MeridianLink(MLNK) - 2022 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents MeridianLink's unaudited condensed consolidated financial statements and management's analysis Item 1. Financial Statements (unaudited) Presents MeridianLink's unaudited condensed consolidated financial statements and comprehensive notes for Q1 2022 Condensed Consolidated Balance Sheets Total assets increased to $1,055,190 thousand, driven by cash and deferred revenue, with liabilities also rising Condensed Consolidated Balance Sheets (in thousands) | Metric | March 31, 2022 (unaudited) (in thousands) | December 31, 2021 (in thousands) | | :----- | :---------------------------------------- | :------------------------------- | | Total Assets | $1,055,190 | $1,025,893 | | Total Liabilities | $487,335 | $469,615 | | Total Stockholders' Equity | $567,855 | $556,278 | | Cash and Cash Equivalents | $146,746 | $113,645 | | Accounts Receivable, net | $32,160 | $24,913 | | Deferred Revenue (Current) | $29,293 | $14,707 | Condensed Consolidated Statements of Operations Net income increased to $7,479 thousand, driven by 7% revenue growth and lower interest expense, despite rising costs Condensed Consolidated Statements of Operations (in thousands) | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Change (in thousands) | Change (%) | | :----- | :----------------------------------------------- | :----------------------------------------------- | :-------------------- | :--------- | | Revenues, net | $72,754 | $67,811 | $4,943 | 7% | | Total Cost of Revenues | $24,538 | $19,476 | $5,062 | 26% | | Gross Profit | $48,216 | $48,335 | $(119) | (0.2%) | | Total Operating Expenses | $33,622 | $28,930 | $4,692 | 16% | | Operating Income | $14,594 | $19,405 | $(4,811) | (25%) | | Interest Expense, net | $4,358 | $10,062 | $(5,704) | (57%) | | Net Income | $7,479 | $7,231 | $248 | 3% | | Basic EPS | $0.09 | $(0.03) | $0.12 | N/A | | Diluted EPS | $0.09 | $(0.03) | $0.12 | N/A | Condensed Consolidated Statements of Preferred Units and Stockholders' Equity / Members' Deficit Stockholders' equity increased to $567,855 thousand due to net income and share-based compensation, post-corporate conversion Stockholders' Equity (in thousands) | Metric | Balance at December 31, 2021 (in thousands) | Balance at March 31, 2022 (in thousands) | | :----- | :---------------------------------------- | :--------------------------------------- | | Total Stockholders' Equity | $556,278 | $567,855 | | Net Income | N/A | $7,479 | | Share-based Compensation Expense | N/A | $3,887 | - Upon corporate conversion, Class A preferred units converted into 16,607,235 shares of common stock, and Class B common units converted into 53,646,668 shares of common stock[23] Condensed Consolidated Statements of Cash Flows Operating cash flow increased by 21% to $34,863 thousand, while investing and financing cash flows significantly decreased Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Change (in thousands) | Change (%) | | :----- | :----------------------------------------------- | :----------------------------------------------- | :-------------------- | :--------- | | Net Cash Provided by Operating Activities | $34,863 | $28,697 | $6,166 | 21% | | Net Cash Used in Investing Activities | $(1,941) | $(86,695) | $84,754 | (98%) | | Net Cash Provided by Financing Activities | $179 | $93,769 | $(93,590) | (100%) | | Net Increase in Cash, Cash Equivalents and Restricted Cash | $33,101 | $35,771 | $(2,670) | (7%) | | Cash, Cash Equivalents and Restricted Cash, End of Period | $146,746 | $75,652 | $71,094 | 94% | Notes to Condensed Consolidated Financial Statements Provides detailed disclosures for financial statements, covering business, accounting policies, and key financial components Note 1 – Organization and Description of Business MeridianLink provides cloud-based SaaS solutions to financial institutions, completed IPO in 2021, with uncertain COVID-19 impacts - MeridianLink provides secure, cloud-based digital solutions to financial institutions (banks, credit unions, mortgage lenders, specialty lending providers, and consumer reporting agencies) primarily through a SaaS model[20] - On July 27, 2021, Project Angel Parent, LLC converted into MeridianLink, Inc (corporate conversion)[22] - On July 30, 2021, the Company completed its IPO, selling 10.0 million newly issued shares at $26.00 per share, generating net proceeds of approximately $242.1 million[24] - The COVID-19 pandemic has not caused significant effects on partners or bad debts, but future impacts are unpredictable[29][31] Note 2 – Significant Accounting Policies Financial statements adhere to GAAP, with key estimates in revenue and share-based compensation; adopted new lease and business combination ASUs - Unaudited condensed consolidated financial statements are prepared in accordance with GAAP, with normal, recurring adjustments[32][33] - Significant estimates include revenue recognition, share-based compensation, fair value of acquired intangibles, and income taxes[36] - Adopted ASU 2016-02, "Leases (Topic 842)," on January 1, 2022, resulting in recognition of approximately $2.6 million in ROU assets and $3.4 million in related liabilities[46][47] - Adopted ASU 2021-08, "Business Combinations (Topic 805)," on January 1, 2022, prospectively for business combinations[48][49] Note 3 – Revenue Recognition Total net revenues reached $72,754 thousand, primarily from Lending Software Solutions and subscription fees, with deferred revenue increasing Revenue by Solution Type (in thousands) | Revenue Type | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :----------- | :----------------------------------------------- | :----------------------------------------------- | | Lending Software Solutions | $49,167 | $43,134 | | Data Verification Software Solutions | $23,587 | $24,677 | | Total Revenues | $72,754 | $67,811 | Revenue by Source (in thousands) | Revenue Source | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :------------- | :----------------------------------------------- | :----------------------------------------------- | | Subscription fees | $63,469 | $60,316 | | Professional services | $7,112 | $5,491 | | Other | $2,173 | $2,004 | | Total Revenues | $72,754 | $67,811 | Deferred Revenue (in thousands) | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :----- | :----------------------------------------------- | :----------------------------------------------- | | Deferred Revenue, beginning balance | $14,707 | $10,873 | | Deferred Revenue, ending balance | $29,293 | $26,068 | Note 4 – Balance Sheet Components Details prepaid expenses, property, and intangible assets, with net intangibles decreasing to $287,854 thousand due to amortization Selected Balance Sheet Components (in thousands) | Asset Type | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :--------- | :---------------------------- | :------------------------------- | | Prepaid expenses and other current assets | $10,010 | $9,398 | | Property and equipment, net | $5,613 | $5,989 | | Intangible assets, net | $287,854 | $298,597 | - Weighted average remaining useful lives for intangible assets range from 1 year (non-competition agreements) to 7 years (customer relationships and trademarks)[68] - Total amortization expense for intangible assets was $12,344 thousand for the three months ended March 31, 2022, up from $11,767 thousand in the prior year[68] Note 5 – Commitments and Contingencies No material adverse legal claims; acquired StreetShares for $58.9 million; future commitments total $12,869 thousand - No legal proceedings or claims are currently expected to have a material adverse effect[71] - Signed a merger agreement on March 5, 2022, to acquire StreetShares, Inc. for $58.9 million, including $30.0 million in escrow for a contingent earnout[72] - Future minimum payments under non-cancelable purchase commitments total $12,869 thousand, with $11,872 thousand due in 2025[73] Note 6 – Leases Leases office space with a 3-year weighted average term and 5.0% discount rate; Q1 2022 rent expense was $347 thousand - Weighted average remaining lease term: 3 years[76] - Weighted average discount rate: 5.0%[76] - Total rent expense for Q1 2022: $347 thousand[78] - Sublease income for Q1 2022: $0.1 million[77] - Operating lease ROU assets as of March 31, 2022: $2,311 thousand[78] - Total operating lease liabilities as of March 31, 2022: $2,969 thousand[78] Note 7 – Long-Term Debt Net long-term debt was $427,968 thousand; 2021 Credit Agreement includes a $435.0 million term loan at 4.3% interest Long-Term Debt, Net (in thousands) | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :----- | :---------------------------- | :------------------------------- | | 2021 Term loan | $435,000 | $435,000 | | Debt issuance costs | $(7,032) | $(7,490) | | Total debt, net | $427,968 | $427,510 | - Entered into 2021 Credit Agreement on November 10, 2021, for a $435.0 million term loan and a $50.0 million revolving credit facility[84] - Effective interest rate on 2021 Term Loan: 4.3% as of March 31, 2022[88] - Company was in compliance with all financial covenants at March 31, 2022[86] - Future principal payments of long-term debt total $435,000 thousand, with $414,337 thousand due thereafter (after 2026)[93] Note 8 – Share-based Compensation Share-based compensation expense surged to $3,808 thousand in Q1 2022, with $17.7 million and $20.5 million unrecognized for options and RSUs - 2021 Stock Option and Incentive Plan adopted, replacing prior plans, with 13,171,588 shares initially reserved[94][95] - Total share-based compensation expense for Q1 2022: $3,808 thousand, compared to $643 thousand in Q1 2021[108] - Unrecognized share-based compensation expense: $17.7 million for stock options (over ~2.75 years) and $20.5 million for RSUs (over ~2.91 years)[100][106] Note 9 – Income Taxes Effective tax rate rose to 28% in Q1 2022; $2.4 million in unrecognized tax benefits for R&D credits, no valuation allowance needed - Effective tax rate for Q1 2022: ~28% (Q1 2021: ~22%)[109] - Gross unrecognized tax benefits for R&D credits: $2.4 million as of March 31, 2022 (vs. $1.9 million at Dec 31, 2021)[110] - No valuation allowance is deemed necessary for deferred tax assets[112] Note 10 – Related Party Transactions Incurred $0.2 million in related party rental expense; Advisory Services Agreement with Thoma Bravo terminated post-IPO - Rental expense from related party property: $0.2 million for Q1 2022 and Q1 2021[113] - Advisory Services Agreement with Thoma Bravo terminated upon IPO[114] - Cost of sales with Thoma Bravo affiliated company: $0.4 million for Q1 2022 (vs. $0.3 million in Q1 2021)[115] Note 11 – Net Income (Loss) Per Share Basic and diluted EPS improved to $0.09 in Q1 2022 from $(0.03) loss, driven by higher net income Net Income (Loss) Per Share | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :----- | :-------------------------------- | :-------------------------------- | | Net Income (Loss) Attributable to Common Stockholders (in thousands) | $7,479 | $(1,701) | | Basic EPS | $0.09 | $(0.03) | | Diluted EPS | $0.09 | $(0.03) | | Weighted Average Common Stock Outstanding (Basic) | 79,974,071 | 51,551,231 | | Weighted Average Common Stock Outstanding (Diluted) | 82,228,936 | 51,551,231 | - 2,351,017 potentially dilutive securities (options, RSUs) were excluded from diluted EPS calculation for Q1 2022 due to anti-dilutive impact[118] Note 12 – Subsequent Events Acquired StreetShares for $58.9 million in April 2022; awarded 1.85 million RSUs and 0.5 million stock options in May - Acquired StreetShares on April 1, 2022, for $58.9 million cash consideration (including $30.0 million contingent earnout)[119] - Acquisition funded by available cash, aims to provide digital small business lending technology[119] - In May 2022, awarded ~1,852,330 service-based RSUs and ~502,825 stock options[121] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Analyzes MeridianLink's financial condition and results, highlighting SaaS model, revenue drivers, COVID-19 impacts, and liquidity Overview MeridianLink provides cloud-based SaaS solutions to financial institutions, expanding through organic growth and strategic acquisitions - MeridianLink is a leading provider of cloud-based software solutions for financial institutions (banks, credit unions, mortgage lenders, specialty lending providers, and CRAs)[131] - Solutions are delivered via a SaaS model, with customers paying subscription fees and transaction-based fees (volume-based fees)[134] - Revenues grow as customers add transaction types, purchase modules, utilize partner integrations, or increase transaction volume[135] - Company focuses on mid-market financial institutions ($100 million and $10 billion in assets) but sees opportunity in expanding to smaller and larger institutions[139] - Strategic acquisitions include CRIF (2018), TCI (2020), TazWorks (2020), and Saylent (2021), expanding solution portfolio[140] - Partner Marketplace allows third parties to access customers, generating one-time service fees and revenue share[141] Impact of the COVID-19 Pandemic COVID-19 impacts remain widespread and unpredictable, with MeridianLink prioritizing safety and business continuity - COVID-19 has had widespread, evolving, and unpredictable impacts on global societies, economies, and business practices[143] - Company's focus remains on employee health and safety, customer service, regulatory compliance, and business continuity[144] - Uncertainty persists regarding the duration and extent of the pandemic's adverse impact on business operations and financial performance[145] Components of Operating Results Operating results are driven by subscription, professional services, and other revenues; gross margin was 66.3% in Q1 2022 - Revenues consist of subscription fees (annual base fees, platform partner fees, volume-based fees), professional services (implementation, configuration, consulting, training), and other revenues (referral/marketing agreements)[147][148][150][151] - Cost of revenues includes personnel costs, third-party vendor fees, cloud-based hosting, allocated overhead, and amortization of developed technology, expected to grow in absolute dollars[152][153][154][155] - Gross margin was 66.3% for Q1 2022, down from 71.3% for Q1 2021[156] - Operating Expenses: General and Administrative, Research and Development, and Sales and Marketing expenses are expected to increase in absolute dollars due to business growth and public company compliance[157][158][159][160][161][162][163][164] - Total Other (Income) Expense, Net primarily consists of interest expense, net[165] - Provision for Income Taxes reflects management's estimate of current and future taxes, influenced by R&D credits, state taxes, and permanent differences[166][167][168] Results of Operations Revenues grew 7% to $72,754 thousand, but gross profit slightly declined; net income increased 3% due to lower interest expense Results of Operations (in thousands) | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Change (in thousands) | Change (%) | | :----- | :----------------------------------------------- | :----------------------------------------------- | :-------------------- | :--------- | | Revenues, net | $72,754 | $67,811 | $4,943 | 7% | | Subscription and services cost of revenues | $21,104 | $16,614 | $4,490 | 27% | | Amortization of Developed Technology | $3,434 | $2,862 | $572 | 20% | | Gross Profit | $48,216 | $48,335 | $(119) | (0.2%) | | General and Administrative expenses | $18,187 | $17,595 | $592 | 3% | | Research and Development expenses | $8,409 | $6,986 | $1,423 | 20% | | Sales and Marketing expenses | $4,743 | $3,599 | $1,144 | 32% | | Acquisition Related Costs | $2,283 | $750 | $1,533 | 204% | | Total Other Expense, net | $4,195 | $10,042 | $(5,847) | (58%) | | Provision for Income Taxes | $2,920 | $2,132 | $788 | 37% | Liquidity and Capital Resources Liquidity from operations, debt, and IPO proceeds; $146.7 million cash and $50.0 million credit capacity as of March 31, 2022 - Sources of liquidity include cash flows from operations, long-term debt, and IPO proceeds (approximately $242.1 million net from 2021 IPO)[182] - As of March 31, 2022, liquidity includes $146.7 million in cash and cash equivalents and $50.0 million in unused revolving credit facility capacity[183] - Primary uses of cash are funding operations, acquisitions, capital expenditures, debt payments, and interest expense[184] - Cash flows from operating activities provided $34.9 million in Q1 2022, driven by net income and non-cash adjustments and increased deferred revenue[191] - Cash flows from investing activities used $1.9 million in Q1 2022 for capitalized software and property/equipment purchases (vs. $86.7 million used in Q1 2021, which included TazWorks acquisition)[193][194] - Cash flows from financing activities provided $0.2 million in Q1 2022 from stock option exercises (vs. $93.8 million provided in Q1 2021, which included long-term debt proceeds)[195][196] Recent Accounting Pronouncements Refers to Note 2 for details on recent accounting pronouncements, adoption dates, and estimated effects - Refers to Note 2 for details on recent accounting pronouncements, including adoption dates and estimated effects[197] Emerging Growth Company Status MeridianLink is an EGC, benefiting from JOBS Act exemptions until December 31, 2026, or earlier if thresholds are met - Company 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[198] - EGC status allows exemptions from certain public company requirements (e.g., auditor attestation on internal controls, executive compensation disclosures)[332] - EGC status will be maintained until December 31, 2026, or earlier if revenue exceeds $1.07 billion, market value of common stock held by non-affiliates exceeds $700 million, or non-convertible debt exceeds $1.0 billion over three years[333] Critical Accounting Policies and Significant Judgments and Estimates Identifies critical accounting policies and estimates, including revenue recognition and goodwill, with no material changes since 2021 - Identified critical accounting policies and estimates include revenue recognition, contract balances, share-based compensation, business combinations, goodwill and intangible assets, and income taxes[199] - No material changes to critical accounting policies and estimates since December 31, 2021[201] Item 3. Quantitative and Qualitative Disclosures about Market Risk No significant changes in market risk exposure since December 31, 2021 - No significant changes in market risk exposure since December 31, 2021[202] Item 4. Controls and Procedures Management concluded disclosure controls were effective as of March 31, 2022, with no material changes in internal control Evaluation of Disclosure Controls and Procedures Disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2022 - Disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2022[204] Changes in Internal Control Over Financial Reporting No material changes in internal control over financial reporting during Q1 2022 - No material changes in internal control over financial reporting during the quarter ended March 31, 2022[205] Inherent Limitations on Effectiveness of Controls Control systems provide reasonable, not absolute, assurance and are subject to inherent limitations - Control systems provide reasonable, not absolute, assurance and may not prevent or detect all errors or fraud due to inherent limitations like faulty judgment, simple errors, circumvention by individuals, or management override[206] Special Note about Forward-Looking Statements Report contains forward-looking statements subject to substantial risks and uncertainties, cautioning against undue reliance - Report contains forward-looking statements regarding future financial performance, strategy, operations, and market conditions[124][126] - Statements are subject to substantial risks and uncertainties, including those detailed in "Risk Factors"[124] - Company undertakes no obligation to update forward-looking statements, except as required by law[126] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits Item 1. Legal Proceedings No current material adverse litigation or claims, though involved in ordinary course legal proceedings - No current material adverse litigation or claims[208] - Involved in ordinary course legal proceedings from time to time[208] Item 1A. Risk Factors Investing in common stock involves substantial strategic, operational, legal, financial, and governance risks Summary of Risk Factors Overview of key risks including customer retention, competition, operational, legal, financial, and governance factors - Risks include failure to retain or attract customers, expand offerings, or integrate acquisitions[213] - Competitive landscape, mortgage market fluctuations, and disruptions in software delivery are key business risks[213] - Data protection failures, regulatory non-compliance, and changes in tax laws pose legal and financial risks[214][215] - Thoma Bravo's controlling stake and potential conflicts of interest are noted[216] - Stock price volatility, EGC status, and potential dilution are risks related to common stock[217] Risks Related to Our Strategy and Industry Risks include customer retention, intense competition, lower mortgage volumes, slow cloud adoption, and financial industry downturns - Failure to retain or attract customers, expand offerings, or respond to evolving tech requirements could harm business[217][223][224] - Intense competition and market fragmentation, including from internal solutions and larger competitors, could adversely affect growth and profitability[230][231][233][234] - Expected lower mortgage lending volume in 2022 due to rising interest rates could adversely affect business[235][236][237] - Slow adoption of cloud-based solutions or unanticipated market changes could reduce sales[239] - Dependence on the financial services industry means any downturn, consolidation, or decreased tech spending could adversely affect revenues[240] Risks Related to Our Business and Operations Operational risks include economic impacts, security breaches, data center disruptions, software defects, and personnel retention challenges - Uncertain economic conditions, including the COVID-19 pandemic, continue to heighten risks and may adversely affect the industry and operations[241][246][247] - Security breaches or compromises of customer/client data could materially impact reputation, business, and results, especially with remote work and reliance on third-party providers[248][249][250][251] - Dependence on internal and third-party data centers and internet hosting providers means disruptions could adversely affect business[253][254] - Transitioning software solutions to the public cloud presents risks of business continuity disruption, data loss, and operational challenges[255][256] - Defects, errors, or performance problems in software solutions could harm reputation, incur significant costs, and lead to liability[257][258] - Inability to effectively integrate with third-party systems or performance issues with such systems could adversely affect operations[259][260][261] - Failure to meet service level commitments could lead to credits, refunds, or contract terminations[263] - Inaccuracies in key operating metrics due to internal tools or third-party data could harm reputation and business[264][265] - Usage and volume-based pricing can cause revenue fluctuations, especially with macroeconomic trends[266] - Unpredictable, time-consuming, and costly sales cycles could harm business and operating results[268] - Failure to expand sales and marketing capabilities or retain product partners could limit customer base and revenue growth[269][270][271] - Inability to offer high-quality customer support or higher-than-anticipated support costs could harm business and reputation[272] - Dependence on key and highly skilled personnel, and challenges in retention/hiring, could harm business development and marketing[273][274] - Growth places significant demands on management and infrastructure, requiring substantial financial and operational resources[275][276] - Shift of product development to India poses risks related to communication, intellectual property, quality, and geopolitical instability[277][278][280] - Vulnerability to natural disasters and man-made problems (e.g., terrorism) could cause significant damage or interruption[281] Risks Related to Legal and Regulatory Matters Legal and regulatory risks include litigation, IP protection, data privacy, financial industry compliance, and tax liabilities - Future litigation could damage reputation and be costly/time-consuming to defend[282] - Inability to protect intellectual property (copyrights, trademarks, patents, trade secrets) could adversely affect business and competitive advantage[283][284] - Use of open source software could lead to litigation, require costly licenses, or force release of proprietary code[285][286] - Lawsuits by third parties for intellectual property infringement could result in significant expenses and harm operating results[287][288] - Customer use of solutions in violation of legal/regulatory requirements could damage reputation and subject the company to liability[289] - Evolving privacy, information security, and data protection regulations (e.g., CCPA, CPRA) may limit solution adoption and adversely affect business[290][291][292] - Failure to comply with laws and regulations applicable to technology providers for financial institutions (e.g., GLBA, FCRA) could increase costs and impose business constraints[293][294][295][296] - Changes in financial services industry legislation could adversely affect business by decreasing usage/volumes or increasing compliance costs[297][298] - Failure to comply with anti-bribery, anti-corruption, anti-money laundering laws, and export controls could lead to penalties and adverse consequences[299][301][302][303] - Successful assertion by states/local jurisdictions that the company should have collected additional sales or use taxes could result in significant liability[304] Risks Related to Finance and Accounting Financial risks include fluctuating results, goodwill impairment, restrictive debt covenants, high leverage, and tax law changes - Quarterly results may fluctuate significantly due to various factors (customer retention, transaction volume, operating expenses, market conditions, seasonality), not fully reflecting underlying business performance[305][306] - Forecasts are subject to significant risks, assumptions, and uncertainties, potentially causing actual results to differ materially from expectations[308][309][310][311] - Subscription revenue recognition over contract terms means business downturns/upturns may not be fully reflected until future periods[312] - Goodwill and other intangibles impairment could result in significant charges to earnings[313] - Debt agreements contain restrictive covenants limiting financial and operational flexibility[314] - High leverage and substantial indebtedness increase vulnerability to adverse conditions and limit future financing[315][316][317] - Inability to secure sufficient additional financing on favorable terms could hinder future capital needs[318] - Phase-out of LIBOR could affect interest rates on variable-rate debt and future financing terms[319] - Amendments to tax laws, rules, or regulations could adversely affect financial position[320] Risks Related to Potential Conflicts of Interests and Related Parties Thoma Bravo's controlling stake creates potential conflicts of interest and influences governance, potentially delaying control changes - Thoma Bravo holds a controlling stake (~50.2% as of May 6, 2022) and can determine matters requiring stockholder approval, potentially delaying or preventing changes of control[322][323][324] - As a controlled company, MeridianLink relies on exemptions from certain NYSE corporate governance requirements (e.g., independent directors on board/committees)[322] - Thoma Bravo may pursue corporate opportunities independent of the company, potentially creating conflicts of interest[326][327] Risks Related to Our Common Stock and Governance Structure Common stock risks include price volatility, dilution from future issuances, no dividends, and governance provisions affecting control - The trading price of common stock could be volatile due to various factors (new products, competition, operating results, market conditions, litigation, regulatory changes)[328][329][330][331] - As an emerging growth company, the company is exempt from certain public company requirements, which might make its common stock less attractive to some investors[332][334] - Issuance of additional capital stock (for financings, acquisitions, incentive plans) will dilute other stockholders[335] - No intention to pay dividends; return on investment depends on stock price appreciation[336] - Ability to issue preferred stock could adversely affect voting power or value of common stock[337] - Delaware law and charter/bylaw provisions could delay, discourage, or prevent a change in control[338][339] - Bylaws designate Delaware Court of Chancery as exclusive forum for certain litigation, potentially limiting stockholders' ability to obtain a favorable judicial forum[340] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No material change in the use of IPO proceeds as previously described - No material change in the use of IPO proceeds[341] Item 3. Defaults Upon Senior Securities No defaults upon senior securities were reported - None[342] Item 4. Mine Safety Disclosures Mine safety disclosures are not applicable to MeridianLink, Inc - Not applicable[343] Item 5. Other Information No other information was reported - None[344] Item 6. Exhibits Lists exhibits filed with the 10-Q report, including corporate documents and certifications - Lists various exhibits filed, including Certificate of Incorporation, Bylaws, Specimen Common Stock Certificate, Registration Rights Agreement, and CEO/CFO certifications[346] - Includes Inline XBRL Instance Document and Taxonomy Extension Documents[346] SIGNATURES The Quarterly Report on Form 10-Q is signed by the CEO and CFO on May 12, 2022 - Signed by Nicolaas Vlok, Chief Executive Officer, and Chad Martin, Chief Financial Officer, on May 12, 2022[350]