MeridianLink(US:MLNK)2022-11-08 01:11Financial Data and Key Metrics Changes - MeridianLink reported GAAP revenue of $71.8 million for Q3 2022, representing a 7% year-over-year increase and a 36% adjusted EBITDA margin [7][17] - Adjusted gross margin for Q3 was 69%, while GAAP gross margin was 61% [18] - Operating cash flow for Q3 was $19.6 million, with free cash flow at $16.9 million, resulting in a 24% free cash flow margin [19] Business Line Data and Key Metrics Changes - The consumer lending business grew by 21% year-over-year, driven by strength in personal and non-vehicle loan types [7] - Mortgage-related revenue decreased to 21% of total revenue, down 22% from the previous year, with mortgage lending software accounting for 6% of lending software solutions [17][18] - Lending software revenue grew 17% year-over-year, and excluding the mortgage slowdown, it increased by 20% year-over-year [18] Market Data and Key Metrics Changes - The mortgage market is experiencing significant headwinds due to rising interest rates, which are at two-decade highs [8] - The company expects the mortgage market to contribute approximately 18% of revenue for Q4 2022 [22] Company Strategy and Development Direction - MeridianLink aims to capture a larger share of its $10 billion total addressable market (TAM) by investing in customer engagement and expanding platform capabilities [9][10] - The acquisition of OpenClose is intended to enhance the company's mortgage lending technology and support depository institutions [14][23] - The company is focused on migrating its solutions to the public cloud to improve security, speed, and scalability [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in long-term growth opportunities despite challenging macroeconomic conditions [7] - The company is closely monitoring macroeconomic impacts on the market while maintaining cost discipline [17] - There is a strong pipeline for Q4, with good visibility into FY 2023 revenue, excluding the mortgage market [52] Other Important Information - MeridianLink achieved the Great Place to Work certification for the third consecutive year, highlighting its positive workplace culture [15] - The company was ranked 54th on the 2022 Global IDC FinTech 100 list, marking its first year of participation [78] Q&A Session Summary Question: Market share in mortgage guidance - Management clarified that there has been no change in market share, attributing revenue reductions to volume-driven impacts from the mortgage market downturn [28] Question: Trends in auto business - The auto business has remained strong, with improvements in inventory levels expected to support future success [30] Question: OpenClose acquisition details - The purchase price for OpenClose was $65 million, seen as a strategic investment to enhance mortgage product offerings [32] Question: Strength in lending solutions - Most growth in lending solutions, excluding mortgage, came from same-store sales rather than new customers [51] Question: Demand across consumer lending - Demand remains consistent, with an uptick in home equity lending noted [58] Question: Long-term growth framework - Management indicated that they are positioned to capture future refinancing opportunities as the mortgage market stabilizes [62] Question: M&A outlook - The company continues to have an appetite for M&A, with private market valuations aligning more closely with public market expectations [71]