Q4 2021 Alkami Technology Inc Earnings Call
Yeah.
Hello, and welcome to Alkermes first quarter 2021 financial results Conference call. My name is Adrian and I'll be your operator for today's call. At this time all participants are in a listen only mode. Later, we'll conduct a question and answer session. During the question and answer session. If you have a question. Please press Star then one on you touched on phone.
Please note. This conference call is being recorded and I'll turn the call over to Steve Calk, Steve you may begin.
Thank you operator with me on today's call are Alex Sherman, Chief Executive Officer, and Bryan Hill, Chief Financial Officer. During today's call. We may make forward looking statements about guidance and other matters regarding our future performance. These statements are based on management's current views and expectations and are subject to various risks and uncertainties. Our actual results may be materially different.
Our summary of risk factors associated with our forward looking statements. Please refer to today's press release and the sections in our 10-K entitled risk factors and forward looking statements. These statements made during the call are being made as of today and we undertake no obligation to update or revise any forward looking statements.
Also unless otherwise stated financial measures discussed on this call will be on a non-GAAP basis. We believe these measures are useful to investors in the understanding of our financial results. A reconciliation of comparable GAAP financial measures can be found in our earnings press release and in our quarterly filings with the SEC now I will turn the call over to Alex <unk>.
Dave.
Thank you all for joining us today for our fourth quarter 2021 earnings call.
I am pleased to report that we delivered strong performance both for the fourth quarter and the full year.
Brian will discuss the numbers in a few months, but let me give you some highlights.
In the fourth quarter, we grew revenue by 27%, which was ahead of our expectations. We exited 2021 with nearly $12 4 million loss registered users on the Akamai platform. This is up nearly 950000 sequentially and up nearly $2 7 million users.
Prior to the end of 2020.
In terms of sales.
The fourth quarter was the most successful in our 12 year history.
We closed 22, new logos during the quarter and remove five existing clients.
Estimate to our technology quality and support.
Huge shout out here to our alkermes for a job very well done.
I'm excited and grateful to be at alchemy, I've joined a great team with innovative technology and a vibrant culture.
So it's early November a small problem with clients prospects investors and employees and conversations with these stakeholders confirm that our strategy is sound.
Product portfolio is on target and our <unk>.
Dedication to our clients from deep in the values of the organization.
What about clients why they sell it to alchemy of consistently hubs for reasons.
First our market leading user experience.
I will use your experience reflects the design principles and integration expertise that is embedded in our product and engineering teams and this is validated by testimonials independent research.
Appstore ratings.
Okay.
Is the speed at which we bring new products to market. Our platform is built on a modern cloud technology principles. It's open extensible micro service based on multi tenant with rapid scalability and continuous integration delivery and deployment.
With this foundation, we can deliver what our clients are asking for.
The ability to compete with the most progressive Megabanks Neo banks and Tim talks in more markets.
Well in the fourth quarter alone we developed an early release, we delivered an early release of our all new mobile application, we launched clients on our new crypto product launched our integration of <unk>, which is a new fraud mitigation platform and launched our first client who was using salesforce as their primary core.
Third.
He has a proven track record of execution.
<unk> is one of the leaders in new digital banking users converted over the last several years and our client services organization continues to build a more predictable implementation experience with 28 clients going live during 2021.
38, digital banking platform implementations underway.
And we've done those despite a larger and more sophisticated product set that we offer just a few years ago.
Fourth is our commitment to deliver a complete solution through building partnering or making strategic acquisitions.
Our recent acquisition of MK decision now Alkermes digital account opening and loan originally loan origination solution demonstrates this commitment.
In Q4, we sold this solution to three digital banking platform clients already capitalizing on this great market opportunity.
Our customers are increasingly depending on alchemy to beat the platform on which they are delivering more of their own the end customer experience and we are committed to increasing the range of our portfolio.
We also continue to see a tailwind in a macro environment is beneficial to our clients.
The financial services market has been consolidating for some time now.
Activity in 2021 was at its highest level in more than a dozen years.
The financial institutions that we serve are the acquirers in this market and their digital user growth, which was 14% in 2021 is higher than the market average. This demonstrates the strength of their digital that the strength of our digital banking platform often informs both the strategy and the competitive position of these <unk>.
Yes.
Banks and credit unions in our target market do digital banking is core to their transformation and they need a partner to advance the innovation agenda, and we get alchemy are proud to be that partner.
Alchemy has built a great foundation and we are well prepared for our next phase of growth.
Since there are strong demand execution will be the key to our success.
All such alchemy will focus on five aspects of our business to drive growth over the next several years.
First we will become the digital banking provider of choice for banks, while maintaining our market leadership position with credit unions.
Regional and community banks want to quality alternative among digital banking providers.
Over the last few years, we've made significant product investments in our commercial banking offering and are now positioned competitively in this market.
Multiple new bank client client signings in 2021 demonstrate that alchemy can be a force in the bank market.
Our technology user experience product functionality client support and predictable deployment have made us a de facto leader in the credit Union market. In these same strengths will make us the leader in the bank market.
Second we will increase our focus on growing add on sales our client relationships are strong and they are asking us to provide them with more capabilities to serve this need our product portfolio has tripled in five years.
We've recently built in add on sales organization, and we will increase sales and marketing investment in this part of our business.
I'm pleased to announce that last week, we added call crossed the alchemy as chief revenue Officer.
<unk> is an experienced sales leader, who has had a significant impact it worked hard in a sense among other enterprise software providers.
Phone call for some time and I'm confident that Karl will help take alchemy into our next chapter of growth.
Third we will allocate increased investment to make our platform the foundation of our clients' technology portfolio.
A common theme from clients they expect alchemy deep deep digital banking platform for their fintech ecosystem.
They understand that there is cooperative.
With many of the innovators in their market given that no company can predict every winter and our fintech industry that has raised a $132 billion in 2021 alone.
Our customers want a platform that integrates with innovation with godless of origin.
And we are building that platform as evidenced by the nearly 1000 SDK submissions. We received in 2021, which is almost double what we received in 2020.
We envision a future in which the alchemy digital banking cloud enables wide ranging innovation for our customers.
Fourth we are strengthening our focus on talent.
The marketplace is competitive and there is increasing pressure across the industry to attract and retain talent.
As a young thriving company that is on the forefront of digital transformation. We believe we can compete effectively in the tablet market and view success in the talent market is a necessary investment in core to achieving our near and long term objectives.
I'm happy to announce that in Q4, we added Julie hoagland to the executive team as Chief Human Resource Officer, Julie has over 25 years of HR experienced some billing highly effective cultures at companies like Davita and H Belo she's.
She has already taken our talent acquisition and culture to the next level.
Fifth we will execute on our M&A strategy.
We have virtually unlimited opportunities to expand our portfolio and accelerate our expertise.
Although extensibility of our platform is critical to our strategy of allowing clients to connect with third parties that they're choosing there are circumstances, where it makes more sense for us to acquire companies to be able to shape. The development of the underlying functionality for the benefit of our clients.
As we continue to grow and improve our access to capital M&A will be a regular feature of our growth profile.
In closing.
I'm excited to be here and I'm confident that alchemy is the right strategy talent and technology.
In an attractive market as digital banking is a must have component for modern F. EIS and we will succeed by enhancing our business banking portfolio.
Vesting in sales marketing and <unk>.
Sales and marketing to support add on sales building out our platform capabilities developing our talent and remaining agile on the M&A front.
With that let me turn the call over to Brian . Thanks.
Thanks, Alex and good afternoon, everyone, our fourth quarter financial and operational execution was strong across the board I'll start with revenue in the fourth quarter, we achieved revenue of $42 4 million, which outperformed our financial guidance by $1 1 million and represented growth of 27% compared to the prior year.
This was driven by continued strong performance across all our primary revenue drivers, we implemented eight new logos in the quarter, bringing our digital platform client count to 177 compared to 151 in the prior year.
We exited 2021 with nearly $12 4 million registered users live on the platform nearly $2 7 million users or 28% compared to last year and almost 950000 more users in the third quarter 2021 digital user growth has been driven by <unk>.
Two areas over the last 12 months first we have implemented 2008 financial institutions supporting a $1 3 million digital users and second our clients have increased their digital user adoption by $1 4 million users or 14%.
For the fourth quarter, we implemented over 520000 users and digital user adoption within our client base increased nearly 430000 users.
We continue to drive cross sell and higher new client <unk> growing revenue per wide user to $13 68 per year, three 5% compared to the prior year quarter. This.
This compares to a blended market opportunity of over $50 per user inclusive of digital account openings for deposit and loan accounts subscription revenue grew 28% compared to the year ago quarter and represented 94% of total revenue.
We increased annual recurring revenue or <unk> by 32% and we exited 2021 at $169 million.
It is important to note. We also possess over $30 million at a or are in backlog for implementation over the next 12 to 15 months.
Our client sales team continued to build on their cross sell success and drove 21% of new sales in the fourth quarter and 24% for the full year. This team also renewed five clients during the fourth quarter and 12 for the full year.
We're very excited with the early success from our client sales team and expect this to be an area of continued investment.
And increased contribution.
Overall, we are very pleased with our revenue performance in 2021, and with an additional $2 $5 billion in addressable market related to the 8-K decision acquisition. We are now serving a tam of nearly $10 billion.
Turning to gross margin and profitability.
Our target operating model as non-GAAP gross margin of 60% to 65% as we scale our revenue.
We expect to achieve this at a pace of 200 to 300 basis points of gross margin expansion on average per year. For example, some years such as 2021 gross margin expansion might exceed our average objective. Conversely, other years may possess lower expansion, resulting from investment and M&A.
Activity on balance we expect to average 200 to 300 basis points of expansion as we progress to our target operating model for.
For the fourth quarter of 2021, non-GAAP gross margin was 57% compared to 58% in the year ago quarter, Let me unpack the primary drivers for you.
Okay decision acquisition was 90 basis points dilutive to our Q4 2021, non-GAAP gross margin and.
Additions during the fourth quarter of 2020, non-GAAP gross margin benefited from approximately one 8 million of one time client buyout revenue normalizing for both items non-GAAP gross margin expansion would have been 190 basis points for Q4 2021.
For the full year non-GAAP gross margin was 57% compared to 53% in 2020 expansion for the full year was driven primarily by revenue scale greater utilization and cost efficiencies in our client implementation client support and client success functions somewhat offset.
Set by higher costs associated with our third party revenue relationships.
Moving to operating expense as.
As a reminder, our goal is to balance investment opportunities with revenue growth and to maintain a good line of sight towards adjusted EBITDA positive, which we expect to occur as we exit 2023, we have a large market opportunity to address and recognize gaining market share at the sacrifice of near term profitability.
Is the correct trade off at this point in our lifecycle for creating shareholder value.
For the fourth quarter of 2021, non-GAAP R&D expense was $11 8 million or 28% of revenue a year ago R&D represented 32% of revenue the resulting margin expansion is primarily attributable to revenue scale.
non-GAAP sales and marketing expense was $5 9 million or 14% of revenue sales and marketing represented 12% of revenue a year ago.
The primary driver for the uptick is the return to pre pandemic sales activities and head count investments in strategic areas, such as our client sales team.
non-GAAP general and administrative expense was $11 6 million or 27% of revenue.
Last year G&A was approximately 25% of revenue the increase was primarily driven by incremental costs to support our growth and the addition of public company costs, such as higher business insurance, and adding new accounting Investor relations legal and human resource personnel.
Our adjusted EBITDA loss for the fourth quarter was $4 4 million.
Other than the high end of our expectations for full year 2021, our adjusted EBITDA loss was $22 million compared to $23 4 million in 2020.
Moving onto the balance sheet.
We ended the quarter with just over $308 million of cash on balance sheet, representing a $6 million net use of cash during the quarter.
We continue to see opportunities to use our balance sheet to accelerate technology growth and expand our addressable market through M&A.
We approach M&A was conservative guidelines around return on investment deal size and portfolio integration and we expect to continue this approach going forward are.
Our most recent acquisition M. K decision performed in line with our Q4 expectations. We continue to see strong growth in digital applications for both deposit and loan accounts.
Okay decision supports both on a single cloud based decisioning platform against financial institutions, the ability to offer additional products and enhance the onboarding experience as I discussed last quarter, you should view, okay decision as a purchase of technology required future investment during 2022.
We address the market opportunity.
Okay decision added approximately $1 million to our adjusted EBITDA loss in the fourth quarter of 2021, and we expect will contribute approximately $5 million to our adjusted EBITDA loss in 2022.
Now turning to guidance.
For the first quarter of 2022, we're providing guidance for revenue in the range of 43 million to $44 million and adjusted EBITDA loss of $5 5 million to $4 5 million.
For full year 2022, we're providing guidance for revenue in the range of $188 million to $192 million and an adjusted EBITDA loss of 21 million to $18 million. The full year. Adjusted EBITDA guidance includes the impact from M. K decision previously discuss.
And moderate pressure on wages, resulting from an increasingly competitive environment for recruiting and retaining talent and area of focus key to our success in 2022 and beyond.
It is important to note that since our revenue is primarily subscription based and there is a nine to 12 months implementation cycle between new logos, signing and revenue recognition nearly 95% of expected 2022 revenue is already under contract.
Revenue variability results from implementation timing and the velocity of in year add on sales, which possesses a much shorter implementation cycle.
To summarize our fourth quarter was the most successful in our 12 year history. We closed 22, new logos during the quarter, we made significant strides in cells implementations technology infrastructure and human capital, all while expanding our Tam and accelerating our competitive position in the marketplace.
Yes.
With that I'll hand, the call to the operator for questions.
Thank you well now begin the question and answer session.
Have a question. Please press Star then one on your Touchtone phone.
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And our first question comes from Andrew Schmidt from Citi. Your line is open.
Hey, everyone. Thanks for taking my question and welcome again, Alex and Steve Good to have you.
First question on the just for.
For Alex if I could ask about the you know as you.
Think about the platform coming on board.
And I know you mentioned looked at this in your prepared remarks, but are there areas. You think you could double down on new areas that you think you'd get into from a product perspective, just curious.
You push the bids for fresh eyes.
How you think about the product portfolio today and going forward. Thanks.
Thank you very much this is Alex.
To your question, what things as exciting to me.
As I mentioned in my prepared remarks is that the product portfolio itself has tripled.
Over the last couple of years and so an area that we will increase investment.
Is is in our sales and marketing effort.
To bring those products to the existing customer base. So thats for me an area of of.
Clear investment.
Got it thank you for that and then maybe one for Brian .
Could you help us out sorry, if I missed this.
They use your backlog at the end of the quarter and then when we should expect it to come into the base from a timing perspective. Thanks.
No that's great. Thanks, Andrew for the question.
As Alex mentioned in his prepared comments I mean, we have 38, new logos in flight and the 38, new logos represent one three little more than $1 3 million users.
During 2022, we expect 33 of those will implement but you have to think of the sales rhythm throughout the year and given the majority of the new logo sales that took place we are in the back half of the year with a very high concentration in Q4, given we had a very successful Q4 youll see a similar type.
<unk> trend and implementations with more of a back half 2022 year heavy implementation cycles. So each quarter of 2022, there will be more implementations in terms of users than the previous sequential quarter.
<unk>.
Alright, I'll jump back in the queue good quarter guys. Thank you very much.
Your next question comes from Bob Napoli from William Blair. Your line is open.
Got it thank you.
Hey, good afternoon could you talk to you again Steve.
Steve Bryan.
Nice to see you.
User additions.
The.
Mix I know, Alex you talked about banks being one of your five.
Key themes, if you would or areas of focus.
What do you what's the mix of fee.
New logos added <unk>.
The mix in the backlog if you could just give some color around that and then I think.
On the last call you had discussed at the revenue per user for the bank users was much higher than for credit unions. If you could give some color.
That is why it would be helpful.
This is Alex I know that Brian ask answer a little bit of the specifics, but it's pretty neat to me about.
Business banking market, and we're making investments in the product too.
To continue to build out the competitive nature of our product offering and what's great is we have got the bank market. We can go into but we're also increasingly seeing as the credit unions are trying to attract business banking customers as well so the product investment for us helps both.
In terms of our historic.
Our strong position in credit unions and then it also helps us in the competitiveness in the in the bank market and then Brian I'll, let you.
Answer some of the specifics in the question.
Yes, Bob good good talking to you again I. Appreciate the question. So presently we have 13 banks under contract and of those 13 banks. None of those are alive. So we have four and our implementation backlog, but more importantly, when you look at our sales pipeline, we now have close to $35.
6% of ourselves pipeline that is supported by new bank.
New logo opportunities so.
We're very encouraged by that.
Also whats key with the banks that we have that are in the implementation cycle or and then in <unk>.
<unk> motion several of those are on new core integrations and as you know Bob once you integrate to a new core that opens up a full new market for you. So again, we're very excited about the progress we're making banks in that in terms of the core integrations that are underway.
Thanks.
Thank you and then just.
You went through the business model, Brian just.
And just thoughts on the growth of revenue per user.
Over the next few years to get those users and revenue per user kind of model.
That you're focused on.
Long term debt.
Right. So you know our long term growth objective is staying above 25% organic growth on a long term basis, we expect 20% of that to come from user growth, whether it's new logo or whether it's from our clients growing their users and then about 5% coming from <unk>.
Expansion keep in mind, when our existing clients grew their users they are adding users at a much lower <unk> than our overall average and so that results in a bit of a headwind in <unk> expansion ARPA expansion comes from a couple of different areas, one of which is cross sell activity, which.
We're seeing an increasing amount of our total contract value that we've originated coming from cross sell activities. So that's encouraging for US Secondly, we're also seeing each year for the last three years as a individual cohort more products and higher <unk> associated with that new sales cohort for.
<unk> in 2021, our clients average our new clients average around 16 products and $20 of <unk>.
Great. Thank you.
And your next question comes from Sterling Auty from J P. Morgan.
Yeah. Thanks, Hi, guys. So wondering in.
From just the very high level when you look at the strength in demand in the quarter, what's kind of the key pain points that youre seeing customers looking to solve and how durable do you see that demand be as you look out over the course of 2022, especially in the face of rising interest rates.
Yes. Thanks.
This is alexey.
When we sit down and speak with brand new customers, who are making a decision.
The thing that they're trying to accomplish is to have.
A more digitally friendly.
The platform for their end customers to use.
So their end customers are increasingly getting younger.
Their end use their end customers are used to having much more of a.
B to C type experience in the rest of their digital lives and they want their bank to give them that same type of experience and so one of the reasons why we feel like we continue to be successful is that we reliably have.
One of the best if not the best user experiences from a product perspective, if you look at.
App ratings, if you look at testimonials and so from our perspective, the market really starts to come our way as financial institutions have to deliver a more modern more user friendly banking experience.
They're going to they're going to pick a company like alchemy to be their partner.
Gotcha, and then Brian you talked about the add on sales at renewal time.
Skewed towards the end of the year any additional color as to what you experienced in particularly which modules has the most traction in terms of that add on sale.
Sterling there is there isn't a common theme on.
One particular add ons, so being pushed over another I mean generally what happens and what we experience is there is a core group of.
Eight to nine products that are typically on every new logo account.
And then depending on the bank strategy and with the bank or credit Union is presently.
Obtaining from their existing digital banking platform there will be additional products that are added just to match the capability.
Those are always different.
And so the add on sell motion is driven by what the individual needs are of each financial institutions. So it's hard to pull out a single thing, but having said that when we do see traction its typically when we rollout a new product for example, we're seeing a lot of demand generation around our crypto.
Product, where we partnered with <unk>.
We've seen some demand generation being built around <unk>, which is a new security product that we've offered and so there is typically some buzz that we'll see whenever rolling out something new because we're putting marketing plans and things of that nature behind it and pushing those products, but outside of that.
It just depends on the strategy and the goals of the financial institution.
Outside of our top.
6% to seven.
We adopted products the adoption rate drops quite a bit creating a very large white space for us to go after as we're trying to expand <unk> and increase the <unk>.
<unk> success of our client sales team, maybe one just a little color commentary on top of that this is not.
But 10000 company data set we've got a customer advisory board.
<unk>.
We will ask them what are the things that are most interesting to them.
In their business right now in three things come up across that customer Advisory Board. One is what alternatives can they have to.
To BNP other buy now pay later the second is what new innovations are coming from a fraud perspective, and then third is what investments can we continue to make.
To create a.
More extensible platform that they can plug and play different innovations that are that are coming into market. So three things that we hear from that advisory board or be NPL is.
It is an area of interest for them fraud is an area of interest for them and our continued investment in our platform.
Great. Thank you.
And your next question comes from <unk> Tandon from Needham Your line is open.
Thank you good evening.
Alex It's Brian I was just curious as you have mentioned the 22, new logo wins, which was very impressive this quarter could you talk about competition in that context in terms of are you seeing better win rates is just the market that dynamic where that's really boosted the fourth quarter sales, maybe some sort of underlying trends around competition would be helpful.
Before we get to before we entered the competition part of this question.
Let me just provide a little bit of color for the new sales and how they came in during the year.
We had mentioned in our Q2 call and our Q3 call as the earlier months of the pandemic resulted in lower new opportunity creations, which then as they worked their way through the sales cycle that resulted in.
Softer new sales and what we were wanting in the first half and even in some respects to the third quarter of 2021, but we also mentioned was that recovered.
The new opportunities recovered in the first half of 2021, we felt good demand build as we were approaching the third quarter and we were expecting a strong Q4 as a result of what we were seeing in the marketplace and as you mentioned in 'twenty two.
New logos, that's very impressive is the largest in company history.
Our fourth quarter, new sales were up about 60% a little bit more than 60% over the prior year. So saw lots of success in the fourth quarter now as we roll into 2022 as you would expect.
Your sales pipeline.
You have to rebuild from the success that you had in the fourth quarter, but what we're seeing and feeling is there shouldn't be.
The same level of drop off in Q1 that we've experienced in other years.
Albeit Q4 was a it was a very very high quarter for us in terms of new sales. So.
So with that.
As we proceed through 2022, we're expecting.
Similar type of demand and I'm, not suggesting we're putting up 22, new logos each quarter, what I'm, suggesting is year over year, we should experience.
Still strong growth as we're tracking through the year in terms of new sales and maybe what I would add to it. It's it was.
Our best competitive win rate in almost a couple of years.
I got an opportunity great the great part about airplanes flying again is.
Many of these clients came to our Plano headquarters and we got to spend one and two days together.
So I was fortunate to be able to spend a lot of time with prospects that became clients in the quarter.
<unk> single one of these situations is competitive there is not a situation we get into that it's not competitive.
And the wind teams for alchemy are pretty consistent.
First the best product wins.
And so the investment that we make in the product investment that we make to create a great cut.
Customer experience is one of the main reasons why customers.
By Alchemy. The second is this is a very dynamic market, where there's a lot changing and customers are looking for a company.
That can that can get technology out the door quickly that can build and release.
Software on a continuous basis and so the second reason that I heard from customers that they wanted to do business with alchemy is they had confidence that we have the ability to allow them to stay competitive with the larger banks in the industry or or brand new fintech in the industry and then <unk>.
Finally, we've got a significant investment in our in our client success organization and the customers experienced the entire client success organization and the culture of that organization and the desire that that organization has to help them be successful they realize that they're not just buying a product. They are also buying a company.
And so for me the customers that I got to visit with that were all competitive.
The reason why they chose alchemy is we have the best product, we have the ability to get product to market faster than anybody else.
We have a really good.
Support service organization that that helps them get live on the product.
That's very helpful perspective, thank you so much.
And our next question question Pat.
Well from JMP Securities I'm, sorry with Wesbanco.
Hi, This is Tim so non per pad.
Think about the tradeoff between growth and profitability in 2022 in particular can you talk more about the wage pressure you mentioned and if you're starting to see any signs of easing.
Hey, Aaron.
I appreciate the question and Pat's absence.
Our thoughts today as we mentioned on the call.
As the market opportunity is significant.
We're one of the more successful companies and growing our user base, which directly contributes to our revenue model and we believe that we can create.
More significant shareholder value by gaining market share and growing topline revenue, but with that we also believe that a balanced approach over time.
Makes the most sense and therefore, we have our target operating model that suggests that we will be at a 60% to 65% gross margin over the next two to three years with an eye on 25% plus adjusted EBITDA margin.
A bit longer than that so we're balancing current investment and future investment with an eye towards continuing to grow the top line north of 25%.
Then with a view of becoming adjusted EBITDA positive as we exit 2023, and reaching a 25% plus gross.
Our adjusted EBITDA margin rather.
At some point in the future.
Got it. Thank you very much and then Alex now that you're three months into your time as CEO can you help us understand your top two personal strategic priorities for the remainder of 2022.
Yes. This is as I stated, we're pretty clear on our investment areas.
We're going to we're going to focus on having the best business banking product out there.
To invest in sales and marketing to help us grow our add on sales, we're going to continue to build out our platform capability because our customers are basically telling us that they want their digital banking application to be a broader platform upon which they are running more and more of their business.
We're going to have the most talented software company and so we're going to invest in.
In the talent in the organization.
And there are a lot of pretty amazing M&A opportunities that we have to build out the reach and range of our.
Of our company. So those are the those are the focus areas for us.
Got it thank you.
And your next question comes from Josh Beck from Keybanc.
Yes.
Okay.
Thank you for taking the question I had a little bit more of a financial.
<unk>, maybe for you Brad.
Ryan, but just kind of.
Remind us.
What's driving the delta between revenue growth and.
<unk> growth and maybe how we should think about some of those trends as we model out.
2022.
It's the timing of implementation and if we have one time revenue items, such as what we had in Q4 2020.
Our growth is really our primary focus.
If you look at 2020 to the low end of our guidance through the high end of our guidance that would suggest a R. <unk> growth for the year will be in the 25% to 27% range, which is a bit ahead of the revenue growth.
That's being driven in large part by the back half concentration of new logo implementation and what can influence that during the year as the the the motion and timing of add on sales because an add on so implement as much quicker than a new logo typically its a 90 to 120 day.
<unk> cycle for an add on so.
Very helpful.
Thank you. Thank you for the color there and.
You talked about the win rate there Alex.
Best I believe you said it a couple of years you obviously went through some.
Some of the finer points around the.
The product.
Really.
Kind of similar differentiation.
I'm curious about.
Do you feel like just being public obviously.
Only with banks that vary.
Kind of a high bar for for the vendors they work with they weren't great transparency.
That process has been.
Public.
Maybe a little bit of a break.
Boost you get from that.
Helpful. It in any way.
I haven't been in several software companies.
Look it doesn't hurt right it doesn't hurt to be up to be a public software company and so I certainly think that that gives you a.
But it gives you.
Some equal amount of credibility, but at the end of the day customers are making a decision based upon.
Their brand how they want to represent themselves to their customers, what's going to make them more competitive.
And they pick the best product and the best company and so we've got to win we've got to win that battle.
More than anything else. So it may give us a little bit more credibility, but we still have to have the best product and the best service and the best culture to win.
And I'd add a couple of comments to Alex's response.
Okay.
We're dealing with financial institutions, I mean, our end market.
Financial.
<unk> and what's important to them outside of what Alex has spoken to about the best product and the best product wins, but the financial profile.
The conversations I had with CFO .
Pre IPO versus the conversations with cfos of prospects and clients post IPO, it's very different because now we have greater access to capital we have more capital on balance sheet.
We have sufficient capital on balance sheet.
It's necessary to reach free cash flow positive.
Which is about $40 million to $50 million of our 309 or $308 million of cash.
Cash on balance sheet. So so those conversations are very different and I believe that the cfos of prospects of or even.
Lions, they like the aspect of us having greater reach into the capital markets to fund our business.
Great.
Thanks, Jim.
And our last question comes from Bob Napoli from William Blair. Your line is open.
Thank you for the follow up.
You had mentioned I think a couple of times Alex.
Is it your customers are asking for a buy now pay later products and <unk> products.
Are you planning on.
Are you building those products organically.
Are you partnering with other firms that provide those products.
The answer is both and <unk>.
Just the other day I got to see.
As a early version of some technology that we've created around the MK decision product.
One of our customers intends to use as their <unk> offering.
Okay. So no.
Organically on that product and the product will still we will we will partner with people as well, but as I was saying I got to see the other day and early version. So this is not something that we've taken to market, but an early version, where we've taken our MK decision technology.
And it is serving as the foundation for our BNP offering for.
For one of our customers and Bob that's that's really one of our core strategies, we want to build out our platform either through partnering or through acquisition and then also obviously organic development, we don't necessarily want to always pick the winner for each of our clients, even though we think when we organically built.
A product it is a best in class product in the market, but we want to have a platform that is flexible and extensible that allows our clients to choose.
The solution that they desire to use and then we want to be able to bring that to market very quickly, which is a huge competitive differentiator for us.
Thank you and then on the M&A front it sounds like you're very active.
What products and what.
Yes.
I guess youre looking for technology, primarily.
But is that is that correct youre looking primarily for Florida.
Technology add ons and what areas do you see the most interest in.
I guess should we expect the size of M&A transactions to be similar to engage decision good day could it be much larger.
Yes, so ilmenite just fits into our product strategy and how we're going to deliver products to the market again, we can either partner by our organically developed so we don't want to eliminate for any specific area of focus.
It's more driven by our product roadmap in terms of size.
K decision was.
Again more of a.
Technology purchase without a large install base of clients.
I wouldn't point to M K decisions say that.
The typical acquisition because if we can buy a best in breed point solutions fits into either security or marketing automation or one of those types of areas of interest for us.
Then if it comes with an installed base, that's great, but it needs to meet our financial profile, meaning in terms of long term contracts are accretive to our growth rate accretive to our gross margin fits in with them.
All the financial objectives that we have but a great solution that we can bring to market very quickly and one that's desirable by the end market.
Thank you appreciate it.
Okay well this is Alex Thank you all for joining us and look forward to updating you next quarter.
Thank you ladies and gentlemen, this concludes today's conference. Thank you for participating.
Disconnect.
Okay.
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