Ladies and gentlemen thank you for standing by and welcome to MeridianLink's Third Quarter 2021 Earnings Call. At this time, all participants are in a 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, head of investor relations. Erik, please go ahead..

Good afternoon, and welcome to MeridianLink's third quarter 2021 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; and Chief Financial Officer, Chad Martin.

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 refer to both GAAP and non-GAAP financial measures.

You can find a 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 and good afternoon, everyone. Thank you all for joining us for our third quarter 2021 earnings call. It's been another great quarter, and I want to recognize our employees for helping our clients make a positive impact on the consumers, businesses, and communities they serve.

Our commitment to our clients and the trust they place in our platforms drives our culture, our innovation and our optimism for the future. Thanks again to the MeridianLink team for making a difference. During today's call, Chad and I will provide details on our third quarter results and give an update on 2021 guidance.

As you can see, MeridianLink exhibited strong performance in Q3, which exceeded our previously communicated guidance. Third quarter GAAP revenue was $67.4 million, up 29% year-over-year, and we delivered this growth while continuing to demonstrate high levels of profitability with 46% adjusted EBITDA margins in the quarter.

Our strong Q3 results were driven by continued growth in consumer lending volumes for our clients and higher than expected levels of mortgage activity. I couldn't be prouder of these results, which showcase our commitment to growth, while maintaining best-in-class margins.

We are well-positioned in our markets, have a strong growth trajectory and with the TAM of over $10 billion, we are excited about our future growth prospects. Before we dive further into our third quarter results, I'd like to congratulate our clients who made Forbes' 2021 Best Banks and Best Credit Unions list.

This elite list honors the top 3% to 4% of the country's financial institutions, and we are humbled that a majority of the honorees are MeridianLink clients. Their customer-centric philosophy, digital-first focus and commitment to excellence inspires us and fuels our strategic growth initiatives.

I want to talk about wins on four of our strategic growth initiatives today. First, innovation; second, cross-sell; third, expanding our target market; and fourth, monetizing our partner network. I will also provide an update on strategic M&A. First, our innovation continues to drive growth.

Product innovation has been and will continue to be a hallmark of MeridianLink. Innovation drives our client success. They face increasing consumer demand for more digital-first solutions and need to modernize their digital lending processes and offerings.

In fact, most new and cross-sell clients cite our innovative offerings, an integrated platform as a key driver in selecting MeridianLink to accelerate the digitalization efforts.

In Q3, we announced new data verification enhancements that enabled our consumer reporting agency clients to expand their portfolio of data services, including recurring background checks that reduce risk and new features in our Advanced QuickApp tool that enables them to serve customers more robustly.

Clients share their enthusiasm about these enhancements giving our annual TazWorks User Group client event in September. For consumer reporting agencies using Mortgage Credit Link, we also expanded verification of employment offerings to mortgage lenders through a key new LOS integration.

The feedback we receive from clients will continue to drive our product innovation, especially in areas that support the ongoing digital transformation. Second, the synergies of combining products on MeridianLink One is helping to drive cross-sell.

MeridianLink One is our platform of products, which spans a digital consumer lending journey from account opening through loan origination and data collection, decisioning, and funding. In Q3, we added more than 60 new MeridianLink Portal instances and enhancement updates to new and existing clients.

MeridianLink Portal is our consumer lending, digital point-of-sale solution and supports the industry's digital transformation while broadening our MeridianLink one footprint.

MeridianLink Portal integrates seamlessly with our MeridianLink Consumer and MeridianLink Opening solutions to empower our clients to deliver access and convenience to their customers by allowing them to apply anywhere and anytime for a consumer loan, mortgage, or savings account.

Further, in early 2021, one of the largest privately owned banks in its state, with $4 billion in assets and more than 30 locations selected MeridianLink Consumer as their consumer lending platform. We then cross-sold MeridianLink Mortgage in Q3, displacing a longtime legacy system.

The bank was in place with the possibilities of the integrated platform, the vast network of mortgage service partners integrated with MeridianLink Mortgage and our rich reporting capabilities.

There are many other stories highlighting how MeridianLink is driving value and differentiation for our existing clients and new logo prospects, and how their trust and partnership drive our growth.

We are honored that clients continue to cite our industry leadership position and trust in our longstanding innovation as the key reasons they work with us. Third, we continue to win new logos, both in our sweet spot and beyond, expanding our target market.

As you know, our typical client is a financial institution with $100 million to $10 billion in assets. During the third quarter, we brought on many new banks and credit unions that fit this profile.

One of these, which has offices throughout the country, chose MeridianLink over competitors due to our well-rounded system, ease of application, decisioning tools, integrations, and automation. These same factors allow us to expand our target market and we continue to win with larger clients and beyond our traditional end markets.

During the quarter, we added a Federal Reserve top 100 commercial bank with more than $20 billion in assets, more than twice the size of our typical client. We also added the specialty consumer finance company with nationwide operations and several regional finance companies.

We will continue to focus on our primary target market, but these two recent successes add yet another growth opportunity for us and prove that our innovative solutions compete and win as we continue to expand. Fourth, we continue to monetize our partner network with increasingly high profile integrations.

Our vibrant Partner Marketplace provides our clients with the vendors and solutions that they're choosing and offers us a substantial monetization opportunity through one-time service fees, annual integration fees, and transaction based revenue share income. We continue to cultivate and optimize our Partner Marketplace.

And in the third quarter, we welcomed several new partners, including Plaid. Plaid provides instant account verification for account funding for MeridianLink Portal. It is an add-on product that can be used to replace ACH micro deposits for verifying account ownership.

Plaid's integration into our marketplace offers clients a faster and premium alternative to more labor-intensive options. Plaid is already generating value for our clients and we are seeing stronger interest for Q4.

We continue to be excited at the breadth of our offerings in our Partner Marketplace and happy to see clients turn to our trusted partners to fuel their growth. Finally, I want to update you on strategic M&A, specifically the progress we have made integrating Saylent.

In addition to developing our own solutions organically, we will continue to selectively pursue acquisitions that provide additional capabilities or clients or both, and we pride ourselves on our ability to efficiently integrate acquisitions.

I'm pleased to report that in Q3, we made great progress integrating Saylent and building on its capabilities. We completed the development of a new marketing automation beta product to offer a more personalized, digital lending experience for our clients' members and customers.

We are excited by the rapid progress we're making, and we will continue to provide updates on the integration of Saylent and other M&A activities when it occurs. Before I close, I'd like to end as I started and highlight another important industry recognition.

In September, our Co-Founder, Chief Strategy Officer, and a partner in the business that I respect and admire greatly, Tim Nguyen, received the 2021 Innovator of the Year award from Orange County Business Journal.

He's an initial inspiration and drives spark in this company, and we are pleased that his continuing innovation and business acumen received well deserved recognition. Congratulations, Tim. I will now turn the call over to Chad to talk about our financial results..

Thanks, Nicolaas and thanks again to everyone for joining us today. Since this is only our second earnings call, I'll start by providing the highlights for the quarter, give a brief recap of our financial model, and then I'll go through our third quarter results in more detail before moving on to guidance for the fourth quarter and full year 2021.

As Nicolaas mentioned, in the third quarter, we generated total revenue of $67.4 million, up 29% year-over-year. 88% of our third quarter revenues were subscription fees with the balance coming from professional services and other.

Our operating loss was $8.8 million, but our non-GAAP operating income was $17.1 million, and adjusted EBITDA was $30.1 million.

Our IPO was completed in the third quarter and the corporate conversion and accelerated vesting of pre-IPO equity, combined with the equity incentives granted to employees as of the IPO, drove a substantial increase in our stock-based compensation.

But please note that in our earnings release, we present our operating expenses net of the impact of stock-based compensation for comparability. We have a usage based SaaS recurring revenue model. Our customers sign long-term contracts, usually three years, that are not cancelable without penalty and which auto-renew at the end of term.

Typically, customers commit to annual fees and monthly purchases of applications. In exchange for higher monthly commitments, they receive lower per application pricing and any transaction over the monthly minimum commitment is an incremental charge.

Our platform's ability to make our customers more efficient and effective at lending, naturally drives more volume once it's installed and used. We can grow with our customers and we are aligned with their success. We provide both lending software solutions and data verification software solutions.

In the third quarter, lending software solutions revenues accounted for approximately two-thirds of our total revenue and grew 34% year-over-year. The other one-third of our revenue comes from data verification software solutions, which increased 20% year-over-year.

Third quarter revenues from the mortgage loan market generated 29% of our overall revenues. Specifically, 9% of our lending software solutions revenues and 70% of our data verification software solution revenues were tied to our mortgage focused products.

Of our 29 points of year-over-year revenue growth in the third quarter, 23 points were contributed by the acquisitions of TCI and TazWorks, while the remaining six points came primarily through the addition of new customers, increased module penetration of existing customers, and increased volume from our customers.

As expected, organic growth from data verification software solutions trended lower year-over-year, but organic growth from lending software solutions remained robust, growing double-digits versus the prior year period. Gross margin in Q3 was 60% and adjusted for stock-based compensation, it was 73%.

We continue to invest in our sales and marketing and R&D efforts to drive organic growth acceleration. We are investing significantly to build robust sales and marketing capabilities. Compared to the third quarter last year, we spent 87% more in sales and marketing and 64% more in research and development, adjusted for stock-based compensation.

Even with this additional spend, our adjusted EBITDA margin was 46%, and our adjusted EBITDA grew by approximately $2 million to $31 million. While we intend to continue investing to drive growth, we will also carefully control expenses and our focus on the conversion of incremental revenue into profits and free cash flow.

Turning to the balance sheet and cash flow statement. We ended the third quarter with $93 million in unrestricted cash and cash equivalents, up $63.8 million from the end of the second quarter.

In the quarter, we used $200 million of our IPO proceeds to paydown debt, extinguishing our second lien debt and reducing the first lien by $75 million, and reducing our quarterly interest expense to around $5.9 million. As a part of this paydown of debt in Q3, we incurred a debt extinguishment charge of $4.4 million.

We are currently in the process of refinancing our existing credit facility and expect that process to be completed shortly. Current indications are that we expect to be able to reduce our base interest rate by 75 basis points in addition to extending the duration of our loans and increasing the size of our revolving credit facility.

Operating cash flow in the third quarter was $19.1 million, and free cash flow was $17.6 million or a 26% free cash flow margin. We continue to generate funds that can be used to invest in the business, pursue acquisitions or deleverage. I will now conclude my prepared remarks by providing guidance for Q4 and for the full year of 2021.

Overall, we continue to see strong business momentum, and our pipeline remains robust. Given the seasonal nature of our business, I would like to remind everyone that Q4's financial results are typically lower than Q3.

For the fourth quarter, estimated total revenue is expected to be between $59.5 million and $60.5 million compared to $53.9 million for the same period in 2020. This represents an estimated increase of 10% to 12% year-over-year.

On a non-GAAP basis, our fourth quarter estimated adjusted EBITDA is expected to be between $21 million and $22 million, representing EBITDA margins of approximately 36% at the midpoint of the range.

For the full year 2021, estimated total revenue is expected to be between $263.2 million and $264.2 million compared to $199.3 million for the same period in 2020. This represents an estimated increase of 32% to 33% year-over-year.

On a non-GAAP basis, our full year 2021 estimated adjusted EBITDA is expected to be between $119.7 million and $120.7 million, representing EBITDA margins of approximately 46% at the midpoint of the range.

We continue to be pleased with the performance of TCI and TazWorks, which are expected to continue contributing at levels in line with recent results.

Lending software is expected to suffer a modest drag from slowing mortgage lending activity and data verification software will face difficult comps in the quarters ahead, given the elevated mortgage refinance activity in the year-ago quarters.

Overall, we expect the mortgage related percentage of our revenue in Q4 to be in the low 20%s versus 29% realized in Q3. This expected reduction in mortgage contribution will continue to reweight the MeridianLink business toward its faster growing areas, which support continued double-digit underlying growth.

With that, Nicolaas and I are happy to take any of your questions.

Operator?.

Sure, sir. [Operator Instructions] Your first question comes from the line of Koji Ikeda with Bank of America. Please go ahead..

Hey, guys. Hey, Nick. Hey, Chad. Thanks for taking my question. I guess, first question either for you, Nicolaas or Chad. You talked about these two -- actually, a lot of wins here. I wanted to focus on the consumer specialty lending in the top 100 bank. I think this is pretty important.

How do those conversations start with these customers? And then, how do we think about the initial land at that top 100 bank, any potential expand from here? And then, just given these are pretty big wins for you, I think, are you going to be leaning in harder to the higher end of the market from here?.

Thank you for the question, and great question. Our lens remains very focused on the $100 million to, call it, $10 billion of assets under management.

We have seen success where larger institutions and this large bank, in this case, are totally interested and supportive of our configurable approach to the platform, as well as the enablement of functionality through our Partner Marketplace with our partners that's integrated into our Partner Marketplace.

And Koji, I think, there's a big difference between trying to highlight customization. We're not a platform that goes out and say we are highly customizable and we spend years implementing the platform.

We are very focused on that mid-market, but we've seen success in the upper end of the market and we continue to invest in our platform and our product.

For example, there's going to be a -- work being done, and we've spoken about this in the past, where there's investments being made and enhanced decisioning, which I think naturally opens up that market for us to go to bigger clients and also enhanced POS over time where we're making investments. But it's not us expanding the lens.

It's us getting the introduction, getting the call, or speaking to the right folks. There's so much opportunity for us left in our mid-market approach in that $100 million to $10 billion. That we've got -- we've seen strong demand. We've seen great success with our portal in that marketplace and some great ones at market.

But at the same time, we've been working on pricing and packaging strategies to help us to also go further down-market with good momentum. So, I would say, pleased with the outcome, very proud of what the team did in landing such a large opportunity in the business.

But I would not want to position it as the next growth lever and move everybody to focus on up-market. It's an opportunity that we're pursuing, but it's not refocusing our lens..

Got it. Thanks for that. And maybe one follow-up here for Chad. Thank you for the color on the mortgage percentage of lending and mortgage percentage of data revenue. I wanted to just double-click on that a little bit more here.

So, if we punch in the guidance and those assumptions here of low 20%s, that does imply some pretty steep declines in the mortgage loan market related revenue. I guess, with interest rates staying pretty low here and the nice performance that you had in that segment in the third quarter.

I mean, how should we be thinking about that segment? Are you guys seeing something different out there? Or is this just a level of conservatism for the mortgage side?.

Koji, thanks for the question. So, we're still leveraging the market view on their mortgage bankers association, Fannie, Freddie, or where the market will go. Certainly, if the market is -- the market has stayed stronger longer, which helped with our Q3 results.

And if you see that continue into Q4, then there may be some benefit to the numbers as well. But we're expecting that the guidance we gave incorporates that 20% drop, and you're seeing that in the Q4 numbers.

But I also want to just circle back, right? We not take away from the growth we're seeing on the consumer side, but we also came in above expectation. And the fact that we're seeing this benefit to the mortgage related business is just giving us more ability to continue to invest in sales and marketing and R&D and really drive the business forward..

Got it. Thanks, Nicolaas. Thanks, Chad. Appreciate the time..

Thank you..

Thank you. And your next question comes from the line of Timothy Chiodo with Credit Suisse. Please go ahead..

Great. Thanks a lot. This is Tim. So, a question on the Partner Marketplace. So, we often think about it as a good leading indicator of some of the ancillary services, if you will, that are attractive to some of the banks and credit unions that you work with. So, the recent announcement with Plaid is obviously a great interest.

But in general, aside from that partnership, maybe you could just shed some light on some of those ancillary services that seem to really be gaining traction? And what are the ones that are picking up share, if you will, within usage of the Partner Marketplace?.

That's a great question. I don't want to highlight specific partners, probably speak more in general because we have multiples of partners, in some cases, doing the same. And we let clients choose or partners kind of engage and we enable what's being selected..

Yeah. I think categories [indiscernible]..

Yeah. Yeah. And I would say one area that I continue to see interest in is fraud and the prevention of fraud. Specifically, I think over the last 12, 18 months with so much moving out of branch and moving digital, that there's certainly a higher alert for prevention of fraud.

And how can you weed through what's out there? And that's of interest for pretty much every MeridianLink client one way or another. And Plaid's a good example of that, but there are numbers of other partners, which is part of our Partner Marketplace and integrated into the MeridianLink platform as well..

Okay. Excellent. Thank you. And then, just real quick for the Q4, is there -- should we still think about TCI and TazWorks as just being down sequentially in Q4, those two businesses, relative to their contribution on an absolute dollar basis in Q3? I believe the seasonality is a little bit weaker in Q4..

Sure. So, we'll expect to see the same seasonal impact on the TCI and TazWorks businesses that we're modeling into the base business. But we still, as Nicolaas mentioned, and we've mentioned, we're still seeing good results from those acquisitions. They're exceeding what we had in our original business case when we did them.

And so, we're still very pleased with how they're performing relative to their original business case..

All right. Excellent. Thank you so much for all the help..

Thank you. Your next question comes from the line of Andrew Schmidt with Citi. Please go ahead..

Hey, guys. Thanks for taking my questions here. I wanted to begin on the enhanced decision mentioned. We understand that historically, NFI would give you some parameters for a credit profile of the customer they go after and you could filter new loan decisions that way.

Obviously, in the market, we've seen development of many, many different types of loan decisioning, alternative data, machine learning applications, and things like that to kind of improve underwriting processes. So, just curious, when we talk about enhanced decisioning, what type of opportunities we're talking about here? Thanks..

Sure. Our goal with our enhanced decisioning is to be more flexible, enable more inputs, and also the ability to incorporate more third-party data into the decisioning, and the structure in which decisioning kind of ends up functionally. The goal would be to make it faster, allow more criteria to be inserted.

And I would also believe it ultimately opens up a more robust up-market opportunity. But the goal is for us is to strengthen our decisioning engine with kind of an approach to be smarter and more digitally connected and aware of the ecosystem..

Got it. Thank you for that, Nicolaas. And then, just in the third quarter, the non-mortgage consumer LOS side. I couldn't feel it -- I just want to confirm this. I had estimating that growing in the upper teens range. Just want to confirm whether that's correct or incorrect.

And then, is there a way to break that down between sort of, let's call it, net new logos versus cross-sell versus volume activity? Any detail there would be helpful. Thanks..

Yeah. Andrew thanks for the question. I think your analytics there are accurate. And what I would point to is just we still see the same kind of growth characteristics that we talked about.

We don't break it out in the numbers themselves, but still seeing the same growth characteristics of new customers, driving growth in that number, as well as seeing the cross-sell, up-sell and the volume increases per customer included in the quarter-over-quarter -- quarter over year ago quarter growth..

Got it. And maybe if I could sneak one more related question. Just if you could talk about -- since it's a large focus for people, just talk about just your visibility as it pertains to that growth sort of sustaining or accelerating into 2022 based on implementation pipeline, sales pipeline, backlog, et cetera. Any color around that would be helpful.

Thanks a lot..

Yeah. Thanks, Andrew. So, we won't give 2022 guidance until we report early next year. But there's no change to -- on the consumer side, the trends that we've outlined around the double-digit growth coming from the new logos, cross-sell, up-sell, volume increases going forward.

So, no intention that will be -- the long range growth and the volume and drivers of growth that we've communicated will have changed..

Understood. Thank you very much. Appreciate the comment..

Thank you. Your next question comes from the line of Alex Sklar with Raymond James. Please go ahead..

Hi. This is [indiscernible] on for Alex Sklar. I just have a quick question. So, there are a lot of moving pieces going on with the consumer debt wallet right now. And auto is also a bit under pressure around industry, but credit cards and personal loans seem to be going to have been strengthening.

What can you tell us about how the mix of volume is impacting your guidance? Thanks..

Let me respond to kind of it from a higher level, and I'll hand it over to Chad if he wants to respond to the model and guidance.

I think the fact of the matter is we've been living what you've seen and kind of highlighted again on the question, over the last six, nine, 12 months, even from kind of a shift and also, even touching on supply chain, I think, we've seen whatever the headwinds and tailwinds.

Headwinds, call it on the auto and maybe new home side, sales side and the tailwinds in other areas of the business.

And I strongly believe that the business is extremely well-positioned, and it's probably going to be like a coil spring at some point in time, I believe, from a consumer standpoint, when the supply chain issues are easing up and getting resolved. My viewpoint is we can't really pinpoint timing and we don't include that in our guidance.

We -- from a consumer standpoint, I know that there's a heavy focus on digitalization from our clients. We've seen really strong demand kind of building that footprint out. I believe we're going to see a bigger benefit when we see some of the headwinds become more tailwinds in the business.

But in the meantime, the business is performing really well even with kind of what you're seeing and highlighting out there. And I believe the base thing we as a company can do is stay laser-focused on managing what's in our control, executing on our strategic growth vectors, which I've highlighted earlier in my prepared remarks.

And to me, the bottom line is a great third quarter. We've given you our best guidance for fourth quarter. And I continue to believe we're going to drive strong growth even despite some of the headwinds and tailwinds that we see. And we've seen over the last nine, 12 months. Chad, if you want to comment on model, you're more than welcome here..

Yeah. Thanks, Nicolaas and thanks, Alex, for the question. I think Nicolaas hit on it right. So, we're not making any really radical predictions or changes in the expected mix of the business.

We're expected to see in the Q4 guidance we provided other than we've been explicit in our expectation around what has been the tailwinds, which have been mortgage, and where we expect to see that revenue go..

Thank you. Your next question comes from the line of Bob Napoli with William Blair. Please go ahead..

Thank you. Good afternoon, Nicolaas and Chad.

So, on the long-term, looking at your net revenue retention rate and cross-sell, assuming once mortgage normalizes, what would be your target for a net revenue retention rate?.

So, we've talked about when we look at kind of our ARR and ARR year-over-year growth, which we -- which last year, we reported 20% -- 120% for some of the tailwinds that Nicolaas talked about in mortgage. Those tailwinds may turn into headwinds at some point as Nicolaas talked about, and headwinds may turn into tailwinds.

But long-term, we continue to think that that part of the growth will be roughly 10%. As we look to both the cross-sell, up-sell, volume, price increase, Partner Marketplace, driving growth in that range for our consumer part of the business..

Okay. Maybe for Erik. On the M&A front -- or Chad or Nicolaas. I guess just any update on the market environment that you're -- the opportunities that you're seeing in the market, the types of acquisitions you might be looking for.

But how active are you? How active is the pipeline? And what types of deals are you looking for?.

Bob, great question and good hearing your voice again. I think Chad mentioned earlier that pretty much every acquisition we completed, we anticipate it to be one that is value asset platform brings growth opportunities to our clients and from an internal tracking standpoint are exceeding our expectations.

The point I'm making is we continue to be discerning around strategic fit and value creation here. And while we see good deal flow, we tend to be very specific in our focus. We do want to build out our competitive differentiator stronger, but we also are looking at adjacent spaces that appear to be of interest to us.

You've seen us work with Saylent and do a technology acquisition that we are integrating into our platform that will be integrated into our data and our analytics and drive real value for our clients. And we continue to look at Plaid around that, that's strengthening the platform, would strengthen our offering to drive growth for our clients.

We've assembled the team, Erik and another individual and the team is focused. It's thought about strategic growth initiatives. We've outlined five and M&A is certainly getting attention should [technical difficulty] as we continue to evaluate fair opportunities..

Thank you. Appreciate it..

Thank you. [Operator Instructions] Our next question comes from the line of Matt VanVliet with BTIG. Please go ahead..

Yeah. Thanks for taking the question, guys. Nice job on the quarter. I guess as you look at where maybe the incremental sales and marketing investments are going to be more focused moving ahead, realizing that the recent ones have given you pretty good returns.

Have some of the newer deals, whether it's the larger bank or the specialty lending company, are you allocating more resources to be a little more prospective in some of those areas of the market? How should we think about what some of the incremental heads are going to be focused on moving ahead?.

That's a good question, Matt. I don't think we're going to change the mix that we are investing in between new and cross-sell, up-sell in 2022 and beyond. We've found good momentum in our new local and go-to-market motion.

We are expanding in specific markets and focus on certain segments with marketing plays, sales plays that sets up growth for us for 2022, but no real significant change is contemplated between. As a reminder, having our new logo teams have our cross-sell, up-sell team, have our channel team, and then, our Partner Marketplace.

I would say, expect more of the same type of investments. We've invested heavily over the last 12, 18 months, and tech stack as well. We're coming out of that cycle where -- in 2022, I would like to see us continue to build out and gain efficiency with our tech stack in our go-to-market organization.

Personally, I'm pretty excited where we forward -- from where we came from, where we are at, and where we're going with our go-to-market. And I'm a big believer in the investments we're making in the sales and marketing organization..

Excellent. And then as you look at what the MeridianLink One platform ultimately sort of offers along with the Partner Marketplace.

Does that give you enough of a competitive barrier as we see some of the -- all five companies or really even some of the FinTech companies trying to get into lightweight loan pricing and offering, or do you have to continue to push the envelope on the development side to make sure you're staying ahead of and including all of the necessary functionality to not let some of these other providers kind of sneak in?.

We don't rest on our laurels, but we do know we've got a very defensible mode in our Partner Marketplace and the indications that we've built over more than a decade into the platform. From my perspective, the positioning we have in the marketplace is strong. We are in a leading -- market leading position.

We will need to continue to invest in digitalization and data and analytics and enhanced decisioning. The touch points, as the market continues to shift into enabling the consumer where the consumer is moving away from pure branch interaction to an omni-channel experience and the supporting infrastructure behind that.

But I do not believe that there is any company better positioned with a platform and an ecosystem and integrate it into the greater consumer lending landscape than MeridianLink.

And while we need to continue to invest, it's the culmination of two decades of knowledge and the investments we've been making over the last, call it, more than two years into technology, moving our platform to the cloud here and getting that ready for 2022 in a meaningful way. We had a great point in time in the history of the platform.

I -- what I believe the market is going, we've been positioning ourselves for that for a long time. And I feel where we are at today and where we're going we have a very strong competitive position to compete in the market that we've defined as that $100 million to $10 billion of assets under management..

And then -- sorry, just quickly one more follow-up. You mentioned that in a growing trend here that people are going to the branch less and some of those interactions are there. Are there any areas of data verification components that are maybe becoming more incremental? Obviously, you guys added the tenancy screening through acquisition.

But are there other types of data sources or ways that lending institutions are looking to be a little smarter, but cast a wider net, especially if the mortgage market continues to contract?.

I would point you back to fraud. I think at this point in time, when I speak to CEOs of alliance, one of the top of mind items, especially in the world of digital acceleration is fraud and fraud prevention and management around that.

And we are very focused on enabling additional functionality through our Partner Marketplace, through integrations as well as continue to build our platform in that regard. So, from my standpoint, I feel digitalization is a great tailwind. It's bringing significant new opportunities to us and others in the marketplace.

The fact that our platform is so broad and so well integrated to consume data and make sure that the data is vetted as part of the decisioning and fraud is managed. I view that as the next frontier in analytics and how you think through decisioning as part of that.

And personally, I believe if we're going to look back five years from now in this industry and maybe 10 years looking back, we're looking at very much a digital revolution taking place in the consumer lending landscape.

What you've seen with mortgage in the last decade or so as the whole mortgage process digitalized, that's coming on a broad basis for consumer lending and probably in a more meaningful way than what we've even anticipated a year or two ago..

Great. Thank you..

Thank you. And your next question comes from the line of Tom Roderick with Stifel. Please go ahead..

Yeah. Hi, gentlemen. Thank you for taking my question. So, apologies, I think everyone's juggling, a few calls today, so I hope this wasn't already asked. But I know investors and we, in particular, were pretty interested in the update on the MeridianLink Portal that you had more recently.

I think you talked about some 60 customers upgrading in the quarter.

What I'd love to understand from that in terms of what that means to your customers that are selecting that? Talk a little bit more about what the financial impact is to you? And then, also from the perspective of does it change the competitive landscape out there in terms of who you might bump into in the financial services technology world sort of more of the same typical cut-throat competition? Or is that changing at all as you push your way into a broader digital footprint on the customer portal front?.

Let me kind of respond to it from a market standpoint and I'll hand it to Chad to kind of respond to the financial part of this. Our portal is the innovation that took place over the last 18 months, two years on specifically creating an omni-channel experience for our customers, clients and members.

And it is the enablement of -- and this strategy played out before there was a pandemic. MeridianLink's team and Board stacked hands on really building the platform to be a digital enabler and moving the mid market financial institutions we serve to be competitive with larger banks and larger financial institutions.

And our positioning has always been invested -- and omni-channel invested in the digital experience creates a single sign on. That's why we started investing over two years moving to the cloud. It is creating that scalable platform and ecosystem that we invest in and we have partners participating in it.

And the portal is that front-end where the consumer touches our platform, that engagement point that they experience our clients' interaction with them. And it's driven by MeridianLink. So, it's a pretty important investment for us and something that we're really excited about, bringing further to market.

From a positioning standpoint, today it's very focused on the consumer lending landscape. You can clearly see that a point-of-sale that can be more if we choose to go there.

But today, we want to be the best portal, the best access point for our clients into the MeridianLink platform that enables their experience across the platform and being integrated with our partner ecosystem. Chad, I don't know if you want to speak to kind of the subscription part of it, how this plays into the platform and the financials..

Yeah. Tom, so, the Portal is one of the modules, one of kind of the dozen modules we sell in the consumer lending category. It's rapidly growing and it's subscription rather than application base. But I would say we do also get the benefit of our customers are using a portal solution.

If they're attracting additional applications by having that customer friendly application, we do get a bit of the benefit of seeing additional volume in the other modules that they have on the consumer side..

Yeah. Perfect. I'm glad you clarified that, Chad. And is that subscription just driven by number of end consumers on the platform? So, it's not transactionally or application driven, it's just number of customers that the financial institution has, that would drive that price point..

We do price it more on the size of the institution, not necessarily type of customers, but [technical difficulty]..

Okay. And then one quick follow-up. I was interested in your answer there, just to Matt's last question on additive solutions. You're highlighting fraud as one solution that sort of seems to be catching on.

And when you combine that with data verification, the analytics, and the AI, it seems like perhaps the market is ready to move beyond just the automation of paper processes to really investing in artificial intelligence and machine learning and a lot of the intelligence, let's say, edge of the network there.

Maybe you could just go one step further and talk about high level, what your customers are doing to lean in on that theme? And is there additive money around the horn? Should we expect to hear a lot more of the AI, the fraud in some of these sort of newer solutions that are a step-up in intelligence?.

It's an area of interest for us. It's an area that we are investing in our own capabilities, as well as partner integrations and partner capabilities as evidenced, in example, by the Plaid integration. And it's also an area that we are looking through the lens of M&A.

And it's certainly an opportunity that we would like to capture value from if there's value to be captured.

But more importantly, if there's value to be captured and driving growth for our customers and helping our customers differentiate, make faster, better decisions, have a better risk management process integrated into decisioning, we're highly interested in building out that capability over time.

And I believe it's also to the benefit of the greater market, not just our existing or new future customers..

Yeah. Really helpful. Thank you. I'll jump back in here. I appreciate it..

Thank you. And that concludes our question-and-answer session for today. I will now turn the call back to our CEO, Nicolaas Vlok, for final comments..

So, thank you everybody for joining us on our second quarter as a public company where we're reporting our results. And I think you may have picked that up from both Chad and my discussions today that we've never been more optimistic about the health of the business and the opportunity ahead of us.

We have numerous growth levers at MeridianLink and the demand for our products is strong. And I would say -- I would even venture wanting to say unprecedented. For me, as holidays approach, I feel fortunate that the biggest thing that's keeping me up at night right now is how we can get our toys into the hands of our clients faster here.

We're sitting on a great opportunity. There's great tailwinds in this market. And we're very excited to be part of that journey in the digital consumer lending landscape. And I would also like to finish on a personal note.

This is an incredible journey and I want to send my sincere gratitude to all of our employees, our clients and our partners for getting us here. Thank you all for your interest in MeridianLink, and we look forward to talking to you on our next earnings call when we will discuss Q4. Thank you for joining today.

Operator?.

Thank you, sir. This concludes today's conference call. Thank you for participating. You may now disconnect..