Alkami Technology, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; comparisons are with the three months ended March 31, 2022. Alkami provides cloud-based digital banking software to financial institutions. Figures are unaudited and in U.S. dollars.
Financial performance and position
| Metric | Q1 2023 | Q1 2022 / prior balance |
|---|---|---|
| Revenue | $60.0 million | $44.8 million; up 33.9% |
| SaaS subscription revenue | $57.5 million | $42.8 million |
| Gross profit / gross margin | $32.1 million / 53.6% | $24.8 million / 55.4% |
| Operating loss | $16.9 million | $13.0 million |
| Net loss / diluted loss per share | $17.0 million / $0.18 | $13.4 million / $0.15 |
| Adjusted EBITDA (non-GAAP) | Loss of $2.9 million | Loss of $3.6 million |
| Cash from operations | Use of $9.6 million | Use of $8.3 million |
| Cash, cash equivalents and marketable securities, March 31 | $185.4 million | $196.4 million at December 31, 2022 |
| Term debt principal / net carrying amount, March 31 | $85.0 million / $84.6 million | $85.0 million principal at December 31, 2022 |
Operating cash outflow reflected the net loss and working-capital uses, partly offset by noncash expenses, including $11.4 million of stock-based compensation. Investing activities provided $15.8 million, primarily from net maturities and purchases of marketable securities; financing activities used $0.6 million. Cash and restricted cash totaled $117.9 million at quarter-end, including $3.6 million of restricted cash.
Material changes and operating trends
- Revenue growth reflected higher registered users and revenue per registered user, plus $3.5 million contributed by Segmint, acquired in April 2022. ARR was $240.1 million, up 35.7% year over year; registered users increased 17.9% to 15.1 million, and revenue per registered user rose 15.1% to $15.88.
- Gross margin declined 1.8 percentage points as cost of revenue grew 39.4%, faster than revenue. Management cited higher third-party partner and hosting costs, personnel costs, and Segmint-related costs and amortization.
- Research and development expense rose 45.2% to $20.5 million and sales and marketing expense rose 37.7% to $10.9 million, reflecting investment in product development and growth. General and administrative expense was nearly flat at $17.1 million.
- Net loss widened, while adjusted EBITDA loss narrowed. The 2022 comparison included a $2.7 million gain on revaluation of MK contingent consideration; the estimated earn-out remained zero at March 31, 2023.
Liquidity, outlook and risks
- Management said existing cash resources and the credit facility were expected to fund operations, growth plans and capital expenditures for at least the next 12 months and longer term. It may seek additional capital; equity financing could dilute shareholders, while further debt could increase obligations.
- The $40 million revolving facility had no borrowings outstanding. The $85 million term loan matures April 29, 2025, bears variable interest at SOFR plus 3.00%–3.50%, and is subject to recurring-revenue and minimum-liquidity covenants. Alkami reported compliance with all covenants at quarter-end.
- Management reported no loss exposure from Silicon Valley Bank’s receivership and no impact on liquidity, financing or credit-agreement terms. The company noted that deposits may exceed FDIC-insured limits and said it was monitoring financial-sector developments.
- No formal numerical revenue or earnings guidance is provided in this filing. Management expects cost of revenue and operating expenses to grow as the business expands and continues investing in implementation, client support, infrastructure, research and development, and sales and marketing.
- Key disclosed risks include client acquisition, retention and renewals; long sales and implementation cycles; reliance on third-party hosting and integrations; cybersecurity and privacy; competition; financial-sector spending; execution of growth and acquisitions; and its history of losses. The company reported no material change to previously disclosed risk factors, no material litigation, and no material changes in contractual obligations.
Important facts for investors to verify
- Whether ARR, registered-user and revenue-per-user growth continue to convert into revenue and improved gross margins.
- Whether cost growth, including hosting, third-party partner costs and acquisition-related amortization, moderates relative to revenue growth.
- Cash consumption, the path to profitability, and the company’s stated liquidity outlook against its debt service and covenant requirements.
- The effect of variable-rate debt and future term-loan repayments, and whether any additional financing is required.
- Stock-based compensation and dilution: the filing reports 21.3 million potentially dilutive common-share equivalents excluded from diluted EPS because the company recorded a loss.
- Management’s statements about SVB exposure and covenant compliance, and developments in financial-institution credit conditions and client spending.