What changed in this filing

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Item 1. Business

2024-02-29 compared with 2023-02-24 · 61 added, 56 removed, 296 unchanged (28% of the section changed)

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We inspire and empower community, regional and super-regional financial institutions (“FIs”) to compete with large, technologically advanced, and well-resourced banks in the United States.

Our solution, the Alkami Platform, allows FIs to onboard and engage new users, accelerate revenues and meaningfully improve operational efficiency, all with the support of a proprietary, true cloud-based, multi-tenant architecture.

Our solution, the Alkami Digital Banking Platform, allows FIs to onboard and engage new users, accelerate revenues, and meaningfully improve operational efficiency, all with the support of a proprietary, true cloud-based, multi-tenant architecture.

We cultivate deep relationships with our clients through long-term, subscription-based contractual arrangements, aligning our growth with our clients’ success and generating an attractive unit economic model.

We founded Alkami to help level the playing field for FIs.

Our vision was to create a platform that combined premium technology and fintech solutions in one integrated ecosystem, delivered as a SaaS solution and providing our clients’ customers with a single point of access to all things digital.

Since then, our vision has been to create a platform that combines premium technology and fintech solutions in one integrated ecosystem, delivered as a SaaS solution and providing our clients’ customers with a single point of access to all things digital.

We invested significant resources to build a technology stack that prioritized innovation velocity and speed-to-market given the importance of product depth and functionality in winning and retaining clients.

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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.

The key differentiators of the Alkami Platform include:

The key differentiators of the Alkami Digital Banking Platform include:

• User experience :

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Data synchronized and stored from back office systems and third-party fintech solutions and synthesized into meaningful insights, targeted content and other areas of monetization.

The Alkami Platform offers an end-to-end set of digital banking software products.

The Alkami Digital Banking Platform offers an end-to-end set of digital banking software products.

Our typical relationship with an FI begins with a set of core functional components, which can extend over time to include a rounded suite of products across account opening and loan origination, card experience, client service, extensibility, financial wellness, security and fraud protection, marketing and analytics and money movement.

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Our 2023 client cohort, however, has contracted for 18 of our offered products, on average.

Our target clients vary in size, generally ranging from approximately $500 million to $100 billion in assets and from approximately 10,000 to 2 million digital banking users.

We had 199, 177 and 151 FIs as Alkami Platform clients as of December 31, 2022, 2021, and 2020, respectively.

Our target clients include the top 2,500 FIs by assets excluding those with assets greater than $450 billion (“megabanks”).

We had 236, 199 and 177 FIs as Alkami Digital Banking Platform clients as of December 31, 2023, 2022, and 2021, respectively.

We primarily go to market through an internal sales force.

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.

Given the long-term nature of our contracts for the Alkami Digital Banking 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 approximately 70 months as of December 31, 2023.

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 increase annual recurring revenue of clients existing at December 31, 2022, 2021 and 2020 115%, 115% and 117%, respectively.

Our ability to grow revenues through deeper client customer penetration and cross-sell allowed us to increase annual recurring revenue from clients existing at December 31, 2023 by 115%.

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

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

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 $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.

The United States banking industry is massive, with almost $26 trillion in assets on the balance sheets of nearly 9,500 FIs as of December 31, 2022, 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 $12 trillion in assets, to significantly smaller local community banks and affinity credit unions.

The United States banking industry generated over $1 trillion in gross income in 2022, 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.

Our addressable market consists of financial institutions with assets of $100 million to $450 billion representing over 250 million registered users.

Within this market, we target the top 2,500 FIs by assets excluding megabanks.

We believe based on third party estimates this segment of the market represents an opportunity of more than 200 million registered users and offers the greatest potential lifetime value, considering the cost and resources to acquire and service the relationship

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.

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Our Platform and Ecosystem

The Alkami Platform is a multi-tenant, single code base, continuous delivery platform powered by a true cloud infrastructure.

The Alkami Digital Banking Platform is a multi-tenant, single code base, continuous delivery platform powered by a true cloud infrastructure.

Our platform integrates with core system providers and other third-party fintech providers, and acts as the primary interaction point among consumers, businesses and FIs.

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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 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.

The Alkami Digital Banking Platform maintains more than 300 integrations to more than 1,000 endpoints, as of December 31, 2023.

Our third-party partnerships and integrations are a crucial element of the Alkami Digital Banking 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.

This depth of product configurability and optionality is made possible by the software adapters we have built to standardize access to solutions offered by third-party vendors.

The Alkami Value Proposition

We have grown rapidly since 2009 by understanding our clients’ objectives and pain points, including adding nearly 4.9 million live registered users from December 31, 2020 to December 31, 2022.

We have grown rapidly since 2009 by understanding our clients’ objectives and pain points, including adding more than 5 million live registered users from December 31, 2021 to December 31, 2023.

We have designed our solutions to improve our clients’ ability to achieve their core objectives, including new client growth, customer engagement, increasing and holding deposits, making loans, facilitating money movement and lowering overall operating costs.

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• Premier user experience:

The Alkami Platform enables our clients to leverage technology to deliver a premier user experience.

The Alkami Digital Banking Platform enables our clients to leverage technology to deliver a premier user experience.

The experience we build, and that our clients deliver, is validated by our clients’ market-leading app ratings, which are, on average, higher than each of our main competitors and reflect the level of customer satisfaction associated with leading technology brands.

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Platform security capabilities such as card management and true real-time alerts further help to mitigate fraud and develop a relationship of trust between our clients and their customers.

The Alkami Platform delivers tangible results to clients, including increased registered user growth, increased product usage, operational efficiencies and customer retention.

The Alkami Digital Banking Platform delivers tangible results to clients, including increased registered user growth, increased product usage, operational efficiencies and customer retention.

Our Growth Strategies

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We continue to broaden our product set to address the needs of our client base.

We offered nine products when we

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 offered nine products when we launched Alkami Business Banking in 2015, and as of December 31, 2023, 33 products were available through the Alkami Digital Banking Platform, and our clients had purchased an average of 13 products from us.

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

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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.

Segmint operates a marketing analytics and messaging delivery platform with patented software that enables FIs 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.

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

We deliver our platform through a purpose-built, true cloud SaaS solution, enabling our clients to avoid costly and disruptive system-wide maintenance windows as well as testing projects during upgrades, which is typical of single-tenant platform solutions that are currently prevalent in large parts of the industry.

Our clients choose the Alkami Platform to:

Our clients choose the Alkami Digital Banking Platform to:

• Onboard new registered users efficiently.

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• Guard registered user data and interactions to mitigate fraud.

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 :

Allows our clients’ customers to create and manage deposit accounts, including checking, savings, CD and Money Market accounts.

We deliver this value proposition through the following 10 product categories, encompassing 33 products and more than 300 integrations as of December 31, 2023:

• Digital Account Opening :

Allows our clients’ customers to open new deposit accounts, including checking, savings, CD and Money Market accounts.

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.

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.

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.

• Data Insights:

Enables clients to build internal analytical tools.

Our acquisition of Segmint added unique data models and customer segmentation tools (primarily KLIs) to our platform's capabilities, enabling our clients to better understand, model, and predict their customers' preferences, lifestyle, and financial needs.

• Card Experience :

Includes features that allow for cardholder alerts and control preferences as well as card account maintenance features for self-service.

• Client Service:

Includes features that allow for cardholder alerts and control preferences, card account maintenance features for self-service, and digital card capabilities.

• Money Movement:

Includes fully integrated money movement tools to increase deposits, facilitate payments and transfers, and drive consistent user engagement.

The Alkami Digital Banking Platform seamlessly integrates third-party services into a consistent digital banking experience that is portable across multiple user interfaces.

• Customer Service:

Includes a suite of products digitizing and streamlining communications around largely administrative functions.

Products range from basic SMS and push notification capabilities to digital authentication and chat and conversational tools, both digitally as well as by human interaction.

• Extensibility:

Allows for platform extension without sacrificing continuous integration and delivery of the underlying Alkami Platform.

This includes our SDK and application program interfaces (“APIs”).

• Commercial Banking:

Through real-time insight into cash position and our data capabilities, we equip clients to compete for businesses of all sizes—all while simplifying the back office with a single platform with an industry-leading user experience.

Our commercial banking solution includes comprehensive payment and receivable solutions, sub-user permissions management, automated billing, payment fraud prevention, and actionable reporting all built into a secure and scalable platform.

• Financial Wellness:

Aggregates and synthesizes information that client customers need in order to make informed financial decisions.

This includes basic account aggregation, credit score monitoring, transaction data enrichment and access to third-party financial management products.

This includes basic account aggregation, credit score monitoring, transaction data enrichment, home value tracking, savings goals, and access to third-party financial management products.

Users are able to make healthier financial decisions, while our FIs gain valuable insights, enabling them to drive targeted marketing and product origination.

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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.

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:

Includes fully integrated money movement tools to increase deposits and drive consistent user engagement.

While most competitors currently provide third-party products via an intrusive, off-brand, sign-on screen, the Alkami Platform seamlessly integrates third-party services into a consistent digital banking experience that is portable across multiple user interfaces.

• Extensibility:

Enables clients to embrace and extend the Alkami Digital Banking Platform using our SDK and application program interfaces (“APIs”).

This includes the ability to integrate with internal systems & the broader fintech ecosystem, modify & customize workflows, and elevate the look and feel of the Alkami Digital Banking Platform.

Our Technology and Architecture

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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, 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.

As of December 31, 2023, we served over 650 clients, of which 236 are FI clients of the Alkami Digital Banking Platform, including community, regional and super-regional credit unions and banks across both retail and business banking.

Our original product suite was retail focused.

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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 have had an average contract life for those contracts of approximately 70 months as of December 31, 2022.

Our typical FI relationship begins with a subset of the Alkami Digital Banking Platform as part of a SaaS subscription contract, with an average contract life for those contracts of approximately 70 months as of December 31, 2023.

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.

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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.

Cross-sell contributed 37% of total contract value (“TCV”) in 2022, compared to 24% in 2021, highlighting our significant continued opportunity to grow within our existing client base.

Our client success team is responsible for nurturing relationships holistically throughout the duration of the contract, ensuring that we understand their needs in real time and that our clients are deriving maximum value from the Alkami Platform.

Cross-sell contributed 35% of total contract value (“TCV”) in 2023, highlighting our significant continued opportunity to grow within our existing client base.

Importantly, this team supports retention and deepens the relationship with the client, providing us with the best opportunity to renew clients upon contract expiration, often coupled with an extension of the relationship to additional products.

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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.

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

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Since our inception, our culture has been distinguished by how we think, act and interact, and is foundational to fulfilling our mission and vision.

Our culture is expressed by our six Essential Culture Compounds:

Optimistic Perseverance, Courageous Innovation, Caring Collaboration, Transparent Communication, Trusted Accountability and Real Fun!

Our culture is expressed by our Values:

The Customer is our North Star, We Win Together, How You Show Up Matters, Seek the Answer and Finish Strong.

We regularly conduct employee surveys to better understand the level of employee engagement and the effectiveness of our programs and initiatives.

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• wellness, benefits and flexible time-off programs designed to assist employees and their families with maintaining physical and emotional wellbeing, while balancing the demands of being part of a high-growth company;

• internship and cohort programs that seek to identify and attract diverse talent and offer opportunities for professional learning and potential future employment opportunities with Alkami;

• cohort programs that seek to identify and attract diverse talent and offer opportunities for professional learning and potential future employment opportunities with Alkami;

• employee committees focused on embracing our culture, diversity and inclusion;

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

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.

In 2023, for instance, we were recognized as a "Best Place to Work in Financial Technology," a "Best and Brightest Companies to Work For in Dallas," as well as a "Best Company for Career Growth," a "Best

Engineering Team,” and a "Best Product and Design Team" from Comparably.

Government Regulation

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Privacy and Information Safeguard Laws

In the ordinary course of our business, we and our clients using our solutions access, collect, store, use transmit and otherwise process certain types of data, including personal information (“PI”), which subjects us and our clients to certain privacy and information security laws in the United States and internationally, including, for example, the CCPA, the CPRA and other state privacy regulations, and other laws, rules and regulations designed to regulate consumer information and data privacy, security and protection, and mitigate identity theft.

These laws impose obligations with respect to the collection, processing, storage, disposal, use, transfer, retention and disclosure of PI, and require that financial services providers have in place policies regarding information privacy and security.

In addition, under certain of these laws, we must provide notice to

consumers of our policies and practices for sharing PI with third parties, provide advance notice of any changes to our policies and, with limited exceptions, give consumers the right to prevent use of their PI and disclosure of it to third parties.

In the ordinary course of our business, we and our clients using our solutions access, collect, store, use transmit and otherwise process certain types of data, including personal information (“PI”), which subjects us and our clients to certain privacy and information security laws in the United States and internationally, including, for example, the CCPA, as amended by the CPRA, and other state privacy regulations, and other laws, rules and regulations designed to regulate consumer information and data privacy, security and protection, and mitigate identity theft.

impose obligations with respect to the collection, processing, storage, disposal, use, transfer, retention and disclosure of PI, and require that financial services providers have in place policies regarding information privacy and security.

In addition, under certain of these laws, we must provide notice to consumers of our policies and practices for sharing PI with third parties, provide advance notice of any changes to our policies and, with limited exceptions, give consumers the right to prevent use of their PI and disclosure of it to third parties.

Further, all 50 states and the District of Columbia have adopted data breach notification laws that impose, in varying degrees, an obligation to notify affected individuals in the event of a data or security breach or compromise, including when their PI has or may have been accessed by an unauthorized person.

These laws may also require us to notify relevant law enforcement, regulators or consumer reporting agencies in the event of a data breach.

These laws, as well as new regulations promulgated by the SEC, may also require us to notify relevant law enforcement, regulators, or consumer reporting agencies and/or investors in the event of certain types of cyberattacks or a data breaches.

Some laws may also impose physical and electronic security requirements regarding the safeguarding of PI.

In order to comply with the privacy and information security laws, we have confidentiality and information security standards and procedures in place for our business activities and our third-party vendors and service providers.

To assist our efforts to comply with the privacy and information security laws, we have confidentiality and information security standards and procedures in place for our business activities and our third-party vendors and service providers.

Privacy and information security laws evolve regularly, and complying with these various laws, rules, regulations and standards, and with any new laws or regulations or changes to existing laws, could cause us to incur substantial costs that are likely to increase over time, requiring us to adjust our compliance program on an ongoing basis and presenting compliance challenges, change our business practices in a manner adverse to our business, divert resources from other initiatives and projects, and restrict the way products and services involving data are offered.

See “Risk Factors—Risks Relating to Cybersecurity or Data Privacy—Privacy and data security concerns, data collection and transfer restrictions, contractual obligations and U.S.

and foreign laws, regulations and industry standards related to data privacy, security and protection could limit the use and adoption of the Alkami Platform and materially and adversely affect our business, financial condition and results of operations.”

and foreign laws, regulations and industry standards related to data privacy, security and protection could limit the use and adoption of the Alkami Digital Banking Platform and materially and adversely affect our business, financial condition and results of operations.”

Available Information

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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