Good afternoon, ladies and gentlemen. And welcome to the Alkami Technology Fourth Quarter 2024 Financial Results Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. This call is being recorded on Thursday, February 27, 2025. I'd like to turn the conference over to Steve Calk, Vice President of Investor Relations. Steve, please go ahead.

Thank you, Alan. 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 section in our latest 10-K. 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 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'll turn the call over to Alex.

Thank you, Steve. Good afternoon, and thank you all for joining us. I'm pleased to report another great quarter of financial results for Alkami, which contributed to an outstanding full-year performance. During the fourth quarter of 2024, Alkami grew revenue 26% and generated over $10 million in adjusted EBITDA. In addition, we ended the quarter with 20 million users on the Alkami Platform, which is up 2.5 million users compared to the prior year. For the full year of 2024, we delivered revenue growth of 26%, adjusted EBITDA margin expansion of 900 basis points, and improved operating cash flow by over $36 million. We are proud of these results as our execution continues to track the multiyear revenue and profit targets Bryan and I provided at the beginning of 2023. I'd like to make a few comments on the quarter and the year, and then I'll discuss our plans to acquire MANTL. In our fourth quarter 2021 earnings call, we outlined a five-point plan to drive our desired long-term business outcomes. First, we would succeed in the bank market as we had in the credit union market. Second, we would leverage add-on sales to drive growth. Third, we would invest in our platform for efficiency and differentiation. Fourth, we would become a destination company for talent. And fifth, acquisitions would be part of our growth equation. Alkami's current business results are an outcome of excellent progress on these five business objectives. At the end of 2024, we had 42 banks under contract, including 23 live on the Alkami Platform and 19 in our backlog. This compares to eight banks on our platform at the end of 2021. We remained focused on the credit union market as we were investing in the bank market. And in 2024, we became the number one digital banking provider in the credit union market in terms of mobile users. As a reminder, our longer-term goal is to generate half our new logo wins in the bank market and half in the credit union market. Since 2021, we have almost doubled the participation of add-on sales to Alkami's new bookings. In 2024, add-on sales represented 45% of new bookings at Alkami, compared to 24% in 2021. Our client sales team has been a key part of increasing our revenue per user by 30% since the end of 2021, and they have more than tripled our annual renewal count over that period, with 42 in 2024 versus 12 in 2021. Within the Alkami Platform, our investments have improved quality, resiliency, and scalability. We migrated over 90% of our platform's microservice traffic to Kubernetes and enabled auto-scaling capabilities. Our availability has increased to 99.99% for 2024, and we believe we are the only provider that includes maintenance windows in our availability calculations. Our hosting costs per user have improved by 26% from our quarterly high watermark over the last three years, and platform investments have improved the efficiency of implementations. Hosting costs and implementation efficiency have been prime drivers of an improvement in gross margin of almost 600 basis points since 2021. On the talent front, we've increased our retention rate 10% to 85% since 2021. Our employee engagement scores are 82% favorable. In 2024, the awards Alkami won include Best Culture, Best Sales Team, Best Product Team, Best HR Team, Best Engineering Team, Best Leadership Team, and Best Places to Work in Fintech. This leads me to the final business objective we discussed, which is to grow through acquisitions that fit into the strategy and business model of Alkami. We are excited to add MANTL’s people, products, and clients to Alkami. Nathaniel, Ben, and the rest of the MANTL team have built a great company that solves a really hard problem, which is critical to our market. And most importantly, they've done it with a great culture and a commitment to the customer. MANTL offers the premier SaaS solution for onboarding and account opening and serves as the front door for deposit originations for both consumer and business accounts in a wide variety of financial institutions. Over the last couple of years, we've heard from our clients and the broader market about the increasing strategic need to improve the way they open accounts for new customers and add products for existing customers. For example, Alkami fielded a study in October 2024 in which we asked regional and community financial institutions what their top investment priority would be in 2025. Out of 12 possible choices, the top-ranked investment priority was technology to improve the customer or member experience, including an account opening platform. This option was number one among credit union respondents and number two among banks. The need to improve the account opening experience has become critical for community banks and credit unions in a world that expects an elegant digital offering. These financial institutions are under intense competitive pressure from megabanks and fintechs, which have invested heavily to create better digital technology. When these dynamics are considered alongside predictions of the upcoming greatest wealth transfer in history, every client executive I meet is prioritizing the creation of an improved onboarding experience across all their channels. MANTL is unique in that it offers a multi-tenant or agnostic single platform that enables financial institutions to support all channels in onboarding deposit accounts, including digital, in-branch, call center, and relationship managers. It addresses the needs of both consumers and businesses and automates the onboarding process for virtually all deposit account types. MANTL is proven technology, as they have 145 clients under contract, including 112 financial institutions in production, ranging in size from $80 million to over $20 billion in assets. Of these, approximately 70% are banks. MANTL's bank penetration and the minimal overlap between MANTL and Alkami's client base create a great cross-sell opportunity for both Alkami and MANTL. With this acquisition, Alkami solidifies its position as the premier digital sales and service platform in the industry. After the MANTL transaction closes, Alkami will have three market-leading required technologies for a bank or credit union to onboard, engage, and grow their account base in a secure environment. These technologies are onboarding and account opening, digital banking, and data and analytics. For onboarding, MANTL will create a single onboarding and account opening solution that works across all channels for all customer types for the majority of deposit products. This offering is already proven to boost deposit growth with a higher converting application, higher initial funding, and less fraud than competitive alternatives. For engagement, Alkami's Digital Banking solution was awarded Best Banking App by Tearsheet in 2024. It is the fastest growing Digital Banking Platform among all U.S. financial institutions, and it serves over 20 million users with a single code base in a multi-tenant environment. For growth, Alkami's data and marketing solution is built for financial institutions and provides 50,000 descriptive data tags and a dozen AI predictive models trained on analyzing more than 18 billion core transactions, which improves personalized targeting and cross-selling to increase revenue and reduce churn. But when these solutions are used in an integrated manner, the Alkami digital sales and service platform will create more client value, enabling Alkami's clients to have a competitive advantage in their market. Alkami will become the ultimate land-and-expand solution for banks and credit unions. Let me give you three examples. First, driving retail to business expansion. Using Alkami data and marketing, a financial institution could promote a business deposit account to a retail account holder with a history of business transactions, onboard the new deposit account in minutes using MANTL, and guide the account holder on new features and functionality in Alkami Digital Banking. Next, improving account opening conversion. A financial institution could identify customers or members who have abandoned the account opening experience in MANTL, use Alkami's data and marketing to run targeted marketing campaigns to encourage conversion, and guide the customer on features and functionalities in the Alkami Digital Banking platform. And finally, increasing accounts and digital users. Either through auto-registration by MANTL into Alkami Digital Banking or by leveraging Alkami data and marketing to target new customers that have not registered, the addition of an onboarding and account opening system will create a flywheel effect for increasing digital banking users and the number of accounts per household, which is a benefit for both Alkami and our clients. We believe this acquisition unlocks portions of our total addressable market by increasing our competitive advantage. Complementing our digital sales and service platform with an industry-leading onboarding and account opening experience will drive growth in new digital banking client wins. In addition, we're excited to place the MANTL product suite into the hands of our client sales team, who have demonstrated success in growing Alkami client relationships and cross-selling products from our segment and ACH Alert acquisitions. In closing, I'm proud of our results from 2024. I'm excited about the momentum we take into 2025. And I'm eager to close the MANTL transaction and bring these new capabilities to our market with the intent for Alkami to be the number one Digital Banking Platform. Thank you to our employees, clients, and investors for continuing to say yes to Alkami. We take your trust personally, and we will continue to execute on our commitments. I'll now hand the call to Bryan.

Thanks, Alex, and good afternoon, everyone. In 2024, we continued to drive industry-leading revenue growth and outperform on our profitability goals. For the year, we achieved total revenue of $333.8 million, representing year-over-year growth of 26% and improved adjusted EBITDA to $26.9 million, compared to a loss of $1.6 million in 2023. Subscription revenue grew 26.5% in 2024 and represented almost 96% of total revenue. Our fourth-quarter results were a strong finish to the year, and we are entering 2025 with good momentum. For the fourth quarter of 2024, we achieved revenue of $89.7 million, representing growth of 26%. Subscription revenue grew 25% and represented 96% of total revenue. We increased ARR by 22% and exited the quarter at $356 million. We currently have approximately $56.5 million of ARR in backlog for implementation, the majority of which will occur over the next 12 months. Included in our backlog are 39 new clients, representing 1.3 million digital users. We exited the quarter with 272 clients and 20 million registered users on our Digital Banking Platform, representing registered user growth of approximately $2.5 million or 14% compared to last year. Over the last 12 months, we implemented 38 financial institutions supporting 1.2 million digital users. In addition, our existing clients increased their digital user adoption by 1.3 million users. As a reminder, because of the long-term nature of our contracts, we have three to four quarters of visibility into upcoming client attrition. During 2024, we churned less than 1% of our digital banking ARR. Over the long term, we modeled digital banking ARR churn at 2% to 3% per year but expect to do much better in 2025. Currently, we expect to churn four clients in 2025, representing 175,000 users and less than 1% of ARR. We ended the quarter with an RPU of $17.81, up 7% compared to a year ago, driven by add-on sale success and the addition of new clients who tend to onboard with a higher average RPU. For example, new digital banking clients implemented for the fourth quarter with an RPU of $23.55, reflecting greater product adoption when compared to our installed base. We are seeing broad-based demand across our product portfolio. For the year, we signed 35 new Digital Banking Platform clients, including 15 banks, and our add-on sales effort represented approximately 45% of 2024 new sales. In addition to add-on sales, our client sales team is responsible for client contract renewals. We renewed 42 client relationships in 2024. Added together with 35 new logo wins, this represents 77 competitive wins for the year compared to 70 in 2023. In total, our 2024 renewal cohort increased the ARR run rate by 12% at the time of renewal, once again outperforming prior year cohorts as financial institutions are keeping their functionality competitive with their industry competition. In 2025, we expect approximately 25 renewals, slightly below our recent average as we pull forward several renewals into 2024. And finally, our remaining performance obligation was just under $1.4 billion, representing 3.8 times our ARR and up 20% compared to a year ago. Now turning to gross margin. For the fourth quarter of 2024, we delivered non-GAAP gross margin of 63.1%, representing nearly 280 basis points of expansion compared to the prior year. We achieved gross margin expansion through continued improvement in our hosting costs and platform investments, as well as operating leverage across our post-sale operations. As a reminder, our 2026 gross margin objective is 65%. Moving to operating expenses. For the fourth quarter of 2024, non-GAAP operating expenses of $46.8 million or 52% of revenue represented year-over-year operating leverage of approximately 500 basis points. We derived operating leverage across each operating expense category, but primarily in G&A, where we continue to realize operational scale. In addition, we continue to achieve a high level of sales team productivity and go-to-market efficiency. For the last 12 months, we increased our ARR for $64.8 million, while investing $50.7 million in non-GAAP sales and marketing, representing an efficiency ratio of 1.3 to 1. We believe this ranks Alkami among the best in SaaS in terms of sales and marketing efficiency. Our adjusted EBITDA in the fourth quarter was $10.2 million, better than the high end of our expectations. Our adjusted EBITDA margin for the quarter was 11.3%, and when combined with our revenue growth rate, results in achieving the Rule of 37. We have started to invest in our captive offshore capability, and as we discussed last quarter, we expect an investment of approximately $5 million in 2025. We are still planning to complete the transition from our current vendor during 2026, and we do not anticipate any impact on our 2026 financial targets, although we do expect to see a positive impact on margins beyond 2026. Related to our balance sheet, we ended the quarter with just under $116 million of cash and marketable securities. In 2024, we produced operating cash flow of $18.6 million, an improvement of $36.1 million compared to 2023. We've also just announced an amendment to our credit facility, which expands our revolver from $125 million to $225 million and extends the maturity date to February of 2030. Before turning to guidance, let me provide some additional commentary on the MANTL acquisition. This is a very attractive transaction that will position us as a clear leader in digital banking with a powerful platform to help financial institutions onboard, engage, and grow their customer relationships. There will be no one like us among digital banking providers, and similar to our acquisitions at ACH Alert segment, we believe MANTL will help differentiate our platform, drive further success in digital banking client wins, and contribute to our current success cross-selling products into our digital banking install base. As discussed in today's press release, we've agreed to acquire MANTL for an enterprise value of $400 million on a debt-free, cash-free basis and subject to customary purchase price adjustments, which we expect to be approximately $7 million. We plan to issue restricted stock units to MANTL employees with an estimated value of $13 million at transaction closing in replacement for unvested compensatory stock options. The resulting purchase price of $380 million is expected to be funded with cash. We have multiple options to fund the $380 million cash purchase price. Our options include balance sheet liquidity, revolver capacity, and a universal shelf that can be used for equity, equity-linked, or debt financing. We're evaluating these options as we approach closing. Closing is expected to occur before the beginning of the second quarter and is subject to customary provisions, including HSR approval. The purchase price represents less than seven times projected ARR under contract at the end of 2025. We believe the acquisition has an IRR of about 30% before considering revenue synergies expected to start during 2026. Now turning to guidance. For the first quarter of 2025, we are providing guidance for revenue in the range of $93.5 million to $95 million, which represents total revenue growth of 23% to 25%. For adjusted EBITDA, we are providing first quarter guidance in the range of $9.5 million to $10.5 million. For the full year 2025, we are providing guidance for revenue in the range of $440 million to $445 million, representing total revenue growth of 32% to 33%. We are also providing adjusted EBITDA guidance of $47 million to $51 million. Assuming an acquisition close date of March 31, full-year guidance includes revenue contribution of approximately $30 million and an adjusted EBITDA loss of $5 million from the MANTL acquisition. We believe the MANTL business will be accretive to adjusted EBITDA starting in 2026. We expect MANTL's ARR under contract at December 31, 2025, to be approximately $60 million, representing a growth rate above 30% compared to the same metric at the end of 2024. In closing, I'm very pleased with our 2024 financial performance. Our team delivered best-in-class growth, continued operating leverage, and superior go-to-market efficiency. We continue to perform among the best SaaS companies. And now, with the leading omnichannel account opening solution in MANTL, we believe we are an unequivocal category leader in an industry that already enjoys strong tailwinds and many years of innovation ahead.

Thank you. Your first question comes from Andrew Schmidt of Citi. Your line is already open.

Hi. This is David Wielazinski on for Andrew Schmidt. Thank you for taking my questions. How does MANTL compare with your existing account opening solutions? And I was wondering if you could give more details on the potential impact of the cross-sell opportunity there?

Thank you for the question. The current account opening offering that we have is digital only for just one or two deposit types. And as we got into that market and listened to what our customers were trying to do, they really needed to be able to have an account opening solution that could operate in digital, could operate in call centers, in-branch, and even if you think about commercial banking with a relationship manager. They needed to have the ability to support a whole lot more different types of products and specialty account structures, retirement accounts, health savings accounts, trust accounts, escrow accounts, lots of different types of account roles, whether it would be beneficiary, custodian, guardian. And none of those were things that we were offering with our current product. And then I would say because of what I would call more of a normalization of interest rates, we all went through about 15 years to 20 years of almost zero interest rates. And now that interest rates are what you might consider a little bit more normal, the ability to attract deposits, as well as make loans, has become critical to the financial institutions. So in summary, our current product did a few things well, but it did not meet all of the needs of the market, and that's what the MANTL product does.

Thank you for that. And then what is embedded in the 2025 outlook between the user growth and ARPU expansion? And could there be more of a skew towards user growth, assuming a pickup in M&A activity?

Yeah. The guidance that we've provided for 2025 is in line with what we have been providing on more of our longer-term guidance and is very consistent with 2024. So user growth—organic user growth, so excluding the MANTL acquisition, we would expect user growth in the 14% to 15% range, which is very consistent with 2024. ARPU expansion will be in a 6% to 8% range. Again, very consistent with 2024. What we haven't yet determined is consideration of the MANTL client base, the incremental users that will come with the MANTL client base and the ARPU. So let me give you a couple of examples. MANTL today has 112 clients under contract, and those clients carry an average ARPU between $5 and $6. So it's a nice ARPU add, but they're going to bring about 8 million digital users to Alkami, and there’s very little overlap, as Alex commented on in his prepared remarks, between the two client bases. The MANTL client base is 70% banks and 30% credit unions. The Alkami client base is 90% credit unions and 10% banks at the moment. So there’s nice complementary nature, but with very little overlap. So what you'll ultimately find is our user count will jump to 28 million, 29 million, but you're adding those users at a $5, $6 ARPU.

Very clear. Thank you.

Your next question comes from Saket Kalia of Barclays. Your line is already open.

Hey, team. This is Ryan Parley on for Saket tonight. Thanks for taking the question.

Hi.

Maybe just to start on the MANTL deal, certainly interesting. I'm curious what you see in terms of the competitive environment in this type of market. Is it similar to your core digital banking space where it's a lot of the core providers that you might be running up against, or would it be other competitors that you might expect to go more head-to-head with this type of acquisition?

There's really—when we talk with our clients, there are three alternatives that they pursue in trying to deliver this type of capability to their customers or their members. One is they've got a very outdated capability from a core provider. The second is there are some smaller players in the market that they look at. And many of them also try to write some of their own software to stitch together the experience. What we liked about MANTL is that with what a MANTL customer experiences, and this is the design of their product, the way that they've thought about the user experience across the end-to-end process, and the fact that they're core agnostic and they've built technology that allows them to integrate very well with over 20 different core systems. So a median retail account opening experience within MANTL is 5 minutes compared with 15 minutes in the industry. And a median business account opening experience in MANTL is 8 minutes compared with three and a half hours in the industry. And 85% of the applications receive an automated decision. So that's what we were looking at when we got excited about MANTL is yes, there's some other small players. Yes, there's some legacy core technology. Yes, there's customers that have tried to write their own. But the outcomes that the MANTL technology delivers are far superior to anything else that was on the market.

Got it. Super helpful. Bryan, maybe a follow-up for you. I think in the press release you mentioned that while there's an EBITDA loss for MANTL this year, you expect it to be EBITDA accretive in fiscal 2026. Just wondering, are you including any expense synergies from this deal at all, or is that just purely driven by revenue synergies and cross-sell, that sort of thing? Thanks.

So as it relates to revenue synergies, we're really expecting those to occur or be more evident in 2026 and primarily in the back half of 2026. As I mentioned in the previous question from Dave at Citi, the client bases are very complementary to one another, so there is going to be a nice opportunity for revenue synergy. As it relates to expense synergies, MANTL will be able to leverage G&A within Alkami. At some point, we'll be able to leverage the Global Capabilities Center that we're developing in 2025 in India. So it's more about helping MANTL scale more efficiently than it is having cost-cutting synergies on day one, because keep in mind, MANTL is a fast-growing business. We do not want to do anything to upset the growth trajectory that they're currently experiencing. We're here to identify synergies from a go-to-market perspective and even drive further revenue growth.

Very helpful. Thanks, guys.

Your next question comes from Patrick Walravens of Citizens. Your line is already open.

Oh! Great. Thank you. Congratulations, you guys. Alex, I would love to hear sort of the background to the deal. When did you first meet them? How did the process unfold? How did we get to this transaction?

Well, the two companies have known about each other since 2019. So we've known them and they've known us, and we've stayed in relationship for quite a while. I would characterize this as a deal that evolved through understanding each other's culture, understanding the people that were running their company, and the quality of people that were running their company. And also listening to our customers. Pat, last year, we had our Customer Advisory Board together in June at a customer location outside of Denver, Colorado. We treat that Customer Advisory Board very strategically. We speak with them not about features and functions, but they help guide the long-term future of the company. We were reviewing several different options that Alkami could invest in, fraud detection, continued investment in our data platform and several other areas. At the end, they huddled and came back to us and said, there's something that's a bigger issue than us. We've all got these legacy systems. We've got different underwriting platforms, things like that. But what we really need is a great end-to-end onboarding experience for our members to both attract members so we can get deposits and then also cross-sell other products to our customers or our members. So, Alkami, what we really need you to do is deliver to us that great end-to-end experience. So, Pat, we've known each other for a long time. We've respected each other for a long time. The market need was really speaking to us wanting to do something in this space. And then, as I said, we've just spent a lot of time getting to know each other, getting to know their management team. One of the things we really cherish is the ability for our culture to treat our customers as the North Star. That was evident in all the investigation that we did with MANTL. So, Pat, probably more than you want to know, but I would characterize this as we've known each other for a long time, we knew there was a strategic need in the market, and we got to know each other for a period of many months to make sure that this was the right thing to do.

And Pat, I'll add a couple more comments to this. I mean, strategically, taking what we view as the absolute best asset in space, the most disruptive, elegant, digital experience as it relates to onboarding, pairing that with similar accolades as it relates to the Digital Banking Platform, and then finally combining that with what we view as the best marketing and data analytics solution, creates a network effect, a flywheel effect in the revenue of all of those offerings that we believe is very powerful. When it's just a front-end to back-end digital twin to the branch and delivers that experience, there is no other Digital Banking Platform or technology provider in the space that can deliver the front to back offering that I just described. We've been watching MANTL for a long time, and MANTL is always when it's the right time to do an acquisition of this type. MANTL was at a point where raising capital would be an alternative or potentially finding a strategic partner. For all the reasons that Alex just described, finding a home at Alkami really was the best decision that they felt they could come to. After years of talking to them and staying close to them, it all manifested late 2024, and here we are today announcing what we're extremely excited about, which is the future of Alkami and really the very early beginnings of building a $1 billion revenue company over the next four to five years.

All right. That's super helpful. Thank you both.

Your next question comes from Chris Kennedy of William Blair. Your line is already open.

Good afternoon and thanks for all of the details. Just wanted to focus a little bit. It seems like MANTL has a really good presence within banks and doing kind of business banking activities. Just talk about kind of how that dynamic played into the acquisition.

It played in a couple of different ways. As you know, we're focused on the bank market, and being able to pair the onboarding and account opening platform serves both consumer and business and all sorts of business types, right? Whether it's sole proprietorship, general partnerships, non-profits, trusts, estates. That capability was really interesting to us in terms of Alkami's long-term strategic direction where we've been investing in the bank market. But the other thing that's been really interesting is probably 45% of the credit unions that I meet with have a commercial strategy. And so this also fits into us being able to bring MANTL into the credit union install base for Alkami, not just because they've got a good consumer product, but because they've got a good business product as well. It was really kind of both of those things. One, it matches our strategy of investing in the bank market. But number two, as Bryan said, there's virtually no overlap between the two companies from a customer base. There's probably less than 10 accounts. And because of some of the transformation that's happening in the credit union market, the coverage that MANTL has for both consumer and business was really attractive as we think about the potential for cross-sell in the future.

Great. Thank you for that. And then I guess just another quick one on MANTL. I know the question was asked earlier, but the prospects for EBITDA to go from a negative to a positive. Can you just double-click on that again? Thank you.

Yeah. Chris, that's primarily driven by just revenue scale. MANTL exiting 2025 with $60 million of revenue under contract and that's growing north of 30%. They're still relatively a small business that's becoming a larger business with a very fast growth trajectory. It's Alkami relying on MANTL to lean on Alkami for those areas within its business to help it scale.

I mean, one of the things that many of the analysts that both Bryan and I have met with for many quarters have asked us about acquisitions. We said, when we do an acquisition, it will be strategic and it will also fit into the Alkami business model. The thing that we like about MANTL is that it is a growth company. This is not a situation where, as Bryan said earlier, we want to cut a lot of expenses to fit them into some model. This is a situation where they're a well-run company that can leverage some things within Alkami, so that, as Bryan mentioned, in 2026, we see this as accretive to our business.

Understood. Thanks a lot.

Yeah. But Chris, as you look out over a multiyear period, think about MANTL being a couple of points of incremental organic growth. MANTL should be accretive to gross margin, and MANTL will be a drag of 1 point to 2 points on EBITDA margin for the next two to three years before reaching and conforming to an Alkami EBITDA margin profile beyond that.

Your next question comes from Adam Hotchkiss of Goldman Sachs. Your line is already open.

Great. Thanks so much for taking the questions. I just want to follow up on the last question around MANTL's existing base. When you were evaluating MANTL, to what degree do you think that you're going to be able to cross-sell the Alkami Platform into MANTL's customers? I know these contracts are a little bit longer than other industries, and there may be less visibility into that. But what comfort do you have over the next couple of years that you might see some incremental success or accelerated bank traction due to that? Thanks so much.

The existing MANTL client-based segment is very similar to Alkami. What I mean by that is financial institutions with assets between $500 million and $10 billion, that represents a significant percentage of the MANTL client base, which is also similar to Alkami. Our sweet spot where we have found the greatest penetration has been assets in the size of $500 million to $10 billion for financial institutions. There's no reason to expect that we would not have the ability to cross-sell the Alkami Digital Banking Platform into the MANTL base or to sell the MANTL solution and offering into the Alkami installed base. We think it's very complementary. We feel that both companies have had significant success in the same area and segmentation of the market.

Okay. That's really clear. Thanks. And then just on the renewal pull-forward you mentioned, just curious if that impacts your cross-sell expansion opportunities into 2025 and how you would typically see a year after a pull-forward of renewals be impacted from a growth perspective? Thanks so much.

We're having success cross-selling whether it's time for a renewal or not. Our client sales team has really begun to gain momentum and has a pretty strong ability to cross-sell into a client, whether it's one year after signing the contract and the client just went live or if it's five years, six years later at the point of renewal. So we would expect that our client sales team would continue to contribute to total contract value sold positively.

Very clear. Thanks so much.

Your next question comes from Alice Smith of JPMorgan. Your line is already open.

Great. Thank you so much for taking our questions. So first I was hoping to start on the gross profit margin line. You've had pretty stable gross profit margin expansion since at least 2020, and I think you mentioned that MANTL should be gross profit margin accretive in 2025. Can you remind us of your thinking about the longer-term margin trajectory for the gross profit margin line? Thank you.

So what we've provided is that by 2026, the Alkami core business will be at 65% gross margin. We gave that guidance, that longer-term guide about three years ago. We're a bit ahead of that. We'll exit 2025 at a run rate of 65%, and you should expect MANTL to be accretive by 100 basis points.

That's very helpful. Thank you. And as we think through the other OpEx line items and the EBITDA deficit that MANTL causes for the first year, how would you allocate those costs roughly?

Well, let's just talk about the EBITDA loss. You should think about $5 million of EBITDA loss occurring over the second, third, and fourth quarters of 2025, $2 million in the second quarter, $2 million in the third quarter, and around $1 million in the fourth quarter. From a gross margin perspective, MANTL has been able to achieve around a 75% gross margin. The OpEx categories from a contribution by category are a little bit heavier on sales and marketing than Alkami is, but they align pretty closely to how Alkami aligns.

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

Hey, guys. Congrats on the quarter. This is Daniel on for Jeff. Just on the cross-sell motion, how that will look, if I'm understanding correctly, and the Alkami account opening offering currently doesn't cover some of the needs that the customers have, such that a lot of them will maybe have some other offering in place. What does the Alkami base have right now for the most part, and what would that be that you'd be displacing as you're coming in with MANTL to cross-sell?

As I said earlier, the customer base will have a range of technologies that they're trying to use to accomplish this. They might have—and given Alkami's product—the product that we have today, given our product penetration and our customer base, the majority of our customers will have the following scenario as opposed to an Alkami product. They'll either be trying to use something off of their legacy core, they'll be using another third-party product, but in a lot of cases, they will have tried to write some of their own software to stitch together this process. Some of the things that are really unique about MANTL are how they've streamlined the process and embedded automated KYC as an example. When a customer sees this process and how it manifests itself from a user experience, it's just a very different experience than they're able to deliver today. So I would anticipate that our client sales team that covers our existing bank customers and our existing credit union customers will be—after closure—will be bringing the MANTL product to any or all of our customers for the potential of cross-sell. There's not really a customer that we have that we would not bring the MANTL product to from a cross-sell perspective.

Okay. That's helpful. And then just on the flip side, on the impact on the MANTL side, just as they work with a lot of other people in the marketplace, like I believe they're part of the Q2 marketplace, how will those relationships, if at all, be impacted after getting acquired by you guys? Is there any inherent churn contemplated there?

We would hope that they would continue to be successful in all the markets that they serve. That's our goal. Our goal would not be to do anything that would truncate their success in any market that they're serving. That said, you could imagine that our product teams have already had a lot of great ideas. One of the things that Bryan talked about earlier, I talked about in my prepared remarks, is if you think about having transactional data that you're using in the onboarding process, and then that onboarding process is showing up natively in the digital banking experience, that's a really attractive design for a client. We're not going to do anything like that in any market, but you would imagine that we've got a lot of product ideas in terms of how we integrate digital banking with MANTL with our data and marketing platform.

There are no further questions at this time. So this concludes today's conference call. Thank you for your participation, and you may now disconnect.