MeridianLink(MLNK) - 2025 Q2 - Quarterly Results

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 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 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] Transaction Details | Metric | Value | | :--- | :--- | | Transaction Type | All-cash | | Enterprise Value | Approx. $2.0 billion | | Price Per Share | $20.00 | Management Commentary 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] - 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] Investor Communications Update 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] - Financial guidance for the full year 2025 has been suspended pending the completion of the acquisition[6] 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 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 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 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 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 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] Percent Revenue Related to the Mortgage Loan Market 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] Condensed Consolidated Statements of Cash Flows 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] 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 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] Reconciliation of Cost of Revenue and Operating Expenses 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 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 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] - ACV (Annual Contracted Value): Represents the minimum annualized SaaS revenue commitment from fully activated contracts at the end of a period[12] Non-GAAP Financial Measures 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] - Key adjustments to derive non-GAAP figures include excluding share-based compensation, amortization of intangible assets, acquisition-related costs, and restructuring charges[15] - A structural long-term projected non-GAAP income tax rate of 24% is applied for greater consistency across reporting periods[14]