Q1 2023 MeridianLink Inc. Earnings Call
Speaker 2: Ladies and gentlemen, thank you for standing by and welcome to the Meridian Lynx 4th quarter 2022 earnings call. At this time all participants are in list and only mode. After the speaker's presentation there will be a question and answer session. Please be advised that today's conference is being recorded.
Speaker 2: I would now like to turn the conference over to your first speaker today, Eric Schneider. Eric, please go ahead.
Speaker 3: Good afternoon and welcome to Meridian Lynx first quarter just a year 2023 earnings call.
Speaker 3: We will be discussing the results announced in our press release issued after the market closed today.
Speaker 3: With me, our Meridian Lynx Chief Executive Officer, Nicholas Block, Chief Financial Officer, Sean Lichok, and President Go To Market, Christmas Loof.
Speaker 3: Before we begin, I'd like to remind you that today's conference call will include forward-looking statements.
Speaker 3: based on the company's current expectations.
Speaker 3: These forward-looking statements are subject to a number of significant risks and uncertainties, and our actual results may differ materially.
Speaker 3: For discussion of factors that could affect our future financial results in business, 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.
Speaker 3: All of our statements are made based on information available to us as of today. And, except is required by law, we assume no obligation to update any such statements.
Speaker 3: During the colon, we will also refer to both GAP and non- GAAP financial measures.
Speaker 3: You can find the reconciliation of our GAP to non- GAAP measures included in our press release, which is posted to the Investor Relations section on our website. With that, let me turn the call over to Nicholas. Thank you, Eric. Good afternoon, everyone. Thank you all for joining us for our first quarter of 2023 Earning School. Thank you.
Speaker 3: I want to thank the entire Merurian link team for helping us achieve another solid quarter. Total lending software solutions have been you grew 18% year over year, which is a fantastic achievement given current market conditions. Let's take a look at our focus areas and business highlights that led to these results. We remain hyper focused on being the most trusted financial services technology platform, helping customers best position their businesses for success, especially in uncertain economic times.
Speaker 3: We are continuously improving our platform capabilities through product innovation and value-added partner integrations.
Speaker 3: And for another quarter, the powerful capabilities of the MeridianLink One platform continue to drive new logo and cross-cell momentum.
Speaker 3: As a result, Meridian Link exceeded top-line guidance again in Q1, with GAAP revenue up 6% year-over-year to $77.1 million and demonstrated solid operating performance.
Speaker 3: Our business model remains resilient and our customers continue to want, especially our mid-market customers that provide personalized insights and real-time, frictionless landing solutions to meet the changing needs of consumers.
Speaker 3: As the leading provider of a modern digital lending platform, we see customers continuing to choose MeradineLink 1 to base position and transform their businesses for future growth.
Speaker 3: The healthcare pipeline and the fact that sales cycles have not slowed reinforces this view.
Speaker 3: We continue to pay close attention to external conditions and market expectations. Because our customers are retail focused, we have seen no material impact from the recent failure of several regional banks in the United States.
Speaker 3: The risk highlighted by these events was related to financial institutions with a large concentration of commercial deposits, which is not common in our target market.
Speaker 3: In respect of the economic cycle, the market is undergoing increased digitalization and meridian link is at the forefront of that. Whether it's moral competition, consolidation or regulation, there will be pressure on financial institutions to automate their learning processes.
Speaker 3: In the meantime, we remain laser focused on capturing new market opportunities and assessing our customers in serving their communities. In a few minutes, Storn will speak about our Q1 financial performance and provide 2023 second quarter guidance and full year guidance. Before that, I would like to recognize the leadership we have gained to fuel our go to market engine and then I will give several updates on our three areas of growth acceleration.
Speaker 3: We are proud of the evolution of our go-to market capabilities.
Speaker 3: As part of Meridian links the development over the years, we have created and deployed a comprehensive scalable strategy to accelerate growth and strengthen market position.
Speaker 3: we have added the following leadership expertise across our go-to-market organization.
Speaker 3: First, we welcomed a new Chief Sales Officer, Richard Shake, late summer of last year.
Speaker 3: Since joining the Meridian Link team, Richard has been instrumental in structuring our sales team to win more customers and increase cross-shelmer maintenance.
Speaker 3: We also welcome Suresh Balasubramanian to the team as our new Chief Marketing Officer at the end of February .
Speaker 3: Will the added benefit of suratio software experience and focus on the mom generation?
Speaker 3: We are bolstering our ability to capture more share in the market.
Speaker 3: And finally, we are excited to add Dean Girmayat to our leadership team as Meridian Link's new Chief Customer Officer.
Speaker 3: Deans will necessarily go to more quick experience, combined with these customer-saintening approach. Makes him a strong leader to accelerate productivity and engagement across our support, services and customer success teams.
Speaker 3: Our investment in the team has built an efficient and high-performing go-to-market motion, resulting in a consistent robust pipeline.
Speaker 3: On that note, let's turn to a few go-to-market wins in the first quarter that represent our dedication to the first area of growth acceleration, which is engaging more deeply with our customers. As evidence of continued amount for the MeridianLink 1 platform, we are happy to report an approximately 60% year-over-year increase.
Speaker 3: which is focused on meeting the needs of our customers. Critical to our sales motion, we are focused on creating value through the connective capabilities of our multi-product platform. For example, our MeridianLink consulting team is dedicated to maximizing the customer's credit portfolio performance and overall benefit from the MeridianLink One platform. Levering each depth of experience from PaaS engagements, this team has been providing alternative decisioning rules to customers.
Speaker 3: Turning to our partner network, we would like to highlight the enhancements made to our MeridianLink Collections integration with SWBC. This expanded integration increases efficiency, automation of payments, and improves the user's experience with the SWBC products launched from within the MeridianLink One platform. Our customers and their borrowers can now leverage this improved functionality, strengthening their collection strategy in the midst of demanding financial conditions.
Speaker 3: A final example of expansion can be seen through our ability to capitalize on partner relationships to one new logo.
Speaker 3: who are shifting focus to increasing liquidity in response to the current learning environment. The integration of MeridianLink engage and MeridianLink opening provides a comprehensive deposit growth solution that enables customers to capture more deposit opportunities to the frictionless account opening and relevant personalized communications. Finally, we are looking forward to hosting a user forum on my 8th through the 11th at the Disning Land Resort and Aniring. There is nothing more empowering than bringing together existing and prospective customers to discuss how the innovative capabilities of MeridianLink one platform can enable their growth journey.
Speaker 3: As we are on track for a record-breaking year in attendance, we can't wait to engage with our customers, face-to-face and dive deeper on how MoraleanLink can provide both immediate and long-term value to the market.
Speaker 3: I want to emphasize again, Almoradionline continues to deliver consistent growth and healthy profitability levels while investing in strategic initiatives.
Speaker 3: whose mission to create the best border or experiences is directly aligned with ours. In the face of uncertain macro-economic conditions this year, we will continue executing well on what we can control, stating highly focused on our three areas of growth acceleration and demonstrated in Q1. We will continue engaging with customers to meet and exceed their digital lending needs. In part by expanding our platform capabilities and revenue opportunity. Our flying will start with empowering our customers to grow and better serve their clients and communities.
Speaker 3: We strive to be the most trusted financial services technology platform that positions our customers to succeed in an economic climate.
Speaker 3: With that, I will now turn the call over to Sean to talk about our financial results and provide guidance. Thank you, Nicholas, and I'd like to thank everyone for joining on the call today.
Speaker 4: Before reviewing our financial results and guidance, I'd like to emphasize how impressed I am with the achievements in the first quarter.
Speaker 4: Our results continue to reflect an impressive team effort and culture, and for that I want to again share my gratitude with the entire Meridian Link team.
Speaker 4: In the face of challenging compares the over year, we finished the quarter strong exceeding top line revenue guidance.
Speaker 4: We continue to see the impact of macroeconomic headwinds, but likewise we continue to perform.
Speaker 4: Let's first look at how our software solutions break down. As the primary driver of software solutions, consumer lending revenue contributed 88% and grew 13% year over year. Mortgage-related revenue within lending software solutions, inclusive of open close, accounted for the remaining 12% of the total. Using mortgage and consumer, total lending software revenue accounted for nearly 75% of total revenue and grew 18% year over year.
Speaker 4: Turning to data verification software solutions, revenue accounted for nearly 25% of total revenue and declined 19% deal of the year. This was driven by the 28% decrease in mortgage-related revenue, which represents 61% of total data verification software solutions.
Speaker 4: related revenue was down 8% from last year.
Speaker 4: Despite market had a win, we remain focused on our mortgage lending strategy as a major component of the consumer debt wallet. We continue to outperform in a declining market as we are taking more share, cross-selling through Meridian Lake 1, and adding capabilities that enable customers to win. The other 76% of our business continues to outperform.
Speaker 4: Moving to profitability. Accounting for stock-based compensation, gap gross margin was 64%. Adjusted gross margin in Q1 was 71%. Before turning to operating performance in the quarter, I'd like to break down the year over the year increase in our operating expenses. In addition to our strategic investments, there are also calling out specific costs associated with recent acquisitions.
Speaker 4: that are one time in nature to help investors better understand the true increase in operating expenses. Compared to the first quarter of last year, GNA increased 24% on a GAAP basis and 39% on a non-GAAP basis.
Speaker 4: Adjusted for .2 million of one time bad debt expense associated with customers from past acquisitions.
Speaker 4: G&A increased 36% compared to the first quarter of last year.
Speaker 4: Adjusted for a one-time $0.6 million retention bonus associated with the past acquisition, R&D increased 57% compared to the first quarter of last year. On a GAAP basis, sales and marketing increased 73%, while on a non-GAAP basis, sales and marketing increased 82% compared to the first quarter of last year. These investments represent our commitment to engage more deeply with our customers through go-to-market and to expand our platform capabilities. We expect a long-term return on these investments.
Speaker 4: overall operating performance. Gap operating income was 1.7 million, and non-gap operating income was 9.6 million.
Speaker 4: On a gap basis, net loss was 5.7 million.
Speaker 4: On a gap basis, net loss was 5.7 million or 7% of revenue.
Speaker 4: And adjusted EBITDA was 24.9 million, representing an adjusted EBITDA margin of 32%.
Speaker 4: Highlighting the true operating performance of the business, adding back the 0.8 million of one-time costs, adjusted EBITDA was 25.7 million, representing an adjusted EBITDA margin of 33%, and adjusted in line with our guide.
Speaker 4: Now turning to the balance sheet and cash flow statement. We ended the first quarter with $77.8 million in unrestricted cash and cash equivalents, an increase of $22 million from the end of the fourth quarter. Operating cash flow in the first quarter was $28.1 million.
Speaker 4: for a 36% cash flow margin, and free cash flow was 26 million or 34% cash flow margin.
Speaker 4: In the last 12 month period ending in the first quarter.
Speaker 4: Operating cash flow was 67.8 million or 25% cash flow margin and free cash flow was 58.3 million or 21% free cash flow margin.
Speaker 4: We repurchased 3.5 million what the shares as part of our abusive cash flow in the quarter. Wording links ongoing cash generation provides protection in this period of uncertainty while enabling strategic capital allocation for us to build value for our customers and shareholders.
Speaker 4: I'll now pivot to guidance for Q2 and update guidance for the full year of 2023.
Speaker 4: Entering the year, we anticipated deceleration in consumer lending volumes due to less aggressive lending in our customer base as access deposits decrease.
Speaker 4: They also expected a continued decline in mortgage-related revenue in the first half of the year, with the previous sharp increase in mortgage interest rates occurred during the second quarter of 2022. Our view on these dynamics has not changed over the last quarter, and we expect to continue adding new customers and increasing model prices.
Speaker 4: This represents an estimated year of year change of 4% to 8%.
Speaker 4: So the full year 2023, we are raising total revenue to be between 307 million and 3 on 13 million compared to 288 million from the same period in 2022.
Speaker 4: This represents a estimated increase of 7% to 9% year-old year.
Speaker 4: For the mortgage related revenue, we expect the mortgage market to contribute approximately 25% of revenue for the second quarter in 2023.
Speaker 4: Compared to 24% the second quarter of 2022.
Speaker 4: We anticipate our contribution in Q1 to continue throughout the year. To provide more color around the growth drivers in our total revenue.
Speaker 4: The mortgage-related revenue guide implies a continued decline in data verification revenue given the impact of a tough comparable in 2022.
Speaker 4: guide implies a continued decline in data verification revenue given the impact of a tough comparable in 2022. However,
Speaker 4: We expect that the pickup from our mortgage lending capabilities winning in the market, both organically and through open close, will more than offset the data verification drag in 2023. We expect that the pickup from our mortgage lending capabilities winning in the market
Speaker 4: On the non-mortem side, we expect data verification revenue to do flat year over year as a result of headwinds in the employment screening market coming off post-pandemic ironized.
Speaker 4: Understanding these dynamics, we expect consumer lending will continue momentum in 2023.
Speaker 4: Understanding these dynamics, we expect consumer lending will continue momentum in 2023, as demonstrated in the first quarter.
Speaker 4: Consumer lending is the largest part of our business and is at the heart of our value proposition.
Speaker 4: We're doing like exists to enable the customers growth journey by providing a frictionless digital lending experience that exceeds consumer expectations.
Speaker 4: Over the years, we have thrived in providing premier lending capabilities which are now enhanced through Merden-Link 1.
Speaker 4: In 2023, there's ample opportunity to equip more customers with the capabilities that differentiate them against the competition in today's demanding environment. Our Q1 highlights today demonstrate how the configurability of the Q1 system is a great
Speaker 4: Procell momentum and access to hundreds of partners the MeridianLink 1 can and will empower further volume growth for customers and for MeridianLink as a whole. Now, turning to the adjusted EBITDA guide. Now, turning to the adjusted EBITDA guide.
Speaker 4: On a non-gap basis, second quarter estimated adjusted EBITDA to be expected to be between 27 million and 30 million, representing the adjusted EBITDA margins of approximately 37 percent of the equivalent points. For the full year 2023, we are reiterating our adjusted EBITDA range of 109.
Speaker 4: We also anticipate an increase in legal costs associated with third-party litigation that we expect will be largely completed this year. We will be focused on managing our cost structure to make up for an estimated $1.5 million of expenses in the one-time costs incurred in the first quarter.
Speaker 4: and the increase in legal costs anticipated in the year. Moving forward, we continue to align our forecasting and accounting as part of the broader maturation as a public company. As CFO , I'm dedicated to organizing our processes and cost structure to best position Meridian Link for its next phase of growth.
Speaker 4: I like to end by reiterating the company's track record of consistent profitability and growth. These are two proof points demonstrating that was billions of our business model and superior quality of our customer base. But the end of the day, customers now more than ever.
Speaker 4: with that. Nicholas, Chris and I are happy to take any of your questions and I'll turn it back over to the operator.
Speaker 2: If you are using a speakerphone, please lift the handset before pressing any keys. One moment please for your first question. Your first question comes from Bob Napoli with William Blair. Please go ahead. Hi. Good afternoon. Thank you for the question. Good results in a tough environment. I guess just given all the concerns about credit crunch and what we're seeing in the stock market with the regional banking market, why are you as confident as you are in the guidance for consumer lending? It seems like there is high risk of potential significant slowdown.
Speaker 4: Hey, Bob, Sean. Hey, Sean. I think a couple of quick ones. One is, you know, this hasn't just popped up out of nowhere. There's been a continued.
Speaker 4: There's been continued pressure, if you will, in the market for a couple of quarters now, if not longer. And so we.
Speaker 4: We're not doing anything out of the ordinary. We continue to see strong demand, strong volumes. Volumes have held up nicely. And so there really isn't – even though the growth in the consumer has decelerated, it is still material, and I think it will continue throughout the year. So –
Speaker 4: So that's number one is just historically, we see no pattern of a slowdown outside of our guide. I think the other is just around the what I said in my prepared remarks, which is just the quality of our customer base.
Speaker 4: I was up very early this morning and was listening to hours upon hours of credit tightening and fiscal policy and what will the Fed do.
Speaker 4: We look at our hospital days and they are lending to very high quality customers. And it's because of the market, it's because of the credit union making up two thirds of our depository base. There's multiple factors for it.
Speaker 4: we lend, our customers lend to a very high quality base and it shows up in our volumes. So, you know where you have kind of the at-risk institutions are typically where you see high high proportions of commercial or at-risk lending.
Speaker 4: And we just don't see that in our base. And so, we have anticipated the deceleration. It's built into our guidance. And so, we're very confident in the top line as it stands today. Thank you. And then as a follow-up –
Speaker 2: The credit union portion of your business, two-thirds, as you said, of the base, are you seeing differences out of credit union versus, you know, the regional banking market?
Speaker 4: No, if anything, just, you know, credit unions operate fundamentally different, right? They don't have customers, they have partners, they have members. And I, you know, so if anything, the balance sheet of a credit union, the liquidity of a credit union.
Speaker 4: obtain more of that credit union population going forward. Thank you. Thank you so much.
Speaker 4: population going forward. Thank you. Appreciate it. Yep.
Speaker 2: Your next question comes from Nick Cremo with Credit Suisse. Please go ahead. Hey guys. Congrats on the strong results and thanks for taking my question. And it's nice to hear that the sales cycles have not slowed down.
Speaker 5: First, can you provide an update on the trends that you saw in April from the lending volume perspective and how that's factored into the Q2 guide? At the midpoint of the guide, it looks like flat quarter over quarter versus lending volume being up seasonally in Q2 normally. So is that just more conservatism or are you seeing lending volumes taper off a little bit?
Speaker 4: the what I talked about earlier, the natural deceleration of growth from 2022. You know, I can speak to the specific lines of business inside of consumer, but in general, we saw growth across the board, a little bit less growth than non-secured assets. That's a little bit...
Speaker 5: Thanks very much for all the color and then for my follow up I was hoping just to get an update on the traction you guys are having with your Veridian Link business lending product that was Launch Flash Quarter.
Speaker 6: Great question. This is Chris. We were made on track with our integration thesis. Remember that this was a IT buy, so we successfully integrated that into the product over Q4 and Q1, and now we're selling it as part of the overall platform value proposition to our customers—in seeing
Speaker 7: If we could dig in a little bit more on the cross-sell bookings. You mentioned in the prepared remarks, 60% increase in the cross-sell bookings. If you could maybe talk about what products or what is it about the platform or what is it about the end market that is driving the cross-sell booking strength and what would it, I guess it's easy to assume it would have been a tough quarter to sell cross-sell but
Speaker 6: it's going pretty good for you guys. So any sort of color there would be helpful. Thank you. This is Chris and this really ties back to the year-over-year sales and marketing investment that we've been making. We have made a concerted effort to expand our capability both on us a messaging and customer contact perspective on increasing our penetration in our base. Remember that our average customer has four to five of our 13 modules so a lot of ourno trend leading up to this year. seven
Speaker 6: And from a R&D perspective to support that, what we've been focused on is where do each of these solutions add more value together than a part and then tying that directly to the market need. So being more specific of what we're seeing, some of that impact is a lot of our institutions are looking to grow their deposits, which is something we've been very successful from an account opening perspective.
Speaker 6: So that's just one example and that's central to our thesis from a platform-solid motion.
Speaker 4: Yeah, and Koje, this is Sean. I would say that, you know, I've said in past quarters, the kind of the first wave of our go-to-market motion will be focused on cross-sell just because the opportunities are there. And so 70% of our bookings this quarter were cross-sell intentionally.
Speaker 7: percent cross-sell inside the quarter. Got it. Thank you for that. Sean, maybe just a follow-up for you. You mentioned in the guidance assume 25 percent of total revenue coming from the mortgage loan market. It sounds like also the commentary for the full year. It feels like maybe incorrect.
Speaker 8: Yes.
Speaker 9: you know,
Speaker 4: We counter-cyclically bought open clothes in Q4 for a good reason. We saw good results for mortgage lending, better results than anticipated. DVS, we talked about in our prepared remarks. We saw a lot of good results for mortgage lending. We saw a lot of good results for mortgage lending.
Speaker 4: 28% down year from year over year perspective, but that is beating the market considerably. So DVS being down 28%, if you even exclude kind of the inorganic piece, open closed piece,
Speaker 4: we're still only down in the mortgage lending component 2% or roughly 2%. So we're beating the market. I think 25% is consistent throughout the year in our forecast and is.
Speaker 4: that did turn a little bit of a corner in Q1. We said this in our last quarterly call, you know, for us with our contract structure or with our minimums in place, we thought it was the trough, and we're hoping that that was the case and that this is gonna come out positive going forward. Got it. Thank you so much for taking the pleasure.
Speaker 2: Yep, thanks, Koje. Your next question comes from William McNamara with BTIG. Please go ahead. Hi. Thank you for taking my question. I just kind of wanted to know if there have been, you know, any major changes with the go-to-market strategy given the new leadership in sales and marketing. This is Chris.
Speaker 6: The strategy remains consistent over the last three quarters where we've been messaging how we bring a comprehensive platform for our customers to ultimately enable them to compete for consumers. So this team is being brought in to help us on that journey as we look to double the company against.
Speaker 2: Great, thank you. Your next question comes from Alex Sklar with Raymond James. Please go ahead.
Speaker 10: Hi, this is Jessica Wong for Alex. I just got one quick question. So with the completion of your cloud move, you freed up a lot of R&D resources. What are big areas you're looking to address now on a product roadmap and how should we think about product velocity now that you're in the cloud? Thanks.
Speaker 6: This is Chris. Very excited about our move to the cloud. We've discussed the host of benefits that come with that. Now that those resources are rolling off, we maintain our investment and extending our advantage in terms of enabling our customers to outcompete for consumers and us.
Speaker 6: outgrow their competitors in the market. And the way we're doing that is a few fold. One is enabling our customers to maximize their auto decisioning. So meeting consumers expectations on how fast they can get a loan, expanding the number of leveraging technology, including our own technology as well as marketplace to expand interestingly the rateess brushes on markets across the market seeing Sakura closing. Negative trend going out Clinical
Speaker 6: the percentage of the population base that they can auto decision and decision profitably and then the third and final one is ensuring that they Have the best-in-class digital tools to make that successful so we're going to Accelerate down that path with those additional resources Your next question
Speaker 4: traction just in the overall credit environment. Can you just kind of remind us, you know, what the sensitivity is, how to think about that, and, you know, how, you know, the scenarios that you're kind of positioning for today. It sounds like it's more of a kind of gradual decel with, you know, as savings kind of get spent down.
Speaker 11: But just curious on that front, any comments there would be helpful. Thanks a lot.
Speaker 3: Hi Andrew, this is Nicholas and thank you for joining in the question.
Speaker 3: I think what you need to take a look at is Meridian Link and the history of the company too. Over the last two decades, even in the Great Recession, the company's consumer lending business...
Speaker 3: continue to grow at slower rates during the narrow window around the Great Recession but the company still grew and we have we've spent considerable time thinking through how to model this year and what the year looks like and if you compare what we've looked at from prior years and kind of this year
Speaker 3: I think the team did a remarkably good job at staying ahead of the curve and expectations. And maybe to some extent, we have the benefit of the past that we can draw from on history and trends.
Speaker 3: But what we've put forward into our guide at the beginning of this year's fiscal cycle, we're not moving off from that because we've already accounted in our viewpoint some of the slowdown and headwinds. We've operated in kind of a headwind-constrained environment for the better part of 18.
Speaker 3: kind of a landing cycle for all of an acid of the vehicle.
Speaker 3: with the hopes of acquiring a certain class of vehicle, let's say, called a BMW. And unfortunately, in a tightening credit environment, the BMW doesn't get approved, and it moves to a different brand and a different lower cost model. And you see kind of the same social security number showing up a little later somewhere else where a second application is run through our system.
Speaker 3: and which in that case may get approved. And I would leave you with that thought is it's not a total negative for us if the consumer who's on a cycle with a vehicle every three, four, or five years needs to interact with the system and have multiple touch points due to failure of first approval.
Speaker 3: And then what I will also add into the mix here is, and Sean Touchin had very well in his early commentary on an equation asked by Samri. But our customer base typically functions well in a certain demographic. It can last.
Speaker 3: also add into the mix here is, and Sean touched on it very well in his early commentary on a question asked by somebody, but our customer base typically functions well in a certain demographic and
Speaker 3: demographic of folks who rarely have a deposit account of over 250,000, folks who get their bimonthly salary paid in and it goes to a mortgage, a couple of card payments, it goes to personal loan and credit cards and a very stable
Speaker 3: members of a created union or a retail bank or a bank with a retail focus. And what we've seen in the past is yes, there have been contractions. There have been a break recession. We've seen kind of the early stages of COVID and we've kind of looked at the trains in our business. And what we have...
Speaker 3: done so far this year and how we've looked at the business and the modeling.
Speaker 3: From my perspective, our business is in good shape.
Speaker 3: There is a ton of interest in the market for digitalization in our customer base and our traditional customer base is trailing. They're not ahead of the curve right now and their members and clients are demanding more touchless interactions, touchless lending interactions. And the need for Meridian Link's offering and solutions and platform is growing. It's not receding.
Speaker 3: And from a need in the market standpoint, I believe if you look at a 10-year cycle, those who are investing today and will do so in the near medium-term future will be the ones best positioned to gain new clients, new members. They will be the ones who are most likely going to be the driving force in the future.
Speaker 3: that we've reached is.
Speaker 3: Maybe out of the whole banking kind of merry-go-round and the swings and the go-arounds here, you see
regulation tightening, kind of less of the poverty taking institutions. Our expectations, it's going to be more on the banking side than the credit union side.
And maybe there's a smaller number of those, but the number of consumers that's interacting with the system is growing, it's not shrinking. The consumer drives the U.S. economy and the consumer is also in play more and more where
every meaningful interaction for an asset purchase is some form of loan application, and it becomes more and more digital, and it was a pretty decent jump in the cycle of COVID initially, and that momentum is continuing and accelerating. So my take is maybe.
If you think of it in a quarter or two, there may be a little bit more headwinds, but overall on this whole cycle, and if you look at the MeridianLink business over two decades,
I don't see this business going through a significant change in business model or anything because we have natural tailwinds that tend to be stronger in better times and the headwinds we've accounted for in the times we're in right now.
So I'm pretty confident I'm with Sean in how we view the business for 2023 here and in our guidance.
Sean alluded to April volumes here. We kind of see strength and in some areas a little weakness, but there's nothing to call out that is out of the ordinary for us based on the April volumes. That will lead us to have a different view on Q2 or the year to date.
from the view that we started the year with. So I've said a lot, Sean, I don't know if you want to add anything to what I've said. I think to say anything would be idiotic. That was a perfect answer.
I agree very very comprehensive. Thank you for that Nicholas and I agree some of those nuances do need to be better understood in terms of
the killer segments of the end market. On the cross sell obviously there's a very positive momentum there and clearly that's been a focus from a go to market perspective.
But you know, it keeps me that Meridian Lake 1 may also be helping as well, just having things on a single platform may sort of incentivize more cross sell. So to what extent is Meridian Lake 1 a contributor as well as the kind of the proof go to market? Obviously it's not one thing.
It's just curious specifically on the Merdy and Lake One component. Thanks a lot. This is Chris, and I very much view the R&D through sales and marketing linemen is central to the success. So being a little bit more specific is it really comes down to extending our value prop to the customers to encourage them to buy more than one solution from.
that interconnective tissue and how do we extend that capability?
So, the Maria link one is the center and the associated value prop is the center of our cross-cell strategy. And the rest of the organization supports that. Got it. Thank you very much. And then just one more quick one if I can sneak in. I know implementation efficiency. And then just one more quick one.
and reducing time to revenue has been a focus. Maybe you could talk a little bit about that, the terms of how that's trending and how we should expect that to progress over the coming quarters and years. Thanks. And I apologize, but the audio on my end was a little shaky on this last question. If I was the question about that. I can really keep that up being a little. Yeah.
That would be great. It was about, yeah, yeah, thank you so much that it was about implementation efficiency and the back wall of absorption.
I know that's been a focus, so just curious how that's trending and how should we expect that to evolve over the coming quarters and years.
Hopefully, that came through clearly. It came through clearly. Thank you and I appreciate you repeating that. It's trending well. We continue to work the backlog down and release ACV in the business. I think overall, if you look at our results, that's part of the story.
We're also very excited to have had Dean Germeyer join us as our Chief Customer Officer. And Dean brings a ton of experience in the scaling of services, services enablement, kind of building a very repeatable, scalable, predictable services organization.
And where we at, I think we've done remarkably well in how we've accelerated the business over the last three years or so.
from where we were to where we at. But I really think that the focus and ideas and playbook that Dean is going to help us and his leadership team to move things to the next level. So I'm pretty excited as we go into 23 and we'll be doing planning for 24. How the business will continue to scale and expand but
So, having Dean join the team and driving a new focus on that organization, I think it's going to even pick up more place than what we've seen to today. And Andrew, I think we've talked about this before, but just one more point on that. I agree wholeheartedly with Nicholas. I'd like to see us – I think even working the backlog as a phrase, we're kind of turning the corner and turning the corner.
do time. But right now I would say a group of Nicholas, it's more manageable that it has been. We have line of sight to the backlog that we do have and we have a good and improved cycle time around the services implementation that's specific to ProCirc.
that will provide us the ACV release that's in our guidance. Perfect. Thank you very much guys. Appreciate all the comments.
will be expressed in our guidance. Perfect. Thank you very much, guys. Appreciate all the comments. Yep, thank you, Andrew.
Your next question comes from Scott Witchell with Wolf Research. Please go ahead. Hey guys, thanks for taking my question. Just one from me. Going back to sort of the topic on cross-selling, I was just wondering if there was any noticeable shift in demand from your existing customers as a result of the banking turmoil that we saw?
solution tied to our marketing automation solution, which we had recently enhanced the integration of specifically around account opening. So one thing that's great about the overall MariaLink One value proposition is depending on the different economic cycles, we can leverage points of our platform together to help them accomplish their outcome. So in this case, they want to grow deposits, they can leverage a combination of our solutions together.
I joined late, so apologies if this was asked, but great to see the improving net retention in the lending solutions business. And by the way, I appreciate the disclosure. I wonder if you could just talk about sort of what products you feel like are having the most success in driving up that NRR or if that's more of sort of a volume-driven expansion, any color and sort of what's driving that improvement in net retention one level deeper.
would be helpful. Well, Hi-Sec at first. Second, you know, in the disclosure supplement, I think it calls out clearly lending software versus data verification, right? So,
Clearly, a very big difference between 111 percent NRR on our lending software versus DVS at 83.7. The DVS component, we've continued to see a mortgage drag for a long period of time.
The balance of DVS is flat year on year. So, you know, I don't expect a huge improvement in that line but really it's inside of lending that we really see the benefit from an NRR perspective. 111% in total, the numbers are skewed towards consumer even at a higher rate.
what's sort of driving that improvement. So the 111 in lending, I mean if we look at this back a year ago was about a hundred and one percent. So clearly just a lot of success and either volume or kind of new products. That's really the crux of the question. Is it sort of coming from one or the other and kind of what's what you know if it's from new products.
which of those products are the ones that are driving it. Does that make sense? Well, yeah, I mean, it's a combination of things. I do wanna make sure that we take note that the cross-cell was a big component of that, and that is now being included in the number in the overall NRR percent calculation where it wasn't before. That's a correction and there's...
or we have the opposite now inside of consumer, like I said with volumes, you're kind of seeing it across the board with consumer. I don't think it's one product or another. I can't point to auto, I can't point to personal loans, I can't point to credit cards, it's kind of.
a stabilization and a sell-through of the entire consumer product. Got it. That's helpful. Nicholas, maybe for the follow-up for you. I think it was in another question you alluded to share gains a little bit. I was wondering where you feel like you're taking, and Chris feel free to chime in on this as well.
Where do you feel like you're taking share more? Right? Is it from the core providers? Is it from other software providers? Is it from in-house solutions? A little bit more qualitatively, of course, where you feel like you're getting some of those share gains. I think I'll go with option D second and say all of the above. Because there's not one area where...
we executing in a way where we stand out. I would tell you Smaller mud market depository taking institutions at least my perspective is have under invested on a percentage basis
over the last decade against
Roger Pierce who invested more in digital readiness, who invested more in order decisioning and
My sense right now is there's pretty much a thirst for a solution that isn't a kind of single point offering, that is a broad platform offering, and it's not that we compete with the solution, but we compete with the solution.
What I would rather say is our conversations with customers today is about the differences what we have on offer. You have access to your information across our platform. You have the ability to do analytics across our platform. You have the ability to do enhanced marketing automation and other automations across our platform.
And it's less about at that point competing with a single vendor. It's more about where we choose to compete and we choose not to be at the high end of the market. We are pretty focused on where we are and where we win at higher percentage than.
At that point competing with a single vendor, it's more about where we choose to compete and we choose not to be at the high end of the market. We are pretty focused on where we are and where we win at a higher percentage than average.
And we are replacing legacy solutions, single point solutions, kind of more workflow driven solutions. And that cuts across more of my definition, legacy offerings, who's not as enabled as we are, who doesn't offer the integrations into a partner marketplace with APIs, with everything else. So.
I think we have moved the needle over the last three, four years with R&D and innovation that it's not
we compare us against a single offering and we win more there or more over here. It's either you buy MeridianLink's platform with all the integrations and the ability to do everything so well across the platform, from account opening to all the loan types to analytics to automation to auto decisioning to the integrations into the partner marketplace enablement.
and collections if there's a workout room where somebody needs to go into, and you can't really put your finger on a single competitor out there who meridian lingos and competes with the same thing.
And that's why I would pick option D, say all of the above, because we literally see it coming from all of the above sources and then some. Got it. Very helpful, guys. Thank you. Thank you. Thank you, Saagat. Ladies and gentlemen, as a reminder, should you have a question, please press star for a second.
platform. Any update on that or demand for that product, outlook for that product?
This is Chris. The MarineLink Insight in the associated report cards we can provide our clients is central to our business review process going forward. Specifically what it enables is for our customers to see how they're benchmarked against key performance factors across the origination cycle so they can get data from us that they can't get anywhere else due to our scale.
and we leverage that as a cornerstone as we work with them to plan their three to five year technology roadmap. And that the Insights product is a way for them to drill deeper on that data on a day-to-day basis and how such due to that change was seen uptake in demand.
leverage that as a cornerstone as we think, as we work with them to plan their three to five year technology roadmap and that the insights product is a way for them to drill deeper on that data on a day to day basis. And now, such to that change was seen an uptake in demand. Great, thank you. And then you did.
repurchase 3 million shares in the quarter? I think I read. Was that planned or was that opportunistic and from a capital perspective, do you have more capital return planned? That's $3 million, not... Okay. Mike, okay, it seems like a lot. Okay, forget the question. Yeah. Okay, but just to quickly touch on it, that is part of our structure.
Thank you operator and as we close today's earnings call I'd like to welcome our new customers and partners to the MeridianLink family.
Our dedicated team strives to create the best experiences for everyone who works with us. As we grow, we maintain our customer-centered approach, and I'm grateful to the hundreds of employees whose commitment inspires me on a daily basis. Our partners and customers benefit from their expertise. And speaking of customers, I look forward to sharing the insights we will gather from our 2023 User Forum.
to another successful event. Again, thank you for joining and have a great afternoon evening.
Thank you, operator. Thank you, ladies and gentlemen. This concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.