Q4 2024 MeridianLink Inc Earnings Call
Speaker Change: Ford quarter and fiscal year 2004 earnings call. At this time, all participants are in listen only mode. After the speaker's presentation, there will be a question and answer session.
Speaker Change: Please be advised that today's conference is being recorded. I would now like to turn the conference over to first speaker today, Gianna Rotellini, Gianna, please go ahead.
Speaker Change: Good Afternoons and welcome to MeridianLink's fourth quarter and fiscal year, 2024, Ernie's call.
Speaker Change: We will be discussing the results announced in our press release issued after the market closed today. With me today, our MeridianLink's Chief Executive Officer, Nicholas Block, President Larry Katz, and Chief Financial Officer Elias Olmeta.
Speaker Change: Before we begin, I would like to remind you that today's conference call will include forward-looking statements based on the company's current expectations.
Speaker Change: These forward-looking statements are subject to a number of significant risks and uncertainties that our actual results may differ materially.
Speaker Change: For 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 file from time to time with the Securities and Exchange Commission.
Speaker Change: 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.
Speaker Change: Please note that. Others have been revenue. All numbers and remarks are on a non-GAAP basis unless otherwise stated.
Speaker Change: A reconciliation to comparable gap metrics can be found in today's earnings presentation, which is available on our investor relations website and as an exhibit to the Form 8K furnish with the SEC just before this call.
Speaker Change: Our earnings presentation is available for you to download and reference throughout our prepared remarks. With that, let me turn the call over to Nicholas.
Nicolaas Vlok: Thank you, Gianna. Good afternoon, everyone, and thanks for joining us today.
MeridianLink closed 2024 with a strong fourth quarter.
Nicolaas Vlok: We recorded revenue in excess of 79 million, or 7% growth year-over-year, and adjusted EBDA above 33 million, or a 42% adjusted EBDA margin.
Nicolaas Vlok: I'm pleased without results in a challenging and uncertain macro environment.
Nicolaas Vlok: Most importantly, we continued our commitment to being the leading financial technology platform Trusted by customers to execute winning landing strategies with MeridianLink 1.
Nicolaas Vlok: Despite the headwinds of 2024, we executed well controlling what we could control [inaudible]
Nicolaas Vlok: Our sales team generated strong demand and delivered a second consecutive year of record bookings.
Nicolaas Vlok: Our services team accelerated time to revenue and achieved a high-world mark in our subscription revenue activations, which we've previously referred to as ACV release.
Nicolaas Vlok: Our product teams continue to innovate by adding capabilities that strengthen MeridianLink Wang's position as the leading digital lending platform for mud market financial institutions.
Nicolaas Vlok: We significantly improved our operating efficiency, delivering over 400 basis points of adjusted
Nicolaas Vlok: And we continued our discipline approach to capital allocation, completing several transactions that strengthened our balance sheet and the Versified L-Share Older Base.
Nicolaas Vlok: Looking forward, I would like to frame 2025 by sharing some industry observations based on conversations with Creative Union and Bank Executives.
Nicolaas Vlok: While economic uncertainty is high and consumer confidence is challenged, customers and prospects are increasingly prioritizing investment in landing technology.
Nicolaas Vlok: These investments are focused on platforms that enable omnichannel client acquisition, touchless landing and seamless integrations with best of breed solutions.
Nicolaas Vlok: To compete for digitally native consumers, financial institutions are prepared to increase their technology spend in lending platforms, and we see a longer-term trend benefiting MeridianLink
I'm excited about what's in store for MeridianLink.
Nicolaas Vlok: There is no other digital landing platform with a breath and depth of MeridianLink 1.
Nicolaas Vlok: While volumes have weighed on the recent top line growth, we are focused on long-term growth, investing to meet our customers' needs and accelerating platform adoption.
Nicolaas Vlok: Go to market and service delivery investments have paid off with consecutive years of record bookings and activations.
Nicolaas Vlok: Despite the current environment, we believe in our long-term opportunity and plan to deploy capital into sales and marketing, product and infrastructure, which will further position us to capture share and volume when the market returns.
Nicolaas Vlok: I have great confidence in our ability to scale the business in 2025 and beyond.
Speaker Change: Before I turn it over to Larry, I want to update you on a change to our guiding practice.
Larry Katz: Going forward, we will provide quarterly updates to annual guidance, and we will no longer provide guidance for the following quarter.
Larry Katz: We are making this change because we are focused on delivering long-term value and we firmly believe that annual guidance is the best lens for investors to evaluate our business.
Elias will share more in his remarks.
Larry Katz: I'd like to thank the entire MeridianLink team for our solid performance this year. With your expertise and education, I'm proud that we ended another year delivering on our commitments to customers and shareholders.
Larry Katz: Now I will turn it over to Larry to review our business highlights.
Larry Katz: Thanks, Nicholas. We finished the year with strong sales execution, posting record bookings for the second year in a row. Both new logo and cross-sell bookings increased year-over-year as both credit unions and banks turned to MeridianLink as a trusted partner to accelerate their digital transformation.
Larry Katz: We had strong bookings performance in both Cross L and New Logo. We also had a higher mix of mortgage and larger ACB platform wins.
Larry Katz: A key driver of our sales performance is the breadth and depth of the MeridianLink 1 platform, which provides us a natural expansion opportunity across more than 1,500 lending software customers.
Larry Katz: Our ability to win is a testament to the deep expertise, best of breed platform functionality, and market-leading reputation through it built over the past 25 years.
Speaker Change: Since stepping into the presidency six months ago, I've had the opportunity to meet with dozens of customers, partners, prospects, and industry experts.
Speaker Change: The messages I hear are consistent. We have a distinctive and compelling platform and our customers are committed to running their business unread in like one.
Speaker Change: At the same time, our customers are looking to us to continue to innovate, to deliver distinctive solutions that help them grow by acquiring and serving digitally-native consumers in an AI-enabled
Speaker Change: They also look to us to continually make it easier to do business with us.
Speaker Change: The message is clear. We have done well over the years and we absolutely have an opportunity to do better. With all commercial functions now under one roof, I am focused on breaking down silos, ensuring that customer feedback more actively informs our product roadmap and streamlines our customer journey.
and many more. Thank you. Thank you.
Speaker Change: As we head into 2025, we are continuing to invest in sales and marketing to further optimize our land and expand the strategy.
Speaker Change: We are adding to our solutions consulting team to help customers and prospects understand the value of our platform and how it meets their needs. And we are maturing our account-based selling motions based on extensive white space analytics and enhance demand generation strategies.
Speaker Change: Entering the year with the robust pipeline and solid foundation in place, I am confident that our team is well positioned to generate increased demand more efficiently.
Speaker Change: With that, I will move to our business highlights for Q4.
Speaker Change: We had a strong quarter of cross-cell and upsell, demonstrating the resilient nature of our customers who continue to invest in innovative solutions, even in a challenging market.
Speaker Change: For example, an existing consumer lending bank customer with 9 billion assets recently added MeridianLink access and MeridianLink business and now deploys a total of six modules across the MeridianLink one platform.
Speaker Change: This customer also enabled MeridianLink's automated decision capability to drive touchless lending. This is a great example of the opportunity that MeridianLink 1 presents to deepen and expand existing relationships.
Speaker Change: Pub note, this access win was won a 15-in-fourth quarter where the tripling customer wins year-over-year.
Speaker Change: Turning to new logo wins. This was our best new logo quarter in two years, increasing new customer bookings nearly 40% year-over-year. This suggests that financial institutions are leaning into their digital transformation to prepare for a more robust demand environment.
Speaker Change: For example, we signed a bank with 8 billion in assets onto MeridianLink mortgage and MeridianLink consumer, enabling them to seamlessly execute a high-value cross-source strategy.
Speaker Change: We won this competitive deal due to our feature-rich functionality, speed of implementation and partner integrations.
Speaker Change: This customer is also leveraging our patented debt optimization capability to increase visibility across the consumer debt wall, which maximizes acceptance rates and deepens relationships with clients.
Speaker Change: We also delivered another solid quarter and year of subscription revenue activations for ACV release showcasing our services teams continued focus on streamlining delivery.
Speaker Change: We activated more subscription revenue dollars than in 2024. Heading into 2025, our plan has to release more ACB dollars while maintaining healthy backlogs.
Speaker Change: Moving to products, we launched a new share wallet add-on for MeridianLink consumer and opening customers.
Speaker Change: This unique data rich product supports our customers' cross-selling efforts by identifying financial products that consumers have with other financial institutions.
Speaker Change: Sheriff Wallet helps our customers extend Wallet Chair and increase lifetime value of their consumer relationships while reducing acquisition costs.
Speaker Change: Fed Choice Federal Credit Union chose to implement our share of wallet product to drive more relevant cross-sell. The Iran Campaigns for Personal Loans and Helox, which successfully shifted members to its money-saving fixed-rate products.
Speaker Change: With the new ability to deliver highly personalized offers to its members, Fed choices across
Speaker Change: Ending now with a great new partner ad, we announced a new partnership with Sklar Navigator.
Speaker Change: and Advanced Credit Report Analytic Tool designed to help consumers better understand and manage their finances.
Speaker Change: Skor Navigator integrates with our DVS solution and provides mortgage lenders with more efficient methods of assessing applicant credit worthiness.
Speaker Change: Through the SCORE Navigator platform, the Loan Officer can communicate with applicants to help them improve credit scores during the application process and consolidate debt, thereby increasing lender application approvals.
Speaker Change: Leading CRAs like CIC and Advantage Credit have used the integration for their labors, we're strengthening consumer relationships and boosting retention.
Speaker Change: Thank you Larry, and good afternoon everyone. We finished the year with a solid fourth quarter.
Speaker Change: Throughout 2024, MeridianLink achieved consistent revenue growth, expanded profitability, and improved free cash flow conversion.
Speaker Change: Drilling in the Q4, we achieved gap revenue of 79.4 million or 7% growth year-over-year, which is at the high end of our guidance range.
Speaker Change: Adjusted EBITDA was 33.4 million, a 42% adjusted EBITDA margin which exceeded the point of our guidance range.
Speaker Change: We generated 12.1 million of free cash flow of 15% of revenue and ended the quarter with 92.8 million new cash, the cash are good ones.
Speaker Change: Before I further describe a revenue growth, in prior quarters we have made reference to a large data verification customer down, so.
Speaker Change: We are an active litigation with this customer and have reached an agreement to mutually drop our claims with the parties entering into a three-year agreement.
Speaker Change: We anticipate that going forward, annual customer revenue will be reduced by approximately six million as a result of the down sell and the recent agreement.
Revenue from this customer total, 13.1 million in 2024.
Speaker Change: This downsell has been a headwind toward data verification and total revenue growth in prior years. We anticipate that the identified adjustment in revenue from 2024 to 2025 will impact total revenue growth by approximately 220 basis points.
Speaker Change: Now, turning to our Q4 total year-over-year revenue performance of 7% growth in terms of the revenue in our algorithm. One, ACV release contributed mid-single digits. Two, price and charm were in the low single digits each, and essentially all say each other.
Speaker Change: Three, volumes and one-time customer downsells combined were in the low single digits and mostly offset each other.
Speaker Change: Moving to our total revenue performance of 7% growth in Q4 by source.
Speaker Change: Subscription revenue grew 5% year over year, contributing significantly an 82% of our total revenue.
Speaker Change: This growth was driven by the successful activation and recognition of subscription revenue for more implemented software solutions for both new and existing customers, what we refer to as ACV release.
Speaker Change: Services revenue lose 6% year over year, primarily driven by higher implementation fees associated with software from additional bookings.
Speaker Change: All the revenue grew 40% year-over-year, driven by one-time partner revenue-shared
Speaker Change: Now, looking at our 7% total revenue growth in Q4 by solution type, total lending software revenue growth was 7% year-over-year and accounted for approximately 80% of revenue.
Speaker Change: Excluding revenue from the mortgage loan market, consumer lending revenue was 9% year-over-year and accounted for 89% of lending soccer revenue.
Speaker Change: This strong growth in uncertain macro demonstrates the power of our core franchise.
Speaker Change: Mortgage lending software solutions to client 7% year-over-year and accounted for the remaining 11% of lending software revenue. The decline was attributable to customer downsell and churn.
Speaker Change: Turning to data verification software solutions, revenue increased 4% year over year and accounted for 20% of total revenue.
Speaker Change: This increase was attributable to a 5% increase in mortgage-related revenue, which represented 57% of total data verification software revenue in Q4.
Speaker Change: As we lap the one-time customer downsell from the customer I previously mentioned in Q3, revenue accelerated in the quarter.
Moving on to our profitability.
Speaker Change: Adjusted Gross Profit was $59 million, representing a 74% margin and a 37 basis point improvement in operating leverage year-old a year.
Turning to Operating Expenses.
Speaker Change: R&D expense was 7 million, or 9% of revenue, and declined 22% year-over-year, reflecting lower staffing due to our previously announced restructuring.
Speaker Change: Sales and marketing expense was 8.6 million or 11% of revenue, up 2% year-over-year.
Speaker Change: GNA expense increased 36% year-over-year to 11.1 million or 14% of revenue, reflecting select discretionary investments made to position the company for scale.
Speaker Change: Ajusted EBITDA was 33.4 million, a 42% adjusted EBITDA margin. This is a 28 basis point improvement in operating leverage year over year.
Finishing with our capital position [inaudible]
Speaker Change: Cash flow from operations was 13.8 million or 17% of revenue, and free cash flow was 12.1 million
Speaker Change: We ended the fourth quarter with cash and cash equivalent of 92.8 million, an increase of 10.5 million
Speaker Change: Now let's look at full year 2024 results. We had a challenging operating environment, especially in the first half of the year.
Speaker Change: Notwithstanding, we achieved solid in-year revenue growth as Larry mentioned record bookings and the highest-adjusted ebathom margin in three years.
Revenue increased 4% to 316.3 million per year.
Speaker Change: Describing the 4% revenue growth in terms of the revenue algorithm, 1.
Speaker Change: ACV release contributed mid-single digits, two, Price and Churn were in the low single digits each and essentially offset each other, and three, volumes and a one-time DVS customer downsell combined were a low single digit track.
Speaker Change: Subscription revenue grew 3% year over year, which contributed 84% of total revenue.
Speaker Change: Services grew 9% year-over-year, primarily driven by higher implementation fees associated with software from additional bookings.
Other revenue grew 17% year over year, driven by increased partner revenue.
Now looking at our 4% total revenue by solution type
Speaker Change: Total lending software revenue will be 7% year-over-year and accounted for nearly 79% of total revenue.
Speaker Change: Excluding revenue from the mortgage market, consumer lending revenue growth was 9% year-over-year and accounted for 89% of lending software revenue.
Speaker Change: Achieving 9% year-of-a-year growth in our core business is a huge accomplishment, especially in the context of one of the most challenging lending environments.
Speaker Change: This highlights the value of our investments and the work and success of our go-to market and services team over the last year.
Speaker Change: Morty's lending software solutions declined 7% year-over-year and accounted for the remaining 11% of lending software revenue.
Speaker Change: The decline was attributable to customer churn and downsell. Mortgage volumes were strong year over year, and contracts below their minimum significantly improved from approximately two-thirds to approximately one-half by the end of Q4.
Speaker Change: Turning to data verification software solutions, revenue declined 6% year-over-year and accounted for 21% of total revenue. This decline was attributable to an 11% decrease in mortgage-related revenue, which represented 56% of total data verification software revenue in the year.
Speaker Change: This decline in mortgage-related data verification revenue was driven by the one-time downsell of a single large customer discussed previously.
Moving on to our profitability.
Speaker Change: Adjusted Gross Profit was 232 million, 73% adjusted gross margin. This is nearly a hundred basis points of improvement in operating leverage year over year driven by continued productivity of our services team.
Turning to Operating Expenses [inaudible]
Speaker Change: R&D expense was 29.4 million or 9% of revenue and declined 27% year-over-year reflecting lower staffing through the previously mentioned restructuring.
Speaker Change: Sales and marketing expense was 35.9 million or 11% of revenue, up 13% year-over-year. This increases primarily due to investment in our go-to-market team and strategy.
Speaker Change: G&A expense increased 12% year over year to 40.8 million or 13% of revenue, reflecting the previously mentioned select discretionary investments made to position the company for Skat.
Adjusted EBITDA was 130.7 million, 41% adjusted EBITDA marching.
Speaker Change: This is a 400 basis point improvement in operating leverage year-over-year. We made some purposeful discretionary investments in the year while maintaining disciplined cost
finishing with our capital position.
Speaker Change: cashflow from operations was 77.8 million or 25% of revenue and free cashflow was 70.3 million or 22% of revenue
Speaker Change: Total debt was $472.7 million, and excluding debt issuing costs and cash, net debt was $375.8 million representing net debt, the LTM adjusted EBITDA of approximately three times.
Once again, we were disciplined allocating capital.
Speaker Change: We invested in the business and we purchased shares at a discount to intrinsic value, returning 105.4 million of capital to stockholders who we purchased.
Speaker Change: We also engage in several capital market activities such as the debt repricing and top up and two secondary offerings that broadened our shareholder base.
Nicolaas Vlok: Now I will provide guidance for 2025. As Nicholas mentioned, going forward, we will only provide annual guidance updates on our quarterly calls.
Nicolaas Vlok: While we will no longer provide prospective quarterly guidance, we're relevant, we will comment on and provide insights into anticipated trends. We have made this change because we want to improve the alignment between our guidance and how we run the business.
Nicolaas Vlok: Our approach is to deploy Capo and to create long-term value for our shareholders. We believe that shifting to annual guidance will help to focus our operating teams in the equity market on the long-term progress that we are making rather than on quarterly variances.
Nicolaas Vlok: Keep in mind that our variances are typically driven by volumes, which are less predictable and tend to obscure the more stable and important drivers of our business, which include ACV
Moving on to the 2025 guidance.
Nicolaas Vlok: On-going conversations with customers and recent economic data point to an uncertain environment to the consumer in 2025. As a result, we are cautious in our outlook for customer volumes and associated revenue.
Nicolaas Vlok: We expect total gap revenue to be between 326 and 334 million compared to 316.3 million fully four year of 2024. This represents an estimated increase of three to six percent year over year.
Nicolaas Vlok: To provide more color on how revenue will trend by solution type at the midpoint of our guidance.
Nicolaas Vlok: We expect the mortgage market to contribute approximately 18.5% of revenue for the full year 2025.
Nicolaas Vlok: To help investors understand our sensitivity to current volume levels in our mortgage lending business we estimate that a 5% increase in our expected annual mortgage loan volumes will yield approximately a 1% increase in our annualized mortgage lending subscription revenue.
Nicolaas Vlok: There is not a one-for-one correlation between volumes and revenue growth because only the incremental volumes for customers above their minimums convert into overdruvenant and overdruvenant is a fraction of the total revenue for the year.
Nicolaas Vlok: On the non-mortgage side, we expect modest growth year-over-year in data verification revenue.
Nicolaas Vlok: Understanding these dynamics, we expect consumer lending will grow approximately 7% in 2025, driven by releasing ACV at a steady pace.
Nicolaas Vlok: In a higher, for longer, interest rate environment, consumer volumes are expected to be flat year over year.
Nicolaas Vlok: I will now describe our 4% total revenue growth at the midpoint of our guides in terms of the revenue algorithm.
Nicolaas Vlok: One, we expect ACV release to continue contributing mid-single digits and be the single largest driver of our revenue growth in 2025.
Nicolaas Vlok: Two, we expect price insurance to continue to offset each other.
Nicolaas Vlok: 3. We expect that volumes and the DVS customer renewal combined will be a low single digit track. Excluding the customer down sell, total volumes across all our products will be slightly positive, year-to-year and the a neutral contribution to revenue growth.
Nicolaas Vlok: Now, focusing on the adjusted EBITDA guides. For the full year 2025, we expect our adjusted EBITDA range to be between 131.5 million and 137.5 million, representing an adjusted EBITDA margin of approximately 41% at the midpoint.
Nicolaas Vlok: As revenue increases, we are investing in our product load map and go to market team to drive growth. We continue to manage the business to eventually become a rule of 50 company and are investing appropriately.
Nicolaas Vlok: Given our visibility into Q1 trends, insight from customers on recent economic data, we anticipate normal seasonality in our revenue through 2025.
Nicolaas Vlok: MeridianLink's high percentage of subscription revenue and strong quarterly ACV release give us confidence in our annual growth expectations, with relatively stronger sequential revenue growth in the second half of the year.
Nicolaas Vlok: We expect our expenses to be impacted by the timing of investments that will start in Q2.
Nicolaas Vlok: These will wrap up in the second half, and there will be a modest contraction in margins. Both R&D and sales and marketing as a percentage of revenue will increase approximately 100 dips for 2025 compared to 2024, as we invest in our product roadmap and go to market capabilities.
Nicolaas Vlok: As a result, we expected just an EBITDA margins to be the highest in the first quarter before slightly declining in the second half of the year.
Nicolaas Vlok: I'd like to end with how we are thinking about capital allocation going forward, to reiterate our order of priorities is.
Nicolaas Vlok: First, investing in organic growth in areas that deliver repeatability and scale to the organization.
Nicolaas Vlok: Second, discipline M&A. We remain ready to execute on the right deal at the right price and have recently invested in our corporate development team.
Nicolaas Vlok: And third, repurchasing our shares when trading in a discount to intrinsic value. I'm excited to announce that in February , our board authorized a new stock repurchase program to acquire up to $129.5 million.
Nicolaas Vlok: On this last point, I would like to comment on our stock-based compensation philosophy.
Nicolaas Vlok: In 2024, we made larger than usual grants as we recruited new leadership to help the scale of the organization. Our expectation is that share grants will come down in 2025.
Nicolaas Vlok: Finally, I'd like to reiterate how resilient the company has been. All thanks to the outstanding effort of our team. We ended the year strongly despite the challenges we faced because of the dedication and skill of our employees who work closely every day for the benefit of our customers. Looking forward, we believe this is a year during which execution remains paramount, while the macro takes time to recover.
Nicolaas Vlok: Is that manifest itself? We will continue investing in technology, infrastructure, and sales and marketing to support future growth and scale.
Speaker Change: With that, Nicholas, Larry and I are happy to take any of your questions and I'll turn it over to the operator.
Speaker Change: Thank you. Ladies and gentlemen, we will now begin the question and answer session.
Speaker Change: Should you have a question, please press the star, followed by the number one on your touch tone phone, then you will hear a prompt that your hand has been raised. Should you wish to decline from the pooling process, please press the star, followed by number
Speaker Change: If you are using a speaker phone, please lift the handset before pressing any keys. One moment please for your first question.
Speaker Change: Your first question comes from Chris Kennedy from William Blair. Please go ahead.
When you think about...
Speaker Change: The volume component, you gave good color on the mortgage, the sensitivity of the mortgage side of the business. Is there any way to think about the sensitivity on the non-mortgage component?
Speaker Change: and many more. Thank you for watching. I hope you enjoyed this video. If you did, please like it and subscribe to my channel. I would really appreciate it. I'll see you in the next one.
Hi, it's Elias. Thanks for the question.
Speaker Change: Thank you and thank you for acknowledging that we've improved our disclosures and we are going to continue to work on that but at this point I am not going to be providing further disclosures around consumer but that is something that we will keep in mind for future calls.
Speaker Change: Okay, understood. And then just talk briefly about the sustainability of your 41% EBITDA margin target going forward, you know, as the environment changes and as you continue to invest in sales and marketing.
Thanks for taking the questions.
Speaker Change: Yeah, of course. We feel good about the 41% as we talked about.
Speaker Change: You know, last quarter, you know, the number to really anchor around is, you know, the 40% guidance. What's really occurring, though, is
Speaker Change: You know, as we ramp up some of the investments that I was referencing in my color commentary, those are going to come in in the second half of the year, so you're going to see a slightly higher and more elevated set of margins in Q1, possibly even in the first half. [inaudible]
Speaker Change: and as those investments roll on to the P&L obviously that'll put a little bit of pressure.
on those margins, so ...
Speaker Change: You know, what you're seeing in the 41% guidance is really, is not us signaling that it's going from 40 to 41, rather just simply acknowledging the timing around some of the investments that we're undertaking, but
Speaker Change: We feel very good about it. We have good, good cost control in place and continue to be disciplined about how we deploy capital.
Great. Thanks for taking the questions.
Speaker Change: Thank you for taking the questions. Good to see this stability here.
Speaker Change: Maybe just on the investments for 2025, I heard the detail around sales and marketing, but you also mentioned product infrastructure, so if you could put a finer point on where the investments are being made across the other categories outside of sales and marketing, that would be great. Thank you very much.
Okay, Andrew, thank you for the question. It's Nicholas.
Speaker Change: We are going to invest, let's tackle the question in two sections. On the product side, our focus is on digital digital interfaces. It's in partner infrastructure. It's also...
Speaker Change: around our mortgage business, where we continue to see expanded opportunity, and then what I would call infrastructure which kind of spans out of our product and an internal business systems, but it's around data engineering and scaling our systems to continue to scale the business in the future.
Please see the complete disclaimer at https://sites.google.com
Nicolaas Vlok: Okay, thank you for that, Nikolai. And then maybe just the next question on the pipeline that you're seeing. Obviously, fourth quarter tends to be a higher watermark for bookings, but, you know, it was a very good quarter from a new logo perspective, so you called out it with some larger bank wins.
Nicolaas Vlok: So maybe just talk a little bit about what you're seeing in terms of the pipeline, the size and composition, and whether you see that new logo momentum continuing. Thank you very much.
Yeah, I'm Andrew Slary. I'll address for my voice here.
Nicolaas Vlok: Look, Pipeline, we ended the year with a... Suppologist, we ended the year with a strong Pipeline.
Nicolaas Vlok: and feel good about the momentum coming into the first half of the year across the...
across the products.
Speaker Change: You want me to grab it for you? Yeah, that'd be great. Okay, so we've continued to...
Speaker Change: Hello everyone, this is the operator. I apologize for this inconvenience.
Speaker Change: Oh, I'm sorry, we were muted here. I answered the question to myself. I could hear it out, no worries.
Speaker Change: Okay, did you hear anything I said or do you want me to start at the beginning, Andrew?
Andrew: No, it cut out when you started talking, see if you could repeat what you said, that'd be great.
Speaker Change: Okay, we had a great back half of the year in terms of pipeline build but also in sales momentum and we continue to see that momentum continue into the 25 year and our expectation as it will continue to be very similar in the first half.
Speaker Change: We are seeing great success with our cross-cell initiatives, specifically the momentum is building around mortgage for us, and then some of our other modules on our platform.
specifically as we think about.
Speaker Change: What's next and what's happening in our business from an opportunity standpoint? What we're hearing from customers and new prospects is folks.
Speaker Change: where it helps them grow and help them find new customers. So, from our perspective, growing
Speaker Change: Pipeline means we are in lockstep with our customers that's leaning into grow members to grow clients, grow deposits and we're pretty excited with where the pipelines act and where it's going.
Got it. Thank you so much, Nicholas. Appreciate the response.
Thank you, and your next question comes from Saket Kalia.
from Barkeys. Please go ahead.
Sackett: Hey, it's Saket from Barclays. Thanks for taking my questions here.
Sackett: Nicholas and Larry maybe for you. Can we just maybe go one level deeper just into that core consumer L.O.S. business?
Sackett: to see it's healthy. Maybe the question is, how do you feel about the growth drivers in that business if you go, you know, if you peel back the onion and the potential to sustain that growth in the future?
Speaker Change: Saket, thank you. Great question. I think I'm going to speak Larry has lost his voice so he's waving at me.
Sackett: with answers and numbers. But we're pretty proud of the 9% consumer learning growth. And if you just...
Sackett: to use your term, Peelback the Onion. It was driven by solid ACV release in the setting we end.
Sackett: We are in a challenging, macro-environment, and today we control or we can't control. We keep selling more, there's customer demand for our product, our platform, and as we kind of land that and cross sell and accelerate a new logo motion, we feel...
Sackett: that, and we believe that we can sustain the growth in that segment of the business. The demand is there as well as the team is set up to continue to release ACV at the pace that we're doing it today.
Speaker Change: I got it. That's very helpful. Maybe for my follow-up for you, Elias. I know you said we're not going to talk about sort of new metrics here, but I was wondering just as an update, how do you kind of think about the different consumer loan types?
as a percentage of that LLS business.
Speaker Change: I think in the past maybe you know we've heard about sort of rough percentages coming from you know the overall auto loan market or used auto-market is there is there any any detail you can give us just as we look back at 24 in terms of the different loan types and how they contributed.
Speaker Change: Yeah, I will be happy to, I guess, give an update as relates to a couple of the loans in the consumer.
Speaker Change: Otto is, of course, roughly half, so the single largest category within our...
Speaker Change: You know consumer LOS and within that you break that down and roughly two thirds of that is used and one third of that is new so more exposure obviously to the used car market.
Arbada Corner
Speaker Change: And then, you know, the remainder obviously makes up, you know, the balance of what's in consumer and, you know, just by way of update that has not been shifting in any appreciable way.
Got it. Super helpful. Thanks guys.
Speaker Change: Thank you. Your next question is from a Parker Lane from Steve Lell, please go ahead.
Speaker Change: Hi, this is Matthew Kikkert, I'm for Parker, thank you for taking my questions. To start, could you talk about your recent partnership with Zestai, I'm curious what they're bringing incrementally to the table for you, and then also maybe some broader thoughts on your fraud product lineup and opportunity in 2025.
and many more. Thank you. Thank you.
Sounds good, this is Nicholas again.
Speaker Change: Two questions this and call it fraud. This is being a great partner in the marketplace for our customers and partnering with us. They are one of our, what I would call, AI decisioning partnerships that bring value to our decisioning engine. We've integrated them pretty deeply into our platform. It's a...
Preet.
Deep and wide integration with our customers.
Speaker Change: And the benefit is the customers have the ability to move to the next level of enhanced and automated decisioning, is they choose to do so. And this has been one of our foundation partners in bringing kind of an AI approach to the platform and decisioning.
Speaker Change: In terms of fraud, we continue to find high interest in the fraud landscape. We have a number of partnerships there, for example, so here and also on the experience site.
Speaker Change: And our customers continue to lean in, and they would like to move with more front of house. It's not just brought on the landing.
Speaker Change: application, but it's also fraud on when you onboard a new deposit and a new account. So we continue to invest, we continue to expand also great partnerships with some real industry leaders on the fraud side.
I'm sorry. I'm sorry. I'm sorry. I'm sorry. I'm sorry.
Speaker Change: Okay, thank you for that feedback, and then in your capital allocation strategy comments, you mentioned M&A second before share repurchases. Do you have any comment, maybe like particular areas of the business or the market that you would be looking to strengthen through M&A?
Parker Canjus, repeat the question for a second.
Speaker Change: Sure. So, in the capital allocation comments that you made in the prepared remarks, you mentioned M&A is the second priority before sharing purchase. So I was curious maybe like is there a particular area that you'd be looking to make any M&A, whether it, you know, in the near-to-mid term that, you know, would strengthen your business?
Speaker Change: Yeah, a great question. You may get a winded answer from me. We...
Speaker Change: We think of M&A in kind of a few different vectors. One is...
Continue to expand the platform.
Speaker Change: and continue to look at what I would call tuck-in acquisitions that bolt out the platform breath and depth and give our customers that ability to work with a single vendor and that's a strong message we're getting from our customer basis.
Speaker Change: They want to work with less vendors and they would like to have a single hand to shake in a single neck to break and consolidating what is a great fit into our platform is something that we spending quite a bit of time looking at and we've we've
Speaker Change: invested in capacity and also building out our M&A muscle in the company over the underlices leadership call it over the last three, four, five months.
And we've seen quite a bit of activity.
Evaluating
Speaker Change: opportunities in that area and it's from kind of inbound from bankers from us going out into the market as well as getting deeper into what I would call our partner marketplace where we have some tight integrations [inaudible]
with Partners. There's also great opportunity for us to build adjacent to our platform into areas that
Speaker Change: I would say is a natural short arm extension and we also evaluating that.
Speaker Change: Growth perspective, otherwise you should expect us to be more focused on holding platform capacity through the talkings and very near-adjaciencies.
Okay, thank you very much.
Speaker Change: Thank you. As a reminder, if you wish to ask a question, please press bar 1.
Alex Karr: Your next question comes from Alex. Alex Sklar from Raymond James, please go ahead.
Hi, did I just cut on for Alex?
and many more. Thank you. Thank you.
Alright, thanks. A couple of things happening.
as relates to NRR.
Speaker Change: Larry and Nicolaas made reference to these. One is obviously we are you know growing our bookings and we had a very strong ACV release year.
Alex Karr: and then on top of that is if you look at our customer counts.
Alex Karr: Our customer count, you know, while coming down, it is coming down across a segment of very small customers.
and so that is pushing our NRR upwards.
Alex Karr: You know, and as we head into 2025, I certainly think that is, you know, sustainable and they're going to be growing as we continue to work on releasing, you know, ACV and, you know, to the extent that there's volume. There could be upside to that, but those are really the drivers of our inner. [inaudible]
Speaker Change: Got it, just like a really quick follow up. Do you kind of see turn as maybe having peaked already or do you still have a more recording position on the situation as whatever develops in the macro environment?
Yeah, it's gonna...
Speaker Change: It's going to be, obviously the macro impacts it, and so we're watching that very carefully. What I would point you to is, I guess I'd make a few comments. One is that...
Speaker Change: You know, Charnas relates to consumer, we think, is roughly what we would expect it to be mortgage
Speaker Change: slightly elevated, but as we head into 2025, you know, you see the flip in our mortgage lending business declining, sorry, changing, excuse me, flipping from negative seven to about eight. [inaudible]
Speaker Change: And that is really just a function of the fact that amongst other things, Sharn is going to be diminishing as well as there was some one-time items that we've labbed in Q4 of 2023.
Got it. Thank you.
You're welcome.
Speaker Change: Alright, so there are no further questions at this time.