United States securities and exchange commission logo
January 12, 2021
Nicolaas Vlok
Chief Executive Officer
Project Angel Parent, LLC
c/o MeridianLink, Inc.
1600 Sunflower Avenue, #200
Costa Mesa, CA 92626
Re: Project Angel
Parent, LLC
Draft Registration
Statement on Form S-1
Submitted December
15, 2020
CIK No. 0001834494
Dear Mr. Vlok:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments.
Draft Registration Statement on Form S-1
Prospectus Summary, page 1
1. You refer to yourself
as a leading provider of cloud-based software solutions for
financial institutions,
including banks, credit unions, mortgage lenders, specialty lending
providers, and consumer
reporting agencies, or CRAs. Please clarify the basis of your
leadership, such as
market share by revenues or other criteria.
2. Please discuss the
material terms of the stockholders agreement, which provides for rights
to appoint members to
your board of directors. Also discuss the terms of your charter and
bylaws which allows
Thoma Bravo to set the size of our board of directors and fill any
Nicolaas Vlok
Project Angel Parent, LLC
January 12, 2021
Page 2
vacancy on our board of directors, including newly created seats, for
so long as Thoma
Bravo beneficially owns at least 30% of the outstanding shares of your
common stock.
3. You indicate that you intend to utilize some or all of the exemptions
from certain
corporate governance requirements. Please clarify which exemptions you
intend to utilize
after this offering.
4. Please define active system users and clarify how you calculated
that you have 200,000
active system users and disclose the period measured.
Non-GAAP Financial Measures, page 67
5. We note your purchase accounting adjustment related to "Deferred
revenue reduction
from purchase accounting" in your adjusted EBITDA measure, as
presented by
your reconciliation of net loss to adjusted EBITDA on page 69.
Considering your
deferred revenue was adjusted to fair value at the time of acquisition
pursuant to GAAP,
this non-GAAP adjustment intended to eliminate the impact of purchase
accounting
appears to substitute individually tailored revenue recognition and
measurement methods
for those of GAAP. Please tell us how you considered the guidance of
Question 100.04 of
the Division's Non-GAAP C&DIs and Rule 100(b) of Regulation G when
presenting
this measure.
6. Please accompany your presentations of Adjusted EBITDA margin with an
equally
prominent presentation of a comparable ratio calculated using GAAP
amounts. Refer
to Item 10(e)1(i)(A) of Regulation S-K and footnote 27 of non-GAAP
adopting Release
No. 33-8176.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Overview, page 70
7. We note on page F-26 that "[d]uring the year ended December 31, 2019,
there were
1,000,000 unit options granted which contain vesting provisions
dependent upon the
Company achieving certain valuation multiple targets upon a change in
control event or
sale of the Company." Please clarify if the options will vest upon
your IPO and if so,
please disclose in quantified detail the charge that you anticipate
will be incurred.
Key Operating Measures, page 73
8. We note your calculation of the metric identified as "Customer Net
Retention Rate"
FirstName LastNameNicolaas Vlok
reflects customer additions as well as customer terminations and
consequently, which is a
Comapany NameProject
measure AngelinParent,
of the change LLC
total customers and not customer retention.
Please revise the
Januarydescription of this
12, 2021 Page 2 metric to accurately reflect its substance.
FirstName LastName
Nicolaas Vlok
FirstName LastNameNicolaas Vlok
Project Angel Parent, LLC
Comapany
January 12,NameProject
2021 Angel Parent, LLC
January
Page 3 12, 2021 Page 3
FirstName LastName
9. Please disclose the ARR Net Retention Rate for the period ending
December 31, 2019 or
tell us why this information is not material to investors.
Results of Operations, page 84
10. In regard to revenues, for each period presented, please disclose and
discuss the
percentage of revenues contributed by new compared to existing
customers and describe
in sufficient detail any other underlying reasons driving material
changes, such as changes
in pricing for annual or volume-based fees. In regard to expenses, for
each applicable
expense category, please disclose quantitatively the increase in
headcount, or any other
material cost driver, such as fees paid to third party vendors in
connection with delivering
services to customers. Refer to Item 303(a)(3)(ii) of Regulation S-K
and Section III.B.1
of SEC Release No. 33-8350.
Business
Who We Serve, page 96
11. In your risk factor on page 48, you indicate that you expect lower
mortgage lending
volume in 2021 and 2022, and it may affect your operations and
financial results. Please
clarify whether you derive a significant amount of revenue from
mortgage lending
providers, mortgage loan applications and loan activity.
Technology and Solutions, page 102
12. You describe the back-office operations, customer support, and product
development have
been integrated from the 2018 merger of CRIF and MeridianLink. Please
clarify the
extent that the solutions offered by CRIF and Meridian Link are
integrated in the same
platforms or if they are still sold, marketed, and operated
separately. We note that your
customers are under long-term agreements. Further, please clarify how
the applications
and solutions provided by Teledata and Tazworks will be integrated
into your solutions.
13. You indicate on pages 31 and 32 that a significant portion of your
product development
operations is performed in India by third-party services providers.
Please describe the
product development work performed by these third-party service
providers and clarify
whether you are substantially dependent upon any agreements with these
third parties.
14. Please clarify whether you generate material amount of revenue through
your Partner
Marketplace.
Corporate Conversion, page 132
15. We note that Project Angle Parent LLC has two classes of Units: Common
Class B Units
and Preferred Class A Units. Please clarify how each of these Units
will be converted into
common stock.
Nicolaas Vlok
FirstName LastNameNicolaas Vlok
Project Angel Parent, LLC
Comapany
January 12,NameProject
2021 Angel Parent, LLC
January
Page 4 12, 2021 Page 4
FirstName LastName
Principal Stockholders, page 133
16. Please revise your beneficial ownership table to include the natural
persons that hold
voting and/or investment power of the shares held by Thoma Bravo and
its affiliates.
Description of Indebtedness, page 135
17. You disclose that you will repay your Second Lien Credit Facility in
its entirety with
offering proceeds. Please clarify whether you will maintain this
credit facility or if it will
terminate after it is repaid.
Description of Capital Stock, page 140
18. For the Corporate Opportunity charter provision described on page 144,
you indicate that
it will take a certain percentage of stockholder votes to change this
provision. Please
clarify if the Corporate Opportunity charter provision will still be
in effect if Thoma
Bravo no longer has a significant amount of beneficial ownership of
your equity. If so,
please revise your risk factor on page 52 to address this issue.
Underwriting, page 153
19. Please provide a brief description of the related persons that
may purchase reserved
shares in your IPO. For example, clarify if the related persons are
restricted to officers,
directors, employees, and sponsors, or if it will comprise of a larger
pool of investors such
as friends and family of these specified investors or customers,
suppliers or business
partners.
20. Please provide a brief description of the certain limited
exceptions to your lock-up
agreement.
Consolidated Financial Statements
Consolidated Statement of Operations, page F-4
21. We note the Corporate Conversion will occur immediately after the
effectiveness of the
registration statement. Please provide pro forma earnings per share
data on the face of
your income statement for all periods to give effect to the total
number of shares of
common stock to be issued in the Corporate Conversion.
Note 2. Summary of Significant Accounting Policies
Revenue Recognition, page F-12
22. We note that your contracts with customers often include multiple
performance
obligations, which typically include multiple subscription and
implementation services.
Your revenue recognition policy footnote should provide greater detail
in how
you identify and recognize distinct performance obligations normally
found within a
contract. In regard to subscription services, please describe whether
your customer
Nicolaas Vlok
Project Angel Parent, LLC
January 12, 2021
Page 5
support services are a distinct performance obligation and clarify how
they are a
single performance obligation integrated with subscription services
and recognized ratably
over the same period of time. Please also clarify how you considered
the level of
integration, interdependency, and interrelation in your determination
to account for
implementation services as a separate performance obligation.
23. We note on page 40 that you may be obligated to provide credits or
refunds if you fail to
meet service level commitments in certain customer agreements. Please
disclose whether
your transaction prices include estimates of variable consideration
and clarify the nature
and impact of the variable consideration included in your contracts,
if any. Refer to ASC
606-10-32-5 through 32-7 and ASC 606-10-50-20.
Note 6. Long-Term Debt, page F-22
24. In regard to your first and second liens bearing interest at a rate
using LIBOR, please
specify the interest rate, or range, used to calculate interest
expense.
Note 12. Subsequent Events
Business Combinations, page F-32
25. We note your disclosure that in November and December 2020, you
acquired the
operations and assets of Teledata Communications, Inc. and TazWorks,
LLC,
respectively. Based on this description, it appears that you acquired
businesses. Please
tell us how you considered Rule 3-05 of Regulations S-X in evaluating
the significance of
these acquisitions and whether you are required to include audited
financial statements
and pro forma information. As part of your response, provide us with
the results of your
significance tests.
General
26. Please supplementally provide us with copies of all written
communications, as defined in
FirstName LastNameNicolaas Vlok
Rule 405 under the Securities Act, that you, or anyone authorized to do
so on your behalf,
Comapany NameProject
present to potentialAngel Parent,
investors LLC on Section 5(d) of the Securities
Act, whether or
in reliance
Januarynot
12,they
2021retain
Pagecopies
5 of the communications.
FirstName LastName
Nicolaas Vlok
FirstName LastNameNicolaas Vlok
Project Angel Parent, LLC
Comapany
January 12,NameProject
2021 Angel Parent, LLC
January
Page 6 12, 2021 Page 6
FirstName LastName
You may contact Joseph Cascarano, Senior Staff Accountant, at (202)
551-3376 or
Robert Littlepage, Accounting Branch Chief, at (202) 551-3361 if you have
questions regarding
comments on the financial statements and related matters. Please contact Edwin
Kim, Staff
Attorney, at (202) 551-3297 or Jan Woo, Legal Branch Chief, at (202) 551-3453
with any other
questions.
Sincerely,
Division of
Corporation Finance
Office of Technology
cc: Joseph C. Theis, Jr., Esq.