Q4 2023 MeridianLink Inc Earnings Call

Operator: Ladies and gentlemen, thank you for standing by, and welcome to MeridianLink's fourth quarter 2023 earnings call. At this time, all participants are in a listen-only mode.

Ladies and gentlemen, thank you for standing by and welcome to move you can links our fourth quarter 2020 earnings call. At this time all participants are in a listen only mode.

Operator: After the speaker's presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your first speaker today, Gianna Rotellini. Gianna, please go ahead.

I'll take the speaker's presentation, there will be a question and answer session.

Be advised that today's conference is being recorded I would now like to turn the conference over to your first speaker today.

Jenna. Please go ahead.

Gianna Rotellini: Good afternoon, and welcome to MeridianLink's fourth quarter fiscal year 2023 earnings call. We will be discussing the results announced in our press release issued after the market closed today. With me today are MeridianLink's Chief Executive Officer, Nikolaas Vlok, Chief Financial Officer, Sean Blitchok, and President of Go-To-Market, Chris Maloof. 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.

Good afternoon, and welcome to Meridian links fourth quarter fiscal year 2023 earnings call, we will be discussing the results announced in our press release issued after the market closed today with me today, I'm ready and money Chief Executive Officer, Nicholas Block, Chief Financial Officer, Sean Blackjack and President.

Go to market Crystal Lu.

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.

Forward looking statements are subject to a number of significant risks and uncertainties and our actual results may differ materially.

Gianna Rotellini: For a discussion of the risks, uncertainties, and other factors that could affect our future financial results and business, please refer to the disclosure in today's earnings release and the periodic reports and filings we make from time to time with the Securities and Exchange Commission. All of our statements are made based on information available to us as of today, and, except as required by law, we assume no obligation to update any such statements. During the call, we will also refer to both GAAP and non-GAAP financial measures. You can find the reconciliation of our GAAP to non-GAAP measures included in our press release, which is posted in the investor relations section of our website. With that, let me turn the call over to Nikolaas. Thank you, Gianna. Good afternoon, everyone.

For a discussion of the risks uncertainties and other factors that could affect our future financial results and business. Please refer to the disclosure in today's earnings release, and our periodic reports and filings we file from time to time with the Securities and Exchange Commission all of our statements are made based on information available to you.

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.

Right.

With that let me turn the call over to Nicholas.

Thank you Gian and good afternoon, everyone. It's great to having all of you join us today.

Nicolaas Vlok: It's great having all of you join us today. 2023 was another successful year for MeridianLink. We executed well on our strategic initiatives set at the beginning of the year designed to serve our customers with great efficiency. As a result, we generated strong demand, finishing the full year with software bookings exceeding the record we set in 2020. And we made great progress releasing ATV under our new logo and cross-sell.

2023 was another successful year for Meridian link.

We executed well on our strategic initiatives in the beginning of the year that were designed to serve our customers with greater efficiency.

As a result.

Generated strong demand, finishing the full year with software bookings exceeding what we said in 2022 and.

And we made great progress releasing ACB from a new logo and cross sell wins.

Nicolaas Vlok: We also had a fantastic year of innovation with multiple product launches and partnerships to strengthen the capabilities of MeridianLink ONE. With the dedication and expertise of the entire MeridianLink team, we continue to deliver on our commitments to our customers and stockholders. Turning to our results for the fourth quarter, our GAAP revenue grew 6% year-over-year to $74.6 million, with an adjusted EBITDA margin of 42%, exceeding the top end of our EBITDA guide. Our performance in the quarter demonstrates our ability to execute in key strategic areas of the business that accelerate growth, while also demonstrating cost discipline. It remains our goal to help customers navigate an evolving operating environment and out-compete for consumers by providing a personalized, frictionless learning experience. With that, let's move to our Q4 updates on the three areas of growth acceleration that are anchored to our platform strategy. First, engaging more deeply with customers. Second,

We also had a fantastic year of innovation with multiple product launches and partnerships to strengthen the capabilities of meridian like one.

With the dedication and expertise of the entire Maready linked team, we continue to deliver on our commitments to our customers and stockholders.

Turning to our results for the fourth quarter, our GAAP revenue grew 6% year over year to $74 6 million.

With an adjusted EBITDA margin of 42% exceeding the top end of our EBITDA guidance.

Our performance in the quarter demonstrates our ability to execute in key strategic areas of the business that accelerate growth, while also demonstrating cost discipline.

It remains our goal to help customers navigate an evolving operating environment.

Outcompete for consumers by providing a personalized frictionless leading experience.

With that let's move to our Q4 update on the three areas of growth acceleration that our anchor to our platform strategy.

First engaging more deeply with customers.

Second.

Nicolaas Vlok: Spanning the Capabilities of the Platform, third, empowering customers to grow more quickly and better serve their community. Starting with customer engagement, our go-to-market team achieved another strong booking scorer with multiple high-value platform wins. The foundation we have set over the last two years to build and operate an efficient and high performing go to market engine continues to drive growth. As I mentioned, we had record software bookings for the year, which was fueled by the cross-sell momentum of MeridianLink. In Q4, we signed nine consumer lending customers to our mortgage lending solution. This is an excellent signal that our platform strategy and go-to-market is working. Next.

Expanding the capabilities of the platform.

Empowering customers to grow more quickly and better serve their communities.

Starting with customer engagement.

Go to market team achieved another strong bookings quarter with multiple high value platform wins.

The foundation, we have set over the last few years, the bulk and operate and efficient and high performing dosing Walcott agent continues to drive growth.

As I mentioned, we had record software bookings for the year, which was fueled by the cross sell momentum of Meridian link one.

In Q4, we signed nine consumer lending cost of less tail mortgage lending solution.

This is an excellent signal that our platform strategy and go to market is working.

Next.

Nicolaas Vlok: We wanted to highlight a couple of high value deals that we landed in the quarter, that demonstrates the ongoing demand for MeridianLink One. The majority of our high value deals are often with new customers signing on multiple modules, understanding the value of connected solutions that cater to nearly all consumer lending. For example.

We wanted to highlight a couple of high value deals that we landed in the quarter.

It demonstrates the ongoing demand for Meridian link one.

The majority of our high value deals are often with new customers signing on multiple modules understanding the value of connected solutions that case up to nearly all consumer lending needs.

For example.

Nicolaas Vlok: One of our more significant wins at just under $500,000 in ARR was a $1.4 billion AUM custom, who signed on for four MeridianLink consumer modules and our new point-of-sale solution that launched last quarter, MeridianLink Action. The customer chose MeridianLink ONE to link through a digital channel, achieve greater automation, and improve efficiency in decisioning and cross-selling. Another high-value win at just under $300,000 in IRR was with the 300 million IUM customers, who selected MeridianLink Home Equity and Indirect Lending based on the decisioning capabilities of MeridianLink. This customer also chose our Enhanced Implementation Service, which involves close collaboration to achieve specific results such as low volume growth and increased productivity. This is a great example of how the MeridianLink team is dedicated to engaging with customers from the initial sale through implementation to accelerate growth. On that point, I would like to provide an update on the strategic investments we have made in talent and process improvements in our services organization over the last few years. First, we are making progress releasing a. In Q4, Total SAS ACV release was the highest in the year. Second, we are becoming more efficient in releasing ACEs.

One of our more significant ones at just under 500000, <unk> was a $1 4 billion of U M customer with <unk>.

<unk> on formulary linked consumer modules and our new point of sale solution that launched last quarter.

Do you like axis.

The customer chose marine link one the length through a digital channel achieved greater automation and improved efficiency in Decisioning and cross selling.

Another high value.

Just on the on the $1000 or less with the 300 million au and customer who selected Meridian link home equity and indirect lending based on the decisioning capabilities of Meridian link one.

This customer also chose out enhanced implementation services, which involve close collaboration to achieve specific results such as loan volume growth and increased productivity.

It is a great example of how the malaria linked team is dedicated to engaging with customers from the initial sale through implementation to accelerate growth.

On that point I would like to provide an update on the strategic investments we have made in talent and process improvements in our services organization over the last year.

First we are making progress re leasing ACB.

In Q4 total SaaS ACC release was the highest in the year.

Second we.

We are becoming more efficient in releasing ACB.

Nicolaas Vlok: This progress is clear in our adjusted gross margin expansion in Q4, which was more than 400 basis points higher year over year. We look forward to one of the biggest opportunities for engagement at our MeridianLink Live Forum at the end of April in Nashville. We can't wait to showcase our in-depth capabilities that help customers achieve their digital transformation. Most importantly, MeridianLink Live will create valuable moments of engagement and feedback that we can use to enrich our strategy and create additional value for customers and shareholders.

This progress is clear now adjusted gross margin expansion in Q4, which is more than 400 basis points higher year over year.

Less.

We look forward to one of the biggest opportunities for engagement Adam already linked lie forum at the end of April in Nashville, We cant wait to showcase our in depth capabilities that help customers achieve their digital transformation goals.

Importantly, we've already live will create valuable moments of engagement and feedback that we can use to enrich our strategy and create additional value for customers and stockholders.

Nicolaas Vlok: These are just a few examples of how we engage more deeply with customers to accelerate growth for the business at the core. Looking to 2024, our go-to-market team is hyper focused on engaging with more, from New Logo to CrossSell, and our services team remains committed to bringing customers life fast. Moving to our second area of growth acceleration, expanding the capabilities of the platform through product innovation and partner integration. Critical to our sales efforts, we are focused on fine-tuning MeridianLink One to drive our customers' digital lending strategy.

These are just a few examples of how we engage more deeply with customers to accelerate growth for the business in the quarter.

Looking to 2020 for our go to market team is hyper focused on engaging with more prospects.

New logo to cross sell and our services team remains committed to bringing customers live SaaS.

Moving to our second area of growth acceleration expanding the capabilities of the platform through product innovation and partner integrations.

Critical to our sales motion, we are focused on fine tuning that at Enlink, one to drive our customers' digital lending strategy.

Nicolaas Vlok: Over the last few years, we have invested in R&D to achieve significant technological strides, such as migrating to the public cloud and integrating multiple acquisitions. While we have accomplished these development goals, innovation is an ongoing commitment that keeps us at our market-leading position, and we remain focused on increasing the value of the platform for customers. Now let's review how we expanded our capabilities in Q4. We integrated MeridianLink Engage with MeridianLink Collect to automatically identify and cater to pre-delinquent customers.

Over the last few years, we have invested in R&D to achieve significant technological strides.

Such as migrating to the public cloud and integrating.

Multiple acquisitions.

While we have accomplished these development goals innovation is an ongoing commitment that keeps us in our market leading position and we remain focused on increasing the value of the platform for customers.

Now, let's review, how we expanded our capabilities in Q4.

We integrated Maready link engage with meridian linked collect to automatically identify and case that is pre delinquent accounts.

Nicolaas Vlok: Through this functionality, our customers can work with consumers to optimize the debt wallet and avoid delinquency. In today's digital environment, consumers largely prefer handling banking and collection tasks through user-friendly technology instead of in-person interaction. This new integration is a great example of how the end-to-end capabilities of MeridianLink One cater to the evolving lending needs of the consumer. We also enhanced our existing integration with Zest AI, a leader in automated underwriting, to provide multiple custom credit scores for decisioning and MeridianLink consumer. With more custom score options, our customers can increase their cross-sell opportunities. In addition to the automation and insights available through the MeridianLink One infrastructure, we leverage AI from our partner network to automate the learning process for customers. Finally, expanding our data verification software solutions, we scaled our employment screening and background verification capabilities by partnering with Wokato, a leading enterprise automation platform. Through Ocorro, we can accelerate the addition of new Applicant Tracking Systems, or ATS, integrations to capture new employers for our CRA customers to serve.

Through this functionality our customers can work with consumers to optimize the date wallet and avoid delinquency.

In today's digital environment consumers, largely preferred handling banking and collection tasks through user friendly technology instead of in person interactions.

This new integration is a great example of how the aim to in capabilities of Moray link one cater to the evolving lending needs of the consumer.

We also enhanced our existing integration with <unk> II.

Leader in automated underwriting to provide multiple custom greater score for Decisioning and meridian linked consumer loans.

With more custom score options, our customers can increase the cross sell opportunities.

In addition to the automation and insights available through the Meridian link one infrastructure, we leverage AI from our partner network to automate the lending process for customers.

And then on an expansion with them add data verification software solutions, we scaled our employment screening and background verification capabilities by partnering with Ocado, the leading enterprise automation platform.

Google Kauto, we can accelerate the addition of new applicant tracking systems or Ats integrations to capture new employers flat CRA customers to service.

Nicolaas Vlok: With more ATS integrations, the more volume and revenue we can process for our plan. Before moving to our next focus area, I'd like to provide an update on the traction that our MeridianLink Access launch has achieved so far. In 2023, we signed more than 40 customers in total on MeridianLink across the country. For more information about MeridianLink, contact us at meridianlink.com. For more information about MeridianLink, contact us at meridianlink.com or MeridianLink Mortgage.

With more Ats integrations.

Our volume and revenue we can process through our platform.

Before moving to our next focus area I'd like to provide an update on the traction that our meridian link <unk> launch has achieved so far.

In 2023, we signed more than 40 customers in total on meridian axes, and Meridian link mortgage axes.

This is an outstanding achievement by our go to market and product teams and is a great example of how we are innovating to generate more demand for the company.

Nicolaas Vlok: This is an outstanding achievement by our go-to-market and product teams and is a great example of how we are innovating to generate more demand for the. Our product and partner, Updating Q4, are just a few ways we are continuously improving the borrower experience to help customers capture and retain more demand for their lending solutions, in turn increasing revenues for MeridianLink. Finally, our third area of focus for growth acceleration is centered around our ability to empower customers to compete, grow, and succeed in the markets in which they participate. We've been successful in empowering our customers to capture a greater share of their clients' debt wallet through MeridianLink One. This highlights a critical component of our platform strategy, the ability to increase the module penetration with our existing customers, which ultimately increases the LTV of the customer.

Our product and partner updates in Q4 adjust a few ways. We are continuously improving the borrower experience the help customers capture and retain more demand for the lending solutions in turn increasing revenues for Meridian link.

Finally, our third area of focus for growth acceleration centered around our ability to empower customers to compete grow and succeed in the markets in which they participate.

We've been successful in empowering our customers to capture a greater share of their clients' data wallet through Meridian link one.

This highlights a critical component of our platform strategy.

Ability to increase the module penetration without existing customer base, which ultimately increases the LTV of the customer.

Nicolaas Vlok: Starting with strong cross-tail wins in the quarter, and existing MeridianLink consumer customers, with three modules out of the fourth module MeridianLink access and enable dealer track e-contracting through our partner market, both announced in Q3, with learning capabilities designed for configurability and automation, it improves the digital journey for the consumer. In this example, our sales team worked with a customer on a renewal that empowered long-term growth by capitalizing on our network, further increasing the value of the customer for MeridianLink. We also signed an existing MeridianLink consumer and opened a new account onto our Collect and Engage solutions to expand the use of MeridianLink One.

Starting with strong cross sell wins in the quarter.

And existing already linked consumer customer with three modules out of the fourth module or the link assays and enabled <unk> track E contracting Walker marketplace, both announced in Q3.

With lending capabilities designed for Configurable lithium automation.

And that includes the digital journey for the consumer.

In this example, our sales team worked with the customer on a renewal that empower long term growth by capitalizing on our roadmap.

Further increasing the value of the customer for Meridian link.

We also signed an existing but any Lincoln sema and opening customer onto out the lift and engage solutions to expand the use of Meridian link one.

Nicolaas Vlok: This customer's main focus was on finding connected lending solutions but for serving a growing demand in... This points directly to our value proposition of providing customers with a platform designed for scaling through digitalization. Let me end on a successful GoLive story.

This customer's main focus was on finding connected learning solutions, but for serving a growing demand environment.

This points directly to our value proposition of providing customers with a platform designed for skating to the digitalization sideways.

Let me end on a successful go lives story.

We recently announced a plus favorable created union on existing but are they linked consumer and mortgage customer with over 190000 members and more than $2 billion in assets under management going live on Meridian link consulting engage and insight.

Nicolaas Vlok: We recently announced A-plus Federal Credit Union, an existing MeridianLink consumer and mortgage customer with over 190,000 maintenance customers and more than $2 billion in assets under management, going live on MeridianLink Consulting, Engage, and Instagram. Over time, A-plus FCU has gone from using six disparate loan origination platforms to now only using MeridianLink One. Through our platform's advanced decision capability, A-plus FCU doubled their instant approval rate on consumer loans.

Overtime.

Acu is gone from using six this setup loan origination platforms to now only using already in link one.

Through our platforms advanced Decisioning capabilities a.

Plus favorable collated union doubled their instant approval rate on consumer loans.

This site, primarily one success story, we had a customer further optimizes the lending process to approve loans faster and they move workflow inefficiencies.

Moving the member experience as a result.

Nicolaas Vlok: This is a Prime MeridianLink One success story, where a customer further optimizes the lending process to approve loans faster and remove workflow inefficiencies, improving the member experience as a whole. Before handing the call over to Sean, I want to emphasize that MeridianLink delivered consistent top-line growth and expanding profitability levels through a year of restructuring and strategic investing to support future scaling. We have a track record of intentional capital allocation, investing organically and inorganically in areas that provide value to customers and stockholders. To set the stage for 2024, we have made strategic investments that we expect will propel the company forward. We are focusing on what's in our control, which includes accelerating ACV release and generating demand. We've also worked to develop a strong customer success strategy to empower the customer growth journey through MeridianLink One. Thanks again to the whole team.

Before handing the call over to Sean I want to emphasize that meridian linked delivered consistent top line growth.

And expanding profitability levels through a year of restructuring and strategic investing to support future scaling.

We have a track record of intentional capital allocation investing organically and inorganically in areas that provide value to customers and stockholders.

The safest stage for 2024, we have made strategic investments that we expect will propel the company forward.

We are focusing on what's in our control, which includes accelerating ACB release and generating demand.

We've also worked to tee up a strong customer success strategy to empower the customer growth journey through Meridian link one.

Thanks again to the team they are focused on empowering our customer success is the driving reason that meridian linked continues to deliver strong performance.

I am looking forward to seeing what we can accomplish together this year.

I will now turn the call over to Sean to talk about our financial results and guidance.

Great and thank you Nicholas before diving in I would also like to take a moment to highlight the phenomenal teamwork and execution demonstrated in the quarter.

<unk> has remained steadfast in serving customers with best in class services and support to position their businesses for growth.

Turning to our financial achievements in 2023.

Sean W. Blitchok: Their focus on empowering our customer success is the driving reason that MeridianLink continues to deliver strong performance. I'm looking forward to seeing what we can accomplish together. After that, I will now turn the call over to Sean to talk about our financial results and guidance. Great, and thank you, Nick. Before diving in, I'd also like to take a moment to highlight the phenomenal teamwork and execution demonstrated in the quarter. The team has remained steadfast in serving customers with best-in-class services and support to position their businesses for growth. Turning to our financial achievements in 2023, MeridianLink had an impressive year of profitable growth, supported by consistent cost-effectiveness. A great achievement in the face of a challenging macroeconomic environment, we have aligned our cost structure to support future scale and expand profitability going forward. We also strategically deployed our capital through stock repurchases to generate value for our stock.

<unk> had an impressive year of profitable growth supported by consistent cost discipline.

Great achievement in the face of the challenging macroeconomic conditions.

We have aligned our cost structure to support future scaling and to expand profitability going forward.

Also strategically deployed our capital through stock repurchases to generate value for our stockholders.

In terms of our key performance indicators, we continue to refine our internal processes and external disclosures to better represent the underlying drivers of our performance.

On that note.

I want to highlight our resilient annual recurring revenue or <unk> and net retention metrics in the quarter.

We finished Q4 with IRR of $257 5 million and a net retention rate of 98%.

Specifically, however, our lending software solutions finished the year, even stronger with the net retention rate of 101%.

Excluding the impact from mortgage volumes, the net retention rate of our consumer lending revenue was 103%.

The primary drivers of our net retention rate or cross selling additional modules volume growth and price increases.

Sean W. Blitchok: In terms of our key performance in the quarter, we continue to refine our internal process and external disclosures to better represent the underlying drivers of our performance. On that note, I want to highlight our Resilient Annual Recurrent Revenue, or ARR, and net retention metrics in the quarter. We finished Q4 with an ARR of $257.5 million and a net retention rate of 98%. Specifically, however, our lending software solutions finished the year even stronger with a net retention rate of 101%. Excluding the impact of mortgage volumes, the net retention rate of our consumer lending revenue was $103,000.

There is stability and our retention rate due to how sticky are our customer base is.

More customers use our platform to automate and integrate their lending processes, the lower the probability for sure.

As Nicolas mentioned in his remarks, we also finished another quarter with an impressive roster of new logo wins.

In the fourth quarter, we had 1996 total customers using our software solutions.

On an organic basis total customers declined 2% year over year.

Yes.

While there has been increased churn from lower value mortgage related customers as a result of financial distress.

We view this as an optimization of our customer base.

Sean W. Blitchok: The primary drivers of our net retention rate are cross-selling additional modules, volume growth, and pricing. There's stability in our retention rate due to how sticky our customer base is. The more customers use our platform to automate and integrate their lending processes, the lower the probability. As Nikolaas mentioned in his remarks, we also finished another quarter with an impressive roster of new logo winners. In the fourth quarter, we had 1,996 total customers using our software solution. On an organic basis, total customers declined 2% year over year.

As the market normalizes, we focus our go to market efforts on sticky depository customers, we expect to see an improvement in new logo going forward.

To understand how these metrics have trended over time and by solution type. Please reference the financial supplement made available on our Investor Relations website.

Shifting focus to our fourth quarter financials.

We generated total revenue of $74 6 million up 6% year over year, driven primarily by the resilience of consumer lending transaction volumes and increased product go lives from both new and existing customers.

Breaking down software solutions.

Our total lending software revenue.

For nearly 80% of total revenue and grew at 8% year over year.

Sean W. Blitchok: Well, there's been increased churn from lower-value mortgage-related customers as a result of financial distress. We view this as an optimization of our customer base. As the market normalizes, we will focus our go-to-market efforts on sticky depository customers. We expect to see an improvement in the New Logo going forward. To understand how these metrics have trended over time and by solution type, please refer to the financial supplement made available on our Investor Relations website. Now, we shift focus to our fourth quarter. We generated total revenue of $74.6 million, up 6% year over year, driven primarily by the resilience of consumer lending transaction volumes and increased product go-lives from both new and existing customers. Breaking Down Software Solutions

Is the primary driver of our lending software solutions.

Non mortgage lending revenue contributed 87% and grew 5% year over year.

Mortgage related revenue within lending software solutions accounted for the remaining 13% of the total.

Turning to data verification software solutions revenue from those solutions accounted for nearly 20% of total revenue and declined 3% year over year.

This was driven by a 6% decrease in mortgage related revenue.

Which represents 56% of total data verification software solutions for Q4.

In Q4 total mortgage related revenue was up 9% from last year and generated 22% of overall meridian linked revenue driven by the uplift from open close which we acquired in November of last year.

Now transitioning to profitability.

GAAP gross margin was 66%.

Sean W. Blitchok: Our total lending software revenue accounted for nearly 80% of total revenue and grew at 8% year over year, is the primary driver of our lending software solutions. Non-mortgage lending revenue contributed 87% and grew 5% year over year. Mortgage related revenue within Lending Software Solutions accounted for the remaining 13% of the total. Turning to data verification software solutions, revenue from those solutions accounted for nearly 20% of total revenue and declined 3% year over year. This was driven by a 6% decrease in mortgage-related revenue, which represented 56% of total data verification software revenue for Q4.

Adjusted gross margin in Q4 was 74% representing a 400 basis point improvement year over year, driven by increased productivity of our services team and technology stack.

Before reviewing our operating performance in the quarter I'd like to break down the year over year changes in our operating expenses.

Compared to the fourth quarter of 2022, G&A increased 1% on a GAAP basis and decreased 16% on a non-GAAP basis.

R&D declined 12% on both a GAAP basis, and non-GAAP basis compared to the fourth quarter of 'twenty two.

On a GAAP basis sales and marketing increased 34%, while on a non-GAAP basis sales and marketing increased 29% compared to the fourth quarter of 2022.

The changes across our non-GAAP operating expenses were primarily driven by rebalancing head count and increased compensation costs to fuel our continued go to market efforts.

Sean W. Blitchok: In Q4, total mortgage-related revenue was up 9% from last year and generated 22% of overall MeridianLink revenue, driven by the Uplift from OpenClose, which we acquired in November of last year. Now transitioning to profitability, Gap gross margin was 66%.

We are selectively investing in talent to support our growth while ramping down spend in other areas like R&D now that we've completed significant technology projects such as the migration to the public cloud.

Sean W. Blitchok: Adjusted gross margin in Q4 was 74%, representing a 400 basis point improvement year over year driven by increased productivity of our services team and technology stack. Before reviewing our operating performance in the quarter, I'd like to break down the year-over-year changes in our operating expenses. Compared to the fourth quarter of 2022, GNA increased 1% on a gap basis and decreased 16% on a non-gap basis. R&D declined 12% on both a gap basis and a non-gap basis compared to the fourth quarter of 22.

Now moving to our overall operating performance.

GAAP operating income was $6 8 million and non-GAAP operating income was $15 2 million.

On a GAAP basis net loss was $29 6 million or <unk> 40 negative 40% margin, which includes a onetime noncash tax expense of $29 4 million recorded in the quarter for the recognition of a valuation allowance on certain deferred tax assets.

On a non-GAAP basis, adjusted EBITDA was $31 1 million, representing a margin of 42%.

This represents an improvement of nearly 900 basis points on a year over year basis.

Sean W. Blitchok: On a GAAP basis, sales and marketing increased 34%, while on a non-GAAP basis, sales and marketing increased 29% compared to the fourth quarter of 2022. The changes across our non-GAAP operating expenses were primarily driven by rebalancing headcount and increased compensation costs to fuel our continued go-to-market efforts. We are selectively investing in talent to support our growth while ramping down spend in other areas like R&D now that we've completed significant technology projects, such as the migration to the public cloud. Now, moving to our overall operating performance. Gap operating income was $6.8 million, and non-gap operating income was $15.2 million. On a gap basis, net loss was $29.6 million, or a negative 40% margin, which includes a one-time non-cash tax expense of $29.4 million recorded in the quarter for the recognition of a valuation allowance on certain deferred tax assets.

Driven by work to optimize our cost structure.

The majority of this adjusted EBITDA beat was structural and demonstrates our strong cost discipline, which we plan to continue this year.

Now pivoting to the balance sheet and cash flow statement.

We ended the fourth quarter with $84 million in cash and cash equivalents, a decrease of $17 1 million from the end of the third quarter driven by stock repurchases.

Cash flow from operations was $12 5 million or 17% of revenue and free cash flow was $9 6 million or 13% of revenue for the fourth quarter.

Let's look at full year 2023 results overall, we anticipated the credit tightening that happened across our consumer base.

And executed well on our scaling initiatives to counter the deceleration in volume growth.

As we've seen in past cycles, our customers stayed resilient in a challenging operating environment and made the strategic decision to purchase our solutions are designed to help accelerate growth.

This continued demand and our ability to take customers live faster drove our performance.

For the full year 2023.

Sean W. Blitchok: On a non-GAAP basis, adjusted EBITDA was $31.1 million, representing a margin of 42%. This represents an improvement of nearly 900 basis points on a year-over-year basis, driven by work to optimize our cost structure. The majority of this adjusted EBITDA beat was structural and demonstrates our strong cost discipline, which we plan to continue this year. Now pivoting to the balance sheet and cash flow statement. We ended the fourth quarter with $80.4 million in cash and cash equivalents.

We generated total revenue of $303 6 million up 5% year over year.

Breaking down our revenue growth by software solutions.

Our total lending software accounted for.

Nearly 76% of total revenue and grew at 11% year over year.

As the primary driver of our lending software solutions non mortgage lending revenue contributed 88% and grew 6% year over year.

Mortgage related revenue within lending software solutions accounted for the remaining 12% of the total.

Sean W. Blitchok: A decrease of $17.1 million from the end of the third quarter driven by stock repurchase. Cash flows from operations were $12.5 million, or 17% of revenue. And free cash flow was $9.6 million, or 13% of revenue for the fourth quarter.

Turning to data verification software solutions revenue from these solutions accounted for nearly 24% of total revenue and declined 10% year over year.

This was driven by an 18% decrease in mortgage related revenue, which represented 59% of total data verification software solutions in 2023 and.

Sean W. Blitchok: Now let's look at full year 2023 results. Overall, we anticipated the credit tightening that happened across our consumer base and executed well on our scaling initiatives to counter the deceleration and volume growth. As we've seen in past cycles, our customers stayed resilient in a challenging operating environment and made the strategic decision to purchase our solutions that are designed to help accelerate growth. This continued demand and our ability to take customers live faster drove our performance for the full year 2023. We generated total revenue of $303.6 million, up 5% year-over-year.

In 2023 total mortgage related revenue was up 5% from 2022 and generated 23% of overall Meridian link revenue driven by our lending solutions.

We are seeing volume recovery in the mortgage market. However, we still expect it to take time for customers to grow above their minimum commitments such that volume will drive revenue growth.

As that recovery continues we are staying focused on what we can control.

Our platform strategy of cross selling mortgage lending to our consumer lending depository customers continues to be successful as demonstrated by the go to market wins that Nicholas discussed.

Sean W. Blitchok: Breaking down our revenue growth by software solution, our total lending software accounted for nearly 76% of total revenue and grew at 11% year over year. As the primary driver of our lending software solutions, non-mortgage lending revenue contributed 88% and grew 6% year over year. Mortgage-related revenue within Lending Software Solutions accounted for the remaining 12% of the total. According to data verification software solutions, revenue from these solutions accounted for nearly 24% of total revenue and declined 10% year-over-year.

The other 77% of our business continues to grow which is primarily led by the demand from our existing customers for our suite of end to end consumer lending capabilities.

That brings me back to the power of the platform.

Where it didn't link one caters to the evolving lending needs of the consumer.

As customers add on modules they are prime to grow even in the most challenging lending environment, which in turn increase the revenue opportunity for Enlink.

Transitioning to profitability.

Gross margin was 64%.

'twenty three.

Adjusted gross margin was 72%, representing a 100 basis point improvement year over year, driven by increased productivity of our services team and technology stack.

Sean W. Blitchok: This was driven by an 18% decrease in mortgage-related revenue, which represented 59% of total data verification software solutions in 2023. In 2023, total mortgage-related revenue was up 5% from 2022 and generated 23% of overall MeridianLink revenue driven by our lending solution. We are seeing volume recovery in the mortgage market. However, we still expect it to take time for customers to grow above their minimum commitments such that volume will drive revenue. As that recovery continues, we're staying focused on what we can control. Our platform strategy of cross-selling mortgage lending to our consumer lending depository customers continues to be successful, as demonstrated by the go-to-market wins that Nikolaas discussed. The other 77% of our business continues to grow, which is primarily led by the demand from our existing customers for a suite of end-to-end consumer lending capabilities. That brings me back to the power of the platform.

Before reviewing our operating performance in 2023, I'd like to break down the year over year change in our operating expenses.

G&A increased 12% on a GAAP basis and increased 5% on a non-GAAP basis.

R&D increased 12% on both a GAAP basis, and a non-GAAP basis.

And on a GAAP basis sales and marketing increased 51%, while on a non-GAAP basis sales and marketing increased 48%.

The growth across our non-GAAP operating expenses demonstrates our commitment to our previously discussed investment in go to market and scale initiatives.

We believe we now have the necessary infrastructure in place to support future scaling.

Expect to accelerate topline growth as we generate more demand with an industry, leading suite of solutions and partner capabilities.

Our overall performance.

GAAP operating income was $15 5 million and non-GAAP operating income was $51 1 million.

Sean W. Blitchok: MeridianLink One caters to the evolving lending needs of the consumer. As customers add on modules, they are primed to grow, even in the most challenging lending environment, which in turn can increase the revenue opportunity for Meridian. Transitioning to profitability, Gap's gross margin was 64% for 2023.

On a GAAP basis net loss was $42.

$5 million.

Or negative 14% margin.

And on a non-GAAP basis, adjusted EBITDA was $113 million, representing a margin of 37%.

Onto the balance sheet and cash flow statement cash flows from operations or.

Were $68 million or 22% of revenue and free cash flow was $57 8 million or 19% of revenue for the year.

Sean W. Blitchok: Adjusted gross margin was 72%, representing a 100 basis point improvement year over year driven by increased productivity of our services team and technology stack. Before reviewing our operating performance in 2023, I'd like to break down the year over year change in our operating performance. DNA increased 12% on a GAP basis and increased 5% on a non-GAP basis. R&D increased 12% on both a gap basis and a non-gap

We continue to generate funds that can be used to invest in the business pursue acquisitions.

Leverage.

Or repurchase stock under the repurchase program that our board authorized earlier this year.

Before moving to our guidance for the year I want to provide an update around our internal controls as previewed in our 8-K filing on February six this year and noted in the earnings release issued today.

Although the assessment is still ongoing after working diligently with our auditors, we expect to report in our upcoming 10-K, a material weakness related to controls over revenue.

Sean W. Blitchok: And on a gap basis, sales and marketing increased 51%, while on a non-gap basis, sales and marketing increased 48%. The growth across our non-GAAP operating expenses demonstrates our commitment to our previously discussed investment in go-to-market and scale initiatives. We believe we now have the necessary infrastructure in place to support future scaling and expect to accelerate top line growth as we generate more demand with an industry-leading suite of solutions and partner capabilities. For our overall performance, gap operating income was $15.5 million, and non-gap operating income was $51.1. On a gap basis, net loss was $42.5 million, for a negative 14% margin.

Specifically regarding customer contracts and billing.

There has been no restatement of prior period financial statements No change to previously reported financial results and we do not expect any change to the expected timing of our 10-K.

As we continue to mature as a public company, we've been highly focused on improving our control environment.

Sure increased resourcing and audit processes and scrutiny. The company has uncovered additional areas for improvement.

We believe we have the right remediation in place to address these deficiencies.

Those remediation efforts have been and remain underway.

I will now pivot to guidance for Q1 and initial guidance for the full year of 2024.

As we saw last year interest rate levels related credit tightening and consumer sentiment are just some of the main drivers of the loan volumes that are <unk>.

Sean W. Blitchok: And on a non-GAAP basis, adjusted EBITDA was $113 million, representing a margin of 37% on the balance sheet and cash flow statement. Cash flows from operations were $68 million, or 22% of revenue. And free cash flow was $57.8 million, or 19% of revenue for the year. We continue to generate funds that can be used to invest in the business, pursue acquisitions, The Leverage, or repurchase stock under the repurchase program that our board authorized earlier this year. Before moving to our guidance for the year, I want to provide an update on our internal controls, as previewed in our 8K filing on February 6th this year and noted in the earnings release issued today. Although the assessment is still ongoing, after working diligently with our auditors, we expect to report a material weakness related to controls over revenue, specifically regarding customer contracts and billing. There has been no restatement of prior-period financial statements.

Customers capture through our software solutions.

Until we see the market respond to a substantial change in these drivers we expect our customers to continue operating in a challenging credit environment.

As part of our comprehensive forecasting process.

We incorporate external industry data points, and we will update our expectations. Accordingly, as there is increased certainty.

The lending environment going forward.

Aside from volumes there are additional performance drivers in our control that we have strategically invested in to accelerate growth.

We will continue to prioritize capturing new logos and cross sell opportunities.

Accelerating our ACB release, and innovative merging link one to meet the evolving consumer lending needs that exist today.

For the first quarter estimated total revenue is expected to be between $75 million and $78 million compared to $77 2 million for the same period in 2023.

Sean W. Blitchok: No change to previously reported financial results, and we do not expect any change to the expected timing of our 10K. As we continue to mature as a public company, we've been highly focused on improving our control environment. There are increased resourcing and audit processes and scrutiny, and the company has uncovered additional areas for improvement. We believe we have the right remediation in place to address these deficiencies, and those remediation efforts have been and remain underway.

This represents an estimated year over year change of negative 3% to 1%.

For the full year 2024, we expect total revenue to be between $313 million and 323 billion compared to $303 6 million for the same period in 2023.

Presents an estimated increase of 3% to 6% year over year.

Okay.

For mortgage related revenue, we expect the mortgage market to contribute approximately 20% of revenue for the first quarter of 2024 and expect to end the full year 2024 around the same percentage.

Sean W. Blitchok: I'll now pivot to guidance for Q1 and initial guidance for the full year 2024. As we saw last year, interest rate levels, related credit tightening, and consumer sentiment are just some of the main drivers of the loan volumes that our customers capture through our software solution. Until we see the market respond to a substantial change in these drivers, we expect our customers to continue operating in a challenging credit environment. As part of our comprehensive forecasting process, we incorporate external industry data points.

To provide more color around the drivers of our total revenue.

Mortgage related revenue guide represents a decline year over year, because we expect that it will take time the recovery in volumes to push our customers above their.

Committed minimums, and therefore impact revenue growth.

On the non mortgage side, we expect modest growth year over year and data verification revenue as the employment screening market reaction to the economy normalizes.

Sean W. Blitchok: And we will update our expectations accordingly as there is increased uncertainty around the lending environment going forward. Aside from volumes, there are additional performance drivers in our control that we have strategically invested in to accelerate growth. We will continue to prioritize capturing new logos and cross-sell opportunities, accelerating our ACB release, and Innovating MeridianLink One to meet the evolving consumer lending needs that exist today. For the first quarter, estimated total revenue is expected to be between $75 million and $78 million, compared to $77.2 million for the same period in 2023.

Understanding both of these dynamics, we expect consumer lending will drive momentum in 2024.

While industry sources are signaling continued headwinds impacting the us auto market, we plan to continue winning new customers and cross selling other consumer loan types through merging like one.

Now focusing on the adjusted EBIT Guide.

On a non-GAAP basis first quarter estimated adjusted EBITDA is expected to be between $28 million and $31 million.

Presenting adjusted EBITDA margins of approximately 39% at the midpoint.

For the full year 2024, we expect our adjusted EBITDA range to be between $123 million and $130 million, representing adjusted EBITDA margins of approximately 40% at the midpoint.

Sean W. Blitchok: This represents an estimated year-over-year change of 3% to 1%. For the full year 2024, we expect total revenue to be between $313 million and $323 billion compared to $303.6 million for the same period in 2023. This represents an estimated increase of 3% to 6% year-over-year. For mortgage-related revenue, we expect the mortgage market to contribute approximately 20% of revenue for the first quarter of 2024 and expect to end the full year 2024 around the same percentage. Provide more color around the drivers of our total revenue. The Mortgage-Related Revenue Guide represents a decline year over year because we expect that it will take time for the recovery in volumes to push our customers above their committed minimums and therefore impact revenue growth.

Our adjusted EBITDA guidance reflects our continued commitment to operating discipline in areas that we do not believe contribute meaningfully to growth acceleration.

Really 2024 represents an inflection point as our past strategic investments have built the foundation for growth and for future scaling.

We have aim to optimize our cost structure to support incremental growth, which we expect will in turn drive margin expansion as volumes impacted the bottom line.

With that I'd like to touch on how we are thinking about capital allocation going forward.

While we continue to strategically repurchase shares we are planning to re prioritize M&A as the market presents opportunities.

Want to be active in the M&A environment with a focus on continuing to add value to our customers and stakeholders.

To wrap up I'd like to reiterate how resilient the company has been throughout a difficult operating environment.

Sean W. Blitchok: On the non-mortgage side, we expect modest growth year-over-year in data verification revenue as the employment screening market reacts to the economy normalizing. Understanding both of these dynamics, we expect consumer lending will drive momentum in 2024. While industry sources are signaling continued headwinds impacting the used auto market, we plan to continue winning new customers and cross-selling other consumer loan types through MeridianLink One. Now focus on the adjusted EBITDA guide. On an on-gap basis, first quarter estimated adjusted EBITDA is expected to be between $28 million and $31 million, representing adjusted EBITDA margins of approximately 39% at the midpoint.

All thanks to a team that knows how to execute and put the customer first something we've done for over 25 years.

We will continue to prioritize our customer centric scaling initiatives in 2024.

Resulting in expansion of organic growth and profitability.

With that Nicholas Chris and I are happy to take any of your questions and I'll turn it over to the operator.

Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by Don on your telephone keypad.

<unk> III Donald Trump's acknowledging request questions will be taken in the order received should you wish to cancel your request. Please press star followed waited too if you're using a speaker phone. Please lift the handset before pressing any keith.

Sean W. Blitchok: For the full year 2024, we expect our adjusted EBITDA range to be between 123 million and 130 million, representing adjusted EBITDA margins of approximately 40% at the midpoint. Our adjusted EBITDA guide reflects our continued commitment to operating discipline in areas that we do not believe contribute meaningfully to growth acceleration. We believe 2024 represents an inflection point as our past strategic investments have built the foundation for growth and for future scaling. We've aimed to optimize our cost structure to support incremental growth, which we expect will, in turn, drive margin expansion as volumes impact the bottom line. With that in mind, I'd like to touch on how we are thinking about capital allocation going forward. While we continue to strategically repurchase shares, we are planning to reprioritize M&A as the market presents opportunities. We want to be active in the M&A environment with a focus on continuing to add value to our customers and stakeholders. To wrap up, I'd like to reiterate how resilient the company has been throughout a difficult operating environment, all thanks to a team that knows how to execute and put the customer first. Something we've done for over 25 years.

Our first question comes from the line of Alex Scott from Raymond James. Please go ahead.

Great. Thank you.

Sean are Nicholas.

Your commentary around prioritizing the ACB release I just would be helpful. If you could help frame kind of how much backlog you have from bookings that arent, yet implement today and how that kind of compares to the size of that bucket last year.

Hey, Alex Thanks for the question Sean.

So.

As you well know we don't disclose backlog.

But I will say that backlog.

It's been optimized.

We've gone so.

With our new CTO Dean.

We look at backlog a little bit different it's a good problem to have not a bad problem to have I think we saw in Q4 as is.

The fastest HCV release.

So in my tenure at least have the highest ACB release number that we've put up to date, so it's going very very well.

We continue to refine it in the services space to go faster and to optimize our store.

Operator: We will continue to prioritize our customer-centric scaling initiatives in 2024, resulting in expansion of organic growth and profitability. With that, Nicholas, Chris, and I are happy to take any of your questions, and I'll turn it over to the operator. Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the 1 on your telephone keypad. You will hear a three-tone prompt acknowledging your request. Questions will be taken in the order received. Should you wish to cancel your request, please press star followed by 2. If you are using a speakerphone, please leave the handset before pressing any button.

<unk> two <unk>.

Eliminate inefficiencies.

So we have the backlog that we need to execute through FY 'twenty four.

Our selling motion continues to add to that backlog.

I think you and I have talked about this before but it's really about creating an equilibrium between sales in the door.

And getting them, our customers up and running and ACB release going out the door. So.

We believe we have the right balance in 'twenty four there is not too much capacity on the services side.

We're not building backlog.

Alexander James Sklar: Your first question comes from the line of Alex Sklar from Raymond James. Please go ahead. Great, thank you. Sean or Nikolaas, your commentary around prioritizing the ACV release, I just would be helpful if you could help frame kind of how much backlog you have from bookings that aren't yet implemented today and how that kind of compares to the size of that bucket last year. Thanks. Hey Alex, thanks for the question. This is Sean.

Over a period of time, that's unmanageable. So we believe we have the right balance.

<unk> 'twenty for us.

Really about fine tuning it.

Okay got it great great color there and then maybe one just for Chris.

Given the go to market growth. We saw the last 12 months can you just talk about how the sales force looks now from a tenure and productivity standpoint relative to the last few quarters and then anything that's kind of embedded into 2024 outlook from a productivity standpoint.

Sean W. Blitchok: So, as you well know, we don't disclose backlog. But I will say that backlog has been optimized as we've gone. So with our new CCO, Dean, we look at backlog a little bit differently. It's a good problem to have, not a bad problem to have.

Yeah happy to so going back about a year, we talked we started to have the conversation about moving from an order taking organization to a hunting organization and we're well underway in that path. So what you saw last year is us working with the respective teams up leveling where possible and bringing in new talent that can.

Sean W. Blitchok: I think we saw Q4 as the fastest ACV release in my tenure, at least at the highest ACV release number that we've put up to date. So it's going very, very well. We continue to refine in the services space to go faster and to optimize the structure to eliminate inefficiencies. So we have the backlog that we need to execute through FY24. Our selling motion continues to add to that backlog, and I think you and I have talked about this before, but it's really about creating an equilibrium between sales in the door and getting our customers up and running, and ACV release going out the door. So we believe we have the right balance in 24. There's not too much capacity on the services side.

Go out and create that pipeline and take down new logos as well as cross selling to our customer base. So we saw a lot of desire turnover of last year and now many of those many of those sales representatives are still on their ramp, but theyre moving up into a higher level of productivity and we expect that to flow through in 'twenty four.

Alright, great. Thank you all.

Thanks, Alex.

Thank you and your next question comes from the line of Matt Van Vliet from BPI. Please go ahead.

Yes.

Yes, thanks for taking the question.

You gave us some details on some of the consumer lending areas, but.

Sean W. Blitchok: We're not building backlog over a period of time that's unmanageable. So we believe we have the right balance for 24 as a year. It's really about fine tuning it.

You look back on the year and maybe as you're projecting out the year ahead.

Where have you seen the most interest rate sensitivity.

Chris Maloof: Yeah. Okay. Got it. Great, great color there. And then maybe one just for Chris.

And then I guess baked in within that what are your assumptions today for kind of where we end up from a fed funds rate or.

Chris Maloof: Just given the go-to-market growth we saw over the last 12 months, can you just talk about how the sales force looks now from a tenure and productivity standpoint relative to the last few quarters? And then anything that's kind of embedded in the 2024 outlook from a productivity standpoint? Yeah, happy to.

Something on that level that sort of gives you the indication that.

Certain areas of the consumer lending might be stronger or weaker throughout the year.

Yes, Hi, Matt Sean.

Thank you for the question.

Hi.

I mean to answer your first question, it's undoubtedly mortgage.

Chris Maloof: So going back about a year, we talked, we started to talk, have the conversation about moving from an order-taking organization to a hunting organization, and we're well underway on that path. So we saw last year that us working with the rest of the respective teams up leveling where possible and bringing in new talent that can go out and create that pipeline and take down new logos as well as cross onto our customer base. So we saw a lot of desired turnover last year. And now, many of those sales representatives are still on their ramp, but they're moving up to a higher level of productivity, and we expect that that to flow through in 24 hours. All right, great.

That's been exposed.

Most now our business model as you well know.

Does have minimum contractual commitments and so our downside.

It was protected.

But it is it is it has been the most sensitive in terms of volumes that has been the most sensitive in terms of our mcl business in DBS.

So so thats.

And that's something that we're having to contend with for FY 'twenty four as well now it's a story that's already Curt turning around so we are seeing mortgage volumes increase.

Already and we continue to.

Chris Maloof: Thank you all. Thanks, Alex. Thank you. And your next question comes from the line of Matt VanVliet from BTIG. Please go ahead.

That that will continue to improve through the year.

Just a matter of when those volumes become accretive to revenue the consumer the consumer was impacted and continues to be impacted but volumes have been healthy.

Sean W. Blitchok: Yeah, thanks for taking the question. You gave us some details on some of the consumer lending areas, but as you look back on the year and maybe as you're projecting out the year ahead, where have you seen the most interest rate sensitivity? And then, I guess, baked in within that, what are your assumptions today for kind of where we end up from a Fed funds rate or something on that level that sort of gives you an indication that certain areas of consumer lending might be stronger or weaker throughout the year? Yeah, hi, Matt.

If you look across the consumer portfolio, whether youre talking about account opening or.

Credit card personal loans et cetera that has really picked up the slack for auto but as.

This business very well.

We don't see a ton of growth or upside without auto.

At our total volume.

Package.

No.

And I think that's making good progress as well.

Sean W. Blitchok: Sean, thank you for the question. I mean, to answer your first question, it's undoubtedly the mortgage that's been exposed the most. Now, our business model, as you well know, does have minimum contractual commitments. And so our downside, it was protected.

<unk>.

The new car inventories have recovered.

The new cars, making them into the used car inventories is the part that hasnt or is happening hasnt happened, yet, but we are seeing downward pressure on on the used auto market as well so.

Sean W. Blitchok: But it is it is it has been the most sensitive in terms of volumes. It has been the most sensitive in terms of our MCL business and DBS. So, so that's. That's something that we're having to contend with for FY24 as well. Now, it's a story that's already turning around.

It is as we've been talking about for the last couple of quarters.

It's just a matter of timing before the us auto market comes back, but the consumer really does our auto really it does have to come back for us to see.

That growth in consumer.

We would hope for.

Okay very helpful.

Sean W. Blitchok: So we are seeing mortgage volumes increase already, and we continue to think that that will continue to improve through the year. It's just a matter of when those volumes become accretive to revenue. The consumer was impacted and continues to be impacted, but volumes have been healthy. If you look across the consumer portfolio, whether you're talking about account opening or credit cards, personal loans, et cetera, that has really picked up the slack for auto.

And then obviously, we got a bit of an update in January but I'm curious as you think about on a go forward basis talking about R&D, probably coming down as a percentage of revenue where do you stand that in terms of head.

Head count capacity, there and I guess more importantly, what are some of the people that.

That we're focused on the migration.

Process, what are they being sort of repurpose to and how should we think about that in terms of the product roadmap ahead.

Sean W. Blitchok: But, as you know this business very well, we don't see a ton of growth or upside without the auto in our total volume package. And I think that's making good progress as well. The new car inventories have recovered.

So first of all I'd like to talk about what are what are the resources that were included in the at least capacity perspective, what resources that were included in the risk. If you look at the R&D plan over the last four years five years, it's been largely focused.

Sean W. Blitchok: The new cars, making them into the used car inventories, is the part that hasn't or isn't happening, hasn't happened yet. But we are seeing downward pressure on the used auto market as well. So, as we've been talking about for the last couple of quarters, it's just a matter of timing before the used auto market comes back.

Rebuilding the tech stack to be cloud data of one so it can be future proof for the next decade, plus and then the second element was rewriting the code based on the user interface level, which is another significant investment with those two completing that's the capacity we're talking about when we may be actions earlier this year from a go.

Sean W. Blitchok: But the consumer really does, or the car really does have to come back for us to see that growth in consumers that we would hope for. Okay, very helpful. And then obviously, we got a bit of an update in January. But I'm curious, as you think about on a go forward basis, talking about R&D, probably coming down as a percentage of revenue, where do you stand in terms of headcount capacity there? And, I guess, more importantly, who are some of the people that were focused on the migration process?

For perspective, our goals remain largely the same it's about what which aspects of our solution to allow our customers to out compete for consumers and that happens from a number of capacity is one is how are we enabling maxim automated decisioning. So we had our advanced decisioning functionality that we continue to audit.

We delivered ml access which.

<unk> noticed we sold approximately 40 over the last period and we continue to build on the interconnectivity between our platform and how it adds more value together than apart and Theres a number of examples we highlighted so one would be how we're connecting engage our marketing automation solution to our collections solution. So we can any.

Sean W. Blitchok: What are they being sort of repurposed for? And how should we think about that in terms of the product roadmap ahead? First off, I'd like to talk about one of the resources that were included in the, at least in capacity, what resources were included in the RIF. If you look at the R&D plan over the last four years, five years, it's been largely focused on rebuilding the tech stack to be a cloud-native one, so it can be future-proof for the next decade plus. And then the second element was rewriting the code base at the unit interface level, which is another significant investment.

Our clients to create those bespoke experiences and ultimately win in the marketplace.

Great. Thank you.

Thanks, Brad I appreciate it.

Thank you and your next question comes from the line of Scott <unk> from Wolfe Research. Please go ahead.

Good afternoon, guys and thank you for taking my questions here just wanted to touch on some of the customer count dynamics and I know you mentioned that you had some increased churn from lower value mortgage customers and just wondering if you're expecting any of that trend to sort of continue through this year and if so how long we might expect it to continue and just sort of on top of.

Sean W. Blitchok: With those two completed, that's the capacity we were talking about when we made the actions earlier this year. From a go-forward perspective, our goals remain largely the same. It's about which aspects of our solution allow our customers to help compete for consumers, and that happens in a number of capacities. One is how are we enabling maximum automated decisioning, so we have our advanced decisioning functionality that we continue to enhance. We delivered ML Access, which, per Nicholas's notes, we sold approximately 40 over the last period. And then we continue to build on the interconnectivity between our platform and how it adds more value together than apart. And there are a number of examples of that that we highlighted. So one would be how we're connecting Engage, our marketing automation solution, to our collections solution, so we can enable our clients to create those bespoke experiences and ultimately win in the marketplace. Great, thank you. Thanks Matt, I appreciate it. Thank you, and your next question comes from the line of Scott Wurtzel from Wolf Research. Please go ahead.

I know, it's probably affecting the retention rates I'm, just wondering sort of when that dynamic settles out what kind of.

<unk> retention rate, you're sort of expecting as we move throughout the year.

Yes, Thanks Scott.

<unk>.

So this this quarter.

Was was another quarter of.

A consolidation on the total customer count.

It's a number that.

We need to see reverse and I think we're almost at the tail end of what Ive been talking about for the last quarter or two which is.

Financial distress.

<unk> kind of in total.

A shift from in our go to market strategy away from that and more into the depository base customers that are going to be with us for a long period of time now even given that our.

Our churn levels are not are not that high more still a very sticky business.

And so we've allowed our customers to walk away as opposed to.

Redesigning contracts as an example.

That would be not in our financial best interest.

Your question.

Sean W. Blitchok: Good afternoon, guys, and thank you for taking my questions here. I just wanted to touch on some of the customer account dynamics. And I know you mentioned that you had some increased churn from lower-value mortgage customers. And I was wondering if you're expecting any of that trend to sort of continue through this year, and if so, how long we might expect it to continue. And just sort of on top of that, I know it's probably affecting retention rates, and I was just wondering sort of when that dynamic settles out, what kind of retention rate you're sort of expecting as we move throughout the year. Yeah, thanks, Scott. So this, this quarter, was another quarter of consolidation of the total customer count. I, you know, it's a number that we need to see reversed.

Question about timing I would say, we're largely through that if you think about this last quarter Q4.

We had.

A little over 2%.

In terms of customer churn.

Over and above about one five.

That was in the mortgage space so.

You can think of it as we are we're getting to the point, where those are cleaned up and we're in a good spot.

Did see a little bit.

Consumer churn, but not not significantly so I think it's a combination of and we're always going to see a little bit of churn I mean.

Even the best companies in the world operate with a little bit of churn.

It's it's within striking distance I think the total customer count needs to be coupled with new logo.

Sean W. Blitchok: And I think we're almost at the tail end of what I've been talking about for the last quarter or two, which is, financial distress, INBs, kind of in total, a shift in our go-to-market strategy away from that and more into the depository base, customers that are going to be with us for a long period of time. Now, even given that, our churn levels are not that high. We're still a very sticky business, and so we've allowed customers to walk away as opposed to redesigning contracts, as an example, that would not be in our financial best interest.

And new logo piece.

We feel really good about actually even though it doesn't show up in Q4 numbers.

The pipeline is stronger than it's ever been.

We're seeing very minor delays in the sales cycle, but.

We really believe that 2024 is going to be a good year in terms of new logo, so that total customer count.

Comps comes up off of that for <unk>.

Next quarter that I think next quarter, we'll kind of bottom out and will start to see the second half come back up again.

Sean W. Blitchok: Now, to your question about timing, I would say we're largely through that. If you think about this last quarter, Q4, we had a little over 2% in terms of customer churn, you know, about one and a half of that was in the mortgage space. So, you know, you can think of it as we're getting to the point where those are cleaned up, and we're in a good spot. We did see a little bit of consumer churn, but not significantly so. I think it's a combination of, and we're always going to see a little bit of churn. I mean, you know, even the best companies in the world operate with a little bit of churn. It's within striking distance.

Got it that's super helpful. Thank you and then just as a quick follow up and talking about capital allocation, you mentioned that youre going to sorry, I'm kind of looking back at the M&A environment and just kind of wondering if you can give us a little bit more detail on what you could be looking for in the environment.

Gone out and started looking what youre kind of seeing from a bid ask spread perspective relative to maybe the last two years any color on that would be helpful.

Yes so.

<unk>.

Maybe I'll just preview just really fast.

We purchased a significant amount of.

Stock repurchased a significant amount of stock in 2023.

Sean W. Blitchok: I think the total customer count needs to be coupled with the new logo. And the new logo piece, we feel really good about actually, even though it doesn't show up in Q4's numbers, the pipeline is stronger than it's ever been. We're seeing very minor delays in the sales cycle, but we really believe that 2024 is going to be a good year in terms of new logos. So that total customer count comes up off of that for, if not next quarter, then I think next quarter we'll kind of bottom out, and we'll start to see the second half come back up again. Got it. That's super helpful.

We have more authorization to continue to do that and we will do that.

As the stock price presents that opportunity. So that's number one I don't want to.

Ply that that's we believe that the share prices continues to be at a very good value.

And so we will continue to do that the M&A market I think.

You mentioned the bid ask spread.

I think for the overall market are starting to close there is still not exactly where we were.

We would want them in terms of absolute value for us as meridian link, but its very situational right, whether youre talking about.

Sean W. Blitchok: Thank you. And then, just as a quick follow-up and, you know, talking about capital allocation, you mentioned that, you know, you're going to start kind of looking back at the M&A environment. And I just kind of wondering if you could give us a little bit more detail on what you could be looking for in the environment. You know, if you've kind of gone out and started looking at what you're kind of seeing from a Yeah, so, um... And maybe I'll just preview just really fast, you know, we purchased a significant amount of stock and repurchased a significant amount of stock in 2023. We have board authorization to continue to do that, and we will do that as the stock price presents that opportunity. So that's number one.

Peripheral asset or Youre talking about something upstream or downstream more new technology, I mean I think.

It varies widely but those conversations that that have been.

Way way off the Mark.

Because of.

Cash burn or.

Yes.

Investment that was made in.

X y or Z company Youre, starting to see kind of a realization that okay. We're going to do something and so there was a lot of really terrific assets out there in a very fragmented market.

We're looking at a lot of those right now and and I wouldn't be surprised if it was sooner rather than later.

Us.

Got it Super helpful. Thank you guys.

Yes, absolutely. Thank you.

Thank you and your next question comes from the line of Chris Kennedy from William Blair. Please go ahead.

Good afternoon. Thanks for taking the question Nicolas I think you talked about fine tuning Rudy and link one can you give a little bit more details on what you were referring to there.

Sean W. Blitchok: I don't want to imply that that's because we believe that the share price continues to be at a very good value. And so we will continue to do that. The M&A market, I think, you know, you mentioned the bid-ask spread. I think for the overall market, they're starting to close. They're still not exactly where we would want them in terms of absolute value for us as MeridianLink, but it's very situational, right?

Yes, good afternoon.

I think on the call my fine tuning lesson relationship to the services organization.

Unless I'm mistaken where the comment comes from it was when you Sean spoke about.

Our services business, making great strides working backlog down we found a good balance and kind of 2024 is the year, where we're going to improve our processes documented better also in the future.

Sean W. Blitchok: Whether you're talking about a peripheral asset or you're talking about something upstream or downstream or a new technology, I mean, I think it varies widely. But those conversations that have been, you know, way, way off the mark because of cash burn or, you know, the investment that was made in X, Y, or Z company, you're starting to see kind of a realization that, okay, we're going to have And so there are a lot of really terrific assets out there in a very fragmented market. We're looking at a lot of those right now. And I wouldn't be surprised if it was sooner rather than later for us.

Provide consulting companies the ability to implement meridian link one.

And Thats, what I mean in the context of this call by fine tuning, if if im missing it feel free to expand on it.

No and I may have Miss heard it. So thank you for that and then just.

Is there a way to think about what the revenue growth for this business can be you guys have done a lot.

Changing the go to market doing meridian link wine operating in a difficult environment, but as that environment normalizes is there a way to think about what the revenue.

Sean W. Blitchok: Got it. Super helpful. Thank you, guys. Yep, absolutely. Thank you. Thank you. And your next question comes from the line of Chris Kennedy from William Blair. Please go ahead. Good afternoon.

Growth opportunity is for meridian like thank you.

Yes, Thanks, Chris.

For right now I mean, we have not we've not veered from our growth algorithm.

5% new logo, 5% across cross sell.

Nicolaas Vlok: Thanks for taking the question. Nicolaas, I think you talked about fine-tuning MeridianLink 1. Can you give a little bit more details on what you were referring to there? Yes, good afternoon. I think on the call my fine tuning was in relation to the services organization, unless I'm mistaken where the comment comes from.

And 5%.

Sure.

Price and upsell.

<unk>.

I think that if if you.

If you put that in the context of FY2023.

But.

We performed well against the upsell.

Ponant in the price component we saw.

Nicolaas Vlok: It was when Sean spoke about... our services business making great strides. Working back from lockdown, we found a good balance and kind of 2024 is the year where we're going to improve our processes, document them better to, in the future, provide consulting companies the ability to implement MeridianLink One, and that's what I meant in the context of this call by fine-tuning. If I'm missing it, feel free to expand on it. No, and I may have misheard it, so thank you for that.

But maybe a little bit more churn than we would have hoped and new logo was was low.

So.

There are components that are.

<unk>.

Mac tied to the macro that are that are driven.

<unk>.

Out of our control is.

Not completely out of our control, but things that we are we took the kind of countercyclical approach and invested.

At a time, where we knew we had the opportunity to do so so I do believe that this can at minimum be a 15% grower in the market.

Nicolaas Vlok: Is there a way to think about what the revenue growth for this business could be? You guys have done a lot. Unknown Attendee, Jeffrey Lane, Koji Ikeda, Chris Maloof, Anastazia Goshko, Gianna Rotellini, growth opportunities for MeridianLink. Thank you. Yeah, thanks, Chris.

On an annual basis, and I think that again, we're going to start to see the new logo come back we've already got a cross sell and upsell motion that we believe in.

It is happening.

Sean W. Blitchok: For right now, I mean, we have not veered from our growth algorithm of 5% new logo, 5% cross-cross sell, and 5% price and upsell. I think that if you put that in the context of FY23, we performed well against the upsell component and the price component. We saw maybe a little bit more churn than we would have hoped, and new logo was low.

The delivery mechanism by which we take those bookings and turn them into revenue is getting faster and that's getting and it's getting tighter so that that long lead time to revenue is getting tighter and so I think those are the things that were.

Focused on right now.

The volume will come back.

We're we're a world class.

Sean W. Blitchok: So there are components that are, Mac tied to the macro that are driven out of our control is, you know, not completely out of our control, but things that we have, we took the kind of counter-cyclical approach and invested at a time where we knew we had the opportunity to do so. So I do believe that this could be, at minimum, a 15% grower in the market on an annual basis. And I think that, again, we're going to start to see the new logo come back.

Platform.

Our customers don't leave us very often it's just they don't also control over it.

The decisions the buying patterns of the consumer and so I think.

Selling into the installed base continuing to sell creating extremely happy cause customer success oriented.

Yeah.

<unk>.

Motions from Us building out the customer journey to expand and use more and more of our of our products.

Sean W. Blitchok: We've already got across an upsell motion that we believe in and is happening. The delivery mechanism by which we take those bookings and turn them into revenue is getting faster, and it's getting tighter. So that long lead time to revenue is getting shorter. And so I think those are the things that we're focused on right now. Volume will come back.

Is what we can control and what we're focused on now the volume component will come as we go now.

If anything I would say.

As you look at the business in a more normalized environment.

Sean W. Blitchok: We're a world-class platform. I don't, you know, our customers don't leave us very often. It's just they don't also control the decisions and the buying patterns of the consumer.

This has the ability to probably grow more than more than 15%, but at this moment in time.

In this operating environment I think is it still safe to use our compares against the 15 that we've stayed at ever since the IPO.

Sean W. Blitchok: And so I think selling into the install base, continuing to sell, creating extremely happy customers, success-oriented, you know, motions from us, building out the customer journey to expand and use more and more of our products is what we can control and what we're focused on now. The volume component will come as we go. Now, you know, if anything, I would say, You know, as you look at the business in a more normalized environment, this has the ability to probably grow more than more than 15%. But at this moment in time, you know, in this operating environment, I think it's still safe to use our comparisons against the 15 that we've stated ever since the IPO. Thanks for taking the question. Yeah, absolutely. Thank you. Thank you, and your next question comes from the line of Saket Kalia from Barclays. Please go ahead. Hey team, this is Ryan Powderly on for Saket here at Barclays.

Great. Thanks.

Thanks for taking the question.

Yeah, absolutely. Thank you.

Thank you and your next question comes from the line of Kelly <unk> from Barclays. Please go ahead.

Hey, Tim This is Ryan <unk> on for a second here at Barclays. Thanks for taking the questions.

Nicholas maybe first for you could you talk about the competitive environment and the consumer loan business and whether that's changing at all with some vendors like <unk> talking about it a little bit more.

Yes happy to Ryan.

Don't see much of a change in the competitive landscape.

And see no or others, we tend to find folks have more of a single point message than us with a platform approach and a platform may station.

<unk>.

What we have to offer is differentiated enough.

We do not run into.

Scenario is what I would say things have changed when rates have changed at all.

Ryan Powderly: Thanks for taking the questions. Nicholas, maybe first for you, could you talk about the competitive environment in the consumer LOS business and whether that's changing at all with some vendors like Encino talking about it a little bit more? Yeah, happy to Ryan. We don't see much of a change in the competitive landscape. Ben Sino, or others?

And specifically your question to Encino.

We don't see them much in a prospect or customer base I don't know if you have anything to add there Chris.

That's right yes.

Okay.

Got it Super helpful. Sean maybe my follow up for you.

Some great detail on the product line expectations in your guidance I'm. Just curious can you help us understand the amount of contribution you're expecting some volume growth this year and specifically in the context of what the MBA is forecasting for volumes, how much that factors into your expectations going into this full year.

Nicolaas Vlok: We tend to find folks have more of a single point message than us with a platform approach and a platform message. And, what we have to offer is differentiated enough that we do not run into scenarios where I would say things have changed, or rates have changed at all. And specifically your question to Encino, we don't see them much in our prospect or customer base. I don't know if you have anything to add to that, Chris.

Yes, I can thank you Ryan.

I think well if you just take an external viewpoint.

Our.

We we look at.

MBA, we'd look at Qunar, we look at all the external data points those have continued to shift and change and to be honest. It's been it's been an interesting six months or so.

Chris Maloof: Yeah, that's right on. Yeah. Yeah, that's super helpful.

Sean W. Blitchok: Sean, some great detail on the product line expectations in your guidance. I'm just curious, can you help us understand the amount of contribution you're expecting from volume growth this year? And specifically, you know, in the context of what the MBA is forecasting for volumes, how much that factors into your expectations going into this full year? Thanks. Yeah, I can.

And what I've learned is that.

The closer you get to the actual period the better they are at the forecasting.

And so we have our own internal forecasting methodology that I think we would would that incorporates those that route that we rely on more heavily.

I do think that.

Sean W. Blitchok: Thank you, Rowan. I think, well, if you just take an external viewpoint, our We look at the NBA, we look at CUNA, we look at all the external data points. Those have continued to shift and change. And to be honest, it's been an interesting six months or so.

All things considered with everybody banking on.

Recovery.

Or normalization.

Last last year. It was the second half and I don't was half one of this year.

And now it's half II.

Of this year.

No I cant answer that question, but I can say that we're NBA is where Q&A is around 4% for consumer.

Sean W. Blitchok: And what I've learned is, you know, the closer you get to the actual period, the better they are at forecasting. And so we have our own internal forecasting methodology that I think that incorporates those that we rely on more heavily. I do think that, all things considered, with everybody banking on a recovery or normalization. And last year was the second half, and then it was half one this year. And now it's half two of this year.

MBA has a slightly higher 17% for mortgage but I will tell you that that's that's come down over the last six months so.

The answer to your question is we've we've baked in what we're comfortable with in terms of consumer we believe that mortgage is going to come back at a higher rate.

The timing again of when that becomes accretive to revenue for US is the key story and then the other part of the story is when does.

Sean W. Blitchok: I don't know. I can't answer that question. But I can say that where NBA is, where CUNA is, is around 4% for consumer. You know, NBA has a slightly higher, you know, 17% for mortgage.

The mcl component really get above above minimums and start to reflect the overall market. So those are the those are the three three data points.

Sean W. Blitchok: But I will tell you that that's come down over the last six months. So, you know, the answer to your question is, we've baked in what we're comfortable with in terms of consumers. We believe that the mortgage is going to come back at a higher rate.

Super clear Thank you guys.

Yes.

Thank you.

If you get a chance.

Just make sure that you remind socket that he goes we had a bet.

Sean W. Blitchok: The timing, again, of when that becomes accretive to revenue for us is the key story. And then the other part of the story is, when does the MCL component really get above minimums and start to reflect the overall market? So those are the three data points. Super clear.

I should remind sector.

Space Okay.

Sure.

Alright. Thanks.

Okay. Thank you.

Thank you and your next question comes from the line of Koji Ikeda.

From Bank of America. Please go ahead.

Sean W. Blitchok: Thanks, guys. Yeah, thank you. If you get a chance, just make sure that you remind Saket that he owes you something. We had a bet, and so just make sure to remind Saket that he owes me something.

Hey, guys. Thanks for taking the questions I wanted to ask a follow up on kind of understanding the contracts and the minimum commitments and how to think about.

Mortgage loan volumes that we might need to see in the market too.

Sean W. Blitchok: I'll add that to his ledger. Thanks. Okay, thank you. Thank you, and your next question comes from the line of Koji Ikeda from Bank of America. Please go ahead. Hey guys, thanks for taking the questions. I wanted to ask a follow-up on kind of understanding the contracts and the minimum, how to think about Mortgage Loan Volumes that we might..., www.meridianlink.com kind of break out to maybe the overage level, or when are we going to see the volumes out there? https://www.youtube.com.uk Yeah, hi Koji.

Kind of break out to maybe the overage level or when are we going to see the volumes out there what sort of volumes would you need.

We need to see for minimum contract commitments to be met.

Yes, Hi Koji.

So for mortgage in particular.

No.

If you think about our.

Our total population.

Customers or let's take the population of revenue and <unk>.

Ill take it on a customer customer by customer basis, but also from a revenue perspective, we had approaching 90% of our revenue that was coming from contractual minimums.

Sean W. Blitchok: So for mortgages in particular, you know, If you think about our total population of customers, or let's take the population of revenue, and not take it on a customer by customer basis, but from a revenue perspective, we had approaching 90% of our revenue that was coming from contractual minimums. That's not to say that 90% of our customers are, but it varies customer by customer. So, you know, the analysis that we've done is we will see probably a quarter, two quarters of pickup in the minimums for most of our customers, and then we'll start to see upside in the mortgage space. So if you kind of go through the model for us, there's not a lot of upside in mortgages, even though volumes are recovering in the front half. And we see some recovery in the back half of the year. So, hopefully, that's helpful. Thank you for your help.

Now.

That's not to say that 90% of our customers were but it varies customer by customer. So the analysis that we've done is we will see probably.

Quarter two quarters.

Ill pick up isn't the better months for most of our customers and then we'll start to see upside in the mortgage and the mortgage space. So.

If you if you kind of go through the model.

Yes.

Theres not a lot of upside in mortgage even though the volumes are recovering in the front half and we see we see some recovery in the back half of the year. So hopefully that's helpful.

Super helpful. Thank you for that Sean just.

A follow up question here on the guidance and thinking about EBITDA margin.

The guide there is just about 40%.

Sean W. Blitchok: Follow-up question here on the guidance and thinking about EBITDA margin. The guide there is just about 40% for a growth rate of 5% on the revenue side. So how should we be thinking about EBITDA margins? Federal macro or lower, like purposes.

A growth rate of 5% on the revenue side. So how should we be thinking about EBITDA margins any better macro or lower interest rate environment that might drive higher loan volumes would that incremental revenue growth flows down to the bottom line or is the business looking to reinvest that EBITDA side. Thanks, guys.

Sean W. Blitchok: Welcome. Yeah, thanks, Koji. I think it's probably a mix of both.

Yes, Thanks Koji.

I think it's.

It's probably a mix of both.

Sean W. Blitchok: But I would say for the most part, you know, if you look at our gross margins, they continue to improve. And, you know, we've embedded that I think if we just at a high level, if we saw an incremental improvement from this guide, we would pass through a good, good portion of that through to the bottom line. Not saying dollar for dollar, but I think you would start to understand. I mean, the number in the EBITDA guide is already very good in my mind.

But I would say for the most part if you look at our gross margins they continue to improve.

And.

We've we've embedded that I think if you did.

Just at a high level, if we saw an incremental improvement from this guide.

We would pass pass through.

<unk>.

Good good portion of that through to the bottom line.

Not saying dollar for dollar, but I think you would you would start to I mean.

The number the EBITDA guide is already.

Got it in my mind.

Sean W. Blitchok: And so, and what I've said for a while now is our next target, if you will, is to be a rule of 50 company. And so as we start to accelerate, we realize that that's the next threshold, and we're going to work to get to that threshold. At some level, you have to sustain the business. Some of our products are pay per transaction, and so you'll see the cost of goods in them. There are different instances where it won't be as easy as just flowing dollar for dollar through to the bottom line, but it will be enough so that we can make a meaningful improvement in EBITDA as we see the revenue coming in. So hopefully that's helpful. No, but it was super helpful.

And what I've said.

For a while now is our next target if you will.

As to be a rule of 50 company.

And so as we start to accelerate.

We that's the next threshold then we're going to work to get to that threshold.

Hi.

At some level you have to sustain the business some of our products are.

Pay per transaction and so youll see cost of goods in.

There are different instances, where it won't be as easy as just flowing dollar for dollar through to the bottom line, but it will be.

So that we can make a meaningful.

Improvement in EBITDA as we see the revenue concept. So hopefully that's helpful.

That's super helpful. Thanks, John I appreciate the time thank you.

Sean W. Blitchok: Thanks, Sean. Yep. Thank you, and your next question comes from the line of Andrew Schmidt from CTE. Please go ahead.

Thank you and our next question comes from the line of Andrew Schmidt from Seb. Please go ahead.

Chris Maloof: Hey Nicholas, Sean, and Chris, thanks for taking my questions here. I appreciate all the detail. I wanted to put a finer point on just the net news side, specifically, within lending software for depository institutions, which is obviously, as you mentioned, kind of the higher ARPU opportunity. Trying to disaggregate what's maybe cyclical from a buying pattern perspective versus what might be controllable. Maybe to talk about just what you've seen from a pipeline, RFP activity, and win rate perspective. Maybe that can help us get a better sense of just the..., you know, the, you know, what's building for net new ads in the situation there. Thanks a lot. So, this is Chris.

Thanks, Nicholas Sean Chris Thanks for taking my questions here.

I appreciate all the detail I wanted to put a finer point on just the net new side specifically.

Within <unk>.

Lending software for depository institutions, which is obviously as you mentioned kind of the higher <unk> opportunity.

Trying to disaggregate, what's maybe cyclical from a buying pattern perspective versus what might be controllable, maybe you could talk about just what you've seen from a.

Pipeline RFP activity and win rate perspective.

Maybe that can help us get a better sense on just the.

That what's building for net new ads and the situation there. Thanks a lot.

Okay.

Yeah.

This is Chris.

Sean W. Blitchok: So if we look at the last two to three quarters, I'd say win rates and sales velocity have been largely consistent. And as we've built in our new capabilities, investing in marketing and sales enablement, we're seeing ourselves in a superior pipeline position than we did in the prior quarters. So we're making movement here and remain in flight in our transformation from order taking to market taking from a go-to-market motion perspective. Yeah, and Andrew, I don't I don't know that I, I think you used the word cyclicality in a buying pattern. And I don't know that I necessarily see a logical pattern of cyclicality in buying behavior. We do see, you know, depending on the economic cycle, depending on where our financial institutions are financially, that could perhaps delay or accelerate the pipeline build or some of the actual buying decisions, but I don't think there's inherently cyclicality.

If we look at the last two to three quarters, let's say win rates and sales velocity has been largely consistent.

As with built in R&D capabilities, and investing in marketing and our sales enablement, we're seeing ourselves and our superior pipeline position than we have done in the prior quarters. So we're making movement here in <unk>.

We remain in flight in our transformation from order taking to market taking from a go to market motion perspective.

Yeah, and Andrew I don't I don't know that I I think you used the word cyclicality.

From a buying pattern and I don't know that I necessarily see.

A logical pattern and cyclicality.

And buying behavior.

We do see.

Depending on the economic cycle, depending on where financial institutions are.

Financially that could perhaps delay or accelerate.

A pipeline build or some of the actual buying decisions, but I don't think theres inherently cyclicality.

Sean W. Blitchok: That makes sense. Yeah, we just heard more focused on deposit gathering versus, you know, loan origination. But yeah, understood that this stuff needs to get modernized. And there's a lot of demand for it. Makes sense, um, yeah, I understand your question now. Yeah. Right. I don't think there's a shift away from buying and into depositories, or I think it's just a matter of both now. You know, so I don't think that people have shifted away from buying software, retooling, etc.

That makes sense, yeah, we just heard more focus on deposit gathering versus loan origination, but yes.

Understood. This task it modernized and Theres a lot of demand for it.

Yes.

Yes, I understand your question yeah.

Right I don't think there is a shift away from buying and into depository.

Yes.

I think it's just a matter of both now.

So I don't think that people have shifted shifted away from buying software is retooling et cetera.

Sean W. Blitchok: Even with the kind of shift of focus into taking more deposits, very clear, and more balanced. That makes a lot of sense. I appreciate that. And then, you know, at the midpoint, the expense growth is overall expense growth is slightly up, which is, you know, pretty impressive. And, you know, obviously, you have the cost actions you announced and, you know, some of the roll-off of some investments, but I guess the question is, you know, are there areas you could actually double down on? Unknown Attendee, Jeffrey Lane, Koji Ikeda, Chris Maloof, Anastazia Goshko, Gianna Rotellini, Yeah, thanks, Andrew.

Even with the kind of shift of focus into taking more deposits.

Yes.

Very clear more balanced that makes a lot of sense I appreciate that.

Yes.

It looks like at the midpoint the expense growth as overall expense growth is like flat to slightly up which is pretty impressive.

Obviously, you have the cost actions you announced in <unk>.

So the roll off of some investments but.

I guess the question is are the areas you could actually double down on in terms of investing maybe accelerated investment investment you've done this.

Over the past couple of years pretty good job in terms of.

Like one et cetera are there other areas we could.

Incremental investment.

Versus just dropping to the bottom line. Thanks, a lot guys.

Yes.

Yes, Thanks, Andrew I think the.

I quoted numbers.

And the talk track.

Sales and marketing is where we are doubling down.

Sure.

Last year.

<unk>.

80%, 90% growth year on year. This year were 30, 30 ish percent to 40% growth.

Chris Maloof: I think the, You know, I quoted numbers. In the talk track, I think sales and marketing is where we are doubling down. Last year, it was, Unknown Attendee, Jeffrey Lane, Koji Ikeda, Chris Maloof, Anastazia Goshko, Jessica Wang, discretionary spend we we've we've tightened the belt and where we are funding the things that we we know we need to fund. So from an income statement perspective, I feel pretty good about, foundationally, we're at the point of scaling, and as that top line starts Thank you very much, Sean. I appreciate all the comments. Yep, take care. Thank you, and your last question comes from the line of Parker Lane from Stiefel. Please go ahead. This is Matthew Kickert for Parker.

In terms of sales and marketing expense and <unk>.

We're self funding that.

Through trade offs and other places within the business and <unk>.

<unk> got our handle a handle on G&A and we've got a handle on.

<unk>.

Sure.

Discretionary spend we we've tightened the belt and.

We are funding the things that we know we need to fund.

So from a from an income statement perspective, I feel pretty good.

About again foundational AE, we're at the point of scaling.

And as that top line starts to come back into.

Into shape into where we think the growth algorithm should be.

The market starts to shake out I think we'll be in a very good position.

Perfect. Thank you very much I appreciate all the comments.

Take care.

Thank you and your next question comes from the line of Parker Lane from Stifel. Please go ahead.

This is Matthew Stecker for Parker, Thanks for taking my questions.

Chris Maloof: Thanks for taking my questions. You mentioned you are shifting the go-to-market team into more of a hunting mentality this year. How does the MeridianLink One platform fit into the strategy, and does it help accelerate the strategy at all? MeridianLink One is centered around how we drive solutions for our customer base. And I think an effective hunting team is going out and understanding our customers' goals or challenges and then positioning the company's solution to ultimately drive that outcome.

You mentioned, you're shifting the go to market team into more of a hunting mentality. This.

This year, how does the marine like one platform strategy and does it help accelerate the strategy at all.

Well I don't think one is all centered around how we drive solutions for our customer base, and I think and I would say.

Effective hunting team is going out and understanding our customers' goals, our challenges and positioning the company solution to ultimately drive that outcome submarine link one and the maturity model is for the <unk> that can derive from it on key aspects of digital maturity Decisioning insights.

Chris Maloof: So MeridianLink One and the maturity models for the VFIs that can derive from it on key aspects like digital maturity, decisioning, insights, and others are central to having an effective go-to-market strategy. I really view it as all part of the same story, that the sales team is an arm of that story, and it all needs to come together with one message to the customer base. And if you look at some of the detail that we've announced in our script as well, the customer wins with four modules, plus access, the cross-sell success of ML Mortgage into the customer base, the depository taking customer base, I think it's really coming together well there. That makes sense.

Other.

Central to having an effective glenmark promotion I really view it as all part of the same story right. The sales team is an arm of that story and all of these to come together with one message to the customer base.

And if you look at some of the detail that we've announced in our script as well.

The customer wins with four modules.

Access the cross sell success of MLP <unk> into the customer base the deposit taking customer base I think it's really coming together well there.

Yeah.

That makes sense.

Chris Maloof: And secondly, are there any ways that you're looking to incorporate AI more in your tools in 2024? What are you hearing from your customers in terms of AI demand from you and their budgets for it? So I'll start with the demand question. AI within the financial services industry is really interesting in terms of there's a regulatory aspect to it, but there's also a consumer sentiment aspect to it. There's a perception in some consumer bases, at least in the research we've done, on how comfortable or not comfortable they are with using AI to make decisions on their behalf.

Secondly are there any ways that you are looking to incorporate AI and your tools more 2024.

What are you hearing from your customers in terms of AD demand from you and their budgets for us.

Yeah, So I'll start with the demand question.

AI within the financial services industry is really interesting in terms of if there is a regulatory aspect to it but theres also a consumer sentiment aspect to it.

There is a perception in some consumer basis at least in the research we've done.

And how comfortable or not comfortable they are with using AI to make decisions on their behalf. So those are some things.

Chris Maloof: So those are some things we watch closely. And what we've done to date is a lot of work with partners. We're leveraging catch EBT type tools from a customer service perspective or a consumer service perspective. We have a number of partners that are using machine learning models for decisioning. And then what we've been doing internally from an R&D perspective is, over the last few years, we've spent millions of dollars as part of our cloud design to bring all of our data into a single location. And so we've been able to do that. And we've been able to do that in a way. And as we're evaluating our FIs' needs and the consumers' willingness, there are two areas that we're looking closely at.

We watch closely what we've done to date is a lot of work with partners.

Average Shane.

GBT type tools from a customer service perspective, our consumer service perspective, we elaborate we have a number of partners that are using machine learning models for Decisioning.

And then what we've been doing internally from an R&D perspective is over the last few years. We've spent millions of dollars as part of our cloud designed to bring all of our data into a single location.

And as we are evaluating our needs and the consumers what the consumers are willing to bear to areas that were looking closely at are we leveraging an open AI type format to take our incentives program to the next level. So meaning we have a very unique offering that we can enable our customers to see how they're performing.

Chris Maloof: Are we leveraging an open AI-type format to take our insights program to the next level? So, we have a very unique offering, and we can enable our customers to see how they're performing versus their peers on a large array of different key performance metrics. And we can use a language model to present a narrative back to them and where they should focus their efforts to have the optimal outcome. And then there is the other element.

Versus their peers on a large array of different key performance metrics that we can we can use a language model to presenting narrative back in where they should focus their efforts to have the optimal outcome and then the other element.

Chris Maloof: I think a core use of any AI tool is how are we automating key aspects of the lending officer's role for them to be more efficient. And candidly, over the last year, I've seen more and more rhetoric around IT investment around efficiency, which perhaps wasn't as true the years before that, with the key takeaway I'd say is the hardest part for an organization like us to perform in that market is to bring all the data and clean it, and put it in a single place to then build models on top of. Terrific. Thank you very much. Thank you. There are no further questions at this time. Mr. Nicolaas Vlok, please proceed.

It is a core use of NII taught us how are we automating key aspects of the lending officers role for them to be more efficient.

Candidly over the last year, I've seen more and more rhetoric around 19 investment around efficiency, which perhaps was it is true that the years before that.

The key takeaway I would say is the hardest part for an organization like us to perform in that market is to bring all the data and clean it and put in a single place to then build models on top of.

Terrific. Thank you very much.

Thank you there are no further question at this time Mr. Nikolas luck. Please proceed.

Nicolaas Vlok: Thank you for attending today's call. As we close, I'd like to express my gratitude to the team for their ongoing commitment to our customers, partners, and each other. Great teams innovate well. They serve customers in a way that stands apart, and they deliver better experiences day in and day out. That's what we mean.

Thank you for attending today's call.

As we close I would like to express my gratitude to the team for the ongoing combined with customers partners and each other.

Great teams in a way well they serve customers in a way that stands apart and they deliver better experiences day in and day out.

What we mean that that's what we.

Operator: That's what that's what we do, and that's why we remain focused on, and the industry continues to take note. In fact, I was pleased and humbled to see our team receive the HousingWire Mortgage Tech 100 award at the start of this year. We will continue to deliver award-winning products and services to our customers, and we are grateful for their trust and partnership. Thank you for being part of our success. Until next time, have a great day. Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you all for participating. You may all disconnect now. Thank you for watching! www.waymovingapartheid.com

That's why we remain focused on and the industry continues to take note.

In fact, I was pleased and humbled to say our team received the housing Wyatt mortgage take one of an award at the start of this year. We will continue to deliver award winning products and services to our customers and we are grateful for the trust and partnership.

Thank you for being part of Asics face until next time have a great day.

Thank you ladies and gentlemen, this does conclude your conference for today. Thank you all for participating you may all disconnect.

Okay.

Okay.

Sure.

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