MeridianLink(MLNK) - 2024 Q2 - Quarterly Results

Q2 2024 Performance and Business Highlights Financial Highlights MeridianLink reported total revenue of $78.7 million for Q2 2024, a 4% year-over-year increase, driven by 11% growth in lending software solutions, achieving non-GAAP operating income of $15.5 million and adjusted EBITDA of $31.8 million (40% margin), while repurchasing $29.9 million in shares Q2 2024 Key Financial Metrics (in millions) | Metric | Value | Growth/Margin | | :--- | :--- | :--- | | Total Revenue | $78.7 | 4% YoY | | Lending Software Solutions Revenue | $61.6 | 11% YoY | | Operating Loss (GAAP) | $(1.1) | (1)% of revenue | | Non-GAAP Operating Income | $15.5 | 20% of revenue | | Net Loss (GAAP) | $(9.7) | (12)% of revenue | | Adjusted EBITDA | $31.8 | 40% of revenue | | Cash Flows from Operations | $14.4 | 18% of revenue | | Free Cash Flow | $12.4 | 16% of revenue | | Stock Repurchases | $29.9 | 1.6 million shares | Business and Operating Highlights MeridianLink announced key leadership changes, expanded customer adoption of its MeridianLink One platform, enhanced product capabilities through new integrations, and partnered with Conductiv to integrate AI for improved underwriting - Announced significant leadership changes, with Larry Katz named President and Elias Olmeta set to become the new Chief Financial Officer on August 26, 2024[2] - Expanded customer adoption of the MeridianLink One platform, with clients like 3Rivers Federal Credit Union successfully implementing solutions that significantly reduced loan application times[2] - Enhanced product capabilities through a new integration between MeridianLink® Insight and Collect, providing advanced analytics and a new payment propensity index[2] - Partnered with Conductiv to offer innovative AI capabilities, helping customers increase approval rates by up to 47% without increasing losses[2] Business Outlook Financial Guidance for Q3 and Full Year 2024 MeridianLink issued financial guidance for Q3 2024, projecting revenue between $78.0 million and $81.0 million and adjusted EBITDA between $30.0 million and $33.0 million, while updating full-year 2024 revenue expectations to $312.0 million to $318.0 million and adjusted EBITDA to $123.0 million to $128.0 million Financial Guidance (in millions) | Period | Metric | Guidance Range | | :--- | :--- | :--- | | Q3 2024 | Revenue | $78.0 - $81.0 | | | Adjusted EBITDA | $30.0 - $33.0 | | Full Year 2024 | Revenue | $312.0 - $318.0 | | | Adjusted EBITDA | $123.0 - $128.0 | Consolidated Financial Statements Condensed Consolidated Balance Sheets As of June 30, 2024, MeridianLink's total assets were $986.9 million, a slight decrease from $996.3 million at year-end 2023, while total liabilities increased to $547.4 million from $488.0 million, leading to a decrease in total stockholders' equity from $508.2 million to $439.5 million Balance Sheet Summary (in thousands) | Account | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $93,009 | $80,441 | | Total Assets | $986,936 | $996,251 | | Total Liabilities | $547,400 | $488,004 | | Total Stockholders' Equity | $439,536 | $508,247 | Condensed Consolidated Statements of Operations For Q2 2024, revenues increased to $78.7 million from $75.4 million in Q2 2023, but increased operating expenses resulted in an operating loss of $1.1 million (vs. $1.5 million income in Q2 2023) and a widened net loss of $9.7 million (or ($0.13) per share) from $5.2 million (or ($0.06) per share) in the prior year Statement of Operations Highlights (in thousands, except per share data) | Metric | Q2 2024 | Q2 2023 | Six Months 2024 | Six Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Revenues, net | $78,676 | $75,415 | $156,492 | $152,550 | | Gross Profit | $50,500 | $46,921 | $102,243 | $96,101 | | Operating (Loss) Income | $(1,097) | $1,483 | $2,255 | $3,179 | | Net Loss | $(9,670) | $(5,230) | $(14,976) | $(10,896) | | Net Loss Per Share (Basic) | $(0.13) | $(0.06) | $(0.19) | $(0.13) | Revenue Analysis Revenue growth is primarily driven by lending software solutions, which saw an 8% increase in Q2 2024, with subscription fees remaining the largest component, while exposure to the mortgage loan market decreased to 20% of total revenue in Q2 2024 from 26% in the prior-year quarter Net Revenues by Major Source (in thousands) | Source | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Subscription fees | $65,946 | $63,770 | | Professional services | $9,559 | $9,002 | | Other | $3,171 | $2,643 | | Total | $78,676 | $75,415 | Net Revenues by Solution Type (in thousands) | Solution Type | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Lending software solutions | $61,644 | $55,778 | | Data verification software solutions | $17,032 | $19,637 | | Total | $78,676 | $75,415 | - The percentage of total revenue related to the mortgage loan market decreased to 20% in Q2 2024, compared to 26% in Q2 2023[18] Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2024, net cash provided by operating activities increased to $43.4 million from $34.2 million in 2023, while investing activities used $3.8 million and financing activities used $27.0 million (primarily due to $73.8 million in stock repurchases), resulting in a $12.6 million increase in cash and cash equivalents to $93.0 million Cash Flow Summary for Six Months Ended June 30 (in thousands) | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $43,394 | $34,185 | | Net cash (used in) provided by investing activities | $(3,836) | $25,459 | | Net cash used in financing activities | $(26,990) | $(6,552) | | Net increase in cash and cash equivalents | $12,568 | $53,092 | | Cash and cash equivalents, end of period | $93,009 | $108,872 | Reconciliation of GAAP to Non-GAAP Financial Measures Reconciliation of Key Performance Metrics For Q2 2024, GAAP operating loss of $1.1 million was adjusted to non-GAAP operating income of $15.5 million, and GAAP net loss of $9.7 million reconciled to non-GAAP net income of $3.0 million, with Adjusted EBITDA reaching $31.8 million (up from $27.1 million in Q2 2023) and its margin improving from 36% to 40%, primarily due to adjustments for share-based compensation, litigation, and restructuring costs Reconciliation from GAAP Operating Loss to Non-GAAP Operating Income (in thousands) | Description | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Operating (loss) income (GAAP) | $(1,097) | $1,483 | | Share-based compensation | $12,500 | $9,367 | | Litigation-related charges | $1,864 | — | | Restructuring related costs | $988 | $717 | | Other adjustments | $1,289 | $322 | | Non-GAAP operating income | $15,544 | $11,889 | Reconciliation from GAAP Net Loss to Non-GAAP Net Income (in thousands) | Description | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Net loss (GAAP) | $(9,670) | $(5,230) | | Total non-GAAP adjustments (pre-tax) | $16,641 | $10,406 | | Income tax effect on non-GAAP items | $(3,994) | $(2,497) | | Non-GAAP net income | $2,977 | $2,679 | Reconciliation to Adjusted EBITDA (in thousands) | Description | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Net loss (GAAP) | $(9,670) | $(5,230) | | Interest, Taxes, D&A | $24,782 | $21,921 | | Share-based compensation | $12,500 | $9,367 | | Other adjustments | $4,141 | $1,058 | | Adjusted EBITDA | $31,753 | $27,116 | | Adjusted EBITDA margin | 40% | 36% | Reconciliation of Operating Expenses MeridianLink adjusts operating expenses for non-cash items and specific charges to present non-GAAP figures, with Q2 2024 non-GAAP cost of revenue at 28% (vs. 36% GAAP) and non-GAAP R&D, G&A, and Sales & Marketing expenses at 9%, 12%, and 12% of revenue respectively, all lower than their GAAP counterparts GAAP vs. Non-GAAP Expenses as % of Revenue (Q2 2024) | Expense Category | GAAP % of Revenue | Non-GAAP % of Revenue | | :--- | :--- | :--- | | Cost of Revenue | 36% | 28% | | Research and Development | 13% | 9% | | General and Administrative | 37% | 12% | | Sales and Marketing | 15% | 12% | Reconciliation to Free Cash Flow Free cash flow, calculated by subtracting capital expenditures and capitalized software from operating cash flow, reached $12.4 million in Q2 2024, representing a 16% margin on revenue, a significant improvement from $3.3 million (4% margin) in Q2 2023 Free Cash Flow Calculation (in thousands) | Description | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $14,356 | $6,104 | | Less: Capitalized software | $(1,847) | $(2,638) | | Less: Capital expenditures | $(60) | $(171) | | Free cash flow | $12,449 | $3,295 | | Free cash flow as a % of revenue | 16% | 4% | Supplementary Information Non-GAAP Financial Measures Definitions MeridianLink utilizes non-GAAP financial measures like Adjusted EBITDA, non-GAAP operating income, non-GAAP net income, and free cash flow to supplement GAAP results, providing insights into performance by excluding items such as share-based compensation, litigation charges, restructuring costs, and amortization of acquired intangibles - Adjusted EBITDA is defined as net income (loss) before interest, taxes, depreciation, amortization, and other specific adjustments like share-based compensation and restructuring costs[9] - Non-GAAP Operating Income is calculated by excluding items such as share-based compensation, restructuring costs, litigation charges, and acquisition-related costs from GAAP operating income[6] - Free Cash Flow is defined as GAAP cash flow from operating activities minus purchases of property and equipment and capitalized software costs[10] Forward-Looking Statements This report contains forward-looking statements regarding the company's strategy, financial guidance, operational performance, and market conditions, which are subject to risks and uncertainties that could cause actual results to differ materially, and the company undertakes no obligation to update them - The report includes forward-looking statements regarding strategy, financial guidance, future performance, leadership transitions, and product development[12] - Actual results may differ from these statements due to a variety of risks and factors beyond the company's control, as detailed in its SEC filings[13] About MeridianLink MeridianLink provides cloud-based software solutions for financial institutions and consumer reporting agencies, with platforms for digital lending, account opening, background screening, and data verification built on the unified MeridianLink One data platform to help clients drive efficient growth and manage compliance - MeridianLink (NYSE: MLNK) provides cloud-based software for digital lending, account opening, and data verification to financial institutions[5] - The company's solutions leverage the unified MeridianLink® One data platform to help customers identify growth opportunities and support compliance[5]