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Tuesday, Jul 16, 2024

Costa Mesa’s MeridianLink Sees Value Approach $2B

MeridianLink Inc. CEO Nicolaas Vlok is banking on smaller financial institutions increasingly turning to his Costa Mesa software company for high-tech lending and other digital offerings as a way to keep up with larger institutions and fintechs threatening to take away their customers.

MeridianLink provides cloud-based software for smaller financial institutions, particularly credit unions and regional banks, mortgage lenders and specialty lending providers. The company helps 63 of the 100 largest credit unions in the country set up digital lending and deposit accounts, among other services.

“We provide a digital platform for them to interact and run about 80% of their business on,” Vlok says.

“Right now, we’re probably less than a quarter penetrated in our target market with 2,000 clients.”

The company’s caught the attention of Wall Street, as the homegrown Orange County software company kicked off its initial public offering late last month.

MeridianLink (NYSE: MLNK) was priced at $26 per share, on the high end of its expected offering price range.

Shares were trading around $25 as of late last week, putting the Costa Mesa-based company’s valuation within striking distance of $2 billion. It’s now one of OC’s half dozen most valuable publicly traded software companies.

The IPO raised $343.2 million, including $246.3 million in proceeds for the company and $78.8 million to selling stockholders.

“There was a lot of work leading up to it,” Vlok, the 48-year-old chief executive, told the Business Journal on July 28 just hours after the start of trading. He called the NYSE listing “pretty amazing.”

The “sky’s the limit” for future growth, the CEO added.


MeridianLink was founded by Tim Nguyen and Binh Dang, who met while studying computer science at the University of California, Irvine.

They started the company in 1998 as a consultancy before growing into a software developer.

San Francisco-based equity firm Thoma Bravo, which invests in software and technology enabled services sector, purchased MeridianLink in 2018.

Thoma Bravo manages a series of investment funds representing more than $76 billion of assets under management; among its other area holdings are Costa Mesa’s J.D. Power & Associates and Irvine’s Kofax Inc.

In 2019, Nguyen turned over the CEO role to Vlok, who has been an operating partner with Thoma Bravo since 2018.

Vlok has a long history as a CEO, including previously at Vision Solutions Inc., an Irvine-based data recovery software maker that was also a Thoma Bravo portfolio company for 10 years before being sold in 2016.

Vlok has served as CEOs of Idion Technology Holdings, a public technology investment holding company and TST, an incubator company for software and technology businesses. He currently serves on the board of directors of several companies where Thoma Bravo holds an investment, including Cority, Mailgun Technologies, ABC Fitness and Centrify Corp.

While Dang is no longer with MeridianLink, Nguyen, 45, continues as the company’s chief strategy officer.  

Vlok owns 2% of the shares, or 1.6 million, that were worth $40 million as of last week. Nguyen owns 16%, or 12.9 million shares, worth nearly $318 million.

MeridianLink leases about 57,000 square feet of space in Costa Mesa at two properties along Sunflower Avenue, including one building owned by Nguyen.

The Edge

MeridianLink reported revenue climbed 31% to $199.3 million in 2020. It also surged to a $10.9 million profit compared with a $12.6 million loss in 2019. Its revenue looks to be accelerating; the company estimated second-quarter sales may climb 37% to $68 million. Its gross margin is 71%, comparable to many in the software industry.

The company’s IPO prospectus noted how assets in federally insurance credit unions have grown to $1.8 trillion in 2020 from $438 billion in 2000, representing a compounded annual growth rate of 7.5%.

MeridianLink’s client base included 1,925 customers as of Dec. 31, according to the regulatory filing. Notable customers include the Los Angeles Federal Credit Union, First Bank of Ohio and the USF Federal Credit Union in Florida and the American Heritage Credit Union in Philadelphia, according to the company’s website. MeridianLink’s prospectus says its strategy is to provide the latest technology to credit unions and smaller banks that have struggled to keep up with larger competitors.

“The financial services sector is in the midst of a transition from offering primarily in-branch services to providing hybrid in-person and digital services,” said the prospectus. “This transition has recently accelerated, leading to increased investment in software that enables digital capabilities. We are well-positioned to assist our customers to compete with tier one banks and digital market entrants.”

The company will continue to be controlled by Thoma Bravo following the IPO, whose plans for taking the company public had been in the works since December, regulatory filings indicate. Thoma Bravo owns a little more than 50% of the company after the IPO. Underwriters were led by BofA Securities, Credit Suisse and Barclays.

OC Enthusiasm

Vlok says the company counts about 300 employees in Orange County, and just shy of 600 companywide.

He’s enthusiastic about the OC tech scene.

“Lots of folks don’t know how vibrant the tech space is down in Southern California,” said the South African native who has lived in Orange County for 21 years. “To have MeridianLink founded, started, grown up and now become a public company, all out of Southern California and Orange County to me is a pretty remarkable story.”

He cites the importance of local investors like Tech Coast Angels and Aliso Viejo-based business accelerator Octane.

“Hopefully there’s more success to come out of the Orange County landscape.” 

OC’s Tech IPO Boom

Several OC tech companies have tapped public markets for capital this year. Here is a roundup of some recent action.

Ad tech company Viant Technology Inc. (Nasdaq: DSP), in Irvine, went public on Feb. 10 and had a market cap of around $1 billion as of last week.

• TV maker and media company Vizio Holding Corp. (NYSE: VZIO) in Irvine began trading on the New York Stock Exchange on March 25 and sported a market cap around $4.4 billion.

• Irvine-based sensor maker Interlink Electronics Inc. (Nasdaq: LINK) uplisted to the Nasdaq from the over-the-counter market in late March, with a market cap around $72 million.

Automobile tech-focused indie Semiconductor Inc. (Nasdaq: INDI) in Aliso Viejo went public via the SPAC (Special Purpose Acquisition Company) route in June and has a valuation of about $1.2 billion.

Another Irvine-based firm might blow everyone out of the water if it goes public this year. Electric vehicle company Rivian is said to be eyeing an IPO with a whispered valuation of $70 billion; it would become one of the two most highly valued companies in Orange County.

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Kevin Costelloe
Kevin Costelloe
Tech reporter at Orange County Business Journal

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