MLNK - NYSE

Ladies and gentlemen, thank you for standing by and welcome to the MeridianLink's Fourth [ph] Quarter 2022 [ph] Earnings Call. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your first speaker today Erik Schneider. Erik, please go ahead.

Good afternoon and welcome to MeridianLink's first quarter fiscal year 2023 earnings call. We will be discussing the results announced in our press release issued after the market closed today. With me are MeridianLink's Chief Executive Officer, Nicolaas Vlok; Chief Financial Officer, Sean Blitchok; and President, Go-to-Market, Chris Maloof. Before we begin, I'd like to remind you that today's conference call will include forward-looking statements based on the company's current expectations. These forward-looking statements are subject to a number of significant risks and uncertainties and our actual results may differ materially. For a discussion of factors that could affect our future financial results and business, please refer to the disclosure in today's earnings release and the other reports and filings we file from time to time with the Securities and Exchange Commission. All of our statements are made based on information available to us as of today and except as required by law, we assume no obligation to update any such statements. During the call, we will also refer to both GAAP and non-GAAP financial measures. You can find the reconciliation of our GAAP to non-GAAP measures included in our press release, which is posted to the Investor Relations section of our website. With that, let me turn the call over to Nicolaas.

Thank you, Erik. Good afternoon, everyone. Thank you all for joining us for our first quarter 2023 earnings call. I want to thank the entire MeridianLink team for helping us achieve another solid quarter. Total lending software solutions revenue grew 18% year-over-year, which is a fantastic achievement given current market conditions. Let's take a look at our focus areas and business highlights that led to these results. We remain hyper focused on being the most trusted financial services technology platform, helping customers best position their businesses for success, especially in uncertain economic times. We are continuously improving our platform capabilities, through product innovation and value-added partner integrations. And for another quarter, the powerful capabilities of the MeridianLink One platform continue to drive new logo and cross-sell momentum. As a result MeridianLink exceeded top line guidance again in Q1, with GAAP revenue up 6% year-over-year to $77.1 million and demonstrated solid operating performance. Our business model remains resilient and our customers continue to win, especially our mid-market customers that provide personalized insights and real-time frictionless lending solutions to meet the changing needs of consumers. As the leading provider of a modern digital lending platform, we see customers continuing to choose MeridianLink One to best position and transform their businesses for future growth. The health of our pipeline and the fact that sales cycles have not slowed reinforces this view. We continue to pay close attention to external conditions and market expectations. Because our customers are retail focused, we have seen no material impact from the recent failure of several regional banks in the United States. The risk highlighted by these events was related to financial institutions with a large concentration of commercial deposits, which is not common in our target market. Irrespective of the economic cycle, the market is undergoing increased digitalization and MeridianLink is at the forefront of that. Whether it's more competition, consolidation or regulation, there will be pressure on financial institutions to automate their lending processes. In each of these scenarios, the surge in digital transactions will accrue to our benefit, because of our volume-based business model. In the meantime, we remain laser focused on capturing new market opportunities and assisting our customers in serving their communities. In a few minutes, Sean will speak about our Q1 financial performance and provide 2023 second quarter guidance and full year guidance. Before that, I would like to recognize the leadership we have gained to fuel our go-to-market engine and then I will give several updates on our three areas of growth acceleration. We are proud of the evolution of our go-to-market capabilities. As part of MeridianLink's development over the year, we have created and deployed a comprehensive, scalable strategy to accelerate growth and strengthen market position. As part of entering our next phase of growth as a public company, we have added the following leadership expertise across our go-to-market organization. First, we welcomed our new Chief Sales Officer, Richard Scheig late-summer of last year. Since joining the MeridianLink team, Richard has been instrumental in structuring our sales team to win more customers and increase cross-sell momentum. We also welcome Suresh Balasubramanian to the team as our new Chief Marketing Officer, at the end of February with the added benefit of Suresh's software experience and focus on demand generation we are bolstering our ability to capture more share in the market. And finally, we are excited to add Dean Germeyer to our leadership team, as MeridianLink's new Chief Customer Officer. Dean's ability [ph] go-to-market experience combined with his customer-centering approach makes him a strong leader to accelerate productivity and engagement across our support, services and customer success teams. Our investment in the team has built an efficient and high-performing go-to-market motion, resulting in a consistent robust pipeline. On that note, let's turn to a few go-to-market wins in the first quarter, that represent our dedication to the first area of growth acceleration which is engaging more deeply with our customers. As evidence of continued demand for the MeridianLink One platform, we are happy to report an approximately 60% year-over-year increase, in lending software solutions cross-sell bookings in Q1. These three examples are fantastic signals that our platform strategy and go-to-market is accelerating. With the new leadership onboard, we are well positioned to further penetrate the market and help more customers achieve their growth objectives. With that, let's turn to our second area of growth acceleration, expanding the capabilities of our platform and our revenue opportunity. With the completion of the public cloud migration last year, we are excited to allocate existing resources to our product road map, which is focused on meeting the needs of our customers. Critical to our sales motion we are focused on creating value through the connected capabilities of our multi-product platform. For example, our MeridianLink Consulting team is dedicated to maximizing the customer's credit portfolio performance and overall benefit from the MeridianLink One platform. Levering each depth of experience from past engagements, this team has been providing alternative decisioning rules to customers a capability that is imperative for quickly capturing creditworthy customers in an economic downturn. Turning to our Partner Network, we would like to highlight the enhancements made to our MeridianLink connections integration with SWBC. This expanded integration increases efficiency, automation of payments and improves the user's experience with the SWBC products launch from within the MeridianLink One platform. Our customers and their borrowers can now leverage this improved functionality, strengthening their collection strategy in the midst of demanding financial conditions. A final example of expansion can be seen through our ability to capitalize on partner relationships to win new logos. In Q1, we worked closely with one of our Global FinTech partners, in developing a large-scale Credit Card Origination Solution. MeridianLink won the deal on our ability to configure the MeridianLink Consumer to meet the lending needs of the customers' extensive network of banks and sub-lenders. Turning to our third area of focus, MeridianLink empowers customers to compete grow and succeed in the markets in which they participate. We have a track record of enabling customers to win more clients and capture a greater share of their clients' debt wallet. In Q1, we launched a new grow your deposits initiative to address the evolving needs of our customers, who are shifting focus to increasing liquidity in response to the current lending environment. The integration of MeridianLink Engage and MeridianLink Opening provides a comprehensive deposit growth solution that enables customers to capture more deposit opportunities through frictionless account opening and relevant personalized communications. Finally, we are looking forward to hosting a user forum on May 8th through the 11th at the Disneyland Resort in Anaheim. There is nothing more empowering than bringing together existing and prospective customers to discuss how the innovative capabilities of the MeridianLink One platform can enable their growth journey. As we are on track for a record-breaking year in attendance, we can't wait to engage with our customers face to face and dive deeper on how MeridianLink provide both immediate and long-term value to the market. I want to emphasize again how MeridianLink continues to deliver consistent growth and healthy profitability levels, while investing in strategic initiatives. We benefit from having a high-quality resilient customer base whose mission is to create the best borrower experiences is directly aligned with ours. In the face of uncertain macroeconomic conditions this year, we will continue executing well on what we can control staying highly focused on our three areas of growth acceleration as demonstrated in Q1. We will continue engaging with customers to meet and exceed their digital lending needs in part by expanding our platform capabilities and revenue opportunity. Our flywheel starts with empowering our customers to grow and better serve their clients and communities. We strive to be the most trusted financial services technology platform that positions our customers to succeed an economic climate. With that, I will now turn the call over to Sean to talk about our financial results and provide guidance.

Thank you, Nicolaas, and I'd like to thank everyone for joining on the call today. Before reviewing our financial results and guidance, I'd like to emphasize how impressed I am with the achievements in the first quarter. Our results continue to reflect the impressive team effort and culture and for that I want to again share my gratitude for the entire MeridianLink team. In the face of challenging compares year-over-year, we finished the quarter strong exceeding top line revenue guidance. We continue to see the impact of macroeconomic headwinds, but likewise we continue to perform remaining insulated by our customer mix, contract structure and ongoing customer growth. For two decades now, we've benefited from the resilience of our business model and the capabilities of our industry-leading solutions that enable customers to perform through the economic cycle. As we monitor external conditions, we continue to execute well on what we can control, balancing cost discipline and strategic investments to accelerate growth. Now turning to our first quarter financials. We generated total revenue of $77.1 million, up 6% year-over-year driven primarily by growth in consumer lending transaction volumes. We continue to see the MeridianLink One platform empower the customers' growth journey with the capabilities that meet the evolving needs of consumers. Let's first look at how our software solutions break down. As the primary driver of software solutions, consumer lending revenue contributed 88% and grew 13% year-over-year. Mortgage related revenue within lending software solutions inclusive of open close accounted for the remaining 12% of the total. Combining mortgage and consumer, total lending software revenue accounted for nearly 75% of total revenue and grew 18% year-over-year. Turning to data verification software solutions. Revenue accounted for nearly 25% of total revenue and declined 19% year-over-year. This was driven by the 28% decrease in mortgage-related revenue, which represents 61% of total data verification software solutions. Let me focus on mortgage in total for a minute, although total mortgage-related revenue was down 8% from last year and generated 24% of overall MeridianLink revenue this is an improvement in total mortgage sequential for a second straight quarter. Despite market headwinds, we remain focused on our mortgage lending strategy as a major component of the consumer debt wallet. We continue to outperform in a declining market, as we are taking more share cross-selling through MeridianLink One and adding capabilities that have enabled customers to win. The other 76% of our business continues to outperform, which is majority led by consumer lending. While we are seeing the anticipated deceleration in secured lending, other transaction types such as home equity, personal loans and account opening continue to grow. This brings me back to the point that our platform enables customers to provide a frictionless lending process to consumers. No matter of the loan type or preferred channel for accessing credit, MeridianLink One meets the lending needs of its customers and their clients. With our healthy pipeline as demonstrated by the wins in the quarter and the inevitable normalization of the mortgage market, the momentum in our business remains strong. Moving to profitability. Accounting for stock-based compensation, GAAP gross margin was 64%. Adjusted gross margin in Q1 was 71%. Before turning to operating performance in the quarter, I'd like to break down the year-over-year increase in our operating expenses. In addition to our strategic investments, we're also calling out specific costs associated with recent acquisitions, that are onetime in nature to help investors better understand the true increase in operating expenses. Compared to the first quarter of last year, G&A increased 24% on a GAAP basis and 39% on a non-GAAP basis. Adjusted for $0.2 million of onetime bad debt expense associated with customers from past acquisitions, G&A increased 36% compared to the first quarter of last year. R&D increased 64% on a GAAP basis and 65% on a non-GAAP basis compared to the first quarter of last year. Adjusted for a onetime $0.6 million retention bonus associated with the past acquisition, R&D increased 57% compared to the first quarter of last year. On a GAAP basis, sales and marketing increased 73%, while on a non-GAAP basis, sales and marketing increased 82% compared to the first quarter of last year. These investments represent our commitment to engage more deeply with our customers to go to market and to expand our platform capabilities. We expect a long-term return on these investments and we'll continue to examine each expenditure on its individual merits. Turning now to our overall operating performance. GAAP operating income was $1.7 million and non-GAAP operating income was $9.6 million. On a GAAP basis, net loss was $5.7 million or 7% of revenue and adjusted EBITDA was $24.9 million, representing an adjusted EBITDA margin of 32%. Highlighting the true operating performance of the business, adding back the $0.8 million of onetime costs, adjusted EBITDA was $25.7 million, representing an adjusted EBITDA margin of 33% and in line with our guidance. Now, turning to the balance sheet and cash flow statement. We ended the first quarter with $77.8 million in unrestricted cash and cash equivalents, an increase of $22 million from the end of the fourth quarter. Operating cash flow in the first quarter was $28.1 million or a 36% cash flow margin. And free cash flow was $26 million or a 34% cash flow margin. In the last 12-month period ending in the first quarter, operating cash flow was $67.8 million or a 25% cash flow margin and free cash flow was $58.3 million or a 21% free cash flow margin. . We repurchased $3.5 million worth of shares as part of our use of cash flow in the quarter. MeridianLink's ongoing cash generation provides protection in this period of uncertainty, while enabling strategic capital allocation for us to build value for our customers and shareholders. I'll now pivot to guidance for Q2, and update guidance for the full year of 2023. Entering the year, we anticipated a deceleration in consumer lending volumes, due to less aggressive lending in our customer base, as excess deposits decreased. We also expected a continued decline in mortgage-related revenue in the first half of the year with the previous sharp increase in mortgage interest rates occurred during the second quarter of 2022. Our view on these dynamics has not changed over the last quarter, and we expect to continue adding new customers and increasing module penetration at a level that more than offsets these headwinds. For the second quarter, estimated total revenue is expected to be between $76 million and $79 million, compared to $73 million for the same period in 2022. This represents an estimated year-over-year change of 4% to 8%. For the full year 2023, we are raising total revenue to be between $307 million and $313 million, compared to $288 million for the same period in 2022. This represents an estimated increase of 7% to 9% year-over-year. For the mortgage-related revenue, we expect the mortgage market to contribute approximately 25% of revenue for the second quarter in 2023, compared to 24% for the second quarter of 2022. We anticipate our contribution in Q1 to continue throughout the year. To provide more color around the growth drivers in our total revenue, the mortgage-related revenue guide implies the continued decline in data verification revenue, given the impact of a tough comparable in 2022. However, we expect that to pick up from our mortgage lending capabilities and winning in the market both organically and through open closes will more than offset the data verification drag in 2023. On the non-mortgage side, we expect data verification revenue to be flat year-over-year, as a result of headwinds in the employment screening market coming off post-pandemic hiring. Understanding these dynamics, we expect consumer lending will continue momentum in 2023, as demonstrated in the first quarter. Consumer lending is the largest part of our business and is at the heart of our value proposition. MeridianLink exists to enable the customers' growth journey by providing a frictionless digital lending experience that exceeds consumer expectations. Over the years, we have thrived in providing premier lending capabilities which are now enhanced through MeridianLink One. In 2023, there's ample opportunity to equip more customers with the capabilities that differentiates them against the competition in today's demanding environment. Our Q1 highlights today demonstrate how the configurability, cross-sell momentum and access to hundreds of partners to MeridianLink One can and will empower further volume growth for customers and for MeridianLink as a whole. Now turning to the adjusted EBITDA guide. On a non-GAAP basis, second quarter estimated adjusted EBITDA is expected to be between $27 million and $30 million, representing an adjusted EBITDA margin of approximately 37% at the midpoint. For the full year 2023, we are reiterating our adjusted EBITDA range of $109 million and $115 million, representing adjusted EBITDA margins of approximately 36% at the midpoint. Our EBITDA guide reflects the continued operating discipline in areas that do not contribute meaningfully to growth acceleration. Our guide also anticipates an increase in legal costs associated with third-party litigation and we expect will be largely completed this year. We will be focused on managing our cost structure to make up for an estimated $1.5 million of expenses from the one-time costs incurred in the first quarter and the increase in legal costs anticipated in the year. Moving forward, we continue to align our forecasting and accounting as part of the broader maturation as a public company. As CFO, I'm dedicated to organizing our processes and cost structure to best position MeridianLink for its next phase of growth. I'd like to end by reiterating the company's track record of consistent profitability and growth. These are two proof points demonstrating the resilience of our business model and superior quality of our customer base. At the end of the day, customers now more than ever need an efficient digital solution that's designed to accelerate growth. We've been the leader in providing that solution for decades. We will continue to deliver and capitalize on that promise as the market embraces an accelerated digitalization. With that Nicolaas, Chris and I are happy to take any of your questions and I'll turn it back over to the operator.

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question comes from Bob Napoli with William Blair. Please go ahead.

Hi. Good afternoon. Thank you for the question. Good results in a tough environment. I guess just given all the concerns about credit crunch and what we're seeing in the stock market with the regional banking market, why are you as confident as you are in the guidance for consumer lending? It seems like there is higher risk of potential significant slowdown.

Hey, Bob, Sean.

Hey, Sean.

I think a couple of quick ones. One is this hasn't just popped up out of nowhere. There's been continued pressure if you will in the market for a couple of quarters now if not longer. And so we're not doing anything out of the ordinary. We continue to see strong demand, strong volumes. Volumes have held up nicely. And so there really isn't -- even though the growth in the consumer has decelerated it is still material and I think it will continue throughout the year. So that's number one is just historically we see no pattern of a slowdown outside of our guide. I think the other is just around the -- what I said in my prepared remarks which is just the quality of our customer base. I was up very early this morning and listening to hours on hours of credit, credit tightening and fiscal policy and what will the Fed do. We look at our customer base and they are lending to very high-quality customers. And it's because of the mid-market, it's because of the credit union making up two-thirds of our depository base. There's multiple factors for it, but we lend -- our customers lend to a very high-quality base and it shows up in our volumes. So where you have kind of the at-risk institutions are typically where you see high proportions of commercial or at-risk lending. And we just don't see that in our base. And so we have anticipated the deceleration. It's built into our guidance and so we're very confident in the top-line as it stands today.

Thank you. And then as a follow-up the credit union portion of your business two-thirds as you said of the base are you seeing differences out of credit union versus the regional banking market?

No. If anything just credit unions operate fundamentally different, right? They don't have customers. They have partners. They have members. And I -- so if anything the balance sheet of a credit union, the liquidity of a credit union is more stable. And so we don't -- I don't take any escalation calls from credit unions. As a matter of fact, I would say, the volumes are not only steady, but we're looking at how do we obtain more with Richard and the go-to-market team, how do we obtain more of that credit union population going forward.

Thank you. appreciate it.

Yes.

Your next question comes from Nik Cremo with Credit Suisse. Please go ahead.

Hey, guys. Congrats on the strong results and thanks for taking my question. And it's nice to hear that the sales cycle has not slowed down. First, can you provide an update on the trends that you saw in April from a lending volume perspective and how that's factored into the Q2 guide at the midpoint of the guide. It looks flat quarter-over-quarter first lending volume being up seasonally in Q2 normally. So is that just more conservatism, or are you seeing lending volumes taper off a little bit in April?

We don't use -- Nik, it's Sean. We don't use conservatism around here. We did see slight volume decreases in April nothing to be concerned about, but I think, it's just the -- what I talked about earlier the natural deceleration of growth from 2022. I can speak to the specific lines of business inside of consumer, but in general we saw growth across the board a little bit less growth in non-secured assets a little bit more growth in personal loans, credit cards, et cetera. But nothing remarkable is what I would say. The numbers were strong in terms of volumes. The numbers were strong in terms of rate, which is why the beat.

Thanks very much for all the color. And then for my follow-up, I was hoping just to get an update on the traction you guys are having with your MeridianLink business lending product that was launched last quarter.

Great question. This is Chris. We remain on track with our integration thesis. But remember that this was a IP buy. So we successfully integrated that into the product over Q4 and Q1 and now we're selling it as part of the overall platform value proposition to our customers and seeing -- having some great conversations in the market around that.

Thank you.

Next question comes from Koji Ikeda with Bank of America. Please go ahead.

Hey, guys. Thanks for taking the question. I wanted to ask you, if we could dig in a little bit more on the cross-sell bookings. You mentioned in the prepared remarks 60% increase in the cross-sell bookings. If you could maybe talk about what products or what is it about the platform, or what is it about the end market that is driving the cross-sell booking strength. And what would, I guess, it's easy to assume that it would have been a tough quarter to sell cross sell, but it sounds like it's going pretty good for you guys. So any sort of color there would be helpful. Thank you.

This is Chris. And this really ties back to the year-over-year sales and marketing investment that we've been making. We have made a concerted effort to expand our capability both on a messaging and customer contact perspective on increasing our penetration or base. Remember that our average customer has four to five of our 13 modules so a lot of runway there. We recognized that last year. And from an R&D perspective to support that, what we've been focused on is, where do each of these solutions add more value together than a part and then tie that directly to the market. To be more specific on where we're seeing some of that that impact is a lot of our institutions are looking to grow their deposits with something we've been very successful from an account opening perspective. And we have a group -- we've really invested in the seamlessness of the integration between our marketing automation account opening, and then ultimately our consumer LOS and we're seeing that resonate across our customer base both from an ROI perspective as well as a selling motion perspective. So that's just one example and that's central to our thesis from our platform selling motion.

Yes. And Koji, this is Sean. I would say that I've said in past quarters, the kind of the first wave of our go-to-market motion will be focused on cross-sell just because the opportunities are there. And so 70% of our bookings this quarter were cross-sell intentionally. So, it's almost a natural progression where we're going to see cross-sell as the beginning phases of our go-to-market and then new logo almost catching up in future quarters. But very successful, very pleased with the 70% cross-sell inside the quarter.

Got it. Thank you for that. And Sean, maybe just a follow-up for you. You mentioned, I think in the guidance assume 25% of total revenue coming from the mortgage loan market, and it sounds like also the commentary for the full year. It feels like maybe -- and correct me if I'm wrong here. It sounds like the first quarter mortgage performance kind of down year-over-year is going to be the bottom from the seasonal basis and maybe mortgage loan market is turning to growth for the rest, just kind of going forward. Is that the right way to think about kind of this mortgage loan segment?

I think in general, yes, we countercyclically bought OpenClose in Q4 for a good reason. We saw good results for mortgage lending, better results than anticipated. DBS, we talked about in our prepared remarks. We saw 28% down year from a year-over-year perspective but that is beating the market considerably. So, DBS being down 28%, if you even exclude kind of the inorganic piece, OpenClose piece, we're still only down in the mortgage lending component 2% or roughly 2%. So, we're beating the market. I think 25% is consistent throughout the year in our forecast, and is -- did turn a little bit of a corner. We said this in our last quarterly call. For us, with our contract structure, with our minimums in place, we thought it was the trough and we're hoping that that was the case and that this is going to come out positive going forward.

Got it. Thank you so much for taking the question.

Yes. Thanks, Koji.

Your next question comes from William Matt Nemer [ph] with BTIG. Please go ahead.

Hi. Thank you for taking my question. Just kind of wanted to know if there have been any major changes with the go-to-market strategy given the new leadership in sales and marketing?

This is Chris. The strategy remains consistent over the last three quarters what we've been messaging, how we bring a comprehensive platform for our customers to ultimately enable them to compete for consumers. So this team is being brought in to help us on that journey as we look to double the company again.

Great. Thank you.

Yes.

Your next question comes from Alex Sklar with Raymond James. Please go ahead.

Hi. This is Jessica Wang on for Alex. I just got one quick question. So with the completion of your cloud move, you freed up a lot of R&D resources. What are big areas you're looking to address now on a product road map? And how should we think about product velocity now that you're in the cloud? Thanks.

Hi. This is Chris. Very excited about our move to the cloud and we've discussed the host of benefits that come with that. Now that those resources are rolling off, we maintain our investment and extending our advantage in terms of enabling our customers to out-compete for consumers and thus outgrow their competitors in the market. And the way we're doing that is a three-fold. One is enabling our customers to maximize their auto decisioning, so meaning consumers' expectations on how fast they can get a loan expanding the number -- leveraging on technology, including our own technology as well as marketplace to expand the percentage of the population base that they can auto decision and decision profitably. And then the third and final one is ensuring that they have the best-in-class digital tools to make that successful. So, we're going to accelerate down that path with those additional resources.

Your next question comes from Andrew Schmidt with Citi. Please go ahead.

Hey, guys. Thanks for taking my questions. I know, there's been a few questions on just the assumptions regarding loan volume, so maybe you could put a finer point on that. If we did see a sharper contraction just in the overall credit environment can you just kind of remind us what the sensitivity is how to think about that and how the scenarios that you're kind of positioning for today? It sounds like it's more of a kind of a gradual decel with savings kind of get spent down. But just curious on that front. Any comments there would be helpful.

Hi, Andrew, this is Nicolaas and thank you for joining in the question. I think what you need to take a look at is the MeridianLink in the history of the company too. Over the last two, decades even in the Great Recession the company's consumer lending business continued to grow at slower rates during the narrow window around the Great Recession but the company still grew. And we've spent considerable time thinking through how to model this year and what the year looks like. And if you can compare what we've looked at from prior years and kind of this year I think the team did a remarkably good job at staying ahead of the curve and expectations. And maybe to some extent, we have the benefit of the past that we can grow from on history and trends. But what we put forward into our guide at the beginning of this year's fiscal cycle we're not moving up from that because we've already accounted in our viewpoint some of the slowdown in headwinds. And we've operated in kind of a headwind constraint environment for the better part of 18 months or a little longer. Now a few interesting dynamics that's in play and we've seen this in past times as well where the consumer would be entering a buying cycle or kind of a lending cycle for call it an asset vehicle, with the hopes of acquiring a certain class of vehicle think let's say BMW and unfortunately in a tightening credit environment the BMW doesn't get approved and it moves to a different brand and a different lower cost model. And you see kind of the same social security number showing up a little later somewhere else where a second application is done through our system and which in that case may get approved. And I would leave you with that, thought is it's not a total negative for us, if the consumer who's on a cycle with a vehicle every three, four or five years needs to interact with the system and have multiple touch points due to failure of first approval. And then, what I will also add into the mix here is -- and Sean touched on it very well in his early commentary in a question asked by somebody, but our customer base typically functions well in a certain demographic. And that's kind of a demographic of folks who rarely have a deposit account of over 250000 folks who get their bi-monthly salary paid in and it goes to a mortgage a couple of car payments. It goes to a personal loan and credit cards, and are very stable members of a created union or a retail bank or a bank with a retail focus. And what we've seen in the past is yes there have been contractions. They've been in a great recession. We've seen kind of the early stages of COVID and we've kind of looked at the trends in our business. And what we have done so far this year and how we've looked at the business and the modeling. And from my perspective, our business is in good shape. There's a ton of interest in the market for digitalization in our customer base and our traditional customer base is trailing. They're not ahead of the curve right now. And their members and clients are demanding more touchless interactions such as lending interactions. And the need for MeridianLink's offering and solutions and platform is growing. It's not receding. And from a need in the market standpoint, I believe if you look at a 10-year cycle, those who are investing today and will do so in the near medium-term future will be the ones best positioned to gain new clients new members. They will be the ones who is most likely going to be the driving force and future consolidation. If they have the right technology the right platform, the right ways to interact with clients and those who are lacking investment lacking integration will ultimately be consumed in. Now, we've kind of debated a lot of this internally, over the last few months. And the conclusion that we've reached is, maybe out of the whole banking kind of merry go round and the swings and the go around here, you see regulation tightening, kind of lesser deposit taking institutions. Our expectation is it's going to be more on the banking side than the credit union side. And maybe there's a smaller number of those, but the number of consumers that's interacting with the system is growing. It's not shrinking. The consumer drives the US economy, and the consumer is also in play more and more where every meaningful interaction for an asset purchase has some form of loan application. And it becomes more and more digital. And there was a pretty decent jump in the cycle of COVID initially, and that momentum is continuing and accelerating. So, my take is maybe, if you think of it in a quarter or two, there may be a little bit more headwinds. But overall, on this whole cycle and if you look at the MeridianLink business over two decades, I don't see this business going through a significant change in business model or anything because we have natural tailwinds, that tends to be stronger in better times and the headwinds we've accounted for in the times, we're in right now. So, I'm pretty confident. I'm with Sean, in how we view the business for 2023 here, and our guidance. Sean alluded to April volumes here. We kind of see strengthen and some areas, a little weakness, but there's nothing to call out that is out of the ordinary for us based on the April volumes, that will lead us to have a different view on Q2 or the year-to-date from the view that we started the year with. So, I've said a lot. Sean, I don't know if you want to add anything to what I've said.

I think to say anything, would be would be idiotic. That was a perfect answer.

Agree, very comprehensive. Thanks, Nicolaas. I agree. Some of those nuances do need to be better understood in terms of the segments of the end market. On the cross-sell, obviously, there was a very positive momentum there. And clearly, that's been a focus from a go-to-market perspective. But it seems to me that MeridianLink One, may also be helping as well. Just having things on a single platform, may sort of incentivize more cross-sell. So, to what extent is MeridianLink One, a contributor as well as the kind of improved go-to-market. Obviously, it's not one thing, but just curious specifically on the MeridianLink One component. Thanks a lot.

Yes. This is Chris, and I very much view the R&D through sales and marketing alignment is central to the success. So, being a little bit more specific is it really comes down to extending our value prop to the customers, to encourage them to buy more than one solution from us, right? So as we look to extend the platform through a build buy partner approach, everything we add has to add more value together than apart. So one item, I discussed a little bit last, when I was asked about what we would do with the cloud migration resources, is really looking at that inter-connective tissue and how do we extend that capability. And, yes. So the MeridianLink One, is the center and that associated value prop is the center of our cross-sell strategy. And the rest of the organization supports that.

Got it. Thank you very much. And then just one more quick one, if I could sneak in. I know implementation efficiency and reducing time to revenue has been a focus. Maybe you could talk, a little bit about that, in terms of how that's trending and how we should expect that to progress over the coming quarters and years. Thanks.

And I apologize, but the audio in mine was a little shaky on this last question. Was the question about [indiscernible] That would be great. Thank you.

It was about -- Yes. Yes. Thank you. Sorry, about that. It was about implementation efficiency and backlog absorption. I know that's been a focus. So, just curious how that's trending and how should we expect that to evolve over the coming quarters and years. Hopefully that came through clearly?

It came through clearly. Thank you and I appreciate you repeating that. It's trending well. We continue to work the backlog down and release ACV in the business. I think overall if you look at our results that's part of the story. We're also very excited to have had Dean Germeyer join us as our Chief Customer Officer. And Dean brings a ton of experience in the scaling of services, services enablement kind of building a very repeatable, scalable, predictable services organization. And where we're at, I think we've done remarkably well in how we've accelerated the business over the last three years or so from where we were to where we're at. But I really think that the focus and ideas and playbook that Dean is going to help us and his leadership team to move things to the next level. So, I'm pretty excited as we go into 2023 and we'll be doing planning for 2024 how the business will continue to scale and expand. But having Dean join the team and driving a new focus on that organization I think it's going to even pick up more pace than what we've seen through today.

And Andrew I think we've talked about this before, but just one more point on that. I agree whole heartedly with Nicolaas. I'd like to see us I think the -- even working the backlog as a phrase we're kind of turning the corner internally to be more around ACV release, right? And so it means the same thing but has a little bit different connotation. I think there's an equilibrium that has to be struck between bookings, services velocity, and that ACV release over time. And I have full intention on reporting that in due time. But right now, I would say I agree with Nicolaas, it's more manageable than it has been. We have line of sight to the backlog that we do have and we have a good improved cycle-time around the services implementation specific to cursor [ph] that will provide us the ACV release that's in our guidance.

Perfect. Thank you very much guys. Appreciate all the comments.

Yes, thank you, Andrew.

Your next question comes from Scott Wurtzel with Wolfe Research. Please go ahead.

Hey guys. Thanks for taking my question. Just one from me. Going back to sort of the topic on cross-selling. I was just wondering if there was any noticeable shift in demand from your existing customers as a result of the banking turmoil that we saw in March, maybe if we sort of bifurcate January, February versus March and April, was there any noticeable shift in demand byproducts from your customers?

What we did was along with our go-to-market motion was an increase in interest in our account opening solution tied to our marketing automation solution, which we had recently enhanced the integration of specifically around account opening. So, one thing that's great about the overall really like one value proposition is depending on the different economic cycles, we can leverage points of our platform together to help them accomplish their outcome. So, in this case, they want to grow deposits, they can leverage a combination of our solutions to extend that capability.

Great. Thanks guys.

Thanks Scott.

Your next question from Saket Kalia with Barclays. Please go ahead.

Okay. Hey guys. Thanks for taking my questions here. Sean maybe just start with you and apologies I joined late, so apologies if this was asked. But great to see the improving net retention in the lending solutions business. And by the way I appreciate the disclosure. I wonder if you could just talk about sort of what products you feel like are having the most success in driving up that NRR or if that's more of sort of a volume-driven expansion? Any color on sort of what's driving that improvement in net retention one level deeper would be helpful?

Well, hi Saket first. Second in the disclosure supplement, I think it calls out clearly lending software versus data verification, right? So, clearly a very big difference between 111% NRR on our lending software versus DBS at 83.7%. The DBS component we've continued to see a mortgage drag for a long period of time. The balance of DBS is flat year-on-year. So I don't expect a huge improvement in that line, but really it's inside of lending that we really see the benefit from an NRR perspective. 111% in total, the numbers are skewed towards consumer even at a higher rate. And so -- and -- but mortgage is even above 100 at this point. So I think this is -- I don't know if you had a chance to review supplement, but that provides I think the added color that you're looking for.

Yeah. So very helpful. And I saw the difference between those two. I was kind of more wondering what's sort of driving that improvement. So the 111% in lending I mean, if we look at this back a year ago was about 101%. So clearly, just a lot of success in either volume or kind of new products. That's really the crux of the question. Is it sort of coming from one or the other? And kind of what's -- if it's from new products which of those products are the ones that are driving it? Does it make sense?

Yeah. I mean it's a combination of things. I do want to make sure that we take note that the cross-sell was a big component of that and that is now being included in the number in the overall NRR percent calculation where it wasn't before. That's a correction and is now part of the footnote. But inside of the cross-sell motion, I think you're kind of seeing the opposite of what you saw last year right which was mortgage was driving a larger percent and consumer at a slower pace inside of consumer or we have the opposite now inside of consumer -- like I said with volumes, you're kind of seeing it across the board with consumer. I don't think it's one product or another. I can't point to auto. I can't point to personal loans. I can't point to credit cards. It's kind of a stabilization and a sell-through of the entire consumer product.

Got it. Got it. That's helpful. Nicolaas maybe for the follow-up for you. I think it was in another question. You alluded to share gains a little bit. I was wondering where you feel like you're taking -- and Chris feel free to chime in on this as well. Where do you feel like you're taking share more, right? Is it from the core providers? Is it from other software providers? Is it from in-house solutions? A little bit more color on -- qualitatively of course, where do you feel like you're getting some of those share gains?

I think I'll go with option B Saket and say all of the above because there's not one area where we're executing in a way where we stand out. I would tell you smaller mid-market deposits taking institutions, at least my perspective is have underinvested on a percentage basis over the last decade against wallet of peers who invested more in digital readiness, who invested more in order decisioning. And my sense right now is there's pretty much a first for a solution that isn't a kind of single point offering that is a broad platform offering. And it's not that we compete with -- what I would rather say is our conversations with customers today is about the difference is what we have on offer. You have access to your information across our platform. You have the ability to do analytics across our platform. You have the ability to do enhanced marketing automation and other automations across our platform. And it's less about at that point competing with a single vendor. It's more about where we choose to compete and we choose not to be at the high end of the market. We are pretty focused on where we are and where we win at a higher percentage than average. And we are replacing legacy solutions, single point solutions, kind of more workflow-driven solutions and that cuts across more of my definition legacy offerings who is not as enabled as we are, who doesn't offer the integrations into a partner marketplace with APIs with everything else. So I think we have moved the needle over the last three four years with R&D and innovation that it's not -- we compare us against a single offering and we win more there or more over here. It's either you buy MeridianLink's platform with all the integrations and the ability to do everything so well across the platform from account opening to all the loan types to analytics to automation to auto decisioning to the integrations into the partner marketplace enablement and collections if there's a workout room where somebody needs to go into. And you can't really put your finger on a single competitor out there where MeridianLink goes and competes with the same thing. And that's why I would pick option B, say all of the above because we locally see it coming from all of the above sources and then some.

Got it. Very helpful guys. Thank you.

Thank you, Saket.

[Operator Instructions] Your next question comes from Bob Napoli with William Blair. Please go ahead.

Hi. Thank you for follow-up. I just – you touched on it in the last answer but MeridianLink insight to data analytics platform any update on that or demand for that product outlook for that product?

This is Chris. So the MeridianLink Insight and the associated report cards we can provide our clients is central to our business review process going forward. So specifically what it enables is for our customers to see how they're benchmarked against key performance factors across the origination cycle. So they can get data from us that they can't get anywhere else due to our scale and we leverage that as a cornerstone as we work with them to plan their three to five year technology road map and that the Insights product is a way for them to drill deeper on that data on a day-to-day basis and how such through that change we've seen an uptake in demand.

Great. Thank you. And then you did -- repurchased three million shares in the quarter. I think I read -- was that planned, or was that opportunistic? And from a capital perspective do you have more capital return playing through?

That's $3 million not shares.

Okay. It seems like a lot. Okay. Forget the question.

Okay. But just to quickly touch on that is part of our structured repurchase plan. That's tiered based on price. Where we see value in the market we're a participant on repurchase and where stocks have just in general been we've been a buyer.

Thank you very much.

Yes.

There are no further questions at this time. Please proceed.

Thank you, operator. And as we close today's earnings call, I'd like to welcome our new customers and partners to the MeridianLink family. And our dedicated team strives to create the best experiences for everyone who works with us. As we grow, we maintain our customer-centric approach and I'm grateful to the hundreds of employees whose commitment inspires me on a daily basis. Our partners and customers benefit from their expertise. And speaking of customers, I look forward to sharing the insights we will gather from our 2023 user forum when we speak again. This event wouldn't happen without our staff and support of partners. Last year's user forum was a resounding success and provided incredibly valuable moments of engagement and feedback that enriched our strategy and relationships. It played a key role in where we are today and I look forward to another successful event. Again thank you for joining and have a great afternoon, evening. Back to you operator.