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MeridianLink Reports Third Quarter 2021 Results

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Revenue of $67.4 million grows 29% year-over-year

COSTA MESA, Calif., November 03, 2021--(BUSINESS WIRE)--MeridianLink, Inc. (NYSE: MLNK), a leading provider of modern software platforms for financial institutions and consumer reporting agencies, today announced financial results for the third quarter ended September 30, 2021.

"We are extremely pleased with our Q3 results, which included 29% year-over-year revenue growth, while continuing to demonstrate high levels of profitability with 46% adjusted EBITDA margins," said Nicolaas Vlok, chief executive officer of MeridianLink. "This quarter’s solid performance spotlights that financial institutions and consumer reporting agencies choose us time and time again to better serve their customers by accelerating their digital transformation. The adoption of MeridianLink Portal by more than 60 new and existing clients highlights this demand. As a market leader, we are ideally positioned to take advantage of these emerging digitalization trends in our target and adjacent markets."

Quarterly Financial Highlights:

  • Revenue of $67.4 million, an increase of 29% year-over-year

  • Operating loss of $(8.8) million, or (13)% of revenue and Non-GAAP operating profit of $17.1 million, or 25% of revenue

  • Adjusted EBITDA of $31.0 million, or 46% of revenue

  • Cash flow from operations of $19.1 million, and Free Cash Flow of $17.6 million

Business and Operating Highlights:

  • MeridianLink secured another strong roster of new logo customers and cross-sell wins within our target markets of community banks, credit unions, and consumer reporting agencies (CRAs)

  • The company expanded further into adjacent markets, including signing a consumer specialty lending client with a national footprint and a top-100 bank with greater than $20 billion AUM

  • MeridianLink added more than 60 new and existing clients to MeridianLink Portal, our consumer lending, digital point of sale solution

  • The company launched several new integrations and enhancements to our data verification offerings to enable CRA clients to expand their portfolio of data services, including recurring background checks that reduce risk, and new features in our Advanced QuickApp tool that enables clients to serve customers more robustly

  • For CRAs using Mortgage Credit Link, MeridianLink expanded verification of employment offerings to mortgage lenders through a key new integration

Business Outlook

Based on information as of today, November 3, 2021, the Company issues fourth quarter financial guidance and raises the full year 2021 financial guidance as follows:

Fourth Quarter Fiscal 2021:

  • Revenue is expected to be in the range of $59.5 million to $60.5 million

  • Adjusted EBITDA is expected to be in the range of $21.0 million to $22.0 million

Full Year 2021:

  • Revenue is expected to be in the range of $263.2 million to $264.2 million

  • Adjusted EBITDA is expected to be in the range of $119.7 million to $120.7 million

Conference Call Information

MeridianLink will hold a conference call to discuss our third quarter 2021 results today, November 3, 2021, at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time). The conference call can be accessed by dialing (877) 284-4396 from the United States and Canada or (873) 415-0298 internationally with conference ID 1728237. A live webcast of the conference call can be accessed from the investor relations page of MeridianLink’s website at ir.meridianlink.com. An archived replay of the webcast will be available at the same website following the conclusion of the call. A telephonic replay will be available until approximately 8:59 p.m. Pacific Time (11:59 p.m. Eastern Time) on Wednesday, November 10, 2021, at (800) 585-8367 from the United States and Canada or (416) 621-4642 internationally with conference ID 1728237.

About MeridianLink

MeridianLink® (NYSE: MLNK) is a leading provider of cloud-based software solutions for financial institutions, including banks, credit unions, mortgage lenders, specialty lending providers and consumer reporting agencies. Headquartered in Costa Mesa, California, MeridianLink provides services to more than 1,900 customers, including a majority of the financial institutions on Forbes’ 2021 lists of America’s Best Credit Unions and Banks. Further information can be found at www.meridianlink.com.

Non-GAAP Financial Measures

To supplement the financial measures presented in accordance with generally accepted accounting principles, or GAAP, we provide certain non-GAAP financial measures, such as adjusted EBITDA and adjusted EBITDA margin; non-GAAP operating income (loss); non-GAAP net income (loss); non-GAAP cost of revenue; non-GAAP sales and marketing expenses; non-GAAP research and development expenses; non-GAAP general and administrative expenses; and free cash flow. The presentation of these financial measures is not intended to be considered in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with GAAP. Rather, we believe that these non-GAAP financial measures, when viewed in addition to and not in lieu of our reported GAAP financial results, provide investors with additional meaningful information to assess our financial performance and trends, enable comparison of financial results between periods, and allow for greater transparency with respect to key metrics utilized internally in analyzing and operating our business. The following definitions are provided:

  • Adjusted EBITDA: net income (loss) before interest expense, taxes, depreciation, amortization, stock/unit-based compensation expense, employer payroll taxes on employee stock transactions, certain expenses associated with our IPO, sponsor and third-party acquisition related costs, losses resulting from early repayment of debt, lease termination charges, and deferred revenue reductions from purchase accounting

  • Non-GAAP operating income: GAAP income (loss) from operations, excluding the impact of stock/unit-based compensation, employer payroll taxes on employee stock transactions, and sponsor and third-party acquisition-related costs

  • Non-GAAP net income: GAAP net income (loss), excluding the impact of stock/unit-based compensation, employer payroll taxes on employee stock transactions, and sponsor and third-party acquisition-related costs

  • Non-GAAP cost of revenue: GAAP cost of revenue, excluding the impact of stock/unit-based compensation, employer payroll taxes on employee stock transactions, and amortization of developed technology

  • Non-GAAP operating expenses: GAAP operating expenses, excluding the impact of stock/unit-based compensation and employer payroll taxes on employee stock transactions

  • Free cash flow: GAAP cash flow from operating activities plus GAAP purchases of property and equipment (Capital Expenditures) and capitalized costs related to developed technology (Capitalized Software)

Reconciliations to comparable GAAP financial measures are available in the accompanying schedules, which are posted as part of this earnings release on our website. No reconciliation is provided with respect to certain forward-looking non-GAAP financial measures as the GAAP measures are not accessible on a forward-looking basis. We cannot reliably predict all necessary components or their impact to reconcile such financial measures without unreasonable effort. The events necessitating a non-GAAP adjustment are inherently unpredictable and may have a significant impact on our future GAAP financial results.

Forward-Looking Statements

This release contains, and our above-referenced conference call and webcast will contain, statements which are not historical facts and are considered forward-looking within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. Generally, these statements can be identified by the use of words such as "anticipates," "believes," "estimates," "expects," "intends," "may," "plans," "projects," "seeks," "should," "will," and variations of such words or similar expressions, although not all forward-looking statements contain these identifying words. Further, statements describing our strategy, outlook, guidance, plans, intentions, or goals are also forward-looking statements. These forward-looking statements reflect our predictions, expectations, or forecasts, including, but not limited to, statements regarding, and guidance with respect to, our future financial and operational performance, our strategic initiatives, our development or delivery of new or enhanced solutions, our market size and growth opportunities, and our competitive positioning. Actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors that are beyond our control including, without limitation, risks related to our business and industry, as well as those set forth under the caption "Risk Factors" in our final prospectus filed on July 28, 2021, and our other SEC filings. Additional information will also be set forth in Item 1A. Risk Factors, or elsewhere, in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2021. Any forward-looking statement contained herein or provided on the related conference call is based on reasonable assumptions as of the date hereof. We undertake no obligation, other than as required by applicable law, to update any forward-looking statements, whether as a result of new information, future events, or otherwise.

Condensed Consolidated Balance Sheets

(unaudited)

(in thousands, except share/unit and per share/unit data)

September 30,

December 31,

2021

2020

Assets

Current assets:

Cash and cash equivalents

$

93,029

$

37,739

Restricted cash

2,142

Accounts receivable, net of allowance for doubtful accounts

28,565

22,358

Prepaid expenses and other current assets

10,712

5,812

Related party receivable from sellers of MeridianLink

4,123

Total current assets

132,306

72,174

Property and equipment, net

6,300

7,600

Intangible assets, net

309,454

328,032

Deferred tax assets, net

3,811

9,484

Goodwill

565,048

542,965

Other assets

3,247

3,450

Total assets

$

1,020,166

$

963,705

Liabilities and Stockholders’ Equity/Members’ Deficit

Current liabilities:

Accounts payable

$

1,175

$

2,257

Accrued liabilities

22,322

21,070

Deferred revenue

20,889

10,873

TazWorks, LLC purchase liability

85,646

Related party liability due to sellers of MeridianLink

30,000

Current portion of long-term debt, net of debt issuance costs

2,955

Total current liabilities

44,386

152,801

Long-term debt, net of debt issuance costs

419,890

516,877

Deferred rent

425

543

Other long-term liabilities

77

Total liabilities

464,778

670,221

Commitments and contingencies

Class A preferred units, no par value; unlimited units authorized, 319,913 units issued and outstanding as of December 31, 2020; liquidation preference of $402,607 as of December 31, 2020

319,913

Stockholders’ Equity/Members’ Deficit

Preferred stock, $0.001 par value; 50,000,000 shares authorized at September 30, 2021; zero shares issued and outstanding at September 30, 2021

Common stock, $0.001 par value; 600,000,000 shares authorized, 79,528,555 shares issued and outstanding at September 30, 2021

79

Class B common units, no par value; unlimited units authorized, 51,492,805 units issued and outstanding as of December 31, 2020

Additional paid-in capital

592,448

3,909

Accumulated deficit

(37,139)

(30,338)

Total stockholders’ equity/members’ deficit

555,388

(26,429)

Total liabilities, preferred units, and stockholders’ equity/members’ deficit

$

1,020,166

$

963,705

Condensed Consolidated Statements of Operations

(unaudited)

(in thousands, except share/unit and per share/unit data)

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Revenues, net

$

67,367

$

52,254

$

203,652

$

145,407

Cost of revenues:

Subscription and services

23,467

12,660

58,078

35,909

Amortization of developed technology

3,219

2,213

9,190

6,417

Total cost of revenues

26,686

14,873

67,268

42,326

Gross profit

40,681

37,381

136,384

103,081

Operating expenses:

General and administrative

29,917

12,975

64,884

40,293

Research and development

13,533

4,549

27,807

13,582

Sales and marketing

5,994

2,304

13,817

6,505

Total operating expenses

49,444

19,828

106,508

60,380

Operating income (loss)

(8,763)

17,553

29,876

42,701

Other (income) expense, net:

Other (income) expense

(9)

7

(39)

(17)

Interest expense, net

7,165

8,659

27,073

26,033

Loss on debt repayment

4,351

4,351

Total other expense, net

11,507

8,666

31,385

26,016

Income (loss) before provision for income taxes

(20,270)

8,887

(1,509)

16,685

Provision for income taxes

1,176

1,869

5,274

3,445

Net income (loss)

$

(21,446)

$

7,018

$

(6,783)

$

13,240

Class A preferred return

(2,780)

(8,733)

(20,944)

(25,480)

Net loss attributable to common stockholders

$

(24,226)

$

(1,715)

$

(27,727)

$

(12,240)

Weighted average common stock outstanding – basic and diluted

71,697,083

51,283,143

58,495,073

51,111,568

Net loss per share – basic and diluted

$

(0.34)

$

(0.03)

$

(0.47)

$

(0.24)

Net Revenues by Major Source

(unaudited)

(in thousands)

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Subscription fees

$

58,988

$

46,808

$

179,731

$

129,579

Professional services

5,706

3,987

16,812

11,387

Other

2,673

1,459

7,109

4,441

Total

$

67,367

$

52,254

$

203,652

$

145,407

Net Revenues by Solution Type

(unaudited)

(in thousands)

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Lending software solutions

$

44,657

$

33,362

$

133,034

$

96,700

Data verification software solutions

22,710

18,892

70,618

48,707

Total (1)

$

67,367

$

52,254

$

203,652

$

145,407

% Growth attributable to:

TCI and TazWorks

23%

24%

Lending software solutions

10%

13%

Data verification software

(4)%

3%

Total % growth

29%

40%

(1) % Revenue related to mortgage loan market:

Lending software solutions

9%

13%

9%

11%

Data verification software

70%

94%

71%

93%

Total % revenue related to mortgage loan market

29%

42%

31%

39%

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

Nine Months Ended September 30,

2021

2020

Cash flows from operating activities:

Net income (loss)

$

(6,783)

$

13,240

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization

37,654

29,529

Provision for doubtful accounts

300

Amortization of debt issuance costs

2,551

953

Stock/unit-based compensation expense

26,835

2,058

Loss on disposal of fixed assets

524

72

Loss on sublease liability

405

Loss on debt repayment

4,351

Other adjustments

(18)

Deferred income taxes

4,992

3,329

Changes in operating assets and liabilities:

Accounts receivable

(2,033)

(4,660)

Prepaid expenses and other assets

(6,179)

(1,063)

Accounts payable

(961)

1,825

Accrued liabilities

(2,271)

559

Deferred revenue

10,016

9,091

Deferred rent

(71)

(52)

Net cash provided by operating activities

69,012

55,181

Cash flows from investing activities:

Acquisitions, net of cash acquired – TazWorks, LLC

(85,420)

Acquisitions, net of cash acquired – Saylent Technologies, Inc

(35,945)

Capitalized software additions

(3,590)

(2,163)

Purchases of property and equipment

(692)

(3,403)

Net cash used in investing activities

(125,647)

(5,566)

Cash flows from financing activities:

Repurchases of Class A Units

(54)

(900)

Repurchases of Class B Units

(1,887)

(2,114)

Proceeds from initial public offering, net of underwriters’ discounts and commissions

247,227

Proceeds from exercise of stock options

1,317

Payment due to effect of corporate conversion

(6)

Proceeds from long-term debt

100,000

Principal payments of long-term debt

(202,590)

(3,117)

Payments of debt issuance costs

(1,970)

Payments of financing obligation due to related party

(81)

Payments of Class A cumulative preferred return

(12)

(135)

Payments of deferred offering costs

(4,435)

Payment to sellers of Teledata Communications, Inc

(2,142)

Holdback payment to sellers of MeridianLink

(25,665)

Net cash provided by (used in) financing activities

109,783

(6,347)

Net increase in cash, cash equivalents and restricted cash

53,148

43,268

Cash, cash equivalents and restricted cash, beginning of period

39,881

97,770

Cash, cash equivalents and restricted cash, end of period

$

93,029

$

141,038

Reconciliation of cash, cash equivalents, and restricted cash

Cash and cash equivalents

$

93,029

$

141,038

Restricted cash

Cash, cash equivalents, and restricted cash

$

93,029

$

141,038

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

Nine Months Ended September 30,

2021

2020

Supplemental disclosures of cash flow information:

Cash paid for interest

$

24,549

$

25,326

Cash paid for income taxes

239

69

Non-cash investing and financing activities:

Purchases of property and equipment included in accounts payable and accrued expenses

$

$

102

Stock/unit-based compensation expense capitalized to software additions

45

Deferred offering costs in prepaid expenses and other current assets at December 31, 2020 offsetting payments of deferred offering costs

423

Vesting of Restricted stock awards and RSUs

85

64

Effect of corporate conversion

320

Related party receivable net against holdback payment to prior shareholders

4,335

Reconciliation from GAAP to Non-GAAP Results

(unaudited)

(in thousands, except share/unit and per share/unit data)

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Operating income (loss)

$

(8,763)

$

17,553

$

29,876

$

42,701

Add: Stock/unit-based compensation expense

25,527

745

26,835

2,058

Add: Employer payroll taxes on employee stock transactions

79

79

Add: Sponsor and third-party acquisition related costs

209

500

2,323

1,500

Non-GAAP operating income

$

17,052

$

18,798

$

59,113

$

46,259

Non-GAAP operating margin

25%

36%

29%

32%

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Net income (loss)

$

(21,446)

$

7,018

$

(6,783)

$

13,240

Add: Stock/unit-based compensation expense

25,527

745

26,835

2,058

Add: Employer payroll taxes on employee stock transactions

79

79

Add: Sponsor and third-party acquisition related costs

209

500

2,323

1,500

Non-GAAP net income

$

4,369

$

8,263

$

22,454

$

16,798

Non-GAAP basic net income per share

$

0.06

$

0.16

$

0.38

$

0.33

Non-GAAP diluted net income per share

$

0.06

$

0.15

$

0.36

$

0.31

Weighted average shares used to compute Non-GAAP basic net income per share

71,697,083

51,283,143

58,495,073

51,111,568

Weighted average shares used to compute Non-GAAP diluted net income per share

74,764,302

54,184,668

61,552,071

54,013,093

Non-GAAP net income margin

6%

16%

11%

12%

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Net income (loss)

$

(21,446)

$

7,018

$

(6,783)

$

13,240

Interest expense

7,165

8,659

27,073

26,033

Taxes

1,176

1,869

5,274

3,445

Depreciation and amortization

12,697

10,071

37,654

29,529

Stock/unit-based compensation expense

25,527

745

26,835

2,058

Employer payroll taxes on employee stock transactions

79

79

Expenses associated with IPO

230

424

Sponsor and third-party acquisition related costs

209

500

2,323

1,500

Loss on debt prepayment

4,351

4,351

Deferred revenue reduction from purchase accounting

122

170

624

517

Lease termination charges

879

879

Adjusted EBITDA

$

30,989

$

29,032

$

98,733

$

76,322

Adjusted EBITDA margin

46%

56%

48%

52%

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Cost of revenue

$

26,686

$

14,873

$

67,268

$

42,326

Less: Stock/unit-based compensation expense

5,296

54

5,461

109

Less: Employer payroll taxes on employee stock transactions

3

3

Less: Amortization of developed technology

3,219

2,213

9,190

6,417

Non-GAAP cost of revenue

$

18,168

$

12,606

$

52,614

$

35,800

As a % of revenue

27%

24%

26%

25%

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

General & administrative

$

29,917

$

12,975

$

64,884

$

40,293

Less: Stock/unit-based compensation expense

12,158

496

12,864

1,454

Less: Employer payroll taxes on employee stock transactions

59

59

Less: Depreciation expense

572

815

1,743

1,984

Less: Amortization of intangibles

8,906

7,043

26,721

21,128

Non-GAAP general & administrative

$

8,222

$

4,621

$

23,497

$

15,727

As a % of revenue

12%

9%

12%

11%

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Research and development

$

13,533

$

4,549

$

27,807

$

13,582

Less: Stock/unit-based compensation expense

6,194

88

6,358

247

Less: Employer payroll taxes on employee stock transactions

8

8

Non-GAAP research and development

$

7,331

$

4,461

$

21,441

$

13,335

As a % of revenue

11%

9%

11%

9%

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Sales and marketing

$

5,994

$

2,304

$

13,817

$

6,505

Less: Stock/unit-based compensation expense

1,879

107

2,152

248

Less: Employer payroll taxes on employee stock transactions

9

9

Non-GAAP sales and marketing

$

4,106

$

2,197

$

11,656

$

6,257

As a % of revenue

6%

4%

6%

4%

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Net cash provided by operating activities

$

19,103

$

24,864

$

69,012

$

55,181

Less: Capital expenditures

139

574

692

3,403

Less: Capitalized software

1,374

735

3,590

2,163

Free cash flow

$

17,590

$

23,555

$

64,730

$

49,615

View source version on businesswire.com: https://www.businesswire.com/news/home/20211103006046/en/

Contacts

Press Contacts
Becky Frost
(714) 784-5839
becky.frost@meridianlink.com

Investor Relations Contact
Erik Schneider
(714) 332-6357
InvestorRelations@meridianlink.com