Alkami Technology, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; comparisons are with the three months ended March 31, 2023 unless stated otherwise. Alkami provides cloud-based digital banking software, primarily through multi-year SaaS subscriptions to financial institutions.
Financial performance and liquidity
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Revenue | $76.1 million | $60.0 million | Up 26.9% |
| SaaS subscription revenue | $73.0 million | $57.5 million | About 95.9% of revenue in both periods |
| Gross profit / margin | $44.0 million / 57.8% | $32.1 million / 53.6% | Margin up 4.2 percentage points |
| Operating expenses | $56.4 million | $49.1 million | Up 14.9% |
| Operating loss | $(12.4) million | $(16.9) million | Loss narrowed |
| Net loss | $(11.4) million | $(17.0) million | Loss per share: $(0.12) vs. $(0.18) |
| Adjusted EBITDA | $3.8 million | $(2.9) million | Non-GAAP; turned positive |
| Cash from operating activities | $1.0 million | $(9.6) million | Improved by $10.6 million |
Revenue growth reflected 19.8% growth in registered users to 18.1 million and 5.2% growth in revenue per registered user (RPU) to $16.71. ARR was $302.7 million, up 26.1% year over year. Management attributed RPU growth mainly to cross-selling and higher average RPU among recently implemented clients. The company served 244 digital banking platform financial institutions and more than 650 clients across its product lines.
At March 31, 2024, cash and cash equivalents were $44.2 million and marketable securities were $43.1 million, totaling $87.3 million. Current assets were $145.6 million and current liabilities were $37.2 million. Total assets were $397.6 million; stockholders’ equity was $322.9 million. The company had no outstanding revolver borrowings and had repaid the remaining $82.9 million term-loan principal in December 2023. A $60 million secured revolving facility remains available, subject to its terms. Lease liabilities totaled $19.3 million.
Material changes and management commentary
- Revenue grew faster than cost of revenue, which rose 15.2%; gross margin improved from 53.6% to 57.8%. Management cited revenue growth, while noting higher third-party partner costs.
- Operating expenses rose 14.9%, including increases in research and development (11.1%), sales and marketing (27.3%), and general and administrative (12.9%). Stock-based compensation was $13.6 million, up from $11.2 million.
- Operating cash flow improved to positive $1.0 million from negative $9.6 million, but the quarter’s cash generation benefited from non-cash stock compensation and a $3.7 million increase in deferred revenue; accounts payable and accrued liabilities decreased $3.9 million.
- Minimum contracted future subscription revenue for wholly or partially unsatisfied contracts was approximately $1.2 billion. The company expects to recognize 45.9% in the next 24 months and another 34.8% in months 25–48; this excludes estimated excess-user and transaction fees.
- Management said existing cash resources and the credit agreement should fund operations, growth plans and capital expenditures for at least the next 12 months and beyond. No specific revenue, earnings or cash-flow guidance was provided in the filing.
Risks, contingencies and unusual items
- The company remains loss-making under GAAP and reported an accumulated deficit of $446.8 million. It noted that investment in product development, sales, marketing and client support continues to drive costs.
- Key disclosed business risks include attracting and retaining clients, renewals and adoption, long sales and implementation cycles, reliance on third-party hosting and integrations, cybersecurity and privacy, competition, and the financial condition and technology spending of financial-institution clients.
- The credit agreement includes financial covenants, including a minimum liquidity covenant before the April 2025 trigger date and a free-cash-flow covenant. The company reported compliance with all covenants at March 31, 2024. Its $0.3 million standby letter of credit secures its office lease.
- Management said it was not party to litigation expected to have a material adverse effect; it noted that intellectual-property disputes may arise and that client contracts can include indemnification obligations. No material risk-factor changes were reported.
- The CFO adopted a Rule 10b5-1 trading plan on March 11, 2024, covering potential sales of up to 600,000 shares, less shares withheld for taxes, through January 17, 2025.
- Disclosure controls and procedures were reported effective at March 31, 2024, with no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether registered-user growth, client implementations, renewals and cross-selling continue to support ARR and RPU growth.
- Whether gross-margin improvement is sustained as third-party partner, hosting, implementation and support costs evolve.
- Whether positive operating cash flow persists, considering working-capital movements and stock-based compensation.
- Available liquidity and ongoing compliance with the credit agreement’s liquidity, recurring-revenue and free-cash-flow covenants.
- The effects of continued operating investment, stock-based compensation and potential share dilution on the path to GAAP profitability.
- Developments in cybersecurity, third-party service dependencies, intellectual-property matters and the CFO’s disclosed trading plan.