MeridianLink, Inc.

about our successful in-person user forum. Last week, we hosted nearly 1,000 attendees from hundreds of customers and dozens of partners in Huntington Beach for our annual user forum, the first time we've hosted the event live since 2019. The energy and excitement were palpable as we connected about how our solutions help customers deliver the personalized, speedy experiences that today's consumers expect. The positive feedback and stories were inspiring and validating for our entire team. It was a great reminder of why we do what we do. It was also great to spend time in person with many of our employees who are the reason for our continued success and excellence. My last update would be discussing bringing customers online more quickly. And I'd like to talk about how the increasing recognition of our market leadership with MeridianLink One and the associated strength in selling to both new and existing customers makes even more imperative the investments we are making to bring customers online more quickly. While our hiring is somewhat behind schedule, the productivity of new and existing team members is in line with our expectations. In Q1, we were excited to add Liz Rivoli to our executive leadership team as MeridianLink's new Chief People Officer. With the benefit of Liz's expertise, we will accelerate our hiring and investment in additional people initiatives. We see the 30% year-over-year growth in services revenue in Q1 as indicative of the opportunity and expect to see sustained improvements in total time between contract signing and customer go-live as the investments in our services team come to fruition. It's heartening to see the progress we're making, and I'm confident in our accelerating momentum. Of course, none of this would be possible without the hard work of our dedicated team. Before I turn the call over to Chad, I'd like to discuss our continued success in migrating to the cloud. The work stream to complete the re-architecture and deployment of the entire MeridianLink One platform in the cloud remains on schedule, with the first quarter involving the prep work needed to migrate MeridianLink Mortgage to the cloud during the second quarter. I am happy to confirm that we remain on track to re-migrate the final components of our platforms to the cloud this year, at which point our MeridianLink One platform will be completely cloud native. I will now turn the call over to Chad to talk about our financial results and guidance.

Thanks, Nicolas, and thanks again to everyone for joining us today. I'll start by providing the highlights for the quarter. Then I will recap the highlights of our financial model and provide our results in more detail before finally giving guidance for the second quarter and full year 2022. As Nicholas mentioned, in the first quarter, we generated total revenue of $72.8 million, up 7% year over year, 87% of our first quarter revenues for subscription fees with the balance coming from professional services and others. Our GAAP operating income was $14.6 million. Our non-GAAP operating income was $20.8 million. And adjusted EBITDA was $34 million. As a quick reminder, we have a usage-based SAS 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 or reports. In exchange for higher monthly commitments, they receive lower per unit 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 naturally drives more volume once it is installed and used, so 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 first quarter, lending software solutions revenue accounted for nearly 68% of our total revenue and grew 14% year over year. Excluding the impact from the anticipated slowdown in mortgage-related revenues, our lending software solutions revenues grew 19% year over year. The remainder of our revenues come from data verification software solutions, which decreased 4% year-over-year as mortgage-related revenues declined. First quarter revenues from the mortgage loan market generated 28% of our overall revenues, more than previously expected as we believe the surge in mortgage interest rates pulled forward some demand. Specifically, 7% of our lending software solution revenues and 70% of our data verification software solutions revenues were tied to our mortgage-focused products in the first quarter. While the majority of our data verification software solutions revenues is tied to mortgage, this part of our business outperformed the market as we continued to find ways to augment our solutions with additional data items and partners to provide more value to our customers enabling them to continue to win share in the market. The seven points of year-over-year revenue growth in the quarter came primarily from our standard growth drivers as we added new customers, saw increased module penetration, and increased volumes from our existing customers. We expect to drive further growth as we bring additional capabilities to our customers through a combination of M&A, expansion of our partner marketplace, and delivery of organically developed products. Moving to our profitability, gross margin in Q1 was 66%. Adjusted for stock-based compensation, gross margin was 72%. We continue to invest in our sales and marketing and R&D efforts to drive organic growth acceleration. Compared to the first quarter last year, we spent 25% more in sales and marketing and 6% more in R&D, adjusted for stock-based compensation. With this additional spend, our adjusted EBITDA margin was 47%. We will continue to invest across the year to accelerate our underlying growth. Turning to the balance sheet and cash flow statement, we ended the first quarter with 146.7 million in unrestricted cash and cash equivalents, up 33.1 million from the end of the fourth quarter. Operating cash flow in the first quarter was 34.9 million, and free cash flow was $32.9 million, or a 45% free cash flow margin. We continue to generate funds that can be used to invest in the business, pursue acquisitions, deleverage, or repurchase shares under our recently authorized repurchase capacity of up to $75 million in common stock. I will now conclude the call by providing guidance for Q2 and an update for the full year of 2022. Despite the rapid rise in mortgage interest rates since the start of the year and the associated decrease in expected market volumes, we continue to see strong momentum overall, and our pipeline remains robust. For the second quarter, estimated total revenue is expected to be between 71.5 million and 73.5 million, compared to 68.5 million for the same period in 2021. This represents an estimated increase of 4% to 7% year over year. In the second quarter of 2021, the mortgage market contributed $20.3 million of revenue to Meridian Link, or just under a third of our revenue in the year-ago quarter. We expect the mortgage market to contribute less than 25% of revenue for the second quarter of 2022. On a non-GAAP basis, our second quarter estimated adjusted EBITDA is expected to be between $25 million and $27 million, representing EBITDA margins of approximately 36% at the midpoint of the range. While our reported Q1 adjusted EBITDA came in well above our previous guidance, this was primarily due to underspending plans in the quarter, and we intend to accelerate spend in our outlined initiatives throughout the remainder of the year. This includes approximately $1 million per quarter to bring the recently acquired StreetShare solution fully to market as part of Meridian Link 1. For the full year 2022, estimated total revenue is expected to be between $289 million and $293 million, compared to $267.7 million for the same period in 2021. This represents an estimated increase of 8% to 9% year-over-year. On a non-GAAP basis, our full year 2022 estimated adjusted EBITDA is expected to be between 112 million and 116 million, representing EBITDA margins of approximately 39% at the midpoint of the range. The lower year-over-year margin reflects anticipated increases in annual spending in areas that will drive future growth, as described earlier by Nicholas. We will continue to focus on the investment in services capacity to convert more bookings to revenue, and the investment and development in the cloud to both enhance and expand our product suite. Both items that require current expense that we expect will lead to future returns. As we forecast the balance of 2022, the normalization of activity in the mortgage lending market appears to be well underway. We expect this to continue being a minor headwind in lending software and a more meaningful drag on data verification software performance in the quarters ahead. Overall, the mortgage-related percentage of our revenue in 2022 is expected to decrease to the low 20s, down from 30% in 2021, subtracting more than 5 percentage points of growth from Meridian Link in 2022. While this reduction is more than we anticipated at the start of the year, as we have seen rates move higher faster than previously forecast, we have been building our business to counter the decline for some time. We have no doubt that we will continue adding new clients, providing more value to our customers, and therefore increasing revenue for MeridianLink as a whole. And our guidance for the year reflects the ongoing strength of the non-mortgage solutions we provide, which grew 17% year over year in our most recent quarter. With that, Nicholas and I are happy to take any questions. Operator?

Sure, sir. Ladies and gentlemen, if you have a question at this time, please press the star 1 on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue, press the pound key. Again, that's star 1 to ask a question. Your first question comes from the line of Koji Ikeda with Bank of America. Please go ahead.