicolas talked about kind of the success, we've had in making those investments on the sales side.
As well as continuing to invest in new products, we expect to continue to see.
To see growth, there and spend on a relative basis on versus prior years and prior quarters.
And yes, there is additional cost associated with going public.
That we're layering in both just kind of hard cost of insurance and.
In platforms and technology and cost a person so we've added to help us.
Be a public company and so Larry though then is kind of pushing on the on the back into the back half of the year, but overtime bright as we continue to grow the revenue, we're still comfortable with kind of a long term margin guidance that we provided previously.
Got it very helpful. Thanks, guys.
Thank you. Your next question comes from the line of Andrew Schmidt from Citi. Your line is open.
Hey, Douglas Chad, Eric Congrats from me as well on the first quarter out of the gate here in D C.
I wanted to dig into the also the non mortgage consumer side then.
I think a lot of the questions around this or just a function of.
Yeah.
Trying to offset some of the pending mortgage hesitance, we're seeing to maintain or accelerate this line. So I wanted to dig into your visibility in terms of maintaining or accelerating rate of growth on the non mortgage consumer side it seems like quarter.
Clearly you've put a lot of emphasis on the go to market a lot of investment there. It seems like that should be showing up now, which can sort of sustain or improve the current levels of growth youre seeing between that and sort of the secular backdrop and the market is.
Just curious to get your sense between sort of the.
Sales pipeline in Italy patient pipeline.
With confidence in growth there. Thank you.
Thank you Alex and.
I'll make some.
High level remarks, Adam Chad if you have anything to add please speak up when I'm done but.
From a consumer lending standpoint.
We've seen real acceleration in the business over the last year year and a half.
And bookings in the company has been very strong.
We are the benefactor of a healthy backlog and a healthy pipeline to go and implement and the team is really focused on doing so and in scaling our services muscle.
And enabling those newly acquired customers and turning them onto our platform.
So I'm pretty excited about.
What are we taking with us into 2022, given the success we've seen.
And winning business so far in 2021.
As it relates to.
What <unk> what can you control what can you not control.
I don't really lose sleep over.
The world of <unk>.
Supply chain the world off.
Fractions and then possible.
Issues in the middle east or any other things we cannot control.
Myself the leadership team and the employee base is very focused on.
Delivering great products to our customers.
Turning our customers seem to into real ambassadors of our solution on our products.
Focusing on delivering the base.
Customer service, we can it's on winning the customer with some of the deals we are at.
And from a consumer lending standpoint, I'm very buoyant.
I'm excited to wear.
The business is going and accelerating and I feel we kind of on that that acceleration curve, where the sales team has really come through over the last year year and a half accelerating building systems processes, it's becoming predictability beatable, we can see.
Pipeline progression, we kind of really see that it's now also turning on the rest of the organization coming behind our sales organization.
And supporting those clients implementing those clients and I think 2022 is going to be a year for us kind of turning that into into more of a reality as we've continued the winning streak we've had with with with bookings.
Chad anything you want to add to that.
I would just add the point Andrew Thanks for the question.
I would just add that.
Way our contracts are structured our customers don't start paying us until they are implemented in go live and are using the solution.
So the the bookings and kind of the sales success Nicholas has talked about kind of goes into our internal pipeline to then go get implemented so.
The success today will turn into customers and revenue down the line and so obviously, we want to kind of get them online as soon as possible, but there's a lot of change management involved when you implement a solution like like a loan origination system.
And so that gives us the comfort and then also want those customers come in right then they kind of start using more of the platform and so we see growth from those exist future customers kind of again growing through time as they take and use more of the system more turn on more loan types and put more volume on the platform.
Yeah.
Got it sounds very constructive thank you for those comments.
On the M&A strategy done a good job recently.
Does adding products onto the platform to be able to cross sell.
<unk> capabilities to both data verification and the.
The west side with indirect lending and such.
As we look at the pipeline today.
Is this strategy more of the same in terms of capability or product add ons or are there larger larger more transformational opportunities that you see maybe towards commercial lending.
So something that could be a little bit larger in nature.
<unk>.
Thank you for the question and it's a it's a really good question maybe.
Maybe take a step back and I'll give you a 30 minute snapshot into what we did that late to the acquisitions.
About a year and a half close to two years ago. Now we started a process in the business. We've developed a strategic plan with long range planning and modeling that really was the.
The basis of us, making decisions for capital allocation in the business.
It also.
Helped us.
To provide clarity as we.
On board it Eric and started focusing on our M&A playbook and layering that M&A playbook over priorities that we've identified in our strategic plan.
Our focus to date has been very much on them.
It needs to be strategic it needs to add to the consumer landscape and by that I mean, we service the consumer either through consumer lending mortgage cleaning all that data verification solutions.
And it really needs to enable customers and the consume up to benefit from it if.
If it's good for our customer base and it fits well into our platform.
And it's strategic to the business that made sense and the art in evaluating a lot of these transactions is actually saying no to deals not saying, yes, because this significant deal flow as you can imagine.
And in the market.
And.
We really focus on.
<unk> to.
Look at opportunities that that enable and help us drive our priorities and we've made decisions in the business with capital allocation would go towards building or partnering and not buying or acquiring in buying when it might seem so almost of that AG standpoint.
We would like to think that.
Well the markets that we're looking at from them.
Adjacent standpoint would really benefit our platform and our focus.
I don't think we will we will go too far afield with what we're looking at if they are transformative place that that would really change the landscape or the tam or anything that we.
We should be looking at and take a real hard look we will certainly do that but typically transformative acquisitions.
Income by frequent and often and I think we can certainly.
Keep ourselves busy for a long time to come.
With platform additive cut.
Customer additive type of M&A activity and that's the focus of the team it needs to fit into our strategic plan.
And we all need to stack hands and really see the benefit.
All of it for our customers.
Our platform.
I don't know if you want to add.
Anything there.
No that's great. Thanks, Greg 300%.
Very helpful. I appreciate the focus placed on nickel sticky Chad Congrats again.
Thank you Sir.
Thank you. Your next question comes from the line of Alex Sklar from Raymond James Your line is open.
Alright, Thank you Nicolas for Chad I wanted to follow up on the cross sell opportunity you've been talking about and seeing some improvements on already but could you just talk about some of the steps that you've taken internally to really promote that cross sell activity and with that I think you've talked about customers, having an average four of your solution is there any commonality in terms of the customers that are taking higher.
A number of solutions. Thanks.
Thank you Alex.
Well kind of starting with a question we fairly early on realized as we were continuing to scale out.
Go to market operation.
That we need to split the teams.
New logo motion quite different from.
Enabling customers to get more of the benefits of the platform working with customers showing.
Partner integration opportunities working with our customers kind of.
Beta and deeper understanding and use the platform.
So the first step that I think was a significant statement now thinking was to create separate team some time ago.
We've we've continued to add to the cross sell upsell team.
In terms of head count, we've continued to build out and enable the team.
With better understanding of our products and if you ask me where are we at today and where we want to be I continue.
<unk>.
It's a journey, it's not a destination.
If if we.
We never going to be at a place where we should be.
Italy contained with with what we've built we should continue to improve we should continue to invest in.
And and enable.
As we work through.
<unk>.
Enabling the cross sell upsell team I think there's opportunities to expand within existing customers with with tools with modules that we've previously not done.
I think we can continue to see growth from that for I'm hopeful that we can start pushing five here.
In the in the not too distant future on average.
But also there's a lease up.
Very sizable opportunity to better enable and integrate our partner marketplace without cross sell upsell team and that's something we're pretty excited about thinking through how we want to start enabling that in 2022 and beyond so from from my perspective, I think we've built a great Foundation we've enabled.
The great Tech stack across our organization, which we continued to invest in better understanding our customers how our customers are using.
<unk> technologies and <unk>.
That form and then which customers ultimately down the line will benefit the most from a specific product set given the data that we can we can analyze.
And also whether it's our product or our partner product and I think that's another crankle. The tone that we are starting to get a hits around for 2022.
Okay, Great. That's really helpful color and then maybe my follow up I'll kind of continues on that theme, but I wanted to ask about meridian like one.
And the early progress and feedback as it relates to your next Gen platform I know, it's still early days, but anything you can tell us in terms of cross sell or use it benefits from those early adopters and anything in terms of goals in terms of what percent of your base you expect to have live before the end of the year.
But it is but it didn't link one is the collective term for our consumer lending and I broadly define that by including our mortgage offering as well.
And by saying that we will be the only consumer loan origination platform that includes mortgage in the market.
And from a cross sell upsell standpoint, it's it's.
Really a focus that we're driving into 2022 weeks.
We've got some early adopter clients that we're working with so far good.
Good feedback.
Great feedback thinking through the feedback and how to adopt some of the feedback and bring it onto them.
So into the platform. So from my perspective, very pleased with the way we add I think it's from from a timeline standpoint, I would say an area of focus for 22 more than 21.
But what what we're doing is bring it altogether bring bringing the consumer lending offering altogether on the Meridian link one.
With the naming conventions that I think we've shared with you a little while ago.
Okay, great. Thank you.
Thank you. Your next question comes from the line of Matt <unk> from <unk>. Your line is open.
Hey, guys. Thanks for taking my question and a nice job on the quarter Congrats on the IPO.
I guess as you mentioned your user conference a little bit earlier in the year really showed a lot of success, maybe just help us out in terms of any specific areas or segments of the market.
That were sort of surprising there provided more upside than you were anticipating and then how is that event differed from different iterations in the past how much more successful or pipeline build their deal specifically closed coming out of that did you see this year.
Yeah.
Yeah.
That's a good question.
The evolution over the last say three years started with much more breakout sessions much more focused on.
Specific offerings user stories.
We use those have been successful in working with us and enabling a solution for the market.
It continues to be a great lead generator for us.
We tend to showcase products new functionality.
I'm kind of.
Get ahead of the market in terms of where the platform is going and that always cultivates a lot of discussion.
Interaction with clients.
And from a.
Our lead Gen pipeline perspective.
We've seen a great pipeline bolt we've seen.
Deals close already so.
Even with it being virtual for the second time in a row, it hasn't slowed down or change anything meaningfully in terms of the benefits from it in fact, I would say it probably accelerated some even with the switch the year before and the she is still being a virtual event.
I would say customers tend to.
Turning to ask when we will be in person again.
Hopefully we can do that soon because I think we miss out on the networking opportunities that exist and kind of the social sitting in and we have customers kind of engage with each other but given what we had.
To do and deal with from a virtual standpoint, I would say I was very pleased with the outcome.
<unk> and the subsequent benefits in pipeline and in deals already closed.
Great and then quickly Jud can you just remind us where you're at in terms of.
Or I guess growth in quota carrying head count on the sales front, especially on the new logo team and how much of the increased investments around sales support and building out some of that cross sell team versus adding.
New quota carrying heads.
Yeah. Thanks, Matt So we don't break out specific specific quota carrying reps, but we talked about continuing to add to that team and yes, you are correct.
One of the ways, we think about it is not just adding more reps, but really building the team around the reps.
And our CRM, Brian clan talks about right.
Not just having one picture throw the whole game, but really having the rotation and the depth and the <unk>.
Folks on the for their specialists. So you have pre sales you have people who set up.
Leads then you get that you take him to demo that then leads to a closer and so we're really focusing on both.
Process and technology that the teams are using and Nicolas talked about basically seeing faster conversion of opportunities in the pipeline, but then actually then having really great kind of tools and technology to help stand up a new rep. When they come onboard so that we can we can see them be successful.
Alright, great. Thank you.
Thank you. Your next question comes from the line of Tom Roderick from Stifel. Your line is open.
Hey, Great Hi, Nicholas High Chad Thanks for taking my questions and again congratulations on the results of the recent IPO.
This is going to build a little bit on Matt Vanvliet question, but I think it's a good one relative to not just the pace of transaction of volume that you're seeing from existing customers, but what it's taking new customers to kind of get across the goal line and on one hand, it seems to have been.
A challenging environment for some of your peers out there convincing.
Fin tax area or I'm, sorry, convincing actual banks and credit unions to upgrade their legacy technology stacks on the other end.
Looking at our customer base that is being forced to change given the volumes that are taking place.
The platforms out there so would love to hear from your perspective, what's happening with new logo wins, what the urgency is for selection and how that plays into as you know perhaps seasonality in terms of when you actually see those new customers come on the platform.
Yeah, I'm happy to go there and I think it's a good question.
Actually it makes me pause and think for a second and he is yes my perspective on it.
We are living.
In the earliest stages of digital transformation.
In the met market a lot of the larger institution started earlier and they've probably invested more in digitalization than the mid market and the Penn damning with pandemic was a real catalyst kind of forcing folks to start thinking about.
The business model the business strategy, serving their customers and what's different.
What we looking at is the met market that is radian ripe for transformation Radian ripen and the type of customer that we would love to find as an opportunity to engage with his folks who whose.
And the business who's been using a solution that they are struggling with serving in a meeting consumer expectations.
That is anywhere anytime kind of on a on more of a single platform not a point solution, which is hard to integrate and that's where I'm at enlink itself and from my perspective, I can't speak to the folks that you mentioned that that's all.
Struggling to kind of.
Move legacy solutions, but what I can tell you in our experiences.
Where it relates to the consumer.
Our mid market customers are.
Are actively interested in.
Bettering once they have improving their level of service and offering and have the ability to make better and faster decisions on a much more real time basis, and that's where meridian links platform really excels.
And some of the acquisitions that we've done kind of ties it better together from an overall standpoint, where we have access to information, where we have the ability to kind of make better real time decisions.
Type of customer we find.
Have a legacy solution, which don't have the level of integration, which lacks the level of automated decisioning in most cases.
And we enable these med marketing institutions to effectively and better compete with the peers, who has made a investment into digitalization or larger institutions.
So from my perspective, I don't find.
It is it's really selling against kind of legacy or the hesitancy to shift that's.
Finding those customers, who is ready and who wants to make the investment and I always say.
Sales team.
We're not a back office solution.
I think it's it's more challenging to to kind of engage in today's.
Time, if you're investing in back office solutions.
Or in branch solutions, we integrate with back office solutions, but we are an enabler of customers' interactions digitally interactions with with the institution.
And.
My view is it's it's a little bit.
Than our peers.
We tend to enable revenue growth, we tend to see our customers who transitioned from a legacy solution.
Grow faster than the P S.
And they tend to be more efficient and generate some cost savings along the way. So from my perspective, it's a little bit different than struggling to sell.
From a legacy solution I think the market is it's accelerating into it and it's a tailwind that we are benefiting from.
Yeah outstanding that's really good color. Thank you Nicholas.
Sharen quick follow up for you I really appreciate all the detail on the you know the contribution from the mortgage side of the business.
And I think everyone probably understands that the challenge of those compares year on year, So I won't belabor that but I think that's great detail to sort of understand how we measure up and that's compares would love to hear a little bit more detail on the auto lending side of your business. I mean that was a business that was probably pretty tough from a transactional framework last year, but probably.
Pretty robust this year.
Can you just give a little bit more color as to how that segment of the business is impacting you.
Your growth and how we might think about when compares get tough on that or are those is that a pretty steady book of business. As you look out over the last three or four or five years.
Okay.
Yes, Thanks, Tom.
Auto is one component of lending on the consumer side, and we don't we don't break out or or segment report.
Various loan types.
So to that end.
And it is just one of the loan types in the system and as I talked about like when the volume of the customer exceeds their commitment right and it's the volume across all of the loan types that they're processing opening accounts credit cards auto direct indirect et cetera.
So we ended up kind of looking at their holistic level of business and anything that's kind of moving.
Up or down in any period theres often a corresponding.
Offset from another loan type.
Nothing that we're seeing as we kind of look at that.
Everything I would say everything in the volume of loans that we were expecting and forecasting kind of ties to again the industry outlook from Q&A and others as to what's going on in the market and what we're seeing generally and our own and our own app.
Volume's perfect perfect. That's it for me I'll jump back in queue. Thank you both.
Thank you. Your next question comes from the line of Bob Napoli from William Blair. Your line is open.
Thank you.
Congratulations on the IDC, congratulations and great to see.
Ah well learned.
So I guess.
Nicolas you talked a lot about the sales in Europe.
The increased investment in sales on the R&D side it seems like.
Since this management team has come in or it since Bravo has become involved it theres been more investment in R&D and the product has probably improved a lot. So.
The tech stack and the product set.
Yeah. Bob This is Nicholas I don't know if it was my phone or your phone, but it cut out a large portion of your question and I'm not I hope, it's not offensive I asked to ask you to repeat the question not at all.
Just we've talked a lot about sales.
But it seems that it's been.
Critical to the company you really improved the product set.
Since Thomas Bravo was brought in the management team.
What has been the most important upgrades and where are you with your current investment what is the most critical.
To the continuous improvement.
Need to make.
To continue the momentum you have.
That's a really good question and you're right.
The investments, we're making in product will benefit us in future years.
We've we've might.
A number of investments in the product we've invested quite heavily in in the migration to cloud and that's.
We would like to get the scalability and the benefits and what comes with a cloud.
Public cloud environment from a security and and everything standpoint, but our customers are starting to ask it.
As well and we've made that decision to start investing two years ago, and we well into our journey with cloud, but also with invasive and your new user interfaces.
For our products, which brings it much better together that's that's been.
Other work stream that has been in high demand Hyatt equates from our customers.
We are investing in a.
Call it enhanced the.
Decisioning.
Product.
As we move upmarket, we we we would like to remain competitive on that front without offerings and then also on the mortgage side. We continued to invest in we had a big.
Big amount of investment going into a mortgage product that was the last 12.18 months. So from my perspective, you can always do more.
As an opportunity to kind of continue to look at but we've made some really good decisions and what kind of benefit the company for the long term.
What's going to benefit our clients for the long term and also focus on enabling functionality that I think benefits large groups of our customer base.
Way too from here.
I think we've been speaking about are we excited about.
Enhancing upfront in technology.
Doing deeper integrations with a number of our partners and continue to.
To really get the company ready to accelerate.
We'll do the next label with automation and.
Deepa Decisioning.
Technologies.
Thank you and just to follow up on the mortgage investment if you would.
So I think youre data verification businesses.
It's pretty unique versus the number of players in the market are you investing more in that or are you investing in the the LLS or the Pos and Theres a lot of confusion around.
You know the LLS versus you know who's the allo as merchants is to pass.
And the market. So what areas are you investing in mortgage.
In mortgage we are investing in the Lois we have partners that we brought on with.
And in the marketplace.
Okay, and the verification of the data verification piece.
And the data verification on the mortgage side, we work with a number of Cra's.
Mostly the Cra's, who do not from their own custom platform and system.
That is a focus for us in years to come to continue to invest on the front end, but it's it's and.
And in a non threatening wait till the allo S. R. P O S.
Thank you I appreciate it.
Thank you there are no further questions on queue I will now turn the call back to our CEO Nicolas.
Sir Please go ahead.
And folks I just wanted to thank you for.
Joining us on our first public company called.
I've never been more optimistic about the opportunity ahead of us in the future of Meridian link.
And I just like to say on a personal note. This has been an incredible journey and I want to send our sincere gratitude to all of our employees our customers.
Our partners for getting us here.
And then for you on the call. Thank you for all your interest in Enlink and I'm really looking forward to talking to you on our next earnings call have a great evening. Thank you.
Thank you. This concludes today's conference call. Thank you all for participating you may now disconnect.
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