Executive Summary / Key Takeaways

• Alkami is solidifying its position as a leading digital banking platform for community and regional financial institutions (FIs), driven by a strategic focus on enabling clients to compete with larger banks through enhanced digital experiences.
• The recent acquisition of MANTL significantly expands Alkami's capabilities in onboarding and account opening, creating a comprehensive digital sales and service platform expected to drive future growth and competitive differentiation.
• Strong Q1 2025 financial results, including 28.5% revenue growth and improved adjusted EBITDA, demonstrate continued execution and momentum, reinforced by robust user growth and increasing revenue per user (RPU).
• Management maintains confidence in achieving its 2026 financial targets, supported by a healthy implementation backlog, strong sales pipeline, and strategic investments in technology and operational efficiency, including a new offshore capability.
• While facing risks related to recent financing activities and integration, Alkami's proprietary cloud-based technology and expanding product suite provide a competitive moat against both legacy providers and agile fintechs in a market demanding mandatory digital innovation.

The Mandate for Digital Transformation

In the dynamic landscape of U.S. financial services, community and regional institutions face an existential challenge: competing with the technological prowess and vast resources of megabanks like Chase and agile fintechs like Chime. This competitive pressure has elevated digital banking from a mere service channel to a mandatory strategic imperative and a critical capital allocation priority. It's within this environment that Alkami Technology, Inc. operates, positioning itself as the essential partner for FIs seeking to not just survive, but thrive, by delivering sophisticated digital experiences to their account holders.

Founded in 2011, Alkami set out to level the playing field, building a proprietary, true cloud-based, multi-tenant digital banking platform designed for scalability, extensibility, and operational efficiency. This foundational technology, coupled with a strategy of cultivating deep, long-term client relationships through subscription-based contracts (averaging approximately 70 months as of March 31, 2025), has been the bedrock of its growth. Over the years, Alkami has strategically expanded its capabilities through targeted acquisitions, adding fraud prevention (ACH Alert, 2020), initial onboarding/loan origination tools (MK Decisioning Systems, 2021), and data analytics (Segmint, 2022) to its core offering.

The market's demand for digital solutions is not elastic; it's driven by fundamental shifts, including the increasing digital expectations of younger generations poised to inherit significant wealth. These demographics prioritize efficient and elegant digital experiences, particularly for critical interactions like account opening. FIs recognize they must evolve their digital presence to acquire new customers, deepen relationships through cross-selling, and improve operational efficiency. This strategic focus on digital as a sales and service platform, rather than just a cost-reduction tool, is a key tailwind for Alkami.

Technological Edge and Strategic Expansion

Alkami's competitive differentiation is rooted in its core technology. The Alkami Digital Banking Platform is built on a single code base within a multi-tenant architecture, enabling rapid innovation and deployment. This structure supports over 300 real-time integrations with back-office systems and third-party fintech solutions, providing clients with extensive configuration options. The platform's design prioritizes user experience, scalability, and reliability, achieving 99.99% availability in 2024. Operational efficiencies derived from this architecture have contributed to a 26% reduction in hosting cost per user from its peak over the last three years and nearly 600 basis points of gross margin improvement since 2021.

Research and development investments are strategically directed towards enhancing this platform and expanding its capabilities. Key R&D priorities include improving onboarding and account opening, bolstering retail and commercial functionality, refining user experience and personalization, and strengthening core platform elements like scalability, extensibility, reliability, and data capabilities. To increase engineering capacity and drive future operating leverage, Alkami is establishing a captive offshore development center in India, with an expected investment of approximately $5 million during 2025. This initiative aims to support hundreds of Alkamists in the coming years and is anticipated to positively impact margins beyond 2026.

A pivotal strategic move reinforcing Alkami's technological leadership was the acquisition of MANTL, which closed on March 17, 2025, for approximately $375 million net of cash acquired. MANTL is recognized as a premier solution for onboarding and account opening across all channels (digital, in-branch, call center, relationship managers) and customer types (commercial, business, retail). Its core agnostic approach, integrating with over 20 different core systems, and its ability to automate onboarding processes with high efficiency (e.g., median retail account opening in 5 minutes vs. 15 minutes industry average, 85% automated decisions) were key attractions. This acquisition is intended to augment and diversify Alkami's single reportable segment, providing a highly complementary solution that solidifies Alkami's offering as a comprehensive digital sales and service platform combining onboarding, digital banking, and data/analytics. The minimal overlap between Alkami and MANTL's client bases (MANTL's base is ~70% banks, while Alkami's digital banking base is ~90% credit unions) presents a significant cross-sell opportunity, expected to drive future growth and competitive advantage.

Performance Reflecting Strategy and Market Tailwinds

Alkami's recent financial performance underscores the effectiveness of its strategy and the strength of market tailwinds. For the first quarter of 2025, the company reported total revenue of $97.8 million, a 28.5% increase compared to the same period in 2024. This growth was primarily fueled by a 13.0% increase in registered users (up 2.3 million year-over-year to 20.5 million) and an 18.1% increase in Revenue per Registered User (RPU) to $19.74. RPU expansion was driven by successful cross-selling of additional products to existing clients and the onboarding of new clients with a higher average RPU. The MANTL acquisition, which closed mid-quarter, contributed $1.4 million in revenue for the period from March 18 to March 31, 2025, and added approximately $1.80 to RPU in Q1 2025.

Gross margin improved to 59.0% in Q1 2025, up from 57.8% in the prior year, as revenue growth outpaced the increase in cost of revenues. Cost of revenues rose primarily due to higher costs from third-party partners and increased personnel costs, including stock-based compensation related to the MANTL acquisition. Operating expenses also increased across R&D, Sales & Marketing, and G&A, significantly impacted by acquisition-related expenses ($2.4 million) and stock-based compensation tied to the MANTL deal. Notably, the company recorded a $1.7 million loss on impairment of intangible assets related to certain historical MK Decisioning Systems assets as a result of the MANTL acquisition. Despite these investments and non-cash charges, Alkami achieved adjusted EBITDA of $12.1 million in Q1 2025, a significant improvement from $3.8 million in the year-ago quarter.

As of March 31, 2025, Alkami held $95.3 million in cash and marketable securities. The MANTL acquisition was funded through a combination of cash on hand, a $60.0 million borrowing on its expanded revolving credit facility (increased by $100 million to $225 million with maturity extended to Feb 2030), and the issuance of $345.0 million in 1.50% convertible senior notes due 2030. The company also entered into $33.9 million in capped call transactions to mitigate potential dilution from the convertible notes. While the accumulated deficit stood at $484.0 million, management believes existing liquidity and the credit facility are sufficient to fund operations and growth for the foreseeable future.

Competitive Landscape and Positioning

Alkami operates in a competitive market against a mix of players. Direct competitors include established core providers like Jack Henry & Associates (JKHY) and Fiserv (FISV), as well as other digital banking platform providers like Q2 Holdings (QTWO).

• Against Legacy Providers (JKHY, FISV): Alkami's cloud-native, multi-tenant architecture offers significant advantages in agility, innovation speed, and potentially lower operating costs for FIs compared to the often hybrid or less modern platforms of legacy players. While JKHY and FISV boast larger market shares and deep-rooted relationships, their slower adaptation to true cloud models can result in higher maintenance costs for clients and less efficient scaling. Alkami's focus on a superior user experience and integrated digital sales capabilities directly addresses areas where legacy systems often fall short, positioning Alkami favorably for FIs seeking a modern transformation.
• Against Digital Banking Peers (QTWO): Alkami competes more directly with companies like QTWO on platform features, user experience, and integrations. Alkami highlights its proprietary architecture and extensive integrations as key differentiators, enabling a broad product suite and thousands of configurations. While QTWO emphasizes API flexibility, Alkami's integrated suite aims for a more cohesive end-to-end experience. Alkami's recent market share gains, particularly becoming the number one digital banking provider in the credit union market by mobile users, demonstrate its competitive strength and ability to take share.
• Against Fintech Disruptors: While fintechs may offer specialized point solutions (e.g., payments, specific lending tools), Alkami's value proposition lies in providing a comprehensive, integrated platform that allows FIs to offer a wide range of digital services under their own brand, maintaining control and customer primacy. The MANTL acquisition further strengthens this by providing a best-in-class onboarding "front door" integrated into the broader platform.

Alkami's strategy to integrate onboarding, digital banking, and data/analytics creates a differentiated "digital sales and service platform." This allows FIs to leverage data insights to personalize interactions, streamline account opening and cross-selling, and drive revenue growth—a capability management believes will create significant space between Alkami and its competitors and improve win rates. The company's success in cross-selling add-on products (representing ~57% of new sales in Q1 2025, excluding MANTL) and achieving strong ARPU expansion demonstrates the effectiveness of its land-and-expand model and the value clients see in the broader product suite.

Outlook and Future Trajectory

Management expressed strong confidence in achieving the 2026 financial objectives outlined in late 2022, citing consistent execution, a robust pipeline, and the strategic benefits of the MANTL acquisition. For the second quarter of 2025, Alkami provided guidance for revenue between $109.0 million and $110.5 million, representing 33% to 35% year-over-year growth, and adjusted EBITDA between $9.0 million and $10.0 million (including a full quarter of MANTL's expected loss).

For the full year 2025, guidance projects total revenue in the range of $443.0 million to $447.0 million, implying 33% to 34% growth (25% to 26% organic growth). Adjusted EBITDA is guided to be between $49.5 million and $52.5 million. This full-year outlook incorporates an estimated $31.4 million in revenue contribution and a $5.0 million adjusted EBITDA loss from the MANTL acquisition (assuming a March 31 close). MANTL is expected to become accretive to adjusted EBITDA in 2026. MANTL's ARR under contract is projected to reach approximately $60.0 million by the end of 2025, representing a growth rate above 30%.

Key assumptions underpinning this outlook include continued organic user growth in the 14% to 15% range and ARPU expansion in the 6% to 8% range, driven by add-on sales and the higher RPU of new clients. Client churn is expected to remain low, with only 4 clients (less than 1% of ARR) anticipated to churn in 2025, primarily due to M&A. The investment in the offshore capability is expected to impact 2025 margins by approximately one point (within R&D) but contribute positively beyond 2026.

While the outlook is positive, investors should consider the risks associated with the company's increased indebtedness following the convertible notes issuance and revolver borrowing, including potential limitations on cash flow and the ability to service or repurchase debt. The accounting treatment of the convertible notes could also impact reported financial metrics. Furthermore, the successful integration of MANTL and the realization of anticipated cross-sell synergies are critical to achieving the full strategic and financial benefits of the acquisition.

Conclusion

Alkami Technology is executing a clear strategy to become the premier digital sales and service platform for community and regional financial institutions. By combining its robust, cloud-native digital banking platform with acquired capabilities in data analytics and, most significantly, MANTL's leading onboarding solution, Alkami is creating a differentiated offering designed to meet the evolving demands of FIs and their account holders. Strong recent financial performance, coupled with a confident outlook and strategic investments in technology and efficiency, underscore the company's momentum. While risks related to integration and financing exist, Alkami's competitive positioning, driven by its technological foundation and expanding product suite, positions it favorably to capitalize on the mandatory digital transformation underway in the financial services market. The path to achieving its 2026 profitability targets appears well-defined, making Alkami a compelling story for investors focused on the digitization of the financial sector.