Good morning, everyone. Thank you for being here. I'm delighted to have Alex Shootman, CEO of Alkami Technology, and Cassandra Hudson, recently appointed CFO of Alkami. Thank you so much for being here with us today.
You don't get to claim being new anymore.
That's true.
You said that four weeks in, I think.
Time flies when you're having fun. Great. We're going to get through a lot today. We're going to talk about the market opportunity, competitive position, growth algorithm, AI. But first on the market, because I think that's one of the most interesting parts about your business, honestly. Alex, you've identified that over 900 credit unions and 1,000 banks are in your ideal client portfolio, and that they are still on legacy technology. You've said that this is a replacement market governed by five to seven year contract cycles with fewer than 300 potential clients renewing in a given year. Given those dynamics, is the addressable pool of jump balls per year, is it growing, is it shrinking, is it holding steady? What would cause that to change?
Yeah, right now it's holding steady. If you think about our customer set, I won't make you raise your hand, but most of the people that I meet in these conferences, their bank is Bank of America or Chase. They don't really have a sense of what is it like to do business with a community bank. The community banks have pretty old technology. It's pretty hard to execute things, execute things digitally. There's still a lot of fear of making a conversion. If you think about a community bank or credit union making a decision, it's what's the value of me doing this versus the pain of me going through a conversion.
What would have to change the dynamics is you'd have to increase the value of making the change, which was one of the main reasons that we made the MANTL acquisition. The combination of Alkami and MANTL creates a differentiated digital front end to a community bank that they haven't had before. Now they start looking at this capability and saying, "Okay, I'm actually gonna increase deposits more than I did in the past. I'm gonna be able to sell more loans than I did in the past." Now this starts to become worth me going through the process of a conversion. The, for the jump balls to change, it has to either be a reduced risk of a conversion or an increased value and that's why we made the MANTL acquisition.
Maybe as a quick follow-up to that, do you see anything in the near future changing either of those variables?
Right now when we look at a long-term model, we have not assumed. Let me kind of do some math for a second. As you mentioned, let's call it 2,200 institutions, five to seven year contracts. That means about 300 or so come up every year. Some of them stay, and those that don't stay, we have a pretty good win rate on. That's we haven't made any assumptions that that changes in our long-term model. If that begins to change, we hope to influence it, then we'll update our model. Right now when we think about the model that Cassandra reflected, there's no change in any of those economics.
Perfect. Thank you, Alex. A lot's changed in four years. I believe four years ago banks were maybe 2% of your live digital banking clients, and today they're 13%.
You've said before that 78% of banks are still on legacy core technology, whereas it's lower for credit unions, more like 43%. If you think about banks expanding within your, within your client portfolio, can you speak to the attractiveness of servicing banks? What has made you successful in expanding with this customer base in the last, call it four years?
If you thought about Alkami and banks as just a standalone software company. Let's say the Alkami, right now we have the most number of registered live mobile users in the credit union market of anybody else. Let's say that didn't exist, and you just said Alkami and the bank market. In 2022 in 2023 and 2024, we really hit product market fit. In 2020 we had one bank customer. In 2021 we had two bank customers. As we go from 2022 through 2025, we go from about 11 live bank customers to 38 live bank customers.
If you thought about starting up a software company, that would be the time where you'd go, "Oh, now we have product market fit." Where we are with Alkami is the question is no longer can Alkami sell in the bank market. Now the question is can Alkami operationalize what it's gonna take to grow in the bank market. That's really where we are from a growth perspective. What makes it attractive is we have an ambition to be the number one technology provider for regional and community financial institutions. Well, if half the market's banks and half the market's credit unions, you can't be number one if you're only in half the market. What makes it attractive to us is it's part of our long-term ambition, which is to be a foundational technology provider to this market.
Perfect. Alkami consistently wins 30- 40 new digital banking logos per year. Again, you're not displacing other modern providers. Everyone is displacing the legacy V1 products. Since you've launched DSSP more recently, are you seeing your win rates changing at all? Quick follow-up to that, when you do lose a deal, what's the most common reason? Is it conversion risk pricing or something else?
You know, I've been in software for a while, and I've made my fair share of acquisitions that had a business case that didn't come true. We've been really surprised by the execution of the MANTL acquisition. When we acquired MANTL, we had only 11 customers that had all three of the products that make up the Digital Sales & Service platform. That's our Online Banking application, our Data & Marketing platform, and then our origination platform. Now we've got almost 50 customers that have signed up for, you know, all three of those. I haven't been part of an acquisition that had that kind of one year performance. Our win rate on the front half of 2025 and the back half of 2025 was markedly different.
We saw our win rate go way up in the back half of 2025. In terms of when we lose, our biggest competitor is still I'm scared of the conversion. Right? That's now starting to break free in the bank market. That was always a sweet market, and now you're starting to see more community banks make a decision to have a different technology front end than they get from their core. That's, that's still our number one competitor is I'm gonna stay with my older technology.
As a follow-up to that, in a market like this where the 2023 regional bank failures are behind us and the balance sheet of regional banks seems pretty strong, are you seeing more interest in making that conversion, or would you say it's pretty steady year-to-year?
You know, I'm gonna step away from the credit union and stay on the bank market. Really, what's happening in the bank market as opposed to any underlying financials is that think about a community bank, right? It's got the majority of its deposits. Let's say they have 8,000 customers or 15,000 customers. They've got 100 customers that are the majority of their deposits, and those 100 customers were started by a baby boomer or were generational ownership of a firm that was still run by a boomer. Now what they're struggling with is the ownership of those companies are passing on to younger generations. The CEOs that I talk to, the conversation is, "I'm not gonna keep this money." Right.
I may keep a little bit of money, but I'm not gonna be the primary bank if I don't upgrade my technology to be able to serve this next generation of business ownership in this community. That's become more of a driver in terms of the banks making a change, is them understanding their demographics.
Perfect. Thank you. Getting into AI a little bit, I think something that I find really interesting about the digital banking space is that what you provide to your customer embeds thousands of regulatory requirements, integrates with over 450 technology systems, and serves as a system of record for fraud mitigation, money movement, and business logic. In this AI world where code generation is cheaper, do you think the regulatory and integration complexity becomes a bigger moat for you or a smaller one?
Yeah, let me kind of lay out what a, what one of our customers looks like. Our average customer spends $800,000 a year on the Digital Banking solution. What is that? That's two to four employees.
Right? The question is, are they gonna dedicate two to four employees or less than four employees to try to write a Digital Banking system to somehow have some cost savings? The fundamental thing that most of the customers look at is it makes no sense to me from a cost perspective to try to write code Digital Banking. Now, when you get into what you're talking about, what I think most folks don't understand is you have a regulation, then the community bank has to interpret that regulation. Then when they interpret that regulation, the rules of how they interpret it, they actually code into Digital Banking. How much are you able to deposit each month? How much are you able to withdraw each month? What kind of money movement do you have?
All of those decisions that they make, the layer that captures that is the digital banking. All money movement, if you think about money movement, scheduled payments, recurring payments, that's all sitting in the digital banking system. It's almost impossible to create a public LLM with that kind of information that you could put into to create a system. Our customers are 100% thinking about AI, not in terms of rebuilding digital banking, but in terms of can I make more loans? Can I make more deposits? Can I take cost out of the back end? Can I take cost out of fraud? Those are the conversations we have with our customers, are those four business conversations and how can we apply AI towards that.
Mm-hmm. Perfect. Getting into the growth algorithm a little bit more, astounding fact that every five years, clients can grow by more than 100% of their original platform investment with, 2021-2023 cohorts spending more than 2x their landing ARR, and even clients from 2016 spending up to 4x more. With your long-term vision now assuming 40% of ARR growth from new logos and 60% from expansion, can you speak to your cross-sell levers, and what gives you so much confidence that this can continue?
I'm gonna do an answer and then give it to you. I'll talk about the customer dynamics and then hand it to Cassandra. When we have a customer, let me go through their journey. The first part of their journey is moving on to the Digital Banking platform, right? They've made a decision that they're gonna convert. They go through a nine-month project. They come onto the platform, and then they breathe a huge sigh of relief for about six months and they go, "Thank goodness we're over that conversion. Turned out to be pretty good. We've got everybody on board. The customers like it." Then our account team sits down with them and says, "Now let's conduct a strategic account workshop." What that is what's the next 24 months of your digital journey?
They may have only bought 17 of our 30 some odd products to go through the conversion, and now they lay out a 24-month path of new digital capabilities. Remember, most of these businesses are small businesses. They might have 500 employees. They can only take on a sequential amount of projects, right? They can take on a project this month, two more projects next month. What that creates for us is this continuous flow of digital projects over a number of years where we're adding products to the customer. That's why we have confidence in the growth algorithm is because of our what we have on the truck, because of what the customer's appetite is for digital banking as it evolves, and then also just the rate and pace at which they can consume it. It creates this pretty steady flow.
It's one of the things actually I've been so impressed by, since I've joined Alkami. 'Cause I've been a part of companies that have a strategy, a cross-sell strategy that never comes to fruition, but it really is a cross-sell machine here. I think it's a testament to the platform. We have hundreds of integrations. We resell upwards of 40 products today. I think that really gives us a lot of visibility into that add-on sale component, if you will. I think it also makes it easier for us to bring the latest and greatest technology to our customers, right? Obviously we're developing product internally that we're rolling out on a regular cadence.
You know, there's new products that come to bear, and we can quickly partner with those individuals just given the strength of our platform. Kind of between those elements, that's what gives us confidence. Maybe just to touch on the growth algorithm overall, it's really three components. You know, one, just new logo growth, right? Which has been very consistent and we're assuming remains consistent. We have existing customer growth, which is just driven by the number of accounts someone has, population growth, and just overall trends within each of the community banks that we serve. You know, and that has been contributing, you know, kind of in the 5% range each year. That will continue to drive growth for us. The third element is the cross-sell of products that Alex was just speaking about.
Perfect. Maybe the one piece of that I'd like to drill in a little bit more is the user growth piece. There's still a big delta between what population growth is, which I think is sub 3%, and what the market is growing at. You've said that your existing customer base is starting to moderate towards that market rate. Could you maybe recap what the market rate is and what drives that delta between population growth?
There certainly is a trend of individuals having more than one account. You know, I may be above average, but I think I have nine. You know, I think that is a trend that we see, and that certainly drives some of the delta. You know, I also think we tend to serve banks that are growing more rapidly and also benefiting from consolidation, and that is a factor as well.
Mm-hmm. Perfect. Maybe more on the DSSP economics. Recently you've said that DSSP clients see a 30% uplift in ARR versus traditional digital banking new logos with longer contract durations and stronger retention. What's a realistic path for DSSP to become the default landing motion for a majority of new logos, acknowledging that it's still very early days?
It is early, I mean, even in Q1, about half of our new logos were DSSP. We're seeing really good traction. You know, I think the story is resonating with our customers for sure. You know, I think it will continue to be an important part of our RPU growth, both for new customers and also on the add-on sales side of continuing to sell these products.
There's a reason why. Just show of hands, who uses a large money center bank as your bank, like a JPMorgan Chase or Yeah. If you think about your experience if you went to buy a CD, right, or you went to open a second account, it's a very nice seamless experience. There's a website. You say, "I want a second account." You immediately open it. Your account's approved. That is not the experience that is in these thousands of banks, right? That would be a call into the call center. Opening an account could be printing off a PDF form, signing that PDF form, walking it into a branch. Stuff that you're not gonna do.
The reason why we've had the performance is because we took these acquisitions and we actually did the technical work to bring the products together so that now even if you look at Alkami account opening versus Chime account opening, it's more seamless and it's in half the time. When a community bank sees that, they say, "This is what I've been trying to do the past 10 years." That's why we're having the results that we're having. It's not 'cause we're good salespeople, it's because we show them a capability and they basically, any community bank CEO that I go to and I say, "Who's your competition?" It is, "My competition is Chase and Chime. Those are the two people that I'm competing with, and I have to have the technology." That's why it's selling so well.
Perfect. Very clear. Maybe, maybe a bit on AI monetization. At your recent customer conference, you showed four AI prototypes. You've said that there's a challenge. The challenge is less about the technicality of AI and more about the packaging and the pricing, and that there's a tension between the simple pricing where you absorb the cost risk versus usage-based pricing that's unfamiliar to your clients. Where are you leaning these days, and how do you expect to have enough data from your beta clients to set the scalable model?
Yeah, I'll give you an example. We've got an SDK. That is so that a customer can extend Alkami. I just shared this example earlier today. I visited a customer, they've built a Friday night loan application. This is Friday night, my water heater breaks. I need $1,000.
I need to get a loan. That is something they created that is connected to Alkami. Lots of our customers do that. We built a prompt-driven code generator. We took 8 million lines of code that other customers had built into Alkami. We built a, you know, we trained an LLM with that. At our conference, we showed how you could with prompting, you could build code just like you would expect to be able to build code. Our customers were very jazzed by that and saying, "When can we have that?" We said, "Well, would you pay us $10,000 a month for that?
Would you pay us $20,000 a month for that? They're just not willing to pay that much money for something that looks like capabilities that they could get from a free version of ChatGPT, even though it's not trained on 8 million lines of code. We don't know what we can charge for that. We also don't know what the backend cost is gonna be. If all of our customers signed up for that and started using that capability, what's that cost gonna do? That's the work that we, and I think when I talk to my peers, that we all are going through right now. As y'all know, we're not really paying for the cost of tokens right now. We're paying for about 2% of the cost of tokens.
We're, at least for the people that I talk to and us, we're in this mode of, we can build the technology.
We don't know how much we can charge for it, and we're a little bit concerned about what this cost model on the backend's gonna be. I don't think y'all are gonna give us a pass if we say tokens ate our EBITDA guidance, right? That's what we're struggling with right now. We, like I said, the tech's not actually on our platform, we're single code base, multi-tenant. We've got a, data, you know, a data lake backend. It's not hard to build the technology. It's hard to figure out what it's gonna cost.
Mm-hmm. Mm-hmm. On that note, maybe you just answered it, but you've made it clear that you're not ready to change the long-term financial model for AI, on either the revenue or the efficiency side, and it seems exactly for that reason. Do you have a view though? Like, would the positive impact show up first on the cost side or the revenue side?
I think it's gonna show up on the revenue side first, and then as customers start consuming the capability, then it's gonna surprise us on the cost side. That's why we just have to watch a couple. We've got three or four cool products that we built. We've just got to work with some pilot customers on here, 'cause here's the challenge, right? If you wanna price it simply, you just say, "Here's an agentic code creator for SDK, and it's an extra $1,000 a month." If you wanna cover your cost, you have to put some consumption layer in. Now you're putting a consumption layer that the customer has no history of modeling. How are they thinking about their cost?
This is really the dance that we're going through in collaboration with our customers to try to figure out how to bring the technology to market.
Maybe one just quick follow-up on the efficiency side. I mean, I think we're already seeing pretty amazing productivity gains like a lot of other companies out there. I think we'll start to see that show up in the, you know, next 12, 18 months. You know, I think even internally, you can see that people are much more focused on deploying AI use cases and learning about them than ramping headcount as quickly.
Perfect. Thank you. Cassandra, I have a flurry of guidance and growth questions for you now, so perfect timing. I think investors are trying to piece together what the underlying organic growth rate of the business is right now. There's lots of puts and takes between the longer DSSP implementation timelines, some effect from termination fees. Maybe if we strip out the timing items, and some of the headwinds, what is the underlying growth rate of the business?
Well, before I address that, just wanna clarify the implementation point on DSSP, you know, just to make sure that it's well understood. You know, today, if we do a standalone MANTL or Data & Marketing implementation, that takes us about six months. When we sell DSSP, obviously it's Digital Banking, Data & Marketing, and the deposit origination product. And we're assuming that that's gonna take the full 12 months that it would normally take for Digital Banking. Customers are very focused on that contract end date, and there's a lot of organization around it.
That's kind of the comments that we've made on the lengthening. It's not digital banking per se, it's just the two smaller components. you know, there certainly is a bit of noise in our numbers this year between the termination fee impact, which is a few points, and a slight benefit from the timing of the MANTL acquisition, which happened in March of last year. you know, I would direct you to ARR growth, which at Q1, you know, obviously is clean. It does not have any noise from either of those two things, and we grew 22%.
Perfect. Maybe as a quick follow-up to that, it does seem because ARR is not affected by the timing effects as much and whatnot, is that the better metric to be focusing on over revenue?
I mean, obviously they're both important. You know, I mean, I think there's these minor noise items impacting revenue, but ARR is certainly our focus. You know, our entire go-to-market teams are organized around ARR, and it's what I look to and manage internally.
Perfect. Thank you. As we think about the 2026 revenue guide, Your revenue assumptions include continued cross-sell momentum, steady ARR launches, high single-digit ARPU growth, and moderation in existing client user growth. Which of those assumptions do you think is most conservative? What conditions could create upside, whether it's DSSP of adoption, higher ARPU, more bank wins or anything else?
I mean, I think hard to say which one is the most conservative. You know, probably implementation has the most variability is what I would say. You know, we obviously have a lot of visibility into that, and projects are planned out, you know, three to four quarters in advance, so we feel good about the guidance that we gave. You could see timing shift, especially around the DSSP deals that I was just speaking about. You know, we're assuming that customers elect to implement all three products on that 12-month timeframe, but they could decide to implement data and marketing first. Maybe they wanna, you know, use that to actually drive some of their digital banking marketing.
I think we could see some variability there and, you know, could be upside for us, if it plays out that way.
Mm-hmm. Hypothetically, if Alkami wanted to speed up any implementation timelines, what do you think would have the biggest impact? Would it be AI? Would it be hiring more?
It would be third. If you think about a typical implementation for us, we're coordinating 15, 16 different third parties, and these aren't necessarily third parties that we've brought to market. I'll give you just one that is right now. We have a customer who is going live next week, and we need a new API endpoint from Fiserv to be able to get their eDocs, right?
These are the kinda things that we're managing all the time through every single implementation. Really, if we wanted to speed up implementations with a client, it's gonna be through technology innovation, which you could theoretically do with artificial intelligence in terms of the third-party integrations. However, a lot of that is still logistical, right? We've got to get a project manager assigned from Fiserv core. We've got to get a project manager assigned from the cards business at FIS.
That's mostly what we're managing when we're managing a customer onboarding. Then the customer will say, "I'm nervous. I wanna go through 1 more round of employee pilot before we go live." We're not gonna go to the customer, even though you want us to. We're not gonna go to the customer and say, "Hey, we forecasted this for this week. You can't go two weeks out." We're gonna say, "Okay, Mr. Customer, if you're nervous, we're gonna go a couple weeks." Most of the onboarding is logistics as opposed to some sort of technical challenge.
Mm-hmm. Mm-hmm. Makes sense. To that point, you've churned less than 1% of Digital Banking ARR annually for the past three years and expect the same in 2026 with only four clients churning. Your long-term model still assumes a 2%-3% total dollar churn. Maybe what's driving the gap between that sub 1% and the 2%-3% total, and does it make you think that maybe it's a little conservative?
I mean, we've, you know, certainly been trying to help investors understand the components of our business, which is why, you know, we've historically provided digital banking churn and that level of detail. We do have churn from our other products, and they have different contract lengths. For example, MANTL, when sold on a standalone basis, has about a three-year contract life. That 2%-3% guidance factors in churn from our other solutions as well.
Look, if we did 99% gross retention rate for three years in a row, I probably wouldn't change the forecast because that's pretty hard to achieve. That's why I don't feel like the 98% is conservative. I feel like that's a realistic, good planning number that we've overachieved for a couple of years.
Mm-hmm. Mm-hmm. Very clear. And maybe a bit about your You've said that the India captive is largely through its investive, initial investment phase, and you expect operational maturity by the end of this year. If we think about your 300 bps of margin expansion this year, or in your long-term model rather, is that driven by the offshore efficiencies, or is that more to do with pure scale leverage on R&D and G&A?
You know, certainly a little bit, but I would point more towards the scale leverage. You know, we've been improving as a % of revenue with R&D at a pretty steady rate and pace. I expect that to continue. I think where we're starting to become more efficient is on the G&A side, and I think we'll see that pick up over time.
Perfect. Something I'm also excited about is your free cash flow conversion target. You've targeted 90% free cash flow conversion from adjusted EBITDA by 2030. What are the structural drivers improving that conversion? Your CapEx intensity is already pretty low, so is that primarily working capital dynamics?
You're exactly right. Very low CapEx-intensive business, which is great. I think, again, it's that same scale leverage that's benefiting adjusted EBITDA expansion with cash flow catching up. You know, I don't think there's anything, you know, too crazy from a working capital perspective. Of course, there's seasonality in certain quarters, but it really is the scale. With one, you know, slight nuance that eventually we will become a more meaningful taxpayer. That will have to be factored into the 90% target.
Perfect. In general, we're seeing software companies right now making trade-offs between M&A and buybacks, and they're definitely leaning towards buybacks in general. How do you think about balancing buybacks versus keeping powder dry for acquisitions? Maybe what would an ideal acquisition target look like?
I mean, we're doing that calculus every single quarter, right? You know, I think for us, our M&A strategy has been more opportunistic. I think we'll continue to be opportunistic. You know, we're pretty well integrated with the MANTL acquisition, but we still have, you know, a little bit of digesting to do on that acquisition. I think that factors in. You know, just at current stock price levels, the buyback felt like the right thing to do at this time. It's calculus we'll do continuously and make sure that we're balancing both priorities. You know, I think as we're more meaningfully expanding our adjusted EBITDA, that is driving more cash flow, that makes the math a little bit easier.
Perfect. Stock-based compensation increasingly a big focus for investors as they look at not only EBITDA but some multiples, but EBITDA for cash flow, but also GAAP profitability. You've guided that stock-based comp will be about 14% of revenue in 2026, declining to 10% by 2030. What's driving that decline, and how do you think about SBC in the context of your buybacks?
The decline from 2025- 2026 is really driven by the MANTL acquisition. There were some one-time stock-based comp charges that kind of elevated our stock-based comp in the year. I think we're kind of getting to more levels of stock-based comp. You know, we work very closely with our compensation committee to make sure that we're managing the amount of stock that we're granting in any given year to manage to these levels. I think just as we become larger, more mature, while also managing how we give out or grant equity at the company, that lends itself to this path.
Perfect. Alex, Cassandra, we've covered a lot in the past 30 or so minutes, and the last few seconds we have, is there anything you'd like to leave investors with or emphasize?
I'll just say this is a really healthy end market. It's a really healthy end market that has a very predictable purchase pattern. Once a customer comes on board, we've got a very predictable growth pattern for the customer. That's the part that is largely misunderstood about the end market.
Perfect. Alex, Cassandra, thank you so much for being here today.
Thanks for having us.