Q2 2024 Alkami Technology Inc Earnings Call

Operator: Good afternoon, ladies and gentlemen, and welcome to Alkami Technology's second quarter 2024 Financial Results Conference call. At this time, all participants are in a listen-only mode.

Operator: Good afternoon, ladies and gentlemen, and welcome to the Alkami Technology 2nd quarter 2024 financial results conference call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session.

Good afternoon, ladies Daddy Schottenfeld, Matt and welcome to the whole Gamete technologies second quarter, what eat blood before financial results Conference call.

Operator: Following the presentation, we will conduct a question and answer session. Instructions will be provided at the time for you to queue up for questions. If anyone has any difficulties hearing the conference, please press star zero for operator assistance at any time. I'd like to turn the conference over to Steve Calk, Vice President of Investor Relations. Steve, go ahead.

Speaker Change: At this time all participants are in a listen only mode.

Speaker Change: Following the presentation, we will conduct a question and answer session and instructions will be provided at the time for you to queue up for questions. If anyone has any difficulties hearing the God forbid. Please press star zero for operator assistance at any time.

Operator: Instruction will be provided at the time for you to queue up for questions. If anyone has any difficulties hearing the conference, please press far zero for operator assistance at any time.

Steve Talk: I'd like to turn the conference over to Steve Talk, Vice President of Investor Relations. Steve, go ahead.

Speaker Change: I'd like to turn the conference over to Steve Toth, Vice President of Investor Relations.

Speaker Change: Go ahead.

Steve Talk: Thank you, operator, and with me today 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 Calk: Thank you, Operator. And with me today 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, uncertainties, and risks. Our actual results may be materially different.

Speaker Change: Thank you operator, and with me today on today's call are Alex shoot Lin 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.

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 in 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.

Speaker Change: Actual results may be materially different for 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. Some forward looking statements.

Steve Talk: For 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 in Forward-Looking Statements.

Steve Talk: 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 gap financial measures can be found in our earnings press release and in our filings with the SEC.

Speaker Change: <unk> 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 the 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.

Steve Calk: We believe these measures are useful to investors in the understanding of our financial results. Reconciliation of the Comparable Gap Financial Measures can be found in our earnings press release and in our filings with the SEC. Now, I'll turn the call over to Alex.

Speaker Change: The press release and in our filings with the SEC now I'll turn the call over to Alex.

Alex Shootman: Now turn the call over to Alex. Thanks, Steve, and welcome everyone. I'm Steve's report another quarter of strong performance for Alchemy. In the second quarter of 2024, Alchemy agreed revenue 25 percent once again ahead of expectations. In addition, we delivered $4.6 million in adjustity, but exceeding the high end of expectations.

Alex P. Shootman: Thanks, Steve, and welcome, everyone. I'm pleased to report another quarter of strong performance for Apple. In the second quarter of 2024, Alkami grew revenue 25%, once again ahead of expectations. In addition, we delivered $4.6 million in adjusted EBITDA, exceeding the high end of expectations. Since our last earnings call, we celebrated a significant product achievement. Alkami is the first digital banking solution company to be certified by J.D. Power for providing clients with an outstanding mobile banking platform experience.

Alex: Thanks, Steve and welcome everyone.

Alex: I'm pleased to report another quarter of strong performance for alchemy.

Alex: In the second quarter of 2024, how can we agree that it is 25% once again ahead of expectations.

Speaker Change: In addition, we delivered $4 $6 million and adjusted EBITDA exceeding the high end.

Alex: Spectation.

Alex Shootman: Since our last earnings call, we celebrated a significant product achievement. Alchemy is the first digital banking solution company to be certified by JD Power for providing clients with an outstanding mobile banking platform experience. As the first provider in our space during this certification, Alchemy had to pass JD Power's rigorous methodology for meeting high consumer expectations. Specifically, we exceeded JD Power's industry benchmark across a set of 146 best practices covering all aspects of mobile application development, design, and operational functionality. Additionally, we exceeded JD Power's Voice of the Customer benchmark, which ensures our clients, customers, your mobile banking experience is outstanding.

Alex: Since our last earnings call, we celebrated a significant product achievement.

Alex P. Shootman: As the first provider in our space to earn this certification, Alkami had to pass J.D. Power's rigorous methodology for meeting high consumer expectations. Specifically, we exceeded J.D. Power's industry benchmark across a set of 146 best practices covering all aspects of mobile application development, design, and operational functionality. Additionally, we have seated J.D.

Alex: To me, it's the first digital banking solution company to be certified by J D power for providing clients with an outstanding mobile banking platform experience.

Alex: As the first provider in our space to earn their certification alchemy upholstery package rigorous methodology for meeting high consumer expectations.

Alex: Typically we'd exceeded J D power's industry benchmark across the set up of 146 best practices covering all aspects.

That's a mobile application development design and operational functionality.

Alex: Additionally, we exceeded J D Power's voice of the customer of benchmark, which ensures our clients customers view, our mobile banking experience is outstanding.

Alex P. Shootman: Power's Voice of the Customer Benchmark, which ensures that our clients' customers view our mobile banking experience as outstanding. This is meaningful to our business as research continues to show that the number one criteria for an FI selecting a new digital banking platform is the user experience for its customers and members. Our investment in user experience continues to drive success in the marketplace. In the second quarter, we signed eight new digital banking clients, four credit unions, and four banks.

Alex Shootman: This is meaningful to our business as research continues to show that the number one criteria for an FI selecting a new digital banking platform is the user experience for their customers and members. Our investment and user experience continues to drive success in the marketplace. In the second quarter, we signed eight new digital banking clients for credit unions and for banks. One of our credit union wins is a two-year union that will become one of our top clients in terms of ALR. One of our bank wins is a large Midwestern bank that has a commercial growth strategy.

Alex: This is meaningful to our business.

Speaker Change: <unk> continues to show that the number one criteria for selecting a new digital banking platform is the user experience for their customers and members.

Speaker Change: Oh, that's been in use your experience continues to drive success in the marketplace and the <unk>.

Second quarter, we signed eight new digital banking clients or credit unions and for banks.

Alex P. Shootman: One of our credit union wins is a tiered credit union that will become one of our top clients in terms of ARR. One of our bank wins is a large Midwestern bank that has a commercial growth strategy. This bank is an existing ACH client and will be successfully cross-sold digital banking. And as a reminder, we currently have over 500 ACH Alert clients under contract, and 80% of those are banks. We now have 34 banks under contract for our digital banking platform, representing approximately a million digital users.

Speaker Change: What about credit Union wages.

Speaker Change: Union It will become one of our top clients in terms of ALR.

Speaker Change: One of our bike wins is a large Midwestern bank as our commercial growth strategy.

Alex Shootman: This bank is an existing ACH client will be successfully cross-sold digital banking. And as a reminder, we currently have over 500 ACH Lit clients in the contract, and 80% of those are banks. We don't have 34 banks in the contract for a digital banking platform, representing approximately a million digital users based on our current implementation schedule. By the end of Q1 2025, we will have approximately 30 banks live on the ALQA platform. In addition, our sales pipeline remains strong, with almost half in the bank market.

Speaker Change: This bank has an existing ACTH client will be successfully cross sold digital banking.

Speaker Change: As a reminder, we currently have over 500, ACTH alert clients under contract and 80% of those are banks.

Speaker Change: We now have 34 banks under contract for our digital banking platform, representing approximately a million digital users base.

Alex P. Shootman: Based upon our current implementation schedule, by the end of Q1 2025, we will have approximately 30 banks live on the Alkami platform. In addition, our sales pipeline remains strong, with almost half in the bank market. Our current performance and product excellence reinforce my confidence in our 2026 target. We continue to experience tailwinds in our market, with annual digital user growth amongst U.S. financial institutions averaging 5% to 8%. On a base of more than 480 million users, that means every year more digital users are created than are alive on the Alkami digital banking platform.

Speaker Change: Based upon our current implementation schedule by the end of Q1 2025, we will have approximately 30 banks love on the alchemy platform.

Speaker Change: In addition, our sales pipeline remains strong with almost half in the bank market.

Alex Shootman: Our current performance and product excellence reinforce my confidence in our 2026 targets. We continue to experience tailwinds in our market, with annual digital user growth amongst US financial institutions averaging 5 to 8%. On a base of more than 400, maybe million users, that means every year more digital users are created than are alive on the Alkami digital banking platform. This continues to drive our time and growth among our clients.

Speaker Change: Our current performance and product excellence reinforce my confidence in our 2026 targets.

Speaker Change: We continue to experience tail winds in our market with annual digital user growth amongst U S financial institutions, averaging 5% to 8%.

Speaker Change: On a base of more than 480 million users that means every year more digital users are created then are alive on the alchemy digital banking platform.

Alex P. Shootman: This continues to drive our TAM and growth among our clients. An immutable factor driving tailwinds in our market is the evolution of our clients' customer base. In May, we published a study on generational trends in digital banking being driven by the greatest intergenerational wealth transfer in history.

Speaker Change: This continues to drive our Tam and growth among our clients.

Alex Shootman: An immutable factor driving tailwinds in our market is the evolution of our clients' customer base. In May, we published a study on generational trends in digital banking being driven by the greatest intergenerational wealth transfer in history. So key findings include first, 30% of millennials plan to grow the number of financial providers with whom they have a relationship over the next 12 months. This is two and a half times more than the weighted average of Gen Xers and baby boomers who have been driving existing digital banking growth. Next, millennials have 14% more products with their FIs than Gen Xers and 28% more than Boomers.

Speaker Change: And in beautiful factor driving tailwind in our market is the evolution of our clients' customer base.

Speaker Change: We've published a study on generational trends in digital banking being driven by the greatest intergenerational wealth transfer in history.

Alex P. Shootman: Some key findings include first... 30% of millennials plan to grow the number of financial providers with whom they have a relationship over the next 12 months. This is two and a half times more than the weighted average of Gen Xers and Baby Boomers who have been driving existing digital banking growth. Next, Millennials have 14% more products with their FIs than Gen Xers and 28% more than Boomers. This can provide demand for additional products to be sold to our client base. And finally, Millennials are 56% more likely than Gen Xers and Boomers to grow their relationship with their primary financial institution.

Speaker Change: Some key findings include first.

Speaker Change: 30% of millennials plan to grow the number of financial providers with whom they have the relationship over the next 12 months.

Speaker Change: This is two and a half times more than the weighted average of Gen Xers and baby boomers, who have been driving existing digital banking growth.

Speaker Change: Next millennials have 14% more products with <unk> and Gen xers and 28% more than boomers.

Alex Shootman: This can provide demand for additional products to be sold into our client base. Finally, millennials are 56% more likely than Gen Xers and Boomers to grow their relationship with their primary FIs. This generation views their FIs as a broader solution provider, which creates an opportunity for Alkami to deliver future innovations to our clients.

Speaker Change: This can provide demand for additional products to be sold into our client base.

Speaker Change: And finally, millennials were 56% more likely and Gen xers and boomers to grow their relationships with their primary F. I.

Alex P. Shootman: This generation views their FI as a broader solution provider, which creates an opportunity for Alkami to deliver future innovations to our clients. Seed growth and demographic forces are driving demand in our market, and while Alkami has to capitalize on this demand, we don't have to create the demand.

Speaker Change: This generation views there if I as a broader solution provider, which creates an opportunity for alchemy to deliver future innovation to our clients.

Alex Shootman: Seat growth and demographic forces are driving demand in our market. And while Alkami has to capitalize on this demand, we don't have to create the demand.

Speaker Change: <unk> growth.

Speaker Change: Demographic forces are driving demand in our market.

Speaker Change: Well ultimately has to capitalize on this demand we don't have to create the demand.

Alex Shootman: And these demand tailwinds reinforce my confidence in our 2026 targets.

Alex P. Shootman: And these demand tailwinds reinforce my confidence in our 2026 target. We continue to make operational improvements that create leverage in our business. One example is the results we're achieving from investments in our platform. At the end of Q2, almost half of our microservices were converted to Linux and deployed to Kubernetes, which enables our platform to autoscale.

Speaker Change: And these demand por wins reinforce my confidence in our 2026 targets.

Alex Shootman: We continue to make operational improvements that create leverage in our business. One example is the results we're achieving from investments in our platform. At the end of Q2, almost half of our microservices have been converted to Linux and deployed to Kubernetes, which enables our platform to auto scale. We launched our centralized certificate management store, which allows thousands of certificates to be refreshed automatically rather than the previous manual process.

Speaker Change: We continued to make operational improvements that create leverage in our business.

Speaker Change: One example is the results we're achieving from investments in our platform.

Speaker Change: At the end of Q2, almost half of our micro services had been converted to Linux and deploy to kubernetes, which enables our platform to auto scale.

Alex P. Shootman: We launched our centralized certificate management store, which allows thousands of certificates to be refreshed automatically, rather than the previous manual process. Additionally, this quarter we conducted a successful pilot to monitor our observability framework, which will allow us to detect and troubleshoot issues more efficiently, reducing costs and improving client experience. Early in the quarter, we launched our new SDK Wizard, which is a user-friendly installation tool that allows clients and partners to set up their environment in less than 30 minutes.

Speaker Change: We launched our centralized certificate management store, which allows thousands of certificates to be refreshed automatically rather than the previous manual process.

Alex Shootman: . This corridor we conducted a successful pilot to monitor our observability framework, which will allow protecting troubleshoot issues more efficiently, reducing costs, and improving line experience. Early in the corridor, we launched our new SDK wizard, which is a user-friendly installation tool that allows clients and partners to set up their environment in less than 30 minutes. We also launched the Elyse Kami developer portal, Taylor, for the developers wanting greater control and visibility into their development process on the Alkami platform. Our new wizard and portal reduced the workload on the Alkami engineering organization, which allows us to work on capability such as our API infrastructure, which will enable us to be an API first platform.

Speaker Change: This quarter, we conducted a successful pilot are.

Speaker Change: Our absorbability framework, which will allow protecting troubleshoot issues more efficiently reducing costs.

Speaker Change: Client experience.

Speaker Change: Early in the quarter, we launched our new SDK Wizard, which is a user friendly installation tool set of cloud allows clients and partners to set up their environment and less than 30 minutes.

Alex P. Shootman: We also launched the Alkami Developer Portal, tailored for developers wanting greater control and visibility into their development process on the Alkami platform. Our new wizard and portal reduce the workload on the Alkami engineering organization, which allows us to work on capabilities such as our API infrastructure, which will enable us to be an API-first platform. These are some of the investments we've made in our platform that have reduced our cost per user, increased the availability, quality, and performance of the platform, and delivered new capabilities to our clients.

Speaker Change: We also watched the well can be developer portal Panther for developers wanting greater control and visibility into their development process on the alchemy platform.

Speaker Change: Our new Wizard and portal reduce the workload on the alchemy engineering organization, which allows us to work on capabilities, such as our API infrastructure, which will enable us to be an API first platform.

Alex Shootman: These are some of the investments we've made in our platform that have reduced our cost per user, increased the availability, quality, and performance of the platform, and delivered new capabilities to our clients.

Speaker Change: These are some of the investments we've made in our platform better to reduce our cost per user increased the availability quality and performance of the platform.

Speaker Change: <unk> new capabilities to our clients.

Alex Shootman: Our ability to continue to drive operational improvements reinforces my confidence in our 2026 targets.

Alex P. Shootman: Our ability to continue to drive operational improvements reinforces my confidence and our 2026 target. Alkami continues to attract the best and brightest talent who will help us execute our vision. Over the last two years, we've added senior resources, including Deep Varma, who is Alkami's Chief Technology Officer, and Chief Customer Officer, Wayne McCulloch, both of whom are respected technology leaders. In Q2, we were excited to welcome Gagan Kanjalia as Alkami's Chief Product Officer.

Speaker Change: Our ability to continue to drive operational improvements reinforces my confidence in.

Speaker Change: Our 2026 targets.

Alex Shootman: Alkami continues to attract the best and brightest talent who will help us execute our vision. Over the last two years, we've added senior resources, including Deep Varma, who is Alkami's chief technology officer, and Chief Customer Officer Wayne McCulloch, both of whom are respected technology leaders. In Q2, we were excited to welcome Guggen Congelea as Alkami's Chief Product Officer. Guggen brings more than 25 years of experience developing products for some of the most prominent financial institutions in FinTechs in the country, including Capital One, On Deck, and most recently Silicon Valley Bank, where for the last five and a half years, he was Chief Product Officer.

Speaker Change: All can be continues to attract the best and brightest talent, who will help us execute our vision.

Speaker Change: Over the last two years, we've added senior resources, including deep pharma, who is alkermes, Chief Technology Officer, and Chief customer Officer, Wayne Mcculloch, both of whom are respected technology leaders.

Speaker Change: In Q2, we were excited to welcome Gergen Contra Lear is alkermes chief product officer.

Alex P. Shootman: Dougan brings more than 25 years of experience developing products for some of the most prominent financial institutions and fintechs in the country, including Capital One, On Deck, and most recently, Silicon Valley Bank, where he was chief product officer. I joined as a RAID executive to help Alkami continue our momentum in the commercial banking market and refine our long-term strategic product roadmap, which will create an exciting future for Alkami and our clients. With the addition of Duggan, we now have in place the executive team necessary for the next phase of Alkami's growth.

Speaker Change: He brings more than 25 years of experience developing products for some of the most prominent financial institutions and fintech in the country.

Speaker Change: Capital one on deck and most recently Silicon Valley Bank, but for the last five and a half years, he was chief product officer.

Alex Shootman: Guggen is right-executed to help Alkami continue on momentum in the commercial banking market and refine our long-term strategic product roadmap, which will create an exciting future for Alkami and our clients.

Speaker Change: Turning his rate executive to help alchemy continue our momentum in the commercial banking market and refine our long term strategic product roadmap, which will create an exciting future for alchemy and our clients.

Alex Shootman: With the addition of Guggen, we now have emplaced the executive team necessary for the next phase of Alkami's growth. Our ability to attract people like Guggen to Alkami reinforces my confidence in our 2026 targets.

Speaker Change: With the addition of Dugan, we now have in place the executive team necessary for the next phase of Alkermes growth.

Alex P. Shootman: Our ability to attract people like Doug into Alkami reinforces my confidence in our 2026 target. I'm proud of the Alkami team, grateful for the Alkami clients that have trusted us with their digital future, and appreciative of the investors who have chosen to be part of the Alkami story. Our current performance, the tailwinds driving demand, our operational improvements, and our ability to attract great talent reinforce my confidence in our 2026 target. And with that, I'll hand the call over to Brian.

Speaker Change: Our ability to attract people like go into ultimately reinforces my confidence in our 2026 targets.

Alex Shootman: I'm proud of the Alkami team, grateful for the Alkami clients that have trusted us with their digital future, and appreciative of the investors who have chosen to be part of the Alkami story. Including our current performance, product experts, the tailwinds driving demand, our operational improvements, and our ability to attract great talent reinforced my confidence in our 2026 targets.

Speaker Change: I'm proud of the alchemy team grateful for the alchemy clients that have trusted us with their digital future and appreciative of the investors.

Dugan: I was going to be part of the Alkermes story.

Speaker Change: In closing.

Speaker Change: Our current performance.

Speaker Change: Product.

Speaker Change: The tailwind driving demand, our operational improvements and our ability to attract great talent.

Speaker Change: We have enforced my confidence in our 2026 targets.

Brian Hill: With that, I'll hand call over to Brian. Thanks, Alex, and good afternoon, everyone. Our second quarter was another strong quarter for Alkami, leading expectations and continuing our progress towards our long-term financial objectives. For the second quarter of 2024, we achieved total revenue of 82.2 million, which represents your over-year growth of 25%. Subscription revenue grew 28% and represented approximately 95% of total revenue. We increased ARR by 25% and exerted the quarter at 321.3 million. We currently have approximately $52 million of ARR backlog for implementation; the majority of which will occur over the next 12 months. We implemented 10 new clients in the quarter, bringing our digital platform client count to 254.

Speaker Change: So with that I'll hand, the call over to Brian.

Brian Hill: Thanks, Alex, and good afternoon, everyone. Our second quarter was another strong quarter for Alkami, beating expectations and continuing our progress towards our long-term financial objective. For the second quarter of 2024, we achieved total revenue of $82.2 million, which represents year-over-year growth of 25%. Subscription revenue grew 28% and represented approximately 95% of total revenue. We increased ARR by 25% and ended the quarter at $321.3 million. We currently have approximately $52 million of ARM backlog for implementation, the majority of which will occur over the next 12 months. We implemented 10 new clients in the quarter, bringing our digital platform client count to 254.

Brian: Thanks, Alex and good afternoon, everyone.

Brian: Our second quarter was another strong quarter for alchemy, beating expectations and continuing our progress towards our long term financial objectives for.

Brian: For the second quarter of 2024, we achieved total revenue of $82 2 million, which represents year over year growth of 25%.

Speaker Change: Subscription revenue grew 28% and represented approximately 95% of total revenue.

Speaker Change: We increased <unk> by 25% and exited the quarter at $321 3 million.

Speaker Change: We currently have approximately $52 million of backlog for implementation the majority of which will occur over the next 12 months.

Speaker Change: We implemented 10, new clients in the quarter, bringing our digital platform client count to 254.

Brian Hill: We now have 39 new clients in our implementation backlog representing 1.6 million digital users. In the last 12 months, we implemented 36 financial institutions supporting 1.3 million digital users. In addition, our existing clients increased their digital user adoption by 1.4 million users. As a reminder, because of the long future of our contracts, we have three to four visibility into upcoming client attrition. In fiscal year 2024, we expect churn of less than 1%, and over the last 12 months, we have not experienced any digital banking client turn. Over the long term, we modeled digital banking ARR churn at 2 to 3% per year.

Brian Hill: We now have 39 new clients in our implementation backlog, representing 1.6 million digital users. We exited the quarter with 18.6 million registered users live on our digital banking platform, up 500,000 sequentially and up 2.7 million, or 17%, compared to last year. In the last 12 months, we implemented 36 financial institutions supporting 1.3 million digital users.

Speaker Change: We now have 39, new clients, so our implementation backlog, representing a $1 6 million digital users.

Speaker Change: We exited the quarter with $18 6 million registered users live on our digital banking platform.

Speaker Change: 500000 sequentially and up $2 7 million or 17% compared to last year.

Speaker Change: Over the last 12 months, we implemented 36 financial institutions supporting one 3 million digital users.

Brian Hill: In addition, our existing clients increased their digital user adoption by 1.4 million users. As a reminder, because of the long-term nature of our contracts, we have three to four months of visibility into upcoming client attrition. In fiscal year 2024, we expect churn of less than 1%, and over the last 12 months, we have not experienced any digital banking client churn.

Speaker Change: In addition, our existing clients increased their digital user adoption by one 4 million users.

Speaker Change: As a reminder, because of the launch.

Speaker Change: Our contract mix.

Speaker Change: We have three to four visibility into upcoming client attrition.

Speaker Change: Fiscal year 2024, we expect churn of less than 1%.

Speaker Change: Over the last 12 months, we have not experienced any digital banking client churn.

Brian Hill: Over the long term, we model digital banking ARR churn at 2-3% per year. We ended the quarter with an RPU of $17.29, up 7% compared to a year ago, driven by add-on sales success and the addition of new clients who tend to onboard with a higher average RPU. We are seeing broad-based demand across our product portfolio. Our 2024 new sales performance continues to outpace 2023. For the year, we signed 14 new digital banking clients, including five banks, and our add-on sales effort represented over 46% of 2024 new sales.

Speaker Change: Over the long term, we model a digital banking <unk> churn at 2% to 3% per year.

Brian Hill: We ended the quarter with an RPU of $17.29, up 7% compared to a year ago, given by add on cell success and the addition of new clients who tend to onboard with a higher average RPU. We are seeing broad base demand across our product portfolio. Our 2024 new sales performance continues to outpace 2023. For the year, we signed 14 new digital banking clients, including five banks, and our add on cells effort represented over 46% of 2024 new cells. Key growth areas continue to be concentrated in data insights and marketing, broad protection, customer service, and financial wellness product, family categories.

Speaker Change: We ended the quarter with an RP you of $17 29 up 7% compared to a year ago driven by add on sell success and the addition of new clients, who tend to onboard with our higher average RPT.

Speaker Change: We are seeing broad based demand across our product portfolio. Our 2024, new sales performance continues to outpace 2023.

Speaker Change: For the year, we signed 14, new digital banking clients, including five banks and our add on sales effort represented over 46% of 'twenty three 'twenty four new sales.

Brian Hill: The key growth areas continue to be concentrated in data insights and marketing, broad protection, customer service, and financial wellness product family categories. In addition to add-on sales, our client sales team is responsible for client contract renewals. We expect to renew over 30 client relationships in 2024. During the first half of 2024, we renewed 12 client relationships. Renewal terms have been consistent with historical norms in terms of pricing and add-on product adoption.

Speaker Change: Key growth areas continues to be concentrated in data insights and marketing fraud protection customer service and financial wellness product family categories.

Brian Hill: In addition to add on cells, our client sales team is responsible for client contract renewals. We expect to renew over 30 client relationships in 2024. During the first half of 2024, we renew 12 client relationships. Renewal terms have been consistent with historical norms in terms of pricing and add-on product adoption. And finally, our remaining purchase obligation crossed over 1.2 billion, representing just under four times our ARR at 26% compared to a year ago.

Speaker Change: In addition to add on sales.

Speaker Change: Client sales team is responsible for client contract renewals.

Speaker Change: We expect to renew over 30 client relationships in 2024.

Speaker Change: During the first half of 2024, we renew 12 client relationships.

Speaker Change: Renewal terms have been consistent with historical nor norms in terms of pricing as add on product adoption and finally, our remaining purchase obligation crossover $1 2 billion, representing just under four times our IRR.

Brian Hill: And finally, our remaining purchase obligation crossed over $1.2 billion, representing just under four times our ARR and up 26% compared to a year ago. Now, turning to Gross Margin. For the second quarter of 2024, we delivered a nine gap gross margin of 63.2%, representing 450 basis points of expansion compared to the prior year quarter. We achieved gross margin expansion through continued improvement in our hosting cost per registered user, as well as operating leverage across our post-sale operations. As a reminder, our 20-scroll margin objective is 65%.

Speaker Change: 26% compared to a year ago.

Brian Hill: Now turning to gross margin. For the second quarter of 2024, we delivered non-GAAP gross margin of 63.2%, representing 450 basis points of expansion compared to the prior year quarter. We achieved gross margin expansion through continued improvement and our hosting cost per registered user, as well as operating leverage across our post cell operations.

Speaker Change: Now turning to gross margin for.

Speaker Change: For the second quarter of 2024, we delivered non-GAAP gross margin of 63, 2%, representing 450 basis points of expansion compared to the prior year quarter.

Speaker Change: We achieved gross margin expansion through continued improvement in our hosting cost per registered user as operating leverage across our post sell operates.

Brian Hill: As a reminder, our 20th gross margin objective is 65%. We are rapidly approaching this goal and are now beginning to look beyond 2026 as our operational and financial models continue to strengthen.

Speaker Change: <unk>.

Speaker Change: As a reminder, our 'twenty gross margin objective is 65%.

Brian Hill: We are rapidly approaching this goal and are now beginning to look beyond 2026 as our operational and financial models continue to strengthen. Moving to operating expenses, for the second quarter of 2024, operating expenses of $47.8 million, or 58% of revenue, represented operating leverage of 520 basis. We derived operating leverage primarily in R&D and G&A, where we continue to realize operational skill.

Speaker Change: We are rapidly approaching this goal and are now beginning to look beyond 2026, as our operational and financial models.

Speaker Change: To strengthen.

Brian Hill: Moving to operating expenses, for the second quarter of 2024, operating expenses of 47.8 million, or 58% of revenue, represented operating leverage of 520 basis points. In GNA, where we continue to realize operational scale related to R&D, we continue to invest in our platform while scaling this expense line. Investment focus areas include initiatives to drop quality and cost efficiency of the platform, expand our product offering, improve extensibility, and enhance the product market fit of our commercial banking offer. For non-GAAP sales and marketing expenses, we continue to achieve, by high level, a sales team productivity and go to market efficiency.

Speaker Change: Moving to operating expenses for the second quarter of 2020 for operating expenses of $47 8 million or 58% of revenue representing operating leverage of 520 basis points.

Speaker Change: We derived operating leverage primarily in R&D and G&A, where we continue to realize operational scale.

Brian Hill: Related to R&D, we continue to invest in our platform while scaling this expense line. 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.

Speaker Change: Related to R&D, we continue to invest in our platform. Our scaling this expense line 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 offices.

Speaker Change: As for non-GAAP sales and marketing expenses, we continued to achieve a high level, our sales team productivity and go to market efficiency.

Brian Hill: We continue to achieve a high level of sales team productivity and go-to-market efficiency. For the last 12 months, we increased ARR $64.5 million while investing $46.5 million in sales and marketing, representing an efficiency ratio of 1.4 to 1. We believe this ranks among the best in SAS in terms of sales and marketing efficiency. Our adjusted EBITDA in the second quarter was $4.6 million, better than the high end of our expectations, and represents our fourth consecutive quarter of positive adjusted EBITDA.

Brian Hill: For the last 12 months, we increased ARR 64.5 million while investing 46.5 million in sales and marketing, representing an efficiency ratio of 1.4 to 1. We believe this ranks among the best and fast in terms of sales and marketing efficiency.

Speaker Change: For the last 12 months, we increased <unk> $64 5 million, while investing $46 5 million in sales and marketing representing an efficiency ratio of one four to one.

Speaker Change: We believe this ranks among the best in SaaS in terms of sales and marketing efficiency.

Brian Hill: Our adjusted EBITDA on the second quarter was 4.6 million, better than the high end of our expectations and represents our fourth consecutive quarter of positive adjusted EBITDA. We are very pleased with the progression, which is in line with our path to achieve an adjusted EBITDA margin at 20% in calendar year 2026.

Speaker Change: Our adjusted EBITDA in the second quarter was $4 6 million better than the high end of our expectations and represents our fourth consecutive quarter of positive adjusted EBITDA.

Brian Hill: We are very pleased with the progression, which is in line with our path to achieve an adjusted EBITDA margin of 20% in calendar year 2026. As regards our balance sheet, we ended the quarter with approximately $87 million of cash and marketable security.

Speaker Change: We are very pleased with the progression, which is in line with our path to achieve an adjusted EBITDA margin of 20% in calendar year 2026.

Brian Hill: Related to our balance sheet, we ended the quarter with approximately 87 million of cash and marketable securities.

Speaker Change: Related to our balance sheet, we ended the quarter with approximately $87 million of cash and marketable securities.

Brian Hill: On July 1st, we issued an 8-K disclosing that we amended our credit facility. The amendment expands the revolver from 60 million to 125 million, modifies certain covenants to be more consistent with our financial profile, and extends the term by 1 year to April 29th, 2027. Additional details provided in the A.K. As of today, the facility is undrawn.

Brian Hill: On July 1st, we issued an 8K disclosing that we amended our credit facility. The amendment expands the revolver from $60 million to $125 million, modifies certain covenants to be more consistent with our financial profile, and extends the term by one year to April 29, 2027. Additional details are provided in the A.K. As of today, the facility is undrawn. Now, turning to Guyot.

Speaker Change: On July <unk>, we issued an 8-K disclosing that we amended our credit facility.

Speaker Change: <unk> expands the revolver from 60 million to $125 million.

Speaker Change: Modify certain covenants to be more consistent with our financial profile and extends the term by one year to April 29 2027.

Speaker Change: Additional detail is provided in the 8-K.

Speaker Change: As of today the facility is Undrawn now.

Brian Hill: Now turning to guidance. For the third quarter of 2024, we are providing guidance for revenue in the range of 83.8 million to 85.3 million, which represents 24% to 26% total revenue growth. For adjusted EBITDA, we are providing guidance in the range of 5.8 million to 6.8 million.

Speaker Change: Now turning to guidance for the third quarter of 2024, we are providing guidance for revenue in the range of 83 8 million to $85 3 million, which represents 24% to 26% total revenue growth.

Brian Hill: For the third quarter of 2024, we're providing guidance for revenue in the range of $83.8 million to $85.3 million, which represents 24% to 26% total revenue growth. For adjusted EBITDA, we are providing guidance in the range of $5.8 million to $6.8 million. And for full year 2024, we are providing guidance for revenue in the range of $330.5 million to $333.5 million, representing total revenue growth of 25 to 26 percent and subscription revenue growth of 26 to 27 percent.

Speaker Change: For adjusted EBITDA, we are providing guidance in the range of $5 8 million to $6 8 million.

Brian Hill: And for full year 2024, we are providing guidance for revenue in the range of 330.5 million to 333.5 million, which represents a total revenue growth of 25 to 26% and subscription revenue growth of 26 to 27%. We are also providing adjusted EBITDA guidance of 22 million to 24 million.

Speaker Change: And for full year 2024, we are providing guidance for revenue in the range of 335 million to $333 5 million, representing total revenue growth of 25% to 26% and subscription revenue growth of 26% to 27%.

Brian Hill: We're also providing adjusted EBITDA guidance of $22 million to $24 million. In closing, I'm excited about our financial performance this quarter. We're continuing to deliver strong growth while achieving best-in-class go-to-market efficiency, expanding our profitability, and increasing shareholder value. With that, I'll hand the call to the operator for questions. Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the number one on your touchtone phone.

Speaker Change: We are also providing adjusted EBITDA guidance of 22 million to $24 million.

Brian Hill: In closing, I am excited about our financial performance this quarter. We are continuing to deliver strong growth by achieving best in class, go to market efficiency, expanding our profitability, and increasing shareholder value.

Speaker Change: In closing I'm excited about our financial performance this quarter, we're continuing to deliver strong growth, while achieving best in class go to market efficiency, expanding our profitability and increasing shareholder value.

Speaker Change: With that I'll hand, the call to the operator for questions.

Operator: Thank you.

Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by the number one on your thoughts going forward you won't hear a problem that you had this has been great.

Operator: Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question? Please press the star followed by the number one on your touch-tone phone. You will hear a prompt that your hands has been raised. Please leave the handset before pressing any keys. One moment, please, for the first question.

Brian Hill: You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the number two. If you are using a speakerphone, please lift the handset before pressing any keys.

Speaker Change: Should you wish to decline from the polling process. Please press the star followed by the number is.

Speaker Change: If you are using a speaker phone please lift the handset before pressing.

Operator: One moment, please, for the first question. Your first question comes from the line of Chris Kennedy from William Blair. Your line is now open. Good afternoon.

Speaker Change: One moment, please for a different question.

Cristopher Kennedy: Your first question comes from the line of Greece Kennedy from William Blair. Your line is now open. Good afternoon. Thanks for taking the questions.

Chris <unk>: Your first question comes from the line of Chris <unk> from William Blair. Your line is now open.

Cristopher David Kennedy: Thanks for taking the questions. Alex, you alluded to it, but when you talk, when you think about the next phase of growth for Alkami, can you talk about some of the key drivers that you're focused on? Yeah, most of what I was reflecting on, if I go back to my script, what I was reflecting on are the factors that continue to reinforce my confidence in the 2026 targets that Brian and I sent out. So most of my commentary, I'm not trying to be argumentative, wasn't really about the next phase of growth.

Chris <unk>: Good afternoon, thanks for taking the questions.

Alex Shootman: Alex, you alluded to it, but when you talk, when you think about the next phase of growth for Alkeny, can you talk about some of the key drivers that you're focused on? Yeah, most of all, if I go back to my script, what I was reflecting on is the factors that continue to reinforce my competence in the 2026 targets that Brian and I sent out. So most of my commentary, I'm not trying to be argumentative, wasn't really about a next phase of growth. What I continue to see, though, in the market, and I talked about the demand drivers, is that we've got underlying seat growth in the population in general. We've got demographic changes that are driving the need for digitization in almost any aspect of how a consumer deals with their banks.

Speaker Change: Alex you alluded to it but when you talk when you think about the next phase of growth for al can be can you talk about some of the key drivers that you're focused on.

Speaker Change: Yes, most of them if.

Speaker Change: If I go back to my script, what I was reflecting on is the factors that continue to reinforce my confidence in the 2026 targets that Brian and I sent out. So most of my commentary I am not trying to be argumentative wasn't really about.

Brian: Our next phase of growth and what I continue to see though in the market and I talked about the demand drivers.

Alex P. Shootman: What I continue to see, though, in the market, and I talked about the demand drivers, is that we've got underlying growth in the population in general. We've got demographic changes that are driving the need for digitization in almost any aspect of how a consumer deals with their banks. And so, Chris, I'm happy to go a little bit deeper, but we've got a lot of demand tailwinds that Alkami can tap into for longer. Yeah, Chris, I'll just add a couple more points.

Speaker Change: Is that we've got underlying seat growth in the population in general we've got demographic changes that are driving the need for.

Speaker Change: Digitization in almost any aspect of it.

Speaker Change: Of how a consumer deals with their banks and so Chris I'm happy to go a little bit deeper.

Alex Shootman: And so, Chris, I'm happy to go a little bit deeper, but we've got a lot of demand tailwinds that Alkeny can tap into long term.

Speaker Change: We've got a lot of demand tailwind that alchemy can tap into long term, yes, Chris I'll, just add a couple more points.

Brian Hill: In the beginning of 2022, we laid out a plan to scale to 2026, and in that, what we talked about was that we were pretty competitive on the credit union side of the market. And our goal is by 2026 to achieve about 50 percent of the new client wins from banks to complement what we've been doing in credit unions. And in addition to that, what we've also said is we would like 50 percent of the total contract value that we sell in 2026 to come from add-on sales, which in this, what we just reported year to date for 2024, we're at 46 percent.

Alex Shootman: Yeah, Chris, I'll just add a couple more points. In the beginning of 2022, we laid out a plan to scale the 2026, and in that, what we talked about was we're pretty competitive in the credit union side of the market. And our goal is by 2026 to achieve about 50% of the new client wins from banks to complement what we've been doing in credit unions. And in addition to that, what we've also said is we would like 50% of the total contract value that we sell in 2026 to come from out on sales, which in this, what we just reported year to date for 2024, we're at 46%, and most likely will be in that 40 to 45% for the full year.

Speaker Change: In the beginning of 2022, we laid out our plan is to scale that.

Chris: 26, and in that what we talked about was we.

Chris: We're pretty competitive in the credit union side of the market.

Chris: And our goal is by 2026 to achieve about 50% of the new client wins from banks.

Speaker Change: Complement what we've been doing in credit unions and in addition to that.

Speaker Change: What we've also said is we would like 50% of the total contract value that we sell in 2026 to come from add on sales, which in this.

Speaker Change: Well, we just reported year to date for 2024 were up 46% and most likely will be in that $40 to 45% for the full year. So I think we're making a lot of progress towards our 2026 goal, which is what we have.

Brian Hill: And most likely, we'll be in that 40 to 45 percent range for the full year. So I think we're making a lot of progress towards our 2026 goal, which is what we outlined for the investment community back in 2020. understood. Thank you. And you guys are clearly on track there.

Alex Shootman: So I think we're making a lot of progress towards our 2026 goal, which is what we've outlined for the investment community back in 2022.

Speaker Change: Outline for the investment community back in 2022.

Cristopher Kennedy: Understood. Thank you. And you guys are clearly on track there.

Speaker Change: Understood. Thank you and you guys are clearly on track there and then just a quick follow up.

Unknown Executive: And then just a quick follow-up. You've talked about better leveraging the APIs.

Speaker Change: You've talked about.

Cristopher David Kennedy: You talked about better leveraging APIs. Can you just talk about the progress on that journey? Thank you. Yeah, thanks. There are two ways that our customers and our partners access the Alkami application today. They can access it through an API, or they can access it through an SDK.

Speaker Change: A better leveraging the API is can you just talk about the progress on that journey. Thank you.

Unknown Executive: Can you just talk about the progress on that journey? Thank you. Yeah, thanks.

Speaker Change: Yes. Thanks.

Alex Shootman: The there's two ways that our customers and our partners access the Alchemy application today, they can access it through an API where they can access it through through an SDK. The feedback that we've gotten from our customers is that they want to be able to access more parts of the platform so that they can either get different pieces of information out of the platform or put other pieces of information back into the platform. And so that's what we're going through from an API redesign standpoint: how do we allow other pieces of information to come out of the platform so that our customers can do unique things for their customers and members, and then how do we allow them to put information into the platform.

Speaker Change: The.

Speaker Change: There is two ways that our customers and our partners access the alchemy application today that can access it through an API, where they can access it through.

Speaker Change: <unk> an SDK.

Alex P. Shootman: The feedback that we've gotten from our customers is that they want to be able to access more parts of the platform so that they can either get different pieces of information out of the platform or put other pieces of information back into the platform. And so that's what we're going through from an API redesign standpoint, is how do we allow other pieces of information to come out of the platform so that our customers can do unique things for their customers and members, and then how do we allow them to put information into the platform?

Speaker Change: And the feedback that we've gotten from our customers.

Speaker Change: Yep.

Speaker Change: They want to be able to access more parts of the platform.

Speaker Change: So that they can.

Speaker Change: Either get different pieces of information out of out of the platform.

Speaker Change: Put other pieces of information back into the platform and so that's what we're going through from an API redesign standpoint is how do we how do we allow other pieces of information to come out of the platform. So that our customers can do unique things for their customers or members and members and then how.

Speaker Change: How do we allow them to put information into.

Speaker Change: Into the platform.

Alex Shootman: And then ultimately turning it into an API first platform so that they no longer have to use an SDK if they want to integrate a third party capability into the platform. With this, all result from is lower effort inside of Alchemy to connect partner software of the third party software into the platform. And it will enable more stickiness of the platform because there will be more information in and out of the platform in service to the service to the customer.

Alex P. Shootman: And then ultimately turning it into an API-first platform so that they no longer have to use an SDK if they want to integrate a third-party capability into the platform. What this will all result from is lower effort inside of Alkami to connect partner software or third-party software to the platform.

Speaker Change: And then ultimately turning it into an API first platform so that they no longer have to use an SDK if they want to integrate a third party capability into the platform. What this will all result from is lower effort inside of al can be too.

Speaker Change: Net partner software third party software into the platform.

Cristopher David Kennedy: And it will enable more stickiness of the platform because there will be more information in and out of the platform in service to the customer. Great. Thank you. I appreciate it.

Speaker Change: And it will enable more stickiness of the platform because there'll be more information.

Speaker Change: Out of the platform in service to the service to the customer.

Unknown Executive: Great. Thank you. Appreciate it.

Speaker Change: Great. Thank you appreciate it.

Mayank Tandon: Your next question comes from the line of Mayank Tandon from Yidem. Your line is now open. Thank you.

Operator: Your next question comes from the line of Mayank Tandon from Needham. Your line is now open. Thank you. Good evening, Alex, Brian, and Steve.

Speaker Change: Your next question comes from the line of Maria <unk> from.

Speaker Change: Your line is now open.

Maria: Thank you good evening, Alex Brian and Steve I wanted to start Brian or Alex with the comment around the add on sales momentum and great to hear the positive.

Brian Hill: Good evening, Alex, Brian, and Steve. I wanted to start Brian or Alex with a comment around the add-on sales momentum. Great to hear the positive momentum there. Could you maybe unpack that a little bit in terms of which area that's seeing the most traction, which might be lagging a little bit, just any sort of color on where the momentum lies within the add-on products? Yeah, there's four areas where we're seeing some significant progress. One is, what we refer to as data insights and marketing, which in large part that's our segment acquisition. So not just from an add-on sales perspective, but also from a new logo or new client win perspective.

Mayank Tandon: I wanted to start, Brian or Alex, with the comment around the add-on sales momentum. Great to hear the positive momentum there. Could you maybe unpack that a little bit in terms of which areas are seeing the most traction, which might be lagging a little bit, just any sort of color on, you know, where the momentum lies within the add-on product? Yeah, there's four areas where we're seeing some significant progress. One is what we refer to as data insights and marketing, which in large part is our segment acquisition.

Maria: And there could you maybe unpack that a little bit in terms of which areas are seeing the most traction which might be lagging a little bit just any sort of color on.

Speaker Change: Where the momentum lies within the add on products.

Speaker Change: Yes, there is four areas, where we're seeing.

Speaker Change: Significant progress.

Speaker Change: One is what we refer to as data insights of marketing, which in large part that's our segment acquisition. So.

Mayank Tandon: So, not just from an add-on sales perspective but also from a new logo or new client win perspective, we're seeing a lot of adoption within Segment. In fact, today, approximately 28 to 30 percent of our total installed base, so the 254 live digital banking clients, have adopted Segment, which we think is pretty fantastic. Then you move into fraud protection, which is principally driven by another one of our acquisitions, which is ACH Alert. ACH Alert has been sold on four of the five bank bills that we sold this year, and it also represents about 30 percent of adoption in our overall live digital banking clients.

Speaker Change: Just from an add on sales perspective, but also from a new logo or new client win perspective, we're seeing a lot of adoption.

Brian Hill: We're seeing a lot of adoption within Segment. In fact, today, approximately 28 to 30 percent of our total install base, so the 254 lab digital making clients have adopted Segment, which we think is pretty fantastic. And then you move into fraud protection, which again is principally driven by another one of our acquisitions, which is ACH Alert. ACH alert has been sold on four of the five bank bills that we sold this year. And ACH alert also represents about 30 percent adoption in our overall lot digital banking clients. And then you move into customer service and financial wellness areas.

Speaker Change: Within segment in fact.

Speaker Change: Today, approximately 28% to 30% of our total install base. So the 254 live digital banking clients have adopted segment, which we think is pretty fantastic and then you move into fraud protection, which again is principally driven by another one of our acquisitions.

Speaker Change: Which was which is C H alert.

Speaker Change: Alert has been sold on for the five bank deals.

Speaker Change: We sold this year and ACTH alert also represents about 30%.

Speaker Change: The option and our overall digital banking clients and then you move into customer service and financial wellness areas and then in those two areas are then followed by money movement. So it's just the fact that today our clients average 13 products and we offer 33, so depending on what the.

Brian Hill: And then you move into customer service and financial wellness areas, and those two areas are then followed by money movement. So, it's just the fact that today our clients average 13 products, and we offer 33. So, depending on what the customers are interested in from a business operation and strategy point of view really drives what products are adopted, But definitely within the marketing data insights and fraud area. We're seeing quite a bit of track record, Maybe I'll just take that up a level besides specific product performance.

Brian Hill: And then those two areas have been followed by money movement. So it's just the fact that today, our clients average 13 products, and we offer 33. So depending on what the interested in from a business operation and strategy point of view, really drives what products are adopted. But definitely within the marketing data insights and fraud area, we're seeing quite a bit of traction.

Speaker Change: The interested in from a business operation and strategy point of view really drives what products are adopted but definitely within the marketing data insights and fraud area, we're seeing quite a bit of traction.

Alex Shootman: Yeah, maybe I'll just take that up a level besides specific product performance. I'll give you an anecdote of our Customer Advisory Board meeting. We had our customer advisory board together a couple of weeks ago that represents 10 financial institutions, both banks and credit unions, a total of a little under $50 billion in assets with close to about a million and a half digital users across those customers. And there were three topics that they wanted to talk about. One which was look, we're coming to the point where we're going to be able to drive loan volume again.

Speaker Change: Maybe I'll just.

Speaker Change: That upper level, Besides specific product performance I'll give you.

Alex P. Shootman: I'll give you an anecdote about our Customer Advisory Board meeting. We had our Customer Advisory Board together a couple of weeks ago. That represents 10 financial institutions, both banks and credit unions, a total of a little under $50 billion in assets with close to about a million and a half digital users across those customers. And there were three topics that they wanted to talk about.

Speaker Change: An anecdote.

Speaker Change: Our customer Advisory Board meeting, we had our customer advisory board together, a couple of weeks ago that represents 10 financial institutions, both banks and credit unions, a total of a little under $50 billion in assets with.

Speaker Change: Close to about a million and a half digital users across those customers and there was.

Speaker Change: Three topics that they wanted to talk about one which was look.

Brian Hill: One, which was, look, we're coming to the point where we're going to be able to drive loan volume again, and we really need to digitize the front end of our lending platform. We've got a lot of legacy platforms that are connected to our back office. We'll probably leave those in place, but we really need a modern digital first experience for attracting either a new customer or providing a new product. So they want to talk a lot about what the digitization of the front end of the loan process will look like. Brian has already talked about it.

Speaker Change: We're coming to the point, where we're going to be able to drive loan volume again.

Alex Shootman: And we really need to digitize the front end of our lending platform. We've got a lot of legacy platforms that are connected to our back office. We'll probably leave those in place. But we really need a modern digital-first experience for attracting either a new customer or providing a new product. So they want to talk a lot about what is the digitization of the front end of the loan process look like. Brian already talked about it. Very sophisticated thoughts around data. How do I use data for fine grain analytics to understand specific people that I could make a specific offer?

Speaker Change: And we really need to digitize the front end of our lending platform. We've got a lot of legacy platforms that are connected to our back office will probably leave those in place, but we really need a modern digital first experience.

Speaker Change: We're attracting either a new customer we are providing a new products. So they wanted to talk a lot about what is the digitization of the front end of the loan process look like Brian already talked about it.

Alex P. Shootman: Very sophisticated thoughts around data. How do I use data for fine-grained analytics to understand specific people for whom I could make a specific offer? How do I use it to deliver a personalized offer in-channel, in the mobile channel itself?

Brian: Very sophisticated thoughts around data, how do I use data for fine grained analytics to understand specific people that I could make a specific offer how do I use it to deliver a personalized offer in channel in the mobile and the mobile channel itself and then.

Alex Shootman: How do I use it to deliver a personalized offer in general, in the mobile, in the mobile channel itself? And then, was a race around AI. It's just clear that there's two big use cases for our customers for AI. One would be, think about generative AI in the contact center to be able to help them respond to their customers more quickly. And then it would be more predictive AI in terms of battling fraud. So you got Brian's perspective on the specific products and then just an overview from a section of our customer base in terms of what they're interested in.

Brian Hill: And then there are those around AI, where it's just clear that there are two big use cases for our customers for AI. One would be generative AI in the contact center to be able to help them respond to their customers more quickly. And then there would be more predictive AI in terms of battling fraud. So you've got Brian's perspective on the specific products and then just an overview from a section of our customer base in terms of what they're interested in.

Speaker Change: There was a recent round.

Speaker Change: And AI, where it's just clear that there is two big use cases for our customers for AI, one would be think about generative AI in the contact center to be able to help them.

Speaker Change: Sponsor their customers more quickly.

Speaker Change: And then Kent would be more predictive.

Speaker Change: AI in terms of in terms of battling fraud. So you got Brian's perspective on the specific products and just an overview from our section of our customer base in terms of what they are interested in.

Unknown Executive: That's very helpful.

Brian Hill: That's very helpful. Just for a quick follow-up, maybe Brian on the model, just want to get a better sense of the expectations for the back half and then what's really sustainable for your fiscal 26 targets in terms of user growth and our moves to reuse the recent trajectories as maybe a guide to what you should, you know, expect for the next several quarters. Is that a good sort of framework to think about the model? No, it isn't.

Brian: That's very helpful. Just for a quick follow up have you Brian on the model just wanted to get a better sense of the expectations for the back half and then what's really sustainable for your fiscal 'twenty six targets in terms of user growth and our improved should we use the recent trade.

Unknown Executive: Just for a quick follow-up, maybe you've grind on the model.

Unknown Executive: Just want to get a better sense of the expectations for the back app. And then what's really sustainable for your physical 26 targets in terms of user growth and our improves should we use the recent project crease as maybe a guide to what you should expect for the next several quarters. Is that a good sort of framework to think about the model? No, no, it is.

Brian: Chris There's maybe a guide to what you should expect for the next several quarters is that a good sort of framework to think about the model.

Brian Hill: I wouldn't break away from what we've been saying for the last several years on how we achieve 25% revenue growth. 5 to 7% of the percentage points will come from ARPU expansion. ARPU expansion is driven by both the fact that new sales cohorts are coming on with a much higher RPU. Part of that's driven by more banks included in that mix, but credit unions are coming in with more average products and a much higher RPU. So we think that he's a good driver.

Speaker Change: No no. It is I wouldn't break away from what we've been saying for the last several years on how we achieved 25% revenue growth.

Brian Hill: I wouldn't break away from what we've been saying for the last several years on how we achieve 25% revenue growth. You know, five to seven percent percentage points will come from our expansion. Our food expansion is driven by both the fact that new sales cohorts are coming on in a much higher RPU. Part that's driven by more banks included in that mix, but also credit unions are coming in with more average products and a much higher RPU. So, so we think that's a good driver will have good visibility, and what that can do for us in the future.

Speaker Change: 5% to 7% percentage points will come from Arthur expansion ARPA expansion is driven by both the fact that new sales cohorts are coming on at a much higher <unk>.

Speaker Change: Part of that's driven by <unk>.

Speaker Change: More banks included in that mix, but also credit unions are cut.

Speaker Change: And with more average products and a much higher RPM. So so we think that's a good driver and we have good visibility and what that can do for us in the future.

Brian Hill: We have good visibility into what that can do for us in the future. And then, secondly, ARPU expansion comes from the cross-sell that we're seeing. Quite honestly, I'm very excited about what we're seeing come through our client sales organization. Whether it's at the time of renewal or if it's midstream in an MSA, we're seeing nice adoption of our product portfolio. And as I mentioned, that's 46% of the total contract value for our year-to-date 2024 new sales.

Brian Hill: And then secondly, RPU expansion comes from the cross-sell that we're saying, and quite honestly, I'm very excited about what we're seeing come through our client sales organization, whether it's at the time of renewal or if it's midstream in an MSA. We're seeing nice adoption of our product portfolio. And, as I mentioned, that's 46% total contract value for our year-to-date 2024 new sales. So five to seven percent from RPU expansion and the balance 18 to 20% will come from user growth. Now, within any quarter, it could be a percentage point or two different or variability and user growth versus RPU expansion, but we don't see reason to break away from the revenue calculus that we've been providing.

Speaker Change: And then secondly.

Speaker Change: Arco expansion comes from the cross sell that we're seeing and quite honestly I'm very excited about what we're seeing come through our client sales organization, whether it's at the time of renewal or if its midstream and an MSA, we're seeing nice adoption of our product portfolio and as I mentioned that's <unk>.

Speaker Change: 46%, a total contract value for our year to date 2024, new sales, so 5% to 7% from <unk> expansion and the balance 18% to 20% will come from.

Brian Hill: So 5 to 7% of revenue will come from ARPU expansion, and the balance 18 to 20% will come from user growth. Now, within any quarter, it could be a percentage point or two different or have variability in user growth versus ARPU expansion. But we don't see any reason to break away from the revenue calculus that we've been providing. Thank you. Congratulations on the quarter. I appreciate it. Your next question comes from the line of Pat Walravens of Citizens JMP. Your line is now open. Oh, great. Thank you very much.

Speaker Change: User growth now within any quarter.

Speaker Change: It could be a percentage point or two.

Speaker Change: Or variability and user growth versus <unk> expansion, but we don't see any reason to break away from the revenue calculus that we've been providing.

Unknown Executive: Thank you. Welcome.

Speaker Change: Thank you congrats on the quarter I appreciate it.

Unknown Executive: That's on the quarter.

Unknown Executive: We should.

Speaker Change: Uh huh.

Patrick Walravens: Your next question comes from the line of Pat Will Ravens of Citizens JMP. Your line is now open. Oh, great. Thank you very much. And congratulations, you guys. Okay. So I guess I have two questions.

Speaker Change: Your next question comes from the line of Pat Lavelle revenge of citizens J M.

Speaker Change: Your line is now open.

Patrick D. Walravens: And congratulations, you guys. So, I guess I have two questions. The first is, Alex, I'm reading this press release about Millennials versus Gen X and baby boomers. I mean, it's super interesting.

Patrick D. Walravens: Oh, great. Thank you very much and congratulations you guys.

Patrick D. Walravens: So I guess I have two questions. The first is Alex.

Alex Shootman: The first is Alex. I'm reading this press release about the millennials versus the Gen X and baby viewers, and I mean, it's super interesting. I'd love you to expand a little bit on why the millennials are so up for grabs and why they're expanding their number of financial providers. Just as they get more wealth, they need more providers or something more to it.

Speaker Change: Reading this press release about the millennials versus the Gen X and baby Boomers and.

Alex P. Shootman: Just, I'd love you to expand a little bit on why millennials are so up for grabs and why they're expanding their number of financial providers. Is it just because they get more wealth, they need more providers, or is there something more to it? And then my second question is, I would love to hear your thoughts on... How do you guys feel about doing M&A and sort of what the parameters would be for that?

Speaker Change: I mean, it's super interesting.

Speaker Change: I'd Love you to expand a little bit on why it is the millennials are.

Speaker Change: So up for grabs.

Patrick D. Walravens: And why they're expanding their number of financial providers.

Speaker Change: As they get more wealth, they need more providers or there's something more to it and then my second question is I would love to hear your thoughts on.

Patrick Walravens: And then my second question is: I would love to hear your thoughts on.

Alex Shootman: How do you guys feel about doing M&A and sort of what the parameters would be for that? Thanks for the question. On the first question, we set out to do that study in partnership with the Center for Generational Kinetics because of the facts that you and I both know, which is this huge wealth shift from the baby boomer generation to the millennial generation. And we set out to do this study as kind of an advisory to our customers. And many of what you much of what you read in it is what we discovered. The first of all is half of the half of the millennials use a very large bank, but that means half of the millennials are up for grabs to change to regional and committed financial institution to be their primary institution.

Speaker Change: Hey, guys feel about doing M&A and sort of what you are.

Patrick D. Walravens: <unk> would be for that.

Alex P. Shootman: Yeah, Pat, thanks for the question. First, on the first question, we set out to do that study in partnership with the Center for Generational Kinetics because of the facts that you and I both know, which is this huge wealth shift from the baby boomer generation to the millennial generation. And we set out to do this study as kind of an advisory to our customers, and much of what you – much of what you read in it is what we discovered.

Patrick D. Walravens: Yes.

Speaker Change: Thanks for the question first on the first question, we set out to do that study.

Speaker Change: In partnership with the center for generational kinetics, because the facts that you and I, both know which is huge.

Speaker Change: Shift from the baby Boomer generation to the millennial generation and we we set out to do this study is kind of an advisory to our customers and many of what much of what you read and it is what we discovered that first of all there is.

Alex P. Shootman: The first of all is, yeah, half of the millennials use a very large bank, but that means half of the millennials are up for grabs to change to a regional and community financial institution to be their primary institution. In that, we learned things that are very interesting, which is that for millennials, it's not about – the most important thing for them is not that that's where their paycheck is deposited, but that it's a really good digital experience, and then some of the other aspects. I don't think I can divine.

Speaker Change: Half of the half of the millennials use a very large bank, but that means half of millennials are up for grabs too.

Speaker Change: To change for a regional and community financial institution to be their primary institution.

Alex Shootman: In that we learn things that are very interesting, which is for millennial, it's not about the most important thing for them is not that that's where their paycheck is deposited, but that it's a really good digital experience. And then some of the some of the other aspects, I don't think I can divine. I'm not a millennial whisperer, so I can't divine the reason why it might be, but what it would it told us is there's an opportunity for our customers to tap into that generation that's going to inherit a lot of wealth. And then there's an opportunity for alchemy in terms of having more products and the ability to be, you know, to be more innovative.

Speaker Change: In that we learn things that are very interesting which is.

Speaker Change #107: For millennial, it's not about the most important thing for them is not that thats, where their paycheck is deposited with that it's a really good digital experience.

Patrick D. Walravens: And then some of the some of the other aspects.

Speaker Change: I don't think I can divine.

Alex P. Shootman: I'm not a millennial whisperer, so I can't divine the reason why it might be, but what it told us is there's an opportunity for our customers to tap into that generation that's going to inherit a lot of wealth, and then there's an opportunity for Alkami in terms of having more products and the ability to be, you know, more innovative. So it was, you've read it, it's pretty exciting for us, and our customers have appreciated the research.

Speaker Change: I'm not a millennial whisperer, so I can't define the reason why it might be but what it what it told US is there is an opportunity for our customers to tap into that generation thats going to inherit a lot of wells and then there is an opportunity for alchemy in terms of having more products.

Patrick D. Walravens: And the ability to be.

Patrick D. Walravens: To be more innovative so you've read it is pretty exciting for us and our customers have appreciated.

Brian Hill: So it was, but you've read it is pretty exciting for us and our customers have appreciated the appreciated the research in terms of MNA. You know, our philosophy has been we will grow through organic products, we'll grow through MNA, and we'll grow through relationships with third party intellectual property that we bacon. We build into our product from an MNA perspective is if we were to do MNA, you would expect it to have a couple of characteristics. You would expect it to make sense to our customers that they would look at whatever we would do and say that makes sense to me that that alchemy brings that to the table, much like the segment acquisition makes sense to our customers, and you would expect that it would fit into our financial profile.

Alex P. Shootman: In terms of M&A, you know, our philosophy has been we will grow through organic products, we'll grow through M&A, and we'll grow through relationships with third-party intellectual property that we bake in and build into our product. From an M&A perspective, if we were to do an M&A, you would expect it to have a couple of characteristics. You would expect it to make sense to our customers that they would look at whatever we do and say, "That makes sense to me that Alkami brings that to the table, much like the segment acquisition makes sense to our customers."

Patrick D. Walravens: I appreciated the research in terms of M&A.

Patrick D. Walravens: Our philosophy has been.

Patrick D. Walravens: We will grow through organic products will grow through M&A, and we will grow through.

Patrick D. Walravens: Through relationships with third party intellectual property that we bacon, we built into our product.

Patrick D. Walravens: From an M&A perspective.

Patrick D. Walravens: If we were to do M&A you would expect it to have a couple of characteristics. You would you would expect it to make sense to our customers that they would look at whatever we would do and say that that makes sense to me that that alkermes brings that to the table much like the segment acquisition that makes sense to our customers.

Alex P. Shootman: And you would expect that it would fit into our financial profile, right? So the things that we're trying to accomplish financially on behalf of the shareholders, you'd expect us to do something that fits into that financial profile. But I don't feel anything, Brian.

Patrick D. Walravens: And you would expect that it would fit into our financial profile right. So.

Brian Hill: Right, so that the things that we're trying to accomplish financially on behalf of the shareholders, you'd expect us to do something that fits into that financial profile.

Patrick D. Walravens: The things that we're trying to accomplish financially on behalf of the shareholders. You would expect us to do something that fits into that financial profile of the purion anything burn.

Brian Hill: I don't feel anything burned. Yeah, I had a couple of points, Pat. And we talked about this in the past. I mean, our view is MNA is an opportunity to expand our product mix where we are today in terms of scale. We don't view MNA as a way to move away from digital banking. So what we're good at is the digital experience. And to the extent we can add to the digital experience either through money, movement, financial wellness, or maybe fraud and protection on the back end of that, or even complementing data and marketing. I mean, those are attractive areas for us from our financial model.

Brian Hill: Yeah, I'll add a couple of points, Pat, and we've talked about this in the past. I mean, our view is that M&A is an opportunity to expand our product mix. Where we are today in terms of scale, we don't view M&A as a way to move away from digital banking. So, what we're good at is the digital experience, and to the extent we can add to the digital experience, either through money movement, financial wellness, or maybe fraud and protection on the back end of that, or even complementing data and marketing. I mean, those are attractive areas for us.

Speaker Change: I had a couple of points patent and we've talked about this in the past.

Speaker Change: I mean, our view is M&A as an opportunity to expand our product mix, where we are today in terms of scale, we don't view M&A as a way to move away from digital banking. So what we're good at is the digital experience and to the extent we can add.

Patrick D. Walravens: To the digital experience either through money movement financial wellness, or maybe fried and protection on the back end of that.

Patrick D. Walravens: Or even complementing.

Patrick D. Walravens: Data and marketing I mean, those are attractive areas for us.

Patrick D. Walravens: From.

Brian Hill: Our financial model, we put a lot of hard work into our financial model. I mean, this is our fourth straight quarter of positive adjusted EBITDA. We're very proud of that. What comes with that is we are not willing to take a step back, and if we acquired something that was initially at an EBITDA loss, we'd have to bring it very quickly to EBITDA positive. We're not looking to acquire something that would be delivered at our growth rate.

Patrick D. Walravens: Our financial model, we put a lot of work hard work into our financial model. I mean, this is our fourth straight quarter of positive adjusted EBITDA. We're very proud of that what comes with that is we are not willing to take a step back.

Brian Hill: We've got a lot of work, a lot of hard work into our financial model. I mean, this is our fourth straight quarter of positive of just the EBITDA. We're very proud of that. What comes with that is we are not willing to take a step back. And if we acquired something that was initially at a EBITDA loss, we'd have to bring it very quickly to EBITDA positive. We're not looking to acquire something that would be delivered to our growth rate. So, as I kind of go through this criteria, the scope of what's really available starts to become much smaller, but we're looking for very, you know, high quality assets.

Patrick D. Walravens: And if we acquired something that was initially at an EBITDA loss, we'd have to bring it very quickly to EBITDA positive.

Patrick D. Walravens: We're not looking to acquire something that would be dilutive to our growth rate.

Brian Hill: So as I kind of go through this criteria, the scope of what's really available starts to become much smaller, but we're looking for very high-quality assets. And then, finally, what I'll mention is the move on our credit facility. That was very intentional with the thought that it's been two years since our last Illuminate transaction.

Patrick D. Walravens: Is that kind of go through this criteria the scope of what's really available starts to become much smaller, but we're looking for very.

Patrick D. Walravens: High quality assets.

Brian Hill: And then following what I'll mention is the move on our credit facility that was very intentional, with the thought that it's been two years since our last illuminate transaction. The company is organizationally prepared to complete another transaction. So let's start making room, not that we have any acquisition target that's imminent, but let's start thinking ahead and make moves and create the right capital alternatives and options for us as an opportunity does arise so we can move very quickly. But generally, you know, I like to buy companies, and in my past I've bought many. We're looking at, you know, IRR is north of 25% from a financial point of view, but a product that we feel will help sustain our organic growth for very long.

Patrick D. Walravens: And then finally, what I'll mention is the move on our.

Patrick D. Walravens: Our credit facility that was very intentional with the thought that it's been two years since our last eliminate transaction. The company is organizationally prepared to complete another transaction. So let's start making room not that we have any acquisition target that is.

Brian Hill: The company is organizationally prepared to complete another transaction. So let's start making room, not that we have any acquisition target that's imminent, but let's start thinking ahead and making a move and creating the right capital alternatives and options for us as an opportunity does arise so we can move very quickly. But generally, I like to buy companies, and in my past, I've bought many. We're looking at IRRs north of 25% from a financial point of view, but a product that we feel will help sustain our organic growth for a very long time. All right, that's super helpful. Thank you both. Your next question comes from the line of Jacob Stephan from Lake Street. Your line is now open.

Patrick D. Walravens: Eminent, but let's start thinking ahead and make move and create the right capital alternatives and options for us as.

Patrick D. Walravens: An opportunity does arise so we can move very quickly.

Patrick D. Walravens: But generally.

Patrick D. Walravens: You know I like to buy companies and in my past I have bought many.

Patrick D. Walravens: We're looking at.

Patrick D. Walravens: IRR north of 25% from a financial point of view, but a product that we feel will help sustain our organic growth for a very long period.

Unknown Executive: Andrew.

Unknown Executive: All right, it's super helpful.

Speaker Change: Alright, that's super helpful. Thank you both.

Jacob Stephan: Thank you both. Your next question comes from the line of Jacob Stephan, from Lake State. Your line is now open. Yeah, I appreciate it. Thanks for taking the questions. Congrats on the quarter. Just wanted to start out, Brian. You talked a little bit about users added through implementation versus from existing clients, and that mix was about 50 50 over the last 12 months. Maybe could you just kind of talk about how you expect that to trend moving forward if we can see kind of a similar pattern or if you expect it to change. You know, Jacob, it's a similar pattern.

Speaker Change: Your next question comes from the line of Jacob Stefan from Lake Street. Your line is now open.

Jacob Michael Stephan: Yeah, I appreciate it. Thanks for taking the questions. Congratulations on the quarter. Just wanted to start out, Brian. You talked a little bit about users added through implementation versus from existing clients, and that mix was about 50-50 over the last 12 months. Maybe, could you just kind of talk about how you expect that to trend moving forward, if we can see kind of a similar pattern or if you expect it to change? You know, Jacob, it's a similar pattern.

Jacob Michael Stephan: Yeah I appreciate it thanks for taking my questions congrats on the quarter.

Patrick D. Walravens: Yes.

Jacob Michael Stephan: Just wanted to start off Brian you talked a little bit about users added through implementation versus.

Brian: From existing clients in that mix was about 50 50 over the last 12 months.

Speaker Change: Maybe could you just kind of talk about how you expect that to trend moving forward. If we can see kind of a similar pattern or if you expect that to change.

Brian Hill: We're not seeing anything that would lead us to believe that there's going to be a significant movement one way or the other. I mean, it's all dependent upon the timing of when we sign new clients, the mix of those clients versus credit unions and banks, because, as you are aware, the profile of a bank generally has fewer retail users than a credit union of a similar asset size. So there's no reason to make a change to that, but there will be some variability from quarter to quarter on what drives the mix in any one quarter.

Jacob Michael Stephan: Jacob it's a similar pattern, we're not seeing anything that would lead us to believe.

Brian Hill: We're not seeing anything that would lead us to believe that there's going to be a significant movement one direction or the other. I mean, it's all dependent upon the timing of when we sign new clients, the mix of those clients versus credit unions and banks because, as you are aware, the profile of a bank generally has fewer retail users than a credit union of a similar asset size. So there's no reason to make a change on that, but there will be some variability from quarter to quarter on what drives the mix and any one quarter.

Jacob: If theres going to be a significant movement, one direction or the other.

Jacob: I mean, it's all dependent upon the timing of when we sign new clients the mix of those clients versus credit unions and banks because as you are aware the profile of the bank generally has fewer retail users in a credit union or a similar asset size.

Jacob: So there's no reason to make a change on that but there will be some variability from quarter to quarter on what drives the mix in any one quarter.

Brian Hill: Okay. And then just, you know, on the ACH sounds like you guys want a nice big, you know, a bank contract there. That was an ACH client. I'm just curious how, you know, common that situation is where you've got an ACH client. It sounds like there's 30% of, you know, your total customer base is ACH clients, but how common is that situation where you essentially take somebody from ACH and onboard them to the digital banking side. I mean, ACH is a, I mean, it's a fantastic product. And the client base of ACH goes from small financial institutions to very large financial institutions, financial institutions such as Silicon Valley Bank or Regions Bank, Trustmark Bank, some of those type of financial institutions.

Jacob Michael Stephan: Okay.

Alex P. Shootman: And then just, you know, on the ACH, it sounds like you guys want a nice big, you know, a bank contract there that was an ACH client. I'm just curious how common that situation is where you've got an ACH client. It sounds like 30% of, you know, your total customer base are ACH clients. But how common is that situation where you essentially take somebody from ACH and onboard them to the digital banking side? I mean, ACH is a – I mean, it's a fantastic product.

Speaker Change: And then just on the ACA, which it sounds like you guys want a nice bank.

Speaker Change: A bank contract there.

Speaker Change: That wasn't ACTH client I'm, just curious how common that situation is where you've got an <unk> client.

Speaker Change: It sounds like there is 30%.

Speaker Change: Your total customer base of <unk> clients, but.

Speaker Change: How common is that situation where.

Speaker Change: Essentially it takes somebody from ACA engine onboard them to the digital banking side.

Brian Hill: And the client base of ACH goes from small financial institutions to very large financial institutions, such as the Silicon Valley Bank or Regions Bank, Trust Smart Bank, some of those types of financial institutions. In part, that is where we are in our bank market penetration and the product market fit. But over time, it could be a very good source for additional banks to join the Alkami digital banking platform. But today it's just – it's not a main strategic point for us.

Speaker Change: I mean, <unk> I mean, it's a fantastic product and the client base of ACTH goes from small financial institutions to very large financial institutions financial institutions, such as the Silicon Valley Bank or regions Bank Trustmark Bank some of those type of financial institutions. So.

Alex Shootman: So today, it's not meant to be the tip of the spear for us to then follow and draft off of ACH's success through a cross owe of the digital banking platform. In part, that is where we are in our bank market penetration and the product market fix. But over time, it could be a very good source for additional banks to join the Alchemy digital banking platform. But today, it's just, it's not a main strategic point for us.

Speaker Change: Today, it's not meant to be the tip of the spear for US to then follow in draft off of a success through a cross sell of the digital banking platform and partner that is.

Speaker Change: Where we are in are our bank market penetration in the product market fix but over time it could be a very good source.

Speaker Change: For additional banks to join the alchemy digital banking platform, but today, it's not.

Speaker Change: Our main strategic point for us.

Alex Shootman: Here's why it's important. Today, we've moved forward when you think about going into a new market. Any company going into the new market, but you look at, you look for several things in terms of entering and being successful in that market. One is our potential question: is aware of you. So today, if you looked at aided awareness, Alchemy is either number one or number two in the credit unit space. If you look at aided awareness, Alchemy is number seven in the bank market. And so the reason why ACH alerts is important to us both as a standalone product and then entering the bank market is in situations like this.

Speaker Change: Here is why it's important today, we've moved forward when you think about going into a new market any company going into new market.

Alex P. Shootman: Today, we've moved forward. When you think about going into a new market, any company going into a new market, you look for several things in terms of entering and being successful in that market. One is, are potential customers aware of you?

Speaker Change: You look at you look for several things in terms of entering and being successful in that market. One is our potential customers aware of you.

Alex P. Shootman: So today, if you look at aided awareness, Alkami is either number one or number two in the credit union space; if you look at aided awareness, Alkami is number seven in the bank market. And so the reason why ACH Alert is important to us, both as a standalone product and then entering the bank market, is in situations like this, the customer that we ended up selling to was not aware that Alkami was a participant in the bank market because we're number seven in aided awareness.

Speaker Change: So today, if you looked at aided awareness alchemy is either number one or number two in the credit Union space. If you look at aided awareness alchemy is number seven in the bank market.

Speaker Change: So the reason why ACTH alerts.

Speaker Change: Important to us both as a standalone product and then entering the bank market.

Speaker Change: In situations like this.

Alex Shootman: The customer that we ended up selling to was not aware that Alchemy was a participant in the bank market because we're number seven in aided awareness. And through the ACH relationship, they became aware that Alchemy was in the digital banking market and then we ultimately approved for them that we could, that we could serve their needs. So that's what's really exciting to us is seeing that potential.

Speaker Change: Customer that we ended up selling too was not aware that alchemy was a participant in the bank market because we're number seven in aided awareness and truly <unk> relationship. They became aware that alchemy, who is in the digital banking market and then we ultimately prove to them that we could that we can serve their needs. So.

Alex P. Shootman: Through the ACH relationship, they became aware that Alkami was in the digital banking market, and then we ultimately proved to them that we could serve their needs. So that's what's really exciting to us, is seeing that potential. And now we've got to go figure out if we can replicate that more times.

Speaker Change: That's what's really exciting to us is seeing that potential.

Unknown Executive: And now we've got to go to the grad if we can replicate that more time.

Speaker Change: We've got to go figure out if we can replicate that more times.

Unknown Executive: Yeah, I mean, got you another direction. Jacob, the general direction today is when we sell a bank, we draft ACH alert into that transaction. And if you look at 20, 23, and then the five banks that we sold in 2024, there's a very high adoption rate of ACH alert in those transactions. Okay, yeah, that's, that's really helpful. Appreciate all the color.

Brian Hill: Yeah, I mean, that's the direction. Jacob, the general direction today is when we sell a bank, we draft ACH Alert into that transaction. And if you look at 2023 and then the five banks that we sold in 2024, there's a very high adoption rate of ACH Alert in those transactions. Okay, got it. That's really helpful. Appreciate all the color.

Speaker Change: Yes got you.

Speaker Change: Thats a direction.

Speaker Change: Jacob the general direction today as when we sell a bank we draft ACTH alert into that transaction.

Speaker Change: And if you look at 2023.

Speaker Change: And then the five banks that we sold in 2024, there is a very high adoption rate of ACTH alert in those transactions.

Speaker Change: Okay got it that's really helpful. I appreciate all the color.

Alexei Douglas: Your next question comes from the line of Alexei Douglas from JP Morgan. Your line is now open.

Jacob Michael Stephan: Your next question comes from the line of Alexei Dugalev from J.P. Morgan. Your line is now open. Good evening, this is Ellen Smith on behalf of Alexa Gogolev.

Speaker Change: Your next question comes from the line of Aleksey Douglas from JP Morgan. Your line is now open.

Ellen Smith: Good evening, this is Ellen Smith. I'm for Alexei Gogolib. Thank you so much for taking our question. So first, I know that you're very confident about the secular tailwinds driving your business. We are wondering if there are any quote-unquote missing pieces that you're planning to add to your product portfolio in order to be more competitive in RFPs for banking customers. Thank you. Yeah, thanks for the question. When we look at our bank product market fit and our ability to be increasingly competitive in that space, the bank product market fit is not necessarily about there's a large piece of capability that we don't have that we need to add into our product line.

Ellen Smith: Thank you so much for taking our question. First, I know that you're very confident about the secular tailwinds driving your business. We're wondering if there are any, quote unquote, missing pieces that you're planning to add to your product portfolio in order to be more competitive in RFPs for banking customers. Thank you.

Speaker Change: Good evening. This is Alan Smith on for like say go go lives. Thank you so much for taking our question.

Speaker Change: First I know that Youre very confident about the secular tailwind is driving your business clear wondering if there are any quote unquote missing pieces that you are planning to add to your product portfolio in order to be more competitive in rfps for banking customers. Thank you.

Alex P. Shootman: Yeah, thanks for the question. When we look at our bank product market fit and our ability to be increasingly competitive in that space, The bank product market fit is not necessarily about, there's a large piece of capability that we don't have that we need to add to our product line. It tends to be more around what a bank's customer might have, so let's say the ability to process wire transactions at the end of the day.

Speaker Change: Yes. Thanks for the question when we look at our bank product market fit.

Speaker Change: And our ability to be increasingly competitive in that space.

Speaker Change: The bank product market fit is not necessarily about bears a large piece of capability that we don't have that we need to add into our product line.

Alex Shootman: But it tends to be more around a bank's customer might have, so let's say the ability to process wire transactions at the end of the day. We have the ability to process wire transactions at the end of the day, and we have the ability to serve a very large portion of the market with our capability to process wire transactions at the end of the day. But there may be a bank that has an individual customer that has a very complex need around wire payments, for example. And we want to enable that bank to be able to serve that customer.

Speaker Change: It tends to be more around.

Speaker Change: A banks customer.

Speaker Change: Might have.

Speaker Change: So, let's say the ability to.

Speaker Change: Process wire transactions at the end of the day, we have the ability to process more transactions at the end of the day and we have the ability to serve a very large portion of the market with our capability to process more transactions at the end of the day, but there may be a bank that has an individual customer.

Alex P. Shootman: We have the ability to process wire transactions at the end of the day, and we have the ability to serve a very large portion of the market with our ability to process wire transactions at the end of the day. But there may be a bank that has an individual customer that has a very complex need around wire payments, for example, and we want to enable that bank to be able to serve that customer.

Speaker Change: <unk>.

Speaker Change: <unk> has a very complex need around wire payments for example, and we want to enable that bank to be able to serve that customer. So when we think about product market fit for the commercial segment for alchemy.

Alex Shootman: So when we think about product market fit for the commercial segment for Alchemy, we already have pretty good product market fit. Our next steps are not necessarily adding some large additional piece of functionality that we don't have. Our next step, the specific bank of one or two customers that have a complex need, our ability to serve that complex need.

Alex P. Shootman: So when we think about product market fit for the commercial segment for Alkami, we already have pretty good product market fit. Pacific Bank of one or two customers that have a complex need, our ability to serve that complex need is very clear. Thank you so much.

Speaker Change: We already have pretty good product market fit our next steps are not necessarily adding.

Speaker Change: Some large additional piece of functionality that we don't have our next step.

Speaker Change: Specific.

Speaker Change: Thanks.

Speaker Change: One or two customers that have complex need our ability to serve that complex needs.

Ellen Smith: That's very clear. Thank you so much.

Brian Hill: And for a quick follow-up, you've previously discussed how 20 of your top 10 largest clients are accounting for 22 percent of your digital user base. Are you seeing continued in-market consolidation given the tougher external environment, or do you expect the concentration of your base to reduce as you add more banks rather than credit unions? Yeah, I'm not clear on the stats that you just added, but to kind of back up and just more generally, how is market consolidation impacting us?

Speaker Change #103: That's very clear. Thank you so much and sorry quick follow up.

Ellen Smith: And for a quick follow-up, you've previously discussed how about 20 of your top 10 large clients are counting for 22% of your digital user-based. Are you seeing continued and market consolidation given the tephar external environment, or do you expect the concentration of your base to reduce as you add more banks rather than credit unions? Yeah, I'm not, I'm not clear on the stats that you just added, but just kind of back up and just more generally house market consolidation impacting us. Generally, we benefit from market consolidation. In fact, we had two consolidation events that occurred this quarter, where we picked up some digital users, which was a positive.

Speaker Change: Previously discussed how about 20 of your top 10 largest clients are accounting for 22% of your digitally user base are you seeing continued end market consolidation given the conference sterile environment or do you expect the concentration of your base to reduce as you add more banks rather than credit unions.

Speaker Change: Yes.

Speaker Change #104: I'm not clear on the stats that you just add it but just to kind of back up and just more generally house market consolidation impacting us.

Brian Hill: Generally, we benefit from market consolidation. In fact, we had two consolidation events that occurred this quarter where we picked up some new digital users, which was positive. Also, later in the year, as we've been discussing for the last couple of quarters, we do have a financial institution that's leaving us in the fall as the result of M&A activity. So, M&A activity does not, I mean, it's averaged around 3% over the last couple of decades. There are some periods of time where it might be a little more, a little less, but the 3% is pretty consistent. We don't see that changing significantly in the future.

Speaker Change #109: Generally we benefit from market consolidation in fact, we had.

Speaker Change: Two consolidation events that occurred this quarter, where we picked up some digital users which was a positive.

Alex Shootman: Also, later in the year, as we've been discussing for the last couple of quarters, we do have a financial institution that's leaving us in the fall as the result of M&A activity. So M&A activity does not, I mean it's averaged around 3% over the last couple of decades. There's been some periods of time where it might be a little more, a little less, but the 3% is pretty consistent, and we don't see that changing significantly in the future. Now the good news for Alchemy and others that have a pricing protocol that's driven by digital users.

Speaker Change: Also later in the year as we've been discussing for.

Speaker Change: For the last couple of quarters, we do have a financial institution, that's leaving us in the fall as the result of M&A activity.

Speaker Change: So M&A activity does not I mean, it's averaged around 3% over the last.

Speaker Change: A couple of decades.

Speaker Change: There's been some periods of time, where it might be a little more a little less but the 3% is pretty consistent and we don't see that changing significantly.

Speaker Change: In the future now the good news for alchemy, and others that have a pricing protocol, that's driven by digital users are consolidation doesn't.

Brian Hill: Now, the good news for Alkami and others that have a pricing protocol that's driven by digital users, a consolidation doesn't really mean now you're going to have fewer users? I mean, the consolidation activities are normally about gaining market share and gaining additional accounts, which we would typically benefit from. All clear. Thank you all so much. All right, your next question comes from the line of Henry Vary of Craig Hellam Capital Group. Your line is now open. Hey, thanks for taking my question. This is Daniel on for Jeff.

Alex Shootman: A consolidation doesn't early me. Now you're going to have fewer users. I mean, the consolidation activities are normally about gaining market share and gaining additional accounts, and we would typically benefit from that.

Speaker Change: Merely mean now youre going to have fewer users the consolidation activities normally about gaining market share and gaining additional accounts and we would typically benefit from that.

Unknown Executive: All clear. Thank you all so much. All right.

Speaker Change #108: All clear.

Speaker Change: Alright.

Speaker Change: Okay.

Speaker Change #128: Alright. Your next question comes from the line of Henry <unk> of Craig Hallum Capital Group. Your line is now open.

Henry Vary: Your next question comes from the line of Henry Vary of Grace. Thank you for taking my question. This is Daniel on for Jeff. Just on implementation backlog looked like 1.6 million users. I think you said, highest it's been a little while, real strong, even though the client count in implementation backlog is down a bit. So it looks like the clients coming in are getting larger. It's anything we should read there in terms of, is there a major opportunity to be moving up market here? We're beginning to see, or it's just an incremental shift. It's just an incremental shift based on the story of the quarter.

Speaker Change: Hey, Thanks for taking my question. This is Daniel on for Jeff.

Daniel: Just on the implementation backlog it looks like $1 6 million users I think you said highest it's been a little wild will strong even though the client count in implementation backlog is down a bit so it looks like the clients coming in or getting larger is there anything we should read there in terms of is there a major opportunity to be moving upmarket here, we're beginning to see.

Daniel Hibshman: Just on the implementation backlog, looks like 1.6 million users. I think you said the highest it's been a little while, real strong, even though the client count in implementation backlog is down a bit. So it looks like the clients coming in are getting larger. Just anything we should read there in terms of, you know, is there a major opportunity to be moving up market here we're beginning to see, or is this just an incremental shift?

Speaker Change #100: Just an incremental shift.

Daniel Hibshman: It's just an incremental shift based on the story of the quarter. For example, the one Tier One credit union that Alex mentioned we won during the quarter had almost 300,000 digital users. That's obviously still in our backlog, given we just signed that client.

Speaker Change #105: It's just an incremental shift based on the story of the quarter for example, the one tier one.

Brian Hill: For example, the one tier one credit union that Alex mentioned being one during the quarter was almost 300,000 digital users. That's obviously still in our backlog, given we just signed that client. So you're going to see nuances like that from quarter to quarter. And it's just driven by the mix of business that we've sold in the proceeding to the three quarters. Okay. And then just one follow up for me on on banks and the bank backlog there was with 30 now. I think you said expected to be implemented by Q 125, you know, really nice pace of sign expected implementations there.

Speaker Change #105: Union that Alex mentioned, we won during the quarter was almost 300000 digital users.

Speaker Change #120: That's obviously still in our backlog given we just signed that client so youre going to see nuances like that from quarter to quarter and it's just driven by the mix of business that we sold in the preceding two to three quarters.

Brian Hill: So you're going to see nuances like that from quarter to quarter, and it's just driven by the mix of business that we've sold in the preceding two to three quarters. Okay, and then just one follow-up for me on banks and the bank backlog there with 30 now, I think you said, expected to be implemented by Q125, you know, really nice pace of signing and expected implementations there. Just any thoughts, you know, has that just been broken open wide by, you know, getting more implementations under your belt? Or is there some other factor we should be looking at for what's driving the acceleration there?

Speaker Change #101: Okay, and then just one follow up for me on <unk>.

Speaker Change #114: And the bank backlog there with 30 now I think you said expected to be implemented by Q1 25.

Speaker Change #101: Nice pace.

Speaker Change #116: <unk> expected implementations there just any thoughts is that just being broken up and wide by getting more implementations under your belt or is there. Some other factor we should be looking at preferred what's driving the acceleration there.

Brian Hill: Does any thoughts, you know, is that just been broken open wide by, you know, getting more implementations under your belt, or is there some other factor we should be looking at for what's driving the acceleration there? First of all, we're pleased with the progress that we're making in the bank market. As Brian said earlier, the ultimate scorecard of our progress in the bank market is our expectation that, over time, half of our new logos will come from banks and half will come from credit unions. What we look at internally, probably a more false and answer than your than you asked, but what we look at internally is to be successful in a market number one, are we driving demand?

Alex P. Shootman: First of all, we're pleased with the progress that we're making in the bank market. As Brian said earlier, the ultimate scorecard for our progress in the bank market is our expectation that, over time, half of our new logos will come from banks, and half will come from credit unions. What we look at internally, probably a more comprehensive answer than you asked, but what we look at internally is that to be successful in a market, number one, are we driving demand? Number two, do we have product-market fit? Number three, do we have the skills internally to be able to be successful?

Speaker Change #111: First of all we're pleased with the progress that we're making in the bank market.

Speaker Change #151: And as Brian said earlier.

Speaker Change #117: The ultimate scorecard of our progress in the bank market is our expectation that over time half of our new logos coming from banks and half will come from credit unions, what we look at it internally probably.

Speaker Change #102: A more fulsome answer than you asked but when we look at internally is to be successful in a market number one are we driving demand.

Alex Shootman: Number two, do we have product-market fit? Number three, do we have the skills internally to be able to be successful? And then number four, particularly in a kind of market that we're in. Because there's a concentration of back end cores in the bank market. Are we being successful bringing customers on to those cores so that we've got experience bringing them on to those cores so that when a new customer looks at us and says, hey, I really like your product. Kind of a risk to do a conversion, and we're able to walk them through what we've done at six or seven times.

Speaker Change #102: Number two do we have product market fit.

Speaker Change #102: <unk> three do we have the skills internally.

Speaker Change #102: And be able to be successful and then number four particularly in the kind of market that we're in.

Alex P. Shootman: And then number four, particularly in the kind of market that we're in, because there's a concentration of back-end cores in the bank market, are we being successful bringing customers onto those cores so that we've got experience bringing them onto those cores so that when a new customer looks at us and says, hey, I really like your product, kind of a risk to do a conversion, and we're able to walk them through what we've done it six or seven times, you're not going to be the first. So, on all of these areas, we're making progress. I'll let Brian give you a couple of statistics in terms of the demand side and then the number of cores. Yeah. Great.

Speaker Change #102: Because there is a concentration of backend cores in the bank market.

Speaker Change #102: Are we being successful bringing customers onto those cores. So that we've got experienced bring them, bringing them onto those cores show that when a new customer looks at us and says Hey, I really like your product.

Speaker Change #102: Kind of a risk do a conversion and we're able to walk them through what we've done at six or seven times youre not going to be but youre not going to be the first show on all of these areas.

Brian Hill: You're not going to be, but you're not going to be the first. So, on all of these areas, we are making, we're making progress. I let Brian give you a couple of statistics in terms of the demand side and then the number of cores. Yeah, great. So, in terms of demand, there's a couple of factors that we're looking at, a couple of metrics that we're looking at. One is the number of deals that we're participating in. Over the last 12 months, we've participated in 90 bank processes. And we've won about 16% of the TCV that was available to be acquired during those bank processes, which is good.

Speaker Change #102: We're making we're making progress I'll, let Brian give you a couple of statistics in terms of the demand side and the number of cores.

Brian: Great. So.

Brian Hill: So, in terms of demand, there's a couple of factors that we're looking at, a couple of metrics that we're looking at. One is the number of deals that we're participating in. Over the last 12 months, we've participated in 90 bank processes, and we've won about 16% of the TCV that was available to be acquired during those bank processes, which is good. If you look at 2020, It was 70 races that we participated in.

Brian: In terms of demand there is a couple of factors that we're looking at a couple of metrics that we're looking at one is the number of deals that we're participating in.

Brian: Over the last 12 months, we participated in nine bank.

Brian: <unk> processes.

Speaker Change #152: And we've won about 16% of the <unk> that was available to be acquired during those bank processes, which is good.

Brian Hill: If you look at 2020, it was 70 that we participated in. And then the other area is what's going to happen in the future. So we're looking into our selves pipeline. And that is continually moving up the bank representation, and now it's close to 50% as we mentioned in the prepared comments of this call. So, so that that's good movement. Other areas like core integrations, by the end of Q one of 2025, we're going to have over 30 or right at 30 implementations. And that's going to represent seven cores with multiple integrations into each of those cores.

Brian: You look at 2020.

Brian: It was 70 that we participated in and then the other area is what's going to happen in the future. So we're looking into our sales pipeline and that is continually moving up the bank representation announced close to 50% as we mentioned in the prepared comments.

Brian Hill: And then the other area is, well, what's going to happen in the future? So, we're looking into our sales pipeline, and that is continually moving up the bank representation. And now it's close to 50%, as we mentioned in the prepared comments of this call. So, that's good movement. Other areas, like core integrations. By the end of Q1 2025, we're going to have over 30 or right at 30 implementations, and that's going to represent seven cores with multiple integrations into each of those cores.

Brian: This call so so thats good movement.

Brian: Other areas like core integrations.

Speaker Change #121: The end of Q1 of 2025, we're going to have over 30 are right at 30 implementations and that's going to represent seven cores with multiple integrations into each of those cores and what's great about that is the point, Alex just made where any other financial institution.

Brian Hill: And what's great about that is the point Alex just made, where any other financial institution that happens to have one of those seven cores will no longer be the first implementation with that core, but those seven cores represent close to 80% of the bank market that we would view in our target market. So, lots of progress in many different areas, which we feel, and we understand the ultimate scorecard is in 2026. Are we achieving our 50% new client wins target from the bank? I'll leave it be.

Brian Hill: And what's great about that is the point Alex just made, where any other financial institution that happens to have one of those seven cores, it will not longer be the first implementation with that core. But those seven cores represent close to 80% of the bank market that we would view in our target market. So lots of progress in many different areas, which were, again, we feel and we understand the ultimate scorecard is in 2026. Are we achieving our 50% new client wins from the bank? Margo. I'll leave it there. Congrats on the quarter.

Alex P. Shootman: That happens to have one of those seven quarters. It will no longer be the first <unk>.

Alex P. Shootman: Implementation with that core with those seven quarters represent close to 80% of the bank market that we would view in our in our target market.

Speaker Change #119: So lots of progress in many different areas, which we're again, we feel and we understand the ultimate scorecard as in 2026 are we achieving our 50% new client wins from the bank market.

Speaker Change #126: I'll leave it there congrats on the quarter.

Brian: Okay.

Andrew Schmidt: Your next question comes from the line of Andrew Schmidt from City. Your line is now open. Hey, Alex. Hey, Brian. Good results here. Good to speak with you. Good evening.

Andrew Garth Schmidt: Congratulations on the quarter. Your next question comes from the line of Andrew Schmidt from Citi. Your line is now open. Hey, Alex. Hey, Brian.

Speaker Change #113: Your next question comes from the line of Andrew Schmidt from Citi. Your line is now open.

Brian: Yes.

Brian Hill: Good results here. It's good to speak with you this evening. I wanted to, you know, maybe tab on to a previous question just talking about, you know, the average ARR of the, apologies if I missed this, the average ARR of the clients you signed this quarter between, you know, the banks, which should, you know, maybe take more modules and then just general more penetration. How is that just the average contract ARR trending, let's call it, you know, versus Thanks a lot.

Andrew Garth Schmidt: Hey, Alex Hey, Brian Good results here didn't sneak with its evening.

Andrew Schmidt: I wanted to, you know, maybe tab on to a previous question just talking about, you know, the average ARR of the apologies. If I missed this. The average ARR of the clients you signed this quarter between, you know, the banks which should, you know, maybe take more modules and then just general more penetration. How is that just the average contract ARR trending? Let's call it mail versus year or two years ago. Thanks a lot. Yeah, the average ARR, regardless of a bank or credit union, is coming in over the last couple years and even this year between $800, $700, and $800,000.

Andrew Garth Schmidt: I wanted to maybe tab on to a previous question just talking about average.

Andrew Garth Schmidt: <unk>.

Speaker Change #106: Apologies if I missed this.

Speaker Change #106: Average <unk>.

Speaker Change #137: Of the client you signed this quarter between the banks, which should.

Speaker Change #150: Maybe take more modules and then just general more penetration how is that just the average contract are are trending let's call it versus year or two years ago. Thanks a lot.

Brian Hill: Yeah, the average ARM, regardless of a bank or credit union, is coming in at between $700,000 and $800,000. This year, it's trending up slightly above that. That's slightly below our overall average for all of our live clients, but what you have to take into consideration is our top 10 to 15 clients have a significant amount of AR, much more multiples of that in terms of average AR because we do have some very, very large clients.

Speaker Change #106: Yes, the average.

Speaker Change #106: Regardless of a bank or credit Union.

Speaker Change #118: <unk> is coming in over the last couple of years and even this year between 800 700 $800000.

Brian Hill: That is this year; it's trending up slightly above that. That's slightly below our overall average for all of our live clients. But what you have to take into consideration is our top 10 to 15 clients have a significant amount of ARR, much more multiples of that in terms of average ARR because we do have some very, very large clients. But we're not seeing a dramatic change there. What we're seeing is a higher RPU. So some of the number of users that are associated with the more recent cohorts are lower and resulting in a higher RPU, with the ARR still trending upwards.

Speaker Change #136: That is.

Speaker Change #118: This year, it's trending up slightly above that.

Speaker Change #124: That's slightly below.

Speaker Change #118: Our overall average for all of our live clients, but what you have to take into consideration is our top 10 to 15 clients.

Speaker Change #106: Have a significant amount on a much more multiples of that in.

Speaker Change #106: In terms of average IRR, because we do have some very very large clients, but we're not seeing a dramatic change there what we're seeing is a higher <unk>.

Brian Hill: But we're not seeing a dramatic change there. What we're seeing is a higher RPU. So, some of the number of users that are associated with the more recent cohorts are lower and resulting in a higher RPU with the AR still trending up. Got it. If I step away from the ARR for just a second, Andrew, one of the things we are seeing is customers being thoughtful. So the customers see the entire buffet of digital products that they'd like to consume.

Speaker Change #106: So some of the <unk>.

Speaker Change #135: A number of users that are associated with the more recent cohorts are lower.

Speaker Change #106: And resulting in a higher RPC with the.

Speaker Change #106: So trending upwards.

Unknown Executive: Got it.

Andrew Garth Schmidt: Got it and the other thing that's helpful. If I guess, if I step away from the ALR for just second Andrew.

Alex Shootman: And the other thing got to be helpful. If I step away from the ARR for just a second, Andrew, one thing that we are seeing is customers being thoughtful. So the customers see the entire buffet of digital products that they'd like to consume. But they're doing a conversion, and they're being very thoughtful about if I'm doing light for light in a conversion. What's that portion of the buffet? And then what additional capability can I bring on that my team can handle from a change perspective, knowing that there are still maybe two more cultures of digital capability that I want.

Speaker Change #142: One of the things, we're seeing is customers being thoughtful.

Speaker Change #131: So the customers see the entire.

Speaker Change #131: Buffet of digital products that they'd like to consume.

Alex P. Shootman: But they're doing a conversion, and they're being very thoughtful about, if I'm doing like-for-like in a conversion, what's that portion of the buffet? And then what additional capability can I bring on that my team can handle from a change perspective, knowing that there's still maybe two more tranches of digital capability that I want, but I'm going to I'm going to push that out for a little bit after the conversion, just to be able to have my team handle it. The Digital Transformation, if you will. I just talked to a CEO the other day, and they went through a renewal cycle. They're very happy right now.

Speaker Change #131: But theyre doing a conversion and they are being very thoughtful about.

Speaker Change #123: If I'm doing like for like in a conversion what's that portion of the buffet.

Speaker Change #123: And then what additional capability can I bring on that my team can handle from a change perspective.

Speaker Change #123: Knowing that Theres still may be two more tranches of digital capability that I wont, but I'm going to I'm going to push that out.

Alex Shootman: But I'm going to push that out for a little bit after the conversion, just to be able to have my team handle the digital transformation, if you will.

Speaker Change #123: For a little bit after the conversion just to be able to have my team.

Speaker Change #106: Handled.

Speaker Change #149: The digital transformation, if you will I just talked to a CEO the other day and they went through a renewal cycle.

Alex Shootman: I just talked to a CEO the other day, and they went through a renewal cycle. They're very happy right now. She said to me, "I really like they call it home banking," which she said I really like the progress that was made in home banking. But in the renewal cycle, they added six projects, discrete projects that were new digital initiatives for them that get staged out over a period of a year. So we are seeing people be thoughtful about there's a lot that I want to consume, but I need to stage it out over a period of time so that my team can handle the change.

Speaker Change #145: They're very happy right now.

Alex P. Shootman: She said to me, I really like, they call it home banking, but she said, I really like the progress that has been made in home banking. But in their renewal cycle, they added six projects, six discrete projects that were new digital initiatives for them that, you know, get staged out over a period of a year. So we are seeing people be thoughtful about, there's a lot that I want to consume, but I need to stage it out over a period of time so that my team can handle the change. Got it. That makes sense.

Speaker Change #115: She said to me I really like they call it home banking, which he said I really like the progress that we've made in home banking, but in their renewal cycle. They added six projects six discrete.

Speaker Change #139: <unk> there were new digital initiatives for them that get staged out over a period of the year. So we are seeing people be thoughtful about there's a lot that I want to consume.

Speaker Change #134: Our need to stage it out over a period of time, so that might be my team can handle the change.

Unknown Executive: David, that makes sense. Thank you, Alex. Thank you, Brian.

Brian Hill: Thank you, Alex. Thank you, Brian. Maybe you may have addressed this already, but just the gross margin was, was, you know, nicely higher than what we forecast in our model. Was that due to mix with other in terms of higher subscription revenue with other factors? And then what's the right way to think about gross margin for the remainder of this year? Thank you very much.

Speaker Change #106: Got it that makes sense. Thank you Alex Thank you, Brian maybe just.

Brian Hill: Maybe just, you may have addressed this already, but just the gross margin was, you know, nicely higher than what we forecast in our model. Is that to the mix with other terms of higher subscription revs with other factors and then what's the right way to think, gross margin for the meter this year. Thank you very much. Well, we're saying some six, and the investments that we're making in our platform, and which ultimately how that drives gross margin is a lower cost per user for hosting costs. That's one area. I would expect that trend to continue through the remainder of this year.

Speaker Change #129: And you may have addressed this already but just the gross margin with it.

Speaker Change #130: Nicely higher than what you're forecasting our model.

Speaker Change #147: Was that due to mix with the other in terms of higher subscription revenue for the other factors in that.

Speaker Change #141: What's the right way to think gross margin for the remainder of this year. Thank you very much.

Brian Hill: We're seeing some success in the investments that we're making in our platform, which ultimately drives gross margin through a lower cost per user for our hosting costs. So that's one area. I would expect that trend to continue through the remainder of this year. And then the other area is Wayne McCulloch is doing a great job within our Client Experience Organization, the Client Experience Group. They're responsible for our post-sale operations, so that's everything from implementation to client success through client support and other areas.

Speaker Change #125: And we're seeing some.

Speaker Change #127: And the investments that we're making in our platform.

Speaker Change #138: Which ultimately how that drives gross margin as a lower cost per user for our hosting costs. So that's one area.

Speaker Change #132: I would expect that trend to continue.

Speaker Change #132: Through the remainder of this year and then the other area.

Brian Hill: And then the other area is Wayne McCulloch is doing a great job within our clients' experience. It's organization, client experience group. They're responsible for our post-sell operations. So that's everything from implementation to client success through client support in other areas. And we're seeing nice improvements in utilization on the implementation front, productivity that's also resulting in some nice gross margin expansion. That quite honestly, 63.2% this quarter in 450 basis points of your expansion is really good. It exceeded our expectation. I think we'll likely settle in that range for the remainder of the year and exit the year for the full year, just under 63% with another year to go before we achieve our goal of 65% in 2026.

Wayne Mcculloch: As Wayne Mcculloch is doing a great job within our clients' experience organization.

Wayne Mcculloch: Client experience group there, they're responsible for our post sale operations, so thats everything from implementation to client success.

Wayne Mcculloch: Through our client support.

Speaker Change #144: Other areas and we're seeing nice improvements in utilization on the implementation front productivity Thats also resulting in some nice gross margin expansion quite honestly 63, 2% this quarter.

Brian Hill: And we're seeing nice improvements in utilization on the implementation front and productivity that's also resulting in some nice gross margin expansion. Quite honestly, 63.2% this quarter and 450 basis points of year-over-year expansion is really good. It exceeded our expectations.

Speaker Change #127: 450 basis points of year over year expansion is really good at it exceeded our expectation I think we will likely settle in that range for the remainder of the year and exit the year.

Brian Hill: I think we'll likely settle in that range for the remainder of the year and end the year for the full year just under 63%, with another year to go before we achieve our goal of 65% in 2026. So, as I mentioned on the call, it's not now if we can hit 65%; it's when will we hit 65% and where can we take it from there? We'll have that conversation once we achieve 65%. And you've been pretty consistent in saying, "Here's how the gross margin is going to progress." That's right. You know, this amount per quarter; sometimes it's a little higher, sometimes it's a little lower.

Speaker Change #127: For the full year just under 63%.

Speaker Change #106: With another year to go before we achieve our goal of 65% in 2026, so as we as I mentioned on the call.

Brian Hill: So, as I mentioned on the call, it's not now if we can hit 65%, it's when will we hit 65%. Where can we take it from there? Which will have that conversation once we achieve 65%. And you've been pretty consistent to say here's how the gross margin is going to progress. You know this amount per quarter, sometimes a little higher, sometimes it's a little, so maybe just kind of for everybody. What we've provided in our long term outlook is you'll run around 200 to 150 basis points per year of gross margin expansion. And when we first set our, just to be clear, when we first set the objective for 2026.

Speaker Change #106: Now if we can hit 65% is when will we hit 65% where can we take it from there, which we'll have that conversation once we achieve 65% and <unk> been pretty consistent to say here's how the gross margin is going to progress.

Speaker Change #143: This amount per quarter, sometimes it's a little higher sometimes its a little so maybe just kind of it for everybody.

Brian Hill: So let me just kind of speak for everybody. I mean, what we've provided in our long-term outlook is right around 200, 250 basis points per year of gross margin expansion. And when we first set our, just to be clear, when we first set the objective for 2026, we were not factoring in early success with our investment in our platform, which is what's really driving the acceleration towards the ultimate goal in 2026 and also gives us confidence that we can achieve higher than 65% beyond 2026. Yeah, I know Deep's been doing a lot of work there.

Speaker Change #106: What we've.

Speaker Change #106: Provided in our long term.

Speaker Change #106: Outlook is right around 200 250 basis points per year.

Speaker Change #106: Gross margin expansion and when we first set our just to be clear when we first set the.

Speaker Change #106: Jeff did for 2026, we were not factoring early success with our investment in our platform, which that's what's really driving the acceleration towards the ultimate goal in 2026, and also gives us confidence that we can achieve higher than 65%.

Unknown Executive: We were not factoring early success with our investment in our platform, which that's what's really driving the acceleration towards the ultimate goal in 2026 and also gives us confidence that we can achieve higher than 65% beyond 2026. Got it. Yeah, I know deep, so do a lot of work there, so kudos. Good job, guys. Thanks for the time. Sure.

Speaker Change #106: Beyond 2026.

Andrew Garth Schmidt: So kudos. Good job, guys. Yeah, thanks for the time. Sure, and speakers.

Speaker Change #148: Got it yeah I know it keeps you want a lot of work there so kudos good job guys yeah.

Speaker Change #146: Thanks for the time.

Speaker Change #106: Sure.

Operator: And speakers, we don't have any questions over the phone.

Operator: We don't have any questions over the phone. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect. Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music

Speaker Change #140: And speakers, we don't have any questions. So very careful and ladies and gentlemen. This concludes today's conference call. Thank you for your participation you may now disconnect.

Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect. Oh.

Speaker Change #106: Yes.

Speaker Change #106: Okay.

Speaker Change #106: [music].

Speaker Change #106: Yeah.

Speaker Change #106: Okay.

Speaker Change #106: Sure.

Speaker Change #106: [music].

Speaker Change #106: Okay.

Speaker Change #106: Okay.

Speaker Change #106: [music].