Alkami Technology Q4 2024 Earnings Report

Alkami Technology EPS Results

• Actual EPS: -$0.05
• Consensus EPS: $0.08
• Beat/Miss: Missed by -$0.13
• One Year Ago EPS: N/A

Alkami Technology Revenue Results

• Actual Revenue: $89.66 million
• Expected Revenue: $89.63 million
• Beat/Miss: Beat by +$34.00 thousand
• YoY Revenue Growth: N/A

Alkami Technology Announcement Details

• Quarter: Q4 2024
• Date: 2/27/2025
• Time: After Market Closes
• Conference Call Date: Thursday, February 27, 2025
• Conference Call Time: 5:00PM ET

Alkami Technology (NASDAQ:ALKT) is a provider of cloud-based digital banking and engagement solutions tailored for banks and credit unions. The company’s platform offers a comprehensive suite of online and mobile banking features, including bill payment, peer-to-peer transfers, card management, streamlined account opening and real-time alerts, all designed to enhance the end-user experience and drive customer loyalty.

Built on a multi-tenant, software-as-a-service (SaaS) architecture hosted in the cloud, Alkami’s platform leverages modern APIs and a partner ecosystem to integrate third-party fintech applications and services. Financial institutions can deploy configurable modules for personal financial management, fraud monitoring, marketing automation and analytics without the need for substantial internal infrastructure investment.

Founded in 2009 and headquartered in Plano, Texas, Alkami serves a broad base of community banks and credit unions across the United States. The company completed its initial public offering in February 2020 and trades on the Nasdaq under the ticker symbol ALKT. Since inception, Alkami has focused on continuous product innovation to address the evolving demands of retail and business customers for seamless, secure digital banking.

Alkami’s leadership team brings together seasoned professionals from the financial services and technology industries. With backgrounds in banking operations, cloud architecture and fintech integration, the team is focused on guiding the company’s growth strategy, expanding its platform capabilities and advancing the digital transformation initiatives of its institutional clients.

Alkami Technology Q4 2024 Earnings Call Transcript

Key Takeaways

• Revenue growth: Q4 revenue grew 26% year-over-year to $89.7 million, while full-year 2024 revenue rose 26% to $333.8 million with adjusted EBITDA of $26.9 million versus a $1.6 million loss in 2023.
• User and ARR expansion: Alchemy’s digital banking platform reached 20 million registered users (up 2.5 million YoY) and increased ARR by 22% to $356 million, with churn under 1% in 2024.
• Margin gains: Non-GAAP gross margin expanded by 280 bps to 63.1% in Q4 2024, driven by hosting cost reductions (–26% per user) and platform efficiencies, targeting 65% gross margin by 2026.
• Mantle acquisition: Alchemy agreed to acquire Mantle for a net purchase price of $380 million EV (under 7× projected 2025 ARR), adding ~8 million users and 112 clients, with EBITDA accretion expected in 2026 but a $5 million EBITDA drag in 2025.
• 2025 guidance: Alchemy forecasts full-year revenue of $440–445 million (up 32%–33%) and adjusted EBITDA of $47–51 million, including Mantle contributions of ~$30 million in revenue and a $5 million EBITDA loss.

Presentation

[Operator]

Good afternoon, ladies and gentlemen, and welcome to the Alkami Technology Fourth Quarter 2024 Financial Results Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, February 27, 2025. I'd like to turn the conference over to Steve Calk, Vice President of Investor Relations. Steve, please go ahead.

[Steve Calk, Vice President of Investor Relations at Alkami Technology]

Thank you, Alan. With me on today's call are Alex Shootman, Chief Executive Officer, and Bryan Hill, Chief Financial Officer. During today's call, we may make forward-looking statements about guidance and other matters regarding our future performance. These statements are based on management's current views and expectations and are subject to various risks and uncertainties. Our actual results may be materially different. For a summary of risk factors associated with our forward-looking statements, please refer to today's press release in the section in our latest 10-K. Statements made during the call are being made as of today, and we undertake no obligation to update or revise these statements. Also, unless otherwise stated, financial measures discussed on this call will be on a non-GAAP basis. We believe these measures are useful to investors in the understanding of our financial results.

[Steve Calk, Vice President of Investor Relations at Alkami Technology]

A reconciliation of the comparable GAAP financial measures can be found in our earnings press release and in our filings with the SEC. Now I'll turn the call over to Alex.

[Alex Shootman, CEO at Alkami Technology]

Thank you, Steve. Good afternoon, and thank you all for joining us. I'm pleased to report another great quarter of financial results for Alkami, which contributed to an outstanding full-year performance. During the fourth quarter of 2024, Alkami grew revenue 26% and generated over $10 million in Adjusted EBITDA. In addition, we ended the quarter with 20 million users on the Alkami platform, and that is up 2.5 million users compared to the prior year. For the full year of 2024, we delivered revenue growth of 26%, Adjusted EBITDA margin expansion of 900 basis points, and improved operating cash flow by over $36 million. We are proud of these results as our execution continues to track the multi-year revenue and profit targets Bryan and I provided at the beginning of 2023.

[Alex Shootman, CEO at Alkami Technology]

I'd like to make a few comments on the quarter and the year, and then I'll discuss our plans to acquire MANTL. In our fourth quarter 2021 earnings call, we outlined a five-point plan to drive our desired long-term business outcomes. First, we would succeed in the bank market as we had in the credit union market. Second, we would leverage add-on sales to drive growth. Third, we would invest in our platform for efficiency and differentiation. Fourth, we would become a destination company for talent. And fifth, acquisitions would be part of our growth equation. Alkami's current business results are an outcome of excellent progress on these five business objectives. At the end of 2024, we had 42 banks under contract, including 23 live on the Alkami platform and 19 in our backlog. This compares to eight banks on our platform at the end of 2021.

[Alex Shootman, CEO at Alkami Technology]

We remained focused on the credit union market as we were investing in the bank market, and in 2024, we became the number one digital banking provider in the credit union market in terms of mobile users. As a reminder, our longer-term goal is to generate half our new logo wins in the bank market and half in the credit union market. Since 2021, we have almost doubled the participation of add-on sales to Alkami's new bookings. In 2024, add-on sales represented 45% of new bookings at Alkami compared to 24% in 2021. Our client sales team has been a key part of increasing our revenue per user by 30% since the end of 2021, and they have more than tripled our annual renewal count over that period with 42 in 2024 versus 12 in 2021. Within Alkami platform, our investments have improved quality, resiliency, and scalability.

[Alex Shootman, CEO at Alkami Technology]

We migrated over 90% of our platform's microservice traffic to Kubernetes and enabled autoscaling capabilities. Our availability has increased to 99.99% for 2024, and we believe we are the only provider that includes maintenance windows in our availability calculations. Our hosting cost per user has improved by 26% from our quarterly high-water mark over the last three years, and platform investments have improved the efficiency of implementations. Hosting cost and implementation efficiency have been prime drivers of an improvement in gross margin of almost 600 basis points since 2021. On the talent front, we've increased our retention rate 10% - 85% since 2021. Our employee engagement scores are 82% favorable. In 2024, the awards Alkami won include Best Culture, Best Sales Team, Best Product Team, Best HR Team, Best Engineering Team, Best Leadership Team, and Best Places to Work in Fintech.

[Alex Shootman, CEO at Alkami Technology]

This leads me to the final business objective we discussed, which is to grow through acquisitions that fit into the strategy and business model of Alkami. We are excited to add MANTL's people, products, and clients to Alkami. Nathaniel, Ben, and the rest of the MANTL team have built a great company that solves a really hard problem, which is critical to our market, and most importantly, they've done it with a great culture and a commitment to the customer. MANTL offers the premier SaaS solution for onboarding and account opening and serves as the front door for deposit originations for both consumer and business accounts in a wide variety of financial institutions. Over the last couple of years, we've heard from our clients and the broader market about the increasing strategic need to improve the way they open accounts for new customers and add products for existing customers.

[Alex Shootman, CEO at Alkami Technology]

For example, Alkami fielded a study in October 2024 in which we asked regional and community financial institutions what their top investment priority will be in 2025. Out of 12 possible choices, the top-ranked investment priority was technology to improve the customer or member experience, including an account opening platform. This option was number one among credit union respondents and number two among banks. The need to improve the account opening experience has become critical for community banks and credit unions in a world that expects an elegant digital offering. These financial institutions are under intense competitive pressure from megabanks and fintechs who have invested heavily to create better digital technology. When these dynamics are considered with predictions of the upcoming greatest wealth transfer in history, every client executive I meet is prioritizing the creation of an improved onboarding experience across all their channels.

[Alex Shootman, CEO at Alkami Technology]

MANTL is unique in that it offers a multi-tenant, core-agnostic, single platform that enables financial institutions to support all channels in onboarding deposit accounts, including digital, in-branch, call center, and relationship managers. It addresses the needs of both consumers and businesses, and it automates the onboarding process for virtually all deposit account teams. MANTL is proven technology as they have 145 clients under contract, including 112 financial institutions in production ranging in size from $80 million to over $20 billion in assets. Of these, approximately 70% are banks. MANTL's bank penetration and the minimal overlap between MANTL and Alkami's client base creates a great cross-sell opportunity for both Alkami and MANTL. With this acquisition, Alkami solidifies its position as the premier digital and sales and service platform in the industry.

[Alex Shootman, CEO at Alkami Technology]

After the MANTL transaction closes, Alkami will have the three market-leading required technologies for a bank or credit union to onboard, engage, and grow their account base in a secure environment. These three technologies are onboarding and account opening, digital banking, and data and analytics. For onboarding, MANTL will create a single onboarding and account opening solution that works across all channels for all customer types for the majority of deposit products. This offering is already proven to boost deposit growth with a higher converting application, higher initial funding, and less fraud than competitive alternatives. For engagement, Alkami's digital banking solution was awarded Best Banking App by Tearsheet in 2024. It is the fastest-growing digital banking platform among all U.S. financial institutions, and it serves over 20 million users with a single code base and a multi-tenant environment.

[Alex Shootman, CEO at Alkami Technology]

For growth, Alkami's Data and Marketing solution is built for financial institutions and provides 50,000 descriptive data tags and a dozen AI predictive models trained on analyzing more than 18 billion core transactions, which improves personalized targeting and cross-selling to increase revenue and reduce churn. But when these solutions are used in an integrated manner, the Alkami Digital Sales and Service Platform will create more client value, enabling Alkami's clients to have a competitive advantage in their market. Alkami will become the ultimate land-and-expand solution for banks and credit unions. Let me give you three examples. First, driving retail to business expansion. Using Alkami Data and Marketing, a financial institution could promote a business deposit account to a retail account holder with a history of business transactions, onboard the new deposit account in minutes using MANTL, and guide the account holder on new features and functionality in Alkami Digital Banking.

[Alex Shootman, CEO at Alkami Technology]

Next, improving account opening conversion. A financial institution could identify customers or members who have abandoned the account opening experience in MANTL, use Alkami's Data and Marketing to run targeted marketing campaigns to encourage conversion, and guide the customer on features and functionalities in the Alkami Digital Banking Platform. And finally, increasing accounts and digital users. Either through auto-registration by MANTL into Alkami Digital Banking or by leveraging Alkami Data and Marketing to target new customers that have not registered, the addition of an onboarding and account opening system will create a flywheel effect for increasing digital banking users and number of accounts per household, which is a benefit both for Alkami and our clients. We believe this acquisition unlocks portions of our TAM by increasing our competitive advantage.

[Alex Shootman, CEO at Alkami Technology]

Complementing our Digital Sales and Service Platform with an industry-leading onboarding and account opening experience will drive growth in new digital banking client wins. In addition, we're excited to place the MANTL product suite into the hands of our client sales team who have demonstrated success in growing Alkami client relationships and cross-selling products from our Segmint and ACH Alert acquisitions. In closing, I'm proud of our results from 2024. I'm excited about the momentum we take into 2025, and I'm eager to close the MANTL transaction and bring these new capabilities to our market with an intent for Alkami to be the number one digital banking platform. Thank you to our employees, clients, and investors for continuing to say yes to Alkami. We take your trust personally, and we will continue to execute on our commitments. I'll now hand the call to Bryan.

[Bryan Hill, CFO at Alkami Technology]

Thanks, Alex, and good afternoon, everyone.

[Bryan Hill, CFO at Alkami Technology]

In 2024, we continue to drive industry-leading revenue growth and outperform on our profitability goals. For the year, we achieved total revenue of $333.8 million, representing year-over-year growth of 26%, and improved adjusted EBITDA to $26.9 million compared to a loss of $1.6 million in 2023. Subscription revenue grew 26.5% in 2024 and represented almost 96% of total revenue. Our fourth quarter results were a strong finish to the year, and we are entering 2025 with good momentum. For the fourth quarter of 2024, we achieved revenue of $89.7 million, representing growth of 26%. Subscription revenue grew 25% and represented 96% of total revenue. We increased ARR by 22% and exited the quarter at $356 million. We currently have approximately $56.5 million of ARR in backlog for implementation, the majority of which will occur over the next 12 months.

[Bryan Hill, CFO at Alkami Technology]

Included in our backlog are 39 new clients representing 1.3 million digital users. We exited the quarter with 272 clients and 20 million registered users on our digital banking platform, representing registered user growth of approximately 2.5 million or 14% compared to last year. Over the last 12 months, we implemented 38 financial institutions supporting 1.2 million digital users. In addition, our existing clients increased their digital user adoption by 1.3 million users. As a reminder, because of the long-term nature of our contracts, we have three to four quarters of visibility into upcoming client attrition. During 2024, we churned less than 1% of our digital banking ARR. Over the long term, we model digital banking ARR churn at 2%-3% per year, but expect to do much better in 2025. Currently, we expect to churn four clients in 2025, representing 175,000 users and less than 1% of ARR.

[Bryan Hill, CFO at Alkami Technology]

We entered the quarter with an RPU of $17.81, up 7% compared to a year ago, driven by add-on sales success and the addition of new clients who tend to onboard with a higher average RPU. For example, new digital banking clients implemented for the fourth quarter with an RPU of $23.55, reflecting greater product adoption when compared to our installed base. We are seeing broad-based demand across our product portfolio. For the year, we signed 35 new digital banking platform clients, including 15 banks, and our add-on sales effort represented approximately 45% of 2024 new sales. In addition to add-on sales, our client sales team is responsible for client contract renewals. We renewed 42 client relationships in 2024. Added together with 35 new logo wins, this represents 77 competitive wins for the year compared to 70 in 2023.

[Bryan Hill, CFO at Alkami Technology]

In total, our 2024 renewal cohort increased ARR run rate 12% at the time of renewal, once again outperforming prior year cohorts as financial institutions are keeping their functionality competitive with their industry competition. In 2025, we expect approximately 25 renewals, slightly below our recent average as we pull forward several renewals into 2024. And finally, our remaining performance obligation was just under $1.4 billion, representing 3.8 times our ARR and up 20% compared to a year ago. Now turning to gross margin. For the fourth quarter of 2024, we delivered non-GAAP gross margin of 63.1%, representing nearly 280 basis points of expansion compared to the prior year. We achieved gross margin expansion through continued improvement in our hosting costs and platform investments, as well as operating leverage across our post-sale operations. As a reminder, our 2026 gross margin objective is 65%. Moving to operating expenses.

[Bryan Hill, CFO at Alkami Technology]

For the fourth quarter of 2024, non-GAAP operating expenses of $46.8 million, or 52% of revenue, represented year-over-year operating leverage of approximately 500 basis points. We derived operating leverage across each operating expense category, but primarily in G&A, where we continue to realize operational scale. In addition, we continue to achieve a high level of sales team productivity and go-to-market efficiency. For the last 12 months, we increased our ARR $64.8 million while investing $50.7 million in non-GAAP sales and marketing, representing an efficiency ratio of 1.3 to 1. We believe this ranks Alkami among the best in SaaS in terms of sales and marketing efficiency. Our adjusted EBITDA in the fourth quarter was $10.2 million, better than the high end of our expectations. Our adjusted EBITDA margin for the quarter was 11.3%, and when combined with our revenue growth rate, results in achieving Rule of 37.

[Bryan Hill, CFO at Alkami Technology]

We have started to invest in our captive offshore capability, and as we discussed last quarter, we expect an investment of approximately $5 million in 2025. We are still planning to complete the transition from our current vendor during 2026, and we do not anticipate any impact on our 2026 financial targets, although we do expect to see a positive impact on margins beyond 2026. Related to our balance sheet, we ended the quarter with just under $116 million of cash and marketable securities. In 2024, we produced operating cash flow of $18.6 million and an improvement of $36.1 million compared to 2023. We've also just announced an amendment to our credit facility, which expands our revolver from $125 million to $225 million and extends the maturity date to February of 2030. Before turning to guidance, let me provide some additional commentary on the MANTL acquisition.

[Bryan Hill, CFO at Alkami Technology]

This is a very attractive transaction that will position us as a clear leader in digital banking with a powerful platform to help financial institutions onboard, engage, and grow their customer relationships. There will be no one like us among digital banking providers, and similar to our acquisitions of ACH Alert and Segmint, we believe MANTL will help differentiate our platform, drive further success in digital banking client wins, and contribute to our current success cross-selling products into our digital banking installed base. As discussed in today's press release, we've agreed to acquire MANTL for an enterprise value of $400 million on a debt-free, cash-free basis and subject to customary purchase price adjustments, which we expect to be approximately $7 million. We plan to issue restricted stock units to MANTL employees with an estimated value of $13 million at transaction closing and replacement for unvested compensatory stock options.

[Bryan Hill, CFO at Alkami Technology]

The resulting purchase price of $380 million is expected to be funded with cash. We have multiple options to fund the $380 million cash purchase price. Our options include balance sheet liquidity, revolver capacity, and a universal shelf that can be used for equity, equity-linked, or debt financing. We're evaluating these options as we approach closing. Closing is expected to occur before the beginning of the second quarter and is subject to customary provisions, including HSR approval. The purchase price represents less than seven times projected ARR under contract at the end of 2025. We believe the acquisition has an IRR of about 30% before considering revenue synergies expected to start during 2026. Now turning to guidance. For the first quarter of 2025, we are providing guidance for revenue in the range of $93.5-$95 million, which represents total revenue growth of 23%-25%.

[Bryan Hill, CFO at Alkami Technology]

For adjusted EBITDA, we are providing first-quarter guidance in the range of $9.5 million-$10.5 million. For full year 2025, we are providing guidance for revenue in the range of $440 million-$445 million, representing total revenue growth of 32%-33%. We are also providing adjusted EBITDA guidance of $47 million-$51 million. Assuming an acquisition close date of March 31, full-year guidance includes revenue contribution of approximately $30 million and an adjusted EBITDA loss of $5 million from the MANTL acquisition. We believe the MANTL business will be accretive to adjusted EBITDA starting in 2026. We expect MANTL's ARR under contract at December 31, 2025, to be approximately $60 million, representing a growth rate above 30% when compared to the same metric at the end of 2024. In closing, I'm very pleased with our 2024 financial performance.

[Bryan Hill, CFO at Alkami Technology]

Our team delivered best-in-class growth, continued operating leverage, and superior go-to-market efficiency. We continue to perform among the best SaaS companies. And now, with the leading omnichannel account opening solution in MANTL, we believe an unequivocal category leader in an industry that already enjoys strong tailwinds and many years of innovation ahead. With that, I'll hand the call to the operator to take your questions.

[Operator]

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press star one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star two. If you're using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from Andrew Schmidt of Citi. Your line is already open.

[David Wielazinski, Equity Research Senior Associate at Citi]

Hey, this is David Wielazinski on for Andrew Schmidt. Thank you for taking my questions. How does MANTL compare with your existing account opening solutions? And I was wondering if you could get more details on the potential impact of the cross-sell opportunity there?

[Alex Shootman, CEO at Alkami Technology]

Thank you for the question. The current account opening offering that we have is digital-only for just one or two deposit types. And as we got into that market and listened to what our customers were trying to do, they really needed to be able to have an account opening solution that could operate in digital, could operate in call centers, in branch, and even if you think about commercial banking with a relationship manager.

[Alex Shootman, CEO at Alkami Technology]

And they needed to have the ability to support a whole lot more different types of products and specialty account structures: retirement accounts, health savings accounts, trust accounts, escrow accounts, lots of different types of account roles, whether it would be beneficiary, custodian, guardian. And none of those were things that we were offering with our current product. And then I would say, because of what I would call more of a normalization of interest rates, we all went through about 15-20 years of almost zero interest rates. And now that interest rates are what you might consider a little bit more normal, the ability to attract deposits as well as make loans has become critical to the financial institutions. So in summary, our current product did a few things, did a few things well, but it did not meet all of the needs of the market. And that's what the MANTL product does.

[David Wielazinski, Equity Research Senior Associate at Citi]

Thank you for that. And then what is embedded in the 2025 outlook between new user growth and RPU expansion? And could there be more of a skew towards user growth, assuming a pickup in M&A activity?

[Bryan Hill, CFO at Alkami Technology]

Yeah, the guidance that we've provided for 2025, I mean, it's in line with what we have been providing on more of our longer-term guidance and very consistent with 2024. So user growth, organic user growth, so excluding the MANTL acquisition, we would expect user growth in that 14%-15% range, which is very consistent with 2024. RPU expansion will be in a 6%-8% range, again, very consistent with 2024.

[Bryan Hill, CFO at Alkami Technology]

What we haven't yet determined, and we will before we close the MANTL acquisition and once we move into providing more combined guidance on a go-forward basis, is consideration of the MANTL client base, the incremental users that will come with the MANTL client base and the RPU. And so let me give you a couple of examples. MANTL today has 112 clients under contract, and those clients carry an average RPU between $5 and $6. So it's a nice RPU add, but they're going to bring about 8 million digital users to Alkami. And there's very little overlap, as Alex commented on in his prepared comments, between the two client bases. So they're very complementary in nature. The MANTL client base is 70% banks and 30% credit unions. The Alkami client base is 90% credit unions and 10% banks at the moment.

[Bryan Hill, CFO at Alkami Technology]

So, nice complementary to one another, but with very little overlap. So what you'll ultimately find is our user count will jump to 28-29 million, but you're adding those users at a $5-$6 RPU.

[David Wielazinski, Equity Research Senior Associate at Citi]

Very clear. Thank you.

[Operator]

Your next question comes from Saket Kalia of Barclays. Your line is already open.

[Ryan Powderly-Gross, Equity Research VP at Barclays]

Hey, team. This is Ryan Powderly on for Saket tonight. Thanks for taking the question. Maybe just to start on the MANTL deal, certainly interesting. I'm curious what you see in terms of the competitive environment in this type of market. Is it similar to your core digital banking space, where it's a lot of the core providers that you might be running up against, or will there be other competitors that you might expect to go more head-to-head with this type of acquisition?

[Alex Shootman, CEO at Alkami Technology]

When we talk with our clients, there's really three alternatives that they pursue in trying to deliver this type of capability to their customers or their members. One is they've got a very outdated capability from a core provider. The second is there are some smaller players that are in the market that they look at. And many of them also tried to write some of their own software to try to stitch together the experience. What we liked about MANTL is that what a MANTL customer experience is, and this is the design of their product, the way that they've thought about the user experience across the end-to-end process, and the fact that they're core agnostic, and they've built technology that allows them to integrate very well with over 20 different core systems.

[Alex Shootman, CEO at Alkami Technology]

So a median retail account opening experience within MANTL is five minutes compared with 15 minutes in the industry. And a median business account opening experience in MANTL is eight minutes compared with three and a half hours in the industry. And 85% of the applications receive an automated decision. So that's what we were looking at when we got excited about MANTL is, yes, there's some other small players. Yes, there's some legacy core technology. Yes, there's customers that have tried to write their own. But the outcomes that the MANTL technology delivers is far superior to anything else that was on the market.

[Ryan Powderly-Gross, Equity Research VP at Barclays]

All right. That's super helpful. Bryan, maybe a follow-up for you. I think in the press release, you mentioned that while there's an EBITDA loss for MANTL this year, you expect it to be EBITDA accretive in fiscal 2026.

[Ryan Powderly-Gross, Equity Research VP at Barclays]

Just wondering, are you including any expense synergies from this deal at all, or is that just purely driven by sort of revenue synergies and cross-sell, that sort of thing? Thanks.

[Bryan Hill, CFO at Alkami Technology]

So as it relates to revenue synergies, we're really expecting those to occur or be more evident in 2026 and primarily in the back half of 2026. As I mentioned in the previous question from Dave at Citi, the client bases are very complementary to one another. So there is going to be a nice opportunity for revenue synergy. As it relates to expense synergies, scaling the MANTL operation, they'll be able to leverage things such as G&A within Alkami. At some point, we'll be able to leverage the Global Capability Center that we're developing in 2025 in India. So it's more about helping MANTL scale more efficiently than it is having cost-cutting synergies on day one.

[Bryan Hill, CFO at Alkami Technology]

Because keep in mind, MANTL is a fast-growing business. We do not want to do anything to upset the growth trajectory that they're currently experiencing. We're here to identify synergies from a go-to-market perspective and even drive further revenue growth.

[Ryan Powderly-Gross, Equity Research VP at Barclays]

Very helpful. Thanks, guys.

[Operator]

Your next question comes from Patrick Walravens of JMP Securities. Your line is already open.

[Patrick Walravens, Managing Director of Tech Research at JMP Securities]

Oh, great. Thank you. Citizens. Congratulations, you guys. Alex, I would love to hear sort of the background to the deal. When did you first meet them? How did the process unfold? And how did we get to this transaction?

[Alex Shootman, CEO at Alkami Technology]

Well, the two companies have known about each other since 2019. So we've known them, and they've known us, and we've stayed in relationship for quite a while.

[Alex Shootman, CEO at Alkami Technology]

I would characterize this as a deal that evolved through understanding each other's culture, understanding the people that were running their company and the quality of people that were running their company, and also listening to our customers. Pat, last year, we had our customer advisory board together in June at a customer location outside of Denver, Colorado. We treat that customer advisory board very strategically. We meet with them not about features and functions, but, "Hey, help us guide the long-term future of the company." We were reviewing several different options that Alkami could invest in: fraud detection, continued investment in our data platform, and several other areas. At the end, they kind of huddled and came back to us and said, "There's something that's a bigger issue than us." We've all got these legacy systems. We've got different underwriting platforms, things like that.

[Alex Shootman, CEO at Alkami Technology]

But what we really need is we need a great end-to-end onboarding experience for our members to both attract members so we can get deposits and then also cross-sell other products to our customers or our members. So Alkami, what we really need you to do is deliver to us that great end-to-end experience. So Pat, we've known each other for a long time. We've respected each other for a long time. The market need was really speaking to us wanting to do something in this space. And then, as I said, we've just spent a lot of time getting to know each other, getting to know their management team. One of the things we really cherish is the ability for our culture to treat our customers as the North Star. And that was evident within all the investigation that we did with MANTL.

[Alex Shootman, CEO at Alkami Technology]

Pat, probably more than you want to know, but I would characterize this as we've known each other for a long time. We knew there was a strategic need in the market, and we got to know each other for a period of many months to make sure that this was the right thing to do.

[Bryan Hill, CFO at Alkami Technology]

Pat, I'll add a couple more comments to this. I mean, strategically, I mean, taking what we view as the absolute best asset in the space, the most disruptive, elegant digital experience as it relates to onboarding, pairing that with similar accolades as it relates to the digital banking platform, and then finally combining that with what we view as the best marketing data analytics solution, I mean, that creates a network effect, a flywheel effect in the revenue of all of those offerings that we believe is very powerful.

[Bryan Hill, CFO at Alkami Technology]

And then when it's just a front-end to back-end digital twin to the branch and delivers that experience, there is no other digital banking platform or technology provider in the space that can deliver the front-to-back offering that I just described. And so we've been watching MANTL for a long time. And MANTL, it's always when is the right time to do an acquisition of this type. And MANTL was at a point to where raising capital would be an alternative or potentially finding a strategic partner. And for all the reasons that Alex just described, finding a home at Alkami really was the best decision that they felt that they could come to. And so after years of talking to them and staying close to them, it all manifested late 2024.

[Bryan Hill, CFO at Alkami Technology]

And here we are today, and we're announcing what we're extremely excited about, which is the future of Alkami and really the very early beginnings of building a billion-dollar revenue company over the next 4-5 years.

[Patrick Walravens, Managing Director of Tech Research at JMP Securities]

All right. That's super helpful. Thank you both.

[Operator]

Your next question comes from Chris Kennedy of William Blair. Your line is already open.

[Chris Kennedy, Research Analyst of Financial Services and Technology at William Blair]

Good afternoon, and thanks for all of the details. Just wanted to focus a little bit. It seems like MANTL has a really good presence within banks and doing kind of business banking activities. Just talk about kind of how that dynamic played into the acquisition.

[Alex Shootman, CEO at Alkami Technology]

It played in a couple of different ways. As you know, we're focused on the bank market and being able to pair an onboarding and account opening platform that serves both consumer and business and all sorts of business types, right, whether it's sole proprietorship, general partnerships, nonprofits, trusts, estates. So that capability was really interesting to us in terms of Alkami's long-term strategic direction where we've been investing in the bank market. But the other thing that's been really interesting is probably 45% of the credit unions that I meet with have a commercial strategy. And so this also fits into us being able to bring MANTL into the credit union install base for Alkami, not just because they've got a good consumer product, but because they've got a good business product as well. So it was really kind of both of those things. One, it matches our strategy of investing in the bank market.

[Alex Shootman, CEO at Alkami Technology]

But number two, as Bryan said, there's virtually no overlap between the two companies from a customer base. I think it's probably less than 10 accounts. And because of some of the transformation that's happening in the credit union market, the coverage that MANTL has for both consumer and business was really attractive as we think about the potential for cross-sell in the future.

[Chris Kennedy, Research Analyst of Financial Services and Technology at William Blair]

Great. Thank you for that. And then I guess just another quick one on MANTL. I know the question was asked earlier, but the prospects for EBITDA to go from a negative to a positive, can you just double-click on that again? Thank you.

[Bryan Hill, CFO at Alkami Technology]

Yeah, Chris, that's primarily driven by just revenue scale. I mean, MANTL exiting 2025 with $60 million of revenue under contract, and that's growing north of 30%.

[Bryan Hill, CFO at Alkami Technology]

They're still relatively a small business that's becoming a larger business with a very fast growth trajectory. It's Alkami leaning on Alkami and Alkami's go-to-market, Alkami's R&D, Alkami's G&A, those areas to drive future profitability scale for MANTL. It's really the two companies working together and Alkami being able, or rather MANTL being able to lean on Alkami for those areas within its business to help it scale.

[Alex Shootman, CEO at Alkami Technology]

I mean, one of the things that many of the analysts that both Bryan and I have met with for many quarters have asked us about acquisitions. We said, "When we do an acquisition, it will be strategic, and it will also fit into the Alkami business model." The thing that we do like about MANTL, MANTL is a growth company.

[Alex Shootman, CEO at Alkami Technology]

So this is not a situation where, as Bryan said earlier, we want to cut a lot of expense to figure out, fit them into some model. This is a situation where they're a well-run company that can leverage some things within Alkami so that, as Bryan mentioned, in 2026, we see this as accretive to our business.

[Chris Kennedy, Research Analyst of Financial Services and Technology at William Blair]

Understood. Thanks a lot.

[Bryan Hill, CFO at Alkami Technology]

Yeah. But Chris, as you look out over a multi-year period, you should think about MANTL being a couple of points of incremental organic growth. You should think about MANTL being accretive to gross margin. And MANTL will be a drag of one to two points on EBITDA margin for the next two to three years and then reaching and conforming to an Alkami EBITDA margin profile beyond that.

[Chris Kennedy, Research Analyst of Financial Services and Technology at William Blair]

Understood. Very clear. Thank you.

[Operator]

Your next question comes from Adam Hotchkiss of Goldman Sachs. Your line is already open.

[Adam Hotchkiss, VP of Equity Research at Goldman Sachs]

Great. Thanks so much for taking the questions. I just want to follow up on the last question around MANTL's existing base. When you were evaluating MANTL, to what degree do you think that you're going to be able to cross-sell the Alkami platform into MANTL's customers? I know these contracts are a little bit longer than other industries, and there may be a little bit less visibility into that. But what comfort do you have over the next couple of years that you might see some incremental success or accelerated bank traction due to that? Thanks so much.

[Bryan Hill, CFO at Alkami Technology]

The existing MANTL client base segments very similar to Alkami. And what I mean by that is financial institutions with assets between 500 million and 10 billion. That represents a significant percentage of the MANTL client base, and that's also similar to Alkami.

[Bryan Hill, CFO at Alkami Technology]

Our sweet spot where we have found the greatest penetration has been assets in the size of $500 million-$10 billion for financial institutions. So there's no reason to expect that we would not have the ability to cross-sell the Alkami Digital Banking platform into the MANTL base or to sell the MANTL solution and offering into the Alkami install base. So we think it's very complementary. We feel that both companies have had significant success in the same area and segmentation of the market.

[Adam Hotchkiss, VP of Equity Research at Goldman Sachs]

Okay. That's really clear. Thanks. And then just on the renewal pull forward you mentioned, just curious if that impacts your cross-seller expansion opportunities into 2025 and how you would typically see a year after a pull forward of renewals be impacted from a growth perspective. Thanks so much.

[Bryan Hill, CFO at Alkami Technology]

We're having success cross-selling whether it's a time for a renewal or not. So our client sales team has really begun to gain momentum and has a pretty strong ability to cross-sell into a client, whether it's one year after signing the contract and the client just went live, or if it's five, six years later at the point of renewal, so we would expect that our client sales team to continue to contribute in that 45% plus to total contract value sold.

[Adam Hotchkiss, VP of Equity Research at Goldman Sachs]

Very clear. Thanks so much.

[Operator]

Your next question comes from Ali Smith of JPMorgan. Your line is already open.

[Ali Smith, Principal at JPMorgan]

Great. Thank you so much for taking our questions, so first, I was hoping to start on the gross profit margin line. You've had pretty stable gross profit margin expansion since at least 2020, and I think you mentioned that MANTL should be gross profit margin accretive in 2025.

[Ali Smith, Principal at JPMorgan]

Can you remind us your thinking about longer-term margin trajectory for the gross profit margin line? Thank you.

[Bryan Hill, CFO at Alkami Technology]

Yeah. So what we've provided is by 2026, the Alkami core business will be at 65% gross margin. We gave that guidance, that longer-term guide, about three years ago. We're a bit ahead of that. We'll exit 2025 at a run rate of 65%, and you should expect MANTL to be accretive 100 basis points.

[Ali Smith, Principal at JPMorgan]

That's very helpful. Thank you. And as we think through the other OpEx line items and the EBITDA deficit that MANTL causes for the first year, how would you allocate those costs roughly?

[Bryan Hill, CFO at Alkami Technology]

Well, let's just talk about the EBITDA loss.

[Bryan Hill, CFO at Alkami Technology]

So you should think about $5 million of EBITDA loss occurring over the second, third, and fourth quarters of 2025, $2 million in the second quarter, $2 million in the third quarter, and around $1 million in the fourth quarter. From a gross margin perspective, MANTL has been able to achieve around a 75% gross margin. The OpEx categories from a contribution by category, they're a little bit heavier on sales and marketing than Alkami is, but they align pretty closely to how Alkami aligns.

[Ali Smith, Principal at JPMorgan]

Makes a lot of sense. Thanks so much.

[Operator]

Your next question comes from Jeff Van Rhee of Craig-Hallum Capital Group. Your line is already open.

[Daniel Hibshman, Equity Research Analyst at Craig-Hallum Capital Group]

Hey, guys. Congrats on the quarter. This is Daniel on for Jeff. Just on the cross-sell motion, how that will look. If I'm understanding correctly, and the Alkami account opening offering currently doesn't cover some of the needs that the customers have, such that a lot of them will maybe have some other offering in place, just what does the Alkami base have right now for the most part? And so what sort of would that be that you'd be displacing as you're coming in with MANTL to cross-sell?

[Alex Shootman, CEO at Alkami Technology]

Yeah. As I said earlier, the customer base will have a range of technologies that they're trying to use to accomplish this. They might have, given Alkami's product penetration, the product that we have today, given our product penetration in our customer base, the majority of our customers will have the following scenario as opposed to an Alkami product. They'll either be trying to use something off of their legacy core. They'll be using another third-party product.

[Alex Shootman, CEO at Alkami Technology]

But in a lot of cases, they will have tried to write some of their own software to stitch together this process. Some of the things that are really unique about MANTL is how they've streamlined the process and embedded automated KYC as an example. And so when a customer sees this process and how it manifests itself from a user experience, it's just a very different experience than they're able to deliver today. So I would anticipate that our client sales team that covers our existing bank customers and our existing credit union customers will be, after closure, will be bringing the MANTL product to any or all of our customers for the potential of cross-sell. There's not really a customer that we have that we would not bring the MANTL product to from a cross-sell perspective.

[Daniel Hibshman, Equity Research Analyst at Craig-Hallum Capital Group]

Okay. That's helpful. And then sort of just on the flip side, on the impact on the MANTL side, just as they work with a lot of other people in the marketplace, like I believe they're part of the Q2 Marketplace, just how will those relationships, if at all, be impacted after getting acquired by you guys? Is there any inherent churn contemplated there?

[Alex Shootman, CEO at Alkami Technology]

We would hope that they would continue to be successful in all the markets that they serve. That's our goal. Our goal would not be to do anything that would truncate their success in any market that they're serving. That said, you could imagine that our product teams have already had a lot of great ideas.

[Alex Shootman, CEO at Alkami Technology]

One of the things that Bryan talked about earlier, and I talked about in my prepared remarks, is if you think about having transactional data that you're using in the onboarding process, and then that onboarding process is showing up natively in the digital banking experience, that's a really attractive design for a client. So we're not going to do anything to truncate any of their success in any market, but you would imagine that we've got a lot of product ideas in terms of how we integrate digital banking with MANTL with our data and marketing platform.

[Daniel Hibshman, Equity Research Analyst at Craig-Hallum Capital Group]

Congrats.

[Operator]

There are no further questions at this time. So this concludes today's conference call. Thank you for your participation, and you may now disconnect.

Participants

Executives

• Alex Shootman, CEO
• Steve Calk, Vice President of Investor Relations
• Bryan Hill, CFO

Analysts

• Daniel Hibshman, Equity Research Analyst at Craig-Hallum Capital Group
• Adam Hotchkiss, VP of Equity Research at Goldman Sachs
• Ali Smith, Principal at JPMorgan
• Patrick Walravens, Managing Director of Tech Research at JMP Securities
• David Wielazinski, Equity Research Senior Associate at Citi
• Ryan Powderly-Gross, Equity Research VP at Barclays
• Chris Kennedy, Research Analyst of Financial Services and Technology at William Blair