What changed in this filing

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Item 1. Financial Statements

2022-08-05 compared with 2022-05-06 · 199 added, 131 removed, 370 unchanged (47% of the section changed)

3 unchanged sentences

(In thousands, except share and per share data)

March 31, December 31,

June 30, December 31,

Current assets

27 unchanged sentences

Stockholders’ Equity (Deficit)

Preferred stock, $ 0.001 par, 10,000,000 shares authorized and 0 shares issued and outstanding as of March 31, 2022 and December 31, 2021

Preferred stock, $ 0.001 par, 10,000,000 shares authorized and 0 shares issued and outstanding as of June 30, 2022 and December 31, 2021

Common stock, $ 0.001 par, 500,000,000 shares authorized;

and 90,469,637 and 89,954,657 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively

and 91,036,107 and 89,954,657 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively

Additional paid-in capital 682,946 658,374

6 unchanged sentences

(In thousands, except share and per share data)

Three months ended March 31,

Three months ended June 30,

Six months ended June 30,

2022 2021 2022 2021

Revenues $ 50,530 $ 36,701 $ 95,320 $ 69,963

Cost of revenues (1)

23,257 16,180 43,237 31,677

Gross profit 27,273 20,521 52,083 38,286

3 unchanged sentences

General and administrative 18,731 12,185 35,777 21,932

Acquisition-related expenses, net 796 625 ( 582 ) 1,263

Amortization of acquired intangibles 331 91 426 182

Total operating expenses 46,657 30,334 84,473 57,038

5 unchanged sentences

Loss on financial instruments ( 254 ) ( 1,391 ) ( 387 ) ( 3,035 )

Loss on extinguishment of debt ( 76 ) — ( 76 ) —

Loss before income taxes ( 20,077 ) ( 11,375 ) ( 33,396 ) ( 22,254 )

( 13,319 ) ( 10,879 )

Provision for income taxes 156 — 243 —

$ ( 13,406 ) $ ( 10,879 )

Net loss $ ( 20,233 ) $ ( 11,375 ) $ ( 33,639 ) $ ( 22,254 )

cumulative dividends and adjustments to redeemable convertible preferred stock — — — ( 277 )

5 unchanged sentences

Basic and diluted 90,707,381 74,831,512 90,459,503 40,399,138

(1) Includes amortization of acquired technology of $ 0.9 million and $ 0.1 million for the three months ended June 30, 2022 and 2021, respectively, and $ 1.2 million and $ 0.2 million for the six months ended June 30, 2022 and 2021, respectively.

The above financial statements should be read in conjunction with the Notes to the Unaudited Condensed Consolidated Financial Statements.

3 unchanged sentences

(In thousands, except share data)

Three months ended March 31, 2022

Three months ended June 30, 2022

Redeemable Convertible Preferred Stock Common Stock Additional Paid-in Capital Accumulated Deficit Total Stockholders’ Equity (Deficit)

Shares Amount Shares Amount

Balance January 1, 2022

Balance March 31, 2022

— $ — 90,469,637 $ 90 $ 669,284 $ ( 327,259 ) $ 342,115

1 unchanged sentence

Issuance of common stock upon restricted stock unit vesting — — 196,258 — — — —

Common stock issued under Employee Stock Purchase Plan (ESPP) — — 199,887 — 1,841 — 1,841

Exercised stock options — — 170,325 1 346 — 347

Net loss — — — — — ( 20,233 ) ( 20,233 )

Balance June 30, 2022

— $ — 91,036,107 $ 91 $ 682,946 $ ( 347,492 ) $ 335,545

Three months ended June 30, 2021

Redeemable Convertible Preferred Stock Common Stock Additional Paid-in Capital Accumulated Deficit Total Stockholders’ Equity (Deficit)

Shares Amount Shares Amount

Balance March 31, 2021

72,225,916 $ 443,540 6,755,179 $ 7 $ 3,974 $ ( 277,910 ) $ ( 273,929 )

Three months ended March 31, 2021

Stock-based compensation — — — — 3,023 — 3,023

Exercised stock options — — 1,305,635 1 2,105 — 2,106

Payment of Series B Dividend upon initial public offering — ( 4,969 ) — — — — —

Issuance of common stock upon initial public offering, net of underwriting discounts and commissions — — 6,900,000 7 192,803 — 192,810

Conversion of redeemable convertible preferred stock to common stock upon initial public offering ( 72,225,916 ) ( 438,571 ) 72,225,916 72 438,498 — 438,570

Conversion of redeemable convertible preferred stock warrants to common stock warrants upon initial public offering — — — — 5,727 — 5,727

Costs in connection with initial public offering — — — — ( 5,674 ) — ( 5,674 )

Net loss — — — — — ( 11,375 ) ( 11,375 )

Balance June 30, 2021

— $ — 87,186,730 $ 87 $ 640,456 $ ( 289,285 ) $ 351,258

ALKAMI TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE CONVERTIBLE

PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(In thousands, except share data)

Six months ended June 30, 2022

Redeemable Convertible Preferred Stock Common Stock Additional Paid-in Capital Accumulated Deficit Total Stockholders’ Equity (Deficit)

Shares Amount Shares Amount

Balance January 1, 2021

Balance December 31, 2021

— $ — 89,954,657 $ 90 $ 658,374 $ ( 313,853 ) $ 344,611

Stock-based compensation — — — — 21,449 — 21,449

Issuance of common stock upon restricted stock unit vesting — — 278,308 — — — —

Common stock issued under Employee Stock Purchase Plan (ESPP) — — 199,887 — 1,841 — 1,841

Exercised stock options — — 603,255 1 1,282 — 1,283

Net loss — — — — — ( 33,639 ) ( 33,639 )

Balance June 30, 2022

— $ — 91,036,107 $ 91 $ 682,946 $ ( 347,492 ) $ 335,545

Six months ended June 30, 2021

Redeemable Convertible Preferred Stock Common Stock Additional Paid-in Capital Accumulated Deficit Total Stockholders’ Equity (Deficit)

Shares Amount Shares Amount

Balance December 31, 2020

72,225,916 $ 443,263 4,909,529 $ 5 $ — $ ( 263,528 ) $ ( 263,523 )

Stock-based compensation — — — — 4,441 — 4,441

Exercised stock options — — 3,370,202 3 4,932 — 4,935

Payment of Series B Dividend upon initial public offering — ( 4,969 ) — — — — —

Cumulative dividends and adjustments to redeemable convertible preferred stock — 277 — — ( 277 ) — ( 277 )

Issuance of common stock upon initial public offering, net of underwriting discounts and commissions — — 6,900,000 7 192,803 — 192,810

Conversion of redeemable convertible preferred stock to common stock upon initial public offering ( 72,225,916 ) ( 438,571 ) 72,225,916 72 438,498 — 438,570

Conversion of redeemable convertible preferred stock warrants to common stock warrants upon initial public offering — — — — 5,727 — 5,727

Costs in connection with initial public offering — — — — ( 5,674 ) — ( 5,674 )

Repurchase of common stock — — ( 218,917 ) — 6 ( 3,503 ) ( 3,497 )

Net loss — — — — — ( 22,254 ) ( 22,254 )

Balance March 31, 2021

Balance June 30, 2021

— $ — 87,186,730 $ 87 $ 640,456 $ ( 289,285 ) $ 351,258

3 unchanged sentences

(In thousands)

Three months ended March 31,

Six months ended June 30,

Cash flows from operating activities:

8 unchanged sentences

Deferred taxes 162 —

Loss on extinguishment of debt 76 —

Changes in operating assets and liabilities:

9 unchanged sentences

Purchase of marketable securities ( 143,589 ) —

Proceeds from maturities and redemptions of marketable securities 19,000 —

Purchases of property and equipment ( 590 ) ( 477 )

4 unchanged sentences

Cash flows from financing activities:

Proceeds from issuance of long-term debt 85,000 —

Principal payments on debt ( 24,688 ) —

Debt issuance costs paid ( 851 ) —

Proceeds from stock option exercises 1,282 4,935

Proceeds from ESPP issuance 1,841 —

Deferred IPO issuance costs paid — ( 3,857 )

Repurchase of common stock — ( 3,497 )

Net cash provided by (used in) financing activities

Proceeds from issuance of common stock upon initial public offering, net of underwriting discounts and commissions — 192,810

Payment of Series B dividend — ( 4,969 )

Net cash provided by financing activities

62,584 185,422

Net decrease in cash and cash equivalents and restricted cash ( 121,289 ) ( 4,715 )

Net (decrease) increase in cash and cash equivalents and restricted cash ( 216,361 ) 171,688

Cash and cash equivalents and restricted cash, beginning of period 312,954 171,663

21 unchanged sentences

Certain information and disclosures normally included in the notes to the annual consolidated financial statements prepared in accordance with GAAP have been omitted from these interim unaudited condensed consolidated financial statements pursuant to the rules and regulations of the SEC.

Accordingly, these interim unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the accompanying notes for the fiscal year ended December 31, 2021, which are included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 25, 2022.

Operating results for the three months ended March 31, 2022 are not necessarily indicative of results that may be expected for any other interim period or for the year ending December 31, 2022.

Operating results for the three and six months ended June 30, 2022 are not necessarily indicative of results that may be expected for any other interim period or for the year ending December 31, 2022.

The Company has no sources of other comprehensive income, and accordingly, net loss presented each period is the same as comprehensive loss.

Reclassification.

Acquisition-related expenses, net and amortization of acquired intangibles previously included in general and administrative expense and sales and marketing expense, respectively, were reclassified into separate individual captions within the condensed consolidated statement of operations to conform with the current year presentation.

Use of Estimates

1 unchanged sentence

Actual results could differ from those estimates.

Significant estimates and assumptions include determining the timing and amount of revenue recognition, recoverability and amortization period related to costs to obtain and fulfill contracts, deferred implementation costs, and business combinations.

Restricted Cash

The Company defines restricted cash as cash that is legally restricted as to withdrawal or usage.

The amounts included in restricted cash on the condensed consolidated balance sheets at March 31, 2022 and December 31, 2021 represent the additional cash proceeds in deposit with an escrow agent for satisfaction of contingent consideration related to the acquisition of ACH Alert, LLC (“ACH Alert”).

In addition, restricted cash representing additional cash proceeds in deposit with an escrow agent for satisfaction of a holdback provision related to the acquisition of MK Decisioning Systems, LLC (“MK”) is included in the condensed consolidated balance sheets at March 31, 2022 and December 31, 2021.

The amounts included in restricted cash on the condensed consolidated balance sheets at June 30, 2022 and December 31, 2021 represent the additional cash proceeds in deposit with an escrow agent for satisfaction of contingent consideration related to the acquisition of ACH Alert, LLC (“ACH Alert”).

In addition, restricted cash representing additional cash proceeds in deposit with an escrow agent for satisfaction of a holdback provision related to the acquisitions of MK Decisioning Systems, LLC (“MK”) and Segmint Inc.

(“Segmint”) is included in the condensed consolidated balance sheets at June 30, 2022 and December 31, 2021.

See Note 3 for further information.

March 31, December 31,

June 30, December 31,

(in thousands) 2022 2021

11 unchanged sentences

The capitalized software development costs are reported in property and equipment, net in the condensed consolidated balance sheets.

The Company had $ 3.8 million and $ 2.6 million in capitalized internal software development costs as of March 31, 2022 and December 31, 2021, respectively.

The Company had $ 4.9 million and $ 2.6 million in capitalized internal software development costs as of June 30, 2022 and December 31, 2021, respectively.

Capitalized software development costs are amortized using the straight-line method over the estimated useful life of the software, generally three to five years from when the asset is placed in service.

2 unchanged sentences

Generally, contract assets arise as a result of reallocating revenues when discounts are more heavily weighted in the early years of a multi-year contract or the client contract has substantive minimum fees that escalate over the term of the contract.

Contract assets totaled $ 0.7 million and $ 0.7 million as of March 31, 2022 and December 31, 2021, respectively, which are included in other assets in the accompanying condensed consolidated balance sheets.

Contract liabilities are comprised of billings or payments received from the Company’s clients in advance of performance under the contract and are represented in deferred revenues in the consolidated balance sheets.

Contract assets totaled $ 0.6 million and $ 0.7 million as of June 30, 2022 and December 31, 2021, respectively, which are included in other assets in the accompanying condensed consolidated balance sheets.

Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2016-02, “Leases (Topic 842),” to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the consolidated balance sheets and disclosing key information about leasing arrangements.

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, “Leases (Topic 842),” to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the consolidated balance sheets and disclosing key information about leasing arrangements.

The Company anticipates that the adoption of Topic 842 will impact its consolidated balance sheets as most of its operating lease commitments will be subject to the new standard and recognized as right-of-use assets and corresponding operating lease liabilities upon the adoption of ASU 2016-02.

2 unchanged sentences

The Company expects total assets and liabilities reported will increase relative to such amounts prior to adoption.

In June 2016, the FASB issued ASU No.

2016-13, “Financial Instruments—Credit Losses (Topic 326),” which modifies the measurement of expected credit losses of certain financial instruments with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326),” which modifies the measurement of expected credit losses of certain financial instruments with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

The effective date for adoption of the new standard was delayed until calendar years beginning after December 15, 2022, with early adoption permitted.

1 unchanged sentence

This ASU is not expected to have a material impact on the Company’s financial statements.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires entities to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, as if the acquiring entity had originated the related revenue contracts.

This standard is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

Early adoption is permitted, including interim

periods within those fiscal years.

An entity that early adopts this guidance in an interim period should apply the amendments (1) retrospectively to all business combinations for which the acquisition date occurs on or after the beginning of the fiscal year that includes the interim period of early application and (2) prospectively to all business combinations that occur on or after the date of initial application.

The Company early adopted the standard during the second quarter of 2022 and has applied the related accounting to the business combination completed in the current fiscal year and will apply the standard to all business combinations completed prospectively.

The adoption of ASU 2021-08 did not have a material impact on the consolidated financial statements.

Business Combination

2 unchanged sentences

The ACH Alert acquisition also involved $ 4.9 million of additional cash consideration that the Company placed on deposit with an escrow agent to be paid upon the continued employment of one of the owners of ACH Alert, of which $ 2.5 million was paid in October 2021 and $ 2.4 million is to be paid in October 2022.

The Company has classified the amounts held in escrow as restricted cash on the consolidated balance sheets and is accruing the estimated payouts over the requisite service period as a component of general and administrative expense on the consolidated statements of operations.

For the three months ended March 31, 2022 and 2021, the Company recognized compensation expense of $ 0.6 million and $ 0.6 million, respectively, related to this agreement.

The Company has classified the amounts held in escrow as restricted cash on the condensed consolidated balance sheets and is accruing the estimated payouts over the requisite service period as a component of acquisition-related expenses on the condensed consolidated statements of operations.

For the three and six months ended June 30, 2022, the Company recognized compensation expense of $ 0.6 million and $ 1.3 million, respectively, and for the three and six months ended June 30, 2021, the Company recognized compensation expense of $ 0.6 million and $ 1.2 million, respectively, related to this agreement.

MK Decisioning Systems, LLC

2 unchanged sentences

The integrated set of assets and activities acquired from MK through the acquisition meet the definition of a business under ASC 805, as updated by ASU 2017-01.

In addition to the base purchase price, the MK acquisition also included a potential earn-out that is tied to revenue of MK from sales of its

products and services within two 12 -month periods (the “First Earn-Out Period” and “Second Earn-Out Period”), with the First Earn-Out Period beginning on January 1, 2022 and ending on December 31, 2022 and the Second Earn-Out Period beginning on January 1, 2023 and ending on December 31, 2023.

In addition to the base purchase price, the MK acquisition also included a potential earn-out that is tied to revenue of MK from sales of its products and services within two 12 -month periods (the “First Earn-Out Period” and “Second Earn-Out Period”), with the First Earn-Out Period beginning on January 1, 2022 and ending on December 31, 2022 and the Second Earn-Out Period beginning on January 1, 2023 and ending on December 31, 2023.

Pursuant to the terms and conditions set forth in the purchase agreement, the earn-out amount payable, if any, to the former owners, will be a maximum of $ 7.5 million and $ 17.5 million for the First Earn-Out Period and Second Earn-Out Period, respectively, contingent on achievement of certain revenue milestones.

5 unchanged sentences

The Company remeasures the fair value of the contingent consideration on an ongoing basis and records the adjustment to the condensed consolidated statements of operations.

For the three months ended March 31, 2022, the Company recorded a gain on revaluation of contingent consideration of $ 2.7 million.

As of March 31, 2022, the fair value of the contingent earn-out was $ 12.8 million.

For the three and six months ended June 30, 2022, the Company recorded a gain on revaluation of contingent consideration of $ 0 and $ 2.7 million, respectively.

As of June 30, 2022, the fair value of the contingent earn-out was $ 12.8 million.

Assumptions used to estimate the fair value of contingent consideration include various financial metrics (revenue performance targets and stock price forecasts) and the probability of achieving the specific targets using a geometric binomial model.

Based on the final purchase accounting, the Company determined that approximately 62 % of the maximum $ 25 million contingent consideration would be paid to the seller in accordance with the terms of the purchase agreement.

As of March 31, 2022 the Company determined that approximately 51 % of the maximum $ 25 million contingent consideration would be paid to the seller in accordance with the terms of the purchase agreement.

Based on the final purchase accounting, the Company estimated that approximately 62 % of the maximum $ 25 million contingent consideration would be paid to the seller in accordance with the terms of the purchase agreement.

As of June 30, 2022 the Company determined that approximately 51 % of the maximum $ 25 million contingent consideration would be paid to the seller in accordance with the terms of the purchase agreement.

On April 25, 2022, the Company consummated its previously announced merger with Segmint pursuant to the Agreement and Plan of Merger (the "Merger Agreement"), dated March 25, 2022 with Segmint surviving as a wholly owned subsidiary of the Company.

Segmint operates a marketing analytics and messaging delivery platform with patented software that enables financial institutions and merchants to understand and leverage data, interact with customers and measure results.

The aggregate consideration paid in exchange for all of the outstanding equity interests of Segmint at closing was approximately $ 135.1 million (the "Merger Consideration").

A portion of the Merger Consideration of approximately $ 3.1 million was placed into escrow to secure certain post-closing indemnification obligations in the Merger Agreement.

As of June 30, 2022, the allocation of the purchase price for Segmint has not been finalized, and the one-year measurement period has not ended.

The preliminary purchase price allocations are based upon the preliminary valuation of assets and liabilities.

These estimates and assumptions are subject to change as the Company obtains additional information during the measurement period.

The following table summarizes the fair value amounts recognized as of the acquisition date for each major class of asset acquired or liability assumed:

(in thousands) Preliminary Fair Value as of April 25, 2022

Trade accounts receivables $ 1,788

Other current assets 323

Property and equipment 35

Goodwill 99,310

Intangible assets 35,400

Total assets acquired $ 136,856

Accounts payable $ 768

Accrued liabilities 188

Deferred revenues, current 145

Other non-current liabilities 625

Total liabilities assumed 1,726

Net assets acquired $ 135,130

The table below outlines the purchased identifiable intangible assets:

Weighted Average Amortization Period Total

(in years) (in thousands)

Customer relationships 15 $ 14,700

Developed technology 5 20,000

Trade names 10 700

Total identifiable intangible assets $ 35,400

Goodwill resulted from the acquisition as it is intended to augment and diversify the Company’s single reportable segment and provide a complimentary solution to its existing platform offering.

The Company accounted for the acquisition as a business combination.

As a result of the acquisition of the stock of Segmint, the goodwill is not deductible for tax purposes.

For the three and six months ended June 30, 2022 the Company recognized acquisition-related expenses, net of $ 0.2 million and $ 0.8 million, respectively, related to the acquisition of Segmint.

Property and Equipment, Net

Depreciation expense was $ 0.6 million and $ 0.6 million for the three months ended March 31, 2022 and 2021, respectively.

(in thousands) Useful Life March 31, 2022 December 31, 2021

Depreciation and amortization expense was $ 0.6 million and $ 1.2 million for the three and six months ended June 30, 2022, respectively, and $ 0.6 million and $ 1.2 million for the three and six months ended June 30, 2021, respectively.

Property and equipment, net includes the following amounts at June 30, 2022 and December 31, 2021:

(in thousands) Useful Life June 30, 2022 December 31, 2021

Software 2 to 5 years

5 unchanged sentences

$ 26,851 $ 23,845

accumulated depreciation ( 12,629 ) ( 12,017 )

accumulated depreciation and amortization ( 13,348 ) ( 12,017 )

Property and equipment, net $ 13,503 $ 11,828

6 unchanged sentences

Other services includes professional services and custom development.

The following table disaggregates the Company's revenue by major source for the three months ended March 31, 2022 and 2021:

Three months ended March 31,

The following table disaggregates the Company's revenue by major source for the three and six months ended June 30, 2022 and 2021:

Three months ended June 30,

Six months ended June 30,

(in thousands) 2022 2021 2022 2021

3 unchanged sentences

Total revenues $ 50,530 $ 36,701 $ 95,320 $ 69,963

The Company recognized approximately $ 1.9 million and $ 1.7 million of revenue during the three months ended March 31, 2022 and 2021, respectively, which was recognized from deferred revenues in the accompanying condensed consolidated balance sheets as of the beginning of each reporting period.

For those contracts that were wholly or partially unsatisfied as of March 31, 2022, minimum contracted subscription revenues to be recognized in future periods total approximately $ 662.3 million.

The Company recognized approximately $ 9.3 million of revenue during the six months ended June 30, 2022 which was recognized from deferred revenues in the accompanying condensed consolidated balance sheets as of the beginning of the reporting period.

For those contracts that were wholly or partially unsatisfied as of June 30, 2022, minimum contracted subscription revenues to be recognized in future periods total approximately $ 696.0 million.

The Company expects to recognize approximately 47.9 % of this amount as subscription services are transferred to customers over the next 24 months, an additional 31.9 % in the next 25 to 48 months, and the balance thereafter.

1 unchanged sentence

Deferred Cost Recognition

The Company capitalized $ 0.7 million and $ 0.3 million in deferred commissions costs during the three months ended March 31, 2022 and 2021, respectively, and recognized amortization of $ 0.7 million and $ 0.5 million during the three months ended March 31, 2022 and 2021, respectively.

The Company capitalized $ 1.0 million and $ 1.7 million in deferred commissions costs during the three and six months ended June 30, 2022, respectively, and $ 0.2 million and $ 0.5 million for the three and six months ended June 30, 2021, respectively, and recognized amortization of $ 0.7 million and $ 1.4 million during the three and six months ended June 30, 2022, respectively, and $ 0.5 million and $ 1.0 million for the three and six months ended June 30, 2021, respectively.

Amortization expense is included in sales and marketing expenses in the accompanying statements of operations.

Deferred commissions are included in deferred implementation costs in the accompanying condensed consolidated balance sheets in the amount of $ 10.8 million and $ 10.8 million as of March 31, 2022 and December 31, 2021, respectively.

The Company capitalized implementation costs of $ 1.3 million and $ 1.3 million during the three months ended March 31, 2022 and 2021, respectively, and recognized amortization of $ 0.8 million and $ 0.6 million during the three months ended March 31, 2022 and 2021, respectively.

Deferred commissions are considered costs to obtain a contract and are included in deferred implementation costs in the accompanying condensed consolidated balance sheets in the amount of $ 11.1 million and $ 10.8 million as of June 30, 2022 and December 31, 2021, respectively.

The Company capitalized implementation costs of $ 1.6 million and $ 2.9 million during the three and six months ended June 30, 2022, respectively, and $ 1.3 million and $ 2.7 million during the three and six months ended June 30, 2021, respectively, and recognized amortization of $ 1.1 million and $ 1.9 million during the three and six months ended June 30, 2022, respectively, and $ 0.7 million and $ 1.2 million for the three and six months ended June 30, 2021, respectively.

Amortization expense is included in cost of revenues in the accompanying condensed consolidated statements of operations.

These deferred costs are considered costs to fulfill client contracts and are included in deferred implementation costs in the accompanying condensed consolidated balance sheets in the amount of $ 14.5 million and $ 13.5 million as of June 30, 2022 and December 31, 2021, respectively.

The Company periodically reviews the carrying amount of deferred costs to determine whether events or changes in circumstances have occurred that could impact the period of benefit.

No impairment loss was recognized in relation to these capitalized costs for the three months ended March 31, 2022 and 2021.

No impairment loss was recognized in relation to these capitalized costs for the three and six months ended June 30, 2022 and 2021.

Accounts Receivable

Accounts receivable includes the following amounts at March 31, 2022 and December 31, 2021:

March 31, December 31,

Accounts receivable includes the following amounts at June 30, 2022 and December 31, 2021:

June 30, December 31,

(in thousands) 2022 2021

7 unchanged sentences

Accrued Liabilities

Accrued liabilities consisted of the following at March 31, 2022 and December 31, 2021:

March 31, December 31,

Accrued liabilities consisted of the following at June 30, 2022 and December 31, 2021:

June 30, December 31,

(in thousands) 2022 2021

11 unchanged sentences

Total accrued liabilities $ 22,624 $ 19,083

On October 16, 2020, the Company entered into a credit agreement with Silicon Valley Bank and KeyBank (“Credit Agreement”).

The Credit Agreement replaced the prior credit facility provided by Comerica Bank.

The Credit Agreement was scheduled to mature on October 16, 2023.

The Credit Agreement included the following:

On April 29, 2022, the Company entered into an amended and restated credit agreement with Silicon Valley Bank, Comerica Bank, and Canadian Imperial Bank of Commerce (the “Amended Credit Agreement”).

The Amended Credit Agreement amends and restates the prior credit facility provided by Silicon Valley Bank and KeyBank National Association (“the Original Credit Agreement”).

The Amended Credit Agreement matures on April 29, 2025.

The Amended Credit Agreement includes the following among other features:

• Revolving Facility:

The Credit Agreement provided $ 25.0 million in aggregate commitments for secured revolving loans, with sub-limits of $ 10.0 million for the issuance of letters of credit and $ 7.5 million for swingline loans (“Revolving Facility”).

A term loan of $ 25.0 million (the “Term Loan”) was borrowed on the closing date of the Credit Agreement.

The proceeds from the Term Loan were used to fund the acquisition of ACH Alert, which closed on October 4, 2020.

The Amended Credit Agreement provides $ 40.0 million in aggregate commitments for secured revolving loans (“Amended Revolving Facility”).

A term loan of $ 85.0 million (the “Amended Term Loan”) was borrowed on the closing date of the Amended Credit Agreement.

The additional proceeds received from the Amended Term Loan were used to replenish cash used to fund the acquisition of Segmint Inc., which closed on April 25, 2022.

• Accordion Feature:

The Credit Agreement also allowed the Company, subject to certain conditions, to request additional revolving loan commitments in an aggregate principal amount of up to $ 30.0 million.

Revolving Facility loans under the Credit Agreement were permitted to be voluntarily prepaid and re-borrowed.

Principal payments on the Term Loan were due in quarterly installments equal to an initial amount of approximately $ 0.3 million, which began on December 31, 2021 and were scheduled to increase to approximately $ 0.6 million beginning on December 31, 2022 through the Credit Agreement maturity date.

Once repaid or prepaid, the Term Loan were not permitted to be re-borrowed.

Borrowings under the Credit Agreement bore interest at a variable rate based upon, at the Company’s option, either the LIBOR rate or the base rate (in each case, as customarily defined) plus an applicable margin.

The minimum LIBOR rate to be applied was 1.00 %.

The applicable margin for LIBOR rate loans ranged, based on an applicable recurring revenue leverage ratio, from 3.00 % to 3.50 % per annum, and the applicable margin for base rate loans ranged from 2.00 to 2.50 % per annum.

The Company’s minimum interest rate applied to the Term Loan was 4.00 % as of March 31, 2022.

The Company was required to pay a commitment fee of 0.30 % per annum on the undrawn portion available under the Revolving Facility, and variable fees on outstanding letters of credit.

All outstanding principal and accrued but unpaid interest was due, and the commitments for the Revolving Facility were scheduled to terminate, on the maturity date.

The Term Loan was subject to mandatory repayment requirements in the event of certain asset sales or if certain insurance or condemnation events occurred, subject to customary reinvestment provisions.

The Company was permitted to prepay the Term Loan, in whole or in part, at any time without premium or penalty.

The Credit Agreement contained customary affirmative and negative covenants, as well as (i) an annual recurring revenue growth covenant requiring the loan parties to have recurring revenues in any four consecutive fiscal quarter period in an amount that is 10 % greater than the recurring revenues for the corresponding four consecutive quarter period in the previous year and (ii) a liquidity (defined as the aggregate amount of cash in bank accounts subject to a control agreement plus availability under the Revolving Facility) covenant, requiring the loan parties to have liquidity, tested on the last day of each calendar month, of $ 10.0 million or more.

The Credit Agreement also contained customary events of default, which if they occurred, could have resulted in the termination of commitments under the Credit Agreement, the declaration that all outstanding loans were immediately due and payable in whole or in part, and the requirement to maintain cash collateral deposits in respect of outstanding letters of credit.

The Company was in compliance with all covenants as of March 31, 2022.

The Amended Credit Agreement also permits the Company, subject to certain conditions, to request additional revolving loan commitments in an aggregate principal amount of up to $ 50.0 million.

Amended Revolving Facility loans under the Amended Credit Agreement may be voluntarily prepaid and re-borrowed.

Principal payments on the Amended Term Loan are due in quarterly installments equal to an initial amount of approximately $ 1.1 million, beginning on June 30, 2023 and continuing through March 31, 2024, and increasing to approximately $ 2.1 million beginning on June 30, 2024 through the Amended Credit Agreement maturity date.

Once repaid or prepaid, the Amended Term Loan may not be re-borrowed.

Debt issuance costs paid for the execution of the Amended Credit Facility were $ 0.9 million, of which $ 0.1 million was included in prepaid expenses and other current assets and $ 0.2 million was included in other assets on the condensed consolidated balance sheets.

Borrowings under the Amended Credit Agreement bear interest at a variable rate based upon the Secured Overnight Financing Rate (“SOFR”) plus a margin of 3.00 % to 3.50 % per annum depending on the applicable recurring revenue leverage ratio.

If the SOFR rate is ever less than 0 %, then the SOFR rate shall be deemed to be 0 %.

The Amended Credit Agreement is subject to certain liquidity and operating covenants and includes customary representations and warranties, affirmative and negative covenants and events of default.

The Company is required to pay a commitment fee of 0.25 % per annum on the undrawn portion available under the Amended Revolving Facility, and variable fees on outstanding letters of credit.

The Company has a standby letter of credit in the amount of $ 0.3 million which serves as security under the lease relating to the Company’s office space that expires in 2028.

Obligations under the Amended Credit Agreement are guaranteed by the Company’s subsidiaries and secured by all or substantially all of the assets of the Company and its subsidiaries pursuant to an Amended and Restated Guarantee and Collateral Agreement executed contemporaneously with the Amended Credit Agreement.

The Amended Credit Agreement contains customary affirmative and negative covenants, as well as (i) an annual recurring revenue growth covenant requiring the loan parties to have recurring revenues in any four consecutive fiscal quarter period in an amount that is 10 % greater than the recurring revenues for the corresponding four consecutive quarter period in the previous year and (ii) a liquidity (defined as the aggregate amount of cash in bank accounts subject to a control agreement plus availability under the Revolving Facility) covenant, requiring the loan parties to have liquidity, tested on the last day of each calendar month, of $ 15.0 million or more.

The Amended Credit Agreement also contains customary events of default, which if they occur, could result in the termination of commitments under the Amended Credit Agreement, the declaration that all outstanding loans are immediately due and payable in whole or in part, and the requirement to maintain cash collateral deposits in respect of outstanding letters of credit.

The Company was in compliance with all covenants as of June 30, 2022.

In April 2022, the Company applied extinguishment accounting for the debt arrangements related to the Original Credit Agreement upon entering into the Amended Credit Agreement resulting in a loss on extinguishment of debt of $ 0.1 million that is included in the condensed consolidated statements of operations.

Long-term Debt

The following table summarizes long-term debt obligations as of March 31, 2022 and December 31, 2021 (in thousands):

March 31, 2022 December 31, 2021

The following table summarizes long-term debt obligations as of June 30, 2022 and December 31, 2021 (in thousands):

June 30, 2022 December 31, 2021

Term Debt $ 85,000 $ 24,688

3 unchanged sentences

Long-term portion $ 83,391 $ 23,053

Maturities of long-term debt outstanding as of March 31, 2022, are summarized as follows (in thousands):

Maturities of long-term debt outstanding as of June 30, 2022, are summarized as follows (in thousands):

Total $ 85,000

2 unchanged sentences

Stock-based compensation expense was included in the condensed consolidated statements of operations as follows:

Three months ended March 31,

Three months ended June 30,

Six months ended June 30,

(in thousands) 2022 2021 2022 2021

4 unchanged sentences

Total stock-based compensation expenses $ 11,268 $ 3,023 $ 21,042 $ 4,441

The Company recorded $ 0.1 million of income tax expense for the three months ended March 31, 2022, resulting in a negative effective tax rate of ( 0.7 )%, compared to no income tax expense for the three months ended March 31, 2021.

The decrease in the effective tax rate for the three months ended March 31, 2022 as compared to the same period in 2021, is primarily due to state income taxes and deferred taxes related to the tax amortization of acquired goodwill.

Our effective tax rate differs from the statutory tax rate primarily due to the impact of the full valuation allowance against the Company’s deferred tax assets.

The Company recorded $ 0.2 million and $ 0.2 million of income tax expense for the three and six months ended June 30, 2022, respectively, resulting in an effective tax rate of ( 0.8 )% and ( 0.7 )%, respectively, compared to no income tax expense for the three and six months ended June 30, 2021.

The decrease in the effective tax rate for the three and six months ended June 30, 2022 as compared to the same period in 2021, is primarily due to state income taxes and deferred taxes related to the tax amortization of acquired goodwill.

The Company’s effective tax rate differs from the statutory tax rate primarily due to the impact of the full valuation allowance against its deferred tax assets.

The Company recognizes deferred tax assets and liabilities based on the estimated future tax effects of temporary differences between the financial statement basis and tax basis of assets and liabilities given the provisions of enacted tax law.

17 unchanged sentences

The Company evaluates its financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level in which to classify them for each reporting period.

The following table summarizes the Company’s financial assets measured at fair value as of March 31, 2022 and December 31, 2021 and indicates the fair value hierarchy of the valuation:

The following tables summarize the Company’s financial assets measured at fair value as of June 30, 2022 and December 31, 2021 and indicates the fair value hierarchy of the valuation:

Fair Value at Reporting Date Using

(In thousands) March 31, 2022 Level 1 Level 2 Level 3

(In thousands) June 30, 2022 Level 1 Level 2 Level 3

Cash equivalents:

1 unchanged sentence

$ 89,402 $ 89,402 $ — $ —

Treasury debt securities 4,997 4,997 — —

Total cash equivalents 89,402 89,402 — —

2 unchanged sentences

Treasury debt securities 53,016 53,016 — —

International debt securities 2,449 2,449 — —

Total marketable securities 124,237 53,016 68,772 —

21 unchanged sentences

Balance at December 31, 2021

Total fair value adjustments reported in earnings (General and administrative expenses) ( 2,700 )

Balance at March 31, 2022

Total fair value adjustments reported in earnings (Acquisition-related expenses, net) ( 2,700 )

Balance at June 30, 2022

Earnings Per Share

Net loss attributable to common stockholders used in computing basic and diluted earnings per share (“EPS”) has been calculated as the net loss less Series B cumulative dividends and other adjustments to redeemable convertible preferred stock of $ 0 and $ 0.3 million for the three months ended March 31, 2022 and 2021, respectively.

Net loss attributable to common stockholders used in computing basic and diluted earnings per share (“EPS”) has been calculated as the net loss less Series B cumulative dividends and other adjustments to redeemable convertible preferred stock of $ 0 for both the three and six months ended June 30, 2022 and $ 0 and $ 0.3 million for the three and six months ended June 30, 2021, respectively.

The holders of the Company’s redeemable convertible preferred stock did not have a contractual obligation to share in the Company’s losses;

1 unchanged sentence

Basic net loss per share attributable to common stockholders is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period.

Because the Company has reported a net loss for the three months ended March 31, 2022 and 2021, the number of shares used to calculate diluted net loss per share attributable to common stockholders is the same as the number of shares used to calculate basic net loss per share attributable to common stockholders for the period presented because the potentially dilutive shares would have been antidilutive if included in the calculation.

The computation of basic and diluted EPS is as follows for the three months ended March 31, 2022 and 2021:

Three months ended March 31,

Because the Company has reported a net loss for the three and six months ended June 30, 2022 and 2021, the number of shares used to calculate diluted net loss per share attributable to common stockholders is the same as the number of shares used to calculate basic net loss per share attributable to common stockholders for the period presented because the potentially dilutive shares would have been antidilutive if included in the calculation.

The computation of basic and diluted EPS is as follows for the three and six months ended June 30, 2022 and 2021:

Three months ended June 30,

Six months ended June 30,

(In thousands, except shares and per share amounts) 2022 2021 2022 2021

1 unchanged sentence

cumulative dividends and adjustments to redeemable convertible preferred stock

— — — ( 277 )

Net loss attributable to common stockholders $ ( 20,233 ) $ ( 11,375 ) $ ( 33,639 ) $ ( 22,531 )

1 unchanged sentence

Loss per common share - basic and diluted $ ( 0.22 ) $ ( 0.15 ) $ ( 0.37 ) $ ( 0.56 )

For the three months ended March 31, 2022 and 2021, the following potential shares of common stock were excluded from diluted EPS as the Company had a net loss in each period presented:

As of March 31,

For the three and six months ended June 30, 2022 and 2021, the following potential shares of common stock were excluded from diluted EPS as the Company had a net loss in each period presented:

As of June 30,

Stock options 7,068,202 10,934,687

Redeemable convertible preferred stock — 72,225,916

Warrants — 212,408

5 unchanged sentences

The Company leases office space under non-cancelable operating leases for its corporate headquarters in Plano, Texas pursuant to a 10-year lease agreement under which the Company leases approximately 125,000 square feet of office space with an initial term that expires on August 31, 2028, with the option to extend the lease for either two additional terms of five years each or one additional term of ten years .

Rent expense under operating leases was $ 1.1 million for both the three months ended March 31, 2022 and 2021.

In August 2021, the Company entered into an agreement to sublease certain premises of its offices in Plano, Texas.

The sublease is classified as an operating lease and has a term of less than three years.

The Company has sublease income of $ 0.1 million for the three months ended March 31, 2022.

Future minimum payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year at March 31, 2022 were as follows (in thousands):

Rent expense under operating leases was $ 1.0 million and $ 2.1 million for the three and six months ended June 30, 2022, respectively, and $ 1.2 million and $ 2.3 million for the three and six months ended June 30, 2021, respectively.

Future minimum payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year at June 30, 2022 were as follows (in thousands):

Operating Leases

2022 (remaining nine months) $ 2,788

2022 (remaining six months) $ 1,864

Thereafter 6,736

2 unchanged sentences

Deferred rent and tenant allowances are amortized and applied against rental expense over the lease term on a straight-line basis.

As of March 31, 2022 and December 31, 2021, the Company had deferred rent and tenant allowance balances as follows:

(in thousands) March 31, 2022 December 31, 2021

As of June 30, 2022 and December 31, 2021, the Company had deferred rent and tenant allowance balances as follows:

(in thousands) June 30, 2022 December 31, 2021

Deferred rent and tenant allowance $ 5,548 $ 5,895

13 unchanged sentences

As part of the Company’s business planning cycle, the Company performs an annual goodwill impairment test in the fourth quarter of the fiscal year.

There were no indications of impairment of goodwill noted for the three months ended March 31, 2022.

Goodwill had a carrying value of $ 48.1 million as of both March 31, 2022 and December 31, 2021.

Total intangibles, net, consisted of the following as of March 31, 2022 and December 31, 2021:

As of March 31, 2022

There were no indications of impairment of goodwill noted for the three months ended June 30, 2022.

In April 2022, the Company recorded $ 99.3 million to goodwill related to the acquisition of Segmint under the preliminary purchase price allocation.

Goodwill had a carrying value of $ 147.4 million and $ 48.1 million as of June 30, 2022 and December 31, 2021, respectively.

Total intangibles, net, consisted of the following as of June 30, 2022 and December 31, 2021:

As of June 30, 2022

(In thousands) Carrying Value Accumulated Amortization Net Carrying Value

15 unchanged sentences

Total intangible assets $ 12,445 $ ( 1,281 ) $ 11,164

Amortization expense recognized on intangible assets was $ 0.4 million and $ 0.2 million for the three months ended March 31, 2022 and 2021, respectively.

Amortization expense recognized on intangible assets was $ 1.2 million and $ 1.6 million for the three and six months ended June 30, 2022, respectively.

Amortization expense recognized on intangible assets was $ 0.2 million and $ 0.4 million for the three and six months ended June 30, 2021, respectively.

The following table shows the estimated annual amortization expense of the definite-lived intangible assets for the next five years and thereafter (in thousands):

2022 (remaining nine months) 1,200

2022 (remaining six months) $ 3,323

Thereafter 15,270

Subsequent Events

Merger with Segmint Inc.

On April 25, 2022, the Company completed its previously announced merger with Segmint Inc.

Pursuant to the Merger Agreement, Segmint merged with and into a wholly owned subsidiary of the Company.

The aggregate consideration paid in exchange for all of the outstanding equity interests of Segmint at closing was approximately $ 135.5 million.

A portion of the consideration was placed into escrow to secure certain post-closing indemnification obligations in the Merger Agreement.

Credit Facility Amendment

On April 29, 2022, Alkami Technology, Inc.

entered into an amended and restated credit agreement with Silicon Valley Bank, Comerica Bank, and Canadian Imperial Bank of Commerce (the “Amended Credit Agreement”).

The Amended Credit Agreement amends and restates the prior credit facility provided by Silicon Valley Bank and KeyBank National Association.

The Amended Credit Agreement matures on April 29, 2025.

The Amended Credit Agreement includes the following among other features:

• Revolving Facility:

The Amended Credit Agreement provides $ 40.0 million in aggregate commitments for secured revolving loans (“Amended Revolving Facility”).

A term loan of $ 85.0 million (the “Amended Term Loan”) was borrowed on the closing date of the Amended Credit Agreement.

The additional proceeds received from the Amended Term Loan were used to replenish cash used to fund the acquisition of Segmint Inc., which closed on April 25, 2022.

• Accordion Feature:

The Amended Credit Agreement also allows the Company, subject to certain conditions, to request additional revolving loan commitments in an aggregate principal amount of up to $ 50.0 million.

Amended Revolving Facility loans under the Amended Credit Agreement may be voluntarily prepaid and re-borrowed.

Principal payments on the Amended Term Loan are due in quarterly installments equal to an initial amount of approximately $ 1.1 million, beginning on June 30, 2023 and continuing through March 31, 2024 and increasing to approximately $ 2.1 million beginning on June 30, 2024 through the Amended Credit Agreement maturity date.

Once repaid or prepaid, the Amended Term Loan may not be re-borrowed.

If the SOFR rate is ever less than 0 %, then the SOFR rate shall be deemed to be 0 %.

The Amended Credit Agreement is subject to certain liquidity and operating covenants and includes customary representations and warranties, affirmative and negative covenants and events of default.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements