Alkami Forecasts Q2 2025 Revenue Between $109M-$110.5M, Eyes Strategic Growth via MANTL Acquisition

Insights from Earnings Call: Alkami Technology (ALKT) First Quarter 2025

Management View

• CEO Alex Shootman underscored a robust quarter marked by a revenue increase exceeding 28%, along with an adjusted EBITDA of $12 million. He pointed out the significant gain of 2.3 million additional registered users from the previous year, bringing their current user base to 20.5 million. Additionally, he noted the successful completion of the MANTL acquisition, which is anticipated to play a crucial role in driving the company’s upcoming expansion efforts.
• Shootingstar highlighted the persistent high demand for digital banking services, emphasizing that digital transformation continues to be a key focus area for both regional and community banks. He mentioned that these institutions are increasingly incorporating digital banking initiatives into their capital allocation plans.
• Alkami India, as noted by Shootman, is currently functional with more than 40 staff members and intends to expand even further in 2025, focusing on driving innovation and improving operating efficiency.
• Bryan Hill, who serves as CFO, announced a first-quarter revenue of $97.8 million, marking a rise of 28.5% compared to the previous year. The adjusted EBITDA stood at $12.1 million, an increase from last year’s figure of $3.8 million. Revenue from subscriptions climbed by 27%, accounting for 95% of all income. Annual Recurring Revenue (ARR) saw a boost of 33%, reaching $404 million, along with an implementation backlog totaling around $68 million.
• Hill verified his scheduled retirement by February 2026, guaranteeing a seamless handover for the organization.

Outlook

• The management offered their forecast for Q2 2025 revenues between $109 million and $110.5 million, which reflects a growth rate of 33% to 35%. They also anticipate adjusted EBITDA for this period will be within the range of $9 million to $10 million.
• The full-year 2025 revenue forecast has been established at $443 million to $447 million, with an anticipated adjusted EBITDA ranging from $49.5 million to $52.5 million. The projection incorporates around $31.4 million in revenue along with a $5 million adjusted EBITDA deficit due to the MANTL acquisition.
• It is anticipated that MANTL will achieve an ARR of $60 million by the end of 2025, indicating a growth rate of approximately 30% from the previous year.

Financial Results

• In the first quarter of 2025, the total revenue reached $97.8 million, marking a 28.5% growth from the previous year. The adjusted EBITDA also saw an enhancement to $12.1 million, up from $3.8 million during the same period last year.
• Ninety-five percent of the total revenue was attributed to subscription income, which saw an increase of 27% compared to the prior year.
• The number of registered users on the digital banking platform rose to 20.5 million, marking an addition of 2.3 million users compared to the previous year. Over this period, the firm onboarded 37 financial institutions and maintained a customer attrition rate below 1% of their annual recurring revenue (ARR).
• The gross margin increased to 64.3%, thanks to reductions in hosting expenses and strategic platform investments.
• The remaining performance obligations rose to $1.6 billion, showing a yearly increase of 31%.

Q&A

• Analyst Elyse Kanner from JPMorgan asked about the $5 million allocated for an offshore investment. The CFO, Hill, clarified that most of these expenses will occur during Q3 and Q4 of 2025, as they intend to substantially expand their offshore workforce by the end of the year.
• William Blair, who goes by Christopher Kennedy, inquired about cross-selling possibilities involving MANTL. The CEO, referred to as Shootman, highlighted robust early momentum and conveyed optimism regarding the MANTL acquisition performing akin to a divisional acquisition, showcasing substantial potential for cross-selling.
• Jacob Stephan from Lake Street Capital Markets asked about the Annual Recurring Revenue (ARR) in the backlog. Hill explained that MANTL was a major contributor to the $68 million backlog, encompassing 36 new digital banking clients.

Sentiment Analysis

• The analysts showed an optimistic outlook, highlighting the significant cross-selling opportunities presented by MANTL and the high market demand for digital banking services. Most concerns were minor, with discussions primarily revolving around how effectively these strategies would be implemented.
• The management team remained optimistic, especially about integrating MANTL and sustaining business expansion. CEO Shootman highlighted how well MANTL aligns with Alkami’s strategic objectives.

Quarter-over-Quarter Comparison

• In Q1 2025, the revenue grew by 28.5%, surpassing the 26% increase seen in Q4 2024. The adjusted EBITDA saw a notable rise from $10.2 million in Q4 2024 to $12.1 million.
• The ARR rose to $404 million from $356 million in the prior quarter, significantly boosted by the addition of MANTL.
• The number of users increased by 500,000 over the course of the quarter. The gross margin rose to 64.3%, up from 63.1% in the fourth quarter of 2024.
• The guidance language demonstrated a clearer incorporation of MANTL within the overarching strategy, detailing specific contributions to both revenue and EBITDA.

Risks and Concerns

• Management recognized the macroeconomic uncertainties but stressed that investing in digital banking continues to be an essential commitment for financial institutions.
• Possible hazards encompass postponements in the MANTL integration and not attaining the forecasted synergies inside the expected time frame.
• Experts questioned whether the expansion speeds could be maintained long-term and doubted the company’s capability to efficiently broaden its overseas activities.

Final Takeaway

Alkami Technology announced robust financial outcomes for the first quarter of 2025 along with an upbeat forecast for the entire year, bolstered by the addition from acquiring MANTL and sustained escalation in the realm of digital banking services. The leadership expressed firm assurance regarding their capability to meet extended goals and enhance stakeholder returns through well-defined plans aimed at incorporating advanced functionalities and broadening their customer base.

Review the complete earnings call transcript.