MLNK - NYSE

Ladies and gentlemen, thank you for standing by, and welcome to MeridianLink, Inc.'s fourth quarter and fiscal year 2024 earnings call. At this time, all participants are in listen-only mode. After the speaker's 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 the first speaker today, Gianna Rotellini. Gianna, please go ahead.

Good afternoon, and welcome to MeridianLink's fourth quarter and fiscal year 2024 earnings call. We will be discussing the results announced in our press release issued after the market closed today. Joining me today are MeridianLink's Chief Executive Officer, Nicolaas Vlok, President, Larry Katz, and Chief Financial Officer, Elias Olmeta. Before we begin, I would 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 the risks, uncertainties, and other factors that could affect our future financial results and business, please refer to the disclosure in today's earnings release and the periodic 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. Please note that other than revenue, all numbers in our remarks are on a non-GAAP basis unless otherwise stated. A reconciliation to comparable GAAP metrics can be found in today's earnings presentation, which is available on our Investor Relations website and as an exhibit to the Form 8-K furnished with the SEC just before this call. Our earnings presentation is available for you to download and reference throughout our prepared remarks. With that, let me turn the call over to Nicolaas.

Thank you, Gianna. Good afternoon, everyone, and thanks for joining us today. MeridianLink closed 2024 with a strong fourth quarter. We recorded revenue in excess of $79 million, or 7% growth year over year, and adjusted EBITDA above $33 million, or a 42% adjusted EBITDA margin. I am pleased with our results in a challenging and uncertain macro environment. Most importantly, we continued our commitment to being the leading financial technology platform trusted by customers to execute winning lending strategies with MeridianLink One. Despite the headwinds of 2024, we executed well, controlling what we could control. Our sales team generated strong demand and delivered the second consecutive year of record bookings. Our services team accelerated time to revenue and achieved a high watermark in our subscription revenue activations, which we have previously referred to as ACV Release. Our product teams continue to innovate by adding capabilities that strengthen MeridianLink One's position as the leading digital lending platform. We significantly improved our operating efficiency, delivering over 400 basis points of adjusted EBITDA margin expansion. And we continued our disciplined approach to capital allocation, completing several transactions that strengthened our balance sheet and diversified our shareholder base. Looking forward, I would like to frame 2025 by sharing some industry observations based on conversations with credit union and bank executives. While economic uncertainty is high and consumer confidence is challenged, customers and prospects are increasingly prioritizing investment in lending technology. These investments are focused on platforms that enable omnichannel client acquisition, bachelor's lending, and seamless integrations with best-of-breed solutions. To compete for digitally native consumers, financial institutions are prepared to increase their technology spend in lending platforms, and we see a longer-term trend benefiting MeridianLink One, our market-leading platform. I am excited about what's in store for MeridianLink. There is no other digital lending platform with the breadth and depth of MeridianLink One. While volumes have weighed on recent top-line growth, we are focused on long-term growth, investing to meet our customers' needs and accelerating platform adoption. Go-to-market and service delivery investments have paid off, with consecutive years of record bookings and activations. Despite the current environment, we believe in our long-term opportunity and plan to deploy capital into sales and marketing, product, and infrastructure, which will further position us to capture share and volume when the market returns. I have great confidence in our ability to scale the business in 2025 and beyond. Before I turn it over to Larry, I want to update you on a change to our guiding practice. Going forward, we will provide quarterly updates to an annual guidance, and we will no longer provide guidance for the following quarter. We are making this change because we are focused on delivering long-term value, and we firmly believe that annual guidance is the best lens for investors to evaluate our business. Elias will share more in his remarks. I would like to thank the entire MeridianLink team for our solid performance this year. With your expertise and dedication, I am proud that we ended another year delivering on our commitments to customers and shareholders. Now I will turn it over to Larry to review our business highlights.

Thanks, Nicolaas. We finished the year with strong sales execution, posting record bookings for the second year in a row. Both new logo and cross-sell bookings increased year over year as both credit unions and banks turned to MeridianLink as a trusted partner to accelerate their digital transformation. We have strong bookings performance at both cross-sell and new logo. We also had a higher mix of mortgage and larger ACV platform wins. A key driver of our sales performance is the breadth and depth of the MeridianLink One platform, which provides us a natural expansion opportunity across more than 1,500 lending software customers. Our ability to win is a testament to the deep expertise, best-of-breed platform functionality, and market-leading reputation we have built over the past 25 years. Since stepping into the presidency six months ago, I have had the opportunity to meet with dozens of customers, partners, prospects, and industry experts. The messages I hear are consistent. We have a distinctive and compelling platform, and our customers are committed to running their lending business on MeridianLink One. At the same time, our customers are looking to us to continue to innovate, to deliver distinctive solutions that help them grow by acquiring and serving digitally native consumers in an AI-enabled world. They also look to us to continually make it easier to do business with us. The message is clear. We have done well over the years, and we absolutely have an opportunity to do better. With all commercial functions now under one roof, I am focused on breaking down silos, ensuring the customer feedback more actively informs our product roadmap, and streamlines our customer journey. As we head into 2025, we are continuing to invest in sales and marketing to further optimize our land and expand strategy. We are adding to our solutions consulting team to help customers and prospects understand the value of our platform and how it meets their needs. And we are maturing our account-based selling motions based on extensive white space analytics and enhanced demand generation strategies. Entering the year with a robust pipeline and solid foundation in place, I am confident that our team is well-positioned to generate increased demand more efficiently. With that, I will move to our business highlights for Q4. We had a strong quarter of cross-sell and upsell, demonstrating the resilient nature of our customers who continue to invest in innovative solutions even in a challenging market. For example, an existing consumer lending bank customer with $9 billion in assets recently added MeridianLink Access and MeridianLink Business, and now it deploys a total of six modules across the MeridianLink One platform. This customer also enabled MeridianLink's automated decisioning capability to drive touchless lending. This is a great example of the opportunity that MeridianLink One presents to deepen and expand existing relationships. Of note, this Access win was one of 15 in the fourth quarter, more than tripling customer wins year over year. Turning to new logo wins, this was our best new logo quarter in two years, increasing new customer bookings nearly 40% year over year. This suggests that financial institutions are leaning into their digital transformation to prepare for a more robust demand environment. For example, we signed a bank with $8 billion in assets onto MeridianLink Mortgage and MeridianLink Consumer, enabling them to seamlessly execute a high-value cross-sell strategy. We won this competitive deal due to our feature-rich functionality, speed of implementation, and partner integrations. This customer is also leveraging our patented optimization capability to increase visibility across the consumer debt wallet, which maximizes acceptance rates and deepens relationships with clients. We also delivered another solid quarter and year of subscription revenue activations or ACV release, showcasing our services team's continued focus on streamlining delivery. We activated more subscription revenue dollars in 2024. Heading into 2025, our plan is to release more ACV dollars while maintaining a healthy backlog. Moving to products, we launched a new share of wallet add-on for MeridianLink Consumer and Opening customers. This unique data-rich product supports our customers' cross-selling efforts by identifying financial products that consumers have with other financial institutions. Share of wallet helps our customers extend wallet share and increase the lifetime value of their consumer relationships while reducing acquisition costs. FedChoice Federal Credit Union chose to implement our share of wallet product to drive more relevant cross-sell. They ran campaigns for personal loans and HELOCs, which successfully shifted members towards money-saving fixed-rate products. With the new ability to deliver highly personalized offers to its members, FedChoice's cross-sell campaigns hit conversion rates of up to 9%. Ending now with a great new partner add, we announced a new partnership with Score Navigator, an advanced credit report analytic tool designed to help consumers better understand and manage their finances. Score Navigator integrates with our DVS solution and provides mortgage lenders with more efficient methods of assessing applicant creditworthiness. Through the Score Navigator platform, the loan officer can communicate with applicants to help them improve credit scores during the application process and consolidate debt, thereby increasing lender application approvals. Leading CRAs like CIC Advantage Credit have used the integration for their lenders, strengthening consumer relationships and boosting retention. With that, I will now turn the call over to Elias to share our financial results in more detail and provide annual guidance for 2025.

Thank you, Larry, and good afternoon, everyone. We finished the year with a solid fourth quarter. Throughout 2024, MeridianLink achieved consistent revenue growth, expanded profitability, and improved free cash flow conversion. Drilling into Q4, we achieved GAAP revenue of $79.4 million, or 7% growth year over year, at the high end of our guidance range. Adjusted EBITDA was $33.4 million, a 42% adjusted EBITDA margin, which exceeded the high end of our guidance range. We generated $12.1 million of free cash flow, or 15% of revenue, and ended the quarter with $92.8 million in cash and cash equivalents. Before I further describe our revenue growth, in prior quarters, we have made reference to a large data verification customer downsell. We are in active litigation with this customer and have reached an agreement to mutually drop our claims, with the parties entering into a three-year agreement. We anticipate that going forward, annual customer revenue will be reduced by approximately $6 million as a result of the downsell and the recent agreement. Revenue from this customer totaled $13.1 million in 2024. This downsell has been a headwind for data verification and total revenue growth in prior years. We anticipate that the identified adjustment in revenue from 2024 to 2025 will impact total revenue growth by approximately 220 basis points. Now turning to our Q4 total year-over-year revenue performance of 7% growth in terms of the revenue algorithm, one, ACV release contributed mid-single digits. Two, price and churn were in the low single digits each and essentially offset each other. Three, volumes and one-time customer downsells combined were in the low single digits and mostly offset each other. Moving to our total revenue performance of 7% growth in Q4 by source, subscription revenue grew 5% year over year, contributing significantly at 82% of our total revenue. This growth was driven by the successful activation and recognition of subscription revenue from our implemented software solutions for both new and existing customers, what we refer to as ACV release. Services revenue grew 6% year over year, primarily driven by higher implementation fees associated with software from additional bookings. Other revenue grew 40% year over year, driven by one-time partner revenue share true-ups. Now looking at our 7% total revenue growth in Q4 by solution type, total lending software revenue growth was 7% year over year and accounted for approximately 80% of revenue. Excluding revenue from the mortgage loan market, consumer lending revenue growth was 9% year over year and accounted for 89% of lending software revenue. This strong growth in uncertain macro demonstrates the power of our core franchise. Mortgage lending software solutions declined 7% year over year and accounted for the remaining 11% of lending software revenue. The decline was attributable to customer downsell and churn. Turning to data verification software solutions, revenue increased 4% year over year and accounted for 20% of total revenue. This increase was attributable to a 5% increase in mortgage-related revenue, which represented 57% of total data verification software revenue in Q4. As we lap the one-time customer downsell from the customer I previously mentioned in Q3, revenue accelerated in the quarter. Moving on to our profitability, adjusted gross profit was $59 million, representing a 74% margin and a 37 basis point improvement in operating leverage year over year. Turning to operating expenses, R&D expense was $7 million, or 9% of revenue, and declined 22% year over year, reflecting lower staffing due to our previously announced restructuring. Sales and marketing expense was $8.6 million, or 11% of revenue, up 2% year over year. G&A expense increased 36% year over year to $11.1 million, or 14% of revenue, reflecting select discretionary investments made to position the company for scale. Adjusted EBITDA was $33.4 million, or a 42% adjusted EBITDA margin. This is a 28 basis point improvement in operating leverage year over year. Finishing with our capital position, cash flow from operations was $13.8 million, or 17% of revenue, and free cash flow was $12.1 million, or 15% of revenue. We ended the fourth quarter with cash and cash equivalents of $92.8 million, an increase of $10.5 million quarter over quarter. Now let's look at full-year 2024 results. We had a challenging operating environment, especially in the first half of the year. Notwithstanding, we achieved solid in-year revenue growth. As Larry mentioned, record bookings and the highest adjusted EBITDA margin in three years. Revenue increased 4% to $316.3 million for the year. Describing the 4% revenue growth in terms of the revenue algorithm, one, ACV release contributed mid-single digits. Two, price and churn were in the low single digits each and essentially offset each other. And three, volumes and a one-time DVS customer downsell combined were a low single-digit drag. Now turning to our 4% year-over-year revenue growth by source, subscription revenue grew 3% year over year, which contributed 84% of total revenue. Services grew 9% year over year, primarily driven by higher implementation fees associated with software from additional bookings. Other revenue grew 17% year over year, driven by increased partner revenue. Now looking at our 4% total revenue by solution type, total lending software revenue growth was 7% year over year and accounted for nearly 79% of total revenue. Excluding revenue from the mortgage market, consumer lending revenue growth was 9% year over year and accounted for 89% of lending software revenue. Achieving 9% year-over-year growth in our core business is a huge accomplishment, especially in the context of one of the most challenging lending environments. This highlights the value of our investments and the work and success of our go-to-market and service team over the last year. Mortgage lending software solutions declined 7% year over year and accounted for the remaining 11% of lending software revenue. The decline was attributable to customer churn and downsell. Mortgage volumes were strong year over year, and contracts below their minimum significantly improved from approximately two-thirds to approximately one-half by the end of Q4. Turning to data verification software solutions, revenue declined 6% year over year and accounted for 21% of total revenue. This decline was attributable to an 11% decrease in mortgage-related revenue, which represented 56% of total data verification software revenue at the end of the year. This decline in mortgage-related data verification revenue was driven by the one-time downsell of a single large customer discussed previously. Moving on to our profitability, adjusted gross profit was $232 million, a 73% adjusted gross margin. This is nearly a 100 basis point improvement in operating leverage year over year, driven by continued productivity of our services team. Turning to operating expenses, R&D expense was $29.4 million, or 9% of revenue, and declined 27% year over year, reflecting lower staffing through the previously mentioned restructuring. Sales and marketing expense was $35.9 million, or 11% of revenue, up 13% year over year. This increase is primarily due to investment in our go-to-market team and strategy. G&A expense increased 12% year over year to $40.8 million, or 13% of revenue, reflecting the previously mentioned select discretionary investments made to position the company for scale. Adjusted EBITDA was $130.7 million, a 41% adjusted EBITDA margin. This is a 400 basis point improvement in operating leverage year over year. We made some purposeful discretionary investments in the year, maintaining disciplined cost management. Finishing with our capital position, cash flow from operations was $77.8 million, or 25% of revenue, and free cash flow was $70.3 million, or 22% of revenue. Total debt was $472.7 million, and excluding debt issuing costs and cash, net debt was $375.8 million, representing net debt to LTM adjusted EBITDA of approximately three times. Once again, we were disciplined in allocating capital. We invested in the business and repurchased shares at a discount to intrinsic value, returning $105.4 million of capital to stockholders through repurchases. We also engaged in several capital market activities, such as the debt repricing and top-up and two secondary offerings that broadened our shareholder base. Now I'll provide guidance for 2025. As Nicolaas mentioned, going forward, we will only provide annual guidance updates on our quarterly calls. While we will no longer provide prospective quarterly guidance, we will comment on and provide insights into anticipated trends. We have made this change because we want to improve the alignment between our guidance and how we run the business. Our approach is to deploy capital and to create long-term value for our shareholders. We believe that shifting to annual guidance will help to focus our operating teams and the equity market on the long-term progress that we are making, rather than on quarterly variances. Keep in mind that our variances are typically driven by volumes, which are less predictable and tend to obscure more stable and important drivers of our business, which include ACV release. So moving on to 2025 guidance, ongoing conversations with customers and recent economic data point to an uncertain environment for the consumer in 2025. As a result, we are cautious in our outlook for customer volumes and associated revenue. We expect total GAAP revenue to be between $326 million and $334 million, compared to $316.3 million for the full year of 2024. This represents an estimated increase of 3% to 6% year over year. To provide more color on how revenue will trend by solution type at the midpoint of our guidance, we expect the mortgage market to contribute approximately 18.5% of revenue for the full year 2025. To help investors understand our sensitivity to current volume levels in our mortgage lending, we estimate that a 5% increase in our expected annual mortgage loan volume will yield approximately a 1% increase in our annualized mortgage lending subscription revenue. There is not a one-for-one correlation between volumes and revenue growth because only the incremental volumes for customers above their minimums convert into overage revenue, and overage revenue is a fraction of the total revenue for the year. On the non-mortgage side, we expect modest growth year over year in data verification revenue. Understanding these dynamics, we expect consumer lending will grow approximately 7% in 2025, driven by releasing ACV at a steady pace. In a higher-for-longer interest rate environment, consumer volumes are expected to be flat year over year. I will now describe our 4% total revenue growth at the midpoint of our guidance in terms of the revenue algorithm. One, we expect ACV release to continue contributing mid-single digits and be the single largest driver of our revenue growth in 2025. Two, we expect price and churn to continue to offset each other. Three, we expect that volumes and the DVS customer renewal combined will be a low single-digit drag. Excluding the customer downsell, total volumes across all our products will be slightly positive year over year and be a neutral contribution to revenue growth. Now focusing on the adjusted EBITDA guide, for the full year 2025, we expect our adjusted EBITDA range to be between $131.5 million and $137.5 million, representing an adjusted EBITDA margin of approximately 41% at the midpoint. As revenue increases, we are investing in our product roadmap and go-to-market team to drive growth. We continue to manage the business to eventually become a rule of 50 company and are investing appropriately. Given our visibility into Q1 trends, insight from customers, and recent economic data, we anticipate normal seasonality in our revenue through 2025. MeridianLink's high percentage of subscription revenue and strong quarterly ACV release give us confidence in our annual growth expectations. With relatively stronger sequential revenue growth in the second half, we expect our expenses to be impacted by the timing of investments, which will start in Q2. These will ramp up in the second half, and there will be a modest contraction in margins. Both R&D and sales and marketing as a percentage of revenue will increase 100 basis points for 2025 compared to 2024, as we invest in our product roadmap and go-to-market capabilities. As a result, we expect adjusted EBITDA margins to be the highest in the first quarter before slightly declining in the second half of the year. I would like to end with how we are thinking about capital allocation going forward. To reiterate, our order of priorities is first, investing in organic growth in areas that deliver repeatability and scale to the organization. Second, disciplined M&A. We remain ready to execute on the right deal at the right price and have recently invested in our corporate development team. And third, repurchasing our shares when trading at a discount to intrinsic value. I am excited to announce that in February, our board authorized a new stock repurchase program to acquire up to $129.5 million. On this last point, I would like to comment on our stock-based compensation philosophy. In 2024, we made larger than usual grants as we recruited new leadership to help scale the organization. Our expectation is that share grants will come down in 2025. Finally, I would like to reiterate how resilient the company has been, all thanks to the outstanding effort of our team. We ended the year strongly despite the challenges we faced because of the dedication and skill of our employees who work closely every day for the benefit of our customers. Looking forward, we believe this is a year during which execution remains paramount while the macro takes time to recover. If that manifests itself, we will continue investing in technology, infrastructure, and sales and marketing to support future growth and scale. With that, Nicolaas, Larry, and I are happy to take any of your questions, and I'll turn it over to the operator.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from Chris Kennedy from William Blair. Please go ahead.

Good afternoon, and thanks for all the new disclosures and the new detail. When you think about the volume component, you gave good color on the mortgage, the sensitivity of the mortgage side of the business. Is there any way to think about the sensitivity on the non-mortgage component?

Hi, it's Elias. Thanks for the question. You know, thank you, and thank you for acknowledging that we've improved our disclosures, and we are going to continue to work on that. But at this point, I am not going to be providing further disclosures around consumer. But that is something that we will keep in mind for future calls.

Okay. Understood. And then just talk briefly about the sustainability of your 41% EBITDA margin target going forward, as the environment changes and as you continue to invest in sales and marketing. Thanks for taking the questions.

Yeah, of course. We feel good about the 41% as we talked about last quarter. You know, the number to really anchor around is the 40% guidance. What's really occurring though is, as we ramp up some of the investments that I was referencing in my color commentary, those are going to come in in the second half of the year. So you're going to see a slightly higher and more elevated set of margins in Q1, possibly even in the first half. And as those investments roll onto the P&L, obviously, that'll put a little bit of pressure on those margins. So what you're seeing in the 41% guidance is really not us signaling that it's going from 40 to 41, rather just simply acknowledging the timing around some of the investments that we're undertaking. But yeah, we feel very good about it. We have good cost control in place and continue to be disciplined about how we deploy capital.

Great. Thanks for taking the questions.

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

Hi, guys. Thank you for taking the questions this evening, and good to see the stability here. Maybe just on the investments for 2025. I heard the detail around sales and marketing, but you also mentioned product infrastructure. So if you could put a finer point on where the investments are being made across the other categories outside of sales and marketing, that would be great. Thank you very much.

Hey, Andrew. Thank you for the question. It's Nicolaas. We are going to invest—let's tackle the question in two sections. On the product side, our focus is on digital interfaces, partner infrastructure, and also around our mortgage business where we continue to see expanded opportunity. And then what I would call infrastructure, which kind of spans out of our product and into the internal business systems. But it's around data engineering and scaling our systems to continue to scale the business in the future.

Thank you for that, Nicolaas. And then maybe just the next question on the pipeline that you're seeing. Obviously, the fourth quarter tends to be a higher watermark for bookings, but it was a very good quarter from a new logo perspective. You called out some larger bank wins. So maybe just talk a little bit about what you're seeing in terms of the pipeline, the size, and composition, and whether you see that new logo momentum continuing. Thank you very much.

Yeah. Hi, Andrew. It's Larry. Apologize for my voice here. We ended the year with a strong pipeline and feel good about the momentum coming into the first half of the year across the products.

You want me to navigate for you?

Yeah, that'd be great. Okay. We continue to—

Hello, everyone. This is the operator. I apologize for this inconvenience.

Oh, can you—I'm sorry. We were muted here. I answered the question to myself.

I can hear you now. No worries.

Did you hear anything I said, or do you want me to start at the beginning, Andrew?

No, you cut out when you started talking. So if you could repeat what you said, that'd be great.

Okay. We had a great back half of the year in terms of pipeline build, but also in sales momentum, and we continue to see that momentum continue into the 2025 year, and our expectation is this will continue to be very similar in the first half. We are seeing great success with our cross-sell initiatives, specifically the momentum is building around mortgage for us, and then some of our other modules on our platform. Specifically, as we think about kind of what's next and what's happening in our business from an opportunity standpoint, what we're hearing from customers and new prospects is folks are looking at making investments, especially where it helps them grow and help them find new customers. So from our perspective, growing pipeline means we are in lockstep with our customers that's leaning in to grow members, to grow clients, grow deposits, and we're pretty excited where the pipeline's at and where it's going.

Got it. Thank you so much, Nicolaas. Appreciate the response.

Thank you. And your next question comes from Saket Kalia from Barclays. Please go ahead.

Hey. It's Saket from Barclays. Thanks for taking my questions here. Nicolaas and Larry, maybe for you. Can we just maybe go one level deeper into that core consumer LOS business? I think the growth there was about 9%, which is good to see. It's healthy. Maybe the question is, how do you feel about the growth drivers in that business if you peel back the onion, and the potential to sustain that growth in the future?

Saket, thank you. Great question. I think I'm going to speak. Larry has lost his voice, so he's waving at me with answers and numbers. But we're pretty proud of the 9% consumer lending growth. And if you just to use your term, peel back the onion, it was driven by solid ACV release. In the setting we're in, we are in a challenging macro environment, and today, we control what we can control. We keep selling more. There's customer demand for our product, our platform. And as we kind of land that and cross-sell and accelerate a new logo motion, we feel that and we believe that we can sustain the growth in that segment of the business. The demand is there, as well as the team is set up to continue to release ACV at the pace that we're doing it today.

Got it. Very helpful. Maybe for my follow-up for you, Elias, you said we're not going to talk about sort of certain new metrics here, but I was wondering just as an update, how do you kind of think about the different consumer loan types as a percentage of that LOS business? I think in the past, maybe, you know, we've heard about sort of rough percentages coming from, you know, the overall auto loan market or used auto market. Is there any update in terms of the different loan types and how they contribute?

Yeah. I will be happy to give an update as it relates to a couple of the loans in the consumer. You know, auto is, of course, roughly half of the single largest category within our consumer LOS. And within that, you break that down, and roughly two-thirds of that is used, and one-third of that is new, so more exposure obviously to the used car market. Then our non-asset-backed product categories, credit cards, and personal loans are about a quarter. And then, you know, the remainder obviously makes up the balance of what's in consumer. And, you know, just by way of update, that has not been shifting in any appreciable way.

Got it. Super helpful. Thanks, guys.

Thank you. Your next question is from Parker Lane from Stifel. Please go ahead.

Hi. This is Matthew Kikkert on for Parker. Thank you for taking my questions. To start, could you talk about your recent partnership with

Sounds good. This is Nicolaas again. Two questions,

Okay. Thank you for that feedback. And then in your capital allocation strategy comments, you mentioned M&A second before share repurchases. Do you have any comment on maybe particular areas of the business or the market that you would be looking to strengthen through M&A?

Parker, can you just repeat the question for a second?

Sure. So the capital allocation comments that you made in the prepared remarks, you mentioned M&A as the second priority before share repurchases. So I was curious maybe, like, is there a particular area that you'd be looking to make any M&A, whether, you know, in the near to mid-term that, you know, would strengthen your business?

Yeah. Great question. You may get a winded answer from me. We think of M&A in kind of a few different vectors. One is to continue to expand the platform and continue to look at what I would call tuck-in acquisitions that bolt out the platform breadth and depth and give our customers that ability to work with a single vendor. And that's a strong message we're getting from our customer base. They want to work with fewer vendors, and they would like to have a single hand to shake and a single neck to break. And consolidating what is a great fit into our platform is something that we're spending quite a bit of time looking at. And we've invested in capacity and also building out our M&A muscle in the company over the under Elias' leadership, call it, over the last three, four, five months. And we're seeing quite a bit of activity evaluating opportunities in that area. And it's from kind of inbounds from bankers, from us going out into the market, as well as getting deeper into what I would call the partner marketplace, where we have some tight integrations with partners. There's also great opportunity for us to build adjacent to our platform into areas that I would say is a natural short-arm extension. And we're also evaluating that. And then lastly, I would kind of say there's transformational that you always need to take a look at, but it's something that we would do if it truly makes sense from a strategy and growth perspective. Otherwise, you should expect us to be more focused on holding platform capacity through tuck-ins and very near adjacencies.

Okay. Thank you very much.

Thank you. As a reminder, if you wish to ask a question, please press star one. Your next question comes from Alex Carr from Raymond James. Please go ahead.

Hi. This is Jessica on for Alex. I just want to congratulate you on a great quarter, and also just want to double-click on NRR. It's impressive to see the improvement, and I already have also, of course, part of being strong, work quarter bookings. I was kind of curious about what are some of the drivers and factors you're seeing for this improvement, and how sustainable do you see these factors being going forward? Thanks.

Alright. Thanks. A couple of things happening as it relates to NRR, and Larry and Nicolaas made reference to these. One is, obviously, we are growing our bookings, and we had a very strong ACV release year. And then on top of that, if you look at our customer accounts, our customer accounts, while coming down, it is coming down across a segment of very small customers. And so that is pushing our NRR upwards. And as we head into 2025, I certainly think that is sustainable, and they're going to be growing as we continue to work on releasing ACV, and to the extent that there's volume, there could be upside to that. But those are really the drivers of our NRR.

Got it. Just like a really quick follow-up. Do you kind of see churn as maybe having peaked already, or do you still have more of a holding position on the situation as whatever develops in the macro environment?

Yeah. It's going to be, obviously, the macro impacts it. And so we're watching that very carefully. I would point you to, I guess, I'd make a few points. One is that churn as it relates to consumer, we think is roughly where we would expect it to be. Mortgage-related remains slightly elevated. But as we head into 2025, you see the flip in our mortgage lending business declining—sorry, changing, excuse me, flipping from negative seven to about eight. And that is really just a function of the fact that, amongst other things, churn is going to be diminishing, as well as, you know, there were some one-time items that we lapped in Q4 of 2023.

Got it. Thank you.

You're welcome.