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Hello. My name is Mike Bender. I'm a senior editor here at ProSight Financial Association. Welcome to today's webinar. ProSight is a leading nonlobbying industry organization with deep expertise in fraud, risk, compliance and business growth. ProSight was formed in 2024 from the merger of BAI and RMA, two trusted industry organizations that have been supporting financial services leaders for more than 100 years. Our purpose here at ProSight is to empower financial services leaders to advance our industry through training and insights as well as tools and resources like today's webinar.

If you're experiencing technical difficulties during the session, don't hesitate to reach out via the technical questions box and the ProSight staff member will be available to assist you. You'll receive a recording of today's webinar to review on demand following the presentation. This event is intended to be interactive, so I encourage you to participate with speakers and other attendees through the chat QA box.

Okay. Let's get started with today's webinar sponsored by Alkami called Stay or Switch? A Practical Playbook for Digital Banking Platform Decisions and Implementation. As financial institutions work to meet rising digital expectations, many are evaluating whether the current platform can support future growth. Today, we'll hear from Alkami experts and financial institution leaders who've been through the conversion process, and we'll share practical insights on assessing risk, planning for success, minimizing disruption and delivering a seamless customer experience.

With that, I hand it over to our speakers, starting with Katie Doll, Director of Services Operations at Alkami. Katie, over to you.

Hello, everybody. Thank you, Mike, for that introduction. We appreciate you giving us some time and space today to have a conversation. Welcome, everybody, to the webinar. We're excited to talk with you about decisions around digital banking and how and when you know to make a decision to stay on your existing platform or make a switch over to somewhere else.

With that, I would love to introduce all of us and give everyone a few moments to introduce where you've come from and where your digital banking experience was with Alkami. I will start off. My name is Katie Doll. I am the Director of Services Operations here. I handle all of our onboarding and implementation experience within our sales cycle.

Robert, I'll pivot over to you next just for a quick introduction and what you do at Alkami.

Yes. Thanks, Katie. Robert Martinez-Harrison, Senior Director of New Logo Implementation Services.

Perfect. Julie?

My name is Julie, and I am from National Exchange Bank. We are out of Fond du Lac, Wisconsin. I am the eBanking Vice President here at the bank, and we have been live on Alkami for the last 1.5 years.

Perfect. Thank you. And Nick?

Nick Bandoch, Chief Brand Officer, Tri City National Bank. We are a $2 billion community bank in the Greater Milwaukee area, not far from where Julie is. We've been on the Alkami platform just shy of 1 year.

Perfect. Well, I appreciate both of you giving us some time and space today. I know we're all busy running 90 to nothing. So thanks for giving us just a little time and talking about your experiences so that we can learn, but also others can learn from your experience.

Before we get into the data, we would love to do a quick poll with everybody here and just understand where you are in your journey. So as you're evaluating either staying on your existing platform or moving over to Alkami or another provider, I would love to know where you stand. Like where are you in your journey and what made you want to come to this webinar. So we'll wait for the poll here for just a second. Thank you all so much. We're going to look and evaluate that.

And then from here, we're going to go ahead and jump into some of the data points. What is causing folks to look at a digital banking platform right now? Platform -- excuse me, modernization often competes with more important priorities that you have within your institution. So you may recognize that there's a digital experience need. However, that speed to market is just sometimes no longer where you need to be with your existing providers, but a platform replacement can often feel like it's really hard to prioritize against many other things. So we find that tension is often closely tied to how institutions think about risk and moving forward in another large project for your organization. You'll see here that we often see that be the lowest of the priorities as you think about where you're moving forward and what you can do better.

Let's talk about the incumbent advantage, right? It's perceived safe to stay. Actually, Nick gave a great analogy in conversation the other day around staying in a burning house. So think about that. I'm sure he's going to bring it up again in a little bit, but staying in a burning house is often more scary than making that decision to move forward. And so staying with that current provider becomes a risk and also what is the experience as you proceed and how you want to go forward with making a change. And leaders can immediately identify concerns around customer disruption, integrations, training, call center volume, the cost of doing something like this. So the risk of staying can oftentimes be perceived as more gradual. They may show up as slower innovation, weaker digital engagement, difficulty keeping pace.

So as you're thinking about things and what you want to do and moving forward, one of the clearest examples of perceived risk is the complexity of the conversion itself. So we want to make sure we address some of that with you today, and we're going to talk about lessons learned and experiences directly here from a couple of our clients. Last but not least, I'll leave you with this point. I love this one. I think it's really important that in our research with the data that we were able to collect amongst all of our partners, we found that about 23% of digital banking decision-makers identified that the overall complexity of a conversion project is the single biggest barrier to switching providers. So it just feels like that fear of change becomes so overwhelming as you make a decision to move forward. That finding doesn't mean that conversions are inherently unsuccessful. It just tells us that complexity is often perceived before the institution makes a fully decided decision.

So the answer to complexity, conversion anxiety is not to minimize the work, but it's to understand the work and really have a good plan for it. And so while conversion complexity can definitely delay a decision, the cost of waiting may also be accumulating. So I would just encourage all of you to not get stuck too hard in that analysis paralysis phase that tends to happen as you decide if you want to move forward or not.

So in saying that, let's jump right into our conversation here with our panelists. I would love to have a couple of points with both Nick and Julie around why and what made you decide to make a change. So with you, Nick, I'll start us out. What prompted your evaluation?

Yes. I think there was some general unhappiness with the provider that we were on, and we were identifying a couple of things that didn't seem to be getting better. And so I think we were all pretty well aligned on going to find a new partner. The analogy that you had referenced, Katie, that I've often used is if you're in a burning house, there is a risk that you might get hurt on the way out if you try to flee, but you're probably for sure going to get hurt if you stay.

And so as bankers, we always tend to avoid that risk. It feels like riskier to take something on. I think in our case, the risk was far greater if we stayed on a platform that wasn't evolving and wasn't meeting customers' needs. And in most cases, the face of the brand that they're logging into sometimes first thing every morning, you can't afford to not do that well. So after some of the feedback that we had and the accumulation of issues, we took on that search to find a new provider.

Right. Thank you. Julie, what concerns did your leadership team have about making a change and maybe elevated those concerns?

Sure. That's a really good question, Katie. So I would have to say, I absolutely agree with Nick. For us, the risk really was in staying. And we also had to take a look and say, okay, like we have to move thousands of customers over at one time. So what does that look like? For a National Exchange Bank, we chose actually to only move the consumer platform. We kept our business platform on the current provider. However, that still was a really big tall ask, and we really needed to work through all that.

The other thing is that when we worked with Alkami, we knew that we were only in the second financial that was utilizing the core that we were. So there was going to be some additional integration with Alkami that we really have to talk through, and we knew there was going to be a couple of gaps or pitfalls along the way. But as long as we knew that, I think that we felt better going in and management felt better going in that we would just have to work through some of those trials and tribulations along the way. And honestly, Alkami was really great about sitting down with us and making sure that the correct people were on the calls with us as we had to talk through some of those. So those were really the biggest points that we had identified, and we were able to solve for them along the way.

That's awesome. Thank you for both of those. I think I'm curious from your perspective, as you were building these teams and starting to go down this path of making decisions, how did you align all of those resources, like everything from IT needs to be involved to your ops teams, to marketing, to frontline staff in the branches, call center, who needed to be involved early? And how did you go ahead and facilitate all of that? I'll start with you, Julie.

Sure, absolutely. So our initial review was done by a smaller team. When I talk about that, I mean like the sales and the contracts and being able to sit down and talk to various different platform providers, and we did all of that. So when we got to the point that we could kind of narrow it down a little bit, that's when we brought in a larger team to really sit down and demo and make sure that every area of the bank was feeling good with it before we fully went forward.

From there, we made up our project team of knowledgeable people and subject matter experts from each and every single area of the bank. They were involved in the project. There was around probably 19 or 20 people on our project team, and that came from various areas such as ops, deposits, loans, IT, compliance, marketing, treasury. Just about any different department that you have, that's what we made up our project team of. And then throughout the entire process, we were really clear about our objectives, and we made sure to be as transparent as we possibly could with our internal project team and then that flowed down to the other departments and our employees as well.

That's perfect. I love hearing that you were able to pull all of that together. What about you, Nick?

Pretty similar to Julie. So we evaluated 4 partners in total, our current one plus 3 others. We didn't have an RFP, but we had a team of 12 that represented kind of all the major stakeholders and departments in the bank. Some of them, if it came down to like voting, there are certain people that maybe get a bigger vote or their opinion carries more weight. But I think having everybody in there to ask questions and understand it is almost like a future excuse eliminating exercise. No one can say they weren't brought in early. No one doesn't feel like -- they don't feel like their voice wasn't heard.

They all have the chance to ask the questions, meet all the vendors. And so I think what we were really seeking there was not so much a consensus, but a commitment. We're probably not going to get a [ 12 to 0 ] vote on who to go with, but wanted to find the right provider that we all were committed to implementing. So we narrowed it from 4 to 2. We visited the final 2 locations in person to kind of do that last little like culture check. Does it feel like the right fit, and then we ultimately made our decision.

That's awesome. I love that. I love that you got to come to headquarters too, because it's such a fun space. All right. Robert, I'm going to pivot over to you. I would love to hear from you around what we're doing within implementations at Alkami and how we're approaching just successful implementations as a whole within industry.

Yes. No, great question, Katie. Yes, lots of changes happening here at Alkami, great ones taking us in the right direction. Related to implementation, we really approach this as many of you all like a 3-legged stool, I think is the term is typically used, right? Really focusing on the people, process and the technology that make up the implementation life cycle. So what we do here at Alkami is, we put teams together that bring vast amounts of knowledge from financial services as well as digital banking implementations, building a strong team of program managers, right, that are really that quarter back in your single point of contact throughout your implementation.

And then they partner with strategic teams like our technology partners, technical implementations, technical consulting, our conversion teams, all coming together as one group to ensure that your project is as successful as it can be and getting you on to that on-time delivery. This is something that really sets us apart from some of our competitors. We're always scouring the markets to make sure, right, that we're offering the best services that we can, and we're extremely confident that the organization that we have established here at Alkami really helps relieve some of that stress as you're doing these conversions onto our platform and really setting you up for success.

That's awesome. I love that one thing that I've noticed throughout our implementation life cycle is that I've seen you standardize what we can do based upon lessons of hundreds of these things while also leaving some flexibility to cater to specific needs based upon each organization. So flexibility, but a standardized process, I think, is really what's selling these implementations to be successful. So I love -- I just love watching you run.

Yes. No, that's an excellent point, right? We're always iterative with our design, right? We're confident that our standardized processes work, but we're always flexible, right to meet the needs of our clients. So thank you for calling that out.

Awesome. All right. So let's talk about preparation a little bit. We've talked about the upstream, what made you make decisions, how do we do this? But let's talk about prep because I know personally, I don't believe in a perfect project. I don't think they exist out there. If anybody sells you a perfect project or everything is going to go swimmingly, just run now run away. So let's talk about preparation a little bit. Nick, I would love to know from you what work began earlier than you thought it would? And what do you wish you would have done earlier in the process? So talk to me about a little bit of those lessons learned before we dig more into those in a few more slides.

Thanks, Katie. A couple of things that I think we did well here. We get together every President's Day and have an all-employee meeting, and we were very transparent with everybody that we were working on this digital project. So when day-to-day jobs maybe took a small backseat on some smaller projects or you saw people hold in conference rooms all the time, you knew what we were working on. We were fortunate to have done a big deposit product cleanup in the same year. I guess it was done when we started our search. So we cleaned up about 80-some miscellaneous deposit products, excuse me, on the core. some of which had like 17 people in them. We got that down to 35. So that was a big help when we got into implementation that when we were looking at mapping and things and features, we were working with a much smaller subset of deposit products, a big win for us there.

I think the thing that I wish we would have done a little bit better was some data cleanup. I don't think we appreciated how noisy the data is in a core that you've been on for a couple of decades. I'll give you one example. So we have a primary phone number, a secondary phone number and a mobile field. Depending on the time you joined the bank, that mobile number could be in 1 of those 3 fields, right? If you are a long-time customer, you might still have a landline there as a primary, and we added it to the mobile field. If you're like me, you only have one number, you're -- it's in the primary field or maybe you were a child and now you're an adult and there's another phone number lingering in there. And so Alkami is going to map to one phone number and that should be consistent across your data organization. I can tell you ours isn't, wasn't, probably won't be because there's too much noise there. But we had some challenges because we didn't do that appropriate cleanup in advance that we wish we would have done. We overcame it, but we've certainly made a little bit extra work for ourselves.

Yes. I appreciate that transparency. I will say for everybody here. I always like to talk about as a part of the sales cycle, and my involvement is, let me give you a free nugget of information. Regardless where you go, unless you stay on your legacy provider, you are going to have to have good contact information. So e-mail, phone number, so critical to do a cleanup of that data while you have the time. And so even if you're in an evaluation process, start the cycle now, like start cleaning up that data because, one, it's just the business. But two, it's going to be so critical as a part of your conversion to have good e-mail phone number across the board for these folks. I'm sorry, Nick, but you have to go through that. That's not fun.

Hard to get people update their contact information if you can't reach them because you have bad contact information. It's a bad spiral.

Then there's that. I have seen some folks do like if you have a branch or a call center, any interaction you have with people, like just a quick, let me validate your contact information real fast. Well, I've got you on my line. So yes, absolutely critical.

Julie, I would love to talk with you a little bit about the external and internal components. So what did your institution do to prepare the staff? So overall, you know this is coming now. What did you do to kind of align everybody internally?

Yes, Katie, that's a really great question. So for us, we really took the point of view that we wanted to make sure that we were in constant communication with our teams from the very start. So we sent out e-mails to the organization. We made updates on our employee intranet. And then the project team, once we got down to that 19, 20 people and somebody was coming in from each and every single department, we met weekly. And then from there, those individuals took back information from that meeting back to their departments or discussed or figured out if there's something that we needed to do differently. So they were always actively engaged with their departments as well. And then when we met the next week, we could discuss and talk through that.

Something that was a little bit kind of fun and pretty awesome for us on our side is we developed what's called eBanking champions. And so what we did is we identified a subject matter expert from each branch location. And then with them, we trained them above and beyond with our online banking products. So the entire organization has a very good solid pulse or baseline on what the new product is. But these eBanking champions an individual was identified that could learn more to be able to help the customer. So they could be at any branch and somebody could come in and there would always be a subject matter expert there.

We also included a separate phone number and a separate e-mail for that group so that way our customers were able to, at any time, then call in once we went live or send in messaging and they'd be able to get back to them right away. So that was really helpful to be able to use that in our promotions and people went right direct to the experts. They are -- actually are still first line of defense. So customers, if they have questions in regards to their online banking, they actually typically speak with our champions before they get back to our digital banking team. So if somebody comes in and has a question, that frontline staff person is like, you know I'm not sure. They might tap their eBanking champion from that location on the shoulder. They'll talk through a brainstorm. And if they can't still figure it out for the customer, then they would call back to our digital banking team.

And then the last thing I would say that we did for engagement was we worked with our employees to have them be our testers before we went live, just to understand how it works in the platform and to be able to understand what our customers are going through as well. So when we got into that really good space of like, hey, we know for sure, this is our go-live date. The project team would have already been testing for months and months, but then we started gradually adding in additional team members from the entire organization. So everyone from our senior leadership team to our lenders to the frontline staff were on the new platform. So that way when we went go live on that Monday, they were able to help any and all customers.

I love that. I love that so much because when you have people that are in a facility and people that have been in testing as a part of the experience, you know -- they know what that user needs. And I think more than anything in an experience like this, it's about communicating with empathy. I understand it's not a lot of fun, right?

Same thing. I had to reenroll and here's -- so that was a really good -- that's a really good call-up because that is exactly what was able to happen. We were able to say from our side, we had to go through the same thing. We understand what you're feeling and we hear you.

Yes, exactly. And I think as all -- as humans, when we feel heard and validated, we tend to not get us upset, right? It's like Okay. I understand that. Okay. So let's say, assuming I don't think either one of you just do conversion projects for fun, that you have other jobs at your banks and credit unions, how did your team balance conversion work with normal business operations? So knowing you're doing both of these, working it off the side of your desk, Nick, I'll start with you. How did you balance all of that?

Certainly, the -- this project was one of our big company priorities. We had 3 to 5 people pretty much working full time on this during our 10-month implementation. So we had a project manager, an internal project manager, myself. We had a digital banking administrator. Those are the 3 core people and then critical people, actually careful about using that core people confused. We had our treasury management and business banking admin and then our internal core administrator. So those 3 to 5 people on any given day are spending the bulk of their time working on this project. For context, we have about 350 employees. So we have 5 working on it almost full time.

I think that core administrator, that internal person for us is really key. There's so much coordination. We were same core as Julie, but one of those early banks on this particular core to come over to Alkami. And so we really needed our core expert. There's no project manager that's going to have the institutional knowledge of all those core decisions you made through the years. So she was really critical. And we just occasionally had buy-in from other departments to fill holes or prioritize projects if other things were overlapping with this. But this standing on stage, telling everyone we're going to do this. This was a North Star for us to make sure we kept implementation on track and met our deadline.

Perfect. Perfect. Julie, how about for you?

So on our side, we established 2 project managers for the project. One of them was myself and then one of them was our Vice President of Projects. And the 2 of us really worked that high-level overview with the team that was also comprised of another approximately 20 people from each department. So by having the 2 of us being able to work hand-in-hand with each other, we really were able to keep each other accountable, organized, and that's both with the core and with Alkami, right? Because there's a lot of different moving pieces that go along with it. So that was really nice to be able to have somebody really to be bouncing ideas or brainstorming with at all times.

The other side of it, too, if one of us was on vacation and sick, pulled away for their everyday job, that other individual was really able to respond to the e-mails, questions and was able to make decisions because you have that backup and you have that intimate knowledge with each other. And we really found that there was a lot less bottleneck that way. The project can continue on and keep moving because you weren't waiting just for one person to get back. And then from there, too, we also use a consultant from the core, and that very much helped along the way, too, as we had to start working through the process at a pretty minute level.

Perfect. I'm curious, Julie, with the 2 resources that you had, did you guys split tasks with -- you used the word bottleneck. That's what in my little -- did you guys use one person that was more like testing focused, like a test lead almost and one was a PM? Or was it truly like we're just going to divide and conquer the work among both of us...

It was divide and conquer. So like we had an internal project meeting every single week. And then me and my counterpart, we met every week as well, and we reviewed taskless, where's outstanding, what's going on, what haven't we heard back from yet, what do we need to hear from the department. And then we created those agendas together every single week so that we seriously throughout the entire thing, we were like one person and either one of us would be able to handle something and either one of us would be able to monitor that relationship.

I love it. I hope you guys are still friend.

We absolutely are. Yes, she is one of my favorite people.

All right. Well, Robert, I would love to give some space and time for you to just talk about a couple of things in the implementation framework. For those of you that are joining us, take some time to kind of look over all of this. I know it's a lot of words. However, Robert, point out a few things here around what Alkami is doing and how we're collaborating with our clients.

Yes. No, thanks for covering. There's a lot of steps here, right, but a lot of good information that really plays out yet. But I think it's really important, especially just as we're just discussing a minute ago with Nick and Julie in regards to preparation, right, and getting that readiness and understanding your risk and your dependencies. And that definitely is a partnership that we do with our financial institutions as well, right, to make sure that we're also monitoring those on our end, right, and cross-sharing some of that information and co-collaborating on those.

But one thing, I mean, if you've been through implementations before, this is pretty much -- the steps are usually the same. But what really sets us apart, I feel, is related to solution design. We really go above and beyond to ensure that we're creating an environment that is easy to test, right, that has all of the items that configured for you all and getting you ready in your own personalized environment. And that really sets us apart from other folks to ensure that where you're actually operating and testing it is actually what the end result is going to look like. Oftentimes, you can get a demo, site and Ovation bank or something other that kind of is static information and not custom to your platform.

But again, with solution design and how we go about doing that, let me take a step back, right? How we go before we actually create your environment, we actually meet with you with our technical resources to look at what is your current provider providing you now, right? What does it look like? What's the look and feel? What are you used to? And then we take that information and then we create, again, this test environment for you that's Alkami's, right? And showing you where the differences are, what are those nuances having you focus on specific testing elements, right, that may be new. Oftentimes, our customers are coming from a certain platform, and then they're not only looking for parity, but then also looking for enhancements as well, right? So we make sure that we rigorously test those end-to-end to ensure, right, once you go live, it's successful and your members or clients are not impacted by the change.

Yes. And I think the other one is just really testing. We're really heavy on testing. We want to ensure that we're really getting in there. We have, again, as I mentioned, those technical resources that are there to timely address those tickets that you're submitting right any changes or any tweaks that you want to see changed, again, leveraging that dedicated technical resource team to get those implemented as soon as possible for you all. Yes. Anything specific, Katie or Nick or Julie that...

No, I would say I think that you hit the nail on the head with solution design. If I was to say an example, I have seen -- because I work more upstream in the sales cycle, I've seen what that process is, and then I see how your team gets engaged. And I think the thing that is really beautiful that you guys do as a part of that solution design is to say, let me see your existing platform. And kind of to what Nick said earlier, like you forget the things that you've done on this core that you've been on for 20 years, right? So sometimes we see the same thing with the digital banking provider.

So when we do a demo of your existing system, what our team is looking at is looking at that going, hold on a second. I don't know what that is in the scope. And so I have an example where I was sitting in the room watching from a process perspective and somebody goes, yes, and then we click here to do international bill pay. And we were like, international. Okay, where is that at? But we were able to identify that missing item that everybody had just forgotten about, right, because it was a custom tool that they had built out in their existing platform and that we hadn't gotten as a part of the scope, but we were able to avoid that by 8 months and find that risk way upstream versus when you -- when the client got into testing.

So to your point, again, we're going to say test and then test some more and we your hands are from testing, go pass from ibuprofen and keep testing. So we were able to avoid that risk by 8 months and getting them into that environment by just doing a simple demo. And so that is always -- I know what your team is looking for, like how do we avoid and mitigate risks earlier and shift as much of that risk left in the project space versus finding it later and potentially facing delays. So I think that solution design is just so critical to the overall process. And I love hearing that you're still doing that and that the teams are finding value in it, too. If you all on the webinar have any questions about this slide, please pop them into the chat. We're all here and happy to jump in and answer any of those questions that you may have.

All right. So let's talk about overall conversion. I have lots of opinions about the data. Nobody wants to hear from me, I promise. So we're going to talk to Nick and Julie again around what their experience was for the actual conversion. So Nick, I'm going to start with you. What part of launch really felt like it required the most coordination across teams and call centers and vendors? And how did you go about making sure that, that was in alignment? And then Julie, I'm also going to pop over to you, so get your thinking cap on. So go ahead, Nick, we'll start with you.

Yes. I mean the thing that I think rightfully keeps most people up at night and requires the most coordination is go-live date. I mean that's the time when your customers are going to experience a good or bad experience based on how you did, right? That's the moment of truth. So that required a fair amount of coordination. So for us, we have a primary customer care team. That's our call center. We also doubled that by getting people from our branches and other departments around the bank to be a dedicated digital banking customer call center. Even a 2x call center, I will tell you, was not enough on day 1.

We also coordinated having both Alkami and our core representatives. We had 2 people like Julie from the core who are on the project with us, and we had them on site. And that's really critical when they can hear directly from the customer, hear directly from our team, what's going on, and we're all in the room together, kind of marching to the same beat. There's no -- let's set up a conference bridge or anything, everyone's together. And even little stuff like making sure food is ordered and the beverage cooler is stocked and everyone's caffeinated. There's going to be some long days. Call center is going to be open later. It's going to be some early mornings. So a lot of coordination across quite a few teams to make that happen.

The other thing that we did kind of found during testing that there was a couple of commercial business functions that were a little bit more complex. And so we took -- we did about 40,000 people on our main conversion, but we took 300 business customers and we did them at a later date. That really allowed us to do, call it, white glove or concierge service. So we had a team of about 20 bankers. They each had about 15 to 20 customers. They reached out to them a couple of days or weeks before. I am Nick, I'm going to help you with this conversion. No call -- there's no call center number, you just call me directly. And then when that group went live, each banker just had to check in with those 15 businesses. That was a big win for us. I don't think we could have done given that service to those critical commercial customers. While it was only 300 of the 40,000 and change, it's about 25% of the dollars in the bank. So that group needed some extra attention.

Lastly, because of what we learned on launch day and maybe not having the full resource in the customer care that we anticipated enough people on phones. So other people had to jump in. We set up a triage team for that second wave. So there were 6 people that weren't assigned to a customer that if any one of those concierge bankers had an issue, they could drop an e-mail to this dedicated e-mail group that was a triage team, and we could pick it up and take it and they could stay on the phone working with those other customers and really make sure we were delivering on the promise that we wanted for those big commercial customers.

Sure. So I -- go-live day is the day that you always focus on, right? But for us, I really feel that it was the coordination of bringing the files over from our core that weekend prior. So Friday, Saturday, Sunday, that is a long couple of days. And what we did is we actually met on site and we just hunkered down. So there was a group of us. We all met at one location. And we really made it so that it was a fun it was a fun environment, right? We knew it was going to be long days. We knew there was going to be a lot of files coming in from those files. We worked exceptions, but we were all there.

We were able to be high-fiving when we did something really great and then be able to be like, oh my gosh, we need a brainstorm because we didn't think through maybe this part of the process or how do we need to look at X, Y and Z. But we had a lot of fun with it, and we just kind of made it exciting. We did high-fives here and there and just kept people animated and going because just like Nick said, it gets really long, and you have to make sure that you keep that excitement up so you can kind of keep grinding through.

So go-live week for us, too, one of the things that we did there is we purchased shirts for the entire organization. And then the eBanking champs were able to wear pins to distinguish themselves as well as they got different color shirts, too. So that was really fun, too. It was kind of a way to keep the entire organization engaged and just be able to say like, hey, this is something that is coming out, we know, but we're making it fun for you too, along the way. And then lastly, for us, we work really hard with those eBanking champions again. So on Monday, just like Nick had mentioned, you're ready to go, you're there. We worked through those exceptions that weekend prior.

And then our eBanking champs were the ones who are answering the calls and e-mails and providing the support for our customers. And we are so very thankful for them because that allowed the project team and our digital banking team to focus on any outstanding items or surprises that may have shown up that first week. So we could be on bridge calls working with Alkami, talking through items, but they were really a big part of our success that -- those first couple of weeks.

I love that both of you focused on morale boosting. I think that's something that we see hitting this on, like we tell them, we tell clients like here's something that's going to be really important, but that you heeded that advice and you brought it more upstream into the project cycle also. So I know that both of you did stuff for your institutions like shirts or bonuses or things like that to make sure that they felt valued. And to your point, Nick, nobody has ever mad at food and that drink being stashed like it's so critical because there's times that the call center can barely get up to get a snack, right? And again, nobody is calling them to say, thank you. We really appreciate you putting us through all of this hard work. And so to have the organization recognizing them and saying, thank you, I think, is so important. So I'm curious from you -- we'll do this one just for you, Nick. What was harder than expected?

We did not plan as well for the weekend before go-live as Julie did. I think that one really took us by surprise from Friday night at about 7:00 through Sunday night later than that, we were hands on keyboards, almost nonstop, probably 5 to 10 people depending on what file was coming over, exception needed to be worked or discussion need to be had. We had a Teams meeting every 3 hours. We worked independently usually from home or some people came to the office. We didn't powwow or get together like Julie did that was much smarter.

So we're sharing files and coordinating. But I think what we -- what I didn't appreciate was how burned out everybody was the weekend before -- right before another week or probably the busiest week, more late nights ahead. So I wish we would have coordinated that go-live weekend work a little bit better, either by doing some things earlier in the project or just coming from the fact that we were going to have to do that and either have more people available or make some other accommodations so that we didn't burn our levels key people right before a big week.

I'm curious from both of you, how did you monitor business continuity, keeping the train on the tracks and also the account holder experience because you and I both know you're going to send out probably 10 communications and nobody is going to read any of those. So I'm curious from your experience, how did you monitor both of those and making sure that the ROI in that first week and everybody being burned out to your point, Nick, they work the weekend before. How did you balance all of that? Let's start with you, Nick.

Yes. I think one of the things we leaned on a lot from Alkami was the adoption rate. You've implemented a couple of hundred institutions. So seeing where we were after 4 hours live, 8 hours live, 2 days live, et cetera, to know were we getting enough people in. That was our only real benchmark. Obviously, Alkami would have that data. We wouldn't. We haven't done this many times. We also monitor the app stores in real time.

So especially with like a Google Play Store, it's connected to your Google account. People are using the real names in some reviews if there was a name that we knew and we would either post a comment or we just call them directly, hey, saw the review, you're having trouble getting in. Let's see if we can fix that. Certainly monitored the call volume and the wait times. There was -- that was probably less able to be managed in the moment, but there are some takeaways for us for that second wave of business customers that we did and future projects that might have an interruption is what kind of volume we might expect.

And then going beyond that first week, we get a daily report of dollars and accounts at the bank, and there's people that might be upset or unhappy or on what happened during the conversion and they will often claim or threaten to leave or close their accounts. We saw very little of that. I think that's a short-term pain where they might have been unable to get in for an hour or 2. And I think there's a lot more work to change your bank than it is to just be a little patient for 2 hours. So we didn't see any material change to that number in the months ahead. But those are the big thing we watch adoption rate, call data, app stores and then in the weeks after the dollars and the accounts to the bank.

Okay. Perfect. How about for you, Julie?

So internally, just like Nick, we really focused on that adoption rate and made sure to share that with the project team as well as the eBanking channels -- champs, excuse me. So the higher the rate became or the more adoption, the more the excitement really grew and you could see kind of like Nick said, you guys have implemented so many other FIs. So for us, it was kind of like a competition. We're like, well, so how are we doing against somebody else? Like we're doing really great, right? Our customers rock. They're all getting in. So it was kind of something that you made into it being fun. So that way, you could really share with your employees as well to kind of be able to say like, hey, you guys, we're like 50% adoption. We're halfway there. And you're doing great, keep up with it, keep going because we're so close.

During that first month, I would say we mostly heard from the customers that could not get in and needed a bit more help. And that came in via phone calls, e-mails, chats, so our team really just made sure to stay empathetic and understanding. And honestly, our customers were really well receptive to that, and they were able to come in and we were able to get them into the product just the way they needed to be. We also had our eBanking champs at each location. So customers were able to stop by and stop in person if they were having issues as well and somebody was there right on site to be able to help walk them through. That was a really nice feature for us, and they did help with few customers that just came in person.

And then the last thing that we did to really be able to have that communication and be able to help with that account holder experience or that customer experience was really those first 2 weeks we created something called Digital Days. And we had certain locations that would have people on site that would be able to help you. So if you were really truly struggling, you could go in during those Digital Days, and there might be another eBanking champion there, but there also was the project team there. So even myself included. I went out to the Digital Days, met with people, what do you like? What don't you like? And how can I help you get in? And I think that was a really great thing to work with our customer on because if they were frustrated, I could say, well, help me understand because I'm actually on the project team, and I'd love to know what you're thinking right now. And during those Digital Days then, we also did giveaways. We had treats there for them, but the biggest thing was really knowing that they could find us if they needed to find us.

I love it. I love it so much. I wish I was a user for either one of you. So one I could have just probably gotten some swag. All right, my friends. Well, we are getting close to the end. Just a few minutes left. So I want to make sure we're being very cautious of our time. I hope all of you have heard on the webinar today that overall, it's really important to just make sure from start to finish, you're in alignment. Your teams are in alignment, you're in alignment with your vendor and you're staying in lockstep. So it's so important to have a good partnership. But with Alkami, we're here every step of the way from the initial alignment with sales through the core, all the way through data conversion, configurations testing and getting ready for launch.

So I would love to be a part of that experience as we go forward, but I think that you hear overall here, it's so important to be plugged in, in every aspect of those and making sure that your teams are aligned also. As you talk about preparing your call center, it's really important. I heard Nick say, we had a secondary call center still wasn't enough. We try to prepare everyone that your experience is going to have between a 200% and 300% call volume increase that first week of launch. You can do all the preparing you want, but nobody still is going to read that information. You're still going to have folks that didn't confirm their contact information. And so there's just going to be some things you're going to want to do. I would advise here a couple of things just in making sure that you're in lockstep. It's let's load test that call system. You may not have done it in quite a while.

The last thing you want is to have people have any kind of issue getting through, right? You don't want to have them get a busy signal. And then also think about maybe adjusting your call routing. Having folks press right away if they're calling for digital banking instead of waiting to have the option be down in option 7, for example. Let's have them right from the beginning. We know they're going to be calling in for digital. Let's have that be option 1 straight from the beginning. But having people ready for those calls is so important to make sure that you're prepared. As we talk about the actual call center staff or the frontline staff in the branches, some of what Julie mentioned, making sure they're prepared also, what are some basic things like supported browsers, supported devices. One of my favorite examples is still from being in a launch and having a gentleman call in and we said, what type of device are you on? And he said, "I don't know it's orange." Okay. Well, let's start through some other steps then and identifying if it's an Apple device or a Samsung device or something else. But those call center teams are going to get all kinds of examples like that. And so making sure that you have a path that guides both a user experience, but also a call center and frontline experience is just really important that everybody stays in lockstep.

And then lastly, I would say something I know I heard both of Julie and I say is it's handling things with empathy, understanding that your users didn't ask for this experience. So they may have been complaining for a while, but they didn't say they wanted to go through a digital conversion. So understanding that if they're coming to you, it's probably because they're frustrated. And so responding with empathy is just so important and making sure that your teams as a whole stay in lockstep for that experience.

All right. I would love to just hear from you that are still with us on the webinar. If you would like to get more information around what does a readiness conversion look like, what does the implementation look like? And where do you stand? Please respond here, and we will have somebody reach out to you from Alkami if you want to hear more information.

All right. 30 seconds each, I would love to hear from you what is the lessons learned. So Julie, I'm going to start with you. What do you -- you had known from before beginning a project? What would you have done differently? What would you love to know?

Sure. So you kind of actually touched on it before, Katie. For us during the sales project or sales process, excuse me, or during the scoping, be specific in your questions or your responses in the integrations and the processes. Go down to the minutia and explain, right? Not every core, not every FI is going to have the same exact process, and it may not be as simple as an API. You really don't want to get further along in your project and then all of a sudden be like, oh shoot, we have international bill pay. And what can we do with that? Because it may not have been something that cropped up before because maybe another FI doesn't offer that.

And then the other thing is that just like Nick, we had an FI consultant actually from the core that worked with us, so that was professional service hours that we used, and they were a technical expert as well. So while I am now really versed in APIs and how that works, having that person though from the core there was really instrumental for us in being able to talk through some of the processes between our core and Alkami.

Perfect. How about for you, Nick, what would you absolutely do again?

I think the deadlines for me worked out really well. I don't know that we were smart enough to have picked these, but our go-live was November 3. And so because of end of year freezes and other holiday things, it was kind of like November 3 or sometime in January. And I think having that hard deadline really pushed us to say, we're not moving this date state, like it's going to be a 10-month implementation, and that's going to be that. I'm not sure that we hit all of our early deadlines. Those came in when sometimes we'd hit one early, it'd be a little late, but that hard deadline, having it on a date that felt really immovable was something that I was happy for.

The other thing just from a morale that I feel really good about is the Friday before we went go live, we gave everybody on the project team and the customer care team and everyone that was impacted a bonus before that week. I think that really helped with the morale heading into that week that they knew that they were going to be well taken care of, and we acknowledge the extra work ahead of time. That was a big win for us to just keep spirits high going into a challenging week.

I love it. I mean I don't know anybody that complains about more money before a hard week. So I think that's a great idea. What about from you, Robert, what are you seeing? And what would you recommend for any...

Yes. I think Julie and Nick did an excellent job of organically covering some of those best practices and lessons learned. But key takeaways here that I always like to remind our clients is really understanding your resources, right? You heard from Julie and Nick on how they had dedicated alignment and delineation in these roles and ensuring their success going forward. So -- and we'll do that on from an Alkami side, right, providing you with our upfront, what does our framework look like? What does your project schedule look like? What do your playbooks look like so that you can already start kind of aligning the resources you have and having those honest conversations, right, with your leadership teams to say, hey, these are the people that we need, and this is what they're going to work on. So that's number one there.

And number two is, again, what Julie and Nick all talked about, right, just keeping it fun, being flexible and keeping it fun. Overcommunicate, right, to your clients internally, to Alkami, to your third-party vendors, right? Always keep that open line of communication. And again, as you're a trusted partner here at Alkami, we will help ensure that and drive some of those activities for you as well.

Perfect. Thank you so much. All right, everybody here. If this sounded like something you want to be a part of, again, I want to get some more information, scan the QR code. We would love to have a conversation around what's next and potentially even introduce you to Julie and Nick, if you have more questions, and we'd love to just help guide your path. So Mike, I'm going to give this back to you. Thank you for giving us time and space today to have a conversation.

Thank you, Katie, Robert, Nicholas and Julie for sharing your insights with us today. I'd like to ask our audience to take a moment to complete the survey that will appear on your screen. Your feedback is important as we strive to address the key issues impacting the industry, especially in today's dynamic business environment. You can learn more about ProSight and find other relevant content and insights on our website, prosightfa.org. This concludes our webinar. Thank you for joining us, and have a wonderful day.

Good afternoon, ladies and gentlemen, and welcome to the Alkami Technology Second Quarter 2026 Financial Results Conference Call. [Operator Instructions] I would now like to turn the call over to Steve Calk. Steve, you may begin.

Thank you, Chloe. With me on today's call are Alex Shootman, Chief Executive Officer, and Cassandra Hudson, Chief Financial Officer. During today's call, we may make forward-looking statements about guidance and other matters regarding our future performance. These statements are based on management's current views and expectations and are subject to various risks and uncertainties. Our actual results may be materially different. For a summary of risk factors associated with our forward-looking statements, please look at today's press release and the sections in our latest 10-K entitled Risk Factors and Forward-Looking Statements.

Statements made during the call are being made as of today, and we undertake no obligation to update or revise these statements. Also, unless otherwise stated, financial measures discussed on this call will be on a non-GAAP basis. We believe these measures are useful to investors in the understanding of our financial results. A reconciliation of the comparable GAAP financial measures can be found in our earnings press release and in our filings with the SEC. I would now like to turn the call over to Alex.

Good afternoon and thank you for joining us. In the second quarter, Alkami delivered revenue growth and profitability ahead of our expectations. On my first earnings call in 2022, we reported a little over $42 million in revenue and negative adjusted EBITDA of more than $4 million. Prior to that call, we established an internal 5-year goal, become the industry-leading digital banking platform, generate $500 million in revenue, and produce $100 million of adjusted EBITDA. Despite economic and geopolitical uncertainty, goals that seemed extraordinary are now within reach. Our progress reflects 3 durable strengths. Our people and culture, the digital transformation of community banking, and our belief that the customer is our North Star. That principle guides every important decision we make. When faced with choices and trade-offs, the single most important thing we can do is create and keep customers.

In Q2, we signed 5 new digital banking relationships, including 3 banks. We also added 8 MANTL clients and 3 Data & Marketing clients. 7 clients adopted our Digital Sales & Service Platform, or DSSP, through new logo or add-on sales, bringing the number of clients contracted for all 3 DSSP products to 55. We also brought 8 digital banking clients and 18 MANTL clients live. Over the last 12 months, we added 2.7 million users, the most users added in any trailing 12-month period since mid-2024. In that same quarter back in 2022, we noted that we signed 2 banks. At the time, we had 3 live bank clients. And on that foundation, we stated that we would strategically pursue the bank market. Today, we have 54 bank clients under contract and 42 live on the Alkami Digital Banking Platform. Success in the bank market required 4 things.

First, banks needed to know Alkami was a credible alternative. We consistently ranked first or second in awareness and consideration among credit unions, but historically lacked the same recognition among banks. Since entering the bank market, awareness has increased from 37% to 52%, while consideration has increased from 8% to 21%. Second, we needed to build the treasury management capabilities banks require. Once we had enough live customers to assess product-market fit in mid-2024, we identified 28 required capabilities. We've delivered 18, with six more expected to enter beta or become generally available in the second half of 2026. Third, we needed to integrate with bank cores and improve implementation execution. We now support multiple live implementations across 7 bank cores and single implementations across 2 more, covering the majority of our target market.

Bank implementation time improved from more than 13 months in 2023 and 2024 to less than 11 months in 2025. In 2026, banks represent nearly 30% of our digital launches. Fourth, we needed to add bank expertise throughout Alkami. Half of our implementation personnel now have bank market expertise, supported by dedicated bank sales and pre-sales teams and increased banking expertise across product and engineering. Banks launch at higher RPU and purchase more commercial functionality. More than 3/4 of the bank market still uses legacy digital banking, leaving substantial room for displacement. The bank story is no longer can Alkami sell into banks. It's becoming can Alkami operationalize and scale what is working. Last quarter, I explained why expansion within our client base will drive a greater share of future growth. The evidence is visible in our customer cohorts.

First, our 5-year customer cohorts have grown to more than twice their original platform investment, while our 10-year cohorts have grown to approximately 4 times their landing ARR. On my first earnings call with you, we had 18 clients with $2 million or more in ARR. Today, we have 50. Second, clients are adopting more products at launch. In 2021, clients launched with an average of 10 products. Today, they launch with 16, and the RPU of clients launching in 2026 is expected to be nearly twice the average of our install base. Third, RPU has grown from $13.68 in 2021 to over $21 today. Importantly, this growth did not result from a client-wide price increase. It occurred because clients purchased more product from Alkami. These results demonstrate that expansion is not merely an assumption in our 2030 framework. It is established customer behavior.

Alkami is evolving from a vertical application into a vertical platform that lands with more products and compounds in value over time. DSSP accelerates this model by increasing the number of products clients adopt at launch and creating more opportunities to expand over time. Even as we've grown, we continue to have significant opportunities to deliver more value to our clients. Our clients spend meaningfully more on the technology surrounding the core than they spend with Alkami today. That creates room to expand, but only if we earn it by delivering products that compete independently and create greater value together.

Our objective is to become the technology partner of choice for regional and community financial institutions. In the near term, we are continuing to build treasury management capabilities to improve bank win rates. We're adding functionality for the specialty account opening needs of our largest banks to increase revenue per client. We're also building our lending platform and our point-of-sale capabilities that integrate with other loan origination systems to increase our addressable market. In addition, we're encouraged by demand for existing products that incorporate AI.

Behavioral biometrics, unified messaging, and predictive marketing are growing nearly 30% year-over-year and contributing to Alkami's growth. Those investments increase the value we deliver today. Over time, AI expands that opportunity even further. We believe Alkami can provide the trusted data workflow and intelligence layer that allows community financial institutions to deploy AI in regulated environments. Our advantage is not access to a model. It's our understanding of regulated banking workflows, our integrations, our data, and the trust created through relationships across more than 1,000 financial institutions.

Right now, more than 100 Alkamists use an internal prototype every day, helping us learn where AI creates measurable value before we determine how to bring those capabilities to our clients. When we do, our advantage will come from the trust we've earned, the data and integrations we've built, and our regulated banking expertise. In closing, over the last 5 years, Alkami has proven it could add customers, grow with them, and expand profitability. The next phase builds on that foundation. Scale what's working in banks, increase the value delivered to every client relationship, and use DSSP to become the technology partner of choice for regional and community financial institutions.

I now hand the call to Cassandra to discuss our financial results.

Thank you, Alex. Alex just described a strategy built on 3 things: creating customers, growing with them, and expanding profitability. This quarter's financials are the proof. We again exceeded expectations on both revenue and adjusted EBITDA. ARR grew faster than revenue, a leading indicator of the momentum still ahead of us. And operating cash flow continued to improve, reflecting the strengthening cash generation of our model. This is what a durable recurring subscription model looks like as it scales. Growth that compounds within our client base and converts into expanding profitability even as we continue to invest for long-term value creation.

Let me start with our outlook because the guidance we are providing today effectively delivers the 5-year goal Alex described at the top of this call. Roughly $500 million in revenue and $100 million in adjusted EBITDA, a target that once seemed extraordinary is now our plan for the year. For the third quarter of 2026, we expect revenue of $132.7 million to $134.2 million, representing growth of 17.5% to 18.9%. And we expect adjusted EBITDA of $23.5 million to $24.3 million or 17.9% margin at the midpoint.

Our sequential cadence this year is shaped by the timing of one-time revenue, which falls more heavily in the fourth quarter. As a result, both revenue and margin step up in Q4, with back half adjusted EBITDA margin north of 19%. For the full-year, we expect revenue of $528 million to $531 million, representing growth of 19% to 19.7%, and adjusted EBITDA of $96 million to $98 million, or 18.3% margin at the midpoint, reflecting expanded operating leverage as we scale the business. We also expect stock-based compensation to be less than 14% of revenue for the year.

Our revenue outlook reflects continued cross-sell momentum across the platform, a steady cadence of ARR launches throughout the year and mid to high single-digit ARPU growth. For the year, we expect approximately 500 basis points of margin expansion, driven by operating leverage and cost discipline, achieved while we continue to fund targeted investments in product innovation and AI. These investments are intended to increase both value per client and Alkami's own operating leverage over time.

As our long-term model framework is relatively new, I will provide a brief recap. Our targets reflect what we believe are achievable outcomes, given current market trends and the exceptional visibility our long-term contracts provide. We continue to expect to reach Rule of 45 by 2030. The framework assumes continued leadership in credit unions and a gradual increase in bank wins, add-on sales consistent with our historical performance, an annual dollar churn of 2% to 3%, roughly half of which is associated with digital banking clients.

One point worth emphasizing, as we scale, the composition of our growth will evolve. Historically, it has been split roughly evenly across new logos, user growth, and ARPU. Since we are somewhat range bound on contribution from new logos, a larger share will come from ARPU expansion. Expansion is our highest visibility, highest margin source of growth. We believe our profitability assumptions are equally achievable and appropriately conservative. We expect non-GAAP gross margin approaching 70% over time as we improve execution and efficiency.

Approximately 300 basis points of annual adjusted EBITDA margin expansion driven by gross margin improvement and continued operating leverage, and stock-based compensation declining to approximately 10% of revenue. Over the past 3 years, we expanded gross margins over 400 basis points and adjusted EBITDA from negative to more than 15%. We have strong visibility into continued leverage in the model and the combination of recurring revenue, long-term contracts, and expansion within our installed base give us real confidence in our path to Rule of 45.

Turning to second quarter performance. Revenue was $129.8 million, up 15.9% year-over-year. Subscription revenue grew 16.2% and represented 95% of total revenue, outpacing total revenue growth despite the tough comparison associated with termination fees recognized in the prior year. We increased ARR by 21% and exited the quarter at $512 million, once again growing faster than reported revenue. Surpassing the $500 million ARR mark is an important milestone for Alkami, underscoring the scale we have built and the durability of our growth.

We have approximately $61 million of ARR in backlog, representing 37 new clients and roughly 1.3 million digital users. We expect the majority of this backlog to go live over the next 12 months. Our strategy is increasingly centered on expanding value per client, and our financial results continue to support that thesis. In the second quarter, average ARR per client reached approximately $1.6 million, and we now have 50 clients at or above $2 million in ARR, up from 18 at the end of 2021. This illustrates the central premise of our long-term model. As clients adopt more of the platform, the value we create and the value we capture both increase. Importantly, this expansion does not depend on customers increasing technology budgets, it depends on Alkami earning a larger share of budgets that already exist.

As Alex highlighted, we continue to see strong momentum with our Digital Sales & Service Platform. From a financial perspective, DSSP is important because it is driving higher quality revenue across several dimensions. The financial characteristics of the business are evolving as well. As clients adopt more of the platform, contract value, duration, retention, and onboarding ARPU improve. In fact, new logo implementations in 2026 are on track to onboard at nearly double our overall ARPU. This is influenced by the number of bank implementations we have in the pipeline and the uplift from DSSP. We exited the quarter with 313 clients and 23.6 million registered users, an increase of 2.7 million users or 13% year-over-year. Over the past 12 months, we implemented 39 clients supporting 1.3 million digital users and existing clients increased their digital adoption by 1.5 million users.

Our digital banking contracts provide strong visibility into attrition, typically several quarters in advance. Over the past 3 years, we have turned less than 1% of our digital banking ARR annually, usually resulting from a client merger. This speaks to the mission-critical nature of our platform and the strength of our long-term client relationships. Revenue per user increased to $21.69, up 7% year-over-year, driven primarily by strong cross-sell execution, increased user adoption among existing clients, and the increase in the number of live banks, which tend to onboard at higher ARPUs, given the commercial to retail mix.

Remaining performance obligations were approximately $1.7 billion or 3.4x live ARR, providing strong visibility into long-term revenue. Second quarter non-GAAP gross margin was 63%, and we continue to expect to exit 2026 nearing 65%. As anticipated, the quarter reflected lower termination fee revenue, which is inherently variable quarter-to-quarter, alongside timing of direct costs. Underlying platform margins remain on the expansion path we've outlined, driven by scale, execution improvements, and operating efficiencies.

Second quarter operating expenses were $62.8 million or 48% of revenue, representing 640 basis points of year-over-year improvement realized across all areas of operating expense. Adjusted EBITDA was $19.4 million, above the high end of our expectations, with an adjusted EBITDA margin of 14.9%, an expansion of approximately 430 basis points year-over-year. In the second quarter, operating cash flow improved to $22 million, up from $1.2 million in the year-ago quarter. This growth reflects stronger underlying cash generation, driven by improved profitability and disciplined working capital management. We ended the quarter with $81 million in cash and marketable securities.

In the first quarter, the board of directors approved our inaugural stock repurchase program of up to $100 million. We repurchased $15 million of stock in the second quarter and an additional $10 million in the third quarter to-date, as we believe our stock represents an attractive investment at these levels. We continue to believe in a disciplined and balanced approach to capital allocation that enables us to grow through acquisitions, delever the balance sheet through debt reduction, and opportunistically repurchase shares to deliver increased value to our shareholders.

In closing, our results this quarter reflect the strength of our platform and continued execution against our strategic priorities. We are scaling with discipline, balancing growth and profitability while investing in the capabilities that we believe will further differentiate Alkami over time. The visibility in our model and continued momentum across the business position us to drive sustained long-term value.

With that, operator, please open the line for questions.

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Our first question comes from the line of Ella Smith from JPMorgan. Your line is open.

This is Bella Camaj on for Ella Smith. So first, you're coming up on a year since you've launched DSSP. Given that you've begun landing new customers at higher average selling prices with the bundle of products, do you foresee any harder comps for the back half of 2026 or for next year?

I don't foresee harder comps. We started selling last year in the August time frame and the majority of those customers are really still sitting in our backlog for the most part. It does take time for them to effectively be onboarded. So no difficult comps for the back half because of that.

And then just also maybe to add on to that, the 55 clients that have the 3 products that make up DSSP are just a little under 15% of our customer base. So we still have a very large customer base that we can sell the technology into.

Understood. And just as a quick follow-up, given that digital banking implementations are notoriously lengthy and cumbersome, how could AI help you speed up the process? And realistically, how could AI help take days or even weeks off of implementation time lines in the next few years?

AI has already made a huge difference in terms of our ability to be effective. Just as a proof point, if you go back to, I think, 2021 and you look at our customer experience group as a percent of revenue, it was about 16%, and today it is close to 11%. The majority of that step down came after that group, which was really one of the first groups to internally adopt AI at scale, started using AI. So that's been highly -- it's already been effective for us in terms of impacting the business.

Our next question is from Chris Kennedy from William Blair.

Alex, you mentioned efforts regarding the lending platform. Can you just talk about that and the implications as you go after banks?

The lending platform is part of an overall strategy, which is to create an integrated, for lack of a better term, front of house that allows a financial institution to deliver the kind of amazing experience that the large mega banks can deliver. So that's bringing in a new client, then bringing in a new customer, opening a new account, buying a new product, which would be a loan product. So the loan origination effort is part of bringing together deposit origination, loan origination, and digital banking fed by our data and marketing platform so that these institutions can create a competitive parity with the larger institutions. We have the loan platform live with a couple of customers today.

And then there's a second strategy. There are many customers that have an existing back-office loan origination system that they don't want to convert, but they would like to create that integrated experience. And so we're also building, call it a point-of-sale capability, which would integrate with some of the existing loan origination systems on the market today so that those clients could also have an integrated experience.

And then Cassandra, you mentioned some one-time revenue benefits in the fourth quarter. Can you just give us a little bit more color on that? And any implications as we think about 2027?

Sure. No implications as it relates to 2027. Really, this is just shifting small amounts of revenue kind of between Q3 and Q4, if you will, and this is for things like termination fees, as you know, as well as some one-time work that we do for our customers around core conversions and other customization requests. So that is the driver. It is generally small, but is leaning us a little bit more weighted to the fourth quarter.

So we'll do merger work. So when our customers are merging with somebody else, we're supporting them. What Cassandra mentioned on core conversion is a customer may convert their core, and then we have to integrate their existing Alkami Digital Banking system into their new core.

Next question is from Jacob Stephan from Lake Street Capital Markets.

Nice quarter. As it relates to guidance, I just want to get some clarity on, kind of, the gross margin front. Obviously, a little step down in this quarter. But I think your guidance implies a pretty meaningful ramp in the second half, maybe even reaching 67% in Q4. Maybe help us think through that a little bit. Is this related to the one-time kind of revenue items that you talked about, or am I missing something else?

Yes, just to clarify, we expect to exit 2026 with gross margin nearing 65%. So it is a step up from Q2. There was -- in Q2 in particular, we know we had the impact of termination fees and lower termination fee revenue. So that was expected and drove our gross margin a bit lower in the quarter. So I think we'll see that kind of get behind us, if you will, in the back half of the year. And we're still seeing a lot of gains from efficiency just around our implementation, customer support, and site reliability engineering groups. So that continues to benefit us, especially as we see revenue ramp in the back half.

Got it. And maybe just the capital allocation question. As you guys become more profitable, obviously free cash flow margins expanding here. What's the plan with that excess cash? Is it focused on the debt, more share repurchases, mix of both? What's your targets?

Yes, I mean, I would say definitely those 2 as well as continuing to pursue selective acquisitions. I think we're still kind of busy with the MANTL acquisition and all things DSSP right now, but I do still see M&A as an important element of our growth strategy over the long term.

Our next question is from Aaron Kimson from Citizens.

The first one is for Cassandra. ARPU growth came in at 7% year-over-year in 2Q, down from 9% in 1Q. You mentioned mid to high single digit ARPU growth for 2026 in the updated guide in your prepared remarks. On the 1Q call, you spoke to high single digit ARPU growth. Can you talk to the delta in 2026 ARPU outlook going from high single digits to mid to high single digits?

Sure. I think we're still very much in that range. I think we're seeing things normalize post the MANTL acquisition. So the 9% growth that we saw in Q1 in particular still had kind of the timing benefits of the MANTL acquisition. So kind of normalizing for that. We would've been closer to the 7% or so that we saw in Q2, which we're pleased with. As you know, the composition of our growth is continuing to shift to ARPU expansion. And we don't see -- we won't see that happen in any one quarter jump. It will play out over time. So really just kind of trying to indicate that ARPU expansion is happening. It's kind of more normalized, I would say, for the back half of this year.

Okay. That makes sense. And then for Alex, how are you and Nathaniel thinking about the channel motion? Do you see an opportunity to meaningfully grow the reseller motion with the cores? And relatedly, can you talk to any potential co-sell and referral opportunities you see?

Well, today, we have 2 of our main 4 products, the Data & Marketing Solution, and our ACH Alert Positive Pay product are sold to a large degree, sold through channel. We've established a very good relationship with one of the bank core organizations where we've got an economic relationship where we get support from them in implementation planning, in support when a customer is live. They've got payment products that are interesting to us to bring to market.

And then we've just signed an integrator agreement with a second large core that is 1 of the 2 large cores in the bank market, and we're hopeful that, that continues to expand as well. So today, we do have reseller channels. We obviously have quite a bit of embedded IP that we bring through the Alkami storefront, for lack of a better term. We do have 2 emerging core relationships where we feel like there's some additional product that we can bring through the Alkami storefront.

Our next question is from Jeff Van Rhee from Craig-Hallum.

Alex, maybe high level as it relates to the banking efforts. Just talk to me kind of the evolution in your thinking and what you've learned since you've launched those products. As I look at the numbers, I think you had 5, and correct me on any of these if I'm wrong. I think you had 5 go-lives versus 4 in the first half a year ago. I think you have 12 in backlog for implementation now versus 16 a year ago. And if you look at most of the numbers in terms of banks being implemented from backlog, it looks like sideways numbers. And I know you've said there was a point at which you would have enough integrated banking fabrics, and you'd have that skill set, and you'd sort of get the motion down that we would see that acceleration. So I guess what I'm asking is, how is your thinking about when and where that acceleration point is and why it is?

The first thing I would just answer is from a standing start 4 years ago to having more than 50 bank clients under contract and more than 42 live. Just frankly, that as a standalone company would be a successful startup. So I'm very pleased with going from essentially 3 live bank clients to 42 live bank clients in a short period of time. I'm very pleased with the treasury management capabilities that we've built out. And so I need to -- I'm looking at Cassandra where we're both trying to square the numbers that you're quoting, and we're both squinting at each other. You may be a million percent right, but from our perspective, we had quite a few that we closed last year. It's still 30% of our backlog for this year. So Jeff, I don't feel like the business is going sideways, I feel like it's becoming an increasingly important part of our business.

Now when we model the future, we're not modeling, pulling a number off the top of my head. If we sold 10 banks a year ago, we're not modeling that we jump to 25 banks the next year. We're being pretty conservative to say that we're going to increase the number of new logo banks by a couple every year in the planning horizon. And over time, when we look at the profile of the business, we think that half of the new logos are going to be banks and half of the new logos are going to be credit unions. But from where I sit, we've built a very successful business in the bank market, essentially from scratch. We've got the product to be able to take to market. We've got the implementation capabilities to be able to take to market. We're beginning to have awareness in market. And so I've got a lot of confidence in that business. I don't know if you have any numbers that you looked up, I was trying to square with...

Yes, I mean, I think those numbers are right. But I think we're not expecting to see some dramatic re-acceleration in any one quarter. I mean, I think we're pleased with the progress that we've seen in the bank market especially in the first half. And it will -- as Alex had just described, it will kind of take time for us to get to a place where our mix is 50% banks and 50% credit unions.

Okay. And I'll leave that one there. And maybe the second one just from a new wins sort of current tone of business standpoint, Alex, as you're seeing these new wins, I'm just curious if you had any incremental color around maybe sort of what core banking fabrics they're coming from, what people are on that you're signing up, the newest signings. Maybe any color commentary around sales cycles, lengthening, shortening, win rates, improving, steady, declining, just any incremental color sort of at the leading edge of what you're seeing in the marketplace?

Yes, we were pleased with an improvement in the bank win rate through the first half of the year. So that's encouraging for us, especially as we continue to have qualified pipeline that's about half bank and half credit union. In the bank market, there's much more of a concentration of cores. There's 3 Fiserv cores and 2 FIS cores. Remember, our ICP, Jeff is -- and I know you know this, our ICP is pretty specifically a community bank between, say, $500 million and $20 billion in assets. And in that market, when you look at the ICP, there's about 1,330 banks that are on just a handful of cores across Jack Henry, FIS, and Fiserv.

So that remains pretty consistent across the bank market. Much broader range across the credit union market. I would say that in terms of our customer base in the credit union market, we have helped a couple of customers move on to the Corelation core and so we've seen some expansion into that core. That would be my commentary on the cores that we're integrating into. No change in sales cycle, pleased with the increase in the bank win rate.

Once again, because of the buying cycle and because of the length of the contract, and I know you know this, even if things are going on in the economy or in other places around the world, it hasn't really impacted the demand that we see coming in and then the length of time that people prosecute a sale.

Okay. Helpful. One last quick one for you, Cassandra, on the numbers database. I think you'd commented last quarter, you were thinking second half database expense, and then you'd wrap it up by the year-end. Can you just refresh me on the amount of excess expense there for the remainder of the year, and then is that still on track that sort of wraps by the end of '26?

Yes. Cassandra, I'm going to take that because there's actually a business decision. So I think that was about a point maybe was that -- so when we looked at -- earlier on I said that, hey, the most important things we can do is create and keep customers. When we looked at our priorities, what we decided to do is push that project into 2027 and invest those dollars into building out the loan platform, building out treasury management capabilities. And so that the continuation of that project goes into 2027, and that's a priority decision that we made.

And one thing I would just add is we have saved some of those costs. We have done some of the work in the first half, so we are seeing some of the savings. But to Alex's point, we don't expect to realize the full amount of those duplicative costs in 2026.

So thanks for that question. It gave us an opportunity to explain.

Our next question is from Andrew Schmidt from KeyBanc Capital Markets.

Just first, and I apologize if I missed this, I jumped on a little bit late, but I wanted to just clarify the comment on gross margin, the 65%. Is that now an exit rate versus a full-year rate? Just want to be clear in terms of the 65% target.

That's correct, Andrew.

Okay, great. Thank you for clarifying that. And then maybe just on the DSSP-related sales, it sounds like you continue to have momentum there. And I think the premise was on the revenue side that these take a little bit longer, but should show up in the form of larger deals and potentially kind of have a larger revenue contribution exiting '26 into '27. Just curious if there's any color on that in terms of just some of these sort of higher revenue deals coming online and going live post kind of DSSP implementation.

They're really just starting to come online. I think we had one customer go live recently on the full DSSP, and they went live in about 9 months. So ahead of, kind of, 12 months that we were signaling a couple of quarters ago, which is encouraging. Now it's only one customer and we still have many implementations to go, but so far we're really pleased with that progress.

And I think when you look at the current backlog of launching customers' RPU, there's 2 -- couple of things that are contributing to that. One is the mix of bank customers that are in that. And the second is the fact that some of those customers are customers that have bought all 3 products.

And one other follow-up I would just make is just a reminder that in 2026, our new logos are onboarding at nearly double our overall ARPU, and a lot of that is related to DSSP.

Got it. That's helpful. And maybe just to sneak one more in just on competition. Any -- it may be more on the credit union side, just any sort of competitive changes there, win rates, are those relatively stable? Just anything incremental on the CU side.

No, I mean, I continue to see that certainly there are several really good companies on the credit union side. I think that Alkami, Lumin, and Q2 are all good companies that bring good products to market and fight really hard for customer wins. Obviously, as a CEO of Alkami, I think our products and offerings are better, but I -- largely the market has become concentrated on a smaller number of competitors.

Right. Smaller number of modern competitors sort of gaining share. That makes sense.

What I was trying to -- I should have been more precise. I'm thinking about if a credit union has decided to make a change. So not if they're evaluating their current vendor versus making a change. But if they've decided to make a change, I think there's 3 good companies in the market that are competing for that business. And like I said, that's Lumin and Q2 and Alkami. I like our chances, but my point was in the credit union market, although there are maybe some other companies, it's becoming concentrated in terms of customers making a decision.

There are no more questions at this time. Thank you for joining us. You may now disconnect.

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This event is intended to be interactive, so I'd encourage you to participate with our speakers and other attendees throughout via the chat Q&A box. Let's get started with today's webinar sponsored by Alkami, Digital maturity and motion, what business and commercial leaders are doing differently in 2026.

As the pace of change accelerates, financial institutions are under pressure to move faster, reduce friction and act on opportunities in real time. Today's session explores how data and AI are reshaping growth strategies from transforming digital account opening and streamlining onboarding to strengthening fraud defenses and empowering employees.

With that, I'll hand it over to our speakers, starting with Taylor Adkins, Vice President of Product Management at Alkami. Taylor, over to you.

Hello. Welcome, everyone, to Alkami's webinar, Digital Maturity and Motion, what business and commercial leaders are doing differently in 2026. My name is Taylor Adkins, my role is VP and Head of Product at Alkami. And I'm joined by a group of insanely smart and experienced industry insiders, starting with the person on my left, at least on the slide, Jim Marous, I'd love to hand it over to you to introduce, and you can continue to pass the ball to the left to the next and the next.

Okay. Thank you very much, Taylor. I appreciate that. We are joined today by 2 people that really you want to listen to more than anybody else because they're actually doing what we're talking about, which is always better than listening to talking to head to talk about what you should do, which I tend to do too often. So first off, we have Molly Jones, Director of Business Services at SRP Federal Credit Union. Molly, do you want to do a little introduction of your background a little bit?

Sure, sure. Thank you all for having me today. I'm excited to be here. So again, Molly Jones with SRP Federal Credit Union. We are based in South Carolina. We are about a $2 billion bank, and we have over 200,000 members. 5,000 of those are currently business members, and we have 21 branches in our market.

And we serve a market that's about, I guess, a 2-hour radius. So we have a lot of branches in the footprint as well as our digital banking that we're growing. I've been in banking for well over 25 years, started out my career in the big banks and decided to come over to the credit union side about 8 years ago. We've been on the Alkami platform for about 4 years and just launched our treasury services at the end of 2024. So that's a little bit about me and SRP.

Matt, do you want to introduce yourself real quickly?

Sure. Thank you, Jim, and glad to be here as well. My name is Matt Baker. I'm our Head of Product Development, and I also oversee our treasury management strategy for our organization. I've been with Tradition Capital Bank for about 3 years. Similar to Molly, I have started my career at some of the big banks. And then over time, I realized that going to a smaller institution has some of its privileges. Tradition Capital Bank is about a $3.2 billion asset size, and we have branches here in Minnesota and then also in Scottsdale, Arizona.

So let's get started. What's really interesting is every institution that deals with business and commercial banking wants to know, geez, how am I doing? How am I doing this digital transformation effort I've been doing? And where do I stand compared to my peers?

Well, that's never been something we've been able to talk about what you should do, but we've never really had a way to measure how well we're doing. Alkami, I think it was 2 years ago, introduced our first commercial side, business side, digital maturity index. And what that means is they actually created an index, where you can answer 5 to 7 questions very quickly and get to the basis of where do you stand? Where are you compared to your peers? What can you fix? How can you move forward and get better at what you're doing?

And this is the second study. We just introduced a second study on behalf of Alkami to talk about what is business digital maturity. So -- what we talk about that is really 3 pillars. There's 3 components of digital maturity in the business and commercial side, a set of capabilities that you really can grow with from the user perspective, things like digital account opening, user experience, user management, ERP integration and money movement capabilities.

The second pillar is employee productivity. Not only how does -- how do our tools help employees become more productive, but even more so, how does it improve the employee experience by making them more productive, 2 different components. And then third is a mindset or a cultural component, which really gets down to what capabilities define maturity and how do you deliver those with a mindset across the entire organization in a way that can be felt by your customers.

The analysis, as I said, is really easy to take, but it also defines the segments that you're part of. If you look at segmenting the marketplace, you'll see there's 4 key components as we move forward. #1, there's a cautiously modernizing. Those are people that are, in many cases, just starting. It is not defined by asset size, but it's actually defined by where you are in the process and what you implemented that helps define, if you're digitally mature.

Then you go to optimistic believers. This says you're moving forward. You're fairly confident in where you are and you're already prioritizing your investments in alignment with where you are. You pretty much know your North Star. When we've looked at maturity indexes, both the first study and the updated study, we found that those organizations that knew who they wanted to be, those who really knew what their North Star was, did the best job at finding where they are and where they wanted to go.

The third component in that evolution is emerging pioneers. These are those that actually are using it for sales, are using for new components, the digital tools for more components. They're sometimes investing more in technology, but they're also deploying it in a modern way that makes us so both the internal and external audiences feel it. We've also found that those organizations that deploy digital technology the best, the ones that are the most digitally mature have really an amplified revenue stream.

So it really ties right into the revenues, and that helps you to understand the value of that transformation process. The smallest group, but obviously, the most elevated group are Tech Titans. These digital experience exceed the norms. They exceed others in their category. Typically, they're large organizations, but we've also found many Tech Titans that the smallest asset categories. They actually have their sales approach and they have tools that help the commercial calling officers do their business better and try to make it so that they can move forward in the marketplace.

So let's start with our 2 guests. So Molly, I know you took the analysis. #1, what did you find in the analysis? #2, how do you take it? Was it just yourself or you have other people in the organization taking the assessment tool?

So initially, I took it just myself. And through the assessment, it definitely made me realize I needed to bring in other departments and get their -- get them to take the assessment and see where it landed for their answers because I think each of our departments looks at things differently. And I have put that out there to them. I can't tell you what their results are yet. So hopefully, that will shed some light on things and help create some conversations within our organization.

But when I took it, we landed on cautiously modernizing. But as I think about where we are, I feel like we are probably more leaning towards the optimistic believer because I do feel like we know where we want to go, and I feel like we're making some progress. But as with most credit unions, we are very consumer-based. And so not only is the digital component part of our hurdle, but it's also the organizational side of things, getting our compliance and risk and fraud teams to understand where we want to go that sometimes delays how fast we move there.

So I think we are definitely making some strides, but we still are very cautious for sure. I think one of the things that keeps us in that cautious segment, we don't offer online account opening or digital account opening at this time for business. Just not something that we have gotten to a level of comfort with, but that is a direction that we are working towards.

So Matt, where do your organization fall in the spectrum?

We fall into that emerging pioneers quadrant. And I know that I wasn't the only person who took that at our organization, and it was interesting to see how would my answers line up to theirs. And believe it or not, we aligned that all the folks that had taken it ended up in that emerging pioneers bucket as well, which it goes to resonate that, that is kind of our North Star of where that we want to go.

And Jim, as I was looking through those definitions, one of the things that kind of stood out to me is that using the digital platform as part of your sales component. And when we assessed about 2.5 years ago, our digital banking platform and what we found out was it was hurting our sales. And that was where we made a decision -- conscious decision that we need to have a new digital banking platform and moved over to Alkami, and we've been on Alkami since about August.

It's interesting because I think both of you show the power of the tool to define where are we and kind of references where do we need to fix? And what's the next? How do we redefine that North Star? And before we go any further and before I ask you all on the webinar to take the test, I wondered if you'd take the survey to tell us a little bit about where you are in the different categories with regard to user experience, employee productivity and mindset.

Okay. So as you can see, when you really look at the results of the survey, you're going to find that people are all over the place on where they feel they're strongest and where they aren't. And that's what we've seen overall. Taylor, do you want to talk a little bit about where people find themselves at the same time that you on the webinar, take -- scan the QR code here, take the assessment. You can take it while we're talking. It is that easy to do, and you'll be amazed with the information you get back. So Taylor, when people are taking this assessment, what have you seen overall to be the takeaway from this? What do people say when they actually take the assessment?

I think we see a lot. For one, as I view our client base across -- we see a spectrum of kind of all of the above. I think what we see are financial institutions, who either long to be Tech Titans or certainly want to compete with Tech Titans. But generally, what I think I see is a large concentration of financial institutions that sit somewhere probably in between the optimistic believers and emerging pioneers kind of zone.

That being said, I think a lot of financial institutions who take this assessment are often a little bit surprised, especially if they do what Molly has done, which is spreading the assessment across different cohorts within the institution, getting an understanding of where each individual within the organization believes the financial institution sits. And I think sometimes they're surprised by the outcome.

I think there are oftentimes when a financial institution believes its strength is digital, but then through a critical assessment like this, finds that their strengths or their advantages or their opportunities for improvement lie elsewhere. And so I think these are great opportunities for FIs to really dig in to identify opportunities, threats along with their strengths and weaknesses and determine their plans to go forward. And I think that's a big part of our conversation going forward.

It's interesting because I also want to stress that you don't have to be an Alkami customer to actually take this assessment. And what you get back is even more valuable because it doesn't just tell you what your score is and what quadrant you fall into, but how well you do in each category and most importantly, what you can do to get better at it.

So that's kind of interesting. So let's get into some of the research findings we had in 2026. So -- as I said, the definition of digital maturity over the last 2 years, the first test and now this new research actually found revealing new dimensions across account opening setup, fraud and security, employee experience. And what we found was the definition had actually deepened. It wasn't just the easy stuff. Account opening was part of the first survey was one of the definitions. But we found that things like fraud prevention, which is really an expansion, a pretty significant expansion of how you can become digitally mature and employee experience were 2 elements that actually were really new findings that showed that the evolution of digital transformation and digital maturity is continually evolving.

So what's interesting is if an organization on the call today had taken the assessment 2 years ago and came back this year, you could end up being at a lower value than you were when you first took it or even more exciting is you could actually have jumped valuation. So what happens is, for instance, you could have gone, and we've seen this happen quite a bit from optimistic believers, which if you remember, was in the top left-hand corner to a Tech Titan and completely skip the emerging pioneers.

In addition, we've seen over time that emerging pioneers could actually fall behind where they were the last time. This is not a bad thing or a good thing. This is really just showing that the mentions of the marketplace and the way we define ourselves really changes.

So where is your institution with regard to data readiness? As we look at -- if you've taken the assessment, if you've take -- if you did the QR code, which we ask you to do, I wonder where you fall into the whole look of where you are in that transformation. So if you look at the next slide where we talk about the tapping into actionable data and AI to elevate operations, we see that there's really, as you would imagine, a growth element, a 10% value for those who are cautiously modernizing a 22% value for optimistic believers, a 62% for emerging pioneers, which, by the way, showed that this was our biggest area of increase.

So the way organizations are actually using data for emerging pioneers, the increase was significant compared to what it was the last time we did it and 71% had a rich complete account holder data as it was available. So Molly, how do you rate -- how do your organization rate with the utilization of data? How did you feel you did or how did the evaluation come back?

We are trying to break into that. We have a lot of our efforts on, I think, more so understanding the AI, how to make it work for us and how to integrate that in all of our different lines of business in a safe manner that does not put us at risk and also makes it efficient for our employees.

So we are definitely not at a level where I would like to see us with AI. I think there's so much we can do with that. Across the organization as a whole. So we're in very early stages of elevating AI into what we do.

And Matt, what do you see in your organization? I would imagine because you ranked higher overall that you've really made the data and analytics a backbone of what you're doing moving forward?

I think for us, data has always been a critical component. Any time we were working with vendors, our first question was, how are we going to get that data in and how are we going to get into our data storage area? But I think when you start to think about leveraging AI with your data, that similar to Molly, we were very cautious because of a bank, you don't want to go full steam, but we began to recognize that there's power and how do you look at that data and harness that data.

And so I would say we have started to wade into those waters of AI and how we can use that and get people comfortable with that. So we kind of launched that initiative this January, and people are getting more and more comfortable with it. And now that we've kind of gotten used to that, we're looking at how do you bring that to that next level? How do we start implementing it more into using AI agents and thinking about things that could be done to create efficiencies in our organization.

Oftentimes, banks do a lot of things that are very manual. And going back to that one piece about that employee experience, that's a piece that we're trying to focus more on this year as well.

It's interesting, Taylor, that in talking to your organization, when we talked about the utilization of the study, I know the study has been very instrumental in making Alkami stronger in the areas that can help their client -- your clients become more digitally mature. So some of these are call-outs to your organization to say, geez, we've got to get stronger in being able to provide these capabilities because our clients are asking us to perform on their behalf.

Is this probably the strongest area of -- let's make it phone calls or integration, everything else that bottom line, foundational-wise, your clients are saying, you've got to make us stronger being able to actually use this data more than just have this data. I know that's part of the reason why you acquired Segmint years ago, but it's deploying their capabilities to say, it's not about what you have, it's what you do with what you have, isn't it?

Yes. Yes. There's certainly a ton of demand. And obviously, it's one of the biggest opportunities. Our clients and all financial institutions are sitting on a mountain of data. And they are, to your point, coming to us saying, help me activate that data, help me use that data to drive beneficial and measurable outcomes for the financial institution.

And that's really driven us to make a lot of investments around data and AI, in particular. We're also in the process of developing AI agents that support both the branch employee or relationship manager as well as AI agents that drive guidance to individual digital banking users.

In addition, investing in AI around AI-driven extensibility, for example, vibe coding tools that really democratize our SDK as well as, again, getting kind of back to the source of the question, AI-driven personalization. How can we activate moments that matter for individual account holders that enable an FI to drive specific behaviors that result in powerful outcomes for both the account holder and the financial institution.

So again, this assessment and this research that's done is prompting your clients to call you and go, we need to have this, we need this, we have this. It makes us see your product map, your product development map, your assessment tools, your service map to your customers is responding to this in much the same way because you know if we don't have this element in place, all else fails.

Everything I'm going to talk about after this from new account opening to fraud to everything else, if you don't get this right, and most institutions are not in a position to have 22 analysts on board to be able to do this and to help deploy it. I think this is a major key element is it's not just providing a lot of good data. Everybody should have that or at least be able to consolidate in some way. But even if you don't have that capability, the ability to consolidate and to show how to deploy it is something where you really benefit from partnering.

And I talk about it often over the last 6, 7 years, the ability for partners to deliver and the partners across the spectrum from core providers to companies like Alkami and others that really come to the plate for smaller institutions to allow them to punch above their weight as we talk about at Alkami quite a bit that it's not an asset size determination. It's really an executive level mindset determination, which we'll talk about a little bit.

But in the first applications of data, and I'm going to keep on ramping on this for the -- everybody knows this at Alkami. This is my go-to is what about your business account opening strategy? What are your biggest challenges and opportunities? And are you able to get it to a fast and efficient process?

We talk about the consumer side a lot. Most organizations, a far majority still do not have the ability to get to a 3- to 5-minute account opening. We don't expect that on the business account opening, but we do expect a progressive way that makes it so we get rid of a lot of the friction.

So I think, Molly, you mentioned early in the process that you're starting to work on the new account opening, especially on the business side. What is the biggest point of friction from your perspective in your organization that makes it that you can get eventually to an under 10-minute capability?

So I think our biggest friction -- well, it's actually kind of twofold. So being a credit union, not being in the business arena of banking as much as the banks have been, the larger banks, naturally, our organization is just not as comfortable with businesses.

So kind of going back to the last question, with how we want to use AI, I'm hopeful that we can establish an account opening process that takes out the confusion and allows my in-branch team to be able to work more on deepening the relationship and not having to make sure they dotted all the Is and crossed all the Ts when it comes to formation, but focuses on the business owner and the needs.

And then also making sure that the account opening process is more streamlined. We have switched over to Alkami for digital banking, but our core system and our account opening system still needs to be improved. And so that's an area we're working on now is the actual account opening systems and then how to integrate those to make it more user-friendly, both in branch and for the members.

We have not been comfortable allowing business accounts to be opened online because we still have that uncertainty in the branches, too. So it's kind of like we have to cover -- cross one bridge before we get to the next one. But I feel like what I've learned and what I'm seeing with all the new capabilities of the digital banking platforms is we're going to feel much more comfortable because of all the things that can happen behind the scenes.

So the verifications, all of the things that you can put into place are going to make that process so much smoother. So I'm very hopeful this will not be a huge hurdle that we can get across it and start moving forward very quickly.

It's interesting, Molly, because we've seen with this assessment tool that this is a good thing to bring to your leadership. If we can't get the whole organization behind the strategy saying we have to do this. It's now externally defined that this is what's needed. So it becomes a good tool internally to rally the truth, to get compliance, to get business development to get the product area to get the customer experience areas all under the same room and put that as a mission. Matt, where is your organization from the standpoint of new account openings in the business side?

We're similar to Molly and the fact that from a business account opening, recognizing that our clients and the businesses that we're bringing on are very unique. So we do not have any applications out on our website. Most of our business that is coming in is through referrals. And so we really want to have that white glove treatment and taking care of them.

And Molly hit on something that's really interesting. It's not necessarily that upfront for making it easier for the client, but we also have to think about what's happening on the back end and those systems talking to each other. And oftentimes, you've got to solve that first before you can bring something forward to your end clients to say, this is going to make it easier because while it might appear easy on the front end, if it's still feeding back into the back end of your system and is causing more problems, that can actually delay opening an account for a business client. And that is definitely -- we don't want to go backwards as far as how long it takes to get an account open for a client.

It's interesting. This is a very keen area from the standpoint of Alkami being able to help an organization get over these hurdles. Taylor, your organizations have a recent acquisition of a company that this gets you over that 3%. We see that only 3% of organizations are able to actually achieve that 10-minute or less account opening experience.

But I know this is a big deal at Alkami with regard to not only the business side, but also the consumer side. Can you explain a little bit about your business strategy and your product development strategy to be able to actually bring this to fruition for your financial institution and your partners?

Yes, sure. And so obviously, we made an acquisition of a company called MANTL, who has a lot of experience accelerating and digitizing account opening for both retail and business accounts. Now one of the things that makes MANTL unique and made them a very interesting acquisition opportunity for us was not a diabolical focus on digital only.

What really, really drew us to MANTL was the balance of branch and digital multichannel engagement and multichannel origination, which not only differentiates the solution in the space, it also reflects reality in a better way. And so as I think about what comes next, I really kind of lean into Matt's kind of comment about the uniqueness of the businesses that they support.

To me, that is really the next level of transformation that we at Alkami can really start to influence merging digital with the white glove experience that firms like Tradition Capital want to provide, balancing high tech and high touch in a way that enables financial institutions to support unique businesses to be able to provide that handholding experience that differentiates them from kind of large stark mega banks. But at the same time, being able to support even business users growing and evolving expectations for consumer-grade experiences.

In the business world, both things have to be true. We have to be able to provide a consumer-grade experience, but we also have to be able to directly interface the financial institution with their business client in a very intimate way. And I think that really pervades our product strategy as we go forward when we think about business account opening and origination.

I think another key element is because of third-party organizations having these as being key elements of their foundation of what they're trying to deliver, you also get the benefit of organizations that are further along the curve. So Matt and Molly are going to benefit in working to find other organizations that have had the same challenges they have.

I honestly was never in the commercial side of the financial institutions I worked with. So I don't understand all the dynamics except to know that they change every day the compliance issues, the privacy issues, what you have to do for payroll versus treasury and all these other elements. There's -- every one of these is like a separate silo they have to bring together. And it's great to hear from other organizations that have had the same challenges and find out how they get through this. That doesn't mean you're going to -- your organization is going to buy into everything the other organizations have done. But it's always good to get peer groups that say, we've been there, we've done that. We've learned from that.

So moving on to the next part is the second category is how is your institution strengthening fraud prevention and assisting self-service solutions. This is a very brand-new element that wasn't part of the first study's capabilities. And what we found was 31% of financial institutions offer self-service ACH fraud remediation and charge for it.

So that's not the only element that makes you strong on the fraud prevention area. But it's a key element that we found that when you just find yourself if you're moving up the digital maturity curve, that this is one of those takeaways. So without just focusing on the fraud remediation and charging for it, I'll go back to you, Matt.

What did your organization find with regard to how you did this category as you did the assessment, but also as your organization is progressing?

Fraud has always been a hot topic, and we make sure that we are constantly bringing that forward with our clients. One of the things that we implemented years ago was products that are called Check Positive Pay and ACH positive pay. And that's a fraud tool. I like to kind of think about it as it's like insurance. You don't want to have to use it, but you're glad that you have it there.

And so we talked to our clients upfront. And a while back, it was one of those things you talked to them, some would adopt it, some would not. So we really looked at our data and realized we weren't getting the penetration that we really wanted, in which case, a lot was then happening on our fraud team and having to do stuff. So we thought, well, how do we start to make that switch?

And so we actually went a different route. And we actually talked to clients about, hey, we've talked to you about this fraud tool, and it's more of an opt out. And they need to opt out of that as part of our sales process with them and say, no, they choose not to do that going forward. And that's had a significant increase of enrollment into that as well as from a revenue standpoint for us.

But at the same time, it's also decreased our attempt of fraud, especially when we see that going up in the check space. Unfortunately, business clients still write a lot of checks, and that is one area we can help prevent that fraud overall.

Molly, what did you see in the whole fraud remediation as you looked at your assessment and you looked at what you had to work on -- where are you in that category? And where do you want to go forward?

So very similar to what Matt said, we definitely saw the need to offer those fraud prevention services, and I don't feel like we could actually be competitive in the market if we did not have them. For those well-established businesses, the ones that you want to bank, they're looking for those tools. So not only did we want to have them, but we needed to have them.

So I'm actually in the process of launching our Positive Pay, our Check Positive Pay and then ACH Positive Pay will come shortly thereafter. But I think when I think about this, when you hear digital maturity, I think a lot of people probably think about just the app that's on your phone or logging into your online banking, and it's so much more than that.

And so I think the assessment helped to kind of open some eyes around the organization to say, okay, this is a part of our digital maturity, and we all need to be on the same page. And so I know my fraud team, they're always looking for new and better ways to stay on top of things.

I mean it's a 24/7 job, and you've got to always have eyes and ears everywhere. So having tools that can help make that more efficient and have the members involved actively, I think, is very beneficial. So we're excited to launch Check Positive Pay, and I think it's definitely something that you have to have. So I love the way that Matt is making an opt out because I think that's the right way to go.

Yes. It's interesting. When we look at the category of the fraud area and its impact on digital maturity, there are a lot of components. We're simplifying it into one area that we're emphasizing. If you did do the QR code download, you're going to see that the assessment tool allows you to answer a few questions, but it -- it's surprising how deeply the recommendations come and what they say you need to do next.

Again, the scorecard lets you know where are you, where you have to go. The beauty of this is it really tells you where is my prioritization? Where do I -- where can I make the biggest impact with the smallest amount of effort, so I at least move forward at the same time rather than doing the treadmill because we can get caught on that prioritization element.

And when we talk about prioritization, the next section of the report of the study really gets into culture. And I'm going to go a little bit deeper than just culture to say it really gets into overall, the mindset and your leadership because innovation and digital transformation and digital maturity is a mindset. And it has to be held by everyone within the organization because what we'll find out is as you get deeper into it, sometimes digital transformation is a threat to people.

The reason why it's a threat is they believe if there's digital transformation, it means I'm going to be replaced. Actually, what we want to do is make it so that AI tools, data, innovation, all these elements really are a way to get the mindset changed so that you can actually deploy at scale and make it so everybody is more effective.

You'll see that 37% of institutions enable their relationship managers to leverage client account activity data for most or all their client needs. I'm going to tell you right now, my belief is this number is somewhat overinflated. That's my personal belief only because I think people are afraid to say that they're very, very, very cautious about sharing data internally.

The data democratization area is an area of a lot of debate as to how much information, how can you do it? If I was a commercial calling officer, I would love to have every tool available, not only of what I have internally, but what you can look at in the marketplace to say, who should I be targeting based on what our strengths are?

Taylor, to get to you a little bit about Alkami, what have you seen in this space with regard to the sharing of data internally because your organization really provides a lot of next best products and next best opportunities out there in the marketplace. Are people really leveraging as much as this number maybe shows it? Or are people -- yes, they're sharing it, but it's holding back more than we actually make it look like in this stat?

Yes. Jim, I would tend to agree with you. Whenever I first saw this number, I was surprised, right, because it doesn't reflect kind of what I see, and I tend to trust my eyes, right? And I'll go back to what I said a moment ago, right? Financial institutions are sitting on a mountain of data that, by and large, they're not using. And you bring up an interesting point about being conservative about kind of the deployment or proliferation of data because that in itself creates risk, kind of things like that there's a lot of things that are likely holding financial institutions back.

But I think also they don't realize how much of an inhibitor it becomes. I've had conversations with Matt and Molly in the past. And we've talked about, for example, what makes a relationship manager at a branch so special, like what makes an RM that you have on the commercial side, just somebody that you cannot lose. And it always comes back to their experience, their knowledge about an industry, things like that, right?

And not only are those people really hard to replicate, typically, they're hard to find, they're really expensive. That also locks a financial institution into a very, very specific strategy or segment where they have this kind of institutional knowledge. Access to data kind of breaks down those boundaries, right? You can leverage data and the conversation we had previously around AI to turn literally anyone into a data-activated expert that can serve any client that can provide highly personalized and individualized service without all of the strings and kind of cost that goes with it.

So to answer your question, yes, I'm a little surprised by this number. I do think it's lower. I also, though, see this as probably the biggest opportunity for financial institutions as they're making this journey to democratize data, as you said, and to arm their employees with data that can really serve as a force multiplier.

Well, it's interesting because I've talked to some commercial calling officers recently, they're saying, what my institution doesn't give me, I'm using AI to enhance what we've done. So they're actually taking their own call reports on what their clients are using competitively, have built models to say, if I take what we know with the part we don't know, which, again, especially in the commercial side, you maybe have a 25% penetration. And you're probably guiding only those that have the deposit account without looking at the other elements, that calling officer, if they're worth their weight, they've asked the other question to go, where is payroll, where is treasury services, where are these other elements? And what that gives them is combine the tools.

And I know that Alkami is already looking at ways to say, how can we combine the outside with the inside to give you a better rounded view. But that all is dependent on how much you're sharing. What we want to find out is how well are we doing with regarding your institution's capability, the willingness to share the right tools and training to make it so that your most valuable calling officers feel like they're not going to be replaced by AI, but you're going to make them more powerful because you're going to make it so that a lot of the foundational work that they're currently doing, you're going to help them with.

So Molly, from your standpoint, what's your organization's perspective on sharing data, at least on the commercial side?

So we're very hesitant to share a lot of data for sure. But I think we have found ways to create that one-on-one service and make sure we have -- our members have the right tools and our relationship managers have the right tools, but we also know where we have gaps. It kind of reminds me of when I first started as a commercial lender and I can't remember the name of the website, but you would go in and you would put the industry in and then it would just give you some current information, some questions to ask and to think about if I was starting out my career as a lender right now and had a tool that didn't just give me general information, but actually gives me the great information that makes the member know that I care and have an interest in what they do.

I mean that is -- that's a no-brainer. That's going to set us above our competition by so much and also create meaningful long-term relationships that it's not always about AI, but sometimes that just is what jump starts it or it's not always about the tools. But I think, gosh, if I had that back in the day, that would have been great because we were just hoping one of the questions we had would fit in.

So I think that we are trying to provide the right tools now, but do have some limitations on what we are offering to our relationship managers. But I think just knowing what's available and learning how we can maximize the functionality of the Alkami platform is step #1. And I tell Taylor this all the time in these small organizations, we wear a lot of hats, so we might miss what's available.

And so making sure that we are staying on top of what's available to us, how to activate it so that we can take advantage of what we have out there is definitely something we need to do a better job of.

Yes. Matt, from your perspective, are you providing the right tools? Or where are you on that spectrum from 1 to 100, where are you on that spectrum of being able to provide tools and opening up the treasure chests that we've been very protective of, especially knowing now how calling officers can really use this to their advantage?

Yes. Jim, you talked about this earlier that banks sit on a lot of data. But unfortunately, historically, we've siloed that data into different departments. And so that's where you might have only looked at data from your lens and not from the other departments' lenses that does become very beneficial when you're calling on that client.

I think it's only until recently that we have hired actually a data analyst that can start pulling some of that and pulling it all together and then bringing that back over to the calling officers. Because Taylor, you said something as well, you have this institution of knowledge of that person who's been doing this for years, you don't want to lose that. But imagine if you start coupling that with data, that tells a much more powerful story when you're out talking to that client. And it's -- especially if it's data about that particular client that you're seeing, that story starts becoming alive.

And I remember having that conversation with one client, and I said, here, I want to tell you something about what your data told me. And he looked at me and he's like, nobody has ever told me that before. And he looked at his staff and he was like, why hasn't anyone else told me the story? And I'm like, that's the power of the data. It turns it into insight. And I want data to bring insight to our clients, quite honestly.

So Jim, to answer your question, we're probably like 50%, 60% there. I wish we could say we're at 100%, but at least we understand and we're aligned on where we need to go.

I smile because sometimes we say, our buy line should be, I'm not as bad as the other guys. I'm still not where I want to be. And the target keeps on getting away from us. I mean the reality is, as I say often, changes never happened this slowly. It's never -- never happened so fast. It will never happen this slowly again, and that's happening with everything we do. And it gets down to prioritization.

The next slide we have is one I want to illustrate what the power of this tool is. It's a component. And as you can see, I'm going to give you a couple of different takeaways. #1, every part of what we talked about is a microcosm upon which everything else is built. So there's a lot of questions underneath the question. So the research that you get the survey tool and the report shows that when we're talking about institutions increasing productivity in the tools of training and empowerment, there's a lot of elements to that. So in this case, we have 5 of them on this chart.

Another thing this chart shows you is even though you're emerging pioneer, doesn't mean you're the best in every category. And what you'll see is the optimistic believers do a really good job at empowerment and empowering their employees and giving them the tools they need. You'll see that the numbers are better even for cautiously modernizing some of these categories than they are for emerging pioneers.

So these are not static. You're not just in a category and you're not as good in everything. You're better in some things than in others. And these kind of tools, this ability to see this and understand what are the components that make up each one of these categories is so important. So downloading the report, downloading the ability to look at the actual tool and be able to look at the assessment and then getting results back and what it does, it tells you what you should do next because the one thing that's a big takeaway just on this short conversation in this webinar is there's a lot to be done.

And the only way you're going to start now is to actually take the assessment. It is painless. It doesn't cost you anything. You get the results back relatively quickly. You also get a link to the report that talks about what the importance of all these components are. It also will tell you where you should put your prioritization.

These things are evolving. And in 2 years from now, you're going to have another research point, but don't be behind your competitors. You now have the ability to find out where are you in digital banking maturity, both in the business. We also have one for the consumer side that helps you move the needle and make an assessment. And the challenge overall is to actually to get it done.

The only thing I can say is the worst thing that can come out of this webinar is to do nothing, just to find out -- it will be good if you find out where you are, and it will be good to find out what you have to do next. But if that becomes this information in the back of the mind, it's kind of like the data you have stored in the warehouses that you don't end up doing anything with.

I want to thank both Matt and Molly and Taylor, all 3 of you for participating today. We have a lot to cover, not enough time to cover it, but it is -- I am so enthusiastic by the fact that we have tools that can actually allow organizations to see where they are. Because as you look at your North Star, you look at where you're trying to go, getting there is only half the battle. It's actually keeping that as you go forward because it's an evolving marketplace. Thank you all for participating today.

Jim, I'll echo your appreciation. I think this has been a great session.

Thanks so much, Taylor, Jim, Molly and Matt for sharing your insights with us today. I'd like to ask our audience to take a moment to complete the survey that will appear on your screen. We will also be available via follow-up e-mail you'll receive in the coming days. Your feedback is important to us as we strive to address the key issues impacting the industry, especially in today's dynamic business environment. You can learn more about ProSight and find other relevant content and insights on our website, prosightfa.org.

Good morning, everyone. Thank you for being here. I'm delighted to have Alex Shootman, CEO of Alkami Technology; and Cassandra Hudson, recently appointed CFO of Alkami. Thank you so much for being here with us today.

You don't get to play being new anymore.

That's true.

You said that 4 weeks in, I think.

Time flies when you're having fun.

Great. So we're going to get through a lot today. We're going to talk about the market opportunity, competitive position, growth algorithm, AI. But first on the market because I think that's one of the most interesting parts about your business, honestly. And Alex, you've identified that over 900 credit unions and 1,000 banks are in your ideal client portfolio and that they are still on legacy technology. You said that this is a replacement market governed by 5- to 7-year contract cycles with fewer than 300 potential clients renewing in a given year. Given those dynamics, is the addressable pool of jump balls per year, is it growing? Is it shrinking? Is it holding steady? And what would cause that to change?

Yes. Right now, it's holding steady. So if you think about our customer set, I won't make you raise your hand, but most of the people that I meet in these conferences, their bank is Bank of America or Chase, and so they don't really have a sense of what is it like to do business with a community bank. The community banks have pretty old technology. It's pretty hard to execute things digitally. But there's still a lot of fear of making a conversion. So if you think about a community bank or credit union making a decision, it's what's the value of me doing this versus the pain of me going through a conversion.

So what would have to change the dynamics is you'd have to increase the value of making the change, which was one of the main reasons that we made the MANTL acquisition. The combination of Alkami and MANTL creates a differentiated digital front end to a community bank that they haven't had before. And so now they start looking at this capability and saying, "Okay. I'm actually going to increase deposits more than I did in the past. I'm going to be able to sell more loans than I did in the past." So now this starts to become worth me going through the process of a conversion. So for the jump balls to change, it has to either be a reduced risk of a conversion or an increased value, and that's why we made the MANTL acquisition.

And maybe as a quick follow-up to that, do you see anything in the near future changing either of those variables?

Yes. So right now, when we look at our long-term model, we have not assumed -- let me kind of do some math for a second. As you mentioned, let's call it, 2,200 institutions, 5- to 7-year contracts. So that means about 300 or so come up every year. And some of them stay, and those that don't stay, we have a pretty good win rate on. So that's -- we haven't made any assumptions that, that changes in our long-term model. So if that begins to change, we hope to influence it, then we'll update our model. But right now, when we think about the model that Cassandra reflected, there's no change in any of those economics.

Perfect. Thank you, Alex. And a lot has changed in 4 years. I believe 4 years ago, banks were maybe 2% of your live digital banking clients. And today, they're 13%. And you've said before that 78% of banks are still on legacy core technology, whereas it's lower for credit unions, more like 43%. But if you think about banks expanding within your client portfolio, can you speak to the attractiveness of servicing banks? And what has made you successful in expanding with this customer base in the last, call it, 4 years?

If you thought about Alkami and banks as just a stand-alone software company, let's say, the Alkami, right now, we have the most number of registered live mobile users in the credit union market of anybody else. So let's say that didn't exist. And you said Alkami in the bank market. In '23 and '24, we really hit product market fit. So in 2020, we had 1 bank customer. In 2021, we had 2 bank customers. And then as we go from '24 -- '22 through '25, we go from about 11 live bank customers to 38 live bank customers. So if you thought about starting up a software company, that would be the time where you go, "Oh, now I have -- now we have product market fit."

So where we are with Alkami is the question is no longer can Alkami sell in the bank market. Now the question is, can Alkami operationalize what it's going to take to grow in the bank market. And so that's really where we are from a growth perspective. What makes it attractive is we have an ambition to be the #1 technology provider for regional and community financial institutions. Well, like half the market is banks and half the market is credit unions, you can't be #1 if you're only in half the market. So what makes it attractive to us is it's part of our long-term ambition, which is to be a foundational technology provider to this market.

Perfect. And Alkami consistently wins 30 to 40 new digital banking logos per year. And again, you're not displacing other modern providers. Everyone is displacing the legacy V1 products. And since you've launched DSSP more recently, are you seeing your win rates changing at all? As a quick follow-up to that, when you do lose a deal, what's the most common reason? Is it conversion risk, pricing or something else?

I've been in software for a while, and I've made my fair share of acquisitions that had a business case that didn't come true. We've been really surprised by the execution of the MANTL acquisition. When we acquired MANTL, we had only 11 customers that had all 3 of the products that make up the Digital Sales & Service Platform. So that's our online banking application, our data and marketing platform and then our origination platform. And now we've got almost 50 customers that have signed up for all 3 of those. And I haven't been part of an acquisition that had that kind of 1-year performance.

Our win rate on the front half of '25 and the back half of '25 was markedly different. So we saw our win rate go way up in the back half of '25. In terms of when we lose, our biggest competitor is still "I'm scared of the conversion," right? And so that's now starting to break free in the bank market. So that was always a sweet market, and now you're starting to see more community banks make a decision to have a different technology front end than they get from their core. But that's still our #1 competitor is, "I'm going to stay with my older technology."

And as a follow-up to that, in a market like this where the 2023 regional bank failures are behind us and the balance sheet of regional banks seems pretty strong, are you seeing more interest in making that conversion? Or would you say it's pretty steady year-to-year?

I'm going to step away from the credit union and stay on the bank market. Really, what's happening in the bank market, as opposed to any underlying financials, is that think about a community bank, right? It's got -- the majority of its deposits -- so let's say they have 8,000 customers or 15,000 customers. They've got 100 customers that are the majority of their deposits. And those 100 customers were started by a baby boomer or were generational ownership of a firm that was still run by a boomer. And now what they're struggling with is the ownership of those companies are passing on to younger generations. And the CEOs that I talk to, the conversation is, "I'm not going to keep this money," right? "I may keep a little bit of money, but I'm not going to be the primary bank if I don't upgrade my technology to be able to serve this next generation of business ownership in this community." So that's become more of a driver in terms of the banks making a change, is them understanding their demographics.

Perfect. Thank you. And getting into AI a little bit. I think something that I find really interesting about the digital banking space is that what you provide to your customer embeds thousands of regulatory requirements, integrates with over 450 technology systems and serves as a system of record for fraud mitigation, money movement and business logic. But in this AI world where code generation is cheaper, do you think the regulatory and integration complexity becomes a bigger moat for you or a smaller one?

Yes. Let me kind of lay out what one of our customers looks like. So our average customer spends $800,000 a year on the digital banking solution. So what is that? That's 2 to 4 employees, right? So the question is, are they going to dedicate 2 to 4 employees or less than 4 employees to try to write a digital banking system to somehow have some cost savings? So the fundamental thing that most of the customers look at is, "It makes no sense to me from a cost perspective to try to vibe code digital banking." Now when you get into what you were talking about, what I think most folks don't understand is you have a regulation and then the community bank has to interpret that regulation.

And then when they interpret that regulation, the rules of how they interpret it, they actually code into digital banking. So how much are you able to deposit each month? How much are you able to withdraw each month? What kind of money movement do you have? All of those decisions that they make, the layer that captures that is the digital banking. All money movement, if you think about money movement, scheduled payments, recurring payments, that's all sitting in the digital banking system. So it's almost impossible to create a public LLM with that kind of information that you could put into to create a system. Our customers are 100% thinking about AI, not in terms of rebuilding digital banking, but in terms of can I make more loans? Can I make more deposits? Can I take cost out of the back end? Can I take cost out of fraud?

So those are the conversations we have with our customers or those 4 business conversations and how can we apply AI towards that.

Perfect. Getting into the growth algorithm a little bit more. So astounding fact that every 5 years, clients can grow by more than 100% of their original platform investment with 2021 to '23 cohorts spending more than 2x their landing ARR and even clients from 2016 spending up to 4x more. So with your long-term vision now assuming 40% of ARR growth from new logos and 60% from expansion, can you speak to your cross-sell levers? And what gives you so much confidence that this can continue?

I'm going to do an answer and then give it to you, but I'll talk about the customer dynamics and then hand it to Cassandra. So when we have a customer -- let me go through their journey. The first part of their journey is moving on to the digital banking platform, right? So they've made a decision that they're going to convert. They go through a 9-month project. They come on to the platform. And then they breathe a huge sigh of relief for about 6 months. And they go, "Thank goodness, we're over that conversion," turned out to be pretty good. We've got everybody on board. The customers like it. And then our account team sits down with them and says, "Now let's conduct a strategic account workshop." And what that is, is, "What's the next 24 months of your digital journey?" So they may have only bought 17 of our 30-some-odd products to go through the conversion. And now they lay out a 24-month path of new digital capabilities.

Well, remember, most of these businesses are small businesses. They might have 500 employees. So they can only take on a sequential amount of projects, right? They can take on a project this month, 2 more projects next month. What that creates for us is this continuous flow of digital projects over a number of years where we're adding products to the customer. So that's why we have confidence in the growth algorithm, is because of our -- what we have on the truck, because of what the customers' appetite is for digital banking as it evolves and then also just the rate and pace at which they can consume it, it creates this pretty steady flow.

Yes.

It's one of the things actually I've been so impressed by since I've joined Alkami. I've been a part of companies that have a strategy -- a cross-sell strategy that never comes to fruition, but it really is a cross-sell machine here. I think it's a testament to the platform. We have hundreds of integrations. We resell upwards of 40 products today. And so I think that really gives us a lot of visibility into that add-on sale component, if you will. I think it also makes it easier for us to bring the latest and greatest technology to our customers, right? Obviously, we're developing product internally that we're rolling out on a regular cadence. But there's new products that come to bear, and we can quickly partner with those individuals just given the strength of our platform. So kind of between those elements, that's what gives us confidence.

And maybe just to touch on the growth algorithm overall, it's really 3 components. One, just new logo growth, right, which is very -- has been very consistent, and we're assuming remains consistent. We have existing customer growth, which is just driven by the number of accounts someone has, population growth and just overall trends within each of the community banks that we serve. And that has been contributing kind of in the 5% range each year. So that will continue to drive growth for us. And then the third element is the cross-sell of products that Alex was just speaking about.

Perfect. And maybe the one piece that I'd like to drill in a little bit more is the user growth piece. So there's still a big delta between what population growth is, which I think is sub 3%, and what the market is growing at. And you've said that your existing customer base is starting to moderate towards that market rate. So could you maybe recap what the market rate is? And what drives that delta between population growth?

There certainly is a trend of individuals having more than one account. I may be above average, but I think I have 9. So I think that is a trend that we see, and that certainly drives some of the delta. And I also think we tend to serve banks that are growing more rapidly and also benefiting from consolidation, and that is a factor as well.

Perfect. Maybe more on the DSSP economics. So recently, you said that DSSP clients see a 30% uplift in ARR versus traditional digital banking new logos. With longer contract durations and stronger retention, what's a realistic path for DSSP to become the default landing motion for a majority of new logos, acknowledging that it's still very early days?

It is early, but I mean, even in Q1, about half of our new logos were DSSP. So we're seeing really good traction. I think the story is resonating with our customers for sure. So I think it will continue to be an important part of our ARPU growth, both for new customers and then also on the add-on sales side of continuing to sell these products.

And there's a reason why. Just show of hands, who uses a large money center bank as your bank like a JPMorgan Chase or -- yes, so if you think about your experience if you went to buy a CD, right, or you went to open a second account, it's a very nice seamless experience. There's a website, you say, "I want a second account," you immediately open it, your account is approved. That is not the experience that is in these thousands of banks, right? That would be a call into the call center, opening an account could be printing off a PDF form, signing that PDF form, walking it into a branch, stuff that you're not going to do.

So the reason why we've had the performance is because we took these acquisitions and we actually did the technical work to bring the products together so that now even if you look at an Alkami account opening versus a Chime account opening, it's more seamless, and it's in half the time. And so when a community bank sees that, they say, "This is what I've been trying to do the past 10 years," that's why we're having the results that we're having. It's not because we're good salespeople. It's because we show them a capability and they basically -- any community bank CEO that I go to and I say, "Who's your competition?" It is, "My competition is Chase and Chime. Those are the 2 people that I'm competing with, and I have to have the technology." That's why it's selling so well.

Perfect. Very clear. Maybe a bit on AI monetization. So at your recent customer conference, you showed 4 AI prototypes. You said that there's a challenge, the challenge is less about the technicality of AI and more about the packaging and the pricing and that there is a tension between the simple pricing where you absorb the cost risk versus usage-based pricing that's unfamiliar to your clients. Where are you leaning these days? And how do you expect to have enough data from your beta clients to set the scalable model?

Yes, I'll give you an example. We've got an SDK, and that is so that a customer can extend Alkami. I just shared this example earlier today, I visited a customer and they built a Friday night loan application. So this is Friday night, my water heater breaks, I need $1,000, I need to get a loan. So that is something they created that is connected to Alkami. Lots of our customers do that. And we built a prompt-driven code generator. So we took 8 million lines of code that other customers had, built into Alkami. We built -- we trained an LLM with that. And then at our conference, we showed how you could -- with prompting, you could build code just like you would expect to be able to build code. Our customers were very jazzed by that and saying, "When can we have that?" And we said, "Well, would you pay us $10,000 a month for that? Would you pay us $20,000 a month for that?" And they're just not willing to pay that much money for something that looks like capabilities that they could get from a free version of ChatGPT, even though it's not trained on 8 million lines of code.

So we don't know what we can charge for that. We also don't know what the back-end cost is going to be. If all of our customers signed up for that and started using that capability, what's that cost going to do? So that's the work that we -- and I think when I talk to my peers that we all are going through right now is -- and as you all know, we're not really paying for the cost of tokens right now. We're paying for about 2% of the cost of tokens. And so we're -- at least for the people that I'd say up to and us, we're in this mode of we can build the technology. We don't know how much we can charge for it, and we're a little bit concerned about what this cost model on the back end is going to be. I don't think you all are going to give us a pass if we say tokens ate our EBITDA guidance, right? That's what we're struggling with right now.

So we -- like I said, the tech is not actually -- on our platform, we're single-code-based, multi-tenant. We've got a data lake back end. It's not hard to build the technology. It's hard to figure out what it's going to cost.

And on that note, maybe you just answered it, but you've made it clear that you're not ready to change the long-term financial model for AI on either the revenue or the efficiency side, and it seems exactly for that reason. Do you have a view, though, like would the positive impact show up first on the cost side or the revenue side?

I think it's going to show up on the revenue side first. And then as customers start consuming the capability, then it's going to surprise us on the cost side. So that's why we have to -- we just have to watch a couple. We've got 3 or 4 cool products that we've built. We've just got to work with some pilot customers. Because here's the challenge, right, if you want to price it simply, you just say, "Here's an agentic code creator for SDK and it's an extra $1,000 a month." If you want to cover your cost, you have to put some consumption layer in. But now you're putting a consumption layer that the customer has no history of modeling. So how are they thinking about their cost? This is really the dance that we're going through in collaboration with our customers, to try to figure out how to bring the technology to market.

And maybe one just quick follow-up on the efficiency side. I mean, I think we're already seeing pretty amazing productivity gains, like a lot of other companies out there. So I think we'll start to see that show up in the next 12, 18 months. And I think even internally, you can see that people are much more focused on deploying AI use cases and learning about them than ramping headcount as quickly.

Perfect. And Cassandra, I have a flurry of guidance and growth questions for you now, so perfect timing. So I think investors are trying to piece together what the underlying organic growth rate of the business is right now. There are lots of puts and takes between the longer DSSP implementation time lines, some effect from termination fees. So maybe if we strip out the timing items and some of the headwinds, what is the underlying growth rate of the business?

Well, before I address that, I just want to clarify the implementation point on DSSP, just to make sure that it's well understood. Today, if we do a stand-alone MANTL or data and marketing implementation, that takes us about 6 months. When we sell DSSP, obviously, it's digital banking, data and marketing and the deposit origination product, and we're assuming that, that's going to take the full 12 months that it would normally take for digital banking. Customers are very focused on that contract end date, and there's a lot of organization around it. So that's kind of the comments that we've made on the lengthening. It's not digital banking per se. It's just the 2 smaller components.

There certainly is a bit of noise in our numbers this year between the termination fee impact, which is a few points, and a slight benefit from the timing of the MANTL acquisition, which happened in March of last year. I would direct you to ARR growth, which, at Q1, obviously is clean. It does not have any noise from either of those 2 things, and we grew 22%.

Perfect. Maybe as a quick follow-up to that. It does seem because ARR is not affected by the timing effects as much and whatnot. Is that the better metric to be focusing on over revenue?

I mean, obviously, they're both important. I mean, I think there are these minor noise items impacting revenue, but ARR is certainly our focus. Our entire go-to-market teams are organized around ARR, and it's what I look to and manage internally.

Perfect. Thank you. And as we think about the 2026 revenue guide, your revenue assumptions include continued cross-sell momentum, steady ARR launches, high single-digit ARPU growth and moderation in existing client user growth. Which of those assumptions do you think is most conservative? And what conditions could create upside, whether it's DSSP adoption, higher ARPU, more bank wins or anything else?

I mean, I think, hard to say which one is the most conservative. Probably implementation has the most variability, is what I would say. We obviously have a lot of visibility into that, and projects are planned out 3 to 4 quarters in advance. So we feel good about the guidance that we gave. But you could see timing shift, especially around the DSSP deals that I was just speaking about. We're assuming that customers elect to implement all 3 products on that 12-month time frame, but they could decide to implement data and marketing first. And maybe they want to use that to actually drive some of their digital banking marketing. So I think we could see some variability there and could be upside for us if it plays out that way.

And hypothetically, if Alkami wanted to speed up any implementation time lines, what do you think would have the biggest impact? Would it be AI? Would it be hiring more?

It would be -- if you think about a typical implementation for us, we've got -- we're coordinating 15, 16 different third parties. And these aren't necessarily third parties that we brought to market. I'll give you just one that is, right now, we have a customer who is going live next week, and we need a new API endpoint from Fiserv to be able to get their e-docks, right? So these are the kind of things that we're managing all the time through every single implementation. So really, if we wanted to speed up implementations with a client, it's going to be through technology innovation, which you could theoretically do with artificial intelligence in terms of the third-party integrations. However, a lot of that is still logistical, right? So we've got to get a project manager assigned from Fiserv core. We've got to get a project manager assigned from the cards business at FIS. That's mostly what we're managing when we're managing a customer onboarding.

And then the customer will say, "I'm nervous. I want to go through one more round of employee pilot before we go live." And we're not going to go to the customer, even though you want us to. We're not going to go to the customer and say, "Hey, we forecasted this for this week. You can't go 2 weeks out." We're going to say, "Okay, Mr. Customer, if you're nervous, we're going to go -- we're going to go a couple of weeks." Most of the onboarding is logistics as opposed to some sort of technical challenge.

Makes sense. And to that point, you've churned less than 1% of digital banking ARR annually for the past 3 years and expect the same in 2026 with only 4 clients churning. Your long-term model still assumes a 2% to 3% total dollar churn. So maybe what's driving the gap between that sub-1% and the 2% to 3% total? And does it make you think that maybe it's a little conservative?

I mean, we've certainly been trying to help investors understand the components of our business, which is why we've historically provided digital banking churn and that level of detail. But we do have churn from our other products, and they have different contract lengths. So for example, MANTL, when sold on a stand-alone basis, has about a 3-year contract life. So that 2% to 3% guidance factors in churn from our other solutions as well.

But look, if we did 99% gross retention rate for 3 years in a row, I probably wouldn't change the forecast. That's pretty hard to achieve. That's why I don't feel like the 98% is conservative. I feel like that's a realistic good planning number that we've overachieved for a couple of years.

Very clear. And maybe a bit about your -- you said that the India captive is largely through its initial investment phase, and you expect operational maturity by the end of this year. And if we think about your 300 bps of margin expansion this year -- or in your long-term model rather, is that driven by the offshore efficiencies? Or is that more to do with pure scale leverage on R&D and G&A?

Certainly a little bit, but I would point more towards the scale leverage. We've been improving as a percentage of revenue with R&D at a pretty steady rate and pace. I expect that to continue. And I think where we're starting to become more efficient is on the G&A side, and I think we'll see that pick up over time.

Perfect. And something I'm also excited about is your free cash flow conversion target. So you've targeted 90% free cash flow conversion from adjusted EBITDA by 2030. What are the structural drivers improving that conversion? Your CapEx intensity is already pretty low. So is that primarily working capital dynamics?

You're exactly right, very low CapEx-intensive business, which is great. I think, again, it's that same scale leverage that's benefiting adjusted EBITDA expansion with cash flow catching up. I don't think there's anything too crazy from a working capital perspective. Of course, there's seasonality in certain quarters, but it really is the scale with one slight nuance that eventually, we will become a more meaningful taxpayer. And so that will have to be factored into the 90% target.

Perfect. And in general, we're seeing software companies right now making trade-offs between M&A and buybacks, and they're definitely leaning towards buybacks in general. But how do you think about balancing buybacks versus keeping powder dry for acquisitions? And maybe what would an ideal acquisition target look like?

I mean, we're doing that calculus every single quarter, right? I think, for us, our M&A strategy has been more opportunistic. I think, we'll continue to be opportunistic. We're pretty well integrated with the MANTL acquisition, but we still have a little bit of digesting to do on that acquisition. So I think that factors in. And then just at current stock price levels, the buyback felt like the right thing to do at this time. But it's calculus we'll do continuously and make sure that we're balancing both priorities. I think as we're more meaningfully expanding our adjusted EBITDA, that is driving more cash flow, and so that makes the math a little bit easier.

Perfect. And stock-based compensation, increasingly a big focus for investors as they look at not only EV-to-EBITDA multiples, but -- and EV free cash flow, but also GAAP profitability. So you've guided that stock-based comp will be about 14% of revenue in '26, declining to 10% by 2030. What's driving that decline? And how do you think about SBC in the context of your buybacks?

Well, the decline from '25 to '26 is really driven by the MANTL acquisition. There were some onetime stock-based comp charges that kind of elevated our stock-based comp in the year. So I think we're kind of getting to more levels of stock-based comp. We work very closely with our compensation committee to be -- make sure that we're managing the amount of stock that we're granting in any given year to manage to these levels. So I think just as we become larger, more mature, while also managing how we give out or grant equity at the company that lends itself to this path.

Perfect. And Alex, Cassandra, we've covered a lot in the past 30 or so minutes. And the last few seconds we have, is there anything you'd like to leave investors with or emphasize?

I'll just say this is a really healthy end market. It's a really healthy end market that has a very predictable purchase pattern. And then once a customer comes on board, we've got a very predictable growth pattern for the customer. So that's the part that is largely misunderstood about the end market.

Perfect. Alex, Cassandra, thank you so much for being here today.

Thanks.

Thanks for having us.

Hello, and welcome to Alkami's First Quarter 2026 Financial Results Conference Call. My name is John, and I will be your operator for today's call. [Operator Instructions]

I would now like to turn the conference call over to Steve Calk. Steve, you may begin.

Thank you, John. With me on today's call are Alex Shootman, Chief Executive Officer; and Cassandra Hudson, Chief Financial Officer.

During today's call, we may make forward-looking statements about guidance and other matters regarding our future performance. These statements are based on management's current views and expectations and are subject to various risks and uncertainties. Our actual results may be materially different. For a summary of risk factors associated with our forward-looking statements, please refer to today's press release and the sections in our latest 10-K entitled Risk Factors and Forward-Looking Statements. Statements made during the call are being made as of today, and we undertake no obligation to update or revise these statements.

Also, unless otherwise stated, financial measures discussed in this call will be on a non-GAAP basis. We believe these measures are useful to investors in understanding our financial results. A reconciliation of the comparable GAAP financial measures can be found in our earnings press release and in our filings with the SEC.

Now I'd like to turn the call over to Alex.

Good afternoon, and thank you for joining us. We delivered a strong first quarter, achieving 29% revenue growth and over $22 million in adjusted EBITDA, both above expectations. We closed 6 new digital banking relationships, including 2 banks and 3 digital sales and service platform clients. In addition, we introduced our first integrated capabilities for the digital sales and service platform and a new product called Alkami Engage.

Our first quarter performance continues to demonstrate Alkami has the potential for long-term durable growth and increased operating leverage. Alkami operates an attractive and predictable business model in a resilient, large and growing market. Our target market is over 2,000 regional banks and credit unions that rely on legacy infrastructure incapable of providing a modern digital experience. A portion of growth comes from displacing these systems.

Given industry standard 5- to 7-year contracts, combined with stable win rates, we maintain good visibility into the long-term ARR growth that comes from new logo additions. Once on the Alkami platform, our investments in service and reliability, the mission-critical nature of our platform and high switching costs drive gross retention rates 8 to 10 points above typical SaaS companies.

High retention rates, combined with clients adding users and adopting more of the platform results in reliable long-term client growth. Every 5 years, our clients grow by more than 100% of their original platform investment with our 2021 through 2023 cohorts spending above 2x their landing ARR and clients 2016 and older spending close to 4x their landing ARR.

Additive to the land, retain and growth algorithm for Alkami is our entry into the bank market. Four years ago, we launched an effort to use commercial banking capabilities built for large complex credit unions to pursue market leadership serving community banks. At that time, banks represented 2% of our live online banking clients, and today, banks are 13%. Over this 4-year period, we tripled revenue, expanded gross margin by over 700 basis points and improved operating leverage by more than 2,000 basis points.

Through different macroeconomic distractions and volatility in the financial services sector, Alkami has continued to deliver by adding new clients, keeping our clients, expanding our product offering and increasing margins. Client decision cycles create a unique characteristic for Alkami. Our online banking platform is in a replacement market with prospects on legacy platforms under long-term contracts.

There are usually fewer than 300 potential clients in our target market that renew contracts in any given year. Within this group, a portion choose not to convert given the effort and perceived risk. Among those who make a change, we consistently win 30 to 40 new clients per year. For example, the 6 new logos in Q1 is slightly above our historical Q1 average.

New logo growth is consistent and will not spike unless customers choose to exit contracts early or see enough value to overcome conversion resistance. This consistency is a strength, but it also means the next phase of our growth will be driven by expanding the value we deliver within each financial institution. Increasing the value of the platform not only drives expansion, it also improves conversion, and this is why the Mantle acquisition was so strategic.

The Mantle acquisition adds platform functionality to encourage conversions and expands our installed base. Stand-alone Mantle new logo creation has been outstanding with 61 clients added since the beginning of 2025. These are now Alkami clients we can target to cross-sell online banking. In addition to the new logos, at our recent customer conference, we demonstrated differentiated capabilities that materially improve how financial institutions acquire and engage customers.

Two weeks ago, we concluded Co:lab, our annual client conference. The conference continues to set records with over 600 customer attendees, of which 83 were prospects. Since the MNTL acquisition, we've been building deep technical connections between our online banking and origination platforms to deliver an integrated front end that enables our market to compete with mega banks and neobanks like Chase and Chime. We built this capability with 7 clients as design partners, 6 of which have the code in production. We demonstrated live product with real results at Co:lab.

In a side-by-side comparison against 2 leading mega banks and a digital-first fintech, we showed a complete customer journey from account opening through digital engagement. Using a live environment and real workflows, Alkami's digital sales and service platform or DSSP, completed that experience in under 2 minutes compared to an industry benchmark of 5 minutes and the 3 contestants in the 3- to 4-minute range. DSSP has continued to perform for Alkami.

Since the beginning of 2025, we've gone from 11 to 48 clients who have all 3 products that make up DSSP. Over half of all new logos since Q2 of last year have been DSSP and DSSP new logos see a 30% uplift in ARR versus our historic online banking offering. Our intent with DSSP is to increase the number of clients willing to convert, expanding our opportunity within the existing market constraints. We have not reflected this in our long-term model, and our outlook under current new logo assumptions continues to support attractive long-term growth for Alkami.

Last quarter, we introduced a 2030 framework, and that model assumes 40% of ARR growth coming from new logo additions at numbers consistent with our historical average and 60% of ARR growth from expanding within our client base. Alkami is evolving from a vertical application in a replacement market to a vertical platform provider that drives growth for bank and credit unions, and this transaction is occurring because the market demands it.

Historically, community banking technology was defined by core providers that control the system of record. Everything else, digital banking, onboarding, payments was built around that core. For years, that architecture defined how financial institutions operated. That reality has changed. Digital has become the primary way customers experience their financial institutions. Our clients need technology not just to process transactions, but to sell and service financial products in a digital-first world.

This is the role of the digital sales and service platform, a platform that provides a long tail of growth opportunities for Alkami and positions us to become the new primary technology partner for community financial institutions. In this market, leadership will not be defined by the number of institutions served, but by generating the most economic value from each financial institution on the platform. The investments we've made to integrate our acquisitions creates the functional capabilities of Alkami's DSSP that are winning in the market.

However, the platform investments we've made create compounding value for Alkami and our clients. Alkami is a single instance, multi-tenant industry specialized platform, and this gives us the opportunity to provide AI capabilities our clients are requesting. For details on Alkami's AI perspective, please review my prepared comments from our last earnings call.

In the February 25 call, I spent over 50% of my time on AI and Alkami. Since that earnings call, I've had 39 face-to-face customer meetings and AI was discussed in every one of them. Not one client mentioned building their own digital banking or origination platform, but every client wanted to talk about AI as an enabler for personalization, underwriting, fraud management, customer service, analytics, offer management and more.

With over 23 million account holders on our platform, we have a unique foundation to apply AI capabilities at scale. At our customer conference, we demonstrated working AI prototypes built on this platform. These included capabilities that allow clients to tailor Alkami to their needs through prompt-driven development, use natural language to query platform data and better understand their account holders and operations and deploy copilots that support both banker workflows and account holder experiences.

These capabilities are powered by our platform, including our data infrastructure and telemetry from Alkami Engage, a new product which captures real-time user interaction data across the customer journey. Importantly, these are not conceptual demonstrations. We're actively working with a small group of clients to test these capabilities and determine the appropriate commercial models. Given our platform foundation, bringing these capabilities to market is less a technical challenge and more a question of how to package and price them effectively for our clients.

In closing, we are pleased with the integrated product capabilities we built into Alkami's digital sales and service platform. The market reaction has been positive and DSSP provides a foundation we can continue to build upon to differentiate Alkami. We are evolving Alkami from a system of record to a system of action, delivering measurable outcomes for our clients and increasing the value we create within each financial institution relationship. I'm proud of our business results this quarter and grateful to the more than 1,200 Alkamists who continue to get it done and do it right.

I'll now hand the call to Cassandra to discuss our financial results.

Thank you, Alex. Our first quarter results exceeded our expectations, highlighted by strong adjusted EBITDA performance that underscores the durability of our model and the progress we're making in driving operating leverage. We continue to execute with discipline, delivering consistent growth while expanding profitability and investing strategically to support long-term value creation.

Let me start with our updated outlook. For the second quarter of 2026, we expect revenue of $128 million to $129 million, representing growth of 14.2% to 15.1%. As a reminder, our second quarter revenue outlook includes the impact of a sizable termination fee recognized in the second quarter of 2025, which represents an approximate 3 percentage point headwind to year-over-year growth in the quarter.

In the second quarter, we also expect adjusted EBITDA of $17.9 million to $18.7 million or 14.3% margin at the midpoint. This outlook incorporates the impact of our annual user conference, which is reflected in our normal seasonal expense pattern. For the full year, we expect revenue of $527.1 million to $530.9 million, representing growth of 18.8% to 19.7% and adjusted EBITDA of $94.9 million to $97.9 million or 18.2% margin at the midpoint, reflecting continued operating leverage as we scale the business.

Our revenue outlook reflects several underlying assumptions consistent with what we shared last quarter. We expect continued cross-sell momentum across the platform, along with a steady cadence of ARR launches throughout the year. We also expect high single-digit ARPU growth, reflecting strong expansion within the base, partially offset by a modest moderation in user growth among existing clients. We expect a meaningful decline in termination fee revenue in 2026, which will reduce reported growth by a few percentage points. This headwind is partially offset by the contribution from MANTL.

Finally, we expect growth to moderately accelerate in the third quarter due to a more favorable year-over-year comparison. Turning to profitability. We expect a full year non-GAAP gross margin of approximately 65%. In the back half of 2026, we expect adjusted EBITDA margin to be north of 19%, weighted toward the fourth quarter and in line with our typical seasonal pattern.

Overall, we expect approximately 500 basis points of margin expansion for the year, driven by operating leverage in the model, efficiencies from our offshore operations and continued cost discipline while also funding targeted investments in AI that we believe will drive product innovation and long-term efficiency. Lastly, we expect stock-based compensation to be approximately 14% of revenue for the year.

As we discussed last quarter, our long-term model framework reflects what we believe are achievable targets based on the strength of our business today and the visibility provided by our long-term contracts. We continue to expect to achieve Rule of 45 by 2030. From a growth perspective, we expect a gradual increase in bank new logo wins supported by our digital sales and service platform alongside continued leadership in credit unions, reflecting the replacement-driven nature of our market.

We also expect consistent execution in our add-on sales efforts and volume growth from existing customers, together driving ARPU expansion and contributing significantly to our long-term growth as well as total dollar churn of approximately 2% to 3% annually with about half associated with our digital banking clients. Importantly, our long-term outlook does not assume incremental M&A.

From a profitability standpoint, we expect non-GAAP gross margin approaching 70% over time as we improve execution on implementations and drive support efficiencies, approximately 300 basis points of annual adjusted EBITDA margin expansion driven by scale and continued operational improvements, particularly across R&D and G&A and stock-based compensation declining to approximately 10% of revenue.

Turning to first quarter performance. Revenue was $126.1 million, up 29% year-over-year. Subscription revenue grew 30% and represented 96% of our total revenue. As a reminder, we closed the MANTL acquisition on March 17, 2025. This timing contributed approximately 14 percentage points of year-over-year growth to Q1 2026. Growth rates will become fully comparable beginning in the second quarter. We increased ARR by 22% and exited the quarter at $494 million. Importantly, we have approximately $71 million of ARR in backlog pending implementation, representing 40 new clients and roughly 1.4 million digital users. We expect the majority of this backlog to go live over the next 12 months.

As Alex highlighted, we continue to see strong momentum with our digital sales and service platform. From a financial perspective, DSSP is important because it is driving higher quality revenue across several dimensions. Clients adopting multiple components of the platform tend to have higher initial contract values, longer contract durations and stronger retention profiles over time. This is already contributing to ARPU expansion and ARR we've seen -- we're seeing across the business.

Additionally, as we integrate MANTL and expand our platform capabilities, we are increasing our ability to land with a broader set of products and expand within the client over time. This reinforces our land-and-expand model and supports the long-term durability of our revenue. We exited the quarter with 307 clients and 23 million registered users, an increase of 2.5 million users or 12% year-over-year. Over the past 12 months, we implemented 35 clients supporting 1.2 million digital users and existing clients increased their digital adoption by 1.5 million users.

Our contracts provide strong visibility into attrition typically several quarters in advance. Over the past 3 years, we have churned less than 1% of our digital banking ARR annually. For 2026, we currently expect to churn 4 digital banking clients, which again represents less than 1% of ARR. This speaks to the mission-critical nature of our platform and the strength of our long-term client relationships.

Revenue per user increased to $21.46, up 9% year-over-year, driven primarily by MANTL's contribution, strong cross-sell execution and increased user adoption among existing clients. Remaining performance obligations were approximately $1.7 billion or 3.5x live ARR, providing strong visibility into long-term revenue. First quarter non-GAAP gross margin was 64.4%, roughly flat year-over-year, driven by the higher database technology costs we discussed last quarter. We view these costs as temporary and expect them to decline by the end of 2026.

First quarter operating expenses were $59.4 million or 47.1% of revenue, representing 530 basis points of year-over-year improvement realized across all areas of operating expense. Adjusted EBITDA was $22.3 million, above the high end of our expectations with an adjusted EBITDA margin of 17.7%, an expansion of approximately 540 basis points year-over-year. We ended the quarter with $77.6 million in cash and marketable securities. In the first quarter, our operating cash flow improved 15% year-over-year. Free cash flow was consistent with prior year, and we repaid the remaining $15 million of our revolving loan.

Finally, today, we announced that the Board of Directors has approved our inaugural stock repurchase program of up to $100 million. This is an important milestone that reflects our confidence in both our long-term growth and our robust cash flow generation capabilities. We continue to believe in a disciplined and balanced approach to capital allocation that enables us to grow through additional acquisitions, delever the balance sheet through debt reduction and opportunistically repurchase shares to deliver increased value to our shareholders.

In closing, our results this quarter reflect continued execution against our strategic priorities and the strength of our platform. We are scaling with discipline, balancing growth and profitability while investing in the capabilities that we believe will further differentiate Alkami over time. The visibility in our model and continued momentum across the business position us to drive sustained long-term value.

With that, operator, please open the line for questions.

[Operator Instructions] Your first question comes from the line of Chris Kennedy from William Blair.

Cassandra, you have the growover in the second quarter, but you also talked about accelerating growth in third quarter and fourth quarter. Can you just provide a little bit more clarity as to the confidence in accelerating growth?

Sure. Yes. Just to clarify, Chris, that growth acceleration will be in the third quarter in particular, and it is really driven by a more favorable year-over-year comparison, just some timing dynamics that we experienced in 2025. As it relates to the headwind in the second quarter, that's really timing of termination fee revenue. We do have that headwind in every quarter this year, but it is a little bit more pronounced in the second quarter in particular, which is why I called it out on the call.

Okay. Got it. Understood. And then, Alex, you mentioned it, but any additional takeaways or observations from Co:lab when you were talking to your customers and kind of how they're viewing the current environment and AI?

First of all, Co:lab was an amazing event. Once again, we set record in terms of number of attendees. It was great to see 83 prospects, a good balance between credit union prospects and bank prospects. A couple of comments. There is no let up in digital transformation. This is a pretty big market. As I mentioned, over 2,000 credit union and bank customers that all have legacy technology. They're all smart. They all understand what they need to do. They are a little bit captive to these long-term contract dynamics that we talked about, but just continued demand in terms of demand for digital transformation.

What was really exciting to see, so for our market, and for those of you that don't bank with a regional bank or credit union, you may not really be able to appreciate this. But for our market, what's been critical for them to compete with these large money center banks and fintechs is what we would call an integrated front end, a digital front door, whatever you might want to call it.

But it is the integration of digital banking and a deposit origination platform and a loan origination platform to be able to attract a customer, convert them into a customer, have them in digital banking, have them with additional products and all of that seamless and so that the customer or prospect doesn't even know that they're in multiple different products. That has been the benchmark that these institutions have looked for. And that's what we showed from Sage. So I think what I was most pleased with is the audience reaction to real technology that we showed that will make a real difference for this market.

Your next question comes from the line of Aaron Kimson from Citizens.

Alex, you spoke again today in your prepared remarks about more banks being open to separating online banking from their core provider. Can you talk about what's driving that willingness, whether it's increased acceptance that the stand-alone digital providers like Alkami have the superior solution for online banking, the maturity of your solution with MANTL or a change in the use of integrating a stand-alone digital provider solution into the core or maybe something else I'm missing?

Yes. Thanks. Once again, let's talk about the difference between the bank market and the credit union market. And in a previous earnings call, I've got the specific numbers. So I'm going to give you the round numbers. I know we've got the specific numbers. But in the credit union market, it's probably in the mid-40%, 45% of the customers that have an online banking application that is supplied to them from their core provider. And in the bank market, it's been north of 75%. So that's the part that we're beginning to see unwind.

I actually talked to a prospect at Co:lab who is going to pay off 4 years of their remaining digital banking contract to move to a different digital banking platform from their core. And I asked them. I said, this is one of the first times that I've ever heard this. Why are you doing this? And they said, in our market, we have to compete with Wells Fargo and KeyBanc. And we're at the point where our digital capabilities are insufficient. And if we don't make this change, it's going to impact the business of the bank. So you're starting to see that demand push create these conversions.

But the flip side of that is the more customers that see somebody come on to a platform like Alkami, successfully go through the conversion, successfully bring their customers on board, then they're willing to make the change. It's ultimately a decision of value versus risk. And that's why the integration of the data and marketing platform and the onboarding platform and digital banking is so critical because when a bank sees the outcome of speed to bringing on a new customer, reduced cost to bringing on a new customer, increased speed to cross-sell, they start to have the conviction to make the change.

That's really helpful. And then the second one is a little bit more direct. You've incurred $2.8 million in shareholder matters related expense over the prior 2 quarters with $2.2 million in 1Q. Can you provide any color on the nature of these expenses and if you anticipate them to be ongoing or settled for the near term after you added 2 new Board members on March 31?

Sure. Thanks for the question. Those costs are really defense-related in nature. We do expect to incur additional costs related to this item. Obviously, it's difficult for us to predict how much they will be, though I don't think that we're going to be scaling at $2.8 million every quarter from here on out. I think -- so we saw a little bit of a higher cost in Q1, and I would expect those to moderate from here on out.

Your next question comes from the line of Jacob Stephan from Lake Street Capital Markets.

Maybe just first, kind of a notekeeping one here. Maybe give a deeper dive into the bank versus credit unions in the backlog.

Let's see. I guess, banks versus credit unions, it's pretty, I'd say, evenly split in terms of their size. And right now, we have 13 banks in the backlog and the rest would be credit unions.

Okay. And second one for me. I know you've kind of given some in-depth detail on user adds in the past. I'm wondering if you could kind of help us think through the adds in the last quarter and maybe over the last several quarters in terms of existing clients, how many of those were newly implemented customers and just that kind of trend?

I mean in the past, you can kind of think of the trend as roughly half and half new versus existing. In Q1, in particular, just kind of flipping back to my script, we implemented 1.2 million digital users over the past 12 months and then 1.5 million related to existing clients, a little bit more weighted to existing clients over the past year here.

Your next question comes from the line of Jeff Van Rhee from Craig-Hallum Capital Group.

This is Daniel on for Jeff Van Rhee. Just on MANTL and the pace of logo adds there, the 14 this quarter, maybe if you would want to compare that to previous quarters or expectations of how MANTL is tracking relative to expectations?

Mean I think they continue to track very well, right? With all of our products, there is a bit of a cyclical nature to the sales cycle. For us, Q1 tends to be a bit of a lighter quarter and Q4 tends to be our strongest quarter. I think we continue to see really good performance in Q1 for MANTL coming off of a really record 2025.

Yes. And I would just point back to the reason why we're pleased is you go back to beginning of 2025 and our DSSP clients, so that's clients that have acquired MANTL have gone from 11 to 48. And in the same period of time, stand-alone MANTL new logo clients of 61. So if you figure that's a 5-quarter period of time, I'm the ever optimistic CEO, but I consider that to be outstanding performance to make an acquisition like that.

Just take a step back. So the acquisition closed in Q1, right? And so we needed to integrate the 2 companies and in that period of time, delivered that kind of both new logo and cross-sell performance at the same time as integrating the technologies together into one experience that unites the front end of digital banking and origination. I'm frankly just super proud of the team for what they've done.

Yes. Great. And then, Alex, maybe if you could just talk a little bit -- I like your line about Alkami evolving from being a system of record to a system of action. If you could just expand a little bit more on what that means to you and in particular, any examples you'd have of that?

Yes. What our customers are asking for is historically, the digital part of the financial institution was somewhat passive, right? It's relying on the account holder to know what they want to do and then come in and take action. But as we all understand how systems have changed and how we interact with systems, now what our institutions are asking for is you have all of this data, you've got transactional data, you've got telemetry data, you've got core transactional data.

I want you to start predicting things that we want the account holder to do. And then I want you to notify the account holder and ask them to do that. So that's what I mean in terms of making a shift from a system of record to using the data and the analytics capabilities that we have and the predictive capabilities that we have.

Now I want you to tell me to take an action or tell our account holders to take an action. right? I noticed that -- I know that -- so to give you an example. I know that at this time of the month, every single month, your balance starts to drop. So I'm going to reach out to you and recommend an action for you to take so that you don't get into a bad financial situation. So that's the kind of thing that I'm talking about when I say move from a system of record to a system of action.

Your next question comes from the line of Andrew Schmidt from KeyBanc Capital Markets.

Apologies, I hopped on a little bit late here. But the sales force, the shift to separate bank and credit union sales forces, how has that evolved? Has that been effective in terms of building the pipeline, particularly on the bank side? I hear you on the backlog. I'm curious how that has progressed.

Yes. Thanks for the question. Our pipeline remains balanced. It's pretty evenly split between banks and credit unions. And so for us, the transition has been effective. It allows us more specialization in the bank market, and we remain happy that we did it.

Got it. That's helpful. And then obviously, everyone is thinking through sort of more efficient organizational structure when we think about AI development, et cetera. I know you're probably pretty heavy users of this internally. But is there any like structural changes or process changes that need to be made as a result of just increases in model productivity, things like that to consider? Or is it more just kind of just product velocity output increasing on that side of things?

I mean you could imagine that we are using every single model provider in all parts of the organization right now. We're not yet at the point where we're ready to come to our investors and say, this is the benchmark productivity that we're going to we're going to run after. I think the biggest thing that we're seeing in terms of change is the front end of the software development life cycle. If you think about DevOps, DevOps did a lot for us in the back end of the software development life cycle in terms of how we would test code, how we would release code, how we would support code.

That's where a lot of that transformation occurred. A lot of the transformation that we're seeing right now is just the speed in the front end of the software development life cycle and how quickly we go from what used to be something that was in a PRD that is no longer in a document at all and is now a fully functional prototype that we're reviewing with a client instead of having conversations through PowerPoint or through documents -- and that's where I see a lot of -- frankly, a lot of promise for the organization.

And then within the support organizations, we've fully wired the company from a data perspective for access for all of the support organizations to try to speed up the time at which it takes to respond to customers and then ultimately, the cost that it takes to respond to customers. So I'm probably like every other software executive. We're watching our companies transform in months what we used to see happen in years. It's actually a pretty fun and amazing to be in a software company.

Yes. Makes sense. A lot of progress in a short period of time. It's great to hear. If I could just squeeze one more modeling question in. I think I heard the acceleration in the back half revenue perspective, that makes sense as we move past the term fees, et cetera. But is it possible to have a 3Q, 4Q breakout of the cadence to expect just and then for both revenue and EBITDA. I just want to make sure we have that right. We're not caught off guard, if that's possible. If not, that's fine. But go ahead and that out.

No worries. A couple of points, and I'll kind of talk about top line and EBITDA separately. So on revenue, the acceleration is very specific to Q3. And it is due to a more favorable year-over-year comparison. So there are some timing elements in the prior year that's driving that acceleration. If you just kind of think about the nature of our model, right, it's very predictable. We have a steady amount of ARR launches happening this year, very consistent dynamics from existing customer and ARPU growth. So just given that, I think that kind of -- you can calculate what that implies from a revenue perspective for our model.

Can I just say one thing, Andrew, because you followed us for a while. And I'm not trying to be coy, but I would just really encourage you to go back and look at the post Q2 commentary from last year where we were very specific and said, we actually took down Q3 last year because we had a termination fee that accelerated into Q2. And that's exactly what Cassandra is talking about, right? That's the exact -- it's no more complicated than that.

No, makes sense. And then just a round anything EBITDA, EBITDA largely tracked?

For adjusted EBITDA, we typically see adjusted EBITDA builds each quarter throughout the year. So Q4 typically is the highest, both obviously, in terms of dollars, but more importantly, the EBITDA margin and that trend we expect to continue.

But we got to give you prompt trying to get Cassandra to go ahead and give you a Q3 guide.

Exactly. You know I'm pushing the envelope, Alex. I appreciate it.

Your next question comes from the line of Ella Smith from JPMorgan.

So first, maybe for Alex, as banks start to grow as your total customer mix and backlog, are there any unique challenges of serving banks or differences you observe from serving credit unions?

For sure. It's really, I would call it, let's call it, product, technology and skills. So from a skills perspective, what we've had to bring into the organization are people that understand how to do commercial data conversion. So converting a complex business account and the data in a complex business account into Alkami is very different than converting the data from a retail account. And that can be account data, payment data. So all of that data set is very different bank versus retail.

From a product perspective, I think what we've mentioned over several calls is we've got a 3-phase treasury management build-out. And the first phase of our treasury management build-out was to put ourselves in a position where we could effectively move a bank that was on a legacy core providers platform into Alkami. And so that's the work that we've been doing over the last 12 months. And I think we largely finish up that work at the end of this quarter. So there's capability build-out that we have to do.

And then the cores themselves, bank cores operate more from a batch perspective, credit union cores operate more from a real-time perspective. So the core integration themselves and the way that we have to have Alkami, which is a data-hungry application, it's data hungry because we want to create a great user experience. You create a great user experience by having all the information in front of the user.

And so we've had to do some things with the way that Alkami interacts with the bank cores to make sure that the clients get good performance for their customers. So 3 big differences, the skills that we have to have in the organization, the application functionality that we have to create and then the technical integration to the cores themselves.

Perfect, Alex. That makes a lot of sense. And for Cassandra, are there any unit economics considerations that we should be aware of if Alkami signs a DSSP client versus a regular new logo digital banking client? Specifically, what are the implications to revenue, ARR and profitability that we should consider?

Well, I mean, one of the big benefits of DSSP is really around -- obviously, we're selling all 3 products at once, and we typically see about a 30% higher ARPU on our DSSP deals as compared to a traditional new logo. So that would be one. And that lends itself naturally to higher ARR, especially over time as these banks and credit unions grow with their user base. So very profitable customers for us. I would say consistent unit economics from an implementation cost perspective. we have to implement all 3 products, and we kind of do that over the first 12-month term. But otherwise, I would say the dynamics there are relatively consistent.

And the part that is untested, but we have optimism about is the -- what we've delivered so far is just the first phase of functionality of the digital sales and service platform. And that's -- those couple of use cases that I shared. But we're not going to stop building. And so what I get excited about is the opportunity to build new products that we have an opportunity to charge for, assuming that there's value in them to bring to the clients.

And then from my perspective, those would go into the digital sales and service platform at a lower cost of sale in terms of what the customer is buying. But remember, what we shared is 11 to 48 customers in 5 quarters. So there's not yet a long track record where we're able to say this is the change in the unit economics.

Your next question comes from the line of Saket Kalia from Barclays.

Alex, maybe for you, just to piggyback off that last question on DSSP a little bit. Clearly, that tool, as you folks just talked about, adds a lot more value at landing, but maybe that's a little bit of a longer sales cycle. I mean you talked about the 11 to 48. I guess as you look back, how is that sort of performing versus what you expected? And as you think about that sales cycle, is that about in line with what you expected? Or is it longer or shorter? Curious about how it's sort of progressing so far across that still relatively small sample size.

I got to tell you, completing an acquisition and then within a year having that kind of cross-sell, that blew me away in terms of expectations. So I'm pleasantly surprised I actually -- we don't have the data yet, but I actually think -- if you think about what we're showing a client in terms of the experience that they have bringing on a customer, you got 2 kind of things folks are looking for, can I attract a new customer and can I sell more products.

And so having this integrated front end, when people see it and they know how hard they've been trying to deliver it for the last 20 years across a set of 10 different technologies, my expectation is that the sales cycle is not going to be any longer. I don't want to predict anything.

To me, I would hope it's shorter, but it's still governed by the market dynamics that we talked about, right? This is -- the market dynamics are the long-term contracts. So that governs the sales cycle more than anything else, really.

Got it. Got it. That makes a ton of sense. Cassandra, maybe for you. I'm curious Sorry, please. I'm sorry.

Sorry for talking over you. We don't have this in our model. So remember, the most important thing for us is not can we win against a competitor. The most important thing for us is can we increase the number of people that decide to convert off their legacy technology. So this is not included in our model at all. But what I'm hoping is that DSSP creates enough value so that some of those folks that didn't want to go through the conversion effort decide to go through the conversion effort, and we unlock more opportunities within the market constraint that we have.

Got it. Very clear. Cassandra, maybe for my follow-up for you, and it's a little bit of a broader question. I'm curious if there's anything that we should keep in mind this year from just a renewal perspective. Over the years, we've just been growing the customer base. And of course, those customers are going to renew. I mean, is there anything that we should keep in mind this year just around potential tailwinds to RPU or gross margins or anything like that as you think about that renewal pool sort of steadily growing over time?

Thanks for the question, Saket. What I would point to is, certainly, there's gross margin benefit as we achieve higher levels of scale and more and more of our customers have been on the platform for quite some time now. So that does lend itself to higher gross margin. Upon renewal, we typically see customers increase their total contract value with us. They might buy additional product and obviously continue to grow their user bases.

So those benefit us, and we see that in increased ARPU as well as our NRR trends. So I guess those would be kind of the 3 areas I would point to in terms of the renewal impact. We don't have any real big concentrations in any 1 year where we have an outsized number of renewals. It's pretty evenly spread just given how long our business has been humming here.

Your next question comes from the line of Adam Hotchkiss from Goldman Sachs.

I guess to start on the Alkami Code Studio launch. Curious, I realize it's incredibly early, but curious as to sort of initial customer and prospect reactions to that. And then any indications as to how you might charge for that going forward would be helpful.

Yes. Let me make sure that I've got some clarity. The product that we announced is Alkami Engage, and that's the product that is collecting the account holder telemetry information. The reference to Code Studio, if you look at my prepared remarks, what I shared was that we showed a prototype technology demonstration. That is not a product that we have decided to release yet, and it's for all the reasons that you framed. We had it in our innovation studio. People love working with it.

But the 2 things that we're trying to work out really with any of these AI products are more the commercial terms than necessarily the technical terms. It's do we price it simply and then take the cost risk. I'm pretty sure if Cassandra and I showed up and said, tokens or profit guide, you all wouldn't give us a pass. So it's do we price simply and then take the cost risk or do we introduce a usage metric that's not a usage metric that the client has any history with, and so it's hard for them to model. So I actually mentioned 4 different prototypes that we showed.

You talked about Code Studio. That was just 1 of the 4. That's what we're in deep discovery with our customers right now. We have a handful that are using each one of the prototypes to try to understand what the most effective commercial terms are for the product. Given the platform that we have, the complication for us is not really -- I don't want to minimize how hard it is to build a new product, but it's not really can we build AI capabilities. It's really how do we monetize these AI capabilities in a way that it's easy for the customer to buy and it's safe for the company from a profitability perspective.

Yes. No, that's incredibly helpful, Alex. I think that makes a lot of sense, especially given what's happened to token costs. I'd be -- just a follow up on that. I'd be curious how that impacts your -- and I realize it's maybe a bit difficult now, but how does that impact this launch and some of the beta testing you're doing impact your sort of 3- to 5-year view of the platform?

Do you see Alkami becoming more customizable since the cost and accessibility of development is ultimately going to be coming down and you're going to be adding new features more quickly using third parties, first party, et cetera, beyond what you currently have in DSSP. Is that sort of the goal in the road map? Or am I missing the mark and there's something else to read into there?

Well, again, I don't mean to come across as starky when I say this. That's not my intent. But like all of our holy grail is to get more revenue and have it cost us less to deliver it. So that's what we are really looking at all the time. We're not yet ready to change the long-term model that Cassandra has talked about. So Cassandra talked about a long-term model that guides to Rule of 45. If and when we have enough evidence within our operations, either in terms of revenue lift or in terms of cost efficiency to change that model, then we'll announce that we're changing the model, and we'll give you the reasons why we're why we're changing the model. But we don't have enough evidence yet to change that longer-term model.

That concludes the Q&A portion of the call. Thank you for joining us today. You may now disconnect.

Good afternoon, ladies and gentlemen, and welcome to the Alkami Technology Fourth Quarter 2025 Financial Results Conference Call. [Operator Instructions] This call is being recorded on Wednesday, February 25, 2026.

I'd like to turn the conference over to Steve Calk. Steve, go ahead.

Thank you, Natasha. With me on today's call are Alex Shootman, Chief Executive Officer; and Cassandra Hudson, Chief Financial Officer.

During today's call, we may make forward-looking statements about guidance and other matters regarding our future performance. These statements are based on management's current views and expectations and are subject to various risks and uncertainties. Our actual results may be materially different. For a summary of risk factors associated with our forward-looking statements, please refer to today's press release and the sections in our latest 10-K entitled Risk Factors and Forward-Looking Statements. Statements made during the call are being made as of today, and we undertake no obligation to update or revise these statements. Also, unless otherwise stated, financial measures discussed in this call will be on a non-GAAP basis. We believe these measures are useful to investors in the understanding of our financial results. A reconciliation to the comparable GAAP financial measures can be found in our earnings press release and in our filings with the SEC.

I'd now like to turn the call over to Alex.

Good afternoon, and thank you all for joining us. I am pleased to announce a strong fourth quarter performance, which caps off a great year for Alkami. For both the fourth quarter and the year, Alkami exceeded consensus revenue and adjusted EBITDA estimates. In the fourth quarter, we grew revenue 35% and increased adjusted EBITDA to $19 million. And for the full year, we achieved revenue growth of 33% and adjusted EBITDA of over $59 million, which is more than double the adjusted EBITDA we delivered in 2024.

The fourth quarter was a strong sales quarter with 16 new digital banking clients, including 6 banks and 33 new MANTL clients, including 18 credit unions. In 2025, we matched the best year in our history in terms of digital banking new logos with 39 new clients, and MANTL had the best new client booking year in its history. Our MANTL origination platform now has 161 clients live, of which 26 are digital banking clients, and we now have 436 clients live on 1 of our 2 strategic platforms.

In addition to our overall performance, there are 3 areas of our business to call out: the performance of our MANTL acquisition, progress in the bank market, and our ability to integrate digital banking, deposit origination and data and marketing to improve our win rates. The performance of MANTL accelerated since we brought the 2 companies together. In addition to a full record full year new logo performance for MANTL, Q4 was a record revenue activation quarter.

A competitive advantage of MANTL is the combination of digital and in-branch originations, and MANTL is now powering over 1,000 bank and credit union branches across the U.S. It was also exciting to see 2 loan origination clients go live and 13 new loan platform clients signed in Q4.

We continue to make progress in the bank market, with Q4 being our second best bank new logo quarter in our history. In 2025, we brought 16 banks live on our digital banking platform and now have 50 banks under contract with 37 logged on the Alkami platform. We released a new suite of treasury management features with a follow-on feature bundled planned for the second quarter, all of which are intended to improve win rates. We are also seeing more banks separating online banking from their core provider, creating a long growth horizon for Alkami, as 78% of banks on dominant [ bancorps ] use the legacy core provided online product versus 43% of credit unions on dominant CU quarters who use the legacy online product.

Part of the MANTL acquisition thesis was the creation of the Alkami Digital Sales and Service Platform, or DSSP. This is the integration of our digital banking, account origination and data and marketing platforms with the intent to provide a financial institution with capabilities rivaling Chase and Chime. In the second half of 2025, we demonstrated outcomes like the ability to bring on a new account holder and have them in digital banking with multiple products and services in less than 5 minutes.

The Alkami DSSP had a positive impact on our second half performance. When we acquired MANTL, 11 clients -- 11 Alkami clients had all 3 DSSP products. At the end of 2025, we had 45 clients that have bought all 3 products. In the second half, 58% of new digital banking deals resulted in DSSP clients, and our win rates against all our competitors improved. In addition to improved win rates, we enjoy a 30% uplift in ARR when clients buy DSSP and increase the contract legs for origination and data and marketing, resulting in a total contract value uplift. The MANTL acquisition, progress in the bank market and initiation of our DSSP all contributed to a strong business performance in the second half of 2025.

I'm often asked about the impact of AI on Alkami. I believe that AI's impact will be significant, but not uniform across enterprise SaaS companies, and AI will be a net positive for Alkami. Let me remind everyone about key aspects of the Alkami business model. Alkami primarily prices our products by the number of digital account holders at an institution, with secondary pricing tied to metrics like money movement usage or asset size. In addition, our clients typically sign 5- to 7-year contracts.

Alkami employees have a deep understanding of the bank and credit industry and technology. This expertise has been developed through thousands of customer engagements and is used in areas of our business like the system conversion process. These conversions last 9 to 12 months, of which only about 2 to 3 months is actual configuration time. Our clients are highly risk-averse and regulated by agencies such as FDIC, OCC and COA and [ CSA ]. Their digital banking, deposit and loan origination platforms embed thousands of regulatory requirements, including NFI's decisions on how they've implemented KYC, AML, [ OFAC ], [ RIG EDNZ ], audit logging, examiner workflows, data retention and explainability requirements. Our platforms have to integrate into over 450 different financial technology systems, few of which have publicly available integration specifications and all of which have the potential for imposing legal liability.

Customers use Alkami as a system of record to codify items like their fraud mitigation practices, money moving thresholds, business logic for products, funding and interest rates. They memorialize customer due diligence, enhanced due diligence and decision logic such as approvals, outcomes and supporting reasons. On top of Alkami's business model, AI creates revenue opportunities in the form of current and coming AI products.

Segmint, the AI engine that powers our Data & Marketing platform, helps financial institutions deliver the right product to the right account holder at the right time based on behavior, transaction patterns and life events. This technology was attached to all but 2 of our new logos this year. One of the fraud products we sell uses AI to analyze how a user interacts with digital banking, identifying signals that distinguish legitimate account holders from fraud attacks even when logins appear valid. This technology was attached to 67% of our new logos this year.

At our April Client Conference, we plan to show a new product called Alkami Code Studio. Today, clients use our SDK to extend the Alkami platform for their unique requirements. We built an AI-native closed-loop development agent optimized on over 6 million lines of SDK code from across our ecosystem. This agent will enable prop-driven deployment of our SDK, and what used to take clients months will now take days.

AI models run on data, where clients want to deploy AI, but they need a data set unique to their industry to feed their models. We spent the last 18 months building a data lake that ingests cleansed core data, digital banking data, usage patterns and other information that can be used for AI. We have the opportunity to turn this data into products that our clients can use to deploy through [ own ] AI models.

Finally, AI will create leverage within Alkami. Over the last year, we've introduced [ agentic ] models and agents into our organization. And while we are not yet ready to change assumptions on our long-term financial models, early results are promising. We're using specialized AI agents in our development organization that in December alone changed over 1 million lines of code, leading to an 18% increase in developer productivity. We have proof of concepts underway in AI-driven test case generation, proactive anomaly detection to minimize downtime, and we are out of running agents to accelerate incident resolution.

Within our customer support and implementation organization, we're also seeing results that are encouraging. Members of the implementation team are seeing on average, almost 2 hours a day. And we've been able to slow the growth of our support organization while still achieving a 9% increase in speed of ticket closures. In addition, questions routed to the engineering organization have been reduced by 29%, freeing up engineering capacity. The pace of AI disruption will be relentless. And for a specialized vertical software provider in a highly regulated industry like Alkami, it will create new opportunities.

In closing, I'm energized as we start 2026. Within our ideal client profile, there are over 900 credit unions and 1,000 banks that are not using modern technology like Alkami. We continue to see steady demand for digital banking transformation. Our sales pipeline remains consistent with recent years, and Alkami has a superior position with differentiated products designed for scalability and populated with proprietary data. More than 1,200 Alkamists remain committed to our clients as our North Star and know that doing it right is as important as getting it done. Thank you, Alkamists, for who you are and for building the company where I get to work.

I'll now hand the call to Cassandra to discuss our financial results.

Thanks, Alex, and good afternoon, everyone. 2025 was a standout year for Alkami. We delivered robust revenue growth while meaningfully expanding profitability and cash flow, demonstrating the durability and leverage of our model.

For the full year, total revenue reached $443.6 million, up 33% year-over-year. Subscription revenue grew 32% and represented 95% of our total revenue. Adjusted EBITDA more than doubled to $59.1 million compared to $26.9 million in 2024, and our adjusted EBITDA margin expanded 530 basis points to 13.3%. Our performance built throughout the year and positioned us to exit 2025 with significant momentum.

In the fourth quarter, revenue was $120.8 million, up 35% year-over-year. Subscription revenue grew 34% and again represented 95% of total revenue. We increased ARR by 35% and exited the quarter at $480 million. Importantly, we have approximately $71 million of ARR in backlog pending implementation, which includes 42 new clients, representing roughly 1.6 million digital users. We expect the majority of this backlog to launch over the next 12 months.

Our results are reported inclusive of MANTL. At this point, the businesses are functionally integrated, and distinguishing between organic and acquired contributions is increasingly arbitrary. In fact, more than half of our new logos in the second half purchased digital banking, origination and data and marketing together. That's a direct reflection of the success of our Digital Sales and Service Platform strategy. DSSP strengthens our competitive position, particularly with banks, and extends contract durations across our origination in data and marketing products.

In the near term, we anticipate that a DSSP deployment may take longer than a stand-alone origination or data and marketing implementation, which would shift some revenue out by a few quarters. However, that short-term timing impact is more than offset by stronger long-term economics, including higher retention, longer contract duration and greater customer lifetime value. We believe this integrated platform strategy represents a structural competitive advantage.

We exited the year with 301 clients and 22.4 million registered users, an increase of 2.4 million users or 12% year-over-year. Over the past 12 months, we implemented 35 clients, supporting 1.3 million digital users, and existing clients increased their digital adoption by 1.5 million users. Our contracts provide strong visibility into attrition, typically 3 to 4 quarters in advance. In 2025, we churned less than 1% of our digital banking ARR. For 2026, we currently expect to churn 4 digital banking clients, which again represents less than 1% of ARR. This speaks to the mission-critical nature of our platform and the strength of our long-term client relationships.

Revenue per user increased to $21.44, up 20% year-over-year, driven primarily by MANTL's contribution, strong cross-sell execution and increased user adoption among existing clients. Remaining performance obligations were approximately $1.7 billion or 3.6x live ARR, up 26% year-over-year, providing strong visibility into long-term revenue. Fourth quarter non-GAAP gross margin was 63.4%, up 30 basis points year-over-year. Expansion in the quarter was more modest, primarily due to higher database technology costs. We view this as a temporary increase and expect these costs to decline by the end of 2026.

Full year non-GAAP gross margin was 64.1%, expanding nearly 140 basis points and driven by continued optimization of hosting costs, platform modernization and operating leverage across post-sale functions. Fourth quarter operating expenses were $57.9 million or 48% of revenue, representing 420 basis points of year-over-year expansion, primarily within R&D and G&A as we scale efficiently. Adjusted EBITDA in Q4 was $19.1 million, above the high end of our expectations, with an adjusted EBITDA margin of 15.8%. We have largely completed the initial investment phase of our captive offshore capability in India and expect incremental margin expansion as this facility reaches operational maturity in late 2026.

We ended the quarter with $99.1 million in cash and marketable securities. For 2025, operating cash flow was $42.9 million, up from $18.6 million in 2024. Free cash flow was $34.2 million, driven by our enhanced profitability in the year, and we repaid $45 million on our revolving credit facility.

Now turning to guidance. For Q1 2026, we expect revenue of $124.7 million to $125.7 million, representing growth of 27.5% to 28.5%, and adjusted EBITDA of $21.1 million to $21.9 million or 17.2% margin at the midpoint. As a reminder, we closed the MANTL acquisition on March 17, 2025. This timing will contribute approximately 8 percentage points of year-over-year growth to Q1 2026. Growth rates will become fully comparable beginning in Q2.

For full year 2026, we expect revenue of $525.5 million to $530.5 million, representing growth of 18.5% to 19.6%, and adjusted EBITDA of $93.5 million to $97.5 million or 18.1% margin at the midpoint. Our revenue outlook reflects several underlying assumptions. We expect continued cross-sell momentum across the platform and a consistent level of ARR launches throughout the year. We also expect high single-digit ARPU growth, which incorporates a slight moderation in user growth among existing digital banking clients.

In addition to those core drivers, we expect a 75% decline in termination fee revenue, which will reduce reported growth by a few percentage points in 2026. This impact is partially offset by the timing of the MANTL acquisition, which contributes modestly to our full year growth as mentioned previously.

Turning to profitability. We expect a full year non-GAAP gross margin of approximately 65%. In the back half of 2026, we expect adjusted EBITDA margin to be north of 19%, weighted toward the fourth quarter and in line with our typical seasonal patterns. Overall, our nearly 500 basis points of margin expansion reflects leverage in the model, efficiencies from our offshore operations and continued operational discipline. In addition, we expect stock-based compensation to be between 14% and 15% of revenue.

As we look ahead, we wanted to provide insight into our long-term model. These represent what we believe are achievable targets based on our long-term contracts and the current structure of our business. We remain confident in our long-term trajectory and expect to achieve a Rule of 45 by 2030, the key drivers of which include revenue growth fueled by a gradual increase in new logo wins in the bank market driven by our DSSP offering and continued leadership in the credit union market, consistent performance from our add-on sales effort and volume growth from existing customers that moderates in line with market growth, both of which we expect to drive continued RPU expansion and dollar churn of roughly 2% to 3% per year. Our long-term outlook does not assume incremental M&A.

From a profitability perspective, we expect non-GAAP gross margin approaching 70% as we improve execution on bank launches over time and become more efficient at supporting our clients. Average annual adjusted EBITDA margin expansion of approximately 300 basis points driven by efficiencies from our offshore efforts in India and operational improvements from achieving greater scale, particularly in R&D and G&A. Lastly, we expect stock-based compensation to decline to approximately 10% of revenue.

In closing, 2025 demonstrated the strength of Alkami's platform, the leverage in our model and the durability of our growth. We delivered best-in-class revenue growth, expanded margins meaningfully, generated strong cash flow and positioned the company for long-term value creation. We believe our Digital Sales and Service Platform strategy uniquely positions Alkami at the center of digital transformation for financial institutions, and we remain confident in our ability to deliver durable growth and increasing profitability in the years ahead.

With that, operator, please open the line for questions.

[Operator Instructions] Your first question comes from Andrew Schmidt with KeyBanc Capital Markets.

Welcome, Cassandra. Good to have you on the call here. I just wanted to start off on the 2026 outlook. Cassandra, you mentioned a few of the moving parts. Maybe if you could just walk through those? I think term fees were mentioned, DSSP implementation time frames, perhaps we could take a finer point there? And if there's any other factors to consider in the outlook because it does seem like the underlying demand trends are really strong, as you outlined. So important to parse out the moving parts in '26.

Sure. Thanks, Andrew. Thanks for the question. I think you're exactly right. I -- the underlying dynamics of our business are -- remain strong. And the items that we were commenting on regarding our 2026 guide are really timing related.

The termination fees, in any given year, we have some amount of termination fees, and 2025 happened to be a bit of a higher year as it related to that. And I think 2026 is just a smaller amount of those fees, and it is impacting our growth by a few percentage points in the year. In addition to that, it's very early days for DSSP, but just given the fact that we're selling 3 products together, and our clients certainly have the optionality of how they will implement those on their side and what works best for them, we've been modeling slightly longer implementation cycles kind of closer to that 12-month period, which is more typical for digital banking.

On a stand-alone basis, we would typically see our origination in data and marketing products be implementing -- implemented more around 6 months on average. So for those 2 products, in particular, when they're sold as part of a DSSP, we're modeling that revenue shifts out for 2 months as of now. Again, it's early days, and that may change over time, but felt that it was prudent to call out on the call.

Got it. That's super helpful. And I guess just a couple of follow-ups. Any other considerations in terms of implementation timing shifts outside of DSSP?

And then I guess, just the second one. It sounds like as these implementations come online, they sort of lap or you sort of move past the elevated term fees, the growth could step up potentially as we go into '27. Maybe talk about that a little bit? And then I guess, what's the right baseline for pro forma growth this year? Because I know there is a little bit of MANTL that's baked in. So just as kind of a jumping off part. I know I baked a lot in there, but any help there would be helpful.

No worries. Yes, I would say those are the 2 big call-outs, along with what I think we've talked about over the past several calls and the trend that we've seen with the growth from our existing digital banking clients normalizing over time, right? So I think that is a factor as well for our revenue guidance that everyone should be aware of. Not ready to guide to 2027 at this point. But I think if you...

That was a good try, though.

If you isolate -- if you really isolate the term fees and the small impact from the timing of the MANTL acquisition, it should give you a good sense of where growth would be in 2026.

Perfect. Thank you so much. And Alex, got to try. Can't blame me.

Our next question comes from Jacob Stephan with Lake Street.

I appreciate you taking the questions. Nice quarter. I just kind of wanted to touch on some of the milestones you hit here in 2025 and maybe kind of what you're seeing as you look at 2026 in the early kind of the first half here. Maybe if you could just kind of start with the loan activation. I know you said 2 go-lives in Q4, 13 signings in the same quarter. But maybe what are you seeing in the first half here with regards to MANTL and maybe overall DSSP?

Well, first of all, we've been really encouraged in terms of how DSSP helps with our win rate. We're -- what we're doing is creating a situation were instead of only focusing on a great user experience, which is really important. The integration of these 3 technologies actually creates a differentiated business outcome for the client.

So the first integration that we're able to deliver increases the conversion rate of deposit originations, which is critical for these institutions. So what we're seeing on DSSP is our ability to connect to positive business outcomes is helping our win rate. So that's been super helpful.

On the loan side, what we've talked about since the MANTL acquisition is that there is a project underway to build a loan capability. And that was driven by deposit origination clients who wanted to have an integrated front end, if you will, with both deposit origination and loan origination. The product build strategy has been to assemble a collection of lighthouse accounts, if you will, where those lighthouse accounts understand that they're participating in the build process and they're coming online as the product is becoming mature.

So we're still not yet at the point where we've taken this product and are making it generally available for our entire sales force to sell. This is still something that is sold very carefully with the right type of account who knows the situation that they're getting into. And we'll be very public with you and the rest of the investment community when we consider that to be a full product in our portfolio.

Got it. And maybe just kind of touching on the full suite and bank clients specifically. We've obviously been talking about banks and their higher ARPU kind of nature to them. But now it feels like you're really starting to gain some traction with banks. Maybe you could kind of give us like a forward-looking, what's in the pipeline in terms of banks? And how do you see the mix evolving over the next 12 months?

One of the things that I mentioned was that our pipeline is consistent with previous years. The big move in the pipeline probably occurred 18 months, 2 years ago when the pipeline used to be probably 70-30 credit union and bank and it moved to about 50-50 credit union and bank. And so you should just take from my comments that consistent pipeline means that it's about 50-50 credit union and banks.

The dynamic that I mentioned during the call is really important to our long-term growth if you look at the difference between a bank market being a suite buyer and a credit union market being a best-of-breed buyer. And what I mentioned on the call is 78% of the institutions that are on the dominant bank cores have a V1 legacy online banking application that is tied to the core. That's what we're seeing unwind. And we've got an assumption that's built into our model that, that unwinds at a relatively measured pace over the next couple of years. So upside to our assumptions could be if that unwinds faster than we're assuming. And that would -- given our current win rates, that would take up the number of bank wins that we're assuming in our long-term model.

But generally, what's win behind us in the bank market is our treasury road map is improving. Our technical skills to do the bank conversions, especially the commercial data conversions, is improving. And our knowledge of the dominant bank cores is improving. And what that does all of those things together reduces risk for a client who's making the decision to unwind from their suite purchase that they've had in the past and move to a best-of-breed purchase.

Your next question comes from Saket Kalia with Barclays.

Okay. Great. And welcome, Cassandra. Cassandra, maybe just to start with you. We walked through some of the moving parts on the revenue guide. But we didn't talk much about ARR. And I'm just kind of curious, I know you wouldn't necessarily guide to ARR on an out-year basis. But I'm curious, how do you think about it kind of going into '26? How much growth do you think we get from users versus maybe ARPU as we think about the building blocks?

Well, I guess I'm not prepared to kind of guide to ARR in that way. But if you think about the revenue guide, I think it translates pretty well to ARR. We expect high-digit growth in RPU. And I think we would see that flow through in the same way to ARR. And you can also see there's a pretty tight relationship in terms of the absolute dollar growth in revenue to ARR. So if you kind of look at that relationship, it should give you a good sense of how ARR will trend over time.

And then second -- this is Alex. We're trying to share in terms of how we think about our model. If you go back 3 years ago or something like that and you looked at our customers' organic growth, it was pretty far above the general market. But all the way back at that point in time, what we were signaling is as Alkami grows and Alkami takes share, you would expect that our customers' organic growth would begin to match that of the rest of the market.

And so that's one of the main things that we're trying to communicate to our investors is that which we told you several years ago, now that we've got 20-plus million account holders on the platform, that is becoming true for our company is that the customer organic growth is beginning to match the market.

That makes a lot of sense. It's a great flag and just shows how much market share you've taken over the years. So maybe that's a good segue into my follow-up for you, Alex. I mean, during your prepared remarks, you talked a little bit about customers that are still using some legacy tools, and you had some great stats on certain banks versus credit unions. But if I assume out a little bit, I guess, how do you think about the runway left maybe in terms of registered users, right, that could potentially modernize to a solution like Alkami over the coming years?

Yes. Thanks, Saket. That's one of the things I was trying to communicate in my comments. We look -- we go from TAM to SAM to ICP, right? So our ideal client profile. When we're looking at an ideal client profile, this is somebody that fits the size of institution that is the sweet spot for Alkami, right? So we would show up, and they would say what you have fits our need. And we have the experience integrating into the core that they're using. And so those are some of the numbers that I was sharing.

When we look forward, there's still 1,000 banks and 900 credit unions that are in our ICP that can move to a more modern platform. Now we're going to have to compete for that with other great companies that can move to a more modern platform, and we already have experience integrating into their core. And that's one of the things that gives us a view of the durability of our growth in the future is that kind of runway that we still have in front of us.

Now have a question from Ella Smith with JPMorgan.

For my first one, I'm hoping to estimate organic ARR growth. If you assume that MANTL was about $40 million of ARR in the quarter, you get to about 24% organic ARR growth. Is that about right? Or does MANTL contribute more in ARR?

I guess, as I said on the call, it's a bit tricky to really parse that out, right? So with DSSP now, we're selling the 3 products in a bundled transaction. So it's a little bit arbitrary to determine the true organic contribution of MANTL. Kind of the math you were just walking through directionally makes sense as you think about the size of the MANTL business and how fast it's growing. But as I said, it's getting tougher and tougher to really parse that out.

That makes a lot of sense. And maybe for a quick follow-up. Your 2030 financial framework seems to imply your team's confidence that mid- to high teens revenue growth is achievable. And in this moment, there's a lot of uncertainty surrounding multiyear growth for software companies. Is there anything about Alkami or the market you would highlight that would give investors greater confidence surrounding Alkami's top line growth?

I mean, I think we've -- very consistent with what we were just talking about on 2026. We have a lot of great dynamics underpinning our business model. We have long-term contracts, a very sticky product, mission critical in a lot of ways. And so I think that is a really good setup for very durable growth in the next several years.

Just to be clear on the long-term model framework, we're not guiding to specific revenue growth in those out years beyond -- not guiding to anything beyond 2026. We're really focused on achieving that Rule of 45 and expanding our adjusted EBITDA margin. Maybe a couple of things that might help you as you think about the model. In terms of how things will pace out over the years from margin expansion standpoint, we would expect that expansion to be more front-end loaded. So in the earlier is kind of consistent with the guidance I just gave for 2026 and the expansion we've seen over the past several years, we'll continue to see greater leverage from scaling our platform, having disciplined expense growth and seeing a continued mix shift towards our higher-margin revenue streams. As the model matures, the pace of margin expansion will naturally moderate. So I think that just might help give you some directional guidance on the overall picture.

One thing to call out on the revenue growth. If you're modeling that towards 2030, I would think of a more linear progression, just given how our business works. We're not going to see any gradual -- or we don't expect to see any gradual step-downs as we scale or any sharp inflections from year to year. So kind of to summarize that, margin expansion skews earlier in the period. Revenue growth moderates in a steady and linear fashion toward that long-term framework that I gave on the call.

Your next question comes from Cris Kennedy with William Blair.

I'd love to hear from you, Cassandra. What are the key things that you're focused on? And what do you see in the business that you're -- are your priorities now that you've got this role?

Thanks, Cris. Thanks for the question. I think -- it's been -- I've learned a lot about the digital banking market over my first 90 days or so here. I think my priorities are really on supporting our growth, especially on the new customer side and making sure that we're activating customers and launching DSSP in particular. And then also just making sure that we are getting product out the door quickly, especially on the treasury management and loan origination side, which are clearly the newer areas that we've been investing in and will drive growth for us in -- over the longer term.

So I'd say those are the biggest areas of focus for me as we think about the business, and also just everything AI related. I think that's a big topic and something that we are certainly putting a lot of energy into internally.

And thanks for the 2030 framework. As part of that, is there any way to think about free cash flow conversion as you think out into 2030?

Good question. I think you can see that we've been expanding free cash flow pretty steadily now, especially in 2025. And I think we'll see free cash flow conversion from adjusted EBITDA continue to improve. I think a target for us would be 90% cash -- free cash flow conversion in that 2030 time frame.

Your next question comes from Adam Hotchkiss with Goldman Sachs.

Alex, I wanted to touch back on the 900 credit unions and your ICP. I think the 1,000 banks, very clear, there's the new DSSP offering, you're working on bringing that to market. And I'm sure there's going to be a sales effort around that. How do you think about the 900 credit unions? You've had a foothold in the credit union space for a long time now. [indiscernible] catalysts for those folks moving on to more modern [ shots ] that you think have been barriers over the last 3 to 5, even longer years?

Well, there has not been a specific barrier. If you think about jump balls, there's a certain number of jump balls per year based upon contract expiration. So if you had a V1 product and you had a 7-year contract and you might have had some disappointment in that V1 product and you said, "Boy, I'd like to see some improvement to it," you might have decided to re-up for another 7 years on that product because you didn't want to do the conversion and you thought there was going to be some improvement to it. And then now you're coming towards the end of that product life -- or that contract and now you finally decided after 2 contract cycles in 14 years, I don't have the digital platform that I need. And so I'm going to go ahead and move to a new platform.

So those are the dynamics that we're seeing. Once again, this is a replacement market. This is a market share gain market, and that's why we see steady growth. You never will see explosive growth from a bookings perspective 1 quarter over another because it is a replacement market and it depends upon people getting to the end of their contract life cycle and then making a decision to switch.

Now one of the things that helps them make the decision is if there is a modern provider like an Alkami that has a track record of moving customers to a new platform. If you think about Alkami, we've -- in 3 years, we've probably moved as many customers to a new platform as we did in the prior 8 years. So now prospects are able to talk to a whole lot of clients that have gone through a conversion process. And those clients have said this conversion process is pretty good. You should take the risk, it's worth it.

So if I wrap all of that together on the credit union side, there's still a lot of market share that can be gained. That market share gets gained when the contract cycles come up. The customer has to have confidence that the conversion will go well. And all of those things now exist in the market in terms of confidence it can go well, good product, happy customers. That's why we still think that we've got room to grow in the credit union space.

Okay. Alex, that's clear. And then Cassandra, just on the EBITDA margin side for '26. Appreciate all the expansion that the company has had over the last 3 years, though I think the guide came in just a little bit light of expectations on the margin side. So anything to call out there, either on operating expenses or gross margin? Or is that maybe a little bit of conservatism baked in?

Thanks for the question. I think the one thing I tried to highlight on the call was the increased database technology costs that we started to incur in Q4. And those are pretty meaningful, a couple of million dollars that we've had to absorb. And so I think that's incremental to what we were expecting. And we do expect that cost increase to be temporary. And we will still expand our adjusted EBITDA margins by another 500 basis points in 2026 even with those incremental costs, but that would be the one thing that I would call out as a bit of an incremental or new thing that we're dealing with for this year.

I'm going to be less kind than Cassandra. If you go back to beginning of 2023, one of the guides that we gave was that in 2026, we'd be at 20% adjusted EBITDA. And then when we made the MANTL acquisition, we said that, that would temper down to 19%. We've had a third-party vendor that we run their database who just doubled our license cost. And that is the exact difference that you see between the 19% that we told you and what Cassandra is guiding to right now. And so now we're going to convert off of that database because we're frustrated that we got hit with a 2x increase on the database cost, and that's why it's a short-term anomaly for us.

Your next question comes from Jeff Van Rhee Craig-Hallum.

So Alex, just in terms of the mix of displacements when you're coming in and displacing legacy fabrics or frameworks, what are you displacing now versus, call it, 2 years ago and what's changed? .

Well, in the bank market, it's primarily the digital platform that's offered by the core vendor. In the credit union market, it is -- I mean, the good news for us is, you know all the players in the market. So there's probably 3 modern players in the market, 1 that's primarily credit union, 1 that's credit union and banks.

We are not displacing any of those technologies, and they're not displacing Alkami. All of us are displacing where you can see kind of V1. So the bank market is always a core -- digital banking application that's tied to core. In the credit union market, there have been some companies that in the past had very good technology, but maybe in the most recent past, say, the last 3 to 4 years, they haven't been investing in their [ technology ]. Those are the ones that we're replacing.

Okay. One brief question on the bank side. If I have it right, 10 bank wins, second half of the year versus 9 a year earlier. Just thoughts there, specifically with the go-to-market? I know you've been trying to through getting more integrations and other things that you think will improve the ability to go sell that. But I know it's been a focus. Just where are we in terms of figuring that out? And what has to happen for that really to start to accelerate for you?

One of the big changes that we made from a go-to-market perspective is as we announced in the middle of the year that Nathaniel moved into the Chief Revenue Officer role, and through the back half of the year, he made a decision studying the market, studying the team, that from a new logo perspective, we would have a bank sales team and a credit union sales team on the online banking side. So that's a big change for us going into this year. We've always had a blended sales team prior to that. And now we have a concentrated sales team and a concentrated credit union team.

In terms of the core integrations, we have experienced with the dominant cores that we need to do the integrations into for a client. As I may have mentioned in the third quarter call, we structured a commercial relationship that really has turned out to be a fantastic relationship with one of the core providers where we jointly do things like performance modeling with them. We've got direct support with them. And so that's helped us quite a bit in terms of allowing customers to be confident.

Remember, the essential situation that we have with a bank client is they want a more modern platform. They have never existed with a best-of-breed strategy, and they need to overcome their perceived risk and get into that best-of-breed strategy. So when we can come to them, where we're working jointly with one of the core providers, we can help them see how that conversion is going to go. We can help them see what kind of support we're going to have. It really begins to derisk their decision. And Jeff, that's really what we have to do in the bank market is derisk a client's decision. Desire is to make a change, just whether or not they get comfortable with the risk.

Yes. Helpful. Maybe just last for me. Is there -- are you experiencing -- I don't know. It seems like a lack of urgency on the part of buyers that seem to have spiked maybe midyear last year. As I think about the progression of the guide through the year last year, as the year progressed, the year generally got more back-end loaded, and it was just that the go-lives were delayed. And going into midyear, I think you had 12-plus quarters, at least by my model, of mid-20s organic. And then in Q3, you dropped, call it, mid-teens and upper teens. And same for Q4, it looks like we're looking for the same in Q1. And I would have thought if a lot of those go-lives that were going to be in the second half of last year are pushing to this year, that should make up for some of these difficulties of a couple of points of termination and other things. So more like very high picture, is there some very high-level behavioral change of the buyers where there just isn't the urgency for some reason either to sign or maybe even more particularly just get these implementations live?

No, I wouldn't say so. I mean, I think the underlying business fundamentals are there. But if they haven't changed and the demand environment remains strong -- but if you think about us implementing relatively consistent level of ARR between 2025 and 2026, I think that implies a certain level of growth.

It becomes a math equation when 1 part is getting bigger. But we did our research. So just on the research is that 2024 had a slight decline in market jump balls, and then 2025 came back up. So -- that would just be the 1 buyer behavior thing that we did see is a slight dip in 2024 on jump balls and [indiscernible] back up in 2025.

Did the -- did you see a change -- I promise, the last one. Did you see a change in the add-on sales as a percent of bookings? I know you've been sharing that every quarter. I'm just wondering if there was any movement there this quarter?

Roughly the same, Jeff.

Your next question comes from [ Alex Newman ] with Stephens.

Just -- could you expand on some of the capabilities of the MANTL LOS, just in terms of the types of loans you can originate? Just specifically, I know there's some consumer capabilities, but if you're able to originate commercial loans? And if not, if that's on the road map?

Yes. What our customers are asking for right now that we would target is retail and HELOC down. So that would be the focus. Once again, as I said, we -- these are very selected engagements with customers right now. We'll come and tell you all when this is generally available and we're off selling it to everybody. But for the near term, this is retail and HELOC down. And as we have success with that, then we'll have optionality to build other capabilities and move into commercial market or other types of products.

Great. And then can you just provide an update on the progress of [ cross-sell ] activity between MANTL and the digital banking client base and vice versa and how that's progressing?

I think one of the things that I mentioned in my opening comments is there's 160 -- I'm doing this off the top of my head, I'm not looking at my notes -- there's 161 live clients on the deposit origination platform. And of that, there's 26 digital banking clients.

I think the important one was when we put the 2 companies together, there were only 11 Alkami online banking clients that had all 3 products, that have our data marketing platform and had the origination platform. And at the end of the year, under contract are 45 clients that have all 3 products. So I think that speaks to the progress that we've made on creating demand for the integrated platform.

Okay. Awesome. And just -- if I could squeeze one more in here. Just any updates on capital allocation priorities as we head into '26?

Sure.

Well, you saw us pay down some things, that was a use of money.

Yes. And I think you'll -- we'll continue to focus on paying down at least our revolving line of credit. From a capital allocation standpoint, I mean, we're assessing that all the time. For us, opportunistic M&A continues to be a longer-term priority that from a capital allocation perspective, that we're always assessing. And share buybacks would be something that we would continue to assess as well. So no changes today in our capital allocation approach, but something that we're constantly assessing.

Thank you. And as there are no more questions, we will -- I will now say thank you for joining, and you may disconnect.

Hello, and welcome to the Alkami's Third Quarter 2025 Financial Results Conference Call. My name is Andrew, and I will be your operator for today's call. [Operator Instructions] This call is being recorded on Thursday, October 30, 2025.

I would now like to turn the call over to Steve Calk. Steve, you may begin.

Thank you, operator. And with me on today's call are Alex Shootman, Chief Executive Officer; and Bryan Hill, Chief Financial Officer. During today's call, we may make forward-looking statements about guidance and other matters regarding our future performance. These statements are based on management's current views and expectations and are subject to various risks and uncertainties. Our actual results may be materially different. For a summary of risk factors associated with our forward-looking statements, please refer to today's press release and the sections in our latest 10-K entitled Risk Factors and Forward-Looking Statements.

Statements made during the call being made as of today, and we undertake no obligation to update or revise these statements. Also unless otherwise stated, financial measures discussed on this call will be on a non-GAAP basis. We believe these measures are useful to investors in the understanding of our financial results. A reconciliation of the comparable GAAP financial measures can be found in our earnings press release and in our filings with the SEC.

I'd now like to turn the call over to Alex.

Good afternoon, and thank you all for joining us. I am pleased to report that Alkami continued to deliver strong revenue and profit results in the third quarter of 2025, which I plan to discuss. The first, I'd like to announce that Alkami has selected a new Chief Financial Officer to succeed Bryan Hill, who previously announced his intention to retire. Also, as discussed earlier this year, Alkami entered into an agreement with Bryan, in which he will be available in a consulting role to the company for some time in the future.

Alkami's new CFO is Cassandra Hudson. Cassandra brings to Alkami over 20 years of experience building, leading and advising companies through rapid growth, capital market transactions, international expansion and M&A activity. Most recently, she served as CFO of StackAdapt, a leading advertising and marketing technology company. Prior to that, she was CFO of EngageSmart, where she guided the company through a successful IPO and drove meaningful growth in both revenue and profitability. Earlier in her career, she spent 12 years at Carbonite in a series of finance leadership roles, ultimately serving as Chief Accounting Officer and Vice President of Finance. Cassandra comes on board next week, and I'm looking forward to the investment community spending time with her in the coming quarters. I'm grateful that Cassandra said yes to Alkami and excited to have her on our executive team.

Turning to our business results. In the third quarter of 2025, Alkami grew revenue over 31%, increased adjusted EBITDA to $16 million and exited the quarter with 21.6 million registered users on the Alkami platform, up 2.1 million from the prior year quarter. Q3 2025 was also a strong sales quarter, equal to our best Q3 ever. We added 10 new clients on our Digital Banking Platform, 6 credit unions and 4 banks. And one of these clients is the largest new logo transaction in our history. Including this client, Alkami now serves 5 of the top 20 credit unions in the United States.

On a year-to-date basis, our new logo performance is consistent with the last 4 years. Our sales pipeline for Q4 and 2026 is also in line with recent years. And looking further into the future, out of the top 2,500 FIs, excluding megabanks and super regionals, there are still over 900 credit unions and nearly 1,000 banks that are not on a modern platform like Alkami. For these reasons, we remain bullish about the growth opportunity ahead of us.

Our MANTL business also delivered a strong new logo sales quarter with 29 new MANTL clients, 15 of which are new to Alkami. Our cross-sell efforts are beginning to materialize, as year-to-date, MANTL has added 68 new logos, including 29 that are existing Alkami clients. As I mentioned in the previous call, we now have 2 strategic platforms in which we can initiate a relationship with a financial institution. Year-to-date, the company has signed 23 new logos with our Digital Banking Platform. And in the same period, 39 new logo relationships have been created with the Onboarding Platform in FIs that do not have Alkami Digital Banking. Together, that is over 60 new platform client relationships with whom we can expand over time.

From a qualitative perspective, we continue to see positive market reaction to the combination of Alkami and MANTL. In a midyear survey, 80% of bank and credit union leaders in our target market said the MANTL acquisition will have a positive impact on Alkami. Our prospects appreciate that if you want to attract deposits, acquire new account holders, increase engagement and improve operational efficiency, you need Alkami's Digital Sales & Service Platform, which is the combination of our Digital Banking, Onboarding & Account Opening and Data & Marketing Technologies.

We had 6 renewals in the third quarter, and we had an amazing quarter in terms of online banking implementations. In Q3 2025, we brought 13 new clients onto our Digital Banking Platform, the most in a single quarter in our history. 6 of the 13 are banks. And year-to-date through October, we've implemented 14 banks, of which 8 are integrated to the core system that represents our largest market opportunity.

MANTL also had a strong implementation quarter, bringing 15 clients onto our Onboarding and Account Opening Platform, which was as many as we implemented in the entire first half of 2025. If you combine institutions that are live on either our Digital Banking Platform or our Onboarding and Account Opening Platform, we now serve 413 financial institutions, of which 124 are banks and 289 are credit unions.

We also had an exciting quarter in terms of product progress. The design work of our Digital Sales and Service Platform, which once again is the integration of Digital Banking, Onboarding and Account Opening and Data and Marketing, is complete. We've assigned a dedicated engineering team to the build effort and expect to show product to our clients at our spring customer conference. This effort can impact future growth, as we now have 17 clients under contract for all 3 technologies. And delivering the planned product integration can generate a 30% uplift to our new logo ARR.

We also released our new Money Movement Hub, have a one-click SDK deployment in beta, and we showed our client community a prototype of an agentic code creator that builds tailored products for an FI. We released 2 new features for treasury management and last week added an additional 6 treasury management features to our beta client community.

In Onboarding and Account Opening, we are accelerating in-branch product adoption, have continued momentum on account maintenance. And our pioneer loan platform client originated over $4 million in loans in their first 6 months of product usage. From a partner perspective, we created a new development team dedicated to our partner ecosystem, which will double the number of partners we can onboard each year. This will create future growth potential and improve customer satisfaction by giving our clients more capabilities for their account holders.

In closing, I'm proud of the more than 1,000 Alkamiists who achieved another strong quarter of results for our clients and our investors. As we finish 2025, I'm excited about our continued innovation and execution, our resilient growing market and a business model with several growth levers.

I'll now hand the call to Bryan to discuss our financial results.

All right. Thanks, Alex, and let's do this one last time. Shall we? Good afternoon, everyone. In the third quarter of 2025, we achieved total revenue of $113 million, representing year-over-year growth of 31.5% and organic growth exceeding 20%. We continue to improve adjusted EBITDA to $16 million compared to $8.3 million in the year ago quarter, further underscoring the operating leverage of our financial model. Subscription revenue grew 31.5% in the third quarter and represented 96% of total revenue. We increased ARR over 31% and exited the quarter at $449 million.

We currently have approximately $67 million of ARR and backlog for implementation, the majority of which will occur over the next 12 months. Included in our backlog are 37 new digital banking clients representing 1.7 million digital users. We exited the quarter with 291 live clients and 21.6 million registered users on our Digital Banking Platform, representing registered user growth of approximately 2.1 million or 11% compared to last year. Over the last 12 months, we implemented 32 financial institutions.

Because of the long-term nature of our contracts, we had 3 to 4 quarters of visibility into upcoming client attrition. In the last 3 quarters of 2025 3 clients left our platform, representing less than 1% of ARR, and 2 clients were merged with existing Alkami clients. Over the long term, we modeled digital banking ARR churn at 2% to 3% per year, which we have historically outperformed.

We ended the quarter with an RPU of $20.83, up 19% compared to a year ago, driven by the acquisition of MANTL and add-on sales success. Excluding MANTL, RPU increased 7% over the prior year. We continue to see broad-based demand across our product portfolio. This is reflected in our sales pipeline, new client wins, client renewal success, our ability to cross-sell new products into our installed base and now the rate at which we are seeing the market adopt MANTL and our data and marketing analytics solutions.

In the third quarter, we signed 10 new Digital Banking Platform clients and renewed 6 existing clients, representing 16 total digital banking contract signings. One new client win during the quarter was a top 20 credit union representing 450,000 digital users. We expect 25 to 30 renewals in 2025. MANTL added 29 new clients in the third quarter, including 15 that are Alkami digital banking clients. We now have 44 clients under contract that subscribe to both the Alkami Digital Banking Platform and the MANTL Onboarding and Account Opening Solution.

Our add-on sales continue to increase as a percentage of total sales. Our add-on sales effort, excluding MANTL direct sales, represented just under 50% of new sales for the year, 4 percentage points better than the same period in 2024. Our remaining performance obligation was approximately $1.6 billion, representing 3.6x our ARR and up 25% compared to a year ago.

Now turning to gross margin. For the third quarter of 2025, we delivered a non-GAAP gross margin of 63.7%, representing nearly 100 basis points of expansion compared to the prior year. We achieved gross margin expansion through continued improvement in our hosting cost efficiency as well as operating leverage across our post-sale operations. For the first 9 months of 2025, gross margin was 64.4%.

Moving to operating expenses. For the third quarter of 2025, operating expense of $56.4 million or 50% of revenue represented year-over-year operating leverage of approximately 360 basis points. We primarily drove operating leverage across R&D and G&A, where we continue to realize operational scale.

We are on track for adding engineering talent at our Global Capability Center located close to New Delhi in India's National Capital Region. We now have over 110 Alkamists at this facility with an expectation of approximately 150 as we exit 2025. Related to sales and marketing expense, we continue to achieve a high level of sales team productivity and go-to-market efficiency ranking among the very best in SaaS. Sales and marketing is expected to be approximately 15% of revenue for 2025. Our adjusted EBITDA in the third quarter was $16 million, $2 million better than the high end of our expectations and representing an adjusted EBITDA margin of 14.1%.

Turning to our balance sheet. We ended the quarter with $91 million of cash and marketable securities. During the third quarter, we used a portion of our cash to reduce our revolver by $25 million, bringing our current balance to $25 million. For the first 9 months of 2025, operating cash flow was $26 million, which is net of a onetime acquisition items of $7 million. Excluding these onetime items, this is over 2.5x the operating cash flow of $13 million in the year ago period.

Now turning to guidance. For the fourth quarter of 2025, we are providing guidance for revenue in the range of $119.6 million to $121.1 million. At the midpoint, this represents organic growth of 22%, 200 basis points higher than Q3's organic growth. For adjusted EBITDA, we are providing fourth quarter guidance in the range of $16.1 million to $17.1 million. For the full year, we are providing guidance for revenue in the range of $442.5 million to $444 million. We are also providing full year adjusted EBITDA guidance of $56 million to $57 million, representing a raise of just under $4 million above the midpoint of our previous full year guide.

In conclusion, we are pleased with our continued revenue growth and margin expansion. We remain positive about the demand environment and our continuing ability to acquire, grow and retain our clients. This gives us confidence in our ability to achieve our long-term financial objectives and drive shareholder value.

Now on a personal note, it has been a great honor to serve as Alkami's CFO for the past 6.5 years and to steward the company as we expanded revenue 500% and increased profitability over $95 million since 2019. We also engaged in multiple capital raises and acquisitions and built one of the best teams in digital banking. I want to thank our shareholders and our clients and especially our team for helping make this a reality, and I'm excited to see what Alkami can do in the coming years.

And with that, I'll now hand the call to the operator to take your questions.

[Operator Instructions] Your first question is from Andrew Schmidt from KeyBanc Capital Markets.

Your final call here at Alkami, Bryan. Congratulations on the transition. It was great working with you from the IPO up until today. So congrats.

Great working with you, Andrew.

I wanted to just maybe just go back to what you said, Bryan, on the organic growth for the fourth quarter. Obviously, we saw the revenue growth, the outlook come down just a little bit. But I think you mentioned that organic growth is actually accelerating. Maybe you can dig into that a little bit, maybe something that's inorganic or MANTL related that's setting the outlook, but that would be a good place to start.

No, that's a great question. Look, first, I'm very proud that 19 quarters consecutive at Alkami as a public company, we've either met or exceeded both our revenue and adjusted EBITDA guidance. So that's a mark that many companies cannot say. But as we think about our transition of revenue growth from Q3 to Q4, we've said this many times. But the timing of implementations during the year makes a big difference on any 1 quarter's year-over-year growth.

As an example, if you compare the first 9 months of new logo implementations in '25 to '24, we actually had approximately 100,000 more in the first 9 months of 2024. But then when you look ahead to Q4, in 2025, Q4 is really our greatest implementation quarter. We're going to have close to 350,000 more users that we implemented in Q4 of this year versus last year. So that transition provides us the step up in organic revenue growth in Q4, both on the top line for revenue but also for ARR.

And just to add to that, the schedule of when we're doing the implementations depends a lot on when the customer wants to do the implementation.

That's right.

Right? And so that creates, as you said, Bryan, sometimes those dislocations between the quarterly comparisons.

That's right.

Got it. So implementation schedule, but underlying organic growth is healthy and accelerating. Understood. And maybe just a quick question on the competitive environment. So obviously, well-documented transition from a large core provider announced this week. Wondering if -- I know -- I understand they're more on the core side, but did you see any benefit from that? Just in terms of folks coming to you and maybe just reevaluating the tech stack in general, looking for advanced digital banking tools, et cetera. Just curious if that's a benefit for you? Just -- if you have any other comments on just the overall environment that you want to share, that would be helpful.

I don't think for us, any particular company's results in a quarter make a difference in the buying behavior necessarily. What we do see in the bank market -- and we've talked about this before -- the credit union market has historically been a best-of-breed market. It's a buyer who is used to combining a digital banking platform that's different than their core provider.

The community bank market has not been that kind of market. The community bank market was a market that very much bought digital banking from its core provider. And Andrew, that's the biggest thing that we're seeing change is the opening of momentum of people saying, "I'm going to actually have a different digital banking application than my core provider." And that's why it's so important -- what I shared in my opening remarks, of look, since the beginning of the year, we have brought 14 banks live, and 8 of them are on a core that we consider to be our largest market opportunity.

So in summary, no particular quarterly result changes the customers' buying behavior. The most important thing that we're seeing in the community bank market is the beginning of the willingness to buy best-of-breed instead of suite.

And Andrew, keep in mind, out of the 250 million digital users that comprise our addressable market, less than 30% of those are on a contemporary platform. And so the decision to switch to a contemporary platform such as an Alkami -- what we've seen through many different disruptions in this market, whether it was SVB, high interest rates, you name the issue, the demand has remained consistent through that. So if a provider in the market is experiencing problems for different reasons, whatever the case may be, that doesn't really expect the fundamental drivers of what's causing the change.

And then we introduced the MANTL acquisition. We combine that with our online banking platform as well as our data and marketing analytics solution, and we think that's a game changer in the market. As we pointed out on the call, we now have 44 shared clients with MANTL under contract. And we only had 15 when we completed the acquisition. That's significant progress. We think that progress is going to continue as the market continues to understand the power of bringing these 3 primary platforms together. It's a differentiator for them. It's a moat and a differentiator for us.

Your next question is from Patrick Walravens from Citizens.

Great. This is [ Austin Cole ] on for Pat Walravens, and let me extend my congratulations to you, Bryan, as well on your retirement. I wanted to ask -- touch on that topic of disruptions. And I was just kind of wondering if you're hearing anything out there kind of regarding AI and the ability to kind of use some of these tools to build potentially some digital applications and if that's something that's resonating out there in the market at all or not so much?

We actually just had our Customer Advisory Board -- this is Alex. We had a Customer Advisory Board last week for several hours. And probably half of that conversation was how they're either using generative AI or using agents and the different use cases that they have. And so every single financial institution is either using or experimenting with either agentic technology or with generative technology.

None of them think about building their own software with agent technology. Their view is the level of complexity in terms of building the software, integrating that into different core technologies is not something that is on their radar screen. And once again, the thing to remember is, even if 6 different customers have the same exact core, the age of those cores and the way that the core is designed is all 6 of those will be completely different -- completely different implementations. So once again, a lot of interest in use cases for generative AI and for agentic AI, but nobody is talking about building their own system.

Okay. And then if I could just follow up quickly. When you kind of look at your own digital banking solutions and those potential use cases, where are maybe some of those areas that customers would be interested in seeing elements of kind of AI or agentic workflows? And could that be -- could that bolster the product set?

Yes. Well, first of all, there's -- we have AI in our technology today. We use AI in our Data and Marketing platform to create precise audience segments for clients. We have AI embedded into chat products that are in our products. But if you're specifically talking about either agentic AI or generative AI, one of the things that I mentioned in the prepared remarks. So today, we have a software development kit or an SDK in which a client can build can build functionality that extends Alkami. Today, what they have to do is they have to have a developer that builds that functionality.

What we've done is we've taken all of the code that's ever been submitted into Alkami. For example, we've had over almost 3 million lines of code submitted to Alkami since the beginning of this year, and that's customers extending Alkami, so we've taken all of that code, and we've been training an LLM with the code, the instructions, et cetera, and think we'll have the ability to create a prompt based code creator for an FI. So that would be extremely attractive to an institution.

The team that builds onboarding and account opening and building the loan platform and building the account management platform has built out an agent-based banker capability, if you will. So for the banker who is interacting with somebody, how can they rapidly understand everything about that client across all of the systems within the bank.

So to answer your question, there are dozens of use case areas where we can bring capabilities to clients that they're excited about, and we're excited about doing it. We've got -- as I said, we've got 2 pilot projects underway that I just described.

Your next question is from Saket Kalia from Barclays.

Okay. Great. Congrats on hiring Cassandra. And Bryan, tip my cap to you on your next phase.

Great. Thanks, Saket.

Absolutely. Alex, maybe for you. It sounded like the selling activity in the quarter was really strong. But maybe some of the implementations are a bit more Q4 weighted than at least we were thinking. And if you look back at the last few years, it's been that third quarter that's been the strongest quarter in terms of adding new users to the platform. So was maybe some of this -- the push from Q2 -- or the timing from Q3 to Q4, is this because there's just maybe a couple few customers? Or is there may be some shifting seasonality that you're starting to notice in the business?

If I separate it between signing and implementing, if I could talk about those 2 separately, I'll start with implementing. There is a small amount of seasonality in terms of implementing. So when we are talking to a client about the implementation schedule, when you think about the rhythm of their year, they would prefer to implement sometime in late -- either sometime in late Q1, into early Q2 or after Labor Day and before Thanksgiving. So if you just thought purely of the seasonality of their business, there is some preference that the clients have in terms of the time of year that they want to implement.

And if I just look back over the last 4 or 5 years of all the implementations that we've done, it does -- there is a little bit more that happens in Q2 and a little bit more that happens between Labor Day and Thanksgiving. That tends to be what I would say, some type of seasonality. Nothing in terms of online banking happens over the Christmas holiday, right? Because that's when everybody has to be able to access our digital banking.

And then we really don't experience -- there's not any implied seasonality from a bookings perspective, right? A lot of that just depends upon historically, when did the clients contract and when do they need to get a contract signed so that they can get the implementation scheduled. So I don't really see a lot of seasonality necessarily in terms of signings, and then there's some customer behavior in terms of the implementations.

Got it. Got it. That's super clear. Bryan, maybe for my follow-up for you. I just wanted to -- just around the same topic. I just want to make sure I understand how the timing of implementations maybe impacts the revenue guide. And understanding it's very small. But it sounds like because these implementations are maybe happening, again, maybe a quarter later than what we were expecting, that's 1 less quarter of revenue for the full year. But it sounds like from the ARR perspective, we still get the ARR that we were expecting by the end of the year, kind of in line with what we were originally expecting. So we get a quarter less of revenue for the year, but from an ARR perspective, it really shouldn't change, change that view. Is that the right way to think about it?

That is the right way to think about it, Saket. You can have ebb and flow during the year in terms of implementation dates, pushing back, moving forward. And that can impact in your revenue, but the key takeaway is we're going to have a step up to 23%, 22%, 23% in live ARR growth as we exit the year, which is in line with our expectations at the beginning of the year.

The comment I was making in responding to Andrew was really a year-over-year comparison. And so let's separate that from when you have 1 quarter of visibility, what could happen in a quarter. And when you look at Q3, we had some new client implementations shift out during the quarter, which can have an impact on in-quarter revenue. We had 13 implementations for new clients on online banking in Q3 of this year, which is our highest. We had some resource reallocation that occurred to those new online banking client implementations, and that has some marginal impact on an add-on sale implementation.

Now the good news is we go into Q4, and we have $67 million of ARR into backlog. A lot of that is add-on sales and MANTL, and much of that backlog associated with those lines of businesses will implement in the fourth quarter, further driving us to hit the step-up in live ARR growth in the quarter. So that's a lot of different moving parts, but I wanted to provide you a perspective that there are several different levers here that we can push. But the end result is where does live ARR end and how does that compare on a year-on-year basis.

Your next question is from Jacob Stephan from Lake Street Capital Markets.

I'll echo the congratulations to Bryan as well. It's been a pleasure working with you. So there's -- you guys made an interesting comment about 900 middle market institutions that are not on a modern platform yet. If I recall, there's -- you guys have always kind of said there's about 2,000. Just curious, maybe you could help us think through the segments of the remaining 900? Are these -- are we through a lot of the low-hanging fruit and people that are ready to switch immediately, and maybe now we're starting to work into longer sales cycles? Or maybe just help us think through some of that commentary.

Yes. And let me make sure that we've got the specifics correct. What I said is, of the top 2,500 FIs, excluding megabanks and super regionals, there are still over 900 credit unions and nearly 1,000 banks that are not on a modern platform like Alkami, right? And so as we've always said, all these clients are on multiyear contracts. So that means a portion of them come up every year to make a decision. And some of them decided to make a change, and some of them decide to stay with their incumbent provider.

But the main takeaway for us is we've got -- Bryan, how many live online banking?

291.

So we got 291 live online banking customers. And we still have a lot of runway in this market from a digital transformation perspective. And that 2,500 is our target market. So that's the main point I'd like you to take away from it is within our target market, even given the size that Alkami is today and almost $0.5 billion of revenue, we still have quite a bit of market that we can sell into and continue to grow.

Got it. Okay. That's helpful. And then maybe just touching on gross margin here. I think -- in Q2, it looked like we were trending well above kind of the 2026 framework, 65%, but we did see a sequential step down, and you guys are obviously seeing some nice operating leverage. But maybe help us think through some of the gross margin pressures in Q3. Is this strictly MANTL, increased cloud cost or just kind of drill down on that?

No, it's really related to some of the third-party IP that we sell through our platform. Some of the excess fees associated with those sets of products were lower than what we had originally anticipated in the quarter, and that had the effect of driving down gross margin. But that's the main impact sequentially. Year-over-year, we still expanded gross margin 100 basis points, and we'll exit the year just under 65% gross margin for the full year, and we feel really good about where we could actually perform from a gross margin perspective in 2026.

And remember, when Bryan and I came out and shared with you all, a longer-term view of the business model, it would get to 65% gross margin by the end of 2026. So we feel like we are ahead of what we had planned to do.

Your next question is from Ella Smith from JPMorgan Chase.

So first, I was hoping to ask about the record or near record number of implementations. I'm curious, what is enabling you to implement more customers in a given quarter?

Thanks for the question. The services team has continued to rebuild their implementation methodology. And the services team and the product and engineering teams have some different ceremonies that they've created that allow them to collaborate on changes that they need to make. Our code is not a code where you do any custom development, you're doing configuration in the code for the client. And so the teams studied their the best implementation that they do. They looked at the behavior of the company and the best implementations versus the ones that took longer. And then they just started replicating. I don't mean to minimize because it's a big piece of work. They started replicating the behaviors of the best implementations. And that included things like how can we help the customers test the code. That included things like taking over on behalf of the customer, all of the third-party relationships that were going to be necessary during implementation. .

And then a lot of cycle times that have been increased from a speed perspective in terms of the product, the engineering teams and the services team. So I would just characterize it as just really good old-fashioned work that went into understanding what it takes to make a great implementation and then figuring out how to replicate that. So I'm very proud of the company, very proud of the services team to be able to implement 13 clients in the quarter. And we also, last week, had 3 clients go live in the same day. And we've only done that 1 other time in our company's history. So that team is really performing well.

And this is a scale game. So I mean, you can't perform at this level unless you've scaled your business to a point to where you're over 20 million digital users. So our ability to implement is definitely a differentiator for us in the market. And I'd like to echo Alex's complements towards this team because if you drill down into the numbers -- and Alex mentioned this in his prepared comments -- but we also implemented 6 banks during the quarter. We now have 33 banks live. So 20% of the banks that we have live were implemented during the quarter that we had our highest new client implementation quarter.

So that says a lot to the progress that this team has made. It also says a lot to the progress that we're making and now, how we can go to market and sell to a bank with this level of track record and success in implementing a bank financial institution.

That's very helpful. And if I can throw in a quick follow-up. Can you speak to the factors that led to your backlog ticking up in the quarter? And if you can provide any color on its composition, that would be really helpful.

Well, we have 1.7 million digital users in our backlog now. If you look back a year ago, that number was about 1.2 million. So one of the largest factors is the fact of the number of digital users that we have in backlog. It's almost a year's worth of digital user growth, which provides significant visibility.

And then also MANTL, MANTL is contributing in a big way to our implementation backlog. When we acquired MANTL, we suggested that MANTL would reach $60 million of ARR under contract. So that would include the backlog. We're almost at that level as we cross over Q3. So MANTL is doing a very good job in selling their products direct. As we mentioned in our prepared comments, we're doing a great job of cross-selling MANTL into either a new client win or into our installed base. We now have 44 shared clients under contract, which is 29 more than when we acquired MANTL.

And then also the attachment rate of Segmint, so our data and marketing analytics product. For the year, we're attaching at a rate of 75%. So if you step back from this and you go, well, what's the significance of the company being able to sell these 3 individual platforms into a client? Well, when you add Segmint and MANTL on a new client win or even a sell into our installed base, it increases the ARR 30%. So it's a pretty significant boost in ARR growth and ultimately, subscription revenue growth.

Your next question is from Cris Kennedy from William Blair.

Thanks for taking the question. And...

Looks like that question was just connected -- would you mind requeueing, please? Your next question is from Adam Hotchkiss from Goldman Sachs.

Great. And Bryan, great working with you. Best wishes to you going forward. I wanted to talk about -- Bryan, I know you've talked about the high visibility into revenue you have entering any given year. Could you maybe talk a little bit about the pieces outside of that, right? Maybe some of the surprise cross-sells that you get in any given year that would ultimately lead to the outperformance versus the visibility that you have in a given year. How are some of those cross-sells and upsells tracking relative to historical trends?

Our cross-sells actually, as we mentioned on the call, as a percent of our total sales, excluding MANTL, to keep the comparison consistent, was just under 50% through the first 9 months of this year, which was a step up from last year. So our view is we're ahead of where we would like to be from a cross-sell perspective. Our ultimate goal was to be at 50% in 2026. So of our new client wins, 50% of those, banks, 50% are credit unions, but of our total new sales, 50% derived from our cross-sell activity. And MANTL is only going to accelerate that.

Okay. That's really useful. And then one of the things that struck me intra-quarter with some of the MANTL announcements like the Taktile partnership and the bulk account opening product. Can you maybe just give us some color around what MANTL provides you from an innovation perspective now that you have them under your roof? Does it allow you to accelerate and pull forward some of these innovation projects that you've been thinking about? Any color around that would be useful.

Yes. Well, the biggest thing that it provides us is the ability to deliver one of the most important business capabilities that a regional and community financial institution wants. Let me go back just a little bit. These institutions are institutions that have great relationships in their community. They want to grow. But as with everything over the last couple of years, the digital experience makes a huge difference in terms of whether or not they're able to grow.

The experience that they're able to create today without something like Alkami and MANTL technologies coming together, the experience that they're able to create today for a new customer or member that wants to sign up or a new customer member that wants to buy a new product is not a very good experience at all. It's a choppy experience that goes between 3 or 4 different systems, sometimes requires a call into a call center, sometimes might even require a piece of paper to be signed. And so their growth strategy depends upon having an integrated front-end experience that is seamless and intuitive.

So I would tell you the biggest opportunity that we have -- and this is actually the work that is underway right now, where we are building the integration between the 3 products between the data and marketing platform, the onboarding and account opening platform and digital banking is that a new customer of an institution or an existing customer of an institution who's buying a new product, that's a completely seamless experience with a great user experience. And that is a business capability that every single one of our customers and prospects absolutely wants.

Now beyond that, what's great about the team that we put together with Alkami from MANTL is it is a highly innovative software product software team. And so they already have 3 or 4 ideas, like how can we build out an account maintenance application. As we talked about earlier, innovating from a loan origination platform perspective. So that team has a very high velocity of new product development and a lot of creative ideas, and we expect them to be adding product to the portfolio that we can monetize. So we remain really excited about the acquisition that we did.

And Adam, think about -- so it's important, what Alex just shared as it relates to where we can have innovation. And there's other areas in the company where we can drive innovation. But when you have a financial model that affords the visibility such as Alkami's, and you're scaling your profitability at a very high rate. It provides you the luxury to pull forward some of those investments and invest in those areas while you're still over delivering on your commitments from a profitability perspective. And I think that's a key differentiator as you think about the investment thesis and Alkami is what fuels the engine in a public company that fuels the engine of innovation, but yet still allows that business to deliver on its profitability goals. That's a balancing equation you have to walk through. But because of the visibility we have into our revenue and profitability, it provides us that luxury.

The next question is from Cris Kennedy from William Blair.

I'll just echo the comments to Bryan and Cassandra, congratulations. It's good to see the 4 new bank wins in the quarter. Can you just talk about what you're seeing there? And was it related to combining the sales forces of Alkami and MANTL?

Yes. I mean, the one -- I would say the main thing that we're seeing -- remember, this is a risk-averse marketplace. They're having to move from a suite to a best-of-breed. And they want to know that a company has got a track record to successfully move them onto a modern digital banking platform. So our success in bringing previous clients onto the platform is creating confidence in the market.

The other thing that's happening is we're accelerating building capabilities in our treasury management portfolio. And so we're able to meet with prospects and show them the capability that we have in treasury management, show them the advanced capability that we're building, show them the teams that we have dedicated to building that capability and project the rate and speed that we're going to be adding those capabilities.

So if you think about a client, right, they're making a decision today, knowing that they're coming on the system in 9 to 12 months. And so they're evaluating, for example, the treasury management capability that we have right now. They're evaluating the wisdom of our road map, do we know what we ought to build. They're evaluating our track record for building those features and getting them into production. And they're making a decision on a year from now, is this company going to have, a, the capability to connect me with the core I have to their digital banking system? And is this company going to have the commercial, what you call it, commercial business banking, treasury management, are they going to have the capabilities that I need to run my business?

And what we're seeing is that all the hard work that we've been doing over the last couple of years is now starting to create traction in the market where people can see that we're bringing customers live and people can see that we're building software. They want a modern platform, and they're picking Alkami.

Understood. And it's great. And then as a follow-up, it's great to hear MANTL is nearing $60 million of ARR about a quarter ahead of expectations. Can you just talk about the loan origination initiative for MANTL and kind of what you see as the opportunity with that?

Well, let me remind everybody what we've talked about in terms of our loan origination platform is we said there are a set of lighthouse clients that are collaborating with Alkami and MANTL to build a loan platform. And we're going to be bringing those lighthouse clients on the loan platform. We're going to be evaluating product market fit and our ability to do a great job for those clients. And sometime towards the end of this year or the beginning of next year, based upon our evaluation of our ability to go to market with that product, then we'll make a decision to go to market with that product. That is not a generally available product that our sales team can sell right now.

So to frame your expectations, it's a market that would like us to be in it. It's a product that we're building, but we're going to make darn sure that it's got great product market fit, and we've got live customers that are satisfied before we put it in the bag of the sales team.

Your next question is from Jeff Van Rhee from Craig Hallum.

This is Daniel Hibshman on for Jeff Van Rhee. On MANTL, I think what really stuck out to me a lot about some of the numbers you were quoting there, the signings this quarter, if I have it right, 29 new clients from MANTL, 15 of which were new to Alkami. So call it, half of the MANTL signings this quarter were Alkami clients. And I assume cross-sell plays a really big role in that. I mean, the MANTL base can't be half Alkami clients. I think you said -- I would infer that financial basis closer to a sort of market share division in terms of Alkami.

So half of new client signings come on coming from the Alkami base. I mean, are we looking at MANTL's signings almost doubling as a function of being tied up with Alkami? Just your thoughts on the pace and impact that Alkami being part of MANTL is bringing.

I'm going to give you a qualified answer, and I'll let Bryan talk to the numbers. What you've seen from our base is a demand for a great, highly intuitive onboarding and account opening product. And so when they see MANTL and what that team has built, they want to buy the product. So it's had great reception in our market. I would never project doubling sales.

Yes. I mean -- and -- and so MANTL joined Alkami. So let me kind of put that out there. I think you said Alkami joined MANTL. But MANTL joined Alkami. And so when we acquired MANTL, we tried to compare that to our Segmint acquisition, which is our data and marketing analytics products. And what we had at the time of the acquisition as an investment thesis, is the fact that the acquirer, the purchaser within an FI of the MANTL solution is generally the same or close to the same, and it's closely situated to the individual who buys online banking. So we have a good contact from a cross-sell into our installed base perspective that would allow us to leverage those relationships.

Now comparing that to the data and marketing analytics product, we see a very, very high attachment rate on a new logo sell, new client win when the C-suite's involved in the decision. The challenge that we initially had with that acquisition was it's a different buyer in the financial institution. So the relationships that we had for cross-selling into our installed base weren't necessarily the relationship to champion that purchase decision, that buy decision within the FI.

We don't have that challenge with MANTL. So that's what we should point out. And that's why we're seeing very early success and much greater success than what we experienced with the Segmint acquisition in the first 2 to 3 quarters.

That's helpful. And then just on the ARR and backlog for implementation, I believe I heard that was $67 million, just -- for the fact check, if that's correct, $67 million in ARR in backlog for implementation. And then if that was $68 million last quarter, I have written down here. So a slight ticked down sequentially there. Just given the 10 new signings on the digital banking platform, strong signings for the quarter like you called out, just why would that not pick up? What are the dynamics there?

We had a significant implementation quarter. We had the largest number of online banking, new client implementations than we've had in the history of the company. And within that, there were 6 banks, and there was also a very large client that went live as well. So we...

Also, MANTL had as many implementations in Q3 as in the entire first half.

Yes. MANTL continues to improve their throughput of implementation. So there's other -- so there's -- that's the factor that pulls out of your backlog, and it was just a significant implementation quarter, which what gives us confidence in the step-up in organic growth both for revenue and ARR as we exit the year.

There are no further questions at this time. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.