Hello and welcome to Alkami’s First Quarter 2022 Financial Results Conference Call. My name is Danielle and I will be your operator for today’s call. I would now like to turn the call over to Steve Calk. Steve, you may begin.

Thank you, Danielle. With me today on the 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 Form 10-K and 10-Q 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 any forward-looking 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 comparable GAAP financial measures can be found in our earnings press release and in our quarterly filings with the SEC. I’ll now turn the call over to Alex.

Thank you, Steve, and thank you all for joining us today for our first quarter 2022 earnings call. I’m pleased to report that Alkami delivered another quarter of strong performance. Bryan will provide details in a few minutes, but I’d like to share some highlights. In the first quarter, we grew 35%, which was ahead of our expectations. We exited the quarter with 12.8 million live registered users on the Alkami platform, which is up 2.8 million users year over year. In terms of sales, the first quarter was solid. We have five new logos and four renewals of existing clients and our sales pipeline growth exceeded our expectations. In addition, we have 40 new logos and considerable add-on sales and implementation already, all totaling $37 million in ARR. I continue to be impressed with our team, the outgoing product portfolio and the market opportunity we have in front of us. Thank you to all for welcoming us for your passion and execution. We started off the year very well. Last week, we held our annual user conference in Texas with 325 client and prospect attendees representing 149 financial institutions. This is the largest in-person event in our history and through many hours of conversations with clients, prospects, and partners, I heard a consistent call for mandatory innovation. The industry knows that it has a significant opportunity to transform and become the kind of service that customers demand in a digital age. Our clients understand that a good digital experience attracts and retains customers. In fact, in a study conducted specifically for this conference, 80% of Americans say the quality of their digital banking experience is essential to a new firm becoming their primary financial provider and 46% of Gen Z and 50% of millennials report such a poor experience with financial providers’ digital offerings that they opened an account at a new company. I’d like to share with you some specific areas of digital banking that were top of mind with our conference attendees. First is user experience. Our customers want to digitize as much of the banking experience as possible, and they need a great user experience to make that happen. We’ve always been passionate about delivering the user experience that, based on independent Mobile App Store ratings, is one of the best in the market. Our investments in functionality, ease, speed, and integration are why we continue to grow faster than any major digital banking provider. In a few weeks, we will release a new mobile platform that includes an enhanced user experience and one that enables our clients to customize and expand their mobile solutions while also effectively doubling our mobile development velocity. Second is security. Alkami has always focused on providing security innovations to help our clients protect their institutions and customers. Our security partnerships range from machine learning behavior to heuristics, biometric security, foreign soft security tokens, and digital authentication of users. Our ACH alert acquisition is an example of our products being developed with security in mind. With this technology, in just the last 12 months, we’ve monitored the flow of over $300 billion of ACH checks and later transfers, and account holders have stopped over $1.5 billion in fraud without financial institution intervention. Third is access. Alkami has a front-row seat since financial institutions serve as the economic backbone of our communities. We see the power that’s unlocked when consumers and businesses can interact with their financial institutions in an always-on digital world. It’s why we acquired MK Decision, now known as Alkami Ignite. Alkami Ignite provides seamless onboarding and a frictionless experience for users to open deposit or credit accounts, and just one example of how we help expand access to financial resources. Fourth is data. Financial institutions know that targeted, personalized, and relevant communications are a requirement. In the study I referenced previously, we found that 64% of Gen Z wish their financial provider offered a more personalized digital banking experience. This is why we announced the acquisition of Segmint, an innovative marketing data platform with 147 banking and credit union clients. Segmint is a modern data platform that leverages machine learning and artificial intelligence to provide financial institutions with data-driven marketing strategies and analytics. Segmint expands our total addressable market by $1 billion. As an immediate threat to the product and portfolio, it enhances the value of our dataset and helps our clients generate incremental and attributable revenue on the Alkami platform. Segmint is also a great complement to our recent acquisition of MK Decision, as I said earlier, now called Alkami Ignite. Alkami can now offer a complete solution for every stage of the end customer lifecycle from account opening to servicing and engagement to cross-sell and back to account opening. And with very little overlap between the Alkami and Segmint client bases, we see a clear path to broaden our combined relationships in the market. I’m also encouraged by the resilience of our customer base. About a month ago, I met with 17 customer CEOs, and they told me that cash deposits have surged since the beginning of the pandemic, which has weighed on net interest margins. However, they have some confidence that they see a recovery in certain types of loan demand. These leaders are aware that continued innovation will be key to strengthening their businesses in the next cycle. We also continue to see elevated M&A activity among the 10,000 financial institutions in the marketplace. The institutions we serve are acquirers in this market, and their digital user growth—which was 14% in 2021—is typically higher than the market average. For our part, we continue to see strong demand for digital banking innovation, which creates growth in our pipeline, as banks and credit unions view digital banking as a core strategy and a data partner like Alkami. This is a great first quarter. More than ever, I’m convinced we’re on the right track with our focus on five areas. Number one, we are committed to becoming the digital banking provider of choice for banks while maintaining our market leadership position with credit unions. Number two, we will continue our focus on growing add-on sales, and we’re seeing good progress here, as evidenced by our financial performance this quarter. Number three, we continue to allocate investment to make our platform the foundation of our clients’ digital banking infrastructure. Customers I talked with at our conference say they want an extensible platform that allows them to plug and play fintech innovation. Fourth, we are strengthening our focus on talent, ensuring that Alkami remains an attractive employer in the market and making the right investments to keep our teammates in global careers. And fifth, we will remain agile on the M&A front. Our recent acquisition of Segmint demonstrates that we are measured and strategic in our acquisitions, and I expect to continue that thoughtful approach. In closing, thank you again for joining the call to hear about Alkami’s progress and the road ahead. I can speak for the management team and the entire company when I say that we’re proud of the results we’ve delivered to date and we are energized by the opportunity in front of us. With that, let me turn the call over to Bryan.

Thanks, Alex, and good afternoon, everyone. In the first quarter, we continued to execute and deliver strong financial results. Let’s begin with revenue. In Q1, we achieved revenue of $44.8 million, which outperformed the high end of our financial guidance by $800,000 and represented growth of 35% compared to the prior year. This was driven by continued strong performance across all our primary revenue drivers. We implemented three new logos in the quarter, bringing our digital platform client count to 179 compared to 156 in the prior year. As a reminder, we expected the first quarter of 2022 to be the lowest in terms of new implementations, which is consistent with 2021, and we expect the cadence for the remainder of the year to be in line with 2021 as well. For example, we now have 40 new logos representing 1.6 million digital users in the process of implementation. During the remainder of 2022, we expect to implement financial institutions from our backlog representing 1.4 million digital users. We exited the quarter with 12.8 million registered users live on the platform, up 2.8 million or 28% compared to last year and up 464,000 sequentially. Over the last 12 months, digital user growth continues to be driven by two areas. First, we’ve implemented financial institutions supporting 1.3 million digital users. And second, our clients have increased their digital user adoption by 1.5 million users, representing 15% growth. We continue to drive revenue per user through add-on sales and hire new client revenue per user, growing revenue per user to $13.80, up 3% compared to the prior year quarter. This compares to our blended market opportunity of approximately $54 per user, excluding the Segmint market opportunity, which I will address momentarily. Subscription revenue grew 36% compared to the prior year quarter and represented 96% of total revenue. We increased annual recurring revenue, or ARR, by 32% and exited the first quarter at $177 million. It’s important to note that we currently have over $37 million of ARR in backlog for implementation over the next 12 months. As we begin 2022, demand for our products remains strong. We are excited to start the year with stronger sales execution than experienced during the first quarter of 2021. In addition, new sales opportunity creation continues to gain momentum, with our sales pipeline over double the amount of the same quarter a year ago. Our new sales performance for Q1 2022 outperformed the prior year for both the quarter and a trailing 12-month basis. Our client sales team continues to build on their add-on sales success, representing just over 40% of new sales in the first quarter. This team also renewed four clients during the quarter. We are very excited about the continued success from our client sales team and expect this to be an area of continued growth and investment. We now serve a total addressable market of nearly $11 billion. This includes $1 billion in TAM related to our recent acquisition of Segmint. As the premier digital banking provider in the space, we believe we have a significant opportunity to expand our total addressable market both through product development and M&A activity. Now turning to gross margin and profitability. Our target operating model is a non-GAAP gross margin of 60% to 65% as we scale our revenue. We expect to achieve this at a pace of 200 to 300 basis points of gross margin expansion on average per year. However, in some years or quarters, gross margin expansion might exceed our average objective. Conversely, in some years or quarters, we may experience lower expansion resulting from investments in M&A activity. For the first quarter of 2022, non-GAAP gross margin was 58% compared to 55% in the year ago quarter. Expansion was driven primarily by revenue scale, greater utilization, and cost efficiencies in our client implementation, client support, and client success functions, and was somewhat offset by higher costs associated with our third-party revenue relationships and gross margin dilution from our MK Decision acquisition. Please note that M&A integration and investments in operational activities, such as our client implementation team, will constrain margin expansion for the next few quarters. Moving to operating expenses. For the first quarter of 2022, non-GAAP R&D expense was $12.3 million or 27% of revenue. A year ago, R&D represented 32% of revenue. The margin expansion is primarily attributable to revenue scale, but we continue to grow R&D on an absolute dollar basis or 16% when compared to the prior year quarter. Non-GAAP sales and marketing expenses were $7.1 million or 16% of revenue. In the year ago quarter, sales and marketing represented 15.7% of revenue. The primary driver for the uptick is headcount investments in our sales and marketing teams, as we scale for our next phase of growth, the addition of a Chief Revenue Officer to our executive team, and the return to pre-pandemic sales activities such as industry conferences. Non-GAAP general and administrative expenses were $10.9 million or 24% of revenue. In the year ago quarter, G&A was approximately 27% of revenue. The margin expansion is primarily attributable to revenue scale. During 2021, we experienced growth in G&A expenses throughout the year as we absorbed incremental public company costs. We have now reached a sustainable level and expect to leverage G&A expenses as a percentage of revenue, as evidenced in Q1 of 2022. Our adjusted EBITDA loss for the first quarter was $3.6 million, better than the high end of our expectations and considerably better than the year ago quarter. As a reminder, our goal is to balance investment opportunities with revenue growth and to maintain a good line of sight toward adjusted EBITDA positive, which we expect to achieve as we exit 2023. Now moving on to the balance sheet. We ended the quarter with just over $209 million of cash and marketable securities, representing a $9 million net use of cash during the quarter. We closed the Segmint acquisition on April 25 for consideration of $135.5 million. On April 29, we amended our credit agreement, which now includes Silicon Valley Bank, Comerica Bank, and CIBC. We are very excited to partner with these financial institutions. The amended credit agreement will mature on April 29, 2025, and it expands our revolver from $25 million to $40 million. It expands our term loan from $25 million to $85 million. The amended credit agreement also allows us, subject to certain conditions, to request additional revolving loan commitments in an aggregate principal amount of up to $50 million. We funded the Segmint acquisition with approximately $60 million of incremental term debt and $75.5 million of cash from our balance sheet. As evidenced by our acquisition of Segmint, we continue to seek opportunities to use our balance sheet and access to capital to accelerate technology growth and expand our addressable market through M&A. We approach M&A with conservative guidelines around ROI, deal size, and portfolio integration, and we expect to continue with this approach going forward. Now turning to guidance. For the second quarter of 2022, we are providing guidance for revenue in the range of $47.5 million to $48.5 million, and adjusted EBITDA loss of $7 million to $5.5 million. Our Q2 revenue guidance includes approximately $2 million from the Segmint acquisition. Our Q2 adjusted EBITDA guidance includes incremental costs from our client event, strategic projects, and an expected small loss from the Segmint acquisition as we begin integration. For the full year 2022, we are raising our guidance and now expect full-year revenue in the range of $198 million to $201 million and adjusted EBITDA loss of $21 million to $18 million. Our full-year guidance includes approximately $9 million of revenue and a range of negative $1 million to an immaterial positive amount of adjusted EBITDA from the Segmint acquisition. We expect Segmint’s annual recurring revenue under contract at December 31, 2022, to be in the range of $15 million to $17 million. This represents a growth rate of 30% to 50% based on the same metric in the prior year. In addition, the full-year adjusted EBITDA guidance continues to assume moderate pressure on wages resulting from an increasingly competitive environment for recruiting and retaining talent. This continues to be an area of focus and is key to our success in 2022 and beyond. To summarize, we posted a strong first quarter, closed a substantial acquisition that expands our total addressable market by $1 billion. We continued our good progress in sales, implementations, technology infrastructure, and human capital, and we continue to improve our position in the marketplace. With that, I’ll hand the call to the operator for questions.

The first question comes from Mayank Tandon of Needham. Please go ahead.

Hey, good afternoon. This is Sam Salvas on for Mayank today. Congrats on the results. I was wondering if you guys could talk a little bit more about the Segmint acquisition and your expectations regarding cross-selling the Segmint offering with the core Alkami platform.

Hi, this is Alex. Thanks for the question. We’re excited about two things. Number one, this is a very attractive product as a stand-alone sale, right? So the company has built itself into an attractive company with, as I said earlier, well over 100 customers selling Segmint directly to financial institutions, and we’ll continue that motion and expect success with that motion. We’re also very excited about cross-selling to the Alkami base. Our customers have always wanted to use data to improve the way that they personalize their marketing offers and targeting and then also be able to deliver offers back into the mobile product, if you think about it as a channel. So you would take data from Segmint and allow our customer to better target one of their better targets and develop an offer and make that offer, but then also distribute that offer into the Alkami mobile product as a channel. To give you an example, we closed the acquisition right before we started our customer conference. So, the Segmint folks were at our customer conference and obviously, our customers were there. The breakout sessions for the Segmint topics were standing room only. There was a lot of enthusiasm from our customer base. So in summary, we’ve got a great opportunity to sell this product and technology stand-alone without the Alkami product. And we also see a lot of value that’s created for our customers in selling Segmint back into our customer base.

Got it. That’s very helpful. And then just a quick follow-up. I was wondering if you guys could talk a little bit more about some of the new business wins and renewals from the quarter. And what the mix was there between banks and credit unions?

Yes, that’s great. In Q1, we had a very successful quarter in new sales in a couple of different areas. Primarily, when you compare to the prior year, either in a quarter or a trailing 12-month basis, Q1 resulted in a significant start for the year, which we’re super excited about. But it was heavily dominated by banks, which is exciting for us. Out of the five new logos that we had, four of those were banks. On average, the financial institutions that are just over $2 billion of assets across all five took about 15 products, resulting in an RPU of $25 and that compares to our $13.80 company average. So we’re continuing to see each quarter and each year our sales force getting very good at selling multiple products as we expand the platform in that initial order. What’s equally exciting during the quarter is our client sales team. The client sales team represented over 40% of our business and total TCV that we added during the quarter. That’s a step up from last year. It’s a step up from Q4, and now it was a lower new logo quarter for us. So you would expect client sales to represent more of the sales during the quarter, but on a year-over-year basis, client sales was up significantly. Again, great momentum coming out of that team. The four renewals we had represented close to $2 million of ARR collectively across those renewals. We were successful in increasing the run rate from that business by 7%, fairly evenly split between price increases on existing products and adding new products as a part of the renewal. In 2022, we expect to renew close to $20 million of ARR which, up to this point in our lifecycle, we’ve only renewed across all years $20 million in ARR. So, a very exciting renewal year for us and we hope to perform at the same level that we had in the past.

Awesome. That’s super helpful. Great to hear. Thanks for taking the questions again and congrats on the results.

Thank you.

There are no remaining questions. Thank you for attending Alkami’s first quarter 2022 conference call. You may now disconnect.