PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) Presents MeridianLink's unaudited financial statements, including balance sheets, operations, equity, cash flows, and detailed notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Total assets | $936,933 | $961,333 | | Total liabilities | $544,292 | $533,840 | | Total stockholders' equity | $392,641 | $427,493 | | Cash | $91,088 | $92,765 | | Accounts receivable, net | $34,585 | $34,422 | | Deferred revenue (current) | $30,110 | $17,170 | - **Total assets** decreased by **$24.4 million** from December 31, 2024, to June 30, 2025, while **total liabilities** increased by **$10.4 million**, leading to a **$34.8 million** decrease in **total stockholders' equity**[11](index=11&type=chunk) [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues, net | $84,597 | $78,676 | $166,085 | $156,492 | | Gross profit | $57,072 | $50,500 | $110,837 | $102,243 | | Operating income (loss) | $5,206 | $(1,097) | $8,771 | $2,255 | | Net loss | $(3,013) | $(9,670) | $(7,698) | $(14,976) | | Basic EPS | $(0.04) | $(0.13) | $(0.10) | $(0.19) | | Diluted EPS | $(0.04) | $(0.13) | $(0.10) | $(0.19) | - **Net revenues** increased by **7.5%** for the three months ended June 30, 2025, and by **6.1%** for the six months ended June 30, 2025, compared to the same periods in 2024. The company reported an **operating income** of **$5.2 million** for **Q2 2025**, a significant improvement from an **operating loss** of **$1.1 million** in **Q2 2024**. **Net loss** decreased significantly from **$(9.67) million** in **Q2 2024** to **$(3.01) million** in **Q2 2025**[13](index=13&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) | Metric (in thousands) | Balance at December 31, 2024 | Balance at June 30, 2025 | | :-------------------- | :--------------------------- | :----------------------- | | Common Stock (Amount) | $127 | $125 | | Additional Paid-in Capital | $709,057 | $734,970 | | Accumulated Deficit | $(281,691) | $(342,454) | | Total Stockholders' Equity | $427,493 | $392,641 | - **Total stockholders' equity** decreased by **$34.85 million** from December 31, 2024, to June 30, 2025, primarily due to **net losses** and **common stock repurchases** totaling **$53.07 million**, partially offset by **share-based compensation expense** of **$29.63 million**[15](index=15&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $61,547 | $43,394 | | Net cash used in investing activities | $(3,818) | $(3,836) | | Net cash used in financing activities | $(59,406) | $(26,990) | | Net (decrease) increase in cash and cash equivalents | $(1,677) | $12,568 | | Cash and cash equivalents, end of period | $91,088 | $93,009 | - **Net cash provided by operating activities** increased by **42%** to **$61.5 million** for the six months ended June 30, 2025, compared to **$43.4 million** in the same period of 2024[20](index=20&type=chunk) - **Net cash used in financing activities** significantly increased to **$59.4 million** in **H1 2025** from **$27.0 million** in **H1 2024**, primarily due to higher **common stock repurchases** and **taxes paid related to RSU settlements**[20](index=20&type=chunk)[169](index=169&type=chunk)[175](index=175&type=chunk) [Notes to Condensed Consolidated Financial Statements (unaudited)](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(unaudited)) [Note 1 – Organization and Description of Business](index=10&type=section&id=Note%201%20%E2%80%93%20Organization%20and%20Description%20of%20Business) MeridianLink provides secure, cloud-based SaaS solutions to financial institutions and reporting agencies - **MeridianLink, Inc.** offers secure, cloud-based digital solutions to financial services providers, primarily through a **Software-as-a-Service (SaaS) model**[23](index=23&type=chunk) - The company's customer base includes **banks**, **credit unions**, **mortgage lenders**, **specialty lending providers**, and **consumer reporting agencies**[23](index=23&type=chunk) [Note 2 – Significant Accounting Policies](index=10&type=section&id=Note%202%20%E2%80%93%20Significant%20Accounting%20Policies) Unaudited financial statements follow GAAP, reflecting management estimates; company uses extended transition period - The **financial statements** are unaudited and prepared on the **accrual basis** in accordance with **GAAP**, with **management making estimates and assumptions**[24](index=24&type=chunk)[25](index=25&type=chunk)[28](index=28&type=chunk) - **MeridianLink** is an **emerging growth company** and uses the **extended transition period** for new or revised accounting standards[30](index=30&type=chunk) - The company is evaluating the impact of **ASU 2023-09 (Income Taxes)** and **ASU 2024-03 (Expense Disaggregation Disclosures)**, effective for annual periods beginning after December 15, 2025, and December 15, 2026, respectively[31](index=31&type=chunk)[32](index=32&type=chunk) [Note 3 – Revenue Recognition](index=11&type=section&id=Note%203%20%E2%80%93%20Revenue%20Recognition) MeridianLink disaggregates net revenues by solution type and source, detailing contract balances and credit losses Net Revenues by Solution Type (in thousands) | Solution Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Lending Software Solutions | $68,737 | $61,644 | $135,806 | $122,547 | | Data Verification Software Solutions | $15,860 | $17,032 | $30,279 | $33,945 | | Total | $84,597 | $78,676 | $166,085 | $156,492 | Net Revenues by Major Source (in thousands) | Major Source | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Subscription fees | $71,147 | $65,946 | $139,892 | $131,858 | | Professional services | $9,499 | $9,559 | $18,165 | $18,569 | | Other | $3,951 | $3,171 | $8,028 | $6,065 | | Total | $84,597 | $78,676 | $166,085 | $156,492 | Deferred Revenue (in thousands) | Metric | As of June 30, 2025 | As of December 31, 2024 | | :-------------------- | :------------------ | :---------------------- | | Deferred revenue, current | $30,110 | $17,170 | | Long-term deferred revenue | $0 | $75 | | Total deferred revenue | $30,110 | $17,245 | - **Lending Software Solutions revenue** increased by **$7.1 million** (**11.5%**) for **Q2 2025** and **$13.3 million** (**10.9%**) for **H1 2025 YoY**, while **Data Verification Software Solutions revenue** decreased by **$1.2 million** (**7.0%**) for **Q2 2025** and **$3.7 million** (**10.9%**) for **H1 2025 YoY**[33](index=33&type=chunk) [Note 4 – Balance Sheet Components](index=13&type=section&id=Note%204%20%E2%80%93%20Balance%20Sheet%20Components) Details changes in prepaid expenses, property, intangible assets, and accrued liabilities, highlighting amortization Intangible Assets, Net (in thousands) | Asset Type | June 30, 2025 (Net Carrying Amount) | December 31, 2024 (Net Carrying Amount) | | :-------------------- | :---------------------------------- | :------------------------------------ | | Customer relationships | $125,535 | $142,628 | | Developed technology | $28,058 | $33,137 | | Trademarks | $8,470 | $9,700 | | Non-competition agreements | $2,287 | $2,777 | | Capitalized software | $12,717 | $13,280 | | Total | $177,067 | $201,522 | - **Total intangible assets, net**, decreased by **$24.45 million** from December 31, 2024, to June 30, 2025, primarily due to **amortization**, partially offset by **capitalized software additions**[41](index=41&type=chunk) Accrued Liabilities (in thousands) | Accrued Liability Type | June 30, 2025 | December 31, 2024 | | :--------------------- | :------------ | :---------------- | | Accrued payroll and payroll-related expenses | $11,144 | $8,188 | | Accrued bonuses and commissions | $4,747 | $6,313 | | Accrued operating costs | $4,191 | $4,127 | | Sales tax liabilities from acquisitions | $3,383 | $3,383 | | Accrued costs of revenues | $2,537 | $2,305 | | Customer deposits | $1,551 | $795 | | Total accrued liabilities | $30,700 | $29,383 | [Note 5 – Commitments and Contingencies](index=16&type=section&id=Note%205%20%E2%80%93%20Commitments%20and%20Contingencies) Company faces no material adverse legal claims; contractual commitments total $31.7 million for cloud infrastructure - The company is not aware of any **legal proceedings or claims** that could have a **material adverse effect** on its **financial position**, **results of operations**, or **cash flows**[46](index=46&type=chunk) Future Minimum Contractual Commitments (in thousands) | Years ending December 31, | Amount | | :------------------------ | :----- | | 2025 (remaining six months) | $6,324 | | 2026 | $12,855 | | 2027 | $11,808 | | 2028 | $722 | | Total | $31,709 | [Note 6 – Debt](index=16&type=section&id=Note%206%20%E2%80%93%20Debt) MeridianLink's debt is primarily a Term Loan, amended in June 2025; company is covenant compliant Debt, Net of Debt Issuance Costs (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Term Loan | $470,358 | $472,728 | | Debt issuance costs | $(3,601) | $(4,128) | | Total debt, net of debt issuance costs | $466,757 | $468,600 | | Current portion of debt, net | $3,632 | $3,678 | | Long-term debt, net | $463,125 | $464,922 | - On June 17, 2025, the company entered into the **2025 Amendment**, which reduced the **Applicable Rate** on the **Term Loan** from **2.75%** to **2.50%**. The **effective interest rate** on the **Term Loan** was **7.12%** as of June 30, 2025[54](index=54&type=chunk)[58](index=58&type=chunk) - The company was in compliance with all **financial covenants** of the **Credit Agreement** at June 30, 2025, and had no outstanding balance on the **Revolving Credit Facility**[57](index=57&type=chunk)[59](index=59&type=chunk) [Note 7 – Stockholders' Equity](index=18&type=section&id=Note%207%20%E2%80%93%20Stockholders'%20Equity) Board authorized a $129.5 million stock repurchase program in Feb 2025; $76.4 million remains - In February 2025, the board authorized a new **stock repurchase program** for up to **$129.5 million** of **common stock**[61](index=61&type=chunk) Stock Repurchase Activity (in thousands, except share data) | Metric | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :------------------------------------------------------- | :------------------------------- | :----------------------------- | | Total number of shares repurchased | 3,135,583 | 3,135,583 | | Total cost of shares repurchased, including commissions, fees, and excise taxes | $53,068 | $53,068 | | Remaining for repurchase under program (as of June 30, 2025) | N/A | $76,400 | [Note 8 – Share-based Compensation](index=19&type=section&id=Note%208%20%E2%80%93%20Share-based%20Compensation) Significant share-based compensation expense from options, RSUs, and ESPP increased in Q2/H1 2025 Share-based Compensation Expense (in thousands) | Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Stock Options | $2,600 | $1,100 | $3,400 | $2,500 | | Restricted Stock Units (RSUs) | $14,500 | $11,400 | $26,000 | $17,800 | | Employee Stock Purchase Program (ESPP) | $200 | $200 | $300 | $300 | | Total Share-based Compensation Expense | $17,122 | $12,626 | $29,503 | $20,429 | - As of June 30, 2025, there was **$127.2 million** of **unrecognized share-based compensation expense** related to **RSUs**, expected to be recognized over a weighted-average period of **2.74 years**[71](index=71&type=chunk) [Note 9 – Income Taxes](index=21&type=section&id=Note%209%20%E2%80%93%20Income%20Taxes) Income tax provision reflects Q2/H1 2025 effective tax rates, with a partial valuation allowance on deferred tax assets Effective Tax Rate | Period | Effective Tax Rate | | :----- | :----------------- | | Three Months Ended June 30, 2025 | (55.1)% | | Three Months Ended June 30, 2024 | (4.5)% | | Six Months Ended June 30, 2025 | (28.1)% | | Six Months Ended June 30, 2024 | (3.1)% | - The company maintains a **partial valuation allowance** of **$35.6 million** against its **deferred tax assets** as of June 30, 2025, due to uncertainty in utilizing all **deferred tax assets**[81](index=81&type=chunk) - **Gross unrecognized tax benefits** related to **research and development credits** were **$4.1 million** as of June 30, 2025[82](index=82&type=chunk) [Note 10 – Related Party Transactions](index=22&type=section&id=Note%2010%20%E2%80%93%20Related%20Party%20Transactions) MeridianLink engages in related party transactions; total expenses decreased to $0.68M for Q2 2025 Related Party Expenses (in thousands) | Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of revenues | $580 | $501 | $1,019 | $865 | | General and administrative | $67 | $520 | $184 | $686 | | Research and development | $29 | $27 | $56 | $52 | | Total related party expenses | $676 | $1,048 | $1,259 | $1,603 | [Note 11 – Net Loss Per Share](index=23&type=section&id=Note%2011%20%E2%80%93%20Net%20Loss%20Per%20Share) Basic and diluted net loss per share improved in Q2/H1 2025; anti-dilutive securities were excluded Net Loss Per Share | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic Net Loss Per Share | $(0.04) | $(0.13) | $(0.10) | $(0.19) | | Diluted Net Loss Per Share | $(0.04) | $(0.13) | $(0.10) | $(0.19) | - Approximately **10.5 million potentially dilutive securities** (options, **RSUs**, **ESPP** purchase rights) were excluded from diluted **EPS** calculations for the three and six months ended June 30, 2025, due to their **anti-dilutive effect**[85](index=85&type=chunk) [Note 12 – Restructuring Activities](index=23&type=section&id=Note%2012%20%E2%80%93%20Restructuring%20Activities) The 2024 Realignment Plan, completed in 2024, included a 12% workforce reduction and restructuring charges - The **2024 Realignment Plan**, completed in 2024, included a **workforce reduction** of approximately **12%**[86](index=86&type=chunk) Restructuring Charges (in thousands) | Period | Restructuring Related Costs | | :------------------------------- | :-------------------------- | | Three Months Ended June 30, 2024 | $988 | | Six Months Ended June 30, 2024 | $4,179 | [Note 13 – Segment Information](index=24&type=section&id=Note%2013%20%E2%80%93%20Segment%20Information) MeridianLink operates as a single segment, providing cloud-based digital solutions in the US - The company operates in one **operating and reportable segment**, providing **cloud-based digital solutions** in the **United States**[87](index=87&type=chunk) [Note 14 – Subsequent Events](index=24&type=section&id=Note%2014%20%E2%80%93%20Subsequent%20Events) Post-June 30, 2025, new tax legislation passed, and company entered a Merger Agreement for $20.00/share - On July 4, 2025, the U.S. Congress passed the **One Big Beautiful Bill Act of 2025 (OBBBA)**, which includes immediate expensing of domestic R&D and a favorable modification to **interest expense limitation**, expected to impact **income taxes** starting **Q3 2025**[89](index=89&type=chunk) - On August 11, 2025, the company entered into a **Merger Agreement** to be **acquired** by **ML Holdco, LLC**, with each outstanding share of **common stock** to be converted into the right to receive **$20.00** in **cash**[91](index=91&type=chunk)[92](index=92&type=chunk) - The proposed **Merger** is subject to **stockholder and regulatory approvals**, and if terminated under certain circumstances, the company may be required to pay a **termination fee** of **$47 million**[92](index=92&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition, operations, global factors, 2025 developments, and non-GAAP measures [Overview](index=29&type=section&id=Overview) MeridianLink is a leading SaaS provider of secure, cloud-based solutions for financial institutions - **MeridianLink** is a leading **SaaS provider** of secure, cloud-based software solutions for **financial institutions**, including **banks**, **credit unions**, **mortgage lenders**, **specialty lending providers**, and **credit reporting agencies**[105](index=105&type=chunk) - The company's solutions, delivered via a **SaaS model**, generate revenue through **subscription fees** (annual base fees, platform partner fees, volume-based fees) and grow as customers add transaction types, modules, or partner integrations[108](index=108&type=chunk)[109](index=109&type=chunk) - **MeridianLink** focuses on the middle market (institutions with **$100 million** to **$10 billion** in assets) but sees opportunity in expanding to larger customers and leveraging its **Partner Marketplace** for additional revenue and market presence[112](index=112&type=chunk)[113](index=113&type=chunk)[115](index=115&type=chunk) [Global Considerations](index=30&type=section&id=Global%20Considerations) Company monitors economic uncertainty, inflation, and high interest rates impacting spending and loan volumes - The company is monitoring **economic uncertainty**, **elevated inflation rates**, and **high interest rates**, which may lead to reduced spending on products, pricing pressure, and lower loan volumes from **financial institutions**[117](index=117&type=chunk)[118](index=118&type=chunk)[119](index=119&type=chunk) - Increased inflation could result in decreased demand for mortgages and consumer lending, increased operating costs (including labor), reduced liquidity, and limitations on accessing credit or raising capital[119](index=119&type=chunk) [Developments in 2025](index=32&type=section&id=Developments%20in%202025) Key 2025 developments include a Merger Agreement, CEO change, Term Loan amendment, and stock repurchase - On August 11, 2025, **MeridianLink** entered into a **Merger Agreement** to be acquired by **ML Holdco, LLC**, with stockholders receiving **$20.00** per share in **cash**[121](index=121&type=chunk)[122](index=122&type=chunk) - **Nicolaas Vlok** resigned as **CEO** effective October 1, 2025, with **Laurence E. Katz** appointed as the new **CEO** and **President**[123](index=123&type=chunk) - On June 17, 2025, the company amended its **Credit Agreement**, reducing the **Term Loan's Applicable Rate** from **2.75%** to **2.50%**, incurring **$0.7 million** in fees[124](index=124&type=chunk)[125](index=125&type=chunk) - In February 2025, a new **stock repurchase program** of up to **$129.5 million** was authorized; **3.1 million shares** were repurchased for **$53.1 million** in **Q2 2025**, with **$76.4 million** remaining[126](index=126&type=chunk) [Components of Operating Results](index=33&type=section&id=Components%20of%20Operating%20Results) Details revenue components (subscription, services, other) and operating expenses (G&A, R&D, S&M) - **Revenues** consist of **subscription fees** (recognized ratably over contract term, including usage-based fees), **professional services** (recognized as control is transferred), and **other revenues** (from referral/marketing agreements)[128](index=128&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk) - **Cost of revenues** includes personnel costs, third-party vendor fees, cloud-based hosting, allocated overhead, and amortization of developed technology. **Operating expenses** comprise **General and Administrative**, **Research and Development**, and **Sales and Marketing**[132](index=132&type=chunk)[135](index=135&type=chunk)[137](index=137&type=chunk)[141](index=141&type=chunk) - The company expects **general and administrative expenses** to increase in absolute dollars but decrease as a percentage of revenues over the long term, while **research and development** and **sales and marketing expenses** are expected to increase in absolute dollars[136](index=136&type=chunk)[140](index=140&type=chunk)[142](index=142&type=chunk) [Results of Operations](index=36&type=section&id=Results%20of%20Operations) Revenue Performance (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues, net | $84,597 | $78,676 | $166,085 | $156,492 | | YoY Change ($) | $5,921 | N/A | $9,593 | N/A | | YoY Change (%) | 8% | N/A | 6% | N/A | - **Revenue growth** was driven by higher **Lending Software Solutions revenue** (**$7.1M** for **Q2**, **$13.3M** for **H1**) from existing and new customers, primarily cross-selling, partially offset by lower **Data Verification Software Solutions revenue** (**$1.2M** for **Q2**, **$3.7M** for **H1**) due to a large customer downsell and lower mortgage-related volumes[149](index=149&type=chunk)[150](index=150&type=chunk) Operating Expense Performance (in thousands) | Expense Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | General and administrative | $28,553 | $29,237 | $56,238 | $54,416 | | Research and development | $11,380 | $9,905 | $22,292 | $19,390 | | Sales and marketing | $11,933 | $11,467 | $23,536 | $22,003 | | Restructuring related costs | $0 | $988 | $0 | $4,179 | - **General and administrative expenses** decreased by **$0.7 million** (**2%**) in **Q2 2025 YoY**, mainly due to lower **legal fees** (**$3.1M** decline, including **$1.9M** class action settlement in 2024), partially offset by higher **employee-related costs** (**$3.1M** increase, including **$2.7M share-based compensation**)[157](index=157&type=chunk) - **Research and development expenses** increased by **$1.5 million** (**15%**) in **Q2 2025** and **$2.9 million** (**15%**) in **H1 2025 YoY**, primarily due to higher **share-based compensation expense**[159](index=159&type=chunk) - **Total other expenses, net**, decreased by **$1.0 million** (**12%**) in **Q2 2025** and **$2.0 million** (**12%**) in **H1 2025 YoY**, driven by lower **interest expense** and higher **interest income**, partially offset by **debt modification expenses**[163](index=163&type=chunk)[164](index=164&type=chunk) [Liquidity and Capital Resources](index=40&type=section&id=Liquidity%20and%20Capital%20Resources) Discusses liquidity sources, cash flow activities, and contractual commitments as of June 30, 2025 - As of June 30, 2025, **principal liquidity sources** were **$91.1 million** in **cash** and **$34.6 million** in **accounts receivable**, along with an unused **$50.0 million revolving credit facility**[166](index=166&type=chunk) Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change ($) | Change (%) | | :------------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Operating activities | $61,547 | $43,394 | $18,153 | 42% | | Investing activities | $(3,818) | $(3,836) | $18 | —% | | Financing activities | $(59,406) | $(26,990) | $(32,416) | (120)% | | Net (decrease) increase in cash | $(1,677) | $12,568 | $(14,245) | (113)% | - **Net cash used in financing activities** increased significantly due to **$53.3 million** in **common stock repurchases** (including excise taxes) and **$4.7 million** in **taxes paid for RSU settlements** in **H1 2025**[175](index=175&type=chunk) - The company has **contractual commitments** of **$31.7 million** as of June 30, 2025, primarily for third-party cloud infrastructure, with **$22.1 million** remaining under a renewed agreement through January 2028[179](index=179&type=chunk)[180](index=180&type=chunk) [Recent Accounting Pronouncements](index=42&type=section&id=Recent%20Accounting%20Pronouncements) Refers to Note 2 for recent accounting pronouncements, adoption dates, and estimated effects - Refer to **Note 2, 'Significant Accounting Policies,'** for a description of recent accounting pronouncements, including expected adoption dates and estimated effects[181](index=181&type=chunk) [Emerging Growth Company Status](index=42&type=section&id=Emerging%20Growth%20Company%20Status) MeridianLink is an EGC, electing extended transition for new accounting standards under the JOBS Act - **MeridianLink** is an **emerging growth company (EGC)** under the **JOBS Act** and has elected to use the **extended transition period** for complying with new or revised accounting standards[182](index=182&type=chunk) - The company will remain an **EGC** until December 31, 2026, or earlier if it meets certain revenue or market value thresholds[345](index=345&type=chunk) [Non-GAAP Financial Measures](index=43&type=section&id=Non-GAAP%20Financial%20Measures) Defines and reconciles Adjusted EBITDA, a key non-GAAP financial measure, from net loss - **Adjusted EBITDA** is defined as **net loss** before **interest expense**, **provision for income taxes**, **depreciation and amortization of intangible assets**, **share-based compensation expense**, **employer payroll taxes on employee stock transactions**, **material weakness remediation expenses**, **debt modification expenses**, **acquisition-related costs**, **indemnity claim income**, **restructuring costs**, **litigation charges**, and **public offering expenses**[185](index=185&type=chunk) Adjusted EBITDA Reconciliation (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(3,013) | $(9,670) | $(7,698) | $(14,976) | | Interest expense | $8,715 | $9,797 | $17,427 | $19,379 | | Provision for income taxes | $1,070 | $412 | $1,687 | $444 | | Depreciation and amortization of intangible assets | $14,151 | $14,573 | $28,837 | $29,096 | | Share-based compensation expense | $17,122 | $12,500 | $29,503 | $20,436 | | Adjusted EBITDA | $38,435 | $31,753 | $73,280 | $63,523 | - **Adjusted EBITDA** increased by **21.0%** to **$38.4 million** for **Q2 2025** and by **15.4%** to **$73.3 million** for **H1 2025**, compared to the same periods in 2024[187](index=187&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) No significant changes in market risk exposure since December 31, 2024, per 2024 Annual Report - No significant changes in **market risk exposure** have occurred since December 31, 2024[189](index=189&type=chunk) [Item 4. Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls were ineffective due to a material weakness in internal controls over financial reporting - **Disclosure controls and procedures** were not effective as of June 30, 2025, due to a **material weakness** in **internal controls over financial reporting**[192](index=192&type=chunk) - The **material weakness** is primarily related to insufficient controls over the set-up of customer contracts for billing and maintaining complete contract support[193](index=193&type=chunk) - **Remediation efforts**, including process improvements and new key controls, are ongoing, but the **material weakness** has not yet been fully remediated[194](index=194&type=chunk)[195](index=195&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=47&type=section&id=Item%201.%20Legal%20Proceedings) Company is not involved in material litigation or claims, only ordinary course legal proceedings - The company is not currently a party to any **litigation or claims** that would have a **material adverse effect** on its **business, operating results, financial condition, or cash flows**[200](index=200&type=chunk) [Item 1A. Risk Factors](index=47&type=page&id=Item%201A.%20Risk%20Factors) Outlines substantial risks of investing in MeridianLink, covering merger, strategy, operations, and finance [Summary of Risk Factors](index=47&type=section&id=Summary%20of%20Risk%20Factors) Summarizes key risks: merger, strategy, operations, legal, finance, conflicts of interest, and governance - Key risk categories include uncertainties related to the proposed **Merger**, challenges in strategy and industry, operational risks, legal and regulatory compliance, financial and accounting issues, potential conflicts of interest with significant stockholders, and risks concerning common stock and governance structure[203](index=203&type=chunk)[204](index=204&type=chunk)[206](index=206&type=chunk)[207](index=207&type=chunk)[208](index=208&type=chunk)[209](index=209&type=chunk) [Risks Related to the Proposed Merger](index=49&type=section&id=Risks%20Related%20to%20the%20Proposed%20Merger) - **Uncertainties and potential disruptions** associated with the pending **Merger**, including delays, failure to complete, and diversion of management attention, could adversely impact the company's **business, financial results, and stock price**[211](index=211&type=chunk)[213](index=213&type=chunk) - Failure to complete the **Merger** could lead to adverse reactions from financial markets, loss of investor confidence, litigation, and the requirement to pay a **$47 million termination fee** under certain circumstances[214](index=214&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk) - Regulatory approvals for the **Merger** may be delayed or impose unforeseen conditions, and the company is subject to contractual restrictions on business conduct during the pendency of the **Merger**[219](index=219&type=chunk)[220](index=220&type=chunk) [Risks Related to Our Strategy and Industry](index=52&type=section&id=Risks%20Related%20to%20Our%20Strategy%20and%20Industry) - **Lending volumes** are highly sensitive to **economic factors**, including **elevated interest rates**, which may remain low in 2025, adversely affecting the business if the company cannot increase its **market share** or cross-sell solutions[224](index=224&type=chunk)[225](index=225&type=chunk)[226](index=226&type=chunk) - Failure to retain existing customers or attract new ones, innovate the **platform**, or address evolving **technological requirements** could lead to obsolescence, reduced revenue growth, and increased competition from both external providers and internal customer solutions[227](index=227&type=chunk)[228](index=228&type=chunk)[233](index=233&type=chunk)[234](index=234&type=chunk) - The market for **cloud-based solutions** may develop slower than expected, or changes in customer preferences and pricing pressure from competitors could adversely affect sales and operating results[244](index=244&type=chunk) - The **financial services industry**, a significant source of revenue, is subject to **economic downturns**, consolidation, and increased regulation, which could reduce technology spending or lead to loss of business[246](index=246&type=chunk)[247](index=247&type=chunk)[248](index=248&type=chunk) [Risks Related to Our Business and Operations](index=57&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Operations) - **Uncertain economic conditions**, including **elevated interest rates** and inflation, and changes in governmental policies, can adversely affect customer spending on technology and overall transaction volumes[249](index=249&type=chunk) - **Cybersecurity incidents**, **data breaches**, or other compromises, including those involving **AI technologies**, could result in unauthorized access to customer data, reputational damage, operational disruptions, and significant legal and financial liabilities[251](index=251&type=chunk)[252](index=252&type=chunk)[254](index=254&type=chunk)[255](index=255&type=chunk) - **Defects, errors, or performance problems in software solutions**, or inability to effectively integrate with third-party systems, could harm reputation, increase costs, and impair sales[260](index=260&type=chunk)[262](index=262&type=chunk)[264](index=264&type=chunk) - Challenges in **customer support**, inherent inaccuracies in **key operating metrics**, volatility from **usage and volume-based pricing**, unpredictable sales cycles, and difficulties in retaining **key personnel** or managing growth can adversely affect business performance[267](index=267&type=chunk)[269](index=269&type=chunk)[271](index=271&type=chunk)[273](index=273&type=chunk)[279](index=279&type=chunk)[282](index=282&type=chunk) - Dependence on third-party data centers and cloud hosting providers, as well as contracting product development operations to third parties in India, introduces risks of service disruption, security vulnerabilities, and operational inefficiencies[284](index=284&type=chunk)[286](index=286&type=chunk) [Risks Related to Legal and Regulatory Matters](index=67&type=section&id=Risks%20Related%20to%20Legal%20and%20Regulatory%20Matters) - Rapidly evolving privacy, information security, and data protection laws (e.g., **CCPA**, **CPRA**) and potential new federal laws could limit software solution adoption, increase compliance costs, and lead to enforcement actions[289](index=289&type=chunk)[290](index=290&type=chunk)[291](index=291&type=chunk)[292](index=292&type=chunk) - As a technology provider to highly regulated **financial institutions**, the company must comply with laws like **GLBA** and **FCRA**, and any failure to do so or to update solutions for regulatory changes could result in adverse business impacts, fines, or liabilities[294](index=294&type=chunk)[295](index=295&type=chunk)[296](index=296&type=chunk)[297](index=297&type=chunk) - Inability to protect **intellectual property** (**copyrights**, **trademarks**, **patents**, **trade secrets**) against unauthorized use or infringement claims could lead to significant expenses, litigation, and harm to reputation and business[299](index=299&type=chunk)[300](index=300&type=chunk) - Use of open-source software in solutions could subject the company to litigation or require costly re-engineering, while lawsuits by third parties for **intellectual property infringement** could result in significant expenses and harm operating results[301](index=301&type=chunk)[302](index=302&type=chunk)[303](index=303&type=chunk)[304](index=304&type=chunk) - Changes in financial services legislation, failure to comply with anti-bribery/anti-corruption laws, or successful assertions of sales/use tax obligations could adversely affect the business, increase costs, and impose operational constraints[306](index=306&type=chunk)[308](index=308&type=chunk)[311](index=311&type=chunk) [Risks Related to Finance and Accounting](index=73&type=section&id=Risks%20Related%20to%20Finance%20and%20Accounting) - **Quarterly results** may fluctuate significantly due to **economic conditions**, **customer retention**, transaction volumes, operating expenses, and other factors, potentially not fully reflecting underlying business performance[313](index=313&type=chunk) - **Forecasts** are subject to significant risks and uncertainties, and inaccuracies could materially affect revenues, expenses, and profitability, potentially leading to **impairment charges** for acquired entities[314](index=314&type=chunk)[316](index=316&type=chunk) - Due to **ratable revenue recognition**, downturns or upturns in business may not be fully reflected in results until future periods, creating a lag in financial reporting[317](index=317&type=chunk) - The company has significant **goodwill** and other **intangibles** (**$610.1M** and **$177.1M** as of June 30, 2025), and any impairment could result in a significant charge to earnings[318](index=318&type=chunk) - Realization of **deferred tax assets** is dependent on future taxable income, and the company maintains a partial **valuation allowance** (**$35.6M** as of June 30, 2025) due to uncertainty[319](index=319&type=chunk) - **High leverage** and **debt agreements** impose significant operating and financial restrictions, limiting flexibility and increasing vulnerability to adverse conditions[322](index=322&type=chunk)[323](index=323&type=chunk)[324](index=324&type=chunk)[325](index=325&type=chunk) - The company identified a **material weakness in internal controls over financial reporting related to revenue controls**, which is still undergoing remediation. Failure to remediate could lead to inaccurate financial reporting, regulatory investigations, and loss of investor confidence[328](index=328&type=chunk)[329](index=329&type=chunk)[333](index=333&type=chunk) - Changes in **tax laws**, such as the **TCJA** and **IRA**, or new unfavorable tax legislation like the **'One Big Beautiful Act of 2025,'** could adversely affect the company's **financial position** and increase **tax liabilities**[334](index=334&type=chunk) [Risks Related to Potential Conflicts of Interests and Related Parties](index=79&type=section&id=Risks%20Related%20to%20Potential%20Conflicts%20of%20Interests%20and%20Related%20Parties) - **Thoma Bravo** and its related entities beneficially own approximately **39.0%** of the **common stock**, allowing them significant influence over matters requiring stockholder approval and potentially delaying or preventing changes of control[335](index=335&type=chunk)[337](index=337&type=chunk) - **Thoma Bravo** may pursue corporate opportunities independent of the company, which could present conflicts of interest with the company and its other stockholders[338](index=338&type=chunk) [Risks Related to Our Common Stock and Governance Structure](index=80&type=section&id=Risks%20Related%20to%20Our%20Common%20Stock%20and%20Governance%20Structure) - The **trading price of common stock** could be volatile due to numerous factors beyond the company's control, including **economic conditions**, **market sentiment**, operational results, and sales of large blocks of stock[341](index=341&type=chunk)[343](index=343&type=chunk) - As an **emerging growth company**, the company is exempt from certain public company requirements, which may make its **common stock** less attractive to some investors and increase **price volatility**[344](index=344&type=chunk)[346](index=346&type=chunk) - Future issuance or sale of capital stock, including preferred stock, could dilute existing stockholders' ownership interests and adversely affect the **market price of common stock**[347](index=347&type=chunk)[348](index=348&type=chunk) - The company does not intend to pay **dividends** on its **common stock**, meaning stockholder returns will depend solely on **stock price appreciation**[349](index=349&type=chunk) - The **stock repurchase program** may not be fully consummated or enhance long-term stockholder value, and repurchases could increase **stock price volatility** and diminish **cash reserves**[350](index=350&type=chunk)[351](index=351&type=chunk) - **Delaware law** and certain provisions in the company's charter and bylaws could delay, discourage, or prevent a change in control, limiting stockholders' ability to approve favorable transactions[352](index=352&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=84&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Summarizes the company's stock repurchase activity for the three months ended June 30, 2025 Stock Repurchase Activity (Three Months Ended June 30, 2025) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :------------------------ | :------------------------------- | :--------------------------- | | April 1 to April 30, 2025 | — | $— | | May 1 to May 31, 2025 | 312,123 | $16.52 | | June 1 to June 30, 2025 | 2,823,460 | $16.87 | | Total | 3,135,583 | N/A | - As of June 30, 2025, approximately **$76.7 million** remained authorized for repurchase under the **stock repurchase program**[356](index=356&type=chunk) [Item 3. Defaults Upon Senior Securities](index=84&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities during the period - There were no defaults upon senior securities[357](index=357&type=chunk) [Item 4. Mine Safety Disclosures](index=84&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - **Mine Safety Disclosures** are not applicable to the company[358](index=358&type=chunk) [Item 5. Other Information](index=84&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter ended June 30, 2025 - No directors or officers adopted, modified, or terminated a **Rule 10b5-1** or non-**Rule 10b5-1 trading arrangement** during the quarter ended June 30, 2025[359](index=359&type=chunk) [Item 6. Exhibits](index=85&type=section&id=Item%206.%20Exhibits) Lists all exhibits filed as part of the Quarterly Report on Form 10-Q, including organizational documents [Signatures](index=87&type=section&id=Signatures) Report signed by MeridianLink's CEO, Nicolaas Vlok, and CFO, Elias Olmeta, as of August 11, 2025

Core Viewpoint - Johnson Fistel, PLLP has initiated an investigation into MeridianLink, Inc. regarding potential breaches of fiduciary duties by its board members in relation to the proposed sale to Centerbridge Partners, which may undervalue the company’s shares [1][6]. Company Overview - MeridianLink has entered into a definitive merger agreement with Centerbridge Partners, where shareholders will receive $20.00 in cash per share [6]. - The proposed merger price is significantly lower than MeridianLink's 52-week high of $25.33 per share, despite positive projections for the company's sales and revenue growth from Wall Street analysts [6]. Legal Context - The investigation by Johnson Fistel is aimed at assessing whether the board's actions in the sale process are in the best interest of shareholders [1]. - Shareholders who believe the deal undervalues their investment are encouraged to participate in the investigation [3]. Firm Background - Johnson Fistel, PLLP is recognized as a leading shareholder rights law firm with a strong track record in securities class action lawsuits, having recovered approximately $90.725 million for clients [4].

Second Quarter 2025 Results Overview MeridianLink reported strong Q2 2025 financial results and announced its acquisition by Centerbridge Partners for $2.0 billion, leading to the cancellation of its earnings call and suspension of guidance [Financial Highlights](index=1&type=section&id=Quarterly%20Financial%20Highlights) MeridianLink reported strong Q2 2025 financial results with 8% revenue growth to $84.6 million, adjusted EBITDA of $38.4 million (45% margin), and free cash flow of $17.1 million Q2 2025 Key Financial Metrics | Metric | Q2 2025 Value | YoY Growth / Margin | | :--- | :--- | :--- | | **Total Revenue** | $84.6 million | 8% | | **Lending Software Solutions Revenue** | $68.7 million | 12% | | **Operating Income** | $5.2 million | 6% of revenue | | **Non-GAAP Operating Income** | $23.0 million | 27% of revenue | | **Net Loss** | $(3.0) million | (4)% of revenue | | **Adjusted EBITDA** | $38.4 million | 45% of revenue | | **Cash Flow from Operations** | $19.2 million | 23% of revenue | | **Free Cash Flow** | $17.1 million | 20% of revenue | [Acquisition Announcement](index=1&type=section&id=Acquisition%20Announcement) MeridianLink announced it has entered into a definitive agreement to be acquired by Centerbridge Partners, L.P. in an all-cash transaction, valuing the company at approximately $2.0 billion, or $20.00 per share - MeridianLink to be acquired by global investment firm Centerbridge Partners, L.P.[3](index=3&type=chunk) Transaction Details | Metric | Value | | :--- | :--- | | **Transaction Type** | All-cash | | **Enterprise Value** | Approx. $2.0 billion | | **Price Per Share** | $20.00 | [Management Commentary](index=1&type=section&id=Management%20Commentary) Management highlighted strong execution and the Centerbridge acquisition's potential to maximize shareholder value and accelerate strategic initiatives, including AI and data innovation - Outgoing CEO Nicolaas Vlok noted strong execution in an uncertain environment and expressed confidence in the management team under incoming CEO Larry Katz, who is set to take over in October[4](index=4&type=chunk) - CEO designate Larry Katz stated the transaction with Centerbridge will advance the company's strategy by accelerating product innovation, leveraging AI and data, and enhancing customer experiences[4](index=4&type=chunk) [Investor Communications Update](index=1&type=section&id=Cancellation%20of%20Earnings%20Conference%20Call%20and%20Suspension%20of%20Guidance) Due to the pending acquisition, MeridianLink canceled its Q2 earnings conference call and suspended its full-year 2025 financial guidance - The earnings conference call scheduled for August 11, 2025, has been canceled[6](index=6&type=chunk) - Financial guidance for the full year 2025 has been suspended pending the completion of the acquisition[6](index=6&type=chunk) Financial Statements This section details MeridianLink's Q2 2025 financial statements, covering balance sheets, statements of operations, revenue analysis, and cash flow [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets decreased to $936.9 million, total liabilities increased to $544.3 million, and stockholders' equity decreased to $392.6 million Balance Sheet Summary (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$936,933** | **$961,333** | | Cash | $91,088 | $92,765 | | Intangible assets, net | $177,067 | $201,522 | | Goodwill | $610,063 | $610,063 | | **Total Liabilities** | **$544,292** | **$533,840** | | Long-term debt, net | $463,125 | $464,922 | | **Total Stockholders' Equity** | **$392,641** | **$427,493** | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q2 2025 saw improved profitability, with operating income of $5.2 million (vs. loss of $1.1 million in Q2 2024) and net loss narrowing to $3.0 million Statement of Operations Highlights (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | **Revenues, net** | **$84,597** | **$78,676** | | Gross profit | $57,072 | $50,500 | | **Operating income (loss)** | **$5,206** | **$(1,097)** | | **Net loss** | **$(3,013)** | **$(9,670)** | | Net loss per share, basic & diluted | $(0.04) | $(0.13) | [Revenue Analysis](index=7&type=section&id=Revenue%20Analysis) Q2 2025 revenue growth was driven by a 12% increase in Lending software solutions to $68.7 million, with subscription fees as the primary source and mortgage market exposure at 18% [Net Revenues by Major Source](index=7&type=section&id=Net%20Revenues%20by%20Major%20Source) Subscription fees remained the largest revenue source, growing to $71.1 million in Q2 2025 Q2 Net Revenues by Source (in thousands) | Source | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Subscription fees | $71,147 | $65,946 | | Professional services | $9,499 | $9,559 | | Other | $3,951 | $3,171 | | **Total** | **$84,597** | **$78,676** | [Net Revenues by Solution Type](index=7&type=section&id=Net%20Revenues%20by%20Solution%20Type) Lending software solutions drove Q2 2025 revenue growth, contributing 9% to total growth, while data verification solutions declined Q2 Net Revenues by Solution (in thousands) | Solution Type | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Lending software solutions | $68,737 | $61,644 | | Data verification software solutions | $15,860 | $17,032 | | **Total** | **$84,597** | **$78,676** | - For Q2 2025, Lending software solutions contributed **9%** to total growth, while Data verification software solutions had a negative impact of **(1)%**, resulting in a total growth of **8%**[25](index=25&type=chunk) [Percent Revenue Related to the Mortgage Loan Market](index=7&type=section&id=Percent%20Revenue%20Related%20to%20the%20Mortgage%20Loan%20Market) Revenue exposure to the mortgage loan market decreased to 18% in Q2 2025 from 20% in the prior year - The total percentage of revenue related to the mortgage loan market was **18%** in Q2 2025, down from **20%** in Q2 2024[27](index=27&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities increased to $61.5 million for H1 2025, while financing activities used $59.4 million, primarily for common stock repurchases Cash Flow Summary - Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | **$61,547** | **$43,394** | | Net cash used in investing activities | $(3,818) | $(3,836) | | **Net cash used in financing activities** | **$(59,406)** | **$(26,990)** | | Net (decrease) increase in cash | $(1,677) | $12,568 | | Cash and cash equivalents, end of period | $91,088 | $93,009 | - The primary use of cash in financing activities for the first six months of 2025 was **$52.8 million** for repurchases of common stock[29](index=29&type=chunk) Reconciliation from GAAP to Non-GAAP Results This section reconciles MeridianLink's GAAP financial results to non-GAAP measures, including operating income, net income, adjusted EBITDA, expenses, and free cash flow [Reconciliation of Operating Income, Net Income, and Adjusted EBITDA](index=9&type=section&id=Reconciliation%20of%20Operating%20Income%2C%20Net%20Income%2C%20and%20Adjusted%20EBITDA) Q2 2025 non-GAAP results significantly exceeded GAAP, with non-GAAP operating income of $23.0 million (27% margin) and adjusted EBITDA of $38.4 million (45% margin) Q2 2025 GAAP vs. Non-GAAP Profitability (in thousands) | Metric | GAAP | Non-GAAP / Adjusted | | :--- | :--- | :--- | | **Operating Income** | $5,206 | $22,966 | | Operating Margin | 6% | 27% | | **Net Income (Loss)** | $(3,013) | $10,296 | | Net Margin | (4)% | 12% | | **Adjusted EBITDA** | N/A | $38,435 | | Adjusted EBITDA Margin | N/A | 45% | - The largest adjustments reconciling GAAP net loss to Adjusted EBITDA for Q2 2025 were share-based compensation expense (**$17.1 million**) and depreciation and amortization (**$14.2 million**)[31](index=31&type=chunk) [Reconciliation of Cost of Revenue and Operating Expenses](index=10&type=section&id=Reconciliation%20of%20Cost%20of%20Revenue%20and%20Operating%20Expenses) Non-GAAP cost of revenue improved to 25% of total revenue in Q2 2025, with operating expenses well-managed across categories after key adjustments Q2 2025 GAAP vs. Non-GAAP Expenses as a % of Revenue | Expense Category | GAAP % of Revenue | Non-GAAP % of Revenue | | :--- | :--- | :--- | | Cost of revenue | 33% | 25% | | General and administrative | 34% | 11% | | Research and development | 13% | 9% | | Sales and marketing | 14% | 11% | [Reconciliation of Free Cash Flow](index=10&type=section&id=Reconciliation%20of%20Free%20Cash%20Flow) Q2 2025 free cash flow increased to $17.1 million, representing 20% of revenue, up from $12.4 million (16% of revenue) in Q2 2024 Free Cash Flow Reconciliation - Q2 (in thousands) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $19,197 | $14,356 | | Less: Capitalized software | (1,948) | (1,847) | | Less: Capital expenditures | (154) | (60) | | **Free cash flow** | **$17,095** | **$12,449** | | Free cash flow as a % of revenue | 20% | 16% | Supplementary Information This section provides definitions for key operational measures and details the company's non-GAAP financial metrics and their reconciliation [Operational Measures Definitions](index=2&type=section&id=Operational%20Measures%20Definitions) This section defines key operational measures used to assess business performance, including Bookings, Annual Contracted Value (ACV), and ACV release - **Bookings:** Defined as the minimum annual contracted value (ACV) of newly sold SaaS products and professional services[11](index=11&type=chunk) - **ACV (Annual Contracted Value):** Represents the minimum annualized SaaS revenue commitment from fully activated contracts at the end of a period[12](index=12&type=chunk) [Non-GAAP Financial Measures](index=2&type=section&id=Non-GAAP%20Financial%20Measures) MeridianLink uses non-GAAP measures like adjusted EBITDA and free cash flow to supplement GAAP, excluding items such as share-based compensation and amortization, applying a 24% tax rate - The company uses non-GAAP measures such as adjusted EBITDA, non-GAAP operating income, non-GAAP net income, and free cash flow to supplement GAAP reporting[13](index=13&type=chunk) - Key adjustments to derive non-GAAP figures include excluding share-based compensation, amortization of intangible assets, acquisition-related costs, and restructuring charges[15](index=15&type=chunk) - A structural long-term projected non-GAAP income tax rate of **24%** is applied for greater consistency across reporting periods[14](index=14&type=chunk)

Core Viewpoint - Alithya Group (ALYAF) is currently positioned as a more attractive investment option compared to MeridianLink (MLNK) based on valuation metrics and earnings estimate revisions [3][7]. Valuation Metrics - ALYAF has a forward P/E ratio of 8.18, significantly lower than MLNK's forward P/E of 45.88 [5]. - The PEG ratio for ALYAF is 0.58, indicating better value relative to its expected earnings growth compared to MLNK's PEG ratio of 1.55 [5]. - ALYAF's P/B ratio stands at 1.17, while MLNK has a P/B ratio of 2.9, further highlighting ALYAF's relative undervaluation [6]. Earnings Estimate Revisions - ALYAF has experienced stronger estimate revision activity, suggesting a more favorable earnings outlook compared to MLNK [7].

Core Insights - Point Predictive announced a new integration with MeridianLink, enhancing fraud prevention solutions for the lending industry [1][2] - The integration allows financial institutions to utilize Point Predictive's risk scoring and reporting capabilities within their existing workflows, improving fraud detection and streamlining the lending process [2][3] Company Overview - Point Predictive specializes in fraud prevention solutions, leveraging artificial intelligence and a proprietary data repository of over 87 billion risk insights to enhance lending confidence and speed [7] - MeridianLink provides modern software platforms for financial institutions, focusing on digital lending and operational efficiency [9] Integration Benefits - The integration features AutoPass technology, enabling lenders to automatically approve up to 80% of credit-approved applications while reducing documentation requirements for low-risk applicants [3][4] - It helps prevent 40% to 60% of loans that would default within the first 6-12 months, addressing significant lender losses [3] - The integration includes over 150 alerts to identify various types of fraud, enhancing the fraud detection capabilities of financial institutions [5] Early Adoption Results - Early adopters of the integrated solution reported a 45% reduction in stipulation requests and a 38% increase in loan conversions, demonstrating the effectiveness of the technology [6]

Core Insights - TTEC Holdings (TTEC) is currently more attractive to value investors compared to MeridianLink (MLNK) based on various valuation metrics and earnings outlook [1][7] Valuation Metrics - TTEC has a forward P/E ratio of 4.63, significantly lower than MLNK's forward P/E of 48.45, indicating TTEC is undervalued [5] - TTEC's PEG ratio is 0.27, while MLNK's PEG ratio is 1.63, suggesting TTEC has a better expected earnings growth relative to its price [5] - TTEC's P/B ratio stands at 0.88, compared to MLNK's P/B of 3.06, further highlighting TTEC's undervaluation [6] Earnings Outlook - TTEC holds a Zacks Rank of 2 (Buy), indicating a positive earnings estimate revision trend, while MLNK has a Zacks Rank of 3 (Hold) [3] - The stronger estimate revision activity for TTEC suggests an improving earnings outlook, making it a more favorable option for value investors [7]

Core Insights - TTEC Holdings (TTEC) is currently more attractive to value investors compared to MeridianLink (MLNK) based on various financial metrics and rankings [1][3][7] Valuation Metrics - TTEC has a forward P/E ratio of 4.39, significantly lower than MLNK's forward P/E of 47.24, indicating TTEC is undervalued [5] - TTEC's PEG ratio stands at 0.26, while MLNK's PEG ratio is 1.59, suggesting TTEC has better growth potential relative to its price [5] - TTEC's P/B ratio is 0.83, compared to MLNK's P/B of 2.98, further highlighting TTEC's undervaluation [6] Earnings Estimates - TTEC holds a Zacks Rank of 2 (Buy), indicating positive earnings estimate revisions, while MLNK has a Zacks Rank of 3 (Hold) [3][7] - The stronger estimate revision activity for TTEC suggests an improving earnings outlook compared to MLNK [7] Value Grades - TTEC has been assigned a Value grade of B, while MLNK has a Value grade of D, reflecting TTEC's more favorable valuation metrics [6]

Financial Performance - MeridianLink achieved solid Q1 results, including 10% Lending Software Solutions revenue growth[13] - Total revenue reached $815 million, a 5% year-over-year increase[14] - Adjusted Gross Margin grew by 54 basis points year-over-year to 74%[14] - Adjusted EBITDA Margin increased by 193 basis points year-over-year to 43%[14] - Free Cash Flow Margin significantly improved by 1,503 basis points year-over-year to 50%[17] Business Highlights - Lending Software Solutions demonstrated a strong Net Retention Rate (NRR) of 106%, the highest since Q2 2023[13] - Mortgage lending deals completed increased by nearly 90% year-over-year[22] Revenue Drivers - Lending Software Solutions revenue increased from $61 million in Q1 2024 to $67 million in Q1 2025[26] - Mortgage revenue increased from $54 million in Q1 2024 to $60 million in Q1 2025[26] Guidance - The company projects revenue between $326 million and $334 million for the year ending December 31, 2025, representing a growth of 3% to 6%[44] - Adjusted EBITDA is expected to be between $1315 million and $1375 million, a growth of 1% to 5%, with a margin of 40% to 41%[44]

Core Insights - MeridianLink reported quarterly earnings of $0.09 per share, missing the Zacks Consensus Estimate of $0.11 per share, but showing an improvement from $0.06 per share a year ago [1] - The company posted revenues of $81.49 million for the quarter, exceeding the Zacks Consensus Estimate by 0.67% and up from $77.82 million year-over-year [3] Earnings Performance - The earnings surprise for the quarter was -18.18%, with the company having surpassed consensus EPS estimates only once in the last four quarters [2] - In the previous quarter, MeridianLink had an earnings surprise of 14.29% by reporting $0.08 per share against an expectation of $0.07 [2] Revenue Insights - MeridianLink has consistently topped consensus revenue estimates, achieving this four times over the last four quarters [3] - The current consensus EPS estimate for the upcoming quarter is $0.10, with expected revenues of $81.91 million, and for the current fiscal year, the estimate is $0.36 on revenues of $329.81 million [8] Market Performance - Since the beginning of the year, MeridianLink shares have declined by approximately 15.7%, contrasting with the S&P 500's decline of 3.8% [4] - The stock currently holds a Zacks Rank of 3 (Hold), indicating it is expected to perform in line with the market in the near future [7] Industry Context - The Technology Services industry, to which MeridianLink belongs, is currently ranked in the top 27% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [9]

Financial Data and Key Metrics Changes - MeridianLink achieved total revenue of $81.5 million, representing a 5% year-over-year growth, and adjusted EBITDA of $34.8 million, with a 43% adjusted EBITDA margin [6][27][36] - Free cash flow was $40.6 million, equating to 50% of revenue, and cash and cash equivalents at the end of the quarter were $128.9 million, an increase of $36.1 million from the previous quarter [42][36] Business Line Data and Key Metrics Changes - Total lending software revenue grew by 10% year-over-year, accounting for approximately 82% of total revenue, with consumer lending revenue growth at 11% and mortgage lending revenue growth at 7% [38][39] - Data Verification Software Solutions revenue declined by 15% year-over-year, primarily due to a 28% decrease in mortgage-related revenue [40] Market Data and Key Metrics Changes - In 2024, MeridianLink processed 28 million consumer loan applications and nearly $700 billion in application volume, alongside serving 50 million background checks and over 40 million credit reports [19] - The company completed 15 mortgage lending deals in Q1, marking a nearly 90% increase year-over-year, the highest count in over two years [30] Company Strategy and Development Direction - The company plans to focus on three strategic pillars: increasing product portfolio breadth and depth, simplifying customer interactions, and strengthening talent acquisition and retention [22][24] - MeridianLink aims to enhance its product offerings through partnerships and acquisitions, with a particular emphasis on digital interfaces and automation [77][78] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the demand environment, noting a strong pipeline and healthy demand across platforms, despite some softness at the top end of the sales funnel [59][60] - The outlook for 2025 remains unchanged, with total GAAP revenue expected to be between $326 million and $334 million, representing a 3% to 6% year-over-year increase [44][45] Other Important Information - The transition of CEO leadership from Nicholas Vlok to Larry Katz is planned for October 1, with Katz emphasizing continuity in strategy and operational focus [7][10] - The company has made significant investments in its go-to-market organization to enhance value delivery and operational efficiency [9][11] Q&A Session Summary Question: Are the changes in strategy an evolution or new initiatives? - Larry Katz indicated that the changes are a continuation of existing strategies with a focus on accelerating growth and improving customer interactions [54][56] Question: How is the demand backdrop and ability to replace ACV release? - Katz noted a strong and healthy pipeline, with robust demand across platforms, although some softness at the top of the funnel is being monitored [58][60] Question: What is the outlook for the consumer lending business? - Katz highlighted that growth is driven by ACV release, with solid demand in the consumer space and an increase in average ARR [66][68] Question: What are the expectations for the auto lending vertical in 2025? - Olmeta stated that while there is uncertainty, the company is assuming 7% year-over-year growth for the auto lending segment [82][84] Question: What is the appetite for M&A in the current environment? - Katz confirmed that M&A remains a core part of the strategy, with a focus on finding the right deals at the right price [96][98]