What changed in this filing

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Item 1. Business

2025-02-28 compared with 2024-02-29 · 39 added, 39 removed, 318 unchanged (20% of the section changed)

10 unchanged sentences

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

During 2024, we established a new subsidiary in India to support potential future operational needs.

As of December 31, 2024, this entity had immaterial operations and did not have a significant impact on our business operations.

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.

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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.

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, marketing, data insights, card experience, money movement, customer service, business banking, financial wellness, security and fraud protection and extensibility.

Due to our architecture, adding products through our single code base is fast, simple and cost-effective, and we expect product penetration to continue to increase as we broaden our product suite.

As of December 31, 2024, our client base, on average, used 14 of our 34 offered products.

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

Our 2024 new client cohort has contracted, on average, for 20 of our offered products.

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

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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 derive our revenues almost entirely 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, 2024.

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 from clients existing at December 31, 2023 by 115%.

Our ability to grow revenues through deeper client customer penetration and cross-sell allowed us to increase annual recurring revenue from existing digital banking clients as of December 31, 2023 to 113% as of December 31, 2024

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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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.

Our addressable market consists of FIs 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

We believe based on third-party estimates that 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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Emerging technologies are increasingly built to perform routinized tasks associated with this function, freeing up resources to be reinvested in growth.

• 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.

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

The Alkami Digital Banking Platform maintains more than 300 integrations as of December 31, 2024.

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.

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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, 2023, 33 products were available through the Alkami Digital Banking Platform, and our clients had purchased an average of 13 products from us.

We offered nine products in 2015, and as of December 31, 2024, 34 products were available through the Alkami Digital Banking Platform.

During 2024, our clients purchased an average of 14 products from us.

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

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We intend to selectively pursue acquisitions and other strategic transactions that accelerate our strategic objectives.

Our acquisition of ACH Alert, which was completed in October 2020, brought an additional fraud prevention tool to our product suite while also providing access to an additional 95 clients that were either live or under contract with ACH Alert at the time of the acquisition.

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.

Our acquisition of ACH Alert brought an additional fraud prevention tool to our product suite.

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.

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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.

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

Enables clients to deliver tailored, relevant and timely content via targeted marketing campaigns and educational outreaches to their customers.

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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.

• Commercial Banking:

• Business 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.

Our business 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:

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• 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.

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

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

Our Technology and Architecture

Our platform is true cloud and entirely hosted and delivered on AWS.

Our platform is true cloud and entirely hosted and delivered on Amazon Web Services (“AWS”).

The benefits of this infrastructure include resiliency, reliability and increased security;

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This includes an ease of use and seamlessness that begins with on-boarding, and extends through general usage, such as balance inquiries, moving money, monitoring credit, managing cards and executing transactions such as deposits, loans and payments.

Across our clients’ customer base, the average registered user logged onto the digital application three to four times per week, in 2023, providing our clients more opportunities to engage with their customers than a physical branch-based relationship, further highlighting the motivation for our clients to promote client customer digital adoption.

Across our clients’ customer base, the average registered user logged onto the digital application three times per week, in 2024, providing our clients more opportunities to engage with their customers than a physical branch-based relationship, further highlighting the motivation for our clients to promote client customer digital adoption.

Our security infrastructure combines security and services from AWS with our own security protocols and integrations.

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In a world where our clients receive hundreds of millions of access requests per month from unverified sources, our security infrastructure is a key element of our value proposition, particularly against new entrants.

While our products and solutions are highly configurable, in certain instances our clients will request custom development and other professional services which we provide.

While our products and solutions are highly configurable, in certain instances our clients will request custom development and other professional services that we provide.

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, 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.

As we enhanced our product suite to include greater depth of functionality for business banking in particular, we significantly expanded our addressable market as FIs increasingly seek a single digital banking platform for all their retail and business banking needs.

As of December 31, 2024, we served 272 FIs through the Alkami Digital Banking Platform and over 750 clients when including unique clients only subscribing to one or a combination of ACH Alert, MK or Segmint products.

Our clients include community, regional and super-regional credit unions and banks across both retail and business banking.

While our original product suite was retail focused, as we enhanced our product suite to include greater depth of functionality for business banking in particular, we significantly expanded our addressable market as FIs increasingly seek a single digital banking platform for all their retail and business banking needs.

Our target client base includes the top 2,500 FIs by assets, with the exception of the megabanks.

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If we cannot license the intellectual property at issue or develop non-infringing solutions for any allegedly infringing aspect of our business, we may be unable to compete effectively.

See “Risk Factors—Risks Relating to Our Intellectual Property, Software and Third-Party Licenses—Claims by others that we infringe, misappropriate or otherwise violate their proprietary technology or other rights could have a material and adverse effect on our business, financial condition and results of operations.”

See “Risk Factors—Risks Relating to Our Intellectual Property, Software and Third-Party Licenses—Claims by others that we infringe upon, misappropriate or otherwise violate their intellectual property or other proprietary technology rights could have a material and adverse effect on our business, financial condition and results of operations.”

Our Competition

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We believe that the comprehensive integration among our solution offerings and our clients’ internal and third-party systems, combined with our deep industry expertise, including our domain expertise in retail and business banking, reputation for consistent, high-quality client support, pace at which we bring innovation to market, and unified cloud-based digital banking and SaaS solutions distinguish us from the competition.

With respect to our digital banking platform, we compete against a number of companies, including NCR Corporation, Q2 Holdings, Inc.

With respect to our digital banking platform, we compete against a number of companies, including Candescent, Q2 Holdings, Inc.

and Temenos AG in the online, consumer and small business banking space.

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• SaaS delivery and pricing model;

• ability to support both internal and external developers to quickly integrate with third-party applications and systems utilizing a software development kit;

• ability to support both internal and external developers to quickly integrate with third-party applications and systems utilizing a SDK;

• design of the client customer experience, including modern, intuitive and touch-centric features;

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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;

• 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;

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

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

• charitable causes to help create opportunities for employees to join together to make a difference in the workplace and local communities.

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

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.

In 2024, 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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• usury laws;

• the Gramm-Leach-Bliley Act;

• the Gramm-Leach-Bliley Act (“GLBA”);

• the Fair Credit Reporting Act;

• laws and regulations against unfair, deceptive or abusive acts or practices;

• the California Consumer Privacy Act of 2018 (“CCPA”), the California Privacy Rights Act (“CPRA”) and other federal, state and international data privacy, security and protection laws and regulations;

• the California Consumer Privacy Act of 2018 (“CCPA”) and other federal, state and international data privacy, security and protection laws and regulations;

• the Privacy of Consumer Financial Information regulations;

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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, 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 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 GLBA, CCPA 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.

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, 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.

Further, all 50 U.S.

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.

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

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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 Digital Banking 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 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