The largest shareholder of MeridianLink (MLNK), a maker of software for banks, credit unions, mortgage lenders, and consumer reporting agencies, has begun its exit after a mult-year sales plunge and posting financial statements that can’t be trusted.

Private equity firm Thoma Bravo— which bought MeridianLink and merged it with an online lending software firm before taking it public in July 2021— recently sold 18.3% of its stake in the company.

Sales growth at MeridianLink is on pace to decline a third consecutive year — from 34% its first year as a publicly traded company— to mid-single digits with a consensus 2025 Wall Street estimate of 7.6% top line growth.

Notably, the company’s reported revenue is suspect.

In 2023, MeridianLink acknowledged multiple control deficiencies related to revenue. Specifically, the company lacked effective controls in the set-up for customer contracts for billing and maintaining complete contract support.

One year later, MeridianLink still hasn’t fixed the problem, and warned:

“...while we have made significant progress, we continue to make adjustments to further strengthen their efficacy.”

Instead of reassuring investors that there were no material misstatements as a result— as others with control deficiencies do— MeridianLink says only that it has not restated its prior results:

“We can confirm that there has been no restatement of prior period financial statements and no change to our previously released financial results as a result of the identified material weakness.”

Thoma Bravo still owns 39% of shares outstanding.

With an Enterprise Value (EV) of approximately $2.1 billion, MeridianLink is priced as if it will grow annual sales to more than $5 billion, up from an estimated $339.5 million in 2025. To justify its current share price of $23.35 our Reverse DCF— which quantifies investor expectations embedded in the current share price— indicates MeridianLink must:

—Grow sales 35% annually for the next decade, after posting average sales growth of 5.6% the last three years with 2025 consensus sales growth forecasts of 7.6%
—Immediately increase NOPAT margin to 16%, more than twice our 3-year average estimate of 7.3%
—Increase Invested Capital (IC) Turns to 0.5 from our 3-year average estimate of 0.31

Notably, the $5 billion in year ten sales implied by the current share price is more than half of MeridianLink’s Total Addressable Market (TAM) estimate: