Business context and reporting period
Alkami Technology, Inc. provides cloud-based digital banking software to financial institutions. This unaudited Form 10-Q covers the three months ended March 31, 2022, compared with the same period in 2021. Revenue is predominantly recurring SaaS subscription revenue. The company reported 179 Alkami Platform financial-institution clients, 12.8 million registered users, and an average client contract life of approximately 70 months.
Key financial results
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $44.8 million | $33.3 million |
| Gross profit / margin | $24.8 million / 55.4% | $17.8 million / 53.4% |
| Operating expenses | $37.8 million | $26.7 million |
| Operating loss | $13.0 million | $8.9 million |
| Net loss | $13.4 million | $10.9 million |
| Adjusted EBITDA (non-GAAP) | $(3.6) million | $(6.1) million |
| Net cash used in operating activities | $8.3 million | $2.0 million |
SaaS subscriptions contributed $42.8 million of Q1 2022 revenue, versus $31.6 million a year earlier. Basic and diluted loss per share was $0.15, compared with $2.00 in Q1 2021; the share-count comparison is substantially affected by the 2021 IPO and conversion of preferred stock.
At March 31, 2022, cash and cash equivalents were $187.3 million and marketable securities were $112.0 million; together they totaled approximately $299.3 million. Total debt was $24.4 million gross and $24.3 million net of issuance costs. The company reported $342.1 million of stockholders’ equity and an accumulated deficit of $327.3 million. Investing cash outflow of $113.6 million was primarily the $112.1 million purchase of marketable securities, rather than operating investment alone.
Material changes and management commentary
- Revenue grew 34.7% year over year. Management attributed growth mainly to 2.8 million additional registered users—1.5 million from existing clients and 1.3 million from newly implemented clients—and 3.0% growth in revenue per registered user (RPU).
- Annual recurring revenue (ARR), a company-defined metric, increased 32.2% to $176.9 million. Registered users increased 28.3% to 12.8 million, and RPU rose 3.0% to $13.80.
- Gross margin improved 2.0 percentage points to 55.4%. Cost of revenue rose 28.9%, slower than revenue, with increases in personnel and third-party partner costs.
- Operating expenses rose 41.6%, faster than revenue, including a 50.9% increase in general and administrative expense. Management cited higher stock-based compensation, public-company insurance costs, and Segmint transaction expenses, partly offset by a $2.7 million gain from revaluing MK acquisition contingent consideration.
- Stock-based compensation was material: the filing reports $9.8 million in the detailed expense table (versus $1.4 million in Q1 2021). Adjusted EBITDA excludes stock-based compensation and other items and is not a GAAP measure.
Outlook, risks, contingencies, and unusual items
The filing provides no specific quarterly or full-year 2022 revenue or earnings guidance. Management said existing cash resources, including the credit facility, were expected to fund operations, growth plans, capital expenditures, and public-company costs for at least the next 12 months. It expects continued investment in research and development, sales and marketing, implementation, client support, and infrastructure; it also expects cost of revenue and operating expenses to increase in absolute dollars.
As of March 31, minimum contracted future subscription revenue for wholly or partially unsatisfied contracts was approximately $662.3 million; the company expected to recognize 45.3% over the following 24 months. This excludes variable fees tied to excess users and transaction processing.
- After quarter-end, Alkami completed its Segmint acquisition on April 25, 2022 for approximately $135.5 million. On April 29 it entered a new credit agreement, including an $85.0 million term loan and a $40.0 million revolving facility, maturing April 29, 2025. The term-loan proceeds replenished cash used for the acquisition; borrowings bear variable SOFR-based interest, and substantially all company and subsidiary assets secure the obligations.
- At quarter-end, the prior credit agreement had $24.4 million of term debt outstanding and a $25.0 million revolving commitment. The company stated it was in compliance with its covenants. The subsequent refinancing and acquisition materially changed the financing and debt position after the reporting date.
- MK contingent consideration was valued at $12.8 million at quarter-end, down from $15.5 million at year-end; the $2.7 million revaluation gain benefited reported results. The estimate depends on forecasts and probabilities of achieving revenue targets.
- Management identified risks including client acquisition and retention, long sales and implementation cycles, competition, reliance on financial institutions, product performance and security, privacy and regulatory matters, hiring and growth management, acquisitions, and continued operating losses. It noted uncertainty about COVID-19 effects on sales and implementations.
- The company reported no litigation it believed would have a material adverse effect and no material changes to previously disclosed risk factors. It disclosed approximately $25.0 million of future minimum operating lease payments as of March 31, 2022.
Important facts for investors to verify
- Whether ARR, registered-user, and RPU growth translates into durable reported revenue, renewals, and improved profitability.
- How operating expenses and stock-based compensation evolve relative to revenue, and how non-GAAP adjusted EBITDA reconciles to GAAP results.
- The cash, debt, interest expense, covenant headroom, and repayment terms following the Segmint acquisition and April 2022 credit agreement.
- Segmint’s integration, contribution to growth, and acquisition-related costs, along with the likelihood and potential amount of MK earn-out payments.
- The assumptions behind future contracted revenue recognition and the sensitivity of results to client implementation timing, usage, and retention.