Q1 2025 MeridianLink Inc Earnings Call
Speaker Change: Ladies and gentlemen, thank you for standing by and welcome to MeridianLink's score 2020-25 earnings conference call. At the sample participants, Iron and Lise and Olible, at the speaker's comments, there will be a question and answerisation.
Please be advised that today's conference is being recorded.
Speaker Change: I will now like to turn the conference over to your first speaker today, Gianna Rotellini, Gianna, please go ahead.
Speaker Change: Good afternoon and welcome to MeridianLink's first quarter fiscal year 2025 earnings call. 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, Nikolai Vlok, president, Larry Katz, and chief financial officer, Elias Olmeta.
Speaker Change: 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.
Speaker Change: For a discussion of the risks, uncertainties, and other factors that could affect our future financial results in 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 it's required by law, we assume no obligation to update any such statements.
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, furnished 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 Nicolaas.
Nicolaas Vlok: Thank you, Gianna. Good afternoon and thanks for joining us today.
Nicolaas Vlok: We are pleased with our first quarter results. MeridianLink achieved $81.5 million in total revenue, or a 5% growth year over year and adjusted EBITDA of $34.8 million, a 43% adjusted EBITDA margin.
Nicolaas Vlok: Our quarterly results highlight our focus and success operating the business in an increasingly uncertain macroeconomic environment.
Nicolaas Vlok: Earlier today, we announced that Larry Katz, our president, will assume the role of CO effective October 1st.
Speaker Change: of the six rewarding years at the helm of MeridianLink and multiple prior CEO roles. I intend to focus my time on private company boards and investment activities.
Speaker Change: This transition has been carefully planned and I look forward to continuing to work alongside Larry and the entire MeridianLink team over the next four and a half months.
Speaker Change: I have enjoyed every moment of leading this great organization since I took the home from Tim Lewen, our co-founder back in late 2019.
Speaker Change: As part of these changes, Thomas transition to a strategic advisor role and will continue to provide Larry with a strategic insight from which I greatly benefit it.
Speaker Change: Together we have expanded the business meaningfully, growing revenue from approximately 150 million and 2019 to 330 million at the best point of our guidance for 2025.
Speaker Change: We migrated our solutions from on-premise to the cloud and established our platform MeridianLink 1 as the market leader and we grew our customer base to nearly 2000 financial institutions and CRAs
Speaker Change: We have built our partner marketplace to be one of the most robust in the market, and today over 600 partners, a part of our growing ecosystem.
Speaker Change: We continue to innovate across both consumer and mortgage to automate more aspects of the lending process.
Speaker Change: Helping our customers drive deposit growth, speed decisioning, fuel efficiency, and ultimately enable their workforce to focus on their core differentiator.
fostering long-term relationships where they consume it.
Speaker Change: And we might significant investments to transform and scale our go-to market organization to deliver more value at greater speed.
Speaker Change: Now, Larry will lead us into the next chapter for MeridianLink.
Speaker Change: He's an operator with deep experience in both consumer finance and stress, and at companies that have operated at scale.
Speaker Change: He's a great cultural fit for our organization and highly aligned with our mission and values.
First,
He's brought up a rational rigor to many parts of our business.
Driving the development and prioritization of our objectives for 2025.
He has improved our financial discipline and transparency.
and he as further clarified are bold by partner strategy.
Speaker Change: Second, he's invested the time and established strong relationships with all of us stakeholders, including customers, partners, shareholders, and the team.
Speaker Change: Over the last year, he's made with many of our customers across the country and reaffirmed our commitment to both customer success and making it easier to do business with us.
Speaker Change: Just last week, Larry successfully laid the company through a annual user conference, MeridianLink welcoming over 1300 customers, prospects, partners and teammates in attendance.
Speaker Change: He hosted our first ever customer advisory board and the feedback was overwhelmingly positive.
Speaker Change: Throughout the week, our customers shared our excitement regarding our platform and ecosystem growth. Our product roadmap and Larry's laser focus on driving better outcomes for our community banks, credit unions, and credit reporting agencies alike.
and third, Larry is a recognized leader in our organization.
Speaker Change: Among other successes, he has helped bring greater focus and leadership to the commercial team, which became evident through our record annual bookings and new logo momentum we achieved closing out 2024.
Speaker Change: He has also been focused on the development of our talent.
Speaker Change: He's brought in key leadership that can scale and accelerate the business to meet the opportunities ahead.
Speaker Change: including outstanding highest like Elias and our new Chief Strategy Officer,
Speaker Change: I wouldn't have made this decision now if I didn't have the confidence that Larry is the right person to lead the next chapter
Speaker Change: He is ready now, and our employees will join me in my excitement for Larry to take on this role.
Speaker Change: I'm thrilled for him to start his journey as CEO and I'll be there for the transition just as Tim was for me.
to close.
I would like to thank you, our Investors and Analysts.
Speaker Change: I have enjoyed getting to know so many of you throughout my tenure.
Speaker Change: I've learned from you and I'm working hard to use your input to make myself and our company significantly stronger and better.
Speaker Change: I'm excited to stay involved with the company as a board member and significant shareholder.
With that, I will turn it over to Larry.
Thank you, Nicholas.
Larry Katz: First, on behalf of the board and our nearly 700 colleagues, I'd like to take a minute to applaud Nicholas for everything this company has accomplished over the past six years under your leadership.
Speaker Change: MeridianLink is a very different business than it was when you became CEO . You transformed MeridianLink from a collection of on-premise solutions into a leading, cloud-native, loan-origination platform for community financial institutions.
Speaker Change: We did a terrific job with building out our go-to-market team, expanding our customer base, growing our partner marketplace, and extending our product portfolio. Most importantly, you established a strong foundation to deliver long-term value to our customers, partners, and shareholders.
Speaker Change: I have tremendous respect to you, Nicholas, both for what you have built and your capabilities as a leader. You have led with genuine care and appreciation for all stakeholders and created a powerful culture and an enduring legacy.
Speaker Change: Your impact on MeridianLink will be lasting, and I will miss your wisdom on a day-to-day basis.
Speaker Change: I'm grateful for your trust in me and I look forward to working alongside you during your transition and then after October 1st in your continuing role as a MeridianLink board member.
[inaudible]
Speaker Change: I'm thrilled to have the opportunity to lead this company and I'd like to share my perspective on where MeridianLink stands today and where we're headed.
Speaker Change: Today, MeridianLink is a growing and durable business of scale with many compelling strengths. These attributes drew me to MeridianLink one year ago and continue to inspire me today.
MeridianLink delivers real value to our customers.
Speaker Change: We enable community banks and credit unions to support their communities by making lending more accessible and more efficient.
Speaker Change: We are the leading digital lending platform for community financial institutions. In 2024, we processed 28 million consumer loan applications and nearly $700 billion dollars application volume. We also served 50 million background checks and more than 40 million credit reports.
Speaker Change: At the core of our offering is MeridianLink 1 for Unified Cloud Native Platform. It stands out in the market for three key reasons.
Speaker Change: One, our platform is the most comprehensive and scalable consumer lending platform in the market today with the deepest partner network supporting a full range of loan products across the consumer debt wallet.
Speaker Change: Q. Our platform's extensible, multi-tenant architecture gives our customers the ability to compete with Universal Banks, Challenger Banks, and FinTechs.
Speaker Change: and three, our platform has a proven track record of delivering results for customers including loan and deposit growth, consumer acquisition growth, share of wallet expansion, and workflow
Speaker Change: Beyond our platform and product capabilities, we built a powerful, scalable, and effective go-to-market motion. As a vertical-south company, our land and expand model continues to prove its self-effective, with significant opportunities for both new logo acquisition and cross-cell across our product modules.
Speaker Change: We also have something that is harder to measure but just as important and that's a strong culture rooted in customer success.
Speaker Change: Our co-founder, Tim Nguyen, made clear from the beginning, we only succeed when our customers succeed. That commitment is still core to who we are today.
Speaker Change: With this foundation, I'm excited to shape MeridianLink's next chapter.
Speaker Change: Today, we compete in a world that is changing quickly in which the pace of innovation has accelerated, investment has increased, and opportunities abound.
Speaker Change: We will pursue initiatives over the next several years to build on our successes, as well as pursue others that represent new, forward-looking initiatives that will be natural evolutions and extensions of our strategy.
Speaker Change: We've defined three strategic pillars that will guide us going forward. One, increasing our product portfolio, two, making it easier to do business with us, and three, strengthening and our talent.
Speaker Change: First, we're focused on increasing the breadth and depth of our product portfolio and getting the market faster. We are committed to extending the range of our platform to meet our customers needs through product delivery and innovation, partnerships, and acquisitions.
Speaker Change: To help lead this charge, I'm pleased to welcome Troy Kojiolot as our new Chief Strategy Officer.
Speaker Change: Troy joined us in April and brings decades of experience, including 13 years at L.A.M.A., where he served as Senior Vice President of Product. I'm confident in Troy's ability to take us to the next level in product execution and innovation.
Speaker Change: Some parts of our customer experience today, where they need to be.
Speaker Change: Others are more complex than they need to be and we're actively working to simplify these areas.
Speaker Change: Overtime, we believe this focus on customer experience will drive strong product activation higher renewals and ultimately increase the IRR.
Speaker Change: Three we will strengthen our talent.
Speaker Change: Market places competitive and there is increasing pressure across the industry to attract and retain talent.
Speaker Change: As a company at the forefront of digital transformation in financial services. We believe we are well positioned to attract top talent and intend to make investments to achieve our near and long term objectives.
Speaker Change: I want to highlight that while we are focused on delivering results in 2025. Most of our efforts. This year are about building a business that can deliver in 2026 2027 and beyond we are proud of the consistency of our execution on our strategy and investments are intentionally formulated with a long term horizon in mind.
Speaker Change: Sure.
Speaker Change: Let me close by offering a few final thoughts Meridian link is a great business.
Speaker Change: Platform, our customers Trust a team that delivers in a market full of opportunity.
Speaker Change: I'm incredibly excited about what's ahead.
Elias Olmeta: Honestly this company alongside this executive team and nearly 700 talented colleagues with that let me turn the call over to Elias to talk about our first quarter business and financial highlights.
Elias Olmeta: Thanks, Larry and good afternoon, everyone and congrats on your impending promotion. Let me also take a moment to recognize Nicholas on his distinguished career in the exceptional leadership he displayed at Meridian link.
Elias Olmeta: We'll miss you on a day to day basis.
Elias Olmeta: Turning to our results Meridian link achieved $81 5 million in total revenue or 5% growth year over year, and adjusted EBITDA of $34 8, Million% to 43% adjusted EBITDA margin.
Elias Olmeta: Our quarterly results underscore our ability to manage the business amidst a progressively unpredictable macro environments.
Elias Olmeta: Before reviewing our financials I'd like to provide some business updates that showcase the demand for our platform our commitment to product innovation and our focus on customer success.
Elias Olmeta: Q1, we benefited from a favorable demand environment as customers relied on meridian link for solutions that enhance their competitive edge.
Elias Olmeta: This resulted in continued healthy demand with an increased mix of larger deals sustained cross sell momentum and increased demand for mortgage lending.
Elias Olmeta: Total bookings increased this quarter compared to the previous quarter and the same quarter of last year.
Elias Olmeta: Rob sell and upsell continue to represent the majority of our bookings and significantly accelerated year over year.
Elias Olmeta: In Q1, and existing Meridian linked consumer credit Union with nearly $600 million in assets expanded its relationship with us by purchasing meridian like mortgage.
Elias Olmeta: Our silkier marketplace integration and Meridian link access.
Elias Olmeta: With a total of six modules on the Meridian link one platform. This customer will achieve cross sell benefits from covering more of the consumers that wallet and improving workflow efficiencies by lending.
Elias Olmeta: One seamless platform.
Elias Olmeta: Combining silkier with access improves the digital experience for consumers increases application volume and reduces fraud risk.
Elias Olmeta: We also continue to see accelerated demand for our mortgage lending solutions. In Q1, we completed 15 mortgage lending deals up nearly 90% year over year and the highest counting over two years.
Elias Olmeta: Our continued momentum in mortgage highlights our fit for purpose lending capabilities for mid market financial institutions and demonstrates our right to win in this market segment.
Elias Olmeta: The new logo front, we secured a bank customer with $8 billion in assets. They will utilize meridian link mortgage and mortgage access which supports of M&A strategy by enabling more efficient vendor consolidation through one platform.
Elias Olmeta: Our customer recognize our platform's ability to quickly onboard new users as they continue to acquire competitors and turn closing more loans faster.
Elias Olmeta: Our customers in many cases are gaining market share benefiting us as well.
Larry Katz: As Larry mentioned customers choose meridian length, because we are the most comprehensive and scalable digital lending platform in the market today and we drive the notable return on investment.
Larry Katz: By way of example, take Celerity credit Union, we recently announced the celerity and existing already in link.
Larry Katz: Sumer customer with around 50000 members selected Meridian link mortgage for its ability to streamline and centralize lending.
Larry Katz: They were able to consolidate 13 different mortgage products under Meridian link one.
Larry Katz: As of Q1 Celerity has streamlined the application to funding process, reducing processing time by approximately a third and increasing operational efficiency.
Larry Katz: With respect to product updates, we are committed to prioritizing our customers needs in our roadmap.
Larry Katz: In Q1, we enhanced meridian link one to streaming like deposit account applications for consumers returning to their bank or credit Union.
Larry Katz: Secondary account applications make up more than 75% of the policy application volumes and many financial institutions.
Larry Katz: By streamlining the workflow and auto filling necessary data from the core we reduce the total time for consumers to open a secondary account by approximately 70% our product capabilities were on full display for approximately 3500 attendees at Meridian linked live our annual user conference held in Orlando last.
Larry Katz: Weak.
Larry Katz: Customers had a great reaction to the continued progress we've made on Meridian link access at.
Larry Katz: At the user conference we spoke to the increased depth of our product over the last year, including six new partner integrations across fraud identity verification and credit verification to make it easy for customers to leverage value added partner capabilities to create a more seamless digital account opening process for consumers.
Larry Katz: We also added over 10, new application flows, including business account opening home equity and bundled loan and account opening transactions.
Larry Katz: As part of our roadmap efforts, we will continue to invest in our point of sale and account opening capabilities.
Larry Katz: Overall, we are energized by the success of the conference having achieved record attendance generated substantial pipeline and build stronger customer relationships and.
Larry Katz: In summary, we are heartened by the momentum and progress we achieved starting off this year.
Larry Katz: Now onto the financials and Q1 revenue growth accelerated notably in our lending software solutions profitability expanded and we achieved solid free cash flow conversion.
Larry Katz: Reported GAAP revenue was $81 5, million% to 5% growth year over year, and adjusted EBITDA was $34 8 million or 43% adjusted EBITDA margin.
Larry Katz: We generated $46 million of free cash flow or 50% of revenue and ended the quarter with $128 9 million in cash and cash equivalents.
Larry Katz: Our Q1 total year over year revenue performance of 5% growth in terms of the revenue algorithm was as follows one ACI.
Larry Katz: ACD release contributed mid single digits.
Larry Katz: Price and churn were in the low single digits, each and essentially offset each other and three volumes and onetime customer down cells combined were a low single digit drag.
Larry Katz: Excluding a onetime customer down sales volumes were roughly neutral contributor to revenue growth.
Larry Katz: Moving to our total revenue performance of 5% growth by source subscription revenue, which was 84% of our total revenue grew 4% year over year.
Larry Katz: This growth was driven by the successful activation in recognition of subscription revenue from our implemented software solutions for both new and existing customers, what we refer to as ACD release.
Larry Katz: Services revenue declined 4% year over year, primarily driven by a one time core upgrade program that spanned 2024 in Q1 of 2025.
Larry Katz: Excluding this one time program services revenue growth was flat year over year. Other revenue grew 41% year over year, driven by nonrecurring items that amount to approximately 600000.
Larry Katz: Now looking at our 5% total revenue growth by solution type.
Larry Katz: Total lending software revenue growth was 10% year over year and accounted for approximately 82% of revenue consumer.
Larry Katz: Consumer lending revenue growth was 11% year over year and accounted for 90% of lending software revenue we.
Larry Katz: We are encouraged by the acceleration in our core franchise and the fact that the primary driver continues to be one of our controllable ACD release.
Larry Katz: In addition, consumer volumes grew year over year in Q1, driven by strength in auto and a onetime benefit from what we believe has been a partial pull forward in demand driven by consumers purchasing vehicles before tariffs became effective.
Larry Katz: Mortgage lending revenue growth was 7% year over year and accounted for the remaining 10% of our lending software revenue.
Larry Katz: This is the first quarter and a year that we have seen acceleration driven by improving churn and volume uplift primarily from refinancings.
Larry Katz: I also want to highlight a few kpis for our lending business to demonstrate its resilience and acceleration in Q1.
Larry Katz: Total lending IRR was $204 7 million and grew 7% year over year driven by growth in both consumer and mortgage lending solutions.
Larry Katz: <unk> was 106% our highest rate since the second quarter of 2023, and a great proof point of the stickiness of our customers through difficult operating environment.
Larry Katz: We also achieved 10% year over year growth in the average lending software <unk> per customer, which has reached an all time high of 135000.
Larry Katz: This is the fourth quarter in a row of acceleration as lower value customers churn and we continue to find success with larger platform deals across both consumer and mortgage.
Larry Katz: Turning to data verification software solutions revenue declined 15% year over year and accounted for 18% of total revenue.
Larry Katz: This decline was driven by a 28% decrease in our mortgage related revenue, which is nearly half of DBS and it was primarily impacted by the large customer downhill.
Larry Katz: As we noted in Q4, the annual impact of that renewal will be approximately $6 million.
Larry Katz: Moving onto our profitability adjusted gross profit was $60 4 million, representing a 74% margin and a 54 basis point improvement in operating leverage year over year.
Larry Katz: Our total operating expenses were $26 7 million or 33% of revenue and increased 1% year over year.
Larry Katz: R&D expense was $7 8 million or 10% revenue and declined 1% year over year.
Larry Katz: Sales and marketing expense was $9 4 million or 11% of revenue up 2% year over year.
Larry Katz: G&A increased 1% year over year to $9 6 million or 12% of revenue adjusted EBITDA was $34 8 million or 43%. Adjusted EBITDA margin. This is nearly 200 basis points of improvement in operating leverage year over year and demonstrates our continued cost discipline as we work towards our longer term.
Larry Katz: That will start in Q2, an increase in the second half of the year.
Larry Katz: Finishing with our capital position cash flow from operations was $42 4 million or 52% of revenue and free cash flow was $40 6 million or 50% of revenue.
Larry Katz: We ended the first quarter with cash and cash equivalents of $128 9 million, an increase of $36 1 million from Q4.
Larry Katz: I'll now turn to guidance for 2025, we do not anticipate that our Q1 volumes are purely indicative of a longer term trend in particular as it relates to auto.
Larry Katz: We are of the view that what we likely experienced with some pull forward of demand as selected consumers sought to get ahead of the potential impact of tariffs on auto prices.
Larry Katz: We expect the net impact of this pull forward on the year to be neutral because of the tariff related price increases prices should temper demand in future quarters.
Larry Katz: Ongoing conversations with our customers recent economic data and the potential impact from tariffs point to an increasingly uncertain environment for the consumer in 2025.
Larry Katz: As a result of that uncertainty our 2025 outlook remains unchanged at this time.
Larry Katz: Once we are through the second quarter, and assuming greater clarity on the impacts of tariffs and the macroeconomic environment. We may provide an update at that point.
Larry Katz: Total GAAP revenue is expected to be between $326 million and $334 million for 2025.
Larry Katz: Third to $316 3 million for the full year 2024.
This represents an estimated increase of three 6% year over year.
Larry Katz: To provide more color on how revenue will trend by solution type at the midpoint of our guidance.
Larry Katz: We expect consumer lending will grow approximately 7% in 2025, driven by releasing <unk> at a steady pace.
Larry Katz: Higher for longer environment consumer volumes are expected to be broadly flat year over year.
Larry Katz: We expect the mortgage market to contribute approximately 18, 5% of revenue for the full year 2025.
Larry Katz: On the non mortgage side, we expect modest growth year over year data verification revenue.
Larry Katz: I will now describe our 4% total revenue growth at the midpoint of our guidance in terms of the revenue algorithm.
Larry Katz: In this uncertain market, we are staying focused on the controllable we have solid visibility into the drivers of our revenue such as ACD release churn and price.
Larry Katz: As I mentioned volume growth is less certain and we are expecting a modest deceleration in the back half of the year with that one we expect ACB release to continue contributing mid single digits and to be the single largest driver of our revenue growth in 2025.
Larry Katz: Two we expect price to continue to offset churn for the full year.
Larry Katz: Three we expect that volumes in the DVS customer renewal combined will be a low single digit headwind.
Larry Katz: Excluding the customer down sell total volumes across all of our products will be slightly positive year over year, and a broadly neutral contribution to revenue growth.
Larry Katz: Now turning to the adjusted EBITDA Guide.
Larry Katz: Costs are another factor, we are focused on controlling where strategically reinvesting in our product roadmap and go to market team this year to drive future growth.
Larry Katz: For the full year 2025, adjusted EBITDA range is expected to be between $131 5 million and 137 5 million, representing adjusted EBITDA margins of approximately 41% at the midpoint, while the midpoint of our guidance implies a 41% margin we are not changing our longer term.
Larry Katz: What a 40%. This is an instance, where the timing of long term investments can fluctuate.
Larry Katz: Nonetheless, we remain committed to such investments as the current environment presents an excellent opportunity to ready the business for what we see as an attractive growth runway ahead as cyclical with headwinds shift to tail winds.
Larry Katz: To provide more clarity on the shape of the year, we anticipate seasonality in our total revenue throughout 2025 to be broadly in line with the seasonal pattern. We saw in 2024.
Larry Katz: Meridian links high percentage of subscription revenue and strong quarterly ACB release gives us confidence in our annual growth expectations.
Larry Katz: We continue to expect our expenses to be impacting by the timing of investments that will start in Q2.
These will ramp up in the second half and there will be modest contraction in margins, we expect both R&D and sales and marketing as a percentage of revenue will increase approximately 100 bps for 2025 compared to 2024 as we invest in our product roadmap and go to market capabilities.
Larry Katz: We view these incremental investments is preparing the company for growth in the years ahead. As a result, we expect adjusted EBITDA margins to be highest in the first quarter before slightly declining in the second half of the year exiting Q4 at a run rate margin slightly below 40%.
Larry Katz: We continue to manage the business to eventually become a rule of 50 company and are investing appropriately I would note that based on Q1 results. We our rule of 48 company.
Larry Katz: Finally, I'd like to reiterate how resilient the company has been through another quarter all thanks to the outstanding effort of our team.
Larry Katz: Going forward, we are remaining focused on strategically investing in and building a business for scale in 2026 and beyond with that Nicholas Larry and I are happy to take any of your questions and I'll turn it over to the operator.
Larry Katz: Thank you.
Larry Katz: Ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by the number one on your Touchtone phone Youll see a bump that Johan has been great.
Larry Katz: Youre seeing a speaker phone please leave the handset before pressing and it.
Larry Katz: Should you wish to the claim from the polling process. Please press the star followed by the number too.
Larry Katz: The first question.
Speaker Change: Your first question comes from Alex Sklar from Raymond James. Please go ahead.
Alex Sklar: Great. Thank you Larry congratulations on the promotion new role.
Alex Sklar: Maybe just starting with you you laid out some changes you're going to be embarking on kind of as part of this next chapter and I am.
Alex Sklar: Just wanted to get some more color is this this is more kind of an evolution on some of the things <unk> already been working on the last couple of years are these brand new initiatives that youre going to put into focus over the next couple of years, how meaningful are these changes kind of in aggregate.
Larry Katz: Hey, Thanks, Alex This is Larry.
Larry Katz: Look first of all I'm excited to take on the role.
Larry Katz: And.
Larry Katz: And I would I view this as a continuation of our strategy no no real change, but there is a bit of focus that I'm, bringing it in my comments.
Larry Katz: We got a really strong and durable business and over the past year that I've been here working with Nicolas and the team had been focused on.
Larry Katz: Bringing discipline to the business and accelerating growth in the business and this is what I'm highlighting are really strategies to drive acceleration in progress and momentum in the business around how we sell how we go to market, how we deliver products.
Larry Katz: How we deliver our services and so I mentioned, a few of the areas that I'm that I am focused on around.
Larry Katz: Products.
Larry Katz: And depth of our product portfolio on project execution, and we have been working on that over the past year as well and will continue to be focused on that.
Larry Katz: Making it easier to do business with us I've talked about the customer journey in the past and will continue to bring focus to to how we show up with the customer and listening to the customer voice and a good example of that was the cabinet we talked about just hosting this past last week and then strengthening our talent you've seen some of the some of the additions that we brought to.
Larry Katz: The Tam Elias Troy.
Larry Katz: But it's not just around <unk>.
Larry Katz: Bringing in new talent, it's also around supporting our existing talent and helping them develop their own skills and experiences to operate at this larger scale that we have today, so continuing to invest in our own teams. So these are all these are all strategies that I think are super important to our ability to scale and compete going forward and we've been working on them for the past.
Larry Katz: And we will continue to.
Speaker Change: Okay, great great color, there and maybe a follow up either for you Larry for Elias just in terms of the backlog and you called out <unk> bookings that exceeded Q1 of last year and Q4 of last year I know you've got high visibility on ACB release, but just given some of the increased macro very variability how are you thinking.
Speaker Change: About the demand backdrop and the ability to replace that mid single digit ACB relief that you laid out for this year.
Speaker Change: Yes, we are.
Speaker Change: Or is it less.
Again, our pipeline continues to be strong and healthy and we feel really good about that the demand environment continues to be.
Speaker Change: <unk> continues to be robust.
Speaker Change: Demand across the platform, we talked about at both cross sell demand new logo demand mortgage demand. We highlighted so we do feel good about it when I think about that.
Speaker Change: The macro environment that we're operating in.
Speaker Change: We are seeing a bit of softness at the top end of the funnel.
Speaker Change: Hard to know if that's if that's macro related or not but we're watching that carefully.
Speaker Change: We have not yet seen any.
Speaker Change: Changes in our sales cycle as we talked to our sales leaders, we don't hear about that directly but it's reasonable to expect that that that could happen given the uncertainty in these investments that our customers are making I think we will see more reasonable to expect that we could see a little more softness in the new logo because switching platforms as a as a bigger lift than cross.
Speaker Change: Sell so we're watching that carefully as well, but we haven't seen any any changes as of yet.
Speaker Change: Alright, great. Thank you for the color.
Thank you.
circuit Calia: Your next question comes from Circuit Calia from Barclays. Please go ahead.
circuit Calia: Okay, Great Hey, guys. Thanks for taking my questions here and congrats Nicolas and Larry on your on your new respective roles.
circuit Calia: Yes.
circuit Calia: Nicolas and Larry maybe maybe for other view I'd love to dig into the consumer lending business, specifically, a little bit just given the growth acceleration, there and maybe maybe zoom in a little bit on new business and Larry you touched on this a little bit in your prior response, but just to ask it specifically for consumer lending can we just talk a little bit about the new business.
circuit Calia: They're a little bit.
circuit Calia: And maybe zooming out do you think the profile of the customer there is changing at all whether it's banks versus credit union or big versus small any color on whether that profile is changing.
circuit Calia: Yeah.
circuit Calia: As you continue to gain share.
Speaker Change: Sure Hey, sorry, good. Thanks, Thanks, Larry again, thanks for thanks for that.
circuit Calia: Congratulations.
circuit Calia: So on consumer first of all.
circuit Calia: The growth has been annualized can build on this but a lot of the growth is being driven by ACB related right.
circuit Calia: That's really what's showing up there and thats, both cross sell and new logo to your question around new logo demand look it continues to be solid in the consumer space we.
circuit Calia: We continue to have what we think is the most comprehensive the most complete solution out there as a platform.
circuit Calia: And as I was talking to customers last week add lives. It is recognized to be the leader in the space and to really be mission critical and so.
circuit Calia: Feel good about our position there and the demand for for consumer.
circuit Calia: I think in terms of the size of the clients.
circuit Calia: What I would point to is the is the average IRR is Elias talked to is going up and I think that's really just a power of demonstrates the power of the platform and how.
circuit Calia: Sure.
circuit Calia: The value that we're delivering and what customers are willing to pay for that so I think that's a part of it we are seeing some.
circuit Calia: Additional success and larger.
circuit Calia: Clients and we've talked about some of those on the call as well and I think Thats just speaks to the scalability of the platform as well so.
circuit Calia: Yes, so anything you want to add Internet closer last.
Speaker Change: Well, let me just add that of course, it was a tremendous quarter for the consumer right hitting a 11% year over year and just to echo.
circuit Calia: <unk>.
circuit Calia: Success in all the areas that Larry mentioned and that we're seeing that really in HCV release being.
circuit Calia: The leader in driving that growth.
circuit Calia: But also on the back of some of the <unk>.
circuit Calia: Some of the volumes that we saw particularly in automotive there was there was a slight we benefited from.
circuit Calia: Some volume improvement as part of our revenue algorithm. So.
circuit Calia: Really really nice quarter in particular for our consumer but for our lending business in general.
circuit Calia: Yeah, absolutely and actually a life, maybe maybe for you just to follow up on that and in a similar vein just on the consumer business specifically.
circuit Calia: I guess, how do you sort of think about disaggregated. This quarter's 11% growth in terms of I don't know maybe like a same store sales metric right like volume growth from existing customers versus.
circuit Calia: New customer contribution slash ACB release is there a way that you kind of have us think about that to map back to that 11.
circuit Calia: Yes, I mean, the single ACB releases is really.
circuit Calia: It's one of two things, it's either new customers, new logos that we are bringing onboard or existing customers, who are expanding their relationship with us.
circuit Calia: So that is what's driving the ACB release, which was the majority of what we were able to achieve in the quarter. So that I would I would consider if you want to think about that is new versus old that's the way to think about.
circuit Calia: And that's not all volume driven it's mostly driven by minimums, but but nonetheless, that's new customers and then as I alluded to earlier there was we had an uptick from from volumes and that's primarily our existing customers and volume that's being driven.
circuit Calia: From there.
circuit Calia: From their operations that is flowing through for revenue from us and think of that really is the volume that is piercing the minimums and that we are getting some upside.
circuit Calia: Very helpful. Thanks, guys.
circuit Calia: Okay.
circuit Calia: Perfect.
Speaker Change: Your next question comes from Nick <unk> from UBS. Please go ahead.
Speaker Change: Hey, guys. Thanks for taking my questions and congrats on the promotion, Larry and Nicholas Congrats everything that you've accomplished that meridian Lagos CEO over the last six seven years.
Speaker Change: Larry first question for you. So now that you've been with the company for a little over a year.
Speaker Change: Looking out over the next few years can you just put a finer point on where you see the most opportunity.
Speaker Change: To invest in the business organically just in terms of the <unk>.
Speaker Change: <unk> depth of Meridian life product portfolio.
Nick: Yeah, absolutely thanks, Nick.
Speaker Change: Look as I talked about right I think.
Speaker Change: Well, let me, let me talk about kind of our buy build partner strategy here right. One of the changes that we've made with with <unk> coming in is really pulling together buy build and partner under one under one leader and I start there because that's really the continuum of capital allocation. So it's not just organic but it's also a partnership and it's also M&A that we're thinking about.
Speaker Change: And look I think we are there are.
Speaker Change: Number of areas where.
Speaker Change: We're going to continue to invest we're going to continue to invest in digital interfaces.
Speaker Change: Both directly and via a partnership so that means digital point of sale that means workflow digital interfaces.
Speaker Change: And we we spent a lot of time talking about access which is our organic point of sale.
Speaker Change: At access last last week and that will continue to be an area of investment, which we think is well fit for a lot of our customers.
Speaker Change: We will.
Speaker Change: To invest in automation in the platform.
Speaker Change: We talked about areas last week around things like rapid account opening 92nd account opening and Elias has talked about the secondary account.
Speaker Change: Pick up we talked about things like touchless credit card lending those kind of initiatives that drive automation and efficiency and ultimately.
Speaker Change: Conversion for our customers our areas of focus.
Speaker Change: We will continue to we will continue to invest in partnerships.
Speaker Change: And ease of integration with the platform. We've got a large portfolio of partnerships and will continue to will continue to invest in those and those partners because look we cant we don't intend to do everything ourselves.
Speaker Change: We will do ourselves and <unk> partnership and so the ease of integration of monetization of the partnerships is critical and then the last one I'd highlight is as AI AI is going to be.
Speaker Change: We're excited about the opportunities across the business NII.
Speaker Change: And from a product perspective, we think it's going to be a real enabler both for consumers as well as for workforce.
Speaker Change: Can we can see opportunities.
Speaker Change: <unk> from AI powering Doc capture and a much more simple way demand generation strategies decisioning on underwriting collections et cetera. All of those we think are going to be meaningfully changed with AI and thats going to drive efficiency for our customers that's going to drive velocity for our for our customers.
Speaker Change: Meaning.
Speaker Change: From conversion from the front of the applications through funding, which ultimately creates revenue for the customers and it's going to drive it is going to deliver better customer experiences and customer outcomes.
Which allows our.
Speaker Change: Which allows our clients our customers to compete with universal banks and challenger banks, and Fintech, which is which is in that competition is growing every day. So those are the areas that we're focused on them and we'll share more as trying getting to see it and he has developed as buy build.
Speaker Change: Partner strategy.
Okay.
Speaker Change: Understood. Thanks for all the color Larry and for my follow up I had a question for Elias I was hoping that you could just put a finer point on what your expectations are for the auto lending vertical in 2025, just given the uncertainty of that part of the business as they think from any potential tariffs.
Speaker Change: So are you assuming that business grows in line with the rest of consumer lending for the year and what did it grow in Q1. Thank you.
Oh.
Speaker Change: Yes.
Speaker Change: So we don't breakout the individual components of consumer, but as I mentioned consumer grew 11% in the quarter.
Speaker Change: We're not changing our.
Speaker Change: Our guide for the year I would I would point you to the fact that we're assuming.
Speaker Change: 7% year over year growth.
Speaker Change: I acknowledge the.
Speaker Change: Uncertainty on the auto front.
Speaker Change: We did see some improvement there in terms of volumes, but again, we're assuming that that is mostly a pull forward of.
Speaker Change: Stuff that we would have seen in Q2 and Q3.
Speaker Change: And so we are being I think prudent in the face of.
Speaker Change: The significant uncertainty and since we just provided guidance, which I think remains relevant just eight weeks ago, we're going to hold and if we have something more to give you.
Speaker Change: We will look forward to doing so and in Q2.
Speaker Change: Understood. Thank you.
Speaker Change: Thank you.
Koji Ikeda: Your next question comes from Koji Ikeda from Bank of America. Please go ahead.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Mr. <unk> Your line is open up.
Speaker Change: Okay, sorry about that this is on for Koji.
Speaker Change: Thanks for taking my question and Larry Congrats on the promotion you guys talked about improving churn in the mortgage business for the first time in a few quarters, which is great to hear what would it take for you to say that retention has stabilized or inflected positive in the current environment could you see that being a trend soon or would it be a little premature.
Speaker Change: Yes. Thanks for the question I mean, we have seen.
Speaker Change: We have seen.
Speaker Change: Our retention.
Speaker Change: Improve.
Speaker Change: Whether that's whether that's a trend or not I'm not going to venture a guess at this point, what I would say, which is in line with what we have said with prior quarters is that.
Speaker Change: Customers that we are losing tend to be very much at the small end of the scale.
Speaker Change: Similar to what I said last month.
Speaker Change: We classify them within buckets and the average of all of the customers. We lost was about 40000, but over over half of those had <unk> of less than 10.
Speaker Change: So as you can see.
Speaker Change: These arent materially sized customers. This is.
Speaker Change: And these are just.
Speaker Change: Institutions that we don't think are able to either take advantage of the full benefits of the platform brings ore.
Speaker Change: Or just.
Speaker Change: I have decided to drop for one reason or another I guess, what I would say is.
Speaker Change: It's part of the reason why we're seeing <unk> grow and we feel good about.
Speaker Change: Where the business is trending and where.
Speaker Change: <unk>.
Speaker Change: Is trending in the quarter.
Speaker Change: Got it okay. Thank you that's all for me.
Speaker Change: Thank you.
Scott Wurtzel: Your next question comes from Scott Wurtzel from Ward.
Speaker Change: Research.
Speaker Change: Okay.
Speaker Change: Hey, good afternoon, guys. Thank you for taking my question I wanted to go back to the comments you made about the mortgage demand being a little bit elevated I'm wondering if you could maybe unpack that a little more and talk about the drivers of the increased demand and you know with the <unk>.
Speaker Change: Number of mortgage winds up 90% year over year, how much of that is due to higher demand versus better internal sales execution also thanks.
Speaker Change: Thanks, Larry I'll start and I'll ask can follow on.
Speaker Change: Look we have a really strong mortgage offering and we have a we believe we've got the right to win in the mid market and community banking and credit Union space, We've got a terrific price value equation, there and I think that's showing up in our win rate. We also have invested in.
Speaker Change: And our sales team and I think we're really having strong success across the board on.
Speaker Change: On mortgage run rates because of the strength of that team. So I think it's both of them.
Speaker Change: I think that Theres also a macro here.
Speaker Change: And a competitive dynamic in the macro is that at some point.
Speaker Change: They're at lows.
Speaker Change: Market, but we know that at some point that will turn and the smart players out there are looking ahead and saying this is the right time to invest is hard to invest when your.
Speaker Change: When youre going 100 miles an hour. So this is the right time to make some of those tranches transitions that I think we're seeing the impact of that and then we're also seeing some dislocation in our competitive environment competitive set as well whether it's <unk>.
Speaker Change: Changes that others are making or just aging platforms and so there's a real there's a real interest in our platform and Thats why youre seeing a positive trend.
Speaker Change: Yes, I would just add to that in the quarter we flipped.
Speaker Change: We grew nicely in the quarter and again, mostly driven by <unk>.
Speaker Change: <unk> released but we also there was there was some really nice impact from from volumes in the mortgage market, primarily from refi and we've been able to really take advantage of that and if the market continues to perform and we're able to be continue to be successful in the marketplace.
Speaker Change: I am hoping that this is the beginning of a good trend, but too early too early to specifically call that out.
Speaker Change: Got it and just as a just as a follow up I wanted to see if you can talk about your appetite for M&A in this environment right. Now you built a nice cash position on the balance sheet leverage I think at around two five turns now. So just wondering if you can talk about M&A appetite at these levels here.
Larry Katz: Yes, I'll start again as Larry annualized can pick up.
Speaker Change: Since I joined we've been talking about the opportunity.
Larry Katz: And M&A and it's core to our strategy.
Larry Katz: We've done a number of deals in the past and but we have to find the right deals at the right price and of course, they've got to be willing to sell as well. So we have to be patient and disciplined around it which we are.
Larry Katz: So when we think about the M&A strategy I think we've talked about this in prior calls there's kind of three three concentric circles around our business one would be just tuck ins to the platform and that would likely be fishing within our partnership pool.
Larry Katz: Or businesses that we know well because we work with M&A enhance that.
Larry Katz: The core I'll ask the second one would be near Adjacencies similar.
Larry Katz: Related to the Pos business, but maybe I'll circle out from just plug ins and then the third would really be transformational deals when we look at them all the time.
Larry Katz: And I'll let.
Larry Katz: And I think we do have firepower, but I'll, let <unk> talk to the balance sheet.
Larry Katz: As you well point out we have a strong balance sheet I mean, we have almost $130 million of cash we have.
Larry Katz: All of our capacity under our revolver.
Larry Katz: You can see from our from the quarter, we had a very strong quarter from a free cash flow perspective, and so.
Larry Katz: There is there is lots of room for us to do deals that could.
Larry Katz: Without having to go tap external capital that could reach possibly up to $200 million that being said, if we were to do something larger which I'm not I'm not handicapping that I'm merely providing some color you know theres always we're in a good position to to obtain leverage on and foreign capital. So theres lots of activity. We continue to look at.
Larry Katz: Things, we continue to look at things in a very disciplined manner, we think prices.
Larry Katz: Have are high.
Larry Katz: For the right deal, we may reach but we are being disciplined and thoughtful about how we approach. This.
Larry Katz: As we evaluate every every opportunity that comes our way and there are many.
Larry Katz: Great. Thanks, guys.
Parker Lane: Thank you. Your next question comes from Parker Lane from Stifel. Please go ahead.
Speaker Change: Hi, This is Matthew kicker on for Parker. Thank you for taking my questions first congratulations to Nikolas long tenure as CEO and also to Larry for the promotion.
Speaker Change: First question I am curious so the non mortgage lending improves or are there dynamics that would delay the revenue.
Speaker Change: Revenue recognition at all similarly to mortgage volume minimums, there or would you see revenue bounce back more quickly.
Speaker Change: And then non mortgage segments and a better lending environment. Thank you.
Speaker Change: Yes.
Speaker Change: I guess I would say a couple of comments on the on the consumer side.
Speaker Change: There are two items that.
Speaker Change: Work too.
Speaker Change: At times.
Speaker Change: Limit our ability to recognize all of the revenue associated with bonds and I've talked about this in the past. So one is just simply global minimums. So our customers are subject on the consumer side to global minimums related to all of their products. So even though you might have a particular product do well in the quarter. There are total product stack needs to do well for them.
Speaker Change: It appears there are minimums, so if one product goes down that offsets improvement.
Speaker Change: In a particular product. So you have to keep that in mind and the second is as we are having as we are having success with ACD release and as we are having.
Speaker Change: Having success cross selling into our customer base, there is a slight drifts in our minimums upward.
Speaker Change: So all of that is to say that.
The the rate at which our consumer business needs to grow.
Speaker Change: <unk> has increased for us to recognize some of that revenue that doesn't mean, we don't we recognized a few points in the quarter, but that is different and distinct from our mortgage business, where it is just one minimum one product and as those customers peers that we recognize that.
Speaker Change: Net revenue.
Speaker Change: Okay.
Speaker Change: Okay. Thank you for that and then secondly, I know you are focused on investing in both the go to market and the product throughout the remainder of this year I'm wondering if you could detail specific areas of the go to market that you are looking to invest in more and if youre seeing any initial impact from these changes so far in <unk>.
Larry Katz: Sure Larry.
Larry Katz: I think we talked about this a bit last quarter as well.
Larry Katz: Yes.
Larry Katz: Forget about the size of our of our quota carrying sales force sells Martin we've been investing in a couple of things one is sales.
Larry Katz: Sales sales engineering and sales consulting.
Larry Katz: So so helping.
Larry Katz: Existing and new customers really understand the value of the platform understand how they can get the most out of the platform and architect that.
Larry Katz: From the beginning of the sales process.
Larry Katz: And so we have.
Invested there and are starting to really get some great positive feedback there.
Larry Katz: Probably a little early to call.
Larry Katz: Call wins there.
Larry Katz: But building momentum there and I saw that and felt that it lives. The second is in some of our demand generation.
Larry Katz: Investments and strategy is to find top of the funnel and that's.
Larry Katz: We're swimming upstream a little bit against a more challenging macro but.
We will I expect that we will see benefits there and it's certainly a worthwhile investment that's about being in front of our customers.
Larry Katz: And prospects when they are in market.
Larry Katz: And when they are looking at opportunities and we've identified a number of strategies.
Larry Katz: To be more present in client with them an offer.
Larry Katz: Im optimistic about the opportunities there.
Larry Katz: Okay.
Larry Katz: Terrific. Thank you.
Speaker Change: Thank you, ladies and gentlemen, as a reminder, shall you have a question. Please press star one.
Speaker Change: Your next question comes from Marc Feldman from William Blair. Please go ahead.
Speaker Change: Hi, guys. Thanks for taking the questions on for Chris today, and just monitor.
Speaker Change: Extend the congratulations on all the leadership changes going on and then I guess my first question is yes.
Speaker Change: You talked about the deposit account opening application.
And all of the upgrades, you're making there could you just put a finer point on the opportunities associated with that and how that can help you win.
Speaker Change: A differentiated offering with your with your customer base.
Speaker Change: Yes sure.
Speaker Change: Look at account opening has always been core to the offering so it's always been very close.
Speaker Change: To lending and when you open a loan account opening a deposit account at the same time.
Speaker Change: Which ultimately strategically as important to our customers because thats, how they build how they build their customer base and cross sell around it.
Speaker Change: Yes.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: With the generational changes that we're seeing in the larger market, where we're shifting through.
Speaker Change: Gen X and millennials and Gen Y who are all very digitally savvy and digitally native customers.
Speaker Change: The digital applications and Omnichannel account opening is really core to their success and so our investment around access is about a more modern digital omnichannel.
Speaker Change: Et cetera set of capabilities that supports them and we think thats.
Speaker Change: We've had account opening capabilities, we're just investing to improve those and accelerate those and make those more seamless and elegant and efficient and customer friendly and thats really what our investment strategy. As we also open our what we believe access is going to be very relevant to the majority of our customer base for the more complex implementations.
Speaker Change: There are a number of other losses or sorry point of sales that are.
Speaker Change: We had a great two as well and those are always options and we want to be there to support our customers as they for whatever choices they need to make.
Speaker Change: But we think the integration.
Speaker Change: The seamless integration of our account opening with our LLS is really differentiated.
Speaker Change: And.
Speaker Change: Both from an implementation perspective, a data perspective security perspective and also.
Speaker Change: Just ease of use for the customer so.
Speaker Change: I think it's we think it's important and we will continue to be important.
Speaker Change: Got it no. Thank you that's very helpful and I guess second question here I appreciate the expectations given provided around churn just wanted to see if there's any way to break out the.
Speaker Change: Components of churn that are related to industry M&A, just given consolidation a lot of what we're hearing is increases in industry consolidation given the.
Speaker Change: Potentially.
Speaker Change: Softer regulatory landscape.
Speaker Change: Yes, we don't we don't.
Speaker Change: Break that out we may consider that but at this point we don't.
Speaker Change: Break that out or provide any further detail on that.
Speaker Change: And maybe beyond that just the numbers, they're talking to us just from a regulatory perspective as I think you're also asking about kind of what's going on in the macro and how does the regulatory environment impact us I would expect that there will continue to be consolidation in the space and there was there is.
Speaker Change: In a more.
Speaker Change: Accommodating regulatory stance it.
Speaker Change: Consolidation I would expect will accelerate.
Speaker Change: Our experience is is that all a lot of acquirers are customers of ours and that actually is a tailwind for us because it's no surprise that the larger institutions, who are the acquirers. They also are investing in technology and.
Speaker Change: They're more able to scale via acquisition and so we tend to win in those.
Speaker Change: And those kind of deals.
Speaker Change: So.
Speaker Change: We're watching it carefully but I would expect to be a positive for our business.
Speaker Change: Great. Thanks for taking the questions.
Speaker Change: Okay.
Nicolaas Vlok: There are no further questions at this time I will now turn the call over to Nicolas for closing remarks. Please go ahead.
Nicolas: Thank you operator.
Nicolas: As we wrap up I know, you'll join me in congratulating, Larry as our incoming CEO.
Nicolas: I know that he will continue to lead and accelerate our growth strategy and bolt on the trust placed in us by our customers partners and the team.
Nicolas: Speaking of the team I want to thank everyone at the Meridian link for a solid Q1 performance.
Nicolas: I'm consistently impressed by our employees is take the occasion to innovation and customer success.
Nicolas: I'm sure that's a good consistency and creativity stainless trade it will undoubtedly continue in the years to come.
Nicolas: Thank you.
Nicolas: Okay.
Speaker Change: Ladies and gentlemen, this concludes your conference call for today, we thank you for participating in that so that you. Please disconnect your lines.