Carter's (NYSE:CRI) FY 2026 Conference January 12, 2026 11:30 AM ET Speaker1All right, we're going to keep on moving. Thanks, everyone. So my name is Ike Boruchow, Softlines Analyst at Wells Fargo. I'm here with Carter's CFO, CEO Doug Palladini, Richard Westenberger. So thanks for being with us. A lot to talk about. I think I'll start at the highest level, Doug. You know, I think you were named CEO in March, so almost 12 months under your belt.Speaker2Getting there.Speaker1So, maybe just let's talk about th ...

Financial Data and Key Metrics Changes - Gross originations grew 25.3% to $64.2 million, marking 12 consecutive quarters of growth [25][26] - Revenue increased by 22.8% to $74 million, representing the 10th consecutive quarter of year-over-year growth [26][27] - Adjusted EBITDA was $4.4 million, exceeding the outlook range [10][30] - Write-offs as a percentage of revenue were 9.9%, up 60 basis points from Q3 2023, but within the target range of 8-10% [27] Business Line Data and Key Metrics Changes - Total applications increased by 76% year-to-date and 80% in Q3 alone [6][13] - Monthly active users (MAUs) grew nearly 49% year-over-year [8] - KPay originations grew 66% year-over-year, representing 41% of total gross originations [19][20] Market Data and Key Metrics Changes - Gross originations from the top 25 merchants grew 25% during the quarter [26] - Excluding home furnishings and mattress categories, gross originations grew 50% year-over-year [26] - Cross-shopping customers grew about 64% year-over-year, representing 13% of gross originations [17] Company Strategy and Development Direction - The company aims to optimize top-of-funnel growth and pursue strategies for more profitable growth [9] - Focus on enhancing customer engagement through the Katapult App and KPay features [20][21] - The company is navigating a complicated macroeconomic environment while planning for future growth [24][33] Management's Comments on Operating Environment and Future Outlook - Management noted the impact of inflation and market delinquency data on non-prime consumers [24] - A conservative approach is being taken for Q4 expectations, with gross originations projected to grow in the 15%-20% range [33] - For 2026, management anticipates robust growth, projecting at least 20% growth in gross originations for the full year [34] Other Important Information - A $65 million capital investment from Hawthorne Horizon Credit Fund was finalized, allowing for debt repayment and growth investments [4][31] - The company has implemented tighter underwriting standards to improve application quality [15][16] Q&A Session Summary Question: What are the expectations for Q4 2025? - Management expects gross originations to grow in the 15%-20% range, factoring in a headwind from recent tightening [33] Question: How is the company addressing the impact of macroeconomic trends? - The company is closely monitoring macroeconomic indicators and adjusting strategies accordingly, while relying on real-time data for decision-making [24]

Financial Data and Key Metrics Changes - In Q4 2024, Alkami reported a revenue growth of 26% and generated over $10 million in adjusted EBITDA [8][30] - For the full year 2024, total revenue reached $333.8 million, also reflecting a 26% year-over-year growth, with adjusted EBITDA improving to $26.9 million from a loss of $1.6 million in 2023 [30][44] - The adjusted EBITDA margin for Q4 was 11.3%, achieving the Rule of 37, and the company ended the quarter with a cash and marketable securities balance of just under $116 million [42][44] Business Line Data and Key Metrics Changes - Subscription revenue grew by 26.5% in 2024, accounting for nearly 96% of total revenue [31] - The annual recurring revenue (ARR) increased by 22%, reaching $356 million, with approximately $56.5 million of ARR in backlog for implementation [32] - The revenue per user (RPU) increased by 7% to $17.81, driven by successful add-on sales [35] Market Data and Key Metrics Changes - Alkami ended 2024 with 272 clients and 20 million registered users, marking a growth of approximately 2.5 million users or 14% compared to the previous year [33] - The company churned less than 1% of its digital banking ARR in 2024, with expectations to maintain a churn rate of 2% to 3% per year in the long term [34] Company Strategy and Development Direction - Alkami's strategy includes a five-point plan focusing on success in the bank market, leveraging add-on sales, investing in platform efficiency, attracting talent, and pursuing acquisitions [10] - The acquisition of MANTL is expected to enhance Alkami's position as a premier digital banking platform, providing a comprehensive onboarding and account opening solution [22][45] - The company aims to generate half of its new logo wins from the bank market and half from the credit union market, with a focus on cross-selling opportunities post-acquisition [12][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's momentum heading into 2025, with guidance for Q1 2025 revenue between $93.5 million and $95 million, representing a growth of 23% to 25% [49] - For the full year 2025, revenue guidance is set between $440 million and $445 million, indicating a growth of 32% to 33% [50] - The management highlighted the importance of improving account opening experiences for financial institutions to remain competitive against larger banks and fintechs [19][20] Other Important Information - Alkami's gross margin for Q4 2024 was 63.1%, with expectations to reach 65% by 2026 [39][114] - The company has expanded its credit facility from $125 million to $225 million, extending the maturity date to February 2030 [45] Q&A Session Summary Question: How does MANTL compare with your existing account opening solutions? - The current offering is digital-only for limited deposit types, while MANTL provides a comprehensive solution across various channels and account types [56][58] Question: What is embedded in the 2025 outlook between user growth and ARPU expansion? - Organic user growth is expected in the 14% to 15% range, with ARPU expansion projected at 6% to 8% [60][61] Question: What is the competitive environment for MANTL? - MANTL faces competition from outdated core providers and smaller players, but its technology offers superior user experience and integration capabilities [70][72] Question: What are the prospects for MANTL's EBITDA to go from negative to positive? - The transition to positive EBITDA is primarily driven by revenue scale and leveraging Alkami's resources for growth [96][98] Question: How will cross-selling opportunities look post-acquisition? - Both companies have similar client bases, allowing for effective cross-selling of products and services [108][110] Question: What is the long-term margin trajectory for gross profit margin? - Alkami aims for a gross margin of 65% by 2026, with MANTL expected to contribute positively to this margin [114]