Alkami(ALKT) - 2024 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements Alkami Technology's unaudited financial statements as of June 30, 2024, show revenue growth, a narrowed net loss, and positive operating cash flow Unaudited Condensed Consolidated Balance Sheets As of June 30, 2024, total assets slightly increased to $403.9 million, primarily due to higher cash, with stable liabilities and growing equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $61,432 | $40,927 | | Total current assets | $151,956 | $148,585 | | Total assets | $403,857 | $399,825 | | Liabilities & Equity | | | | Total current liabilities | $40,520 | $39,430 | | Total liabilities | $76,673 | $74,884 | | Total stockholders' equity | $327,184 | $324,941 | - Cash and cash equivalents increased by over $20 million from December 31, 2023, to June 30, 2024, while marketable securities decreased by a similar amount[11] Unaudited Condensed Consolidated Statements of Operations For Q2 2024, revenues grew 24.9% to $82.2 million, gross profit increased, and net loss significantly narrowed to $12.3 million, showing improved operational leverage Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Q2 2024 | Q2 2023 | YTD 2024 | YTD 2023 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $82,160 | $65,763 | $158,287 | $125,759 | | Gross Profit | $48,771 | $35,474 | $92,803 | $67,612 | | Loss from Operations | $(13,207) | $(17,873) | $(25,572) | $(34,819) | | Net Loss | $(12,317) | $(17,761) | $(23,750) | $(34,724) | | Net Loss per Share | $(0.13) | $(0.19) | $(0.24) | $(0.37) | - For the six months ended June 30, 2024, revenues increased by 25.9% year-over-year, while the net loss improved by 31.6% from $(34.7) million to $(23.8) million[14][79] Unaudited Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2024, the company generated $1.5 million in operating cash flow, a significant turnaround, with positive investing cash flow from marketable securities sales Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $1,499 | $(15,325) | | Net cash provided by (used in) investing activities | $22,275 | $(96) | | Net cash used in financing activities | $(3,269) | $(4,020) | | Net increase (decrease) in cash | $20,505 | $(19,441) | - The improvement in operating cash flow was primarily driven by a lower net loss and favorable non-cash adjustments, including a $28.6 million stock-based compensation expense[22][125] Notes to the Unaudited Condensed Consolidated Financial Statements The notes provide details on accounting policies, revenue disaggregation, significant future contracted revenues, and the recent amendment to the company's credit agreement - The company is a cloud-based digital banking solutions provider for financial institutions, generating revenue through long-term, subscription-based contracts for its Alkami Digital Banking Platform[25] Revenue by Source (in thousands) | Revenue Source | Q2 2024 | Q2 2023 | YTD 2024 | YTD 2023 | | :--- | :--- | :--- | :--- | :--- | | SaaS subscription services | $78,371 | $61,169 | $151,383 | $118,688 | | Implementation services | $2,110 | $3,214 | $3,958 | $4,884 | | Other services | $1,679 | $1,380 | $2,946 | $2,187 | | Total revenues | $82,160 | $65,763 | $158,287 | $125,759 | - As of June 30, 2024, the company has approximately $1.2 billion in minimum contracted subscription revenues (backlog) to be recognized in future periods, with about 47.2% expected in the next 24 months[37] - On July 1, 2024, the company amended its credit agreement, increasing its revolving loan commitment from $60 million to $125 million and extending the maturity to April 2027[71] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes 25.9% revenue growth to user and RPU increases, with gross margin improving to 58.6% and Adjusted EBITDA turning positive at $8.4 million, indicating sufficient liquidity Overview and Factors Affecting Operating Results Alkami provides a cloud-based digital banking platform, with growth driven by new client acquisition, increased digital adoption, product expansion, client renewals, and innovation - The company's growth strategy focuses on growing its FI client base, deepening client customer penetration, expanding its product suite, ensuring client renewals, and continued innovation[80][81][82] - As of June 30, 2024, the platform had over 300 real-time integrations, which is a key differentiator for scalability and extensibility[76][82] - The average contract life for the Alkami Digital Banking Platform is approximately 70 months as of June 30, 2024, providing a stable, long-term revenue base[78][84] Results of Operations Q2 2024 revenues increased 24.9% to $82.2 million, with gross margin improving to 59.4% and operating expenses growing slower than revenue, demonstrating operational leverage Comparison of Operating Results (in thousands) | Metric | Q2 2024 | Q2 2023 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenues | $82,160 | $65,763 | $16,397 | 24.9% | | Gross Profit | $48,771 | $35,474 | $13,297 | 37.5% | | Total Operating Expenses | $61,978 | $53,347 | $8,631 | 16.2% | | Loss from Operations | $(13,207) | $(17,873) | $4,666 | (26.1)% | - The increase in six-month revenue was driven by 2.7 million new registered users and a 6.7% increase in RPU compared to June 30, 2023[107] - Gross margin improved for the six months ended June 30, 2024, to 58.6% from 53.8% in the prior year period, as revenue growth outpaced the 12.6% increase in cost of revenues[109] Key Business Metrics As of June 30, 2024, key business metrics showed strong growth, with ARR increasing 25.1% to $321.3 million, registered users growing to 18.6 million, and Adjusted EBITDA turning positive Key Business Metrics Comparison | Metric | As of June 30, 2024 | As of June 30, 2023 | Change (%) | | :--- | :--- | :--- | :--- | | Annual Recurring Revenue (ARR) | $321.3 million | $256.8 million | 25.1% | | Registered Users | 18.6 million | 15.8 million | 17.3% | | Revenue per Registered User (RPU) | $17.29 | $16.20 | 6.7% | Adjusted EBITDA Reconciliation (in thousands) | Metric | Q2 2024 | Q2 2023 | YTD 2024 | YTD 2023 | | :--- | :--- | :--- | :--- | :--- | | Net loss | $(12,317) | $(17,761) | $(23,750) | $(34,724) | | Adjusted EBITDA | $4,554 | $(2,527) | $8,363 | $(5,457) | Liquidity and Capital Resources As of June 30, 2024, the company held $87.4 million in cash and marketable securities, generated positive operating cash flow, and enhanced liquidity with a $125 million credit facility - The company had $87.4 million in cash and marketable securities as of June 30, 2024[121] - The company's credit agreement was amended on July 1, 2024, increasing the revolving loan commitment to $125.0 million and extending the maturity date to April 29, 2027[136] - The company paid off the remaining $82.9 million balance of its term loan on December 29, 2023[130] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate fluctuations on its variable-rate credit agreement, but management expects no material impact due to short-term, investment-grade holdings - The company's main market risk is interest rate risk associated with its Second Amended Credit Agreement[144][145] - Due to the short-term nature of its cash, cash equivalents, and marketable securities, the company does not expect a significant negative impact from an increase in market interest rates[146] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2024, with no material changes to internal control over financial reporting during the quarter - The Principal Executive Officer and Principal Financial Officer concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2024[147] - No material changes to the company's internal control over financial reporting occurred during the quarter[148] PART II - OTHER INFORMATION Item 1. Legal Proceedings The company is not currently involved in any litigation expected to have a material adverse effect on its business or financial condition - The company reports no material legal proceedings that would adversely affect its financial condition[149] Item 1A. Risk Factors No material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2023, were reported - No material changes to risk factors were reported compared to the latest Form 10-K[150] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None[150] Item 5. Other Information During Q2 2024, no director or officer adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - No directors or officers adopted or terminated Rule 10b5-1 trading arrangements in Q2 2024[151]