What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2023-02-24 compared with 2022-02-25 · 33 added, 28 removed, 319 unchanged (16% of the section changed)

8 unchanged sentences

In addition, in September 2021, we acquired MK Decisioning Systems, LLC (“MK”) a technology platform for digital account opening, credit card and loan origination solutions.

In April 2022, we acquired Segmint Inc.

(“Segmint”), a leading cloud-based financial data analytics and transaction data cleansing provider.

Our domain expertise in retail and business banking has enabled us to develop a suite of products tailored to address key challenges faced by FIs.

3 unchanged sentences

• Integrations :

Scalability and extensibility driven by 230 real-time integrations to back office systems and third-party fintech solutions as of December 31, 2021, including core systems, payment cards, mortgages, bill pay, electronic documents, money movement, personal financial management and account opening.

Scalability and extensibility driven by more than 280 real-time integrations to back office systems and third-party fintech solutions as of December 31, 2022, including core systems, payment cards, mortgages, bill pay, electronic documents, money movement, personal financial management and account opening.

• Deep data capabilities :

8 unchanged sentences

We primarily go to market through an internal sales force.

Given the long-term nature of our contracts, a typical sales cycle can range from approximately three to 12 months, with the subsequent implementation timeframe generally ranging from six to 12 months depending on the depth of integration.

We derive our revenues almost entirely from multi-year contracts for the Alkami platform that had an average contract life since inception of 70 months as of December 31, 2021.

Given the long-term nature of our contracts for the Alkami Platform, a typical sales cycle can range from approximately three to 12 months, with the subsequent implementation timeframe generally ranging from six to 12 months depending on the depth of integration.

We derive our revenues predominantly from multi-year contracts for the Alkami digital banking platform that have had an average contract life of 70 months as of December 31, 2022.

We predominantly employ a per-registered-user pricing model, with incremental fees above certain contractual client minimum commitments for each licensed solution.

Our pricing is tiered, with per-registered-user discounts applied as clients achieve higher levels of customer penetration, incentivizing our clients to internally market and promote digital engagement.

Our ability to grow revenues through deeper client customer penetration and cross-sell allowed us to deliver a net dollar revenue retention rate of 115% as of December 31, 2021, 117% as of December 31, 2020, and 114% as of December 31, 2019.

Our ability to grow revenues through deeper client customer penetration and cross-sell allowed us to increase annual recurring revenue of clients existing at December 31, 2022, 2021 and 2020 115%, 115% and 117%, respectively.

To support our growth and capitalize on our market opportunity, we have increased our operating expenses across all aspects of our business.

2 unchanged sentences

We had 14.5 million, 12.4 million, and 9.7 million live registered users as of December 31, 2022, 2021, and 2020, respectively, representing a growth rate for one of our key revenue drivers of 17.7% from 2021 to 2022 and 27.6% from 2020 to 2021.

Our total revenues were $152.2 million, $112.1 million, and $73.5 million for 2021, 2020, and 2019, representing growth rates of 35.7% from 2020 to 2021 and 52.5% from 2019 to 2020.

SaaS subscription services, as further described below, represented 94.4%, 93.7%, and 91.5% of total revenues for 2021, 2020, and 2019.

We incurred net losses of $46.8 million, $51.4 million, and $41.9 million for 2021, 2020, and 2019, respectively, largely on the basis of significant continued investment in sales, marketing, product development and post-sales client activities.

Our total revenues were $204.3 million, $152.2 million, and $112.1 million for 2022, 2021, and 2020, respectively, representing growth rates of 34.2% from 2021 to 2022 and 35.7% from 2020 to 2021.

SaaS subscription services, as further described below, represented 95.2%, 94.4%, and 93.7% of total revenues for 2022, 2021, and 2020, respectively.

We incurred net losses of $58.6 million, $46.8 million, and $51.4 million for 2022, 2021, and 2020, respectively, largely due to significant continued investment in sales, marketing, product development and post-sales client activities.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for more information.

The United States banking industry is massive, with $24 trillion in assets on the balance sheets of over 10,000 FIs as of December 31, 2020, according to call report data published by the Federal Financial Institutions Examinations Council (“FFIEC”) and the National Credit Union Administration (“NCUA”).

The United States banking industry is massive, with almost $26 trillion in assets on the balance sheets of over 9,500 FIs as of December 31, 2021, according to call report data published by the Federal Financial Institutions Examinations Council (“FFIEC”) and the National Credit Union Administration (“NCUA”).

These FIs range from megabanks, which collectively held approximately $9 trillion, or 36% of FI assets in the United States, as of December 31, 2021, to significantly smaller local community banks and affinity credit unions.

The United States banking industry generated over $1.2 trillion in revenues in 2020, according to S&P Global Market Intelligence, highlighting a significant market opportunity that drives intense competition and a magnitude of economic importance which requires considerable regulation, both locally and nationally.

The United States banking industry generated over $900 billion in gross income in 2021, according to FFIEC and NCUA call reports, highlighting a significant market opportunity that drives intense competition and a magnitude of economic importance which requires considerable regulation, both locally and nationally.

However, banking is not a static industry, and over the last several decades, technology has emerged as a differentiating factor among FIs, driving market share gains, operational efficiencies and improved regulatory compliance.

13 unchanged sentences

Emerging technologies are increasingly built to perform routinized tasks associated with this function, freeing up resources to be reinvested in growth.

• Importance of efficiency:

The recent low interest rate environment, which began as a monetary stimulus measure during the 2008–2009 global financial crisis, has put immense pressure on FI earnings, notably interest income spreads that FIs earn between taking deposits and providing loans.

This has forced FIs to seek additional revenue streams, often in the form of fee income from payments processing and other non-credit products.

This has also forced FIs to seek opportunities to streamline operations, in many cases automating historically manual and labor-intensive tasks with the benefit of process improvement at a markedly lower cost.

• Importance of deposits:

The recent improvement in the interest rate environment, which began as the Federal Reserve increased its target interest rate to combat inflation, has increased the relative attractiveness of non-bank deposits to savers, caused reductions in deposits held at FIs, and put immense pressure on FI funding costs, potentially compressing interest income spreads that FIs earn between taking deposits and providing loans.

This has forced FIs to seek retail and commercial deposits, in many cases leading to increased FI focus on digital account opening and digital banking user experience.

The heightened focus on technology and security in addressing the evolution of the banking industry has driven massive spend.

25 unchanged sentences

The largest FIs have the financial flexibility to make significant investments;

the four largest banks based on asset size, as reported by S&P Global Market Intelligence, in the United States spent a combined $26 billion on technology in 2020, reflecting their commitment to protect and extend leadership through technology.

the four largest banks in the United States, based on asset size, spent more than $30 billion in aggregate on technology in 2021, according to their public disclosures, reflecting their commitment to protect and extend leadership through technology.

The vast majority of remaining FIs do not have the financial resources to match the technology advantage of megabanks.

6 unchanged sentences

We believe this is critical to FIs as their models shift from physical to digital, enabling the creation of a digital community in the image of their broader brands and aligned with their strategic objectives.

The Alkami Platform maintains 230 integrations to more than 1,000 endpoints, as of December 31, 2021.

The Alkami Platform maintains more than 280 integrations to more than 1,000 endpoints, as of December 31, 2022.

Our third-party partnerships and integrations are a crucial element of the Alkami Platform, enabling FIs to choose from, and connect with, a broad array of third-party service providers essential to the curation of a customized digital experience.

28 unchanged sentences

We offered nine products when we

launched Alkami Business Banking in 2015, and as of December 31, 2021, 30 products were available through the Alkami Platform and our clients had purchased an average of ten products from us.

launched Alkami Business Banking in 2015, and as of December 31, 2022, 32 products were available through the Alkami Platform and our clients had purchased an average of 10 products from us.

We expect cross-sell to continue to contribute meaningfully to our growth.

◦ Customer penetration:

While we recently achieved nearly 12.4 million live registered digital banking users (“registered users”), we estimate this only represents 72% of our clients’ total customers as of December 31, 2021.

While we recently achieved more than 14.5 million live registered digital banking users (“registered users”), we estimate this only represents 75% of our clients’ total customers as of December 31, 2022.

We believe we have a substantial opportunity to grow our registered user base within our existing clients as we continue to enhance our value proposition and more consumers adopt digital banking solutions.

2 unchanged sentences

We are increasingly winning FIs with more sophisticated needs as we grow our market presence and product capabilities.

As compared to the 2019 client cohort, our 2021 client cohort, on average, has more registered users, has longer contract lengths and utilizes more products.

As compared to the 2021 new client cohort, our 2022 new client cohort, on average, utilizes more products resulting in a higher annual recurring revenue per new client and higher revenue per user per new client.

• Broaden and enhance product suite:

6 unchanged sentences

In September 2021, we acquired MK Decisioning Systems, LLC (“MK”), an early-stage technology platform for digital deposit account opening, credit card and loan origination solutions, which added deeper digital account opening and loan origination capabilities to our platform while also providing access to an additional 25 live clients at the time of the acquisition.

On April 25, 2022 we completed our merger with Segmint, Inc.

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.

Powered by data scientists and artificial intelligence, Segmint’s innovative product line offers a variety of ways to optimally use customer data to deepen relationships and grow the customer’s business.

The Alkami Platform provides FIs with a complete digital banking solution designed to facilitate and meet the needs of both retail and business users.

5 unchanged sentences

• Guard registered user data and interactions to mitigate fraud.

We deliver this value proposition through the following eight product categories, encompassing 30 products and 230 integrations as of December 31, 2021:

We deliver this value proposition through the following eight product categories, encompassing 32 products and more than 280 integrations as of December 31, 2022:

• Account Opening & Loan Origination :

1 unchanged sentence

This offering enhances many of our clients’ digital platforms and gives them the opportunity to digitize and replace many of the processes which formerly required a physical branch visit.

We recently enhanced this product category through our acquisition of MK in the third quarter of 2021, which added the ability to offer new customer account opening for deposit accounts as well as loan origination for personal and business credit cards and personal loans.

Our acquisition of MK added the ability to offer new customer account opening for deposit accounts as well as loan origination for personal and business credit cards and personal loans to our platform’s capabilities.

• Card Experience :

12 unchanged sentences

Includes risk-based multi-factor authentication and suspicious transaction monitoring as well as multi-channel payment fraud prevention and information reporting tools.

We recently enhanced this product category through our acquisition of ACH Alert in the fourth quarter of 2020.

Our acquisition of ACH Alert enhanced our platform’s capabilities in this product category.

• Marketing & Analytics:

Enables our clients to build internal analytical tools and enables clients to deliver tailored, relevant and timely

content via targeted marketing campaigns and educational outreaches to their customers.

Enables our clients to build internal analytical tools and enables clients to deliver tailored, relevant and timely content via targeted marketing campaigns and educational outreaches to their customers.

Our acquisition of Segmint added unique data models and customer segmentation tools (Key Lifestyle Indicators, or “KLIs”) to our platform’s capabilities, enabling our clients to creatively segment and refine their marketing campaigns.

• Money Movement:

33 unchanged sentences

These are generally one-time in nature and involve unique, non-standard features, functions or integrations that are not as broadly desired across our client base.

As of December 31, 2021, we served 325 clients, of which 177 are FI clients of the Alkami Platform, including community, regional and super-regional credit unions and banks across both retail and business banking.

As of December 31, 2022, we served over 550 clients, of which 199 are FI clients of the Alkami Platform, including community, regional and super-regional credit unions and banks across both retail and business banking.

Our original product suite was retail focused.

3 unchanged sentences

Unlike the long tail of very small institutions, this target client base is also far more likely to grow organically and through acquisition.

Our typical FI relationship begins with a subset of the Alkami Platform as part of a SaaS subscription contract, and we had an average contract life since our inception of approximately 70 months as of December 31, 2021.

Our typical FI relationship begins with a subset of the Alkami Platform as part of a SaaS subscription contract, and we have had an average contract life for those contracts of approximately 70 months as of December 31, 2022.

Over the course of a client relationship, we seek to expand the number of products our clients embed within their digital experience as well as the digital penetration of the clients’ customer base.

4 unchanged sentences

These teams maintain close relationships with existing clients and act as advisors to each FI to help identify and understand their unique needs, challenges, goals and opportunities.

In 2019, we created a dedicated team for driving additional adoption of products within existing clients.

We utilize a dedicated sales team in order to drive additional adoption of products within existing clients.

In addition to identifying opportunities to extend our relationship with clients within the current product suite, this cross-sell team is also responsible for identifying and addressing pain points with our existing solution and sourcing new ideas for additional product capabilities, whether developed internally or through partnership.

32 unchanged sentences

and Fidelity National Information Services, Inc.

Many of our competitors have significantly more financial, technical, marketing and other resources than we have, may devote greater resources to the promotion, sale and support of their systems than we can, have more extensive client bases and broader client relationships than we have and have longer operating histories and greater name recognition than we have.

have and have longer operating histories and greater name recognition than we have.

In addition, many of our competitors spend more funds on research and development.

37 unchanged sentences

We have received third-party recognition for our employee engagement.

In 2021, for instance, we were recognized as a "Best Place to Work in Financial Technology," "Best and Brightest Companies to Work For in Dallas" and a "Best and Brightest Companies to Work For in the Nation" by the Best and Brightest Companies to Work For program.

In 2022, for instance, we were recognized as "Best Place to Work in Financial Technology", "Best and Brightest Companies to Work For in Dallas", "IDC FinTech Top 100", as well as the "Best Company for Career Growth", "Best Engineering Team, and "Best Place to Work in Dallas" from Comparably.

Government Regulation

48 unchanged sentences

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-K

Item 1. Business