Alkami(ALKT) - 2025 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements The unaudited condensed consolidated financial statements for Q1 2025 show significant asset and liability growth from the MANTL acquisition, with improved net loss Unaudited Condensed Consolidated Balance Sheets Total assets nearly doubled to $837.2 million by March 31, 2025, driven by the MANTL acquisition, while liabilities surged due to new debt Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Total Assets | $837,161 | $437,277 | +91.4% | | Cash and cash equivalents | $61,660 | $94,359 | -34.6% | | Goodwill | $400,158 | $148,050 | +170.3% | | Intangibles, net | $178,801 | $29,021 | +516.1% | | Total Liabilities | $503,117 | $80,247 | +527.0% | | Convertible senior notes, net | $334,720 | $— | N/A | | Revolving loan | $60,000 | $— | N/A | | Total Stockholders' Equity | $334,044 | $357,030 | -6.4% | Unaudited Condensed Consolidated Statements of Operations Revenues grew 28.5% to $97.8 million in Q1 2025, with net loss improving to $7.8 million due to a tax benefit, despite higher operating expenses Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Revenues | $97,835 | $76,127 | +28.5% | | Gross Profit | $57,760 | $44,032 | +31.2% | | Loss from Operations | $(15,396) | $(12,365) | +24.5% | | Net Loss | $(7,816) | $(11,433) | -31.6% | | Net Loss Per Share (Basic & Diluted) | $(0.08) | $(0.12) | -33.3% | - Operating expenses in Q1 2025 included a $1.7 million loss on impairment of intangible assets and $2.4 million in acquisition-related expenses, which were not present or were minimal in Q1 2024[10] Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity decreased to $334.0 million in Q1 2025, primarily due to a capped call transaction and net loss, partially offset by stock-based compensation - A capped call transaction reduced additional paid-in capital by $33.9 million in Q1 2025[14] - Stock-based compensation added $16.4 million to additional paid-in capital in Q1 2025, compared to $13.9 million in Q1 2024[14] Unaudited Condensed Consolidated Statements of Cash Flows Cash flows in Q1 2025 were dominated by the MANTL acquisition, funded by new debt, resulting in a net decrease of $32.7 million in cash and equivalents Summary of Cash Flows (in thousands) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(5,664) | $951 | | Net cash (used in) provided by investing activities | $(389,413) | $6,808 | | Net cash provided by (used in) financing activities | $362,378 | $(4,507) | | Net (decrease) increase in cash | $(32,699) | $3,252 | - The acquisition of MANTL for $375.5 million (net of cash acquired) was the primary use of cash in investing activities[16] - Financing activities were driven by proceeds from issuing $335.5 million in convertible senior notes and borrowing $60.0 million under a revolving loan[16] Notes to the Unaudited Condensed Consolidated Financial Statements Notes detail the MANTL acquisition, new debt instruments including $345 million in convertible notes, and a $8.4 million tax benefit from the acquisition - On March 17, 2025, the Company acquired MANTL for approximately $375 million, net of cash acquired, to augment and diversify its offerings[29][30][32] - The Company issued $345 million in 1.50% convertible senior notes due 2030 and entered into a related $33.9 million capped call transaction to reduce potential dilution[54][61] - The credit facility was amended, increasing the revolving loan commitment to $225 million, with $60 million borrowed in March 2025 to help fund the MANTL acquisition[48][49] - A provisional deferred tax benefit of $8.4 million was recorded due to the partial release of a pre-existing valuation allowance, triggered by the net deferred tax liability from the MANTL acquisition[67] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2025 revenue growth driven by user expansion and RPU, the strategic MANTL acquisition, increased operating expenses, and altered liquidity Overview Alkami's cloud-based digital banking platform drives subscription revenue, with Q1 2025 revenues reaching $97.8 million and a net loss of $7.8 million - Alkami's business model centers on a proprietary, cloud-based, multi-tenant digital banking platform for financial institutions[91] - Growth is driven by both organic expansion and strategic acquisitions, with MANTL in March 2025 enhancing account opening solutions[92] Q1 2025 Financial Highlights | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total Revenues | $97.8 million | $76.1 million | | Net Loss | $7.8 million | $11.4 million | Recent Developments Q1 2025 saw three major strategic transactions: the MANTL acquisition for $375 million, issuance of $345 million in convertible notes, and an increased $225 million credit facility - MANTL Merger: Acquired MANTL, a provider of onboarding and account opening solutions, for ~$375 million net of cash acquired[101] - Credit Agreement Amendment: Increased revolving loan commitment to $225 million and extended the maturity date to February 2030[102] - Convertible Notes Issuance: Issued $345 million principal amount of 1.50% Convertible Senior Notes due 2030[103] Results of Operations Q1 2025 revenues grew 28.5% to $97.8 million, driven by user growth and RPU, with gross margin improving to 59.0% despite increased operating expenses Revenue and Key Metrics Comparison | Metric | Q1 2025 | Q1 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenues | $97,835K | $76,127K | +$21,708K | +28.5% | | Annual Recurring Revenue (ARR) | $403,885K | $302,659K | +$101,226K | +33.4% | | Registered Users | 20,461K | 18,113K | +2,348K | +13.0% | | Revenue per Registered User (RPU) | $19.74 | $16.71 | +$3.03 | +18.1% | - Cost of revenues increased by $8.0 million (24.9%), slower than revenue growth, leading to a gross margin improvement to 59.0%[133] - Total operating expenses increased by $16.8 million (29.7%), driven by higher personnel costs, MANTL acquisition expenses ($2.4M), and an impairment loss ($1.7M)[135] Liquidity and Capital Resources The company held $95.3 million in cash and equivalents as of March 31, 2025, with the MANTL acquisition funded by new debt, and expects sufficient liquidity for the next 12 months - The company had $95.3 million in cash and marketable securities as of March 31, 2025[146] - The MANTL acquisition was funded via the issuance of 2030 Convertible Notes, borrowings on the Revolving Facility, and balance sheet cash[147] Cash Flow Summary (in thousands) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash from operating activities | $(5,664) | $951 | | Net cash from investing activities | $(389,413) | $6,808 | | Net cash from financing activities | $362,378 | $(4,507) | Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate fluctuations on its credit agreement, with minimal impact expected due to short-term investments - The primary market risk is interest rate risk associated with the Amended Credit Agreement[167][168] - Due to the short-term nature of cash equivalents and marketable securities, the company does not believe an increase in market rates would have a significant negative impact on the value of its investments[169] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting - Management concluded that as of March 31, 2025, the company's disclosure controls and procedures were effective at the reasonable assurance level[170] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[171] PART II - OTHER INFORMATION Legal Proceedings The company is not currently involved in any legal proceedings expected to materially adversely affect its business or financial condition - The company states it is not currently party to any litigation expected to have a material adverse effect on its business[172] Risk Factors New risk factors primarily relate to increased indebtedness from the 2030 Convertible Notes, including cash flow limitations, repurchase challenges, and potential stock dilution - Increased indebtedness from the 2030 Convertible Notes could limit cash flow, increase vulnerability to adverse economic conditions, and limit flexibility[174][179] - The company may be unable to raise sufficient funds to repurchase the 2030 Convertible Notes if required after a "fundamental change" or to pay cash due upon maturity or conversion[175] - The conversion of the 2030 Convertible Notes could dilute the ownership interests of existing stockholders[181] - The company is subject to counterparty risk with the financial institutions involved in the capped call transactions, which are intended to reduce dilution[184] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities occurred during the reporting period - None Defaults Upon Senior Securities No defaults upon senior securities were reported during the period - None Mine Safety Disclosures This disclosure item is not applicable to the company's operations - None Other Information No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers in Q1 2025 - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement in Q1 2025[188] Exhibits This section indexes exhibits filed with the Form 10-Q, including the MANTL merger agreement, convertible notes indenture, and amended credit agreement - Lists key legal and financial documents filed as exhibits, such as the MANTL merger agreement and the indenture for the 2030 Convertible Notes[190] Signatures The report was duly signed by the Chief Executive Officer and Chief Financial Officer on May 1, 2025 - The report was signed by the Principal Executive Officer and Principal Financial Officer on May 1, 2025[195]