ALKAMI TECHNOLOGY, INC. Q3 FY2024 earnings

Alkami Technology reported third-quarter revenue of $85.9 million, up 26.9% from $67.7 million in the same quarter last year. Gross profit rose 38.5% to $50.6 million, and the gross margin expanded to 58.9% from 54.0%. The company still recorded an operating loss of $10.4 million, narrower than the $15.8 million loss a year earlier. The net loss was $9.4 million, also narrower than the $15.5 million loss in the prior-year quarter. Diluted EPS was -$0.09, compared with -$0.16 a year earlier. Operating margin improved to -12.1% from -23.3%. For the first nine months, revenue was $244.2 million, up 26.2% from $193.5 million.

Operating metrics kept expanding. Annual recurring revenue reached $342.1 million, up 24.4% from $275.0 million a year earlier. Registered users totaled 19.5 million, an increase of 2.6 million, or 15.4%. The digital banking platform served 266 clients, compared with 229 a year earlier. Alkami signed nine new digital banking clients in the quarter, implemented 12 clients, and renewed 14 clients. The implementation backlog held 36 new clients representing 1.3 million digital users. Remaining performance obligations were $1.3 billion, up 31.7% from $987.4 million, which the company said equals 3.8 times live ARR. Deferred revenue, current portion, was $13.1 million, up 40.5% from $9.3 million.

Cash generation improved sharply. Operating cash flow was $11.0 million in the quarter, up 251.2% from $3.1 million a year earlier. For the first nine months, operating cash flow was $12.5 million, compared with negative $12.2 million in the prior-year period. Capital expenditures were $0.3 million in the quarter, down 14.6% from $0.4 million, and $1.0 million for the first nine months, up 33.9% from $0.8 million. Adjusted EBITDA was $8.3 million, compared with $0.8 million a year earlier. Non-GAAP gross margin was 62.8%, compared with 58.7% a year earlier. Management described the quarter as continued progress toward its 2026 objectives of a 65% non-GAAP gross margin and a 20% adjusted EBITDA margin.

The company gave guidance for the fourth quarter ending December 31, 2024 of adjusted EBITDA between $8.5 million and $9.0 million, and guidance for the full fiscal year ending December 31, 2024 of adjusted EBITDA between $25.2 million and $25.7 million. Total revenue guidance was also issued for both the fourth quarter and the full fiscal year. Alkami does not reconcile its adjusted EBITDA outlook to GAAP net loss because certain significant items, including the provision for income taxes, stock-based compensation expense, and acquisition-related expenses, are not available without unreasonable efforts. The outlook leans on new client implementations, add-on sales, and renewals rather than any single large contract.

Risks remain. Alkami competes in a crowded digital banking market, and its revenue depends on financial institutions, a sector that can face downturns, consolidation, and shifts in technology spending. The company has a history of operating losses, and it still spends heavily on research and development, which was 28.1% of revenue in the quarter. It must keep winning clients, retain and expand existing ones, integrate its platform with core banking systems, and guard against cybersecurity breaches and data privacy problems. Sales cycles run from three to 12 months, with implementation generally taking six to 12 months, so bookings convert slowly. The credit agreement carries covenants, including a minimum trailing four-quarter free cash flow requirement of $(25.0) million and a liquidity requirement of $20.0 million before the financial covenant trigger date. Alkami said it was in compliance with all covenants as of September 30, 2024. The company also closed a secondary offering of 5 million shares in August 2024, from which it received no proceeds. The 2026 margin targets remain long-term objectives, not current results.