ALKAMI TECHNOLOGY, INC. Q1 FY2021 earnings

Alkami Technology reported first quarter fiscal 2021 total revenue of $33.3 million, up 43.3% from the prior-year quarter. Gross profit rose 57.1% to $17.8 million, and GAAP gross margin expanded to 53.4%, up 4.7 percentage points. Non-GAAP gross margin was 54.5%, an expansion of approximately 540 basis points. The operating loss narrowed to $8.9 million, and operating margin improved to negative 26.9%, up 17.0 percentage points. Net loss widened to $10.9 million. Diluted EPS was negative $2.00, a narrower loss than the prior-year quarter. Adjusted EBITDA loss narrowed to $6.1 million from $9.1 million in the prior-year quarter. Operating cash flow was negative $2.0 million, an improvement of 86.8% from the prior-year quarter. Capital expenditures were $0.2 million, down 84.9%.

Annual recurring revenue was $133.8 million as of March 31, 2021, up 39.5% year over year. Registered users reached 10.0 million, up 27.8%. Revenue per registered user increased year over year, helped by cross-sell activity to existing clients and higher average spending from new client wins. Alkami signed six client wins in the quarter, including Liberty Bank, aggregating to over 215,000 digital banking users. The company served 156 financial institutions through the Alkami Platform and an additional 87 clients through the ACH Alert suite, representing 88.4% annual client growth since March 31, 2020. Two client renewals occurred in the quarter. The platform had 220 real-time integrations as of March 31, 2021, and the average contract life was approximately 70 months. The company also signed its 10th bank in the commercial banking space.

Management issued guidance for the second quarter ending June 30, 2021, and for the full year ending December 31, 2021. For the second quarter, it expects an Adjusted EBITDA loss of $7.5 million to $6.5 million. For the full year, it expects an Adjusted EBITDA loss of $26.5 million to $23.5 million. The guidance is based on current expectations and is forward-looking. Alkami completed its IPO in April 2021, issuing 6,900,000 shares at $30.00 per share for net proceeds of $192.8 million. It used part of the proceeds to pay approximately $5.0 million in accumulated dividends on its Series B redeemable convertible preferred stock. The quarter ended with $6.7 million in current deferred revenue and $521.8 million in remaining performance obligations.

The quarter's results reflected continued investment in growth. Research and development, sales and marketing, and general administrative functions all received more resources to support platform enhancements, new client wins, and public company readiness. The company cited risks including its limited operating history and history of operating losses, its ability to manage future growth, attract new clients, and expand existing clients' use of its solutions. Other named risks include intense competition in the digital banking industry, reliance on third-party software and services, security breaches and unauthorized access to client customer data, regulatory and legal requirements, and the ability to attract and retain key employees. COVID-19 remains a factor, with work-from-home arrangements creating challenges in executing sales and implementations. Alkami also flagged risks related to predicting long-term client subscription renewals or adoption, integrating solutions with client systems, and responding to evolving technological requirements. The company believes its existing cash resources will be sufficient for at least the next 12 months, though it may seek additional capital.

The company's credit agreement provides a $25.0 million revolving facility and a $25.0 million term loan, maturing October 16, 2023. It includes a liquidity covenant of $10.0 million and an annual recurring revenue growth covenant requiring recurring revenues in any four consecutive fiscal quarter period to be 10% greater than the corresponding period in the previous year. The sales cycle typically ranges from approximately three to 12 months, with implementation generally taking six to 12 months depending on integration depth. The company expects gross margin to continue to improve due to operational scaling, while cost of revenues is expected to grow in absolute dollars as the business expands.