Business context and reporting period
Alkami Technology, Inc. filed this Form 10-K for the fiscal year ended December 31, 2021. Alkami provides cloud-based digital banking software to U.S. financial institutions, primarily through multi-year SaaS subscriptions priced largely by registered users. This is an annual report; the supplied filing text does not provide standalone fourth-quarter financial results.
At year-end, Alkami served 177 financial-institution clients on its platform and had 12.4 million registered users. It reported 325 total clients across its businesses. In September 2021, Alkami acquired MK Decisioning Systems, adding digital account-opening and loan-origination products.
Financial and operating performance
| Metric | FY 2021 | FY 2020 | Change |
|---|---|---|---|
| Revenue | $152.2 million | $112.1 million | Up 35.7% |
| SaaS subscription revenue | $143.6 million | $105.0 million | 94.4% of 2021 revenue |
| Gross profit / gross margin | $83.8 million / 55.1% | $59.2 million / 52.8% | Margin up 2.3 percentage points |
| Operating loss | $(42.9) million | $(35.1) million | Loss widened |
| Net loss | $(46.8) million | $(51.4) million | Loss narrowed |
| Adjusted EBITDA (non-GAAP) | $(22.0) million | $(23.4) million | Loss narrowed |
| Cash used in operating activities | $(29.0) million | $(38.1) million | Cash use decreased |
| Annual recurring revenue (ARR) | $169.0 million | $128.0 million | Up 32.0% |
Registered users increased 27.8% to 12.4 million, while revenue per registered user rose 3.5% to $13.68. Net dollar revenue retention was 115%, compared with 117% in 2020. The company attributed growth to user additions from existing and new clients and cross-selling. Gross-margin improvement reflected scaling, although third-party partner and hosting costs increased.
Liquidity, debt and capital
Cash and cash equivalents were $308.6 million at December 31, 2021, versus $166.8 million a year earlier. Total current assets were $345.2 million and current liabilities were $33.2 million. Long-term debt, net of issuance costs, was $24.6 million, including $1.6 million current and $23.1 million long-term. Alkami reported compliance with its credit agreement covenants at year-end. The $25 million term loan matures in October 2023; a $25 million revolving facility was available, subject to agreement terms.
Financing cash flow of $192.3 million in 2021 was driven principally by $192.8 million of net IPO proceeds. Investing cash use was $22.0 million, including $18.3 million for the MK acquisition and $2.6 million of capitalized software development. The company reported operating cash burn despite improving it year over year. It stated that available resources were expected to fund operations and plans for at least the next 12 months and longer term.
Future commitments included $24.3 million of debt principal, $58.2 million of purchase commitments over five years, and $25.9 million of operating lease payments. The MK acquisition also carried contingent earn-outs with a reported year-end fair value of $15.5 million; maximum potential earn-out payments were $25 million, subject to revenue milestones.
Material changes, outlook and risks
- Alkami completed its IPO in April 2021, issuing 6.9 million shares at $30 per share and receiving $192.8 million in net proceeds. Preferred shares converted to common stock; accumulated Series B dividends of about $5.0 million were paid.
- Operating expenses rose 34.4% to $126.7 million. General and administrative expense included increased stock-based compensation and public-company costs. Total stock-based compensation was $14.5 million, compared with $2.0 million in 2020; the filing cites a former CEO equity-award modification and increased headcount among the drivers.
- Net loss improved partly because 2020 included a $15.8 million non-operating fair-value loss on warrants and a preferred-stock tranche right; 2021 included a $3.0 million warrant fair-value loss. Warrants converted to equity at the IPO and were subsequently exercised.
- Management provided no specific revenue or earnings guidance in the supplied filing text. It expects to continue investing in product development, sales, marketing, implementation, support and infrastructure, and anticipates gross-margin improvement through scale. It also expects to incur losses for the foreseeable future.
- Key risks include dependence on financial institutions and their technology spending; competition; client renewal, cross-sell and implementation execution; reliance on AWS and other third parties; cybersecurity, privacy and regulatory exposure; rapid growth and hiring needs; and acquisition integration and earn-out uncertainty. COVID-19-related disruption to sales and implementations remained uncertain.
- The company reported no pending legal matter expected by management to have a material impact. Its financial statements received an unqualified audit opinion; the auditor did not opine on internal-control effectiveness, consistent with the company’s emerging-growth-company transition relief. Management said disclosure controls were effective.
Important facts for investors to verify
- Whether user growth, ARR growth, retention and cross-selling sustain revenue expansion, and how much growth comes from new clients versus existing clients.
- Whether gross-margin gains continue as hosting, third-party service and implementation costs grow.
- Cash-burn trends and whether the stated liquidity outlook remains adequate alongside debt service, purchase commitments, leases and acquisition-related payments.
- MK integration progress, revenue milestones and potential earn-out payments; also assess acquisition-related goodwill and contingent consideration.
- The effect of substantial stock-based compensation, unrecognized equity awards and future share-plan increases on expenses and dilution.
- Execution of cybersecurity, privacy, regulatory-compliance and third-party-provider controls, including AWS service continuity.