Q1 2024 Alkami Technology Inc Earnings Call

Okay.

Operator: Good afternoon, ladies and gentlemen, and welcome to the Alkami Technology first quarter 2024 financial resorts conference call. At this time, all lines are in a listen-only mode.

Speaker Change: Good afternoon, ladies and gentlemen, and welcome to the Yelp Alchemy technology first quarter 'twenty 'twenty four financial results conference call. At this time all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session.

Operator: Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. I'd like to turn the conference over to Steve Calk, Vice President of Investor Relations. Steve, go ahead.

Speaker Change: At any time during this call you require immediate assistance. Please press star zero for the operator.

Speaker Change: I'd like to turn the conference over to Steve talk Vice President of Investor Relations. Steve Go ahead.

Steve Calk: Thank you, operator. With me on today's call are Alex Shootman, Chief Executive Officer, and Brian 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.

Steve: Thank you operator with me on today's call are Alex Shoopman, 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.

Steve Calk: For a summary of risk factors associated with our forward-looking statements, please refer to today's press release and the sections in our latest 10-K entitled Risk Factors and Forward-Looking Statements. Statements made during the call are being made as of today, and we undertake no obligation to update or revise these 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. The reconciliation of the comparable GAAP financial measures can be found in our earnings press release and in our filings with the SEC. I'd now like to turn the call over to Alex. Thank you.

Steve: For a summary of risk factors associated with their forward looking statements. Please refer to today's press release and the sections in our latest 10-K entitled risk factors and forward looking statements statements made during the call are being made as of today and we undertake no obligation to update or revise these statements also unless otherwise stated financial measures discussed on this call will be on a.

Steve: non-GAAP basis, we believe these measures are useful to investors in the understanding of our financial results a reconciliation with the comparable GAAP financial measures can be found in our earnings press release and in our filings with the SEC and now like to turn the call over to Alex. Thank you, Steve and thank you all for joining us today.

Alex P. Shootman: Thank you, Steve, and thank you all for joining us today. I am pleased to report another quarter of strong performance. In the first quarter of 2024, we grew revenue 27% and delivered $3.8 million in adjusted EBITDA, both above the high end of our expectations. We ended Q1 with 18.1 million live registered users on the Alkami platform, up 3 million compared to Q1 2023. Our results are a combination of being in a vibrant market and continuing to execute on our priorities.

Alex P. Shootman: I am pleased to report another quarter of strong performance.

Alex P. Shootman: In the first quarter of 'twenty 'twenty, four we grew revenue, 27% and delivered $3 $8 million and adjusted EBITDA, both above the high end of our expectations.

Alex P. Shootman: We ended Q1 with 18.1 million law registered users on the alchemy platform.

Alex P. Shootman: 3 million compared to Q1 2023.

Alex P. Shootman: Our results were a combination of being in a vibrant market.

Alex P. Shootman: Continuing to execute on their priorities.

Alex P. Shootman: Since our last earnings call, I've had 32 face-to-face client meetings in four different regions of the country, and common themes emerged across those conversations. First, we are in a growth market. Second, our clients are seeing the benefits from our platform investment. Third, there's a large opportunity for our data platform to drive AI. And fourth, multiple opportunities exist, long-term, for outcomes. Today, the average US adult has 1.9 financial accounts, which represents almost 480 million user accounts.

Alex P. Shootman: Since our last earnings call I've had 32 face to face client meetings in four different regions of the country and common themes emerged across those conversations.

Alex P. Shootman: First we were in a great market.

Alex P. Shootman: Second our clients are seeing the benefits from our platform investments.

Alex P. Shootman: Third there is a large opportunity for our data platform to drive AI.

Alex P. Shootman: And fourth multiple opportunities exist long term for alchemy.

Alex P. Shootman: That's up from 1.65 accounts per adult or 370 million users at the time of our IPO. User accounts are growing, and our clients have a growth mindset. Every client I met with has a growth strategy. Some are growing geographically. Some are establishing virtual beachheads.

Alex P. Shootman: Today, the average U S. Adult has 1.9 financial accounts, which represents almost 480 million user accounts.

Alex P. Shootman: That's up from 1.65 accounts per adult or 370 million users at the time of our IPO.

Alex P. Shootman: User counts are growing and our clients have a growth mindset.

Alex P. Shootman: Every client I met with hazard growth strategy.

Alex P. Shootman: Some are growing geographically similar establishing virtual beachheads, others are extending into commercial banking, we're building certain types of loans specialties, but they are all thinking about growing not playing defense.

Alex P. Shootman: Others are extending into commercial banking or building certain types of loan specialties. But they are all thinking about growing, not playing defense. A lot gets written about the contraction of regional and community financial institutions, but the reality is the number of FIs has contracted by a consistent 3% per year over 30 years, which means there'll still be over 6,000 institutions a decade from now. Our clients tend to be at the top of the food chain and are the ones consolidating. When a merger happens, they don't merge with another FI who has the same customers as they do. So consolidation generally means seed growth for Alkami.

Alex P. Shootman: A lot gets written about the contraction of regional and community financial institutions, but the reality is the number of F. EIS has contracted a consistent 3% per year over 30 years.

Alex P. Shootman: Which means they'll still be over 6000 institutions a decade from now.

Alex P. Shootman: Our clients tend to be at the top of the food chain and all of the ones consolidated with.

Alex P. Shootman: What a merger happens they don't merge with another F. I, who has the same customers as they do so consolidation generally mean seat growth for alchemy.

Alex P. Shootman: Not only are user counts growing, but in a steady Alkami commission through an independent third party in January, we found the number of FIs open to switching digital banking providers is up year over year. 58% of regional and community financial institutions say they are open to switching digital banking. That's up from 52% in 2023.

Alex P. Shootman: Not only our user counts growing but in a steady alchemy Commission through an independent third party in January we found a number of F. EIS openness switch digital banking providers is up year over year.

Alex P. Shootman: 58% of regional and community financial institutions say they are open to switching digital banking providers, that's up from 52% in 2023.

Alex P. Shootman: And this is a comparison among the regional and community financial institutions within our ideal client profile. In addition, in that same study, 90% of banks and 89% of credit unions said they were optimistic about their financial future over the next 18 months, and 67% of banks and 72% of credit unions anticipate increases in their technology budgets in 2024. Our business is growing because we serve a market that is growing with clients who have a growth mindset.

Alex P. Shootman: And this is a comparison among the regional and community financial institutions within our ideal client profile.

Alex P. Shootman: In addition in that same study 90 per cent of banks and 89% of credit unions said they were optimistic about their financial future over the next 18 months and 67% of banks and 72% of credit unions anticipate increases in their technology budgets in 2024.

Alex P. Shootman: Our business is growing because we serve a market that is growing with clients who have a growth mindset.

Alex P. Shootman: Every client I met with recognizes that we are making improvements in areas that are important to them through our platform investment. One of the most critical attributes of a digital banking platform is that it runs 24 by 7 and has amazing performance. Over the last year, we've improved uptime by over 50 hours, eliminated downtime for major releases, achieved over a 99% crash-free rate on a mobile application, increased our quality by 17%, and delivered a 4x improvement in application response time, all while growing our user count to over 18 million and reducing our cost per user. But now the fun really begins.

Alex P. Shootman: Every client I met with recognizes we're making improvements in areas that are important to them through our platform investments.

Alex P. Shootman: Well one of the most critical attributes of a digital banking platform is that it runs 24 by seven it has amazing performance.

Alex P. Shootman: Over the last year, we'd improved upon by over 50 hours eliminated downtime for major religion releases achieved over a 99% crash free rate on a mobile application increased our quality by 17% and delivered a forex improvement in application response time, all while growing our user accounts.

Alex P. Shootman: Over $18 million and reducing our cost per use it.

Speaker Change: But now the fun really begins.

Alex P. Shootman: With our platform investments, we are adding capabilities that will allow our clients to differentiate in their market. The Alkami platform will add broad-based observability, product usage telemetry, new messaging architectures, timestamp data lake functionality, and an API-centric developer mindset type of interoperability. We are going to deliver to our clients the type of platform that only megabanks have been able to bring to market, and we will do it while continuing to drive the economics associated with our scale. In the majority of my client meetings, at some point in time, I get the question, Hey Alex, what should we be doing with AI?

Speaker Change: With our platform investments, we were adding capabilities that will allow our clients to differentiate in their market.

Speaker Change: The alchemy platform will add broad based observed ability product usage telemetry, new messaging architectures timestamp data lake functionality and an API centric developer mindset type of interoperability.

Speaker Change: We are going to deliver to our clients the type of platform that only mega banks had been able to bring to market.

Speaker Change: We'll do it while continuing to drive economics associated with their scale.

Speaker Change: And the majority of my client meetings at some point in time I got the question.

Speaker Change: Alex what should we be doing with AI.

Alex P. Shootman: I remind our clients that while it really was exciting when Gen AI burst onto the scene at the end of 2022, they've been using AI for quite some time. And in evaluating their AI strategy, they need to remember that AI is made up of two parts: data and models. Data is fuel for AI, and for AI to run well, data needs four characteristics. It must be cleansed, maintained, normalized, and curated.

Speaker Change: I will remind all clients that well it really was exciting when Jenny I burst onto the scene at the end of 2022, they've been using AI for quite some time.

Speaker Change: And in evaluating your AI strategy, they need to remember that AI is made up of two parts data and models.

Speaker Change: Data as a fuel for AI and for AI to run well data in each four characteristics. It must be clans maintained normalized and curated.

Alex P. Shootman: The Alkami data platform has these four characteristics at scale. Our data platform contains 29 million deposit accounts with 20 billion historical transactions, and about 20 million new transactions are added each day. The nature and scale of our data platform allows our clients to apply AI in achieving their business outcomes. The performance of this part of our business mirrors research we've completed, which shows that siloed data sets tie as the top barrier to regional and community financial institutions adopting AI, along with security and regulatory concerns.

Speaker Change: The alchemy data platform has these four characteristics at scale or.

Speaker Change: Our data platform contains 29 million deposit accounts with 20 billion historical transactions and about 20 million new transactions were at it each day.

Speaker Change: The nature and scale of our data platform allows our clients to apply AI and achieving their business outcomes.

Speaker Change: The performance of this part of our business mirrors research, we've completed which shows that silo datasets ties as the top barrier to regional and community financial institutions, adopting AI, along with security and regulatory concerns.

Alex P. Shootman: Our clients recognize that good data drives good AI, which is driving growth for Alkami. From a model perspective, Alkami has a classification model that drives customer insights to build a targeted list of account holders, and a predictive model that identifies daily shifts in financial patterns to predict account holders' financial behaviors and needs. This predictive model is used by FIs to identify account holders most likely to stay, grow, and adopt new products. Customer insights and targeted offers consistently rank among the top digital banking AI use cases being activated in regional and community financial institutions today.

Speaker Change: Our clients recognize that good data drives good AI, which is driving growth for alchemy.

Speaker Change: From a model perspective alchemy has a classification model that drives customer insights to build targeted list of account holders at a predictive model, which identifies daily shifts and financial patterns to predict account holders financial behaviors and needs.

Speaker Change: This predictive model is used by <unk> to identify account holders most likely to stay grow and adopt new products.

Speaker Change: Customer insights and targeted offers consistently rank among the top digital banking AI use cases being activated in regional and community financial institutions today.

Alex P. Shootman: This makes sense given our research shows 44% of all digital banking users and 55% of millennials wish their financial provider offered a more personalized digital banking experience, with half saying they're comfortable with their data being processed by AI if it gave them a better banking experience.

Speaker Change: This makes sense given our research shows 44% of all digital banking users.

Speaker Change: 55% of millennials wish their financial provider offer with more personalized digital banking experience with half, saying, they're comfortable with their data being processed by AI. If it gave them a better banking experience.

Alex P. Shootman: The clients I met with agree that in the near term, the use cases they will pursue will be models based upon transaction data for fraud and personalized offers, and models based upon text or other unstructured content for customer support and employee productivity. We believe the Alkami data platform is a differentiator and can become a major long-term growth contributor for Alkami. In addition to the clients I met with in the spring, I got to see several hundred more at our annual conference held near Dallas, April 8 through the 10th.

Speaker Change: The clients I met we agree that in the near term the use cases, they will pursue will be models based upon transaction data for fraud and personalized offers.

Speaker Change: <unk> models based upon text or other unstructured content for customer support and employee productivity.

Speaker Change: We believe the alchemy data platform is a differentiator and it can become a major long term growth contributor for alchemy.

Speaker Change: In addition to the clients are met within the spring I got to see several hundred more at our annual conference held near Dallas April eight through the 10.

Alex P. Shootman: We had the largest event in our history, with over 800 attendees, which is a 26% increase over last year. As evidence that digital banking is a strategic topic for financial institutions, 30% of client and prospect attendees were in executive roles, with 60% of these being business roles, such as CEOs, CMOs, and CFOs. The other 40% were in technical roles, such as CIOs and Chief Technology Officers.

Speaker Change: We had the largest event in our history with over 800 attendees, which was a 26% increase over last year.

Speaker Change: As evidenced the digital banking is a strategic topic for financial institutions.

Speaker Change: 30% of our client and prospect attendees were in executive roles with 60% of these being business roles such as C. E O Cmos cfos.

Speaker Change: The other 40% were in technical roles, such as CIO and Chief Technology Officer.

Alex P. Shootman: The strength of demand in our market was demonstrated by a 50% increase in qualified prospect pipeline at our conference compared to last year. A few exciting parts of the conference included our first-ever hackathon, where developers from our client and partner communities created new and innovative digital banking products and services over two days, demonstrating the investments we're making in opening up our platform. We had a standing room only women in banking event with close to 150 attendees.

Speaker Change: The strength of demand in our market was demonstrated by a 50% increase in qualified prospect pipeline at our conference compared to last year.

Speaker Change: A few exciting parts of the conference included our first ever Hackathon, where developers from our client and partner community has created new and innovative digital banking products and services over two days demonstrating the investments, we're making in opening up our platform.

Speaker Change: We had a standing room only women in banking event with close to 150 attendees.

Alex P. Shootman: And our marketing team pulled off an amazing celestial coordination as the skies over Dallas cleared out for an eclipse viewing event. In closing, All of the client interaction I've had over the last couple of months has reinforced my belief in the potential of our company to continue to grow at a healthy pace for many years. Our clients like us as a company. They like our culture, and they like what our software does for their customers and members. They know there's no turning back. Everything in their operation is up for reinventing, digitizing, and transformation. And they like to have a partner they can trust to work with.

Speaker Change: And our marketing team pulled off an amazing celestial coordination.

Speaker Change: Sky's over Dallas cleared out for an eclipse viewing event.

Speaker Change: In closing.

Speaker Change: All of the client interaction I've had over the last couple of months is reinforced reinforced my belief in the potential of our company to continue to grow at a healthy pace for many years.

Speaker Change: Our clients like us as a company they like our culture.

Speaker Change: And they like what our software does for their customers or members.

Speaker Change: They know there's no turning back.

Speaker Change: Everything in their operation is up for reinventing for digitizing and transforming and they like to have a partner they can trust to work with.

Alex P. Shootman: If we invest in broadening our product portfolio, it will give Alkami the opportunity to participate in areas beyond digital banking, which makes me very bullish on the long-term growth prospects for Alkami. To position ourselves for our long-term potential, in 2024, we'll maintain our focus on the priorities I outlined at the beginning of the year, will continue to invest in client satisfaction, will build upon the momentum we're experiencing, and will maintain our excellence in launching new clients.

Speaker Change: If we invest in broadening our product portfolio.

Speaker Change: They will get alchemy, the opportunity to participate in areas beyond digital banking, which makes me very bullish on our long term growth prospects for alchemy.

Speaker Change: To position ourselves for a long term potential in 'twenty 'twenty four will maintain our focus on the priorities I outlined at the beginning of the year.

Speaker Change: We will continue to invest in client satisfaction will build upon the momentum we're experiencing banks well.

Speaker Change: We're maintaining our excellence in launching new clients.

Alex P. Shootman: And we will invest in the leadership infrastructure necessary to support our growth. It's really exciting to start the year with a great quarter and get so much customer interaction that reinforces the strength of our market. And it's reassuring to see the level of execution that's happening across Alkami. Thank you to all the Alkamis that keep our clients as our North Star. Thank you to our clients that trust us with their business.

Speaker Change: And we will invest in the leadership infrastructure necessary to support our growth.

Speaker Change: It's really exciting to start the year with a great quarter and get so much customer interaction that reinforces the strength of our market.

Speaker Change: And it's reassuring to see the level of execution that is happening cross alchemy.

Speaker Change: Thank you to all the alkermes to keep our clients says the Northstar, thanks to our clients that trust us with their business.

Alex P. Shootman: And thank you to our investors who continue to partner with Alkami as we build great software. We will keep putting in the work, because this industry deserves to have good technology. I'll now hand the call over to Brian.

Speaker Change: Thank you to our investors, who continue to partner with alchemy as we build a great software company.

Speaker Change: We will keep putting them to work.

Speaker Change: Because this industry deserves to have good technology now.

Speaker Change: Now I'll hand, the call over to Brian.

Brian Hill: Thank you, Alex, and good afternoon, everyone. During the first quarter of 2024, we continued to deliver strong financial results and continued to see healthy demand in our sales pipeline for both new clients and additional products among our existing clients. For the first quarter of 2024, we achieved total revenue of $76.1 million, which represents year-over-year growth of 27%. Subscription revenue also grew 27% and represented approximately 96% of total revenue. We increased ARR by 26% and exited the quarter at $303 million. We currently have approximately $52 million of ARR and backlog for implementation, the majority of which will occur over the next 12 months.

Brian: Thank you Alex and good afternoon, everyone. During the first quarter of 'twenty 'twenty four we continued to deliver strong financial results and continue to see healthy demand in our sales pipeline for both new clients and for additional products among our existing clients for.

Brian: For the first quarter of 'twenty 'twenty four we achieved total revenue of $76 1 million, which represents a year over year growth of 27%.

Brian: Subscription revenue also grew 27% and represented approximately 96% of total revenue were.

Brian: We increased <unk> by 26% and exited the quarter at $303 million. We currently have approximately $52 million of AOR and backlogs limitation, the majority of which will occur over the next 12 months.

Brian Hill: We implemented eight new clients in the quarter, bringing our digital banking platform client count to 244. We now have 42 new clients in our implementation backlog, representing 1.3 million digital users. We exit the quarter with 18.1 million registered users live on our digital banking platform, 600,000 more digital users than year-end 2023, and up 3 million or 20% compared to last year. In the last 12 months, we implemented 38 financial institutions supporting 1.5 million digital users.

Brian: We implemented eight new clients in the quarter, bringing our digital banking platform client count to 244, we now have 42, new clients, our implementation backlog, representing $1 3 million digital users.

Brian: We exited the quarter with 18.1 million registered users live on our digital banking platform 600000, digital users higher than year end, 2023, and a $3 million or 20% compared to last year over.

Brian: Over the last 12 months, we implemented 38 financial institutions supporting 1.5 million digital users. In addition, our existing clients increased their digital user adoption by $1 5 million users in terms of churn.

Brian Hill: In addition, our existing clients increased their digital user adoption by 1.5 million users. In terms of churn, we did not experience any digital banking client churn over the last 12 months, and we expect to lose three clients in 2024, representing less than 1% of ARR. This compares to our expected long-term average churn of 2 to 3 percent.

Brian: We did not experience any digital banking client churn over the last 12 months and we expect to lose three clients in 2024, representing less than 1% of our R. <unk>.

Brian: This compares to our expected long term average churn of 2% to 3%.

Brian Hill: We ended the quarter with an RPU of $16.71, which is 5% higher than last year, driven by add-on sales success and the addition of new clients who tend to onboard with a higher average RPU. We continue to see healthy demand across our product portfolio. Our first quarter of 2024 new sales performance outpaced 2023 by over 20%. We signed six new digital banking platform clients, and our add-on sales effort represented over 50% of new sales for the quarter.

Brian: We ended the quarter with an RP you of $16.71, which is 5% higher than last year driven by add on sales success and the addition of new clients, who tend to onboard with our higher average ARPA you.

Brian: We continue to see healthy demand across our product portfolio.

Brian: Our first quarter of 2024, new sales performance outpaced 2023 by over 20%.

Brian: We signed six new digital banking platform clients and our add on sales effort represented over 50% of new sales for the quarter.

Brian Hill: For the first quarter of 2024, our data insights and marketing, fraud protection, customer service, and financial wellness product categories led adoption among our clients. In addition to add-on sales, our client sales team is responsible for client contract renewals. We expect to renew 30 or more client relationships in 2024. During the first quarter of 2024, we renewed six client relationships, including our largest client, a top 10 U.S. credit union.

Brian: For the first quarter of 2024, our data insights and marketing for our protection customer service and financial wellness product categories led adoption among our clients.

Brian: In addition to add on cells. Our client sales team is responsible for client contract renewals, we expect to read a 30 or more client relationships in 'twenty 'twenty four during the first quarter of 'twenty 'twenty four we renewed six client relationships, including our largest client a top 10 U S credit Union.

Brian Hill: And finally, our remaining purchase obligation reached $1.2 billion, representing four times our ARR and 32% higher than a year ago. Now, turning to Gross Margin. For the first quarter of 2024, NIGAP's gross margin was 61.7%, representing 360 basis points of expansion when compared to the prior year quarter. Gross margin expansion resulted from an improvement in our hosting cost per registered user combined with operating leverage across our post-sale operations. Moving to Operating Expenses.

Brian: And finally, our remaining purchase obligation reached one 2 billion, representing four times, our a R R and 32% higher than a year ago.

Brian: Now turning to gross margin.

Brian: For the first quarter of 2024, non-GAAP gross margin was 61, 7%, representing 360 basis points of expansion when compared to the prior year quarter.

Brian: Gross margin expansion resulted from improvement in our hosting cost per registered user combined with operating leverage across our post sale operations.

Brian: Moving to operating expenses for the first quarter of 2020 for operating expenses of $43 6 million or 57, 3% of revenue represented operating leverage of 680 basis points.

Brian Hill: For the first quarter of 2024, operating expenses of $43.6 million, or 57.3% of revenue, represented operating leverage of 680 basis points. Operating leverage was led by R&D and G&A, where we continue to realize operational scale. Related to R&D, we continue to invest in our platform while scaling this expense category. Investment focus areas include initiatives to drive quality and cost efficiency of the platform, expand our product offering, improve extensibility, and enhance the product market fit of our commercial banking offering.

Brian: Operating leverage was led by R&D and G&A, where we continue to realize operational skill.

Brian: Related to R&D, we continue to invest in our platform while scaling this expense category investment focus areas include initiatives to drive quality and cost efficiency of the platform expand our product offering and prove extensibility and enhance the product market fit of our commercial banking offering Ashford.

Brian Hill: As for non-GAAP sales and marketing expenses, we continue to achieve a high level of sales team productivity and go-to-market efficiency. For the last 12 months, we increased our ARR by $63 million while investing $44 million in sales and marketing, representing an efficiency ratio of 1.4 to 1 for ARR creation to sales and marketing investment. We believe this ranks among the best in SAS in terms of sales and marketing efficiency.

Brian: non-GAAP sales and marketing expenses, we continue to achieve a high level of sales team productivity and go to market efficiency for the last 12 months, we increased our AUR or $63 million, while investing $44 million in sales and marketing representing an efficiency ratio of one four to one.

Brian: One for our.

Brian: Our our creation to sales and marketing investment we believe this ranks among the best in SaaS in terms of sales and marketing efficiency move.

Brian Hill: Moving to profitability, we are pleased with our progress since becoming Adjusted EBITDA positive in the third quarter of 2023. Our Adjusted EBITDA for the first quarter was $3.8 million, which is better than the high end of our expectations. Now, moving to our balance sheet and liquidity. We ended the quarter with just under $90 million of cash and marketable securities. Our revolving credit facility remains undrawn and provides $60 million of borrowing capacity. We produced positive operating cash flow that exceeded last year by approximately $11 million. Now, turning to Gaia.

Brian: Moving to profitability, we were pleased with our progress since becoming adjusted EBITDA positive in the third quarter of 2023, our adjusted EBITDA for the first quarter was $3 8 million, which is better than the high end of our expectations.

Brian: Now moving to our balance sheet and liquidity.

Brian: We ended the quarter with just under $90 million of cash and marketable securities a revolving credit facility remains undrawn and provides $60 million of borrowing capacity.

Brian: We produced positive operating cash flow that exceeded last year by approximately $11 million.

Brian: Now turning to guidance for the second quarter of 2024, we are providing guidance for revenue in the range of 85 million to 82 million, which represents 22% to 25% total revenue growth and 26% to 28% subscription revenue growth.

Brian Hill: For the second quarter of 2024, we're providing guidance for revenue in the range of $80.5 million to $82 million, which represents 22% to 25% total revenue growth and 26% to 28% subscription revenue growth. As regards adjusted EBITDA, we are providing guidance in the range of $2.8 million to $3.8 million. For full year 2024, we are providing guidance for revenue in the range of $328.5 million to $333 million, representing total revenue growth of 24% to 26% and subscription revenue growth of 26% to 28%.

Brian: Weighted to adjusted EBITDA, we are providing guidance in the range of $2 8 million to $3 8 million.

Brian: For full year 2024, we are providing guidance for revenue in the range of $328 5 million to $333 million, representing total revenue growth of 24% to 26% and subscription revenue growth of 26% to 28%.

Brian Hill: We are also providing adjusted EBITDA guidance of $20.5 million to $23.5 million. Because of the impact of expense timing, such as our client conference, we expect the second quarter to be the low point of our adjusted EBITDA performance in 2024. In closing, I'm very pleased with our continued execution, both operationally and financially. We're demonstrating growing success in the market and continued discipline in managing our operating costs and investment. We remain on track to cross over our 65% gross margin and 20% adjusted EBITDA margin objectives in 2026, all while establishing Alkami as the premier digital banking provider in the marketplace. With that, I'll now hand the call over to the operator for questions.

Brian: We are also providing adjusted EBITDA guidance of 25 million to $23 5 million because of the impact from expense timing such as our client conference. We expect the second quarter to be the low point of our adjusted EBITDA performance in 2024.

Brian: In closing I am very pleased with our continued execution, both operationally and financially we're demonstrating growing success in the market and continued discipline in managing our operating costs and investments we remain on track to crossover or 65% gross margin and 20% adjusted EBITDA margin objectives in <unk>.

Brian: 26, all while establishing alchemy as the premier digital banking provider in the marketplace with that I'll now hand, the call over to the operator for questions.

Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the number one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number two. If you are using a speakerphone, please lift the handset before pressing any key.

Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session.

Speaker Change: Should you have a question. Please press star followed by the number one on your Touchtone phone, you'll hear a prompt that your hand is being raised should you wish to decline from the polling process. Please press star followed by the number too.

Brian: Using a speaker phone please lift the handset before pressing any keys.

Operator: One moment while we compile our roster. Your first question comes from the line of Patrick Walravens from Citizens JMP. Please go ahead.

Brian: One moment, while we compile our roster.

Brian: Your first question comes from the line of Patrick <unk> from <unk> JMP. Please go ahead.

Patrick D. Walravens: Oh, great. Thank you very much. So Alex, I have a question for you.

Patrick: Oh, great. Thank you very much.

Alex P. Shootman: Thank you so much for that. The introduction and the tone of business and what's driving it. That was super helpful. One thing you made kind of later in your remarks was about the investments that you've made to open up the platform. Can you talk about that a little bit more? What are they and what's driving them?

Patrick: So Alex question for you. Thank you so much for that introduction.

Patrick: Has the tone of business or what's driving that that was super helpful. One thing one comment you made kind of later in your remarks was about the investments that you've made to open up the platform.

Patrick: When you talk about that a little bit more what what are they and what's driving that.

Alex P. Shootman: Yeah, it's two things, Pat. Today we have APIs into the platform, and we have a software development kit or an SDK. And the feedback that we've gotten from our customers is that they like being able to access the platform both through the APIs and through the SDK, but they found that the way that we supported the SDK was too fragmented for them across the company, and the process by which they would provision the SDK was challenging.

Patrick: Yeah, its two things Pat.

Patrick: Today, we have API into the platform and we have a software development kit or SDK.

Patrick: And the feedback that we had gotten from our customers is they like being able to access the platform both through the API and through the SDK, but they found that.

Patrick: The way that we supported the SDK, whereas.

Patrick: Was too fragmented for them across the company.

Patrick: And the process by which they would provision the SDK was challenging and so we rebuilt the entire provisioning process of the SDK and we built a developer site as well that's got the consolidation of <unk>.

Alex P. Shootman: And so we rebuilt the entire provisioning process of the SDK, and we built a developer site as well that's got the consolidation of all of the ways that they would find code snippets, and get access to help and support with respect to the SDK. And so that's an area that we worked on. Longer term, from an API perspective, there are things that we're doing in the platform that will make the entire platform more API-centric.

Patrick: All of the ways that they would find coach slippage.

Patrick: Get access to <unk>.

Patrick: To help and support with respect to the SDK and so so that's an area that we.

Patrick: That we've worked on.

Patrick: We longer term from an API perspective.

Patrick: There's things that we're doing in the platform that will make the entire platform more a more API centric so rather than just.

Alex P. Shootman: So rather than just having a set of APIs that you can use, the APIs would... would allow for more access into the application to allow customers to do various different things that they'd like to do. So think of the second piece as the final transformation of Alkami into an API-centric platform.

Patrick: Having a set of Apis that you can use.

Patrick: The API is wood.

Patrick: Would allow for more access into the application to allow customers to to do various different things that they'd like to do so think of think of the second piece is.

Patrick: Our final transformation of alchemy into an API centric platform.

Patrick D. Walravens: Right. Okay, great. Thank you. And then, Brian, can I ask you, so 600,000 net ads in Q1, how should we think about that throughout the rest of the year?

Speaker Change: Right. Okay, great. Thank you and then Brian can I ask you. So 600000 net adds in Q1, how should we think about that throughout the rest of the year.

Brian Hill: You should think about user growth in 2024 to be reflective of the same user growth that we had in 2023 in terms of the quarters. Across Q2, Q3, and Q4, it'll be a little bit lower in the second quarter compared to Q3 and Q4, and then Q3 and Q4 will be somewhat even. But for the full year, we'll have user growth in terms of implementations comparable to what we had in 2023.

Brian: Yes, you should think about user growth in 2024 to be reflective of the same user growth that we had in 2023 in terms of the quarters across Q2, Q3 and Q4 it'll be.

Brian: Little bit lower in the second quarter.

Brian: Compared to Q3, and Q4, and then Q3 and Q4 would be somewhat even.

Brian: But for the full year, we'll have user growth and in terms of implementations.

Brian: Comparable to what we had in 2023.

Patrick D. Walravens: Okay, great. Thanks very much.

Speaker Change: Okay, great. Thanks very much.

Operator: Your next question comes from the line of Mayank Tandon from Needham. Please go ahead.

Mayank Tandon: Your next question comes from the line of My AG Tandon from Needham. Please go ahead.

Mayank Tandon: Thank you. Good evening, Alex and Brian. Congratulations on the quarter.

Mayank Tandon: Thank you good evening, Alex and Brian Congrats on the quarter. So Alex I think the slide on page five is very helpful. I just wanted to dive into that a little bit more so as we look at that base of.

Speaker Change: 210 million users with the legacy providers or how fast would you expect to capture that market and realistically do you have a number in your mind that you could share with us in terms of how much you think you can penetrate.

Speaker Change: Portfolio that you have today with your products.

Alex P. Shootman: So, Alex, I think the slide on page five is very helpful, and I just wanted to dive into that a little bit more. So if we look at that base of 210 million users with the legacy providers, you know, how fast would you expect to capture that market? And realistically, do you have a number in mind that you could share with us in terms of how much you think you can penetrate the portfolio that you have today with your products?

Mayank Tandon: Yeah. So the way that we think about our growth algorithm as we expect to grow users between 18, and 20% a year end user growth.

Brian Hill: So, the way that we think about our growth algorithm is that we expect to grow users between 18 and 20 percent a year, and user growth is the result of 50 percent coming from implementation, so new client cells, and the remaining 50 percent coming from our existing base. Our existing base today is growing about 10 percent. And then the other side of our growth algorithm is ARPU expansion, and ARPU expansion is occurring from us bringing on new clients with more products and a richer RPU, as well as cross-selling into our base additional products, because today our clients only possess about 13 products on average when we have 32 products to sell them. So, you should expect between 5 and 7 percent ARPU expansion from quarter to quarter.

Mayank Tandon: As a result of 50% coming from implementation, so new clients cells and the remaining 50% coming from our existing base. Our existing base is growing about 10% and then the the other side of our growth algorithm as <unk> expansion and ARPA expansion is occurring from us.

Mayank Tandon: Bringing on new clients with more products and a richer RP you as well as cross selling into our base additional products because today our clients only because that's about 13 products on average when we have 32 products to sell now so you should expect between five and 7% <unk> expansion from quarter to quarter.

Mayank Tandon: Great. Thanks for that, Brian.

Speaker Change: Great. Thanks for that Brian and then as a quick follow up I wanted to just get an update on your success in the bank space I think in the past you've shared some metrics around your pipeline how much of that breakdown between banks versus credit Union. So if you could give us an update your progression there and that has resulted in any kind of change to your go to market.

Mayank Tandon: <unk> to drive that success.

Alex P. Shootman: And then, as a quick follow-up, I wanted to just get an update on your success in the bank space. I think in the past, you've shared some metrics around your pipeline, how much of that breaks down between banks versus credit unions. So could you give us an update on your progression there, and if that's resulted in any kind of change to your go-to-market strategy to drive that success?

Speaker Change: No. So our sales force the way that were ranged go to market as our sales reps are really pretty strong and adept at selling both into a credit union as well into our bank clients. So at this point.

Brian Hill: Now, so our sales force, the way that we're arranged to go-to-market, our sales reps are really pretty strong and adept at selling both to a credit union as well as to a bank client. So at this point, our go-to-market rhythm, there's no change in that.

Brian: Our go to market rhythm, there's no change in that but just to step back as it relates to banks.

Speaker Change: There's really four areas that we're focused on.

Brian Hill: But just a step back as it relates to banks, there are really four areas that we're focused on. The first area is that we need to ensure that we have strong product market fit. And as we mentioned on our last quarterly call, we had a third party come in, evaluate our product against the market, and the view was that we could cover 92% of the businesses in the United States that are utilizing a treasury management platform.

Speaker Change: The first area is we need to ensure that we have strong product market fit and as we mentioned on our last quarter call. We had a third party come in and evaluate our product against the market.

Speaker Change: And the view was that we could cover 92% of the businesses in the United States that are utilizing a treasury management platform. So we have pretty strong product market fit the second area is around core integrations and today we have.

Brian Hill: So we have pretty strong product market fit. The second area is around core integrations. We have 16 clients and a backlog that are banks. We have 15 that are live, and they represent about seven core integrations. So by the end of the year, in 2024, we're going to implement in total 13 banks, and we'll have multiple core integrations with each bank that we integrate into. So that's a proof point for us as well.

Speaker Change: 16 clients in backlog that are banks, we have 15 that are alive and they represent about seven core integration. So by the end of the year 2024, we're going to implement and totaled 13 banks and will have multiple core integration.

Mayank Tandon: With each core that we integrate into.

Mayank Tandon: So that's that's a proof point for us as well.

Brian Hill: Third, we need market awareness. We need greater brand recognition as it relates to commercial banking in the space. And if you look back over the last 12 months, we've competed in about 70 commercial bank RFPs, and our win rate is in, you call it, the mid-teens as it relates. So we're making progress in being out in the number of deals that are being presented to the market now. It's a push to use core integrations and product market fit to drive a higher win rate.

Mayank Tandon: Third we need market awareness, we need greater brand recognition as it relates to commercial banking.

Mayank Tandon: In the space and if you look back over the last 12 months. We've competed in about 70 commercial bank Rfps and our win rate is in you call. It the mid teens as it relates so we're making progress and being out in the number of deals that are being presented to the market now it's a push to use core integrations and <unk>.

Mayank Tandon: Product market fit to drive a higher win rate and then finally it.

Brian Hill: And then finally, it's about having additional resources internally at Alkami from a product, from a client success, from an implementation perspective that truly move well and interact well with commercial banks because we have a legacy and a history of credit unions. And we have a couple of new hires that we'll be announcing over the next 30 to 45 days for individuals who have accepted positions that will help when we announce those roles.

Mayank Tandon: It's about having additional resources internally our committed from a product from a client success from an implementation perspective that truly.

Mayank Tandon: You'll move well and inner act well with commercial banks, because we have a legacy and a history of credit unions and we have a couple of new hires that.

Mayank Tandon: We'll be announcing over the next 30 to 45 days for individuals who have except positions that will help.

Mayank Tandon: When we announced those roles.

Brian Hill: It'll show our commitment and investment in the space. So we feel like we're making a lot of progress on those four foundational areas that will ultimately result in our goal of having about 50% of the new clients we win each year coming from banks by 2026. Very helpful. Thanks.

Brian Hill: It'll evidence our commitment and investment in the space. So we feel like we're making a lot of progress on those four foundational areas that will ultimately result in our goal of having about 50% of the new clients, we win each year coming from banks by 2026.

Mayank Tandon: That's very helpful. Thanks, Brian.

Speaker Change: That's very helpful. Thanks, Brian.

Mayank Tandon: Okay.

Operator: Your next question comes from the line of Jacob Stephan from Lake Street. Please go ahead.

Mayank Tandon: Your next question comes from the line of Jacobs Stefan from Lake Street. Please go ahead.

Jacob Michael Stephan: Yeah, hey guys, congrats on the quarter. Maybe just touching on kind of that win rate that you referenced. I think last quarter, last call, you had mentioned it kind of came down as a result of taking more shots on goal. But maybe you could just kind of give us a sense for how that's been trending kind of since the last call here. And then, I guess, into 2024.

Brian Hill: Yeah, Hey, guys congrats on the quarter.

Jacob Michael Stephan: And maybe just touching on kind of that win rate that you referenced I think last quarter. You last call. You had mentioned that kind of came down as a result of taking more shots on goal, but maybe you could just kind of give us a sense for.

Jacob Michael Stephan: How that's been trending kind of since the last call here.

Jacob Michael Stephan: I guess into 2024.

Brian Hill: Yeah, I mean, the way that we evaluate win rates is we evaluate it over a longer continuum of time in any one quarter. And we've consistently been in the mid-teens, you know, kind of executing in the mid-teens level as it relates to banks, compared to credit unions, where we're in more like the mid-30s in terms of win rates on a historical basis, you know, looking at 12-month periods of time. We feel that, again, by 2026, we can push our win rate to be more commensurate with the credit union space with success in the four areas that I just outlined in my last question.

Alex Shootman: Yeah, I mean, the way that we evaluate when rates as we evaluated over a longer continuum at the time of any one quarter and we've been consistently on a trailing 12 month basis being in the mid teens kind of executing in the mid teens level as it relates to banks compared to credit unions, where we're in more like the mid thirty's.

Brian Hill: In terms of win rates on a.

Brian Hill: On a historical basis.

Brian Hill: Looking at 12 months periods of time, we feel that again by 2026, we can push our win rate to be more commensurate with the credit Union space with success in the four areas that I've just outlined on the last question.

Brian Hill: Okay.

Jacob Michael Stephan: Okay, got it. And I guess maybe the 1.4 times, you know, sales efficiency, kind of ARR divided by sales and marketing expenditures, you know, obviously, that's nice, that's high, but maybe you could just kind of touch on a question, you know, why wouldn't you spend more if you're kind of with getting that such high efficiency rate?

Speaker Change: Okay got it and I guess, maybe the 1.4 times sales efficiency.

Jacob Michael Stephan: Our divided by sales and marketing expenditures.

Jacob Michael Stephan: Obviously.

Jacob Michael Stephan: Nice.

Jacob Michael Stephan: But maybe you could just kind of touch on.

Jacob Michael Stephan: A question you know why why don't you spend more if youre kind of getting that.

Jacob Michael Stephan: Such high efficiency rate.

Alex P. Shootman: The great thing about our market is that customers are very well known, and there's a lot of data about them. You know, if you think about markets where you have to spend a lot of money on sales and marketing, it's either because you're trying to stimulate the market, you've got a product that's a new product or a new concept, and you have to stimulate demand, or the market is very, very large, and you have to be found by people that have a need. The great thing for us is we don't have to do either one of those things in terms of the regional and community financial institution market. Digital banking is a known solution. People have always had it.

Jacob Michael Stephan: The great thing about our market is that the customers are very well known and there is a lot of data about the customers.

Alex P. Shootman: If you think about markets, where you have to spend a lot of money on sales and marketing it's either.

Alex P. Shootman: Because youre trying to stimulate the market you've got to you've got a product that's a new product or a new concept and you have to stimulate demand.

Alex P. Shootman: Or the market's very very large and you have to be found by people that have a need.

Alex P. Shootman: The great thing for US is we don't have to do either one of those things in terms of the regional community financial institution market.

Alex P. Shootman: Digital banking is a.

Alex P. Shootman: Is a known solution people have it it's a budget line item, so you're not having to spend sales and marketing dollars to stimulate demand and then the great thing about this market is.

Alex P. Shootman: It's a budgeted line item, so you're not having to spend sales and marketing dollars to stimulate demand. And then the great thing about this market is that, because it's regulated, there's a tremendous amount of information that's published about all of the financial institutions. What that results in is our ability to create territories that are pretty precise in terms of when people are going to be coming up on their contracts, and it allows us to spend marketing dollars that are very precise.

Alex P. Shootman: Because it's regulated there is a tremendous amount of information that's published about all of the financial institutions. What that results in is our ability to create territories that are pretty precise in terms of when people are going to be coming up on their contract and it allows us to spend market.

Alex P. Shootman: In dollars that is that's very precise so for us to all of a sudden double our sales and marketing expense.

Alex P. Shootman: So for us to all of a sudden double our sales and marketing expense, we don't think it would be prudent because of the nature of the market itself. And so the nature of the market allows us to maintain the spend envelope that we have on sales and marketing and still drive the business performance that we have.

Alex P. Shootman: We don't think would be prudent.

Alex P. Shootman: Because of the nature of.

Alex P. Shootman: The market itself and so the nature of the market allows us to maintain the spend envelope that we have on sales and marketing and still drive the business performance that we have and I'll make a couple more comments to what Alex just how he just answered.

Brian Hill: and I'll make a couple more comments on what Alex just said and how he just answered. You know, we are investing more in sales and marketing. I mean, we're growing sales and marketing just at or slightly below our revenue growth rate, and we expect to maintain between 14 and 15 percent of revenue for sales and marketing.

Brian Hill: We are investing more in sales and marketing.

Brian Hill: We're growing sales and marketing just at or slightly below our revenue growth rate and we expect to maintain a between 14 and 15% of revenue for sales and marketing, but what that really does for US is that allows us to then take the sales and marketing dollars, we otherwise would have invested in.

Brian Hill: But what that really does for us is it allows us to then take the sales and marketing dollars we otherwise would have invested in and allocate those to our platform, and that really provides more value for the end market. It provides more value for our client base versus, you know, spending more, investing more heavily in sales and marketing. And that's the way that companies always approach go-to-market: the best platform wins. And by having a very efficient sales and marketing ratio and result allows us to invest more in our platform.

Brian Hill: And allocate those to our platform.

Brian Hill: And that really provides more value for the end market. It provides more value for our client base versus.

Brian Hill: Spending more or investing more heavily in sales and marketing and that's the way. The companies always approach go to market is best platform lens and by having a very efficient sales and marketing.

Brian Hill: Our ratio and result allows us to invest more in our platform.

Jacob Michael Stephan: Okay, yeah, no, that's helpful. I appreciate it.

Speaker Change: Okay, Yeah, no that's helpful. I appreciate it.

Speaker Change: Best of luck guys.

Jacob Michael Stephan: Okay.

Operator: Your next question comes from the line of Alexei Gogolev from J.P. Morgan. Please go ahead.

Jacob Michael Stephan: Your next question comes from the line of Alexia <unk> from Jpmorgan. Please go ahead.

Elysse Connor: Hi, this is Elyse Connor speaking on behalf of Alexei Gogolev. So my first question was regarding gross margins. You kind of talked about how it was largely driven by this focus on containerization and reducing hosting costs. I was wondering what you see as the exit rate for the year and kind of the cadence of margin expansion we can expect here. And if there's any upside to the 2026 target that you mentioned, you'd likely exceed it.

Operator: Hi, This is Ken on for Alexia go go up to my first question was regarding gross margins.

Elysse Connor: Kind of talked about how it was largely driven by this focus on containerization and reducing hosting cost I was wondering what you see is the exit rate for the year and kind of the cadence of margin expansion. We can expect here and if there's any upside to.

Elysse Connor: So the 2026 target that you mentioned you'd likely exceed.

Brian Hill: Yeah, so we're still committed to the 65% gross margin for 2026. We're not making a move from that. And the way that we have described our progression to 65% is an average gross margin expansion of 200 basis points per year. It just so happens that in Q1, we did far better than that. And I would expect that in 2024, we're going to do a bit better than 200 basis points per year. And the factors that are going to drive that will be continued success and becoming more efficient with our hosting costs per user, as well as a lot of the activities and initiatives we have around implementation and other post-sale operations, but more efficiency in those areas. And I would just add from

Speaker Change: Yes, so we're still committed to the 65% gross margin for 2026, we're not making a move from that.

Brian Hill: And the way that we have.

Brian Hill: Described our progression to 65% is an average gross margin expansion of 200 basis points per year. It just so happens in Q1, we.

Brian Hill: We did far better than that and I would expect in 2024, we're going to do a bit better than 200 basis points per year and the factors that are going to drive that will be continued success in becoming more efficient with our hosting costs per user as well as a lot of the activities and initiatives we have around implementation.

Brian Hill: <unk> and other post sell operations, but more efficiency in those areas, but I would just add from a commentary perspective.

Brian Hill: And I would just add from a commentary perspective that we're really pleased with the results that we're getting from the investment in the platform, not just delivering improved gross margin, which is important, but it's delivering increased customer satisfaction and attractiveness to Alkami. And we're really pleased with what the services team is doing in terms of how they're onboarding customers and how they're thinking about the roles and responsibilities when they're onboarding customers, where they've just turned out to be doing some things that allow us to scale as we continue to onboard customers. We think we have more customers than anybody else. So, Alkami is really pleased with what the implementation teams are doing and what the platform teams are doing in terms of both business results and customer satisfaction.

Brian Hill: We're really pleased with the results that we're getting from the investment in our platform.

Brian Hill: That is that's not.

Brian Hill: Not just delivering improved gross margin, which is important but it's delivering increased customer satisfaction and attractiveness to that to alchemy, and we're really pleased with.

Brian Hill: What the services team is doing in terms of how they're onboarding customers and how they are thinking about the roles and responsibilities when their onboarding customers.

Brian Hill: Where they've just turned out to be doing some things.

Brian Hill: That allow us to scale.

Brian Hill: As we continue to onboard we take more customers than anybody else. So.

Brian Hill: Alkermes really pleased with what the implementation teams are doing and what the platform teams are doing in terms of both business results and customer satisfaction.

Elysse Connor: Got it. Thank you. And then, as a quick follow-up, you were talking about how a lot of your RPU expansion comes from new customers adopting more products. Do you have any breakdown between how banks versus credit unions are adopting new products if there are trends with maybe one adopting more than the other?

Speaker Change: Got it. Thank you and then I have a quick follow up you were talking about how a lot of your RPM expansion comes from new customers adopting more products do you have any breakdown between.

Elysse Connor: Thanks, Bruce with credit unions are adopting a product with Sarah trends with maybe one adopting more than the other.

Elysse Connor: Okay.

Brian Hill: No, it's about the same, but one, a couple of products are included in just about... The RPU difference between banks and credit unions. Yeah, but the product adoption is about the same, except for a couple of the different products that banks will always take. In general, about 85% of the commercial banks that we sell, they'll take our ACH Alert product, which is a high RPU product, and then they always take our commercial banking product, which is also a high RPU product. So I'll give you some ideas of what I mean by higher RPU and how those products can drive higher RPU.

Elysse Connor: No. It's about the same but one a couple of products are included in just about EU difference between banks and credit unions.

Brian Hill: The product adoption is about the same except for a couple of the different products that banks will always take in general about 85% of the commercial banks that we sell we will take our ACX alert product, which is a high RPC product and then they always take our commercial banking product, which is also a high <unk>.

Brian Hill: <unk> product. So I'll give you some ideas of what I mean by higher ARPA, you and how those products can drive a higher our view when.

Brian Hill: When you look at our backlog today, we have 42 clients in backlog. Of those, 27 are banks, and 17, 15 of those are... 27 of those are credit unions, and 15 of those are banks. The credit unions have an average RPU of $22, and the banks have an average RPU of $27. So our overall backlog is about $24, and banks are driving up the higher average. Compare that to our company average of $16.71. So as new logos are coming on, they're coming on at a much higher RPU than the existing base today.

Brian Hill: When you look at our backlog today, we have 42 clients in backlog.

Brian Hill: Of those 27 are banks and 17.

Brian Hill: 15 of those are.

Brian Hill: 27 of those are credit unions, and 15 of those are banks. The credit unions had an average <unk> of $22 and the banks have an average <unk> of $27. So our overall backlog is about $24.

Brian Hill: And banks are driving up.

Brian Hill: The higher average compare that to our company average of $16 71 subs. So as new logos are coming on are coming on at a much higher ARPA you than the existing base today.

Alex P. Shootman: And the great news for us is that higher RPU, for both credit unions and banks coming on board. Certainly, a contribution to that is we've got a really excellent sales team, but also, the surface area of what people wanna do with digital banking has grown. And so there's a demand pull in terms of the number of products that people are purchasing today versus, say, five or six years ago.

Brian Hill: The great news for us is that higher RP U.

Alex P. Shootman: For both credit unions and banks coming on board certainly a contribution to that is we've got a really excellent sales team, but also the surface area of what people want to do with digital banking has grown and so there is a demand pull in terms of number of products that people are purchasing.

Alex P. Shootman: <unk> today versus call it five or six years ago.

Alex P. Shootman: Yes.

Elysse Connor: Got it. Thank you so much.

Speaker Change: Got it thank you so much.

Operator: Your next question comes from the line of Jeff Van Reen from Craig Helm. Please go ahead.

Elysse Connor: Your next question comes from the line of Jeff Van <unk> from Craig Hallum. Please go ahead.

Jeff Van Reen: Great, thanks for taking my questions, guys. A couple on the product side. First, I guess banks are really struggling, and credit unions, too, and are focused on asset gathering. I want to correlate that into the analytics. I mean, since you bought Segment, can you just talk about whether and how it's met or not met your expectations? I'm just curious about your overall thoughts on analytics as it relates to Segment. And then also, you know, in terms of recent deals, maybe I missed it, but any update in terms of attached rates to deals?

Speaker Change: Great. Thanks for taking my questions guys couple on the product side first I guess as banks are really struggling and credit unions due to and focused on asset gathering correlate that into the analytics. I mean since you bought segment can you just talk about whether and how its met or not met your expectations. Just curious your overall thoughts on analytics as it relates to segment.

Jeff Van Reen: And then also.

Jeff Van Reen: In terms of recent deals maybe maybe I missed it but any update on in terms of attach rates to deals.

Alex P. Shootman: Yeah, well, first of all, let me just give you a commentary on the attractive assets, because the really interesting thing that's happening with our customers is they're trying to navigate two different competing pressures. One is that they want to offer very convenient items like digital account opening, right? So really convenient capabilities for folks like digital account opening. But the more that they enable digital account opening, the more that they can suffer from fraud attacks. You know, several of the customers that I talked to had anywhere upwards of 70 to 75% of the accounts that were opened with digital account opening were fraudulent accounts.

Speaker Change: Yeah, well first of all let me just give you a commentary on the attracting assets because of the really interesting thing that's happening with our customers is.

Alex P. Shootman: They're trying to navigate to different competing pressures one is they want to offer very convenient items like digital account opening alright, so really convenient capabilities, where folks like digital account opening but the more that they enable digital account opening the more that they can suffer.

Alex P. Shootman: From fraud attacks.

Alex P. Shootman: Several of the customers that I talked to AD anywhere upwards of 70% to 75% of the accounts that were opened with digital account opening where we are.

Alex P. Shootman: Fraudulent.

Alex P. Shootman: Accounts, so I would just say overall and then I'll get to the discussion on analytics, but overall, we see this really interesting intersection between what customers want to do is have a great digital account opening experience they want to have very easy and intuitive money movement, but the.

Alex P. Shootman: So I would just say overall, and then I'll get to the discussion on analytics. But overall, we see this really interesting intersection between what customers want to do is have a great digital account opening experience. They want to have very easy and intuitive money movement. But the more that they press on those, then the more that they're challenged by fraud.

Alex P. Shootman: More of that they pressure on those than the more that they are challenged by.

Alex P. Shootman: By fraud. So so that's a that's a great place for somebody like an alchemy to be.

Alex P. Shootman: Both the.

Alex P. Shootman: <unk> provider and a product provider to help a customer.

Alex P. Shootman: Navigate.

Brian Hill: So that's a great place for somebody like Alkami to be, you know, both a strategic provider and a product provider to help a customer navigate. You know, I mentioned in my opening comments that we're seeing demand for the Alkami data platform, which is what is able to drive analytics. And so that product is something that's creating great business results for us. And, Brian, I know we don't break it out separately, but, you know, you may have some commentary just in terms of that product line.

Alex P. Shootman: I mentioned in my opening comments that we're seeing.

Brian Hill: <unk>.

Brian Hill: We're seeing demand in the in the <unk> data platform, which is what is able to drive.

Brian Hill: Analytics, and so that that product is something that is creating great business results for us and so Brian I don't know, we don't break it out separately, but you may have some commentary just in terms of of that product line. Yeah in terms of a contribution both segment and ACTH alerts so two of our acquisitions.

Brian Hill: Yeah, in terms of contribution. Both Segment and ACH Alert, so two of our acquisitions, they contribute a little over 20% of our new sales bookings, both in Q1 of this year as well as the full year of 2023. So that's been pretty consistent for the last 15 to 18 months, and each of those contributes about 10% each. So it's not really weighted more one towards the other.

Brian Hill: They contribute a little over 20% of our new sales bookings both in Q1 of this year as well as full year 2023, So that's been pretty consistent.

Brian Hill: For the last 15 to 18 months and each of those contributing about 10% each so it's not really.

Brian Hill: Weighted more towards the other.

Brian Hill: Yes.

Jeff Van Reen: Very helpful. And then I guess just when you do see the existing base come back for upsells or additional products and you think about the next year or two, it's a variation of the last question, but curious where you see the greatest white space, the greatest opportunity to upsell value-wise to your existing base by product.

Speaker Change: Very helpful. And then I guess, just when you do see the existing base come back for Upsells or additional product and you think about the next year or two it's a variation of the last question, but curious where you see the greatest.

Jeff Van Reen: White space with the greatest opportunity to upsell value wise into your existing base byproduct.

Brian Hill: You know, Jeff, right now, on average, our clients are taking 13 of our products, and we have 32 products that we offer. So the white space is significant.

Jeff Van Reen: Jeff right now on average our clients are taking 13 of our products and we had 32 products that we offer.

Brian Hill: The white space is significant.

Brian Hill: And it depends on the financial institution's strategy of what they're trying to accomplish in the areas that they'll choose to invest in. We called out in our prepared comments a few areas that we saw greater adoption in the first quarter of 2024, and those were around marketing and data insights, which is predominantly Segma. Also in the fraud area, because fraud's top of mind for financial institutions, and that covers ACH Alert and Account Takeover and some of those types of products.

Brian Hill: And it depends on the financial institution strategy of what Theyre trying to accomplish on the areas that we'll choose to invest.

Brian Hill: We called out in our prepared comments a few areas that we saw greater adoption in the first quarter of 2024, and those were around marketing or data insights, which that's predominantly segment.

Brian Hill: Also in the fraud area because fraud is top of mind for financial institutions and that covers Acha learn account takeover and some of those type products and then other areas, where we saw some nice adoption was within.

Brian Hill: And then other areas where we saw some nice adoption were within our customer service area. So that's where AI starts to come into play through chats and other types of products. And then finally, financial wellness, which is around credit scoring and those types of subproducts.

Brian Hill: Our customer service area, So that's where <unk> starts to come into play through chat and other.

Brian Hill: Types of products, and then finally financial wellness, which is around credit, scoring and those types of those sub products.

Alex P. Shootman: If you translate that to customer conversations, it's always about, "Can I get transactional data? that I can either analyze with your models or drive into the... data stack that I have internally to help me manage fraud, either keeping bad guys out or keeping money from leaving."

Brian Hill: Okay.

Brian Hill: The one thing I would say if you say if you translate that to customer conversation, it's always about.

Alex P. Shootman: Can I get transactional data.

Alex P. Shootman: That I can either analyze with your models or drive into that.

Alex P. Shootman: Data stack that I have internally.

Alex P. Shootman: Help me manage fraud, either keeping bad guys out or keeping money from leaving.

Alex P. Shootman: Help me make money movement easier. And then there's a tremendous amount of demand for, I want to be able to do a digital card issuance, and then I want to be able to push that card to a digital wallet. So anything that you think about that you read in terms of creating a really great digital experience for a customer and a member, that's driving demand for our products.

Alex P. Shootman: Help me make money movement easier.

Alex P. Shootman: And then.

Alex P. Shootman: A tremendous amount of demand on <unk>.

Alex P. Shootman: I want to be able to do a digital card issuance and then I want to be able to push that card to a digital wallet. So anything that you think about that you read in terms of.

Alex P. Shootman: Creating a really great digital experience for our customer and remember that's driving demand for our products.

Jeff Van Reen: Got it. Very helpful. Thanks for taking my questions, guys. There are no more questions at this time. Thank you for attending the Alkami First Quarter Earnings Call. You may now disconnect.

Speaker Change: Got it very helpful. Thanks for taking my questions guys.

Operator: [inaudible]

Operator: There are no more questions at this time. Thank you for attending the <unk> first quarter earnings call you may now disconnect.

Operator: Okay.

Operator: [noise].

Operator: Yeah.