Yahoo Finance Alkami Technology Inc (ALKT) Q1 2024 Earnings Call Transcript Highlights: Strong Growth and ...
Total Revenue: $76.1 million, 27% year-over-year growth.
Subscription Revenue: Grew 27%, representing 96% of total revenue.
Adjusted EBITDA: $3.8 million, above expectations.
Annual Recurring Revenue (ARR): Increased by 26% to $303 million.
Client Count: 244 digital banking platform clients.
Registered Users: 18.1 million, up 3 million from Q1 2023.
Churn Rate: Less than 1% expected in 2024, below long-term average of 2-3%.
Gross Margin: Non-GAAP gross margin was 61.7%, up 360 basis points from previous year.
Operating Expenses: $43.6 million, 57.3% of revenue.
Profitability: Adjusted EBITDA positive since Q3 2023.
Cash and Marketable Securities: Ended the quarter with just under $90 million.
Q2 2024 Revenue Guidance: $80.5 million to $82 million.
Full Year 2024 Revenue Guidance: $328.5 million to $333 million.
Adjusted EBITDA Guidance for 2024: $20.5 million to $23.5 million.
Release Date: May 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Alkami Technology Inc (NASDAQ:ALKT) reported a 27% year-over-year revenue growth, achieving $76.1 million in the first quarter of 2024.
Adjusted EBITDA for the quarter was $3.8 million, surpassing the high end of company expectations.
The company saw an increase in live registered users to 18.1 million, a 20% increase compared to the previous year.
Alkami Technology Inc (NASDAQ:ALKT) successfully implemented eight new clients in the quarter, bringing the total digital banking platform client count to 244.
The company has a strong sales pipeline with a 50% increase in qualified prospect pipeline at their annual conference compared to last year.
Negative Points
Alkami Technology Inc (NASDAQ:ALKT) anticipates losing three clients in 2024, representing less than 1% of ARR, although this is below the expected long-term average churn of 2% to 3%.
Despite strong growth metrics, the company faces challenges in the banking sector with a win rate in the mid-teens for commercial bank RFPs.
The company noted that increased digital account openings have led to a rise in fraudulent account activities, posing a challenge to maintaining security while enhancing user convenience.
While there is significant room for product upsell, with clients currently adopting 13 out of 32 available products, converting this potential into actual sales remains a challenge.
Alkami Technology Inc (NASDAQ:ALKT) is still working towards achieving a 65% gross margin by 2026, indicating ongoing pressure to improve cost efficiency and operational scalability.
Q & A Highlights
Q: Can you elaborate on the investments made to open up the platform? What are they and what's driving that? A: (Alex Shootman, CEO) - We've enhanced the SDK provisioning process and built a developer site to consolidate resources for easier access and support. Long-term, we're transforming Alkami into an API-centric platform, allowing deeper integration and more flexibility for our clients.
Q: How should we think about the 600,000 net adds in Q1 throughout the rest of the year? A: (W. Bryan Hill, CFO) - Expect user growth in 2024 to mirror 2023, with slightly lower growth in Q2, and more even growth in Q3 and Q4.
Q: As we look at the base of 210 million users with legacy providers, how fast do you expect to capture that market? A: (W. Bryan Hill, CFO) - We aim for 18-20% annual user growth, half from new client sales and half from our existing base. RPU expansion should be 5-7% quarterly, driven by new clients with richer RPUs and cross-selling more products.
Q: Can you provide an update on your success in the bank space and any changes to your go-to-market strategy? A: (W. Bryan Hill, CFO) - Our sales force is adept at selling into both credit unions and banks. We're focusing on product-market fit, core integrations, market awareness, and internal resources to drive success in commercial banking, aiming for 50% of new clients from banks by 2026.
Q: Could you discuss the win rate trends since the last call and into 2024? A: (W. Bryan Hill, CFO) - Our win rate has been consistent in the mid-teens for banks on a trailing 12-month basis, compared to mid-30s for credit unions. We aim to align bank win rates with credit unions by 2026 through strategic focus areas.
Q: Regarding gross margin driven by focus on containerization and reducing hosting costs, what is the expected exit rate for the year and the cadence of margin expansion? A: (W. Bryan Hill, CFO) - We commit to a 65% gross margin by 2026, with an average annual expansion of 200 basis points. In 2024, we expect to exceed this rate due to efficiencies in hosting costs and post-sale operations.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
