Alkami Technology, Inc. — Q2 2021 Form 10-Q
Business context and reporting period. Alkami provides cloud-based digital banking software to U.S. financial institutions under primarily multi-year SaaS contracts. This unaudited filing covers the three and six months ended June 30, 2021; comparisons are with the same 2020 periods. The company completed its IPO in April 2021.
Financial results
| Metric | Q2 2021 | Q2 2020 | First half 2021 | First half 2020 |
|---|---|---|---|---|
| Revenue | $36.7 million | $26.7 million | $70.0 million | $49.9 million |
| Gross profit / margin | $20.5 million / 55.9% | $13.4 million / 50.4% | $38.3 million / 54.7% | $24.7 million / 49.6% |
| Operating expenses | $30.3 million | $20.5 million | $57.0 million | $42.0 million |
| Operating loss | $(9.8) million | $(7.1) million | $(18.8) million | $(17.3) million |
| Net loss | $(11.4) million | $(7.3) million | $(22.3) million | $(17.5) million |
| Adjusted EBITDA (non-GAAP) | $(5.4) million | $(6.0) million | $(11.5) million | $(15.1) million |
Q2 revenue grew 37.6% year over year; first-half revenue grew 40.3%. SaaS subscription services contributed $34.6 million in Q2 and $66.2 million in the first half. Q2 basic and diluted loss per share was $0.15, versus $1.63 in Q2 2020; the comparison is affected by the substantial increase in weighted-average shares following the IPO and preferred-stock conversion.
At June 30, cash and cash equivalents were $338.5 million, or $343.4 million including $4.9 million of restricted cash. Total assets were $424.7 million, total liabilities $73.5 million, and stockholders’ equity $351.3 million. Debt was $24.9 million net of issuance costs, including $0.9 million current; the company also had a $25.0 million revolving facility and reported no revolver borrowings. Six-month operating cash use was $12.3 million, investing cash use $1.4 million, and financing cash inflow $185.4 million. No income-tax provision was recorded.
Material changes and business indicators
- Gross margin improved year over year, while operating expenses rose 47.7% in Q2 and 35.7% in the first half. General and administrative expense increased substantially, including higher public-company insurance and IPO-related professional costs, growth-related headcount, and ACH Alert costs.
- Management attributed revenue growth to registered-user expansion, higher revenue per registered user (RPU), and the ACH Alert acquisition. ACH Alert contributed $1.3 million of Q2 and $2.4 million of first-half revenue.
- As of June 30, ARR was $144.7 million, up 37.8% year over year; registered users were 10.7 million, up 28.9%; and RPU was $13.48, up 6.6%. The company served 161 financial institutions on its platform and 102 additional ACH Alert clients.
- The April IPO issued 6.9 million shares at $30 per share and generated $192.8 million net proceeds. Preferred shares converted into common stock; the company also paid approximately $5.0 million of accumulated Series B dividends.
Outlook, risks, and unusual items
Management said it expected cash resources, including the credit agreement, to fund operations, growth plans, capital expenditures, and public-company costs for at least the next 12 months. It expects revenue and cost of revenue to grow, and anticipates gross-margin improvement from operational scaling. It also expects continued investment in research and development, sales and marketing, implementation, client support, and public-company functions. The filing gives no specific revenue or earnings guidance.
Key risks cited include operating losses and limited operating history; execution of growth and client acquisition, adoption, and renewal; competition and technology change; security breaches and service disruption; reliance on third parties; regulation and intellectual property disputes; employee retention; and COVID-19-related effects on sales and implementations. Debt covenants require recurring-revenue growth and at least $10 million of defined liquidity; the company reported compliance at June 30. The credit agreement matures October 2023 and bears variable interest.
Unusual items include a $3.0 million first-half non-operating loss from the change in warrant fair value before the warrants converted to equity at the IPO, and $4.4 million of first-half stock-based compensation. ACH Alert-related deferred employment-contingent payments of approximately $4.9 million are held in escrow and accrued as compensation over service periods. Future minimum operating lease payments totaled $27.7 million. The company said pending legal matters were not expected to be material and disclosed no material changes to previously reported risk factors.
Important facts for investors to verify
- Whether ARR and registered-user growth translate into sustained recognized revenue, renewals, and improved operating leverage.
- How much of gross-margin improvement persists as hosting, third-party partner, implementation, and support costs scale.
- The drivers and expected trajectory of operating losses, stock-based compensation, and public-company expenses.
- Liquidity and covenant headroom, variable-rate debt exposure, and repayment requirements through the October 2023 maturity.
- The timing and accounting treatment of ACH Alert-related contingent compensation and the expected adoption effects of lease accounting.