ALKAMI TECHNOLOGY, INC. Q1 FY2024 earnings

Alkami Technology reported first quarter fiscal 2024 revenue of $76.1 million, up 26.9% from the year-ago quarter. Gross profit rose 37.0% to $44.0 million, and gross margin expanded 4.3 percentage points to 57.8%. The company still posted an operating loss of $12.4 million, though that loss narrowed 27.0% from the prior-year quarter. Net loss narrowed 32.6% to $11.4 million. Diluted loss per share narrowed 33.3% to $0.12. Operating margin improved 12.0 percentage points to negative 16.2%. Operating cash flow was $0.95 million, up 109.9% from the prior-year quarter. Capital expenditures were $0.31 million, up 33.6%. Deferred revenue, current portion, rose 26.9% to $12.5 million. Remaining performance obligations reached $1.20 billion, up 32.9%.

Operationally, Alkami ended the quarter with 18.1 million live registered users, up 3.0 million or 20% from the prior-year quarter. Annual recurring revenue was $303 million, up 26.1%. The company served 244 digital banking clients. It signed 6 new digital banking platform clients and implemented 8 clients during the quarter. The implementation backlog held 42 new clients representing 1.3 million digital users. Alkami renewed its largest client, a top 10 credit union, more than doubling the original total contract value and extending the relationship for another five years. Last twelve month churn was 0% against a long-term expected churn of 2% to 3%. Net dollar retention was 115%. In April the company hosted its largest-ever user conference with more than 800 in-person attendees representing 220 financial institutions.

Non-GAAP results showed similar momentum. Non-GAAP gross margin was 61.7%, up from 58.1% in the year-ago quarter, an increase of about 360 basis points. Adjusted EBITDA was $3.8 million, compared with a loss of $2.9 million in the year-ago quarter. Management said the non-GAAP gross margin progress supports its 2026 objective of 65%. The company also pointed to continued scale and efficiencies in research and development, sales and marketing, and general and administrative costs.

Guidance for the second quarter ending June 30, 2024, calls for adjusted EBITDA of $2.8 million to $3.8 million. For the full fiscal year ending December 31, 2024, management guided adjusted EBITDA to $20.5 million to $23.5 million. The outlook also covers GAAP total revenue for both periods. The second quarter is expected to be modestly lower than the first quarter of the year, consistent with seasonality of second-quarter expenses. Revenue growth is expected to come from new client expansion, existing user growth and revenue per user expansion.

Risks remain familiar for a high-growth SaaS company. Alkami cites its limited operating history and history of operating losses, the challenge of managing rapid growth, and the need to attract new clients and retain and expand existing clients. The company also flags unpredictable and time-consuming sales cycles, reliance on third-party software and services, integration with client systems, intense competition, and any downturn, consolidation, or decrease in technology spend in the financial services industry. Other named risks include cybersecurity breaches, regulatory and legal developments, and the ability to attract and retain key employees. The company notes potential dilution from future equity financing and covenants under its Amended Credit Agreement. It was in compliance with all covenants as of March 31, 2024.