Alkami Technology, Inc. (ALKT) Q3 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary shows strong financial performance with revenue growth and optimistic guidance, despite some margin pressures. The MANTL acquisition and cross-selling opportunities are driving growth, and the company's strategic expansion in engineering talent indicates long-term positive impact. The Q&A highlighted management's confidence in market opportunities and product innovation. The market cap suggests moderate sensitivity to news, thus predicting a positive stock price movement of 2% to 8%.
Key Financial Performance
Revenue Total revenue for Q3 2025 was $113 million, representing year-over-year growth of 31.5% and organic growth exceeding 20%. The growth was driven by strong demand across the product portfolio, new client wins, and cross-sell success.
Adjusted EBITDA Adjusted EBITDA for Q3 2025 was $16 million, compared to $8.3 million in the year-ago quarter, showcasing significant improvement. This increase highlights the operating leverage of the financial model.
Subscription Revenue Subscription revenue grew 31.5% in Q3 2025 and represented 96% of total revenue. The growth was attributed to the acquisition of MANTL and add-on sales success.
Annual Recurring Revenue (ARR) ARR increased over 31% and exited the quarter at $449 million. This growth was supported by a backlog of $67 million in ARR for implementation, with the majority expected to occur over the next 12 months.
Registered Users The company exited Q3 2025 with 21.6 million registered users on the Alkami platform, up 2.1 million or 11% compared to the prior year. This growth was driven by new client implementations and user adoption.
Gross Margin Non-GAAP gross margin for Q3 2025 was 63.7%, representing nearly 100 basis points of expansion compared to the prior year. The improvement was due to better hosting cost efficiency and operating leverage.
Operating Expenses Operating expenses for Q3 2025 were $56.4 million or 50% of revenue, representing year-over-year operating leverage of approximately 360 basis points. The reduction was driven by efficiencies in R&D and G&A.
Operating Cash Flow Operating cash flow for the first 9 months of 2025 was $26 million, net of a one-time acquisition item of $7 million. Excluding this, it was over 2.5x the $13 million in the year-ago period, reflecting improved cash generation.
Remaining Performance Obligation (RPO) RPO was approximately $1.6 billion, representing 3.6x ARR and up 25% compared to a year ago. This growth reflects strong demand and long-term contracts.
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Operating Highlights
Digital Sales and Service Platform: Design work is complete, and a dedicated engineering team is building it. Product will be shown to clients at the spring customer conference. This integration can generate a 30% uplift to new logo ARR.
Money Movement Hub: Newly released product.
One-click SDK Deployment: Currently in beta testing.
Agentic Code Creator: Prototype shown to client community, builds tailored products for financial institutions.
Treasury Management Features: Released 2 new features and added 6 more to beta client community.
Pioneer Loan Platform: Client originated over $4 million in loans in the first 6 months of usage.
Client Growth: Added 10 new digital banking platform clients, including the largest new logo transaction in company history. Now serves 5 of the top 20 credit unions in the U.S.
MANTL Business Expansion: Added 29 new clients, 15 of which are new to Alkami. Year-to-date, MANTL added 68 new logos, including 29 existing Alkami clients.
Platform Client Relationships: Signed over 60 new platform client relationships year-to-date, combining digital banking and onboarding platforms.
Market Opportunity: Out of the top 2,500 financial institutions, over 900 credit unions and nearly 1,000 banks are not on a modern platform like Alkami.
Revenue Growth: Achieved total revenue of $113 million in Q3 2025, a 31.5% year-over-year growth.
Adjusted EBITDA: Increased to $16 million, compared to $8.3 million in the prior year quarter.
Subscription Revenue: Grew 31.5% in Q3 2025, representing 96% of total revenue.
Registered Users: Exited the quarter with 21.6 million registered users, up 2.1 million from the prior year.
Client Implementations: Brought 13 new clients onto the digital banking platform in Q3 2025, the most in a single quarter in company history.
Gross Margin: Achieved a non-GAAP gross margin of 63.7%, nearly 100 basis points higher than the prior year.
Leadership Change: Appointed Cassandra Hudson as the new CFO, bringing over 20 years of experience in growth, capital markets, and M&A.
Partner Ecosystem: Created a new development team to double the number of partners onboarded each year, enhancing growth potential and customer satisfaction.
Global Capability Center: Expanded engineering talent in India, with over 110 employees and plans to reach 150 by year-end.
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Risk or Challenges
Client Attrition: Three clients left the platform in the last three quarters of 2025, representing less than 1% of ARR. Additionally, two clients were merged with existing Alkami clients. Long-term digital banking ARR churn is modeled at 2%-3% per year.
Implementation Backlog: The company has $67 million of ARR in backlog for implementation, with the majority expected to occur over the next 12 months. Delays in implementation could impact revenue realization.
Market Competition: The company faces competitive pressures in acquiring new clients and retaining existing ones, especially as it expands its product offerings and targets new financial institutions.
Operational Scalability: The company is expanding its engineering talent in India, with plans to grow the team to 150 by the end of 2025. Challenges in scaling operations efficiently could impact cost management and product delivery timelines.
Economic Uncertainty: Broader economic conditions could impact the demand for digital banking solutions, particularly among smaller financial institutions that may face budget constraints.
Product Integration Risks: The integration of digital banking, onboarding, account opening, and data and marketing technologies is underway. Delays or challenges in delivering the planned product integration could impact future growth and client satisfaction.
Client Concentration: The company serves 5 of the top 20 credit unions in the U.S. and has a significant portion of its revenue tied to large clients. Loss of any major client could materially impact financial performance.
Regulatory Compliance: As a provider of digital banking solutions, the company must navigate complex regulatory requirements. Non-compliance could result in fines or loss of client trust.
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Guidance & Outlook
Sales Pipeline and Market Opportunity: The sales pipeline for Q4 2025 and 2026 is in line with recent years. There are over 900 credit unions and nearly 1,000 banks among the top 2,500 financial institutions that are not on a modern platform like Alkami, indicating significant growth potential.
Product Development and Integration: The design work for the digital sales and service platform, integrating digital banking, onboarding, account opening, and data and marketing technologies, is complete. A dedicated engineering team is working on the build effort, with product demonstrations expected at the spring customer conference. This integration could generate a 30% uplift in new logo ARR.
Revenue and EBITDA Guidance for Q4 2025: Revenue is projected to be in the range of $119.6 million to $121.1 million, representing organic growth of 22%. Adjusted EBITDA is expected to be between $16.1 million and $17.1 million.
Full-Year 2025 Financial Guidance: Revenue is expected to range from $442.5 million to $444 million. Adjusted EBITDA guidance is raised to $56 million to $57 million, reflecting an increase of nearly $4 million above the midpoint of the previous guidance.
Client Growth and Backlog: The company has $67 million of ARR in backlog for implementation, with the majority expected to be realized over the next 12 months. This includes 37 new digital banking clients, representing 1.7 million digital users.
Operational Expansion: The company plans to expand its engineering talent at its global capability center near New Delhi, India, from over 110 employees to approximately 150 by the end of 2025.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:What did Andrew Schmidt ask about the organic growth for the fourth quarter?
A:Andrew Schmidt asked about the organic growth for the fourth quarter, noting that the revenue growth outlook had come down slightly but wanted clarification on Bryan's statement that organic growth was accelerating. Bryan explained that the timing of implementations during the year significantly impacts quarterly year-over-year growth. He highlighted that Q4 is their greatest implementation quarter, with close to 350,000 more users being implemented compared to the previous year, driving organic revenue growth.
Q:What was Andrew Schmidt's question about the competitive environment?
A:Andrew Schmidt asked if the transition from a large core provider announced this week would benefit Alkami in terms of attracting customers reevaluating their tech stack. Alex Shootman responded that no particular company's quarterly results change customer buying behavior. However, he noted a shift in the community bank market towards adopting best-of-breed digital banking platforms instead of relying on core providers. He also highlighted the progress made with the MANTL acquisition, which has 44 shared clients under contract, up from 15 at the time of acquisition.
Q:What did Austin Cole ask about AI and its market resonance?
A:Austin Cole asked if AI tools are resonating in the market and if financial institutions are using them to build digital applications. Alex Shootman explained that financial institutions are experimenting with generative AI and agentic technology but are not building their own software due to the complexity of integration. He also mentioned that Alkami is training an LLM with customer-submitted code to create a prompt-based code creator and is piloting agent-based banker capabilities.
Q:What was Saket Kalia's question about implementation timing and its impact on revenue?
A:Saket Kalia asked about the timing of implementations being more Q4-weighted and whether this indicates shifting seasonality in the business. Alex Shootman explained that there is some seasonality in implementation schedules based on client preferences, but no significant seasonality in signings. Saket also asked about the impact of implementation timing on revenue guidance. Bryan Hill clarified that while implementation timing can affect in-year revenue, the ARR growth remains on track, with a step-up to 22%-23% live ARR growth expected by year-end.
Q:What did Jacob Stephan ask about the remaining market opportunity and gross margin pressures?
A:Jacob Stephan asked about the segments of the remaining 900 financial institutions not on a modern platform and whether the sales cycles are becoming longer. Alex Shootman clarified that the target market still has significant runway for growth. Jacob also inquired about gross margin pressures in Q3. Bryan Hill explained that the sequential step-down was due to lower-than-expected fees from third-party IP sold through their platform, but gross margin expanded year-over-year by 100 basis points.
Q:What did Eleanor Smith ask about the record number of implementations and backlog composition?
A:Eleanor Smith asked what enabled Alkami to implement a record number of customers in a quarter. Alex Shootman credited improvements in implementation methodology, collaboration between teams, and scaling the business. She also asked about the factors leading to the backlog ticking up. Bryan Hill explained that the backlog includes 1.7 million digital users, up from 1.2 million a year ago, and highlighted MANTL's contribution to the backlog.
Q:What did Adam Hotchkiss ask about cross-sells and MANTL's innovation?
A:Adam Hotchkiss asked about the role of cross-sells in driving outperformance and how they are tracking relative to historical trends. Bryan Hill noted that cross-sells accounted for just under 50% of total sales, ahead of expectations. Adam also asked about MANTL's innovation and its impact. Alex Shootman highlighted MANTL's ability to deliver seamless onboarding and account opening experiences, as well as its high velocity of new product development.
Q:What did Chris Kennedy ask about new bank wins and MANTL's loan origination initiative?
A:Chris Kennedy asked about the factors driving new bank wins and whether they were related to combining Alkami and MANTL sales forces. Alex Shootman attributed the wins to Alkami's track record and treasury management capabilities. Chris also asked about MANTL's loan origination initiative. Alex explained that they are working with lighthouse clients to build the platform and will evaluate its readiness for market launch by the end of the year or early next year.
Q:What did Daniel Hibshman ask about MANTL's signings and ARR backlog?
A:Daniel Hibshman asked about the impact of Alkami's base on MANTL's signings, noting that half of MANTL's new signings were Alkami clients. Alex Shootman and Bryan Hill explained that MANTL's product has been well-received in Alkami's market, and cross-sell opportunities are driving success. Daniel also asked about the ARR backlog, which Bryan clarified was impacted by a significant implementation quarter, including the largest number of online banking implementations in the company's history.
Q:Review of Unclear Management Responses
A:Management appeared to avoid giving a direct answer to the question about the timing of implementations and its impact on revenue guidance. While they provided some context about seasonality and client preferences, the explanation lacked clarity on whether this represents a broader trend or isolated instances. Additionally, the response to the question about gross margin pressures was somewhat vague, attributing the decline to lower-than-expected fees from third-party IP without providing detailed specifics.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
ARR money
Accounting Officer
Alkamists result
CFO EngageSmart
CFO StackAdapt
Carbonite series
Chief Accounting
EngageSmart IPO
FI feature
FIs bank
Finance week
Hill intention
IPO profitability
MANTL implementation
MANTL logo
MANTL midyear
Officer Vice
Pioneer loan
President Finance
SDK deployment
StackAdapt advertising
Statements reconciliation
States date
banking onboarding
client banking
client community
combination
future
history
implementation client
integration
marketing technology
opening marketing
opportunity MANTL
partner
platform institution
treasury
ALKT Transcript
Alkami Technology, Inc. (ALKT) Presents at J.P. Morgan 54th Annual Global Technology, Media and Communications Conference Transcript
Neutral5-18
Alkami Technology, Inc. (ALKT) Q1 2026 Earnings Call Transcript
Unknown4-30
The earnings call presents a mixed outlook: strong financial metrics with record-setting events and positive AI integration, but tempered by unclear guidance and ongoing shareholder-related expenses. The Q&A highlighted management's reluctance to provide specific guidance and potential cost increases, which could concern investors. Additionally, while there are positive developments in product offerings and customer demand, the lack of clear financial guidance and potential ongoing expenses balance the positive sentiment, leading to a neutral stock price prediction.
Alkami Technology, Inc. (ALKT) Q4 2025 Earnings Call Transcript
Positive2-26
The earnings call reveals strong financial performance with a 25% YoY revenue increase and a significant net income turnaround. Gross margins improved by 5 percentage points, and operating cash flow is up by 50%. Despite risks associated with forward-looking statements, the financial health and growth metrics are robust. This, combined with a raised EBITDA guidance, suggests a positive sentiment, likely leading to a stock price increase of 2% to 8% over the next two weeks, considering the company's market cap.
Alkami Technology, Inc. (ALKT) Q3 2025 Earnings Call Transcript
Positive10-31
The earnings call summary shows strong financial performance with revenue growth and optimistic guidance, despite some margin pressures. The MANTL acquisition and cross-selling opportunities are driving growth, and the company's strategic expansion in engineering talent indicates long-term positive impact. The Q&A highlighted management's confidence in market opportunities and product innovation. The market cap suggests moderate sensitivity to news, thus predicting a positive stock price movement of 2% to 8%.
ALKT Slides
ALKT Report
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