Executive Summary / Key Takeaways

• MANTL Acquisition Creates a Land-and-Expand Powerhouse: The $393 million MANTL deal transforms Alkami from a digital banking provider into an integrated digital sales and service platform, combining onboarding, banking, and data analytics. This creates a 30% ARR uplift opportunity and positions ALKT to capture the entire customer lifecycle for financial institutions.

• Margin Inflection Is Materializing: Non-GAAP gross margins expanded nearly 100 basis points year-over-year to 63.7% in Q3 2025, driven by 26% improvement in hosting cost per user and implementation efficiency gains. Management expects to exit 2025 at a 65% gross margin run rate—ahead of their 2026 objective—demonstrating operational leverage is accelerating.

• Bank Market Penetration Accelerates: Alkami grew from 8 banks on its platform in 2021 to 42 banks under contract by end of 2024, with 13% of total clients now banks. The MANTL acquisition, with 70% of its client base in banks, provides immediate cross-sell opportunities and credibility in a market where Alkami previously had minimal presence.

• Cross-Sell Engine Drives Sustainable Growth: Add-on sales represented 45% of new bookings in 2024 (nearly doubling since 2021), while 44 clients now subscribe to both Alkami digital banking and MANTL onboarding (up from 15 at acquisition). This reduces customer acquisition costs and increases lifetime value, creating a self-reinforcing growth flywheel.

• Path to Profitability Is Clear but Levered: While ALKT posted a $14.8 million net loss in Q3 2025, adjusted EBITDA reached $16 million and operating cash flow was $26 million year-to-date (2.5x prior year). The $345 million in convertible notes from the MANTL acquisition creates financial risk, but management projects MANTL will be accretive to adjusted EBITDA starting in 2026.

Setting the Scene: The Digital Banking Imperative

Alkami Technology, founded in Delaware in August 2011, emerged with a singular mission: empower community and regional financial institutions to compete with megabanks through superior digital capabilities. The company initially focused on credit unions, where it now holds the number one position by mobile users. This credit union foundation provided a proving ground for Alkami's cloud-native, multi-tenant architecture, which enables rapid deployment and seamless updates across its client base.

The digital banking landscape has fundamentally shifted. As CEO Alex Shootman emphasizes, digital banking is "mandatory innovation" for regional and community FIs to compete with Chase (JPM) and Chime. This isn't discretionary spending—it's existential survival. The average age of credit union members skews older, creating urgent pressure to attract younger depositors who demand elegant, frictionless digital experiences. Meanwhile, banks face margin compression from high-cost promotional CDs and wholesale loans, forcing them to seek low-cost core deposits through superior digital channels.

Alkami's strategic evolution accelerated through a series of targeted acquisitions. The 2020 ACH Alert deal added fraud prevention capabilities. The 2021 MK Decisioning Systems acquisition strengthened onboarding and account opening. The 2022 Segmint purchase brought cloud-based data analytics and transaction cleansing. Each addition layered capabilities onto the core platform, but the March 2025 MANTL acquisition represents a quantum leap—transforming Alkami from a digital banking provider into a comprehensive digital sales and service platform that addresses the entire customer lifecycle.

Technology, Products, and Strategic Differentiation

Alkami's competitive moat rests on three integrated pillars: a proprietary cloud architecture, data-driven engagement tools, and the newly expanded onboarding capabilities from MANTL.

The Cloud-Native Foundation: Alkami's true multi-tenant architecture enables 99.99% platform availability—the company claims it's the only provider that includes maintenance windows in this calculation. Financial institutions cannot tolerate downtime, and Alkami's reliability becomes a switching cost for clients. The architecture also drives hosting cost efficiency, with cost per user improving 26% from its quarterly high-water mark over three years. This directly supports gross margin expansion, as platform investments improve implementation efficiency without requiring proportional cost increases.

Data and Marketing Analytics: The Segmint acquisition provides 50,000 descriptive data tags and AI predictive models trained on 18 billion core transactions. This allows FIs to create precise audience segments for targeted marketing, increasing cross-sell success and reducing churn. The attachment rate for Segmint reached 75% in 2025, meaning three-quarters of new clients adopt the data solution. This creates a virtuous cycle: more data improves model accuracy, which enhances client ROI, which drives higher revenue per user and stickier relationships.

MANTL's Onboarding Dominance: MANTL's premier SaaS solution for account opening serves as the "front door" for deposit originations, with a median retail account opening time of 5 minutes versus 15 minutes industry-wide, and business account opening of 8 minutes versus 3.5 hours. Critically, 85% of applications receive automated decisions. This speed and automation directly address the primary friction point where FIs lose potential customers. The integration with Alkami's digital banking platform creates a seamless experience: MANTL auto-registers users into digital banking, while Alkami's data analytics identifies abandoned applications for targeted marketing recovery.

R&D and Innovation: Alkami's India Global Capability Center, with over 110 "Alkamists" and targeting 150 by year-end, provides engineering capacity at lower cost while maintaining quality. The company released a new money movement hub, one-click SDK deployment in beta, and a prototype agentic code creator that builds tailored products. These innovations reduce time-to-market for new features and enable FIs to differentiate without custom development costs.

Financial Performance & Segment Dynamics

Alkami's Q3 2025 results demonstrate accelerating momentum across all key metrics. Total revenue grew 31.5% to $112.9 million, driven by SaaS subscription services at $107.9 million (95.5% of revenue). The MANTL acquisition contributed $11 million in the quarter, but organic growth remains robust at 22% for Q4 guidance.

Revenue Quality and Predictability: Annual Recurring Revenue reached $449 million as of September 30, 2025, up 31.3% year-over-year. The Remaining Performance Obligation stands at approximately $1.6 billion, representing 3.6 times ARR and a 25% increase from the prior year. Approximately 50% of this backlog will convert to revenue over the next 24 months, providing exceptional visibility. The average contract life is 70 months, indicating long-term client commitment.

User Growth and Monetization: Registered users on the digital banking platform reached 21.6 million, up 10.5% year-over-year. More importantly, Revenue Per User increased 18.8% to $20.83, driven by MANTL contribution and successful add-on sales. Excluding MANTL, RPU still grew 7% organically, showing pricing power and product adoption strength. In Q2 2025, approximately 400,000 new digital users were added, with 75% from existing clients and 25% from new implementations—demonstrating both retention and acquisition health.

Margin Expansion Trajectory: GAAP gross margin declined to 56.8% from 58.9% due to $3.6 million in MANTL-related intangible amortization. However, non-GAAP gross margin expanded nearly 100 basis points to 63.7%, reflecting true operational improvement. Management expects to exit 2025 at a 65% gross margin run rate, ahead of their 2026 objective. This expansion is structural, driven by hosting cost efficiency and implementation leverage, not one-time benefits.

Profitability Path: The $14.8 million net loss in Q3 reflects $56.3 million in stock-based compensation and $19.1 million in depreciation/amortization. Adjusted EBITDA of $16 million shows the underlying business is profitable when excluding non-cash items. Year-to-date operating cash flow of $26 million (2.5x prior year) demonstrates cash generation capability. The company ended Q3 with $91 million in cash and marketable securities, having reduced revolver debt to $25 million.

Segment Dynamics: The business operates as a single segment, but product line performance reveals the strategy's effectiveness. MANTL added 29 new clients in Q3 (15 new to Alkami), bringing year-to-date additions to 68 logos including 29 existing Alkami clients. This cross-sell velocity—materializing within six months of acquisition—exceeds management's expectations. Digital banking implementations hit a record 13 new clients in Q3, the most in company history, with 6 being banks. This bank penetration is critical for diversifying the historically credit-union-heavy client base.

Outlook, Management Guidance, and Execution Risk

Management's guidance reflects confidence in sustained growth and margin expansion. For Q4 2025, revenue guidance of $119.6-121.1 million implies 22% organic growth, a 200 basis point acceleration from Q3. Full-year 2025 revenue guidance of $442.5-444 million represents 33-34% total growth and 25-26% organic growth. Adjusted EBITDA guidance of $56-57 million represents a nearly $4 million raise at the midpoint.

MANTL Integration Timeline: MANTL is projected to reach approximately $60 million in ARR under contract by December 31, 2025, representing over 30% growth from 2024. While MANTL is dilutive to adjusted EBITDA margin by 190 basis points in 2025, management expects it to be accretive starting in 2026. This timeline is credible given the early cross-sell success: 44 clients now use both platforms versus 15 at acquisition, and the attachment rate for the full three-product suite (banking + onboarding + data) is building momentum.

Bank Market Expansion: Alkami's longer-term goal is to generate half of new logo wins from banks and half from credit unions, with 50% of total new sales derived from cross-sell activity. The pipeline remains balanced between banks and credit unions, with Q3 adding 4 banks and 6 credit unions. The MANTL acquisition accelerates this shift, as 70% of MANTL's client base consists of banks with minimal overlap with Alkami's predominantly credit union base.

Implementation Timing Dynamics: Management notes that quarterly growth rates can vary based on implementation scheduling. Q4 2025 will see approximately 350,000 more user implementations than Q4 2024, driving the step-up in organic growth. This creates a back-end loaded growth profile but provides confidence in the acceleration trajectory. The $67 million ARR backlog for implementation, with the majority expected to convert over the next 12 months, supports this outlook.

Talent and Platform Investment: The India Global Capability Center, expected to reach 150 employees by year-end, will concentrate expenses in Q3-Q4 2025 but drive long-term operating leverage. Platform investments in treasury management, money movement, and AI-powered development tools position Alkami to increase RPU and reduce client churn, which is modeled at 2-3% annually but historically outperformed.

Risks and Asymmetries

Indebtedness and Liquidity Risk: The $345 million in 1.5% convertible notes due 2030, combined with $25 million in revolver borrowings, creates financial leverage. While the company ended Q3 with $91 million in cash, the notes require careful management. The capped call transactions, costing $33.9 million, raise the effective conversion premium to 100%, reducing dilution risk. However, the company may be unable to raise funds to repurchase notes following a fundamental change, and interest expense will exceed cash payments due to amortization of debt discount.

Integration Execution Risk: The MANTL acquisition's success depends on realizing cross-sell synergies while maintaining MANTL's growth trajectory. The $1.7 million impairment loss on MK Decisioning Systems assets in Q3 2025 indicates some integration challenges. If Alkami fails to preserve MANTL's standalone brand strength and sales velocity, the projected 2026 EBITDA accretion may not materialize.

Competitive Pressure: Alkami's primary competitor is the incumbent provider—typically the core banking system's digital offering. Q2 Holdings (QTWO), Jack Henry (JKHY), and FIS (FIS) have entrenched relationships and greater scale. While Alkami wins on product depth and implementation speed, larger competitors can bundle services and leverage existing contracts. The risk intensifies if these incumbents accelerate their cloud-native development or acquire similar capabilities.

Market Adoption and Churn: While Alkami models 2-3% annual digital banking ARR churn and has historically outperformed, three clients left the platform in the last three quarters of 2025, representing less than 1% of ARR. However, two clients merged with existing Alkami clients, creating net user gains. If M&A activity slows or competitive pressure increases, gross churn could rise. Additionally, if financial institutions delay digital transformation projects due to economic uncertainty, new sales could decelerate.

Regulatory and Industry Disruption: JPMorgan's potential fees for consumer data access could impact Alkami's data aggregation capabilities, though management is monitoring industry reaction before adjusting strategy. FedNow adoption remains slow due to fraud concerns, and stablecoin winners are uncertain. These trends could delay revenue opportunities in real-time payments and crypto integration.

Valuation Context

At $21.27 per share, Alkami trades at an enterprise value of $2.52 billion, representing 7.55 times trailing twelve-month revenue of $333.85 million. This multiple sits between high-growth SaaS peers and mature financial technology providers, reflecting the company's transition from losses to profitability.

Peer Comparison: Q2 Holdings trades at 5.86x EV/Revenue with 53.37% gross margins and positive operating margins (5.46%), but slower growth. Jack Henry trades at 5.43x EV/Revenue with 43.54% gross margins and strong profitability (28.55% operating margin), but single-digit growth. FIS trades at 4.47x EV/Revenue with 36.65% gross margins. Alkami's 58.36% gross margin and 31% revenue growth justify a premium multiple, though its -11.19% operating margin reflects ongoing investment.

Cash Flow and Profitability Path: The price-to-operating cash flow ratio of 68.91 and price-to-free cash flow of 92.33 appear elevated, but cash generation is accelerating. Year-to-date operating cash flow of $26 million (2.5x prior year) and the trajectory toward positive adjusted EBITDA margins suggest these multiples will compress rapidly if the growth-profitability trade-off continues improving.

Balance Sheet Strength: With $91 million in cash and marketable securities, $25 million in revolver debt, and a $1.6 billion RPO providing revenue visibility, Alkami has adequate liquidity to fund operations and integration costs. The absence of near-term debt maturities reduces refinancing risk, though the convertible notes create potential dilution if the stock appreciates above the conversion price.

Unit Economics: The 31.3% ARR growth, combined with 18.8% RPU growth and 10.5% user growth, demonstrates strong unit economics. The 1.3x sales and marketing efficiency ratio (adding $64.8 million in ARR while spending $50.7 million in non-GAAP sales and marketing) ranks among the best in SaaS, indicating capital-efficient growth.

Conclusion

Alkami Technology has evolved from a credit union digital banking specialist into a comprehensive digital sales and service platform through strategic acquisitions, with MANTL representing the capstone that unlocks the full customer lifecycle. The investment thesis hinges on three critical variables: the successful integration of MANTL delivering 2026 EBITDA accretion, continued penetration of the bank market to diversify the client base, and sustained margin expansion from platform efficiency gains.

The company's 31% revenue growth, 63.7% non-GAAP gross margins, and accelerating cash generation demonstrate that operational leverage is materializing. Cross-sell momentum—44 dual-platform clients, 75% Segmint attachment rate, and 45% of new bookings from add-on sales—creates a sticky, high-value ecosystem that reduces acquisition costs and increases lifetime value.

However, the $345 million in convertible notes creates financial risk, integration challenges could disrupt MANTL's growth trajectory, and competition from entrenched incumbents remains fierce. The stock's 7.55x EV/Revenue multiple fairly reflects Alkami's growth-premium position but leaves little room for execution missteps.

For investors, the key question is whether Alkami can maintain its product velocity and cross-sell success while scaling the bank market presence. If management delivers on its 2026 profitability targets and MANTL achieves the projected $60 million ARR, the current valuation will likely prove conservative. If integration falters or competitive pressure intensifies, the margin of safety is thin. The next four quarters will determine whether Alkami's digital banking flywheel achieves sustainable, profitable scale.