us today, both in person and online. My name is Chris Kennedy. I'm a Research Analyst at William Blair, covering the fintech and payments space. For a complete list of research disclosures and/or potential conflicts of interest, please visit our website at williamblair.com. Next up is Alkami Technology. From the company, we have the CEO, Alex Shootman, and the CFO, Cassandra Hudson. The company was founded in 2009. They came public in 2021, and they're a leading provider of digital banking solutions to credit unions and banks. This is a highly complex, highly regulated market that's not easy to displace in our view, and I'm sure management will talk a little bit more about that. With that, let me pass it over to Alex.
Thanks, Chris. How y'all doing? Appreciate you spending a few minutes with us. Let me share a little bit about the company, about the market, some of the dynamics that are going on within our market and why we feel good about our growth prospects. First off, what do we do? By a show of hands, how many of y'all, your primary bank is a really big bank like a Bank of America, Chase? Okay. If you think about everything that you do digitally, whether that's in a mobile application or that's online, there are 9,000 banks and credit unions that don't have access to the same talent and capital that Bank of America, Chase, Capital One have. To give you a sense, our average customer spends about $800,000 a year with us.
I was at a bank last week in Minneapolis, one of our customers, visiting with them. They have two people to run all of their systems. That's their back end systems, that's their lending system, that's their digital systems. They believe that their primary competition in their market is not the bank down the street. Their primary competition is Chase and Chime. Without boring y'all with everything that's happened in the last five to seven years, it's existential for them that they have to have digital capability that's as good as Chase and Chime. They essentially white label Alkami. One of our customers, when their customers are using the technology platform, it's all branded. It looks like them, under the covers, they're white labeling Alkami.
Alkami is a cloud-native digital banking platform that is built to help regional and community financial institutions compete with money center banks and fintechs and survive. The market itself is very large. I will walk down from TAM to our ideal customer profile. From a TAM perspective, there is 9,000 banks and credit unions in the U.S. When we look at our ideal customer profile, so that would be a financial institution that is at the larger end of that market and a financial institution that has a legacy digital banking infrastructure. There is 1,330 banks and 900 credit unions that are on back-end systems that we have experience integrating to and are the size that we target, the upper end of the market, and have a legacy system.
What's really interesting about our market is because the contracts average five to seven years, what that creates for us is a very steady, predictable stream of new logo opportunities. The company's business is about how do we bring a customer onto our platform and then grow them over time. Cassandra will share a little bit more of the cohort analysis, but essentially a very predictable stream of new logo opportunities because of the length of those contracts. We get them onto the platform and then we are able to grow them. The other thing that's very predictable about Alkami is the buying cycle and the revenue cycle. Once again, 1,330 banks, 900 credit unions. Get in the mind of the buyer. I've got a seven-year contract.
Two years before the contract ends, I will have decided that I'm probably going to want to upgrade my digital banking platform. I'm going to go through a year buying cycle, and then there's a year implementation cycle. Our revenue doesn't start until the customer's live on the platform. What that means is we've got a tremendous amount of forward visibility into the opportunities that are coming into us, the length of time that we're in a buying cycle, when they're going to make a decision, once they make a decision, when their implementation is slotted, and when the revenue is going to start for us. Some dynamics about our market. Digital banking has become a much broader platform than it was even 10 years ago. We would bring customers on our platform 10 years ago, and they might have 10 products, 11 products.
If you think about what you were doing with digital banking 10 years ago, you were checking your balance. You might move some money. Maybe you would deposit a check. That was about it. Now when you think about everything that you're doing in digital banking, you've got an AI chatbot that you're working with. There's all sorts of fraud detection that's going on. You're making payments through Venmo and through some other capabilities. You're checking your FICO score. What that's created for us, and the great news for us is all of that capability comes to market from the really large banks who are continuously driving a level of innovation. When they drive a level of innovation, that creates demand within our market, which creates a broadening product suite, which is what we get to sell into.
Once again, the business model is steady stream of new logos, bring those new logos onto the platform, and then we've got a very large product portfolio to be able to grow those customers. What we've been investing in over the last couple of years, it started with an acquisition, is an integrated digital and sales and service platform. If you go back to 2022, interest rates changed, and for the first time really in a generation, our customers had to attract deposits. Prior to that, core deposits were paying 0% or 1%. They were paying 0% or 1% everywhere. There was no reason to move your money. Interest rates go up, money starts getting hot and moving, and these institutions needed to attract deposits.
Well, those of you all that use a very large bank digital platform, you can't imagine what the experience is like for a smaller bank. You go to open an account online and two clicks in it'll say, Print off a PDF form, sign it and bring it to the branch, or, You need to call the call center. These folks were faced with an existential crisis of money is moving out. They spent about a year doing spot CDs and buying wholesale loans, they finally said, Oh my gosh, we have got to completely modernize the front end of our business. That's why we made an acquisition of a company called MANTL. It was the dominant deposit origination platform, and we spent the last year integrating that together with our data and marketing platform and with our online banking application.
That's become a real differentiator for us in the market. The digital sales and service platform is our data and marketing platform, online banking, and origination. When we acquired MANTL, we had 11 customers that had all three products. That acquisition closed at the end of Q1 last year. We started building the integration throughout the back half of the year, and then we ended the last quarter with close to 50 customers that have all three products. That's our evidence that that's a real differentiator for us. When you think about us for a long-term growth, there's really four things that we focus on. The first is continuing to expand. We are the number one company in terms of live mobile users in the credit union market space.
Continuing to expand into the bank marketplace, implementing more and more capabilities into our integrated digital sales and service platform, continuing to grow the spend that each customer has with us, and then within the system that I'll call Alkami. Alkami's a very large, it's a single code base, multi-tenant SaaS with almost 24 million consumers on the platform. That's a pretty big platform and we need to continue to scale those economics. With that, I'll turn it to Cassandra.
Great. Thank you. Hi everyone. I'm Cassandra Hudson, Alkami's CFO. I can't get away with saying how y'all doing because I'm from the East Coast, but thanks for having me. I'm going to give you some of the financial details in just a minute, and as well as walk through our growth algorithm. What I really want the takeaway to be today is that we're growing very efficiently. We have a highly visible and durable financial model, and it is underpinned by these banks and credit unions that we serve today. All right. Just kind of hitting on some of the Q1 highlights. We signed six new logos in Q1, half of which were our DSSP offering that Alex was just speaking about earlier. We implemented seven clients and we closed the quarter with about 307 clients on our digital banking platform.
We today have 40 customers in our backlog representing about 1.4 million digital users and with the majority of those expected to be implemented over the next 12-month cycle. We exited Q1 with 23 million registered digital users on our platform. That was up 2.5 million and grew 12% on a year-over-year basis. That growth is really driven by two things. One is just new customers going live on our platform, and then the second is existing customers just growing their user bases organically. Our ARR grew 22% and closed at almost $500 million, and we have remaining performance obligations of about $1.7 billion today, which is about three and a half times our current ARR.
Again, just speaking to the visibility that we have in our model from a top-line perspective. Just lastly on churn, we continue to have really low churn with digital banking clients churning less than 1% of ARR, and that's been very consistent from a historical trend perspective. We have multiple levers to drive our overall growth. I really think about it in terms of three categories. First is our new logo ads, which we see as remaining relatively consistent in terms of the absolute dollars that we can add in any given year. Second would be our customers growing their user bases, and that growth, just as I mentioned, was about 6% in Q1. We see this growth kind of remaining healthy in the future with a slight moderation towards overall market growth as we get larger and our base of customers becomes more representative of the market.
Lastly would be ARPU growth. This really is becoming a more meaningful driver of our growth today and expected to be in the next several years as we continue to sell more products across our base of customers with about 35 products that we're actively selling today through our third-party motion, as well as the Alkami-owned products that we have in-house. As I think about how the growth algorithm breaks down, I really expect new logo contribution to be about 25% of our growth, existing customers to contribute another 25%, and then ARPU to really become more meaningful, driving about 50% of our overall growth. Here's just a visual of how our cohorts grow over time. Again, this speaks to the strong upsell, cross-sell motion that we do have and the natural growth that we get from our customer base.
We see customers doubling in size over the course of about a four to five-year period, and then quadrupling over a 10-year period as customers of Alkami. This helps drive growth for us over the long term and gives us a lot of visibility into what lies ahead in terms of our overall revenue growth. Just hitting on some of the historicals. You can see that we have continued to have really strong revenue growth. In Q1, we closed the quarter with about $126 million in revenue, and expect this trend to continue with our financial guidance for the year, guiding to just shy of $530 million on a midpoint basis in terms of revenue and adjusted EBITDA approaching $100 million.
We're really seeing a lot of leverage from a cost perspective in our model, and that has been driving EBITDA margin improvement over the past several years, and it will again this year. That's evidenced by what we saw in Q1 with over 500 basis points of expansion on the EBITDA margin. From a 2030 financial framework perspective, we expect to see gross margins approaching 70% as we get more efficient with supporting our customers, and overall economies of scale from a hosting cost perspective, an adjusted EBITDA margin expanding about 300 basis points on average between now and 2030. We also expect to achieve a Rule of 40 in this timeframe. I think that is it, and I will hand it back to you, Chris, for Q&A.
Yes.
All right.
Thank you for that. We'll open it up to the floor. Don't be shy if you have any questions. Maybe I'll just start out. Alex, you talk to a lot of community banks and credit unions in the market. What are you hearing from their clients in terms of AI and how they're viewing that?
If you go back to what I said earlier, our largest customer has 2,200 employees. Our second-largest customer has the same number of employees as Alkami does. Our average customer has about 300 - 400 employees. They don't have a big staff where they're thinking about coding their own core system or their own payment system or their own digital banking system. What they're looking for is capabilities that they can integrate into their digital banking system that will help them do a better job of underwriting, that'll help them do a better job of marketing so they can attract new customers, that will help them take cost out of the back end of the system. When we're talking to the customers about AI, it's mostly, Help me with fraud loss. Help me do a better job of underwriting. Help me attract more customers.
I've just got a lot of back-office manual work that I want to automate.
Thank you for that. Can you just talk about the complexity of the market integrating with core systems and just how difficult this market is?
Yeah. The thing that's hard to get your head wrapped around, for those of us that haven't worked in a small bank, you think about any Bank of America customers at all. If you think about when you're using your app and you're watching what's going on in the header as you move to different places, you're going to different Bank of America applications that over the years they've done a good job of creating a user experience. Every one of those things that happens in a community bank is a third-party application. They've got a 40-year-old core backend system that might be written in COBOL or RPG.
They've got 20 different third-party systems that they're using that they've contracted with these third parties. Alkami has essentially figured out how to integrate into the core and integrate into these different systems to create an experience that looks like a Bank of America system. You think about Alkami being a system of integration, a system of record, and a system of action. The bank's business decisions are sitting inside of digital banking, and then the customer, whether it's a commercial customer or a retail customer, has made decisions about what they want automated action to take for them, and that's sitting inside of Alkami as well. That's everything that we're orchestrating when we're doing an implementation or when we're managing the system.
Think about that we're doing that with 24 million consumers that are logging into a system that has to be 24 by seven, less than four-second response time. It's pretty easy.
Understood. There's been a lot of changes to the go-to-market strategy over the last year. You referred to it in your presentation. Just talk about that journey and what the outcomes have been so far.
It really started in 2020 when we made a decision to enter the bank market. In 2020, we had two live customers in the bank market, and then as we've grown through about 2022 and 2023 is when we hit product market fit, where we had enough customers where we understood what capabilities did we have and did we not have. Then we spent 2023 through 2025 filling in some of those gaps. We wound up with, or I'll say for today, we've got over 50 bank customers under contract, and we've got almost 40 bank customers live.
As we entered this year, we said, This is the time when we should split the sales force and have a sales force that sells to credit unions and a sales force that sells to banks. There's some other changes that we made in account management, but that was really the big change, and it made sense given that we're now at the point where we're no longer asking ourselves, Can we sell to a bank? Now we're saying, Boy, how can we actually orchestrate the whole company to be able to serve the bank market?
Can you just remind us about the importance of a bank customer versus a credit union customer in terms of ARPU and kind of talk about that journey?
Yeah, I'll let you talk about the ARPU.
Yeah. What we see between credit unions and banks is that credit unions typically have more account holders. They're much more retail-oriented, they come in at a little bit of a lower ARPU. On the bank side, they have a lower number of account holders. Even if you're comparing them on an asset size basis, they may be the same size bank but have just a smaller overall customer base. They come in at a higher ARPU, and that's generally driven by their commercial or business banking needs.
We end up from a land perspective, it's about the same whether it's a bank or a credit union. The other dynamic I should just mention is the investment that we've made in the commercial bank offering also helps us in the credit union space. About a third of our credit union customers have a commercial strategy. Why do they have a commercial strategy? Because it's a good source of deposits. As they started going out to attract deposits, they said, Boy, I'm going to try to attract some business deposits as well. That has helped us in the credit union market.
Just on the bank channel, maybe 13% of your customers are banks today. Talk about, the platform's always evolving, but are you starting to gain that critical mass?
As I mentioned earlier, 2022 to 2023, I've been in small software companies a lot of my career. When you think about a startup software company, you win a couple of lighthouse accounts, and then somewhere when you get to about 12- 15 accounts is when you have enough information to know what your product is and what gaps you still need to be able to have the product that wins. That was us in about 2022, 2023, and then we filled out those capabilities. If you think about the market for us, community bank market, under $10 billion in assets, it's a pretty homogenous market. It's FIS or Fiserv cores, FIS or Fiserv online banking.
The customers are making a decision to unbundle that and modernize their front end, now we have the capability to be able to replace an FIS or Fiserv front end in that market. We also have now the experience to do the core integration, really importantly, we have the skills inside the company to do the commercial data conversion. Those were many of the things that we needed to continue to make progress in that market.
How is AI trying to infiltrate the banking tech space? Is AI a risk, or is it more opportunity?
I think it's more opportunity, Bob. I'll give you an example. This is from our customer advisory board. If you think about underwriting, they would love to do more automated underwriting using AI models. They want to do that. That's an opportunity for us. Now, their headwinds are regulatory. It's very interesting. You go state by state. In Colorado, there's a law which is an explainability law in terms of how you've made your underwriting decision. I've never read the law. What our customers tell us is it's kind of squishy. They don't know exactly what they should do, so they resist in that state. In Texas, that doesn't exist. We've got a customer that 100% of their underwriting is going through an AI model.
I see this as a lift for us, and once again, I see it like we've got AI in our product today in terms of audience recommendation models, in our data and marketing product, in terms of best next offers in our data and marketing product. Those are all upside opportunities for us.
One initiative that you've had is moving some operations to India. Can you just talk about kind of where you are in that journey and the potential outcomes with that?
Yeah, we started that journey through a third party several years ago, and we were having enough-- We always thought that probably 2027 we would have our own captive, and we were having enough success that we decided a few years early to have our own captive. We started that process in 2025. We officially opened our office this year in 2026. We have 100-
Roughly 150 employees there.
150 employees there. We've got whole product teams that operate there. We've got follow the sun operations, and we'll see that as a continued source of talent for us.
Great. Cassandra, you joined late last year. Can you just talk about some observations you have of Alkami and what's surprised you the most since you-
Sure. I think it's some of what Alex was alluding to earlier, just around how complex of an offering this is and needs to be for these financial institutions. I really only came to appreciate that by getting a look behind the scenes and understanding that the product is underpinned by something like 400 different integrations. Several third-party products that are deeply embedded. It's not just like a bundling strategy or a resell motion. I haven't seen a lot of companies that are able to sustain that level of integration, so it's been really impressive. The other thing I would highlight would be the true cross-sell, up-sell engine that we have.
I think I've been a part of companies in my past who were striving to achieve this level of success in terms of cross-sell, up-sell, but it really is working very well here at Alkami and is a big part of our growth today and our future growth strategy.
The revenue per user metric that's up there, what is the kind of full rate one today in terms of if they buy everything?
I think that's in a slide in our investor deck. I want to say it's somewhere around $60.
Yeah. What's like the full potential of that number over time based on?
The $60 would be the potential.
I mean in terms of like new products and is that just on your current product offering?
That's just our current product offering today. If a customer bought everything that we offer, it would be around a $60 revenue per user. It's tough to say where the ceiling is. Like we have a truck where we just continually add new product, and I don't see that there's a limiter on that. I don't know if you agree.
The way that I would think about it is, this is how we think about it long term. There's five systems that a community bank or credit union needs to run the bank, and this is like a maintenance system on an airline. Even if there's an economic downturn, they're not going to turn off the maintenance system. You need a core system, you need payments, you need fraud management, you need an origination system, and you need digital banking. Can't run a bank without it. Alkami started with one of those five. We now have 1.5 of those five because we have deposit origination. We have brought to market loan origination.
If you fast-forward a couple of years and let's say we do our job well and we're like, Okay, we are now in market and we fully have two of the five systems that we need to run a bank or a credit union. That's the point in time when Alkami would take a step back and say, Okay, what's the next major system that we're going to add into the portfolio? Is that going to be something in the payment space? Is that going to be something in the fraud space? What Cassandra was referring to is today we'll continue to bring products to market that might add some amount of ARPU to the company, but if you think about the big jump that you saw in terms of adding the origination platform, that would be us looking at the next major system that we would add.
When you think about competing against Fiserv or FIS, obviously Fiserv is not super hot right now. What is the limiting factor? I assume if they're getting all five, they get discounts so kind of what is your premium above, say, them and then kind of the win rate element or how do we measure success of gaining traction with bank?
Yeah. Well, first of all, if I just take a Fiserv, for example, we work really well with their core business. If you all think about what's happened for the last five to seven years, the people that run these banks are very sophisticated people, they understand that they have to have a set of digital capabilities to be able to continue to execute. They're really just looking at what is a Fiserv or FIS digital capabilities look like versus what does an Alkami's. That's really the comparison. They're making this decision. This is way better digital capability, and I have to go through a system conversion to do it. That's the decision that they're making. The great thing about a replacement market is you're selling into a known budget.
We're not doubling their budget or anything like that. Sometimes we're consolidating the budget because we have the origination platform and the data and marketing platform. It truly is, I'm looking at a differentiated digital capability. When they think about commercially, they've got small businesses in their community who are coming to them and saying, I'd like to do business with you instead of Chase, but you don't have these capabilities and you need to deliver those capabilities. That's the decision that they're making.
All right. We're going to have to end it there. There is a breakout session.
Okay
leave it there.
Thank you.
Thank you.
Thank you.