MeridianLink(MLNK) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) Presents MeridianLink's unaudited financial statements, including balance sheets, operations, equity, cash flows, and detailed notes Condensed Consolidated Balance Sheets | 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] Condensed Consolidated Statements of Operations | 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] Condensed Consolidated Statements of Stockholders' Equity | 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] Condensed Consolidated Statements of Cash Flows | 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] - 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][169][175] Notes to Condensed Consolidated Financial Statements (unaudited) Note 1 – Organization and Description of Business 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] - The company's customer base includes banks, credit unions, mortgage lenders, specialty lending providers, and consumer reporting agencies[23] Note 2 – Significant Accounting Policies 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][25][28] - MeridianLink is an emerging growth company and uses the extended transition period for new or revised accounting standards[30] - 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][32] Note 3 – Revenue Recognition 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] Note 4 – Balance Sheet Components 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] 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 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] 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 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][58] - 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][59] Note 7 – Stockholders' Equity 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] 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 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] Note 9 – Income Taxes 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] - Gross unrecognized tax benefits related to research and development credits were $4.1 million as of June 30, 2025[82] Note 10 – Related Party Transactions 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 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] Note 12 – Restructuring Activities 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] 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 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] Note 14 – Subsequent Events 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] - 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][92] - 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] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition, operations, global factors, 2025 developments, and non-GAAP measures 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] - 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][109] - 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][113][115] Global Considerations 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][118][119] - 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] Developments in 2025 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][122] - Nicolaas Vlok resigned as CEO effective October 1, 2025, with Laurence E. Katz appointed as the new CEO and President[123] - 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][125] - 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] Components of Operating Results 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][129][130][131] - 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][135][137][141] - 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][140][142] Results of Operations 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][150] 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] - 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] - 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][164] Liquidity and Capital Resources 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 $50.0 million revolving credit facility[166] Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change ($) | 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] - 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][180] Recent Accounting Pronouncements 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] Emerging Growth Company Status 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] - The company will remain an EGC until December 31, 2026, or earlier if it meets certain revenue or market value thresholds[345] Non-GAAP Financial Measures 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] 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] Item 3. Quantitative and Qualitative Disclosures about Market Risk 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] Item 4. Controls and Procedures 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] - The material weakness is primarily related to insufficient controls over the set-up of customer contracts for billing and maintaining complete contract support[193] - Remediation efforts, including process improvements and new key controls, are ongoing, but the material weakness has not yet been fully remediated[194][195] PART II. OTHER INFORMATION Item 1. Legal Proceedings 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] Item 1A. Risk Factors Outlines substantial risks of investing in MeridianLink, covering merger, strategy, operations, and finance Summary of Risk Factors 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][204][206][207][208][209] Risks Related to the Proposed Merger - 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][213] - 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][216][217] - 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][220] Risks Related to Our Strategy and Industry - 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][225][226] - 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][228][233][234] - 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] - 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][247][248] Risks Related to Our Business and Operations - 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] - 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][252][254][255] - 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][262][264] - 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][269][271][273][279][282] - 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][286] Risks Related to Legal and Regulatory Matters - 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][290][291][292] - 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][295][296][297] - 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][300] - 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][302][303][304] - 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][308][311] Risks Related to Finance and Accounting - 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] - 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][316] - 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] - 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] - 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] - High leverage and debt agreements impose significant operating and financial restrictions, limiting flexibility and increasing vulnerability to adverse conditions[322][323][324][325] - 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][329][333] - 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] Risks Related to Potential Conflicts of Interests and Related Parties - 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][337] - Thoma Bravo may pursue corporate opportunities independent of the company, which could present conflicts of interest with the company and its other stockholders[338] Risks Related to Our Common Stock and Governance Structure - 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][343] - 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][346] - 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][348] - The company does not intend to pay dividends on its common stock, meaning stockholder returns will depend solely on stock price appreciation[349] - 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][351] - 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] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - There were no defaults upon senior securities[357] Item 4. Mine Safety Disclosures This item is not applicable to the company - Mine Safety Disclosures are not applicable to the company[358] Item 5. Other Information 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] Item 6. Exhibits Lists all exhibits filed as part of the Quarterly Report on Form 10-Q, including organizational documents Signatures Report signed by MeridianLink's CEO, Nicolaas Vlok, and CFO, Elias Olmeta, as of August 11, 2025