Alkami Technology, Inc. (ALKT) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
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.
Key Financial Performance
Revenue $126.1 million, up 29% year-over-year. Subscription revenue grew 30% and represented 96% of total revenue. The growth was driven by the MANTL acquisition, which contributed approximately 14 percentage points of year-over-year growth, and strong cross-sell execution.
ARR (Annual Recurring Revenue) $494 million, increased by 22% year-over-year. Approximately $71 million of ARR is in backlog pending implementation, representing 40 new clients and roughly 1.4 million digital users. Growth was supported by the Digital Sales & Service Platform (DSSP) and cross-sell momentum.
Registered Users 23 million, an increase of 2.5 million users or 12% year-over-year. Growth was driven by the implementation of 35 clients supporting 1.2 million digital users and increased digital adoption by 1.5 million users among existing clients.
Revenue Per User $21.46, up 9% year-over-year. Growth was driven by MANTL's contribution, strong cross-sell execution, and increased user adoption among existing clients.
Non-GAAP Gross Margin 64.4%, roughly flat year-over-year. Higher database technology costs were noted as a temporary factor, expected to decline by the end of 2026.
Operating Expenses $59.4 million or 47.1% of revenue, representing a 530 basis points improvement year-over-year. Improvement was realized across all areas of operating expense.
Adjusted EBITDA $22.3 million, with an Adjusted EBITDA margin of 17.7%, representing a 540 basis points expansion year-over-year. This reflects strong operating leverage and disciplined execution.
Operating Cash Flow Improved 15% year-over-year. Free cash flow remained consistent with the prior year.
Stock Repurchase Program Inaugural stock repurchase program of up to $100 million was approved, reflecting confidence in long-term growth and robust cash flow generation capabilities.
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Operating Highlights
Digital Sales & Service Platform (DSSP): Introduced integrated capabilities for DSSP, which completed customer journeys faster than competitors. DSSP adoption increased from 11 to 48 clients since 2025, with over half of new logos since Q2 2025 adopting DSSP. DSSP clients see a 30% uplift in ARR compared to historic offerings.
Alkami Engage: Launched a new product, Alkami Engage, which captures real-time user interaction data across the customer journey.
AI Capabilities: Demonstrated AI prototypes for personalization, underwriting, fraud management, and customer service. Actively testing these capabilities with clients.
Bank Market Expansion: Banks now represent 13% of live online banking clients, up from 2% four years ago. Revenue tripled, gross margin expanded by 700 basis points, and operating leverage improved by 2,000 basis points during this period.
Revenue Growth: Achieved 29% revenue growth in Q1 2026, with $126.1 million in revenue.
Client Retention: Gross retention rates are 8-10 points above typical SaaS companies. Less than 1% of digital banking ARR churned annually over the past three years.
Profitability: Adjusted EBITDA margin expanded by 540 basis points year-over-year to 17.7%. Operating expenses improved by 530 basis points year-over-year.
MANTL Acquisition: Acquisition added platform functionality, expanded install base, and contributed to higher ARR growth. 61 new clients added since 2025.
Stock Repurchase Program: Board approved a $100 million stock repurchase program, reflecting confidence in long-term growth and cash flow generation.
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Risk or Challenges
Client Decision Cycles: The company's target market is limited to fewer than 300 potential clients renewing contracts annually. Many clients resist conversion due to perceived risks and effort, which limits new logo growth and creates dependency on expanding value within existing clients.
Market Constraints: The replacement-driven nature of the market and long-term contracts limit the number of new clients that can be acquired annually, creating a reliance on cross-selling and expanding within the existing client base.
Economic Volatility: Macroeconomic distractions and volatility in the financial services sector could impact client decision-making and overall market stability.
Termination Fee Revenue Decline: A meaningful decline in termination fee revenue is expected in 2026, which will reduce reported growth by a few percentage points.
Database Technology Costs: Higher database technology costs are impacting gross margins, though these are expected to decline by the end of 2026.
Churn Risk: The company expects to churn four digital banking clients in 2026, representing less than 1% of ARR, but still a potential risk to revenue stability.
AI Commercialization Challenges: While AI capabilities are being developed, the challenge lies in effectively packaging and pricing these capabilities for clients, which could delay monetization.
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Guidance & Outlook
Second Quarter 2026 Revenue: Expected to be $128 million to $129 million, representing growth of 14.2% to 15.1%. This includes a 3 percentage point headwind due to a sizable termination fee recognized in Q2 2025.
Second Quarter 2026 Adjusted EBITDA: Expected to be $17.9 million to $18.7 million, with a 14.3% margin at the midpoint.
Full Year 2026 Revenue: Expected to be $527.1 million to $530.9 million, representing growth of 18.8% to 19.7%.
Full Year 2026 Adjusted EBITDA: Expected to be $94.9 million to $97.9 million, with an 18.2% margin at the midpoint.
Full Year 2026 Non-GAAP Gross Margin: Expected to be approximately 65%.
Back Half of 2026 Adjusted EBITDA Margin: Expected to be north of 19%, weighted toward the fourth quarter.
Long-Term Model Framework (2030): Targets Rule of 45 by 2030, with 40% of ARR growth from new logo additions and 60% from client base expansion. Non-GAAP gross margin expected to approach 70%, with approximately 300 basis points of annual adjusted EBITDA margin expansion.
2026 ARPU Growth: Expected to be high single-digit growth, driven by strong expansion within the base and partially offset by modest moderation in user growth among existing clients.
2026 Termination Fee Revenue: Expected to decline meaningfully, reducing reported growth by a few percentage points.
Stock-Based Compensation for 2026: Expected to be approximately 14% of revenue.
Digital Banking ARR Churn for 2026: Expected to churn four digital banking clients, representing less than 1% of ARR.
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Shareholder Return Plan
Stock Repurchase Program: The board of directors has approved an inaugural stock repurchase program of up to $100 million. This reflects confidence in the company's long-term growth and robust cash flow generation capabilities. The program is part of a balanced approach to capital allocation, which includes growth through acquisitions, debt reduction, and opportunistic share repurchases to deliver increased shareholder value.
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Key Q&A
Q:Can you provide more clarity on the confidence in accelerating growth in the third and fourth quarters?
A:Growth acceleration will be in the third quarter, driven by a more favorable year-over-year comparison and timing dynamics experienced in 2025. The headwind in the second quarter is due to the timing of termination fee revenue, which is more pronounced in Q2.
Q:What are the takeaways or observations from Co:lab regarding customer views on the current environment and AI?
A:Co:lab was a record-setting event with 83 prospects. There is continued demand for digital transformation, especially for an integrated front end combining digital banking, deposit origination, and loan origination platforms. The audience reacted positively to the showcased technology.
Q:What is driving banks to separate online banking from their core provider?
A:Banks are increasingly willing to separate online banking due to the need to compete with larger banks and fintechs. They see value in standalone digital providers like Alkami, which offer superior solutions and faster customer onboarding, reduced costs, and increased cross-sell opportunities.
Q:Can you provide details on the $2.8 million shareholder matters-related expense and whether it will be ongoing?
A:These costs are defense-related. Additional costs are expected but are unlikely to scale at $2.8 million every quarter. Costs were higher in Q1 and are expected to moderate moving forward.
Q:Can you provide a deeper dive into the bank versus credit unions in the backlog?
A:The backlog is evenly split between banks and credit unions, with 13 banks currently in the backlog.
Q:Can you provide details on user additions in the last quarter and trends over the past several quarters?
A:The trend is roughly half new versus existing clients. In Q1, 1.2 million digital users were implemented over the past 12 months, with 1.5 million related to existing clients, showing a slight weighting towards existing clients.
Q:How is MANTL performing in terms of logo additions compared to expectations?
A:MANTL continues to perform well, with 14 logo additions in Q1. The company has seen significant growth in DSSP clients, from 11 to 48, and standalone MANTL clients, reaching 61 over five quarters.
Q:What does evolving from a system of record to a system of action mean for Alkami?
A:It means using data and analytics to predict customer actions and notify them proactively. For example, recommending actions to prevent financial issues based on transactional data.
Q:How has the shift to separate bank and credit union sales forces evolved?
A:The transition has been effective, allowing for more specialization in the bank market. The pipeline remains balanced between banks and credit unions.
Q:Are there structural or process changes due to AI development?
A:AI is transforming the front end of the software development lifecycle, speeding up prototype creation and customer interactions. Internally, data access has improved response times and reduced costs.
Q:Can you provide a Q3 and Q4 revenue and EBITDA breakout?
A:Revenue acceleration is specific to Q3 due to favorable year-over-year comparisons. Adjusted EBITDA typically builds each quarter, with Q4 being the highest in terms of dollars and margin.
Q:Are there unique challenges in serving banks compared to credit unions?
A:Yes, challenges include skills for commercial data conversion, product functionality for treasury management, and technical integration with batch-oriented bank cores.
Q:What are the unit economics considerations for DSSP clients versus regular new logo clients?
A:DSSP deals have about 30% higher ARPU, leading to higher ARR and profitability. Implementation costs are consistent, but there is potential for additional revenue from new products.
Q:How is DSSP performing versus expectations, and how does it impact the sales cycle?
A:DSSP has exceeded expectations with significant cross-sell success. The sales cycle is governed more by long-term contract dynamics than product complexity.
Q:Are there any renewal-related considerations for ARPU or gross margins?
A:Renewals typically lead to higher contract values, additional product purchases, and user base growth, benefiting ARPU and gross margins. Renewal impact is evenly spread across years.
Q:What are the initial customer reactions to Alkami Code Studio, and how might it be monetized?
A:Code Studio is in prototype testing, with customer reactions being positive. The challenge lies in determining simple and profitable pricing models for AI capabilities.
Q:How does the launch of AI capabilities impact Alkami's long-term platform view?
A:AI capabilities could lead to more customizable and efficient solutions, but there is not yet enough evidence to change the long-term financial model.
Q:Review of Unclear Management Responses
A:Management avoided providing a direct Q3 guide for revenue and EBITDA, citing the need to refer to prior commentary and emphasizing the predictability of their model. Additionally, they did not provide specific benchmarks for AI-driven productivity improvements or long-term changes to their financial model, citing insufficient evidence.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI capability
ARR
Co lab
DSSP logo
Digital Sales
Engage
MANTL acquisition
Sales Service
Service Platform
account
banking origination
beginning client
capability Digital
capability client
contract
conversion
customer journey
industry
infrastructure
institution value
logo addition
market
minute
model
platform foundation
platform investment
product
system
term
value institution
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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