MeridianLink, Inc. (MLNK) Q4 2021 Earnings Call Transcript

MeridianLink, Inc. (MLNK 0.63%)
Q4 2021 Earnings Call
Mar 10, 2022, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by and welcome to MeridianLink's fourth quarter and fiscal year 2021 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 your first speaker today, Erik Schneider, head of investor relations. Erik, please go ahead.

Erik Schneider -- Head of Investor Relations

Good afternoon, and welcome to MeridianLink's fourth quarter and fiscal year 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 our statements are made based on information available to us as of today. And except as required by law, we assume no obligation to update any such statements.

During the call, we will also refer to both GAAP and non-GAAP financial measures. You can find the reconciliation of our GAAP to non-GAAP measures included in our press release, which is posted to the Investor Relations section of our website. With that, let me turn the call over to Nicolaas.

Nicolaas Vlok -- Chief Executive Officer

Thank you, Erik, and good afternoon, everyone. Thank you all for joining us for our fourth quarter and fiscal year 2021 earnings call. 2021 was a very successful year with strong growth, and Q4 continued to show strong momentum outside the expected slowing in mortgage-related revenues. As a result, MeridianLink exceeded guidance again in Q4 with GAAP revenue up 19% year over year to $64 million and 38% adjusted EBITDA margins.

In a few minutes, Chad will provide additional details on these results and provide 2022 guidance. But first, I will provide some details on what we are seeing in the macro backdrop and on key areas of strength during the quarter. We continue to see notable strength in the consumer lending side of our business with strong momentum in the fourth quarter, up 23% year-over-year. This strength has been driven in part by the reinvestment of our mortgage-related upside into the rest of our lending business.

In line with our guidance, the impact of mortgage on both our lending software and data verification software revenue types declined in the fourth quarter. Mortgage came in at approximately 27% of revenues during the quarter, and we expect this percentage to decline further in 2022 due to both the expected weakening of mortgage volumes and to the continued outperformance of our consumer lending solutions. As you know, MeridianLink One is a comprehensive, consolidated all-in-one cloud platform that supports all consumer loan and account types, including mortgage. We believe MeridianLink is outperforming in our market due to our diversified portfolio of products offered in our integrated platform and the continuing strong digitalization tailwinds.

Moving on to key areas of strength. There are three things I would like to talk about: one, our increasingly robust go-to-market engine and how that is driving continued momentum in both new logo ones and cross-sell; two, innovation, including product suite integration, modernization, and expansion and how this is driving One; And thirdly, reduced implementation times and how these are driving faster go-lives and helping us to invoice sooner. So let's talk about these three in more detail. Q4 was a record bookings quarter for us with new logos wins the highest ever, driven by continued investment in our go-to-market engine.

We now have nearly 50 quota-carrying reps in the field, and digitalization is top of mind for customers and prospects. Our return on this investment has been tremendous, generating high demand from potential clients. We will continue to invest both in strengthening our position in our sweet spot and extending beyond it, unlocking new market opportunities. One large Q4 opportunity was a win from a fast-growing digital mortgage platform designed exclusively for small to midsized mortgage lenders with more than $150 billion funded in working with more than 300 lenders.

They invested more than $1 million in MeridianLink Mortgage in year one, and we are confident enhanced messaging of MeridianLink's open API technology, multitenant architecture and collaborative approach to growing clients' businesses will continue to drive larger lands. Conversely, MeridianLink entry has enabled wins of institutions smaller than our typical customer through a wholly templatized implementation. These are smaller dollar contracts than our typical customer, but it further extends our market-leading capabilities to institutions of all sizes who are committed to providing the best capabilities in the market. In addition, cross-selling is accelerating.

In Q4, a $500 million-plus national credit union added MeridianLink Opening to their portfolio of MeridianLink products, which now includes MeridianLink Consumer, MeridianLink Portal, and MeridianLink Consulting. Secondly, our commitment to delivering innovation that is meaningful to our customers is also driving momentum. When new logos or current clients select MeridianLink, they repeatedly save a trust MeridianLink to help grow their business because of our market leadership and innovation. We continuously improve solutions for all clients.

Most recently, for CRA clients, we combined the leading independent credit background and tenant screening platforms. In lending, we brought together leading independent products for credit unions and community banks across consumer point-of-sale, account opening, deposit taking, direct lending, and indirect lending. We also launched MeridianLink Engage in beta in Q4 and expanded to general availability in January. Engage is a unique and comprehensive end-to-end consumer lending, account, and card marketing automation solution, and we are seeing good initial engagement from prospects at the top of our sales funnel.

Our engineering team also migrated MeridianLink Portal for consumer lending from our hosting environment to the public cloud in Q4. This is our largest migration to date, and it allows us to offer increased scalability and higher speed to clients while improving our ability to iterate and improve the underlying product technology. In 2022, we will complete the MeridianLink One platform rollout, providing the full breadth of our lending solution in the public cloud with a unified user experience. Thirdly, organic and inorganic investments in both solutions and go-to-market activities have meaningfully increased our bookings rate.

And on the last call, I told you client demand for our capabilities, exceeded our ability to implement them. COVID-19 increased customer demand for integrated, comprehensive digital processes but slowed implementation since portions of the go-live process need to be performed synchronously to accomplish these best outcomes. As mentioned previously, we have developed and launched standardized product and service packages that bring smaller clients live more quickly and using up to two-thirds less effort from our professional services team. We also invested in process improvements that accelerate the portion of the implementation timeline we control.

This helped us close the year with an accelerating number of go-lives across core products. We expect the investments completed and underway in our services team to reduce total time from signing to go-live by about 30%. These investments are necessary to work down our backlog and keep up with the ongoing growth in bookings. We expect a very strong return on the spend, bringing clients online faster as a meaningful financial impact.

Before I turn the call over to Chad, I want to give you some high-level thoughts on 2022. When we think about 2022, we are more confident than ever in our go-to-market and innovation engines. We are penetrating more of our TAM as we continue to win opportunistically outside our sales sweet spot. Our cross-sell muscle is building, and we are increasingly monetizing our partner marketplace.

MeridianLink will also remain a disciplined company in 2022. We've been able to deliver consistent double-digit top-line growth, along with profitability levels well above those of our public fintech peers. None of this is new. This is what you have come to expect of MeridianLink.

The big story for 2022 will be bringing customers online more quickly. I mentioned the investments we are making, and we'll continue to make in our go-to-market organization. This is what we have guided for. But candidly, we have been more successful than we anticipated in generating demand and have proven that adding to our go-to-market organization produces very high returns.

We will continue to ramp up our sales and marketing team to leverage our already strong position and create further distance between us and the competition. As a result, we are increasing investments to accelerate implementation capacity. As we increase hiring, we expect short-term margin pressure, but this investment will allow us to bring recurring revenue online more quickly and improve the go-live experience for our customers. As we closed out the last quarter of our first year as a public company, I'm pleased to see our strong execution on key growth initiatives, and I'm confident this success will continue.

As always, I'd like to thank our employees. It is their dedication to and collaboration with our customers that drives our momentum. We also want to thank our new and existing customers for their trust in us to drive outcomes for their clients and communities. I will now turn the call over to Chad to talk about our financial results.

Chad Martin -- Chief Financial Officer

Thanks, Nicolaas, and thanks again to everyone for joining us today. Since this is our first year-end earnings call, I'll start by providing the highlights for the quarter and the year. Then I will recap the highlights of our financial model and provide our results in more detail before finally giving guidance for the first quarter and full-year 2022. As Nicolaas mentioned, in the fourth quarter, we generated total revenue of $64 million, up 19% year over year.

87% of our fourth quarter revenues were subscription fees with the balance coming from professional services and other. Our operating income was $7.8 million, but our non-GAAP operating income was $11.7 million, and adjusted EBITDA was $24.6 million. For the full year 2021, operating income was $37.7 million. Our non-GAAP operating income was $70.8 million, and adjusted EBITDA was $123.4 million for the year.

Our IPO was completed during the third quarter. So the fourth quarter of 2021 gives an indication of what we believe is the likely level of ongoing stock-based compensation and public company reporting costs. We have a usage-based SaaS recurring revenue model. Our customers signed 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 commitment, 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 is 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 fourth quarter, lending software solutions revenues accounted for nearly 68% of our total revenue and grew 18% year over year. The remainder of our revenues come from data verification software solutions, which increased 20% year over year. For the full year 2021, lending software solutions revenues accounted for nearly 66% of our total revenue and grew 32% year over year.

The remainder of our revenues come from data verification software solutions, which increased 39% year over year. Fourth-quarter revenues from the mortgage loan market generated 27% of our overall revenues. Specifically, 9% of our lending software solutions revenues and 68% of our data verification software solution revenues were tied to our mortgage-focused products. For the full year 2021, revenues from the mortgage loan market generated 30% of our overall revenues, composed of 9% of lending software solutions and 70% of data verification software solutions.

Of our 19 points of year-over-year revenue growth in the fourth quarter, 13 points were contributed by the acquisitions of TCI and TazWorks, while the remaining growth came primarily through the addition of new customers, increased module penetration of existing customers, and increased volume from our customers. As a reminder, TCI was acquired during the fourth quarter of 2020, so the growth contribution this quarter is less than in previous quarters of 2021 as TCI revenue was partially in the 2020 comparable base. As expected, organic growth from data verification software solutions trended lower year over year, but growth from lending software solutions, excluding TCI, remained robust, growing double digits versus the prior-year period. Gross margin in Q4 was 65%.

But adjusted for stock-based compensation, it was 72%. 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 fourth quarter last year, we spent 53% more in sales and marketing and 48% more in R&D adjusted for stock-based compensation.

With this additional spend, our adjusted EBITDA margin was 38%, and our adjusted EBITDA decreased by approximately $3.7 million to $24.6 million. For the full year 2021, sales and marketing and R&D spend grew by a total of 76% and 57%, respectively, again, adjusted for stock-based compensation. 2021 EBITDA grew by $18.8 million to $123.4 million or 18%, and EBITDA margin was 46%. We will continue to invest to accelerate our underlying growth in 2022.

Turning to the balance sheet and cash flow statement. We ended the fourth quarter with $113.6 million in unrestricted cash and cash equivalents, up $20.6 million from the end of the third quarter. In the fourth quarter, we completed the refinancing of our credit facility. We were able to extend the duration of our term loan and increase the size of our revolving credit facility while reducing the initial floating interest rate by 50 basis points.

Operating cash flow in the fourth quarter was $20.8 million, and free cash flow was $19.4 million in the fourth quarter or a 30% free cash flow margin. For the full year 2021, operating cash flow was $89.8 million, and free cash flow was $84.1 million, or a 31% 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 the call by providing guidance for Q1 and for the full year of 2022.

Overall, we continue to see strong business momentum, and our pipeline remains robust. For the first quarter, estimated total revenue is expected to be between $68.3 million and $69.3 million, compared to $67.8 million for the same period in 2021. This represents an estimated increase of 1% to 2% year over year. In the first quarter of 2021, the mortgage market contributed $22.7 million of revenue to MeridianLink, or just over one-third of our revenue in the year-ago quarter.

We expect the mortgage market to contribute only 24% of revenue for the first quarter of 2022. On a non-GAAP basis, our first quarter estimated adjusted EBITDA is expected to be between $26.5 million and $27.5 million, representing EBITDA margin of approximately 39% at the midpoint of the range. For the full year 2022, estimated total revenue is expected to be between $288 million and $292 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 2021 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. This lower year-over-year margin reflects anticipated increases in annual spending, as described earlier by Nicolaas, totaling approximately $15 million. As we've communicated previously, we will continue to invest in areas to drive future growth and the investment in sales and marketing to drive bookings, the investment in services capacity to convert bookings to revenue, and the investment in development and the cloud to both enhance and expand our product suite are all items that will require current expense that we expect will lead to future returns. Entering 2022, TCI and TazWorks have been part of our company for at least a year, so we will no longer be calling them out separately from our base.

The normalization of activity in the mortgage lending market appears to be well underway. We expect this to be 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 mid-20s, down from 30% in 2021. This reduction is less than previously anticipated as we have continued to add new mortgage LOS clients.

Our existing clients have shown an ongoing ability to win market share in the tougher overall volume environment we are currently experiencing, and we are finding ways to augment our solutions with additional data items and partners to provide more value to our customers and, therefore, more revenue for ourselves. With that, Nicolaas and I are happy to take any of your questions. Operator?

Questions & Answers:

Operator

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

Koji Ikeda -- Bank of America Merrill Lynch -- Analyst

Hey, guys. Thanks for taking my question. Just a couple for me here. First one on Engage.

Congrats on getting that generally available earlier this year. Just wondering with the release of Engage, would that cause any sort of sales cycle pause maybe from the end market trying to digest or fully digest what this new product is? And maybe any sort of color on what this Engage product could be replacing? Is it a greenfield opportunity? And any kind of uplift this new product could be for existing customers?

Nicolaas Vlok -- Chief Executive Officer

Good afternoon, Koji, and thank you for your question. First of all, we've been communicating to the market that we would be launching in Q1, and we've seen a good success in the beta program in Q4, so we decided to bring to market and launch in January. Since then, we've seen great activity at top of funnel exceeding our expectations. And the sales cycle will continue to roll out, but it will turn into a booking, which will then move over to our operations group and be implemented in time and turn into revenue.

From an opportunity standpoint, it's automation and analytics. It is, to a large extent, a greenfield opportunity in our customer base. There are some solutions available that have been available through our partner and marketplace but is not nearly as integrated and as real-time as the Engage offering that we've launched. And we're very excited about it.

We've received great feedback to date from clients who have been testing it and add a lot of sales activity since launch in January.

Koji Ikeda -- Bank of America Merrill Lynch -- Analyst

Got it. Thanks, Nic. And then just one follow-up for me here. OK, so you ended the year with 50 quota-bearing reps.

Thanks for that visibility there. And then it sounds like you guys are investing for growth. So just thinking about the QBR specifically, how should we be thinking about the pace of new capacity from here? And how is the hiring environment been for you?

Nicolaas Vlok -- Chief Executive Officer

Let's start with the second part of the question. The hiring environment is pretty much as challenging as you can imagine, and I'm sure you're hearing it from other companies too. It's more challenging finding good skills today than it's been in my time with MeridianLink for more than 3 years. We do, however, keep finding talent.

And when we bring talent onboard, invest on the onboarding and making our new employees part of the family, and train them as quickly as we can to be productive as new members to the team. In terms of ramping, the investments -- the way I would be thinking about the investments, we're sitting on a significant backlog, given the five, six quarters of outperformance in bookings and success. And the investments we're making in our services group is our highest priority investment in scaling. It's business that's contracted.

It's in the bank. It's basically checks. We need to go cash. And to me, it's one of the low-risk investments you can make in today's market and climate and accelerate the business.

And we're confident that it would yield a great ROI. Also, on the sales side, services being the larger part of the investment, but on the sales side, we continue to invest. But it's probably not going to be at the same clip you've seen over the last 12 to 18 months. But we find great opportunity.

We continue to put more product into the field. Some of our lesser-known products, like our Collect product and our analytics products, for example, are getting more airtime and getting more focus. And then also from an Engage standpoint, lots of activity. So from my perspective, the focus is on services, but there's definitely a ramp on the sales side to kind of bring the two together.

And by the end of 2022 have that pretty much in sync where the selling and the implementation isn't yielding a growing backlog anymore. 

Koji Ikeda -- Bank of America Merrill Lynch -- Analyst

Got it, got it. Thanks, Nic. Appreciate the commentary. Thank you.

Nicolaas Vlok -- Chief Executive Officer

You're welcome. Thanks for asking, Koji.

Operator

Your next question comes from the line of Timothy Chiodo with Credit Suisse. Please go ahead.

Timothy Chiodo -- Credit Suisse -- Analyst

Great. Thanks a lot for taking the question. I have one just around general business and industry trends and then another, just a quick follow-up on the guidance and the incorporation of StreetShares. The first one is I know we've talked in the past about sometimes during an RFP process, you'll actually join forces with some of the large incumbent core banking platforms, the Fiserv, FIS, and Jack Henry's of the world.

Just wondering if you've seen any kind of change in that trend if you're still seeing RFPs where you go together in joint to win business together and if you could just touch on that topic generally. And the quick follow-up is just around the guide. If you could just give any of the contributions that might be embedded from the StreetShares acquisition?

Nicolaas Vlok -- Chief Executive Officer

Sounds good. I'll respond to the go-to-market RFP question, and I'll let Chad speak to the guidance question here. We still go to market where we are Switzerland to the cores. We believe that's our best positioning in the market, and we're happy to work with cores and integrating to cores and additional cores.

We continue to work deals alongside cores in all the names you have listed. In fact, some of our larger opportunities are very tightly integrated sales initiatives where we and cores have partner and keep moving the deals forward and keep pushing an outcome together. So from my perspective, no change in that environment to date. Chad, do you want to speak to StreetShares?

Chad Martin -- Chief Financial Officer

Sure. Tim, thanks for the question. So our guidance today doesn't include any impact of StreetShares. That deal was just announced.

It has not yet closed. And when it does close and the timing of the close is known, we'll then be able to put it into the guidance. And we'll provide on our next call, presuming we close by that time, how StreetShares will be added to the view for the year. I would say that the acquisition itself is not material to the overall financial picture.

So I wouldn't expect to see a material change in the financial guidance when we give it, but we certainly will incorporate it into the next update.

Timothy Chiodo -- Credit Suisse -- Analyst

That's excellent. Thank you for both of those answers. Really appreciate it. Thanks a lot.

Nicolaas Vlok -- Chief Executive Officer

Thank you for the questions, Timothy.

Chad Martin -- Chief Financial Officer

Yes.

Operator

Thank you. Your next question comes from the line of Saket Kalia with Barclays. Please go ahead.

Saket Kalia -- Barclays -- Analyst

OK, great. Hey, guys. Thanks for taking my questions here. Nicolaas, maybe just to start with you, kind of zooming out a little bit.

I was wondering if you could just talk a little bit about what your customers are saying about their consumer lending businesses right now amid sort of the rising interest rates. I think that consumer loans are going to be less rate-sensitive than mortgages, for example. But I'm just kind of curious, just broadly how your customers sound about those businesses currently. Does that make sense?

Nicolaas Vlok -- Chief Executive Officer

It makes sense. And good afternoon, Saket, and thank you for the question. I agree with you in terms of your perspective that consumer lending will be less rate-sensitive, and mortgages will be more rate-sensitive. And my perspective, given most of our clients are deposit-retaking institutions, they would welcome a more normalization of rates over time.

And I actually believe and think they could be upside for our customers as nondepository competition will be facing rising cost of capital in a rising interest rate environment. So very much agree with the analysis that you've laid out. And I believe it will be a net benefit over time for the largest part of our customer base.

Saket Kalia -- Barclays -- Analyst

Got it, got it. That's helpful. That makes sense. Chad, maybe for the follow-up for you.

I was wondering if you could just touch a little bit on gross margins a bit and kind of how you're thinking about those going forward. And maybe part of this is relating back to Nicolaas' point just on incremental services investment, which presumably will be going into the cost of goods sold line. But I was just wondering if you could touch on that a little bit, whether that started here in the fourth quarter. And maybe just zooming out on gross margins, as we start to see that mix shift next year and going forward between lending and data verification, can you just touch on whether there's a material gross margin difference between those two?

Chad Martin -- Chief Financial Officer

Sure. Thanks, Saket. Appreciate the question. Touching on gross margins generally, we did see gross margins being slightly lower than our kind of long-term model in the fourth quarter and expecting that to continue into '22.

And as you mentioned, a big component of that is that we will be augmenting our services capacity. And that capacity and those costs do flow through COGS as it relates to the services revenue. So we will see some bump in cost, therefore, a reduction in margin driven by the services. Now there will be services revenue attached to those investments as well.

But the services revenue has a lower gross margin than the SaaS revenue does. Zooming out, like you said, we're looking at the mix shift, the SaaS margin, gross margin on data verification is lower than the SaaS margin on lending because we have the cost of the data elements of the data verification contained within the SaaS side. Conversely, there's less services on our data verification business than on our lending side. So there's not a real material difference ultimately on the gross margin between those two when you look at the overall mix of business.

Saket Kalia -- Barclays -- Analyst

And maybe if I could just sneak in one housekeeping question. Understanding that StreetShares hasn't closed yet. Is there anything that you can give us in terms of scale, whether that's revenue, whether that's number of employees? Anything that you can provide understanding that it still hasn't closed yet.

Nicolaas Vlok -- Chief Executive Officer

Chad, is there anything you want to add to that?

Chad Martin -- Chief Financial Officer

No. We'll be giving that guidance once it's closed, Saket. So I would point you to there, obviously, StreetShares as a web page that talks about the business, that you can glean information about. But we're not looking to provide really any details until we get to close.

Saket Kalia -- Barclays -- Analyst

Got it. Fair enough. Thanks, guys.

Nicolaas Vlok -- Chief Executive Officer

Thank you for the questions, Saket.

Chad Martin -- Chief Financial Officer

I appreciate it.

Operator

Your next question comes from the line of Matt VanVliet with BTIG. Please go ahead.

Matt VanVliet -- BTIG -- Analyst

Yes, good afternoon. Thanks for taking the question, guys. Maybe a bit of a maybe higher level question around sales activity as a follow-up to Saket's question. As the majority of your customers are depository institutions, even if rates aren't rising quite as quickly as maybe it looked like a few months ago, I think the overall trend certainly points to longer-term rates rising.

So with that as a backdrop, are you seeing some of your customers or potential net new customers embracing the idea of investing in technology, especially in a bigger project undertaking like a lending system here? What's the overall appetite for spending balanced with ongoing uncertainty, whether it's from macro or even on the geopolitical side more recently?

Nicolaas Vlok -- Chief Executive Officer

Good afternoon, Matt, and thank you for your question. We still find ourselves in a very opportunity-rich environment. Hard to gaze into a crystal ball to see what the ultimate impact of the conflict will be. But from our perspective and our midsized clients', they're in a cycle where there's a real need for technology refresh.

And it's driven -- it kind of was coming from a digitalization kind of cycle perspective for them too. But with the pandemic that we've dealt with to date, those clients are realizing that the consumers' expectations have shifted away from being in branch transactional to much more digital from an interface and communication standpoint, where branches are becoming more an advisory base and knowledge base visit and not purely a transactional visit. So from a business model standpoint, it's evolving. And we help the mid-market stay competitive to larger Tier 1 banks and larger FIs.

And our positioning to date is we are a platform. We consolidate a number of single-point systems into a platform where decisioning is real-time, where analytics is real-time, and automation is to your benefit. And in past analysis of how MeridianLink customers are doing compared to non-MeridianLink customers, our customers typically outperform non-MeridianLink customers in loan growth. So my perspective is as long as the environment don't significantly weaken or worsen, we will continue to have a productive selling motion in the company.

And we've seen that over the last five quarters. And we're sitting on a backlog that we are scaling toward delivering, contracts are signed, and we've come off our best quarter in terms of new bookings. So from my standpoint, nothing has significantly changed. It feels like the tailwinds are the same and may even be picking up a little bit, given the strength of pipeline and kind of larger deals that we've seen percolate through our funnel.

Matt VanVliet -- BTIG -- Analyst

All right, very helpful. And then, Chad, as we look at -- you're talking about a little bit better-expected performance on the mortgage side embedded in guidance. I guess can you help us think about how some of those net new mortgage LOS customers might be impacting that versus the expectation of -- especially the refinance market probably cooling off further? And then how much, I don't know, of conservatism or potential downside risk have you stripped out of the guidance as we think about kind of where ultimately it shakes out by the end of the year? Thanks.

Chad Martin -- Chief Financial Officer

Yes. Thanks, Matt. So on the mortgage side, as discussed, we are seeing -- the overall rate environment is having an impact on refinancings and those volumes. So we'll see those volumes roll through on the parts of our business that are tied to mortgage.

So both on the lending side, the mortgage LOS and on the data verification side, whether we have the credit CRAs. But offsetting that decline in volumes is what you just referenced that we're doing. Obviously, we're having good success. It's a part of what Nicolaas talked about and the success in go-to-market and adding new mortgage LOS customers to kind of offset and defray what we're seeing in terms of volumes and then leveraging our relationship, our customers potentially gaining share as well as us finding new ways to add data and information into our credit reporting solutions to provide more value to our customers and, therefore, more revenue to us as we're actually able to pass that along in the form of more -- either having more of our partners added into our solutions or raising our own prices and pushing that through.

So we think that that's -- we'd initially talked about in the past of seeing mortgage as a percentage of revenue going to the low 20s or teens. We're now expecting that to be in kind of the low to mid-20s for the year. And we think that's a conservative view, given where we see the market today.

Matt VanVliet -- BTIG -- Analyst

Wonderful. Thank you.

Operator

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

Andrew Schmidt -- Citi -- Analyst

Hey, guys. Thanks so much for taking my questions here. I wanted to dig into the nonmortgage consumer LOS side. Can you talk about kind of the growth expectations embedded here for 2022? And then across the lending modules in the nonmortgage consumer LOS set, if you could just discuss perhaps where you're seeing the most demand, whether it's auto, card, personal, et cetera? Any color there would be great.

Thanks a lot.

Nicolaas Vlok -- Chief Executive Officer

I would make the comment here. And Chad, if you want to step in where it's not a more high level, feel free to do that. But I would say, Andrew, we're living in an environment where we're performing, in my opinion, very well even with some of the headwinds, like supply chain constraints in auto and chips and new homebuilding material. And there's not a lone channel that I would say that really stand out in any way or shape.

If you kind of follow what the market is saying or thinking about what shifts may happen, we're starting to hear our clients are looking and investing more in HELOCs as an example. But we really haven't seen that take off. I would say there's not an area that I would kind of highlight and say is worse on the consumer lending, mortgage, nonmortgage side to one another. It's kind of I think we're in a constrained world.

Folks typically would initiate loans on assets and most of that we see or feel somewhat. My expectation is, and I don't have a crystal ball, that we're going to see '22 still being impacted by these constraints. Maybe things tend to ease up. You may have a better perspective than we do on it.

But we, as a company, are doing everything that's within our control to maximize the opportunities for us, our clients, and the consumers. And whether it's investing in more integrations or assisting clients with better decisioning or better automation and marketing, whatever kind of helps us keep the flywheel moving for us and our clients, we have that control and we're doing it. But I don't have one channel that I would say is outperforming significantly over the other or another one that's kind of pulling everything down. It's worth in percentage points from trend lines of the past.

Chad, is there's anything you want to add?

Chad Martin -- Chief Financial Officer

Yes, Andrew, the only thing I'd to add, as Nicolaas mentioned, is our expectation is that we see more of the same. So the impacts that we've seen through '21 on volumes on nonmortgage consumers were rolling forward. So anything that ultimately improves the market should be beneficial, but there's no expected big change to the up or the down, as Nicolaas mentioned.

Andrew Schmidt -- Citi -- Analyst

OK. Thats' very helpful. Thank you both for that. And then as a follow-up on MeridianLink One, it's good to hear about the progress.

Maybe coming out of 2022 and into 2023, could you talk about just having that work substantially done, what that might mean for either net new or cross-sells? Just curious, at a very, very high level, can you remind us the potential benefits of bringing the platform together in a consolidated fashion? Thanks.

Nicolaas Vlok -- Chief Executive Officer

Great question. From -- we are committed and on track to have migrated our private cloud environments over to public cloud, which ties in with our MeridianLink One platform and also integrating acquired products into our platform in a more meaningful way. We've done that with Saylent. We will continue to bring a platform to market where customers have the ability to acquire certain aspects of the platform as a new standing product, take, for example, mortgage.

But the benefit is really the single user interface, the single sign-on, the analytics that can be done, the data that's made available between various components of the platform. And moving into 2023 from 2022, we will only be doing it in our public cloud environment. And the benefits for us and our clients would be it's more scalable. We have the ability to scale into markets we're not in today.

We can implement and take clients faster in an environment where we just light up additional instances in the cloud. But also over time, as we think about our business and growth trajectory for the long term, being in that kind of environment with a platform where you don't need to put data centers down in markets you choose to go to but going through a cloud platform, that gives you the ability and kind of the benefit of speed when you launch. So it's a strategic initiative for us, putting MeridianLink One out there for our clients, completing the move, as well as ensuring that this is our baseline investment that from a technology architecture standpoint, that's going to carry us for the next decade or longer and positioning the company to roll in acquisitions that's cloud-ready faster, scale the platform faster. The benefits to us and our clients are clearly there.

And the good news is from a selling and go-to-market standpoint, it will be easier. I think it will help us also create a more scaled sales force when we're in an environment where you can really take the platform forward. So I would say, very excited, very confident in our ability to complete the transition. We've seen and achieved a great milestone in Q4 with the move of a very large component over to our public cloud environment, this part of MeridianLink One, and that momentum will continue throughout the year.

And it will set '23 up and the go-to-market motion and our ability to light up customers faster. It will just be an environment that we've wanted for quite some time and we eventually will be there, and we're very excited about it.

Andrew Schmidt -- Citi -- Analyst

Got it. Thank you for that. And clearly, a lot of benefits on the demand side. But it sounds like also on the cost side, there could be some capex savings as well as you kind of move away from in-house data centers.

Is that the right way to characterize it?

Nicolaas Vlok -- Chief Executive Officer

You can think of it in the context of capex moving away. But at the pace, we are growing and just kind of a little bit of color, our growth between '19 and '20, new customer growth was slightly less than 20%. And our new customer growth between '20 and '21 was in excess of 30%. It's nearly doubled.

So I would tell you as the cost for us to expand our data centers is not where we want to make the investment. So yes, there will be savings on that front. But I believe with the backlog we have and then also the momentum we're starting to see in our business, especially bringing on new logos and cross-sell, the ideas is the benefits are tied into faster scaling the ability to grow your footprint at an accelerated pace, the ability to bring acquisitions into the fold faster and make it part of the platform. And while the capex may drop off, there's going to be an increase in opex that will keep pace with the new customer wins and the cross-sell as we keep scaling.

So I don't want to just think the one drops off and the other one is not really increasing. Chad, anything you want to add there?

Chad Martin -- Chief Financial Officer

No. You said it, Nicolaas. We'll be moving capex to opex. And so we will see the decline in the capex, the pickup in the opex.

We're kind of having to double spin now as we have both the data centers and the cloud infrastructure that we're moving to. So through time, we hope to only have the cloud costs carrying us forward and be able to see the reduction in the capex and the spend we've had on maintaining our own data center infrastructure.

Operator

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

Alex Sklar -- Raymond James -- Analyst

Chad, you mentioned in the prepared remarks the idea of the trade-off of higher monthly commitments in favor of lower pricing. Can you just talk about if you've seen any noticeable changes in your revenue visibility in the sense of kind of going back to your customers and kind of ramping up what their monthly commitments are compared to prior years?

Chad Martin -- Chief Financial Officer

Yes. Thanks, Alex. So we have incrementally been working on moving customers to higher commitments in the contract process. For a number of these customers, they're already at a higher volume.

So we're basically just locking in the revenue we're already receiving from these customers when we move them on to that committed construct. And for new customers, they're locked in at that commitment level. And then as their revenue grows through time, they may choose to step their commitment level up to receive lower pricing. But candidly, it's not been a big phenomenon of our customers looking to raise their commitments to take advantage of lower pricing.

And the reality is -- but we have seen the revenue that is in that commitment category increase in light of bringing on these new customers and renegotiating existing contracts. So we have more revenue committed, but that commitment hasn't come really at the expense of having to take a much lower per app from each entity.

Alex Sklar -- Raymond James -- Analyst

Got it. OK. And then I don't know if Nicolaas or Chad want to take this one. But you talked a lot about the services backlog.

And I'm just curious, given the revenue recognition model, how much of a leading indicator is that for logo growth or kind of what you can see in terms of accelerating subscription revenue growth in the end of '22 and '23?

Chad Martin -- Chief Financial Officer

Yes. So the revenue recognition is we're not recognizing revenue from these customers until they go live. And their contract period doesn't start until they go live as well. So we're not losing any contracted revenue during the implementation phase.

Just as Nicolaas talked about, the faster we can get the customer live, the sooner we'll be able to receive and recognize the revenue. And candidly, the customer is happier because they get access to the technology sooner. So as the investment in the services capacity to speed time to market, time to implementation really is a win-win-win for the customer, for us, and for both the services and the SaaS revenue streams. So that is an indicator.

And so as we are successful in doing that, we should see more customers coming online going forward for -- but what Nicolaas was talking about around the success in signing new logos, right, that success is what's building that backlog. So the leading indicator of Nicolaas having the sales success is pushing entities into the backlog that we're now going to convert into revenue more quickly.

Alex Sklar -- Raymond James -- Analyst

Got it. That's very helpful color. Thank you.

Chad Martin -- Chief Financial Officer

Thank you.

Operator

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

Bob Napoli -- William Blair -- Analyst

Thank you, and good afternoon. Nice quarter. So just on the guide, big picture question. I guess long-term target EBITDA margins, 43% to 48%, and I understand you're investing a lot and you have a lot of momentum in the business.

And you're focused on growth. But just any thoughts on the timing or the trend that -- or any goals you have in moving toward that long-term target?

Chad Martin -- Chief Financial Officer

Yes, Bob, thanks for the question. So yes, so the guide, obviously, for the year is right around or just shy of 40% on the EBITDA. We still think the long-term target absolutely makes sense for us. We've talked about the investments we're making.

We've talked about the impact on '22 on gross margin from the services investment we're making. But again, the ROI on that is, as Nicolaas said, cashing the checks. So that's positive. And then we think as we mix -- the mix moves more to SaaS, as the services move those entities into our SaaS revenue, we should see both the gross margins improve, which drag along the EBITDA margins, and also just converting the spend on R&D and sales and marketing.

I talked about kind of the amount that we're spending on a year-over-year basis. Again, all of that is really to push and accelerate revenue. And when the SaaS revenue comes on at a higher margin, that will certainly, through time, pull us to the margins that we're targeting.

Bob Napoli -- William Blair -- Analyst

Thank you. And then, I guess, impressive 30% growth in new customers in '21. That's a nice acceleration. Is that -- I mean are you -- it seems like it's been -- the demand just broadly in the bank tech space and the fintech that you've seen, we've seen a lot of demand.

But have you seen from your customer base a more aggressive posture and maybe this is a post-COVID posture in realizing the need for digital? And I know you've ramped up your marketing investment somewhat specific to you. But are you seeing a mindset change that's driving that? And is there a change in the ARR per customer? Are you adding larger customers?

Nicolaas Vlok -- Chief Executive Officer

Let me speak to the mindset. We definitely see an increased level of interest in our target segment of the market to invest in future technology. And I do believe the pandemic at a point in time paused and have folks to rethink what the business should look like for the next decade or longer. And not because I know what MeridianLink is investing in and doing, but I really believe we're at the right place at the right time with the right platform for the mid-market, and what we do resonates.

We're not the cheapest solution in the market. And we're not a stand-alone solution that companies need to invest dollars and integrate across their technology landscape. We bring a platform that they can run a large portion of their business on. And financial institutions that are forward-thinking want to be more engaging with the broader customer base, tend to engage in various levels of interactions and discussions with us.

Some may start with doing a whole bunch of webinars, learning more what we offer. Eventually, it turns into demos. We end up nurturing discussions and working with clients. And I think it's a mindset that we're starting to see where folks realize they can actually grow their business faster if they're more efficient if they have better access to data and they can make decisions faster in their business for their clients.

And they also are starting to get to the point where they can offer the most competitive rates as they work with MeridianLink and analyze risk better in that whole cycle. So from my perspective, we resonate with a market segment that wants to serve their clients better, wants to outperform competitors who are not been investing to date yet. And our offering is, again my opinion, the market-leading offering with the integrations we have, the breadth of the platform, and how we accelerate and have these mid-market financial institutions kind of outperform non-MeridianLink fintechs. So the way I would think of it is, yes, people are starting to think about what the business is going to look like post-COVID, what should they be doing to attract new customers, new clients, new members and how can they be competitive in a world that has shifted and changed, where the branch isn't performing the same function that historically did before COVID.

And when I speak to prospects when we connect with clients that are buying incremental MeridianLink solutions, that is certainly one of the most prominent themes of the discussion is just thinking about where the business will be in a year or two from now and even longer-term.

Bob Napoli -- William Blair -- Analyst

Great. Thank you. Appreciate the answers.

Chad Martin -- Chief Financial Officer

Bob, I would just add one comment. Yes, I would add one comment, which is I don't think we're noticeably seeing an increased ARR on new logo sales, right? We typically lead with consumer LOS, and then Nicolaas talked about how we're adding additional functionality and growing ARR through time. But I will say, we have focused on really kind of pruning the small end of our customer base, some of the smaller customers that came through the acquisitions we've done in the past year-and-a-half. And really, that's leading and you'll see that we're just having a higher ARR per customer as a result of that.

Operator

Thank you. Your next question comes from the line of Parker Lane with Stifel. Please go ahead.

Parker Lane -- Stifel Financial Corp. -- Analyst

Thanks for taking the question. Sort of a follow-up to the last one. If you just look at the overall SaaS spend of the financial services sector, I think you've highlighted that as a real tailwind in your business over the last few years. In the context of a more uncertain macro and thinking back to the company's history, what have you seen from these institutions in the face of an uncertain macro? Do you think there's any potential for them to perhaps pare back their spending? And then secondarily, what are some of the competing interests here? Are there places that they're looking to digitally transform where MeridianLink is trying to get in there and be the priority of choice for those customers as they think about the next digital transformation project they're taking on?

Nicolaas Vlok -- Chief Executive Officer

Chad, do you mind taking that one for a second?

Chad Martin -- Chief Financial Officer

Yes, no problem. Parker, I would say at a macro level, right, we're still seeing the trend of these institutions investing in technology. The depository institutions, there's still pressure from the neo banks, from the fintechs, from all the start-ups who are looking to propagate their new solutions. And so our customers, right, the community banks, the credit unions are very focused on keeping up in that marketplace.

So we haven't seen any slowdown. And historically, even when times or looking farther back in time, even in difficult periods around more economic uncertainty, often that's the time that then folks are looking to turn to technology to find ways to attract customers to make better lending decisions. And again, our solutions basically help these entities attract deposits, basically attract lending, right, make loans and get interest income on those loans. And that's 80% of their top line.

So having a solution ready to go out in a difficult market and find and continue to ensure that they're driving their top-line performance is something that we -- that's a conversation we relish having even if the overall environment gets a little bit more difficult.

Parker Lane -- Stifel Financial Corp. -- Analyst

Got it. Appreciate the feedback, Chad. Congrats on the quarter.

Chad Martin -- Chief Financial Officer

Thanks.

Operator

Thank you. And that concludes our question-and-answer session for today. I'll now turn the call back over to our CEO, Nicolaas Vlok, for closing remarks.

Nicolaas Vlok -- Chief Executive Officer

Thank you, operator, and thank you to all those who have joined us today for our first full-year review of our performance as a public company. And I'm really excited about our outperformance in this first year being public. And what I said earlier is it's even more remarkable, given the pressure from supply chain constraints and a normalizing mortgage environment, which, again, from my perspective, highlights the tremendous strength of our consumer lending business and also the opportunities ahead of us. As we look ahead, I am confident that our investments in 2022 will position us extremely well to continue to scale and accelerate the business.

I'm looking forward to when these headwinds subside and, in fact, become tailwinds for us and as we are ideally situated to grow our market-leading position. In the meantime, we are confident we can deliver another year of strong revenue growth with best-in-class profitability. And lastly, I want to thank our amazing employees and our loyal clients who trust us and inspire us to be better every day. We've had an exciting week, and I'm looking forward to closing out our acquisition of StreetShares here.

And I would love to officially welcome the team, the StreetShares customers, and their partners to the MeridianLink family. And thanks again. It's what I can say for your commitment to being on our call today. Really appreciate you joining, and have a great afternoon, evening, wherever you may be at. Operator?

Operator

[Operator signoff]

Duration: 66 minutes

Call participants:

Erik Schneider -- Head of Investor Relations

Nicolaas Vlok -- Chief Executive Officer

Chad Martin -- Chief Financial Officer

Koji Ikeda -- Bank of America Merrill Lynch -- Analyst

Timothy Chiodo -- Credit Suisse -- Analyst

Saket Kalia -- Barclays -- Analyst

Matt VanVliet -- BTIG -- Analyst

Andrew Schmidt -- Citi -- Analyst

Alex Sklar -- Raymond James -- Analyst

Bob Napoli -- William Blair -- Analyst

Parker Lane -- Stifel Financial Corp. -- Analyst

More MLNK analysis

All earnings call transcripts