Summary
Alkami's third quarter revenue rose to $53.4 million, up 34.3% from the year-ago quarter. Year-to-date revenue reached $148.7 million, up 35.6%. Gross profit was $27.6 million, up 23.2% from the prior-year quarter, but gross margin slipped to 51.6% from 56.3%. The operating loss widened to $19.8 million from $11.1 million. Net loss widened to $20.0 million from $11.2 million. Diluted EPS was -$0.22, compared with -$0.13. Operating margin was -37.1%, down from -28.0%. The top line is growing quickly, but profitability is moving the wrong way.
Demand metrics were strong. Annual recurring revenue ended the quarter at $213.6 million, up 38.0% from a year earlier. Registered users reached 13.7 million, up 20.3%. Revenue per registered user also increased. Alkami added ten new logos in the quarter. Year-to-date new logo sales count reached fifteen credit unions and seven banks, and six client contracts were renewed in the quarter. There were 11 client renewals in the first nine months. Add-on sales represented over 34% of new sales during the year. The company had 40 new logos in implementation, representing $43 million in annual recurring revenue backlog. Remaining performance obligations were $755.2 million, up 36.5%, and current deferred revenue was $8.67 million, up 25.8%. Alkami served 190 financial institutions through its platform and over 330 clients through ACH Alert, MK and Segmint products, with 70.1% annual client growth since September 30, 2021. Registered user growth of 2.3 million, or 20.3%, was driven by 29 new financial institutions supporting 1.2 million digital users and increased digital user adoption from existing clients of 1.5 million users, partially offset by a 0.4 million decrease in users due to client losses. The average contract life was 70 months as of September 30, 2022, and the platform had more than 270 integrations.
Costs are rising with the business. Operating expenses increased across research and development, sales and marketing, and general and administrative categories. The non-GAAP gross margin was 56.8%, compared with 57.9%. Adjusted EBITDA loss was $4.6 million, compared with $6.1 million in the year-ago quarter. Operating cash flow was -$4.68 million in the quarter and -$24.0 million for the first nine months. Capital expenditures were $0.37 million in the quarter. The company completed the Segmint acquisition in April 2022, which added to revenue and expenses. SaaS subscription services represented 94.9% of total revenues for the three months ended September 30, 2022. Alkami's cash flow profile remains under pressure as it invests in growth.
Guidance points to continued growth. For the fourth quarter ending December 31, 2022, management guided revenue to $54.3 million to $55.3 million and adjusted EBITDA loss to $5.0 million to $4.0 million. For the full calendar year ending December 31, 2022, revenue guidance is $203.0 million to $204.0 million and adjusted EBITDA loss guidance is $18.6 million to $17.6 million. The outlook implies more top-line expansion while adjusted EBITDA losses continue.
Risks include Alkami's limited operating history and history of operating losses. The company must attract new clients and retain and expand existing clients, and its sales cycles can be unpredictable and time-consuming. Alkami relies on third-party software, content and services. Competition in the financial services industry is intense. Security breaches and the integration of acquisitions such as Segmint are also named risks. The credit agreement includes an annual recurring revenue growth covenant and a liquidity covenant, which add financial obligations. Client renewals remain important, and Alkami had six renewals in the quarter. The gap between GAAP and non-GAAP results is another focus because stock-based compensation and amortization are significant.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2022 | Q2 FY2022 | QoQ | Q3 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $53.4M | $50.5M | +5.7% | $39.8M | +34.3% |
| Gross profit | $27.6M | $27.3M | +1.1% | $22.4M | +23.2% |
| Gross margin | 51.6% | 54.0% | -2.4 pp | 56.3% | -4.7 pp |
| Research & development | $18.2M | $16.6M | +9.8% | $12.9M | +41.5% |
| Sales & marketing | $9.7M | $10.2M | -4.7% | $7.3M | +33.0% |
| General & administrative | $18.3M | $18.7M | -2.1% | $13.3M | +37.6% |
| Total operating expenses | $47.4M | $46.7M | +1.6% | $33.5M | +41.4% |
| Operating income (loss) | -$19.8M | -$19.4M | -2.2% | -$11.1M | -77.9% |
| Operating margin | -37.1% | -38.4% | +1.3 pp | -28.0% | -9.1 pp |
| Net income (loss) | -$20.0M | -$20.2M | +0.9% | -$11.2M | -78.7% |
| Net margin | -37.5% | -40.0% | +2.5 pp | -28.2% | -9.3 pp |
| Diluted EPS | -$0.22 | -$0.22 | ±$0.00 | -$0.13 | -$0.09 |
Risks
MD&A states the continued global impact of COVID-19 and variants has renewed certain actions and restrictions, creating challenges in executing sales and implementations that have resurfaced due to renewed actions and restrictions. The company faces significant uncertainty concerning the duration of the pandemic and the severity of future infection surges.
MD&A states each digital banking client win is a competitive takeaway and that future success will significantly depend on continuing to grow the FI client base through competitive wins. Intense competition in the markets served is listed as a risk factor.
The company focuses on and relies on the financial services industry as the source of revenue. MD&A notes it served 190 FIs through the Alkami Platform and over 330 clients through ACH Alert, MK and Segmint products as of September 30, 2022, so a downturn or consolidation in that industry could materially affect results.
Gross margin declined to 51.6% for the three months ended September 30, 2022 from 56.3% in the prior-year quarter, and to 53.6% for the nine months ended September 30, 2022 from 55.3% in the prior-year period. MD&A attributes the decline partly to higher third-party partner costs, hosting costs, and amortization from acquisitions including Segmint.
Net loss widened to $20.0 million for the three months ended September 30, 2022 from $11.2 million in the prior-year quarter, and to $53.7 million for the nine months ended September 30, 2022 from $33.5 million in the prior-year period. Net cash used in operating activities was $24.0 million for the nine months ended September 30, 2022, compared with $16.8 million in the prior-year period.
MD&A says a typical sales cycle can range from approximately three to 12 months, with the subsequent implementation timeframe generally ranging from six to 12 months. The forward-looking risk list flags the unpredictable and time-consuming nature of sales cycles, which can delay revenue and growth.
MD&A highlights client renewals as an important lever for long-term gross margin targets and says future success depends on the ability to renew clients. The company had six and 11 client renewals in the three and nine months ended September 30, 2022, respectively.
MD&A notes the platform relies on more than 270 real-time integrations to third-party fintech solutions and back office systems as of September 30, 2022. Cost of revenues increased partly due to $2.3 million and $6.6 million in higher costs of third-party partners for the three and nine months ended September 30, 2022, respectively.
MD&A discusses the Segmint acquisition completed on April 25, 2022 for approximately $135.0 million, the MK acquisition in September 2021, and the ACH Alert acquisition in fiscal 2020. Integrating these acquisitions, including additional costs and amortization, may divert management attention and affect operating results.
The Amended Credit Agreement bears interest at variable SOFR plus 3.00% to 3.50% and includes an annual recurring revenue growth covenant and a minimum liquidity covenant of $15.0 million tested monthly. Interest expense rose to $1.2 million and $2.3 million for the three and nine months ended September 30, 2022, respectively.
MD&A describes significant headcount growth across engineering, sales, marketing, implementation, and support teams. Stock-based compensation expense was $11.9 million and $33.0 million for the three and nine months ended September 30, 2022, and retaining management and key employees is listed as a risk.
SaaS KPIs
All quarters →Non-GAAP Gross Margin
Revenue per Registered User (RPU)
Annual Recurring Revenue (ARR)
Annual client growth
FI Clients (Alkami Platform)
Non-GAAP net loss
Summary, forecast, risks and KPIs are extracted from ALKAMI TECHNOLOGY, INC.'s SEC filings for Q3 FY2022 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.