All right, great! Let's get started. Welcome everyone, to day one of the UBS Global Technology Conference. My name is Nik Cremo, and I help lead the Payments and FinTech team here at UBS. I'm delighted to have Nicolaas Vlok with us here today, CEO of MeridianLink. Thanks for being here with us, Nicolaas. Thank you, Nick. Thank you for the invite. Happy to be here. Thanks. So just to kick things off, I think it would be helpful if you could just provide a brief introduction of MeridianLink's various businesses, who your customers are, and then contextualize the significance of consumer lending to their businesses. Sounds good. Think of MeridianLink as the leading digital consumer lending platform. Our customers today are depository-taking financial institutions, or largely, out of our 2,000+ customers, about 1,500 are depository-taking institutions. Of that 1,500, about two-thirds, or call it 1,000, is credit unions, and the rest are community, regional, super regional banks. And that's what our consumer lending platform serves. We have a data verification business too, that serves CRAs, which are focused on mortgage credit reporting, as well as tenant, employment, and background verification. And that business serves the CRA market, but it's also part of the quality of the data infrastructure for the rest of our business to do data enrichment and assist with our auto decisioning. So it's kind of a outward-facing CRA business, but also serves internal data infrastructure. Understood. Thanks for that, that context. So I think it would be good just to, to really start with, you know, reviewing the financial performance of MeridianLink year to date and as well as the execution on your various strategic initiatives. Yeah. We've certainly expected, and we've planned for some slowdown in 2023. Clearly, on the mortgage side, the market and volumes from mortgage has been an impact. That's. Overall, mortgage is about low 20% of our business. The rest of the consumer lending business, we've expected with increased rates that they will be impact and credit tightening happening in the market. We've planned for that. The company, even with kind of the headwind environment that I've described right now, are still growing and is growing kind of, mid- to high-single digits. At this point, we've continued to perform from a profitability standpoint, kind of, mid- to high 30% margins on the EBITDA line and a strong cash flow performer. Great. So, I think it would be helpful just to kinda hear from you, like the tone that you're hearing from your end customers as they balance these digital transformation investments amidst, you know, tightening credit standards and, you know, an anticipated economic slowdown. Yeah. I think if you, if you look at it at rates, certainly one of the bigger drivers in our industry would be rates. It's kind of the Goldilocks scenario, where our client base or the depository deposit-taking base don't like it too high or too low. It needs to be just right. That's when they kind of perform their best and have the ability to extend credit to the consumer in kind of the most certain ways. When it's too high, you typically see credit tightening policies in place. If it's too low, it kind of runs away in their ability to access capital. So from a perspective where our clients are today, we're starting to see them retool. We're seeing investments. Our cross-sell in our business has been strong pretty much the whole year. We've seen... Right after the SVB debacle, we've seen some slowdown in new logo activity, specifically around Q2, Q3, but there's a pickup in that now. But cross-sell has been strong and is driven by digital retooling. And an example that we've been given is we have announced our mortgage LOS cross-sell playbook in Q4 last year. We've been selling that very successfully to our depository-taking clients as cross-sell. And there's a pretty active retooling and anticipation of mortgage volumes starting to return and rebound later in 2024 into 2025. Understood. So what's that conversation like when you're engaging in the cross-sell with these customers? I guess, what's the value prop that you're conveying to your customers to, you know, incentivize the cross-sell? Great, great question. Our positioning is this: we are a consumer lending platform. Our offering is a platform where we serve the consumer lending landscape from account opening through all consumer loan channels, even through collections, if it's required, with analytics, with automation and auto decisioning across the platform. Contrast that to standalone solutions or solutions that's not integrated, or legacy, which is what much more of a workflow-driven solution, where the loan officer in multiple occasions need to touch a single application for approval, where this can now be done digitally. We're starting to work with kind of forward-thinking deposit-taking clients, where in one instance, we have a client that's auto approving about 70% of the auto loans, touchless. Starting to have that conversation is meaningful with customers that wanna kind of future-proof their own technology environment for the next decade, if not longer. Understood. So you mentioned auto, and I know that auto has been a tad bit slower than you guys were expecting in the back half of this year. And just kind of, you know, pulling the consumer lending business from, like, the high single digits back to closer to mid single digits. So can you just provide an update as to how the consumer lending business, excluding mortgages, is doing in the first two months of Q4? Yeah. What we've seen in auto lending is kind of a normalization in new auto earlier in the year. If you walk into a new auto dealer, you can pretty much pick the color and option and drive out with your new vehicle at MSRP. That has not been the case a year ago. That needs to make it into... The volume needs to then, at point in time, transfer into the pre-owned market. Once volume is starting to make it back into pre-owned, we're gonna start seeing a recovery in pre-owned taking place as well. There's already kind of a slight turn if you look at the Manheim data. Three months in a row, we've seen pre-owned auto pricing starting to come down, but the pre-owned market has not recovered in volume to the extent we've seen new, and we anticipate that would also be more of a 2024 recovery. But demand has been strong for us in Q4. We anticipate a slight recovery in kind of consumer lending, and so far our guidance is holding. We expect what we've guided to, and the recovery is kind of slight, but there. That's great to hear. Maybe just for those that aren't as familiar, how large is auto as a percentage, or just ballpark, of your consumer lending business, ex mortgage, and then if you break that down one level further between used and new? So auto makes up about half of the revenue of our consumer lending business, which if you kind of if you round the business off, $300 million overall, about $70 million is data verification, and the remainder is consumer lending, and half of that is auto. Of that half, about a third is new, and two-thirds is pre-owned. And it kind of makes sense if you, if you look at our customer base, that I've just described, credit unions and kind of medium-sized banks. They tend to serve clientele that would be buying in the pre-owned market more than the new market, typically. They're a value buyer. And if you kind of look at new, new has kind of performed. Look at data from Cox and J.D. Power. Y ou'll see the new market has kind of stabilized, but we're waiting for that in the pre-owned market to happen. Understood. So just putting all the macro aside, I know that MeridianLink has, you know, a very large TAM with, you know, good secular growth tailwinds behind it. So, yeah, how large do you think the TAM is today, and how fast is it growing, and kind of what are the key secular drivers that you see? We view the overall loan origination TAM as about a $10 billion market. Now, our solution set address closer to $6 billion than the $10 billion today. There is an aspirational view over time that we can address more of that whole loan origination market in time. I would say the biggest overall macro driver for us would be rates starting to turn and kind of find that not too hot, not too cold kind of range. We also view auto recovery as kind of key for us in the pre-owned market to get back to our mid-double-digit growth rate. As to when that will happen, I'm not an economist, but I think if you start looking at what folks are projecting for rate recovery and kind of volume recovery in auto, it feels like towards back half of 2024 is when you're gonna start seeing more of that happen. And then mortgage recovery is also going to be even just in first and new home purchase recovery volumes, is going to have a meaningful impact for us as well. So do you view rates coming down as a catalyst for increased spend from your customers in these transformation investments, aside from just increased volume? Right now, I don't think we, we are seeing customers who's on a digital transformation path changing spend. They, they've mapped out a digital transformation path for their business. Now, the credit union market is a pretty stable market. Think who they serve. They kind of serve firemen, teachers, government employees, who's a very predictable income stream. They don't. They're slower movers in tech, but once they start moving, they keep moving. And if you look at CUNA data over the last 20 years or so, credit unions have consistently grown 7%. In the Great Recession, they once dipped like 0.5 or 0.7 below, in terms of a negative. This year, they probably will grow about 4% loan growth. So they keep growing. Some years they grow faster, some years they grow a little slower. So we're not dealing with a client base that is kind of a negative territory in terms of growth. They're just starting to see slower growth at this point in time, and they keep investing. And I think the proof point to that is the strength in our cross-sell that we've been experiencing all year long. And just to follow up on that, do you see any bifurcation between traditional banks versus credit unions in terms of their demand for spending on your solution? I think there was a bigger pause right around the Silicon Valley Bank and kind of the banking stumble in the earlier part of the year. I think banks took a deeper breath, but it feels like they are coming back to the table and they're starting to spend. And we don't have visibility to the full stack. Kind of, we don't deal with the Tier One banks and kind of really large banks. We kind of... In the banking space, we position ourselves in the $250 million-$35 billion assets under management, and in credit union space, $100 million-$10 billion. So our sense is that part of the market has kind of developed confidence in banking, and they're back engaging. We kind of see it with peers and kind of other providers too, where banks are still committing to digital spend. They, we internally say we see our clients spend in four areas: core, payments, digital banking, and digital lending. It kind of feels like anything that's tied to their digital strategy in terms of digital banking and digital lending, is getting priority and is getting funding. Understood. So just looking back at MeridianLink over the last few years, you guys have executed well on your customer acquisition growth, new logo growth. I mean, so who have you been taking share from over the last few years? We tend to find our most fertile opportunities with customers who's running legacy solutions, and most of those legacy solutions are either single, standalone solutions that serve either account opening or credit card or some form of auto. Or we find that with kind of legacy technology that's been sold or been given away in the past by the core providers. And kind of the dynamic with core providers are they kind of have dozens of core solutions, and in most cases, they have some form of a workflow-driven LOS that isn't kind of digital-enabled, doesn't do auto decisioning, is not integrated across the stack, you can't do analytics across it. We find customers who wants to move away from kind of legacy and kind of want to become more efficient, wants to drive auto decisioning, touchless lending, folks who's looking at transforming their business and be out there, leading kind of either a market segment or they're delivering better service. Those are the ones who we find we best engage with on opportunities. We're not the cheapest solution. We never will engage in negotiations that is kind of a deep discount sales strategy. We sell the value that we bring to the institution and the consumer. If a client sees that value, then it's a, it's a great engagement for us. Kind of an interesting stat that we've been seeing is, since the beginning of 2022, the consolidation that took place in the industry, MeridianLink clients have been the acquiring party in more than two-thirds of the transactions that took place. So it feels like our customers have the technology to go and acquire non-MeridianLink clients and layer their business into our platform and environment. Understood. It's helpful context. So you mentioned 1,500 financial institution customers. So based upon, like, your target market, how would you frame MeridianLink's market share today? You guys, you guys have been, you know, steadily growing that over the last few years. Like, where do you think that could go over the next, call it, five years? Yeah. We think of these roughly 10,000 or so FDIC-insured institutions. We feel we have the right to compete in half or more than half of those for digital lending solutions. Kind of ranges that I've given you is kind of $100 million to about $10-15 billion in the credit union space, and about $250-$350 billion in the bank space. The reason why it looks different is banks have a different structure to their balance sheet. They tend to carry commercial loans on their balance sheet as well, where credit unions tend to not be as much in the commercial lending space. Understood. And so we get a lot of questions on the components and, you know, just the durability of the various parts of MeridianLink's mid-teens revenue growth algo. So maybe if we could just kind of walk through those building blocks between same-store sales, new customers, and new pricing and cross-sell. Yeah, our contracts give us the ability to do price increases annually. And kind of depending on the product CPI, think of it as somewhere between 3%-5% annually. We also have the tailwind behind us of annual loan growth, and you can pick a number that you want to work with. If you take 20 years at 7% in CUNA for credit unions and slightly below 4% for the banking space. We continue to invest in new logo, which will also be a contributor of kind of mid- to just below mid-single digit, and then our cross-sell playbook as well. Understood. So, just on the cross-sell and your broader go-to-market strategy, I know that's been a big focus for you in terms of building that function out from MeridianLink over the last few years. So maybe if you can just walk us through, you know, the various steps that you took, where we are in that journey, and kind of what's left. Sounds good. I don't think there's a destination of what's left, so let's start with the evolution. When MeridianLink and Thoma Bravo partnered in mid-2018, MeridianLink had 4 salespeople and 1 marketing person, and it was very much an order-taking organization. We transformed the business from there to an organization which roughly have about 60 quota-carrying folks that are split between kind of new logo consumer salespeople, then a mortgage logo sales group, which we've decided to focus more internally selling into our existing FI base, but can also sell new logo. And then we have a cross-sell team that's focused on cross-selling existing customers, and it kind of transitions after 6 months from the new kind of new logo holdover into our cross-sell organization, where we continue to sell more modules into the clients. Right now, we have about 4.5 modules penetrated out of 14 on average into our customer base, so cross-sell is clearly a, a big opportunity for us. We also have our channel team, which works with channel partners like Apiture and Jack Henry, and other core providers. And then we have our partner marketplace team, which is a team that's focused on enabling partners to integrate through APIs into our platform, as well as in kind of a future state. Maybe that's answering one of your... Like, where are we going next? We're starting to look at how to integrate some of our key partners into our sales process more meaningfully, where, in kind of the world today, we, we let our partners kind of find the opportunities. We believe that there is a playbook where we can guide those opportunities, where there's more of a ready-made bundle available for clients to select. So we've transformed sales from kind of very much a small order-taking organization to 60 quota-carrying folks. Over the last year, we've invested in building out a revenue ops function. We've added sales enablement to help us kind of scale and transition from more of a product-selling organization to a platform-selling organization. And why that is important is we've migrated over to the cloud in Q3 last year. Q4, we've kind of started moving into our cross-sell platform-selling motion, and our own internal team needs education, as well as our partners and the broader market. Understood. So just to go back to the partner marketplace, how large of a revenue driver is that today? And, like, where could that go over the, call it, medium term, just given that increased focus there? Overall, it's close to $80 million in revenue that runs through the whole partner marketplace. On consumer lending, it's kind of shy- just shy of half or so. It is a meaningful contributor. In new sales, we see about $0.25 of partner revenue drag along for every $1 of SaaS revenue that we sell today, and we think that can grow. We feel that there's an opportunity to move the needle on that $0.25 number for us. Definitely a lot of opportunity there. So just looking into 2024, I know you guys had some good backlog performance throughout the year. Any update on how the backlog is looking, you know, exiting the year? We've transitioned our and transformed our services organization earlier in the year. I think you may remember, we've had a chief customer officer join us earlier in the year. We've moved our sales or sales, our services operation to much more of a practice area, and where we've created three practice areas, instead of running more of a sequential handoff on a project between folks and teams of practice areas, kind of responsible for the whole delivery of a project. The beauty of that is you can also hand that off to outside partners, the knowledge, the documentation, everything. But we've made a significant transition in that we are less people today, but more efficient given that transformation that we've gone through. If you look at the last two quarters, you would see quite nice acceleration from a services delivery and revenue performance standpoint, which also translates into us releasing more ACV into our customer base, and for us to kind of turn into future revenue. So pretty pleased with how well services performed. We are starting to work the backlog down, and we should see a lower backlog depending on our bookings performance in Q4, but we've certainly started chipping away, there is a component of backlog that should always be there. I like thinking there's a three, four-month backlog, given clients are not always ready the moment they sign an agreement for implementation to start. But we've, we've definitely worked the backlog down now from the 8-9 months down to something in the probably 6-7 months window, and it continues to accelerate. That's great to hear that those investments are paying off. So we're getting close to running out of time here. I have to ask an obligatory recessionary question. So, I mean, you guys have a number of defensive factors about your business today with contract minimums. And certain parts of the market, like mortgage, has been, again, a recession, you could say. But if the general U.S. economy did go into a recession in mid-next year, how would you expect the business to perform? You know, I think we've battened the hatches down over the last year because we've had headwinds that we dealt with in auto, first new, then pre-owned, then mortgage. I don't know if it can go much lower in mortgage on the... and we kind of protected on the mortgage side with minimums in, and about 90% or so of mortgage revenue is at minimum. So my view is there's not a lot of downside left on that. On the consumer lending side, there's certainly more downside, but I think a lot needs to go wrong, where there's more headwinds than what we've been dealing with over the last year. 2023 was a challenging year for this business, and the industry as a whole, and we still grew, and we still managed to eke out, and we will grow this year. So I'm pretty pleased with the performance. The way I think of this, and our CFO has a saying, he says: "We're gonna sell through it." And we did sell through it. The bookings demand in the business has been strong. Yes, we've seen same-store sales in auto volume, specifically pre-owned, down in Q2 and also slightly down in Q3. And it does impact the business, but there's a lot of good happening in terms of bookings, momentum, backlog, the way we've structured for scaling. And if we need to continue to weather, I think we'll do that without too much impact on the business today. And my view is there's going to be... The world works in cycles, and our cycle probably started a little earlier than others, and it feels like we've had it in part of 2022, certainly 2023. I don't know if it's gonna have a meaningful impact past that for us in 2024. That's good to hear. So I'll try to sneak in one more question here with our last minute. Mortgage industry forecast for the U.S. by the MBA is supposed to, is projected to be high teens next year. They were obviously a little bit off the mark this year. They had to cut their forecast a little bit. But assuming that's directionally correct, could you anticipate, like, a large acceleration in the mortgage side of the business next year, if that plays out as they've forecasted? I think they were meaningfully wrong, not just wrong. But my take is, I'm not as buoyant as they are. I don't think we're gonna see high teens. I think that one of the previous forecasts even had it in the 20%, volume bounce back. I just, at this point in time, don't see that. So our planning isn't as buoyant. We're certainly not planning for their volume returns. If it turns out to be true and correct, it will be a benefit to us in 2024, beyond what we are thinking and will be guiding to in 2024. Understood. Well, thanks so much for all the color, Nicolaas. That's very helpful. Thank you, Nik. Thanks, everyone, for tuning in. We appreciate it, and we'll catch you guys tomorrow for day two of the conference. Thank you. Thank you for having us.