Release Date: May 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Alkami Technology Inc (ALKT, Financial) reported a 27% year-over-year revenue growth, achieving $76.1 million in the first quarter of 2024.
- Adjusted EBITDA for the quarter was $3.8 million, surpassing the high end of company expectations.
- The company saw an increase in live registered users to 18.1 million, a 20% increase compared to the previous year.
- Alkami Technology Inc (ALKT) successfully implemented eight new clients in the quarter, bringing the total digital banking platform client count to 244.
- The company has a strong sales pipeline with a 50% increase in qualified prospect pipeline at their annual conference compared to last year.
Negative Points
- Alkami Technology Inc (ALKT) anticipates losing three clients in 2024, representing less than 1% of ARR, although this is below the expected long-term average churn of 2% to 3%.
- Despite strong growth metrics, the company faces challenges in the banking sector with a win rate in the mid-teens for commercial bank RFPs.
- The company noted that increased digital account openings have led to a rise in fraudulent account activities, posing a challenge to maintaining security while enhancing user convenience.
- While there is significant room for product upsell, with clients currently adopting 13 out of 32 available products, converting this potential into actual sales remains a challenge.
- Alkami Technology Inc (ALKT) is still working towards achieving a 65% gross margin by 2026, indicating ongoing pressure to improve cost efficiency and operational scalability.
Q & A Highlights
Q: Can you elaborate on the investments made to open up the platform? What are they and what's driving that?
A: (Alex Shootman, CEO) - We've enhanced the SDK provisioning process and built a developer site to consolidate resources for easier access and support. Long-term, we're transforming Alkami into an API-centric platform, allowing deeper integration and more flexibility for our clients.
Q: How should we think about the 600,000 net adds in Q1 throughout the rest of the year?
A: (W. Bryan Hill, CFO) - Expect user growth in 2024 to mirror 2023, with slightly lower growth in Q2, and more even growth in Q3 and Q4.
Q: As we look at the base of 210 million users with legacy providers, how fast do you expect to capture that market?
A: (W. Bryan Hill, CFO) - We aim for 18-20% annual user growth, half from new client sales and half from our existing base. RPU expansion should be 5-7% quarterly, driven by new clients with richer RPUs and cross-selling more products.
Q: Can you provide an update on your success in the bank space and any changes to your go-to-market strategy?
A: (W. Bryan Hill, CFO) - Our sales force is adept at selling into both credit unions and banks. We're focusing on product-market fit, core integrations, market awareness, and internal resources to drive success in commercial banking, aiming for 50% of new clients from banks by 2026.
Q: Could you discuss the win rate trends since the last call and into 2024?
A: (W. Bryan Hill, CFO) - Our win rate has been consistent in the mid-teens for banks on a trailing 12-month basis, compared to mid-30s for credit unions. We aim to align bank win rates with credit unions by 2026 through strategic focus areas.
Q: Regarding gross margin driven by focus on containerization and reducing hosting costs, what is the expected exit rate for the year and the cadence of margin expansion?
A: (W. Bryan Hill, CFO) - We commit to a 65% gross margin by 2026, with an average annual expansion of 200 basis points. In 2024, we expect to exceed this rate due to efficiencies in hosting costs and post-sale operations.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
