Earnings Call Transcript - ALKT Q1 2025

Operator, Operator

Hello, and welcome to Alkami First Quarter 2025 Financial Results Conference Call. My name is John, and I will be your operator for today's call. I would like to turn the conference over to Steve Calk, Vice President of Investor Relations. Steve, please go ahead.

Steve Calk, Vice President of Investor Relations

Thank you, John. 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 are 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. I'll now turn the call over to Alex.

Alex Shootman, CEO

Thank you, Steve. Good afternoon, and thank you all for joining us. I'm pleased to report a great quarter for Alkami. During the first quarter of 2025, Alkami grew revenue over 28% and generated over $12 million in adjusted EBITDA. We exited the quarter with 20.5 million registered users on the Alkami platform, up 2.3 million compared to the prior year quarter, and we successfully closed the MANTL acquisition. In Q1, we continued the momentum we've built since becoming a public company and are positioned to achieve the 2026 financial objectives we outlined during our Q4 2022 earnings call. When we discuss those objectives, our annual revenue was less than half our guidance for 2025, and adjusted EBITDA was a loss of $18 million. Today, our adjusted EBITDA position has improved fourfold, and given our implementation backlog, sales pipeline, product portfolio, and successful completion of the MANTL acquisition, we remain confident in the objectives we discussed over two years ago. The number one question I'm asked by investors these days is how is the demand environment. Consistent with the last few years, we have not seen any decline in the demand for digital banking. I believe the reason for this is that the need for digital banking and regional and community financial institutions is not elastic. It is mandatory innovation if you are going to compete with Chase and Chime in today's market. Our pipeline remains strong, and the demand numbers we see in our instrumentation are consistent with my conversation with clients. Since March, not counting clients I have met at a recent user conference, I've had 29 face-to-face client meetings. Through all of the noise we hear in the macro environment, no one talked about reductions in digital banking. I left those meetings with two observations. First, none of our clients are detached from the uncertainty in the overall macro environment. In terms of uncertainty, good bankers prepare for multiple scenarios. But in each of their scenarios, their digital agenda remains a priority. For most, their digital banking has moved from the budget agenda to the capital allocation agenda. They are thinking about how they grow their business digitally with the same or more intensity as their branch strategy. Second, with an eye towards growth, they are focused on account opening and onboarding. Two weeks ago, I was at a client in the Midwest. And the CEO said, if I only had $1 to spend on any new projects, I'd put $0.90 on account opening and pocket the rest. We have to add customers to thrive, and because of the younger generations we are pursuing, it has to be an efficient and elegant experience. So far, despite macro uncertainty, we continue to enjoy a healthy pipeline, which is at least as strong as this time last year. We believe this is a testament to the necessity for digital banking, the quality of Alkami's people and products, and the early stages we are still in with respect to the digital transformation of the regional and community financial institution market. Demand was on display a month ago at Co:lab, our annual user conference in Nashville, with over 900 attendees representing more than 300 institutions. This size audience continues the trend of record attendance for us and with the majority of attendees in leadership roles, it demonstrated that digital banking is a strategic focus in our market. The shift we continue to see from prior Co:labs is a recognition that digital banking is not just a service strategy. Our prospects and clients see digital banking becoming a sales and service platform. They have to acquire an inventory of trusted assets called deposits. They have to sell that inventory as loans, and they have to make money serving their account holders with fee-based services that are valuable, such as wires, FX, credit cards, and interchange. To do this well, they have to be trusted, knowledgeable, and safe, and they are pursuing these attributes by making personalized digital connections with their account holders. From the main stage, I shared an interview with the CEO of one of our largest clients who handed me a phrase that best describes personalization in our industry and what we are building with our data platform. He called it anticipatory banking. To deliver the digital and sales service platform designed by a market that enables anticipatory banking, I shared with the audience that we are spending our R&D dollars on the following product and platform priorities. Our product investments will go into four areas: onboarding and account opening, retail and commercial functionality, user experience, and personalization. Our platform investments are focused on continuing to drive scalability, extensibility, maintaining industry-leading reliability, and building out our data capability. Account opening and onboarding generated the most interest in our event, which is understandable since the MANTL transaction closed days before our conference call, but mostly the interest was generated by the strategic nature of a great onboarding and account opening experience. As one client told me, we are all about customer acquisition; everything else is just noise. The MANTL sessions were full. The MANTL keynote was the highest-rated session. And during the first quarter of 2025, five Alkami clients purchased MANTL, and two of our forecasted first-quarter new logos revised their deals to include MANTL. One of these deals closed in April; we expect the other deal to close shortly. This is exciting for us that the cross-selling of MANTL into the Alkami client base has just begun. We have no shortage of product opportunities. And as we've previously discussed, we are building a strategic development center in the National Capital Region of India. The purpose of this investment is to increase our product and engineering capacity while maintaining the profitability commitments we've made to our investors. Our efforts with Alkami India are well underway. We are now running a functional office with over 40 Alkamists, with more to come throughout the year. We're also focused on hiring leadership roles and building out our long-term capacity with the goal of supporting hundreds of Alkamists in India in the coming years. We expect Alkami India to drive innovation and bring products to market that are new sources of revenue, all while delivering operating leverage in our business. In closing, we are proud to deliver a great quarter for our investors. We are grateful to our clients for trusting us with their business, and I appreciate the effort each Alkamist puts into their work and the values they demonstrate. Thank you for getting it done and doing it right. Before I hand the call over to Bryan, I'd like to comment on the news in our press release regarding Bryan's retirement. When Bryan shared with me that he was considering moving to the next phase of his life, we both agreed that this was excellent timing given the performance and health of the company. Bryan has done a great job as CFO. He's been at the company while revenue has grown six-fold and has guided Alkami to a positive adjusted EBITDA position. He was instrumental in Alkami's IPO and played a key role in four acquisitions. He's made my life easy as we exceeded our numbers every quarter since going public. In true Bryan Hill fashion, he's finishing strong by providing the company and our shareholders with an extended transition to his retirement. Bryan will remain the CFO of Alkami until either a new CFO comes on board or February 27, 2026, whichever comes first. I'll now hand the call to Bryan to take us through our financial results.

Bryan Hill, CFO

Thank you, Alex, and good afternoon, everyone. Before we discuss the financial results, I want to elaborate a bit on the news Alex just shared. After 36 years of experiences and relationships, I will always value the opportunity to be part of successful organizations. I have decided to retire and resign as the Chief Financial Officer of Alkami Technology. I will remain in my role as CFO while we find and onboard a replacement or until February 27, 2026, whichever comes first. I also plan to continue in a consultative role through December of 2026 or until my services are no longer needed to ensure a smooth transition. This was a difficult decision, but I believe it is the right time for my family as we enter a new chapter in life. I want to sincerely thank all Alkamists, especially the CFO team, along with our Board of Directors and shareholders for their support and trust over the years. It has been an incredible journey, and I am proud of what we have achieved together, especially in growing the company and increasing its profitability. We have a strong leadership team in place, and I am confident that Alkami will continue to succeed and become the leading digital banking platform. Thank you again for your support. Now, I will discuss our financial performance. In the first quarter of 2025, we experienced exceptional revenue growth and surpassed our profitability targets. We completed the acquisition of MANTL, the largest in our history, a convertible notes offering, and expanded our credit facility. Today, we are reporting results that include the MANTL acquisition, which we finalized on March 17, 2025. Consistent with our previous acquisitions, we do not include acquired clients or users in our digital banking platform counts. Our reported clients and users solely reflect those on our platform, and all other financial metrics, such as ARR, ARR backlog, and average revenue per user, include the impact from acquisitions. In the first quarter, we achieved total revenue of $97.8 million, a year-over-year growth of 28.5%, and improved adjusted EBITDA to $12.1 million from $3.8 million in the same quarter last year. Revenue for the first quarter included some unexpected items, such as $1.4 million from the earlier-than-expected closing of the MANTL acquisition and $600,000 of revenue originally anticipated for the second quarter of 2025, related to our annual client conference, Co:lab. Subscription revenue grew 27% in the first quarter and accounted for 95% of total revenue. We boosted ARR by 33% and exited the quarter at $404 million. Currently, we have about $68 million of ARR in backlog for implementation, most of which will occur within the next 12 months. Our backlog includes 36 new digital banking clients, representing 1.1 million digital users. We ended the quarter with 278 active clients and 20.5 million registered users on our digital banking platform, marking a registered user growth of approximately 2.3 million, or 13%, compared to last year. Over the past 12 months, we implemented 37 financial institutions while three clients left our platform. Remember, due to the long-term nature of our contracts, we can anticipate client attrition for 3 to 4 quarters. We expect to lose four clients in 2025, which represents less than 1% of ARR. Long-term modeling indicates an ARR churn of 2% to 3% per year, primarily driven by mergers and acquisitions within our client base. We concluded the quarter with an RPU of $19.74, an 18% increase compared to last year, thanks to the MANTL acquisition, successful add-on sales, and new clients onboarding with higher average RPU. Demand across our product portfolio remains strong, as reflected in our sales pipeline, success in acquiring new logos and client renewals, and the rate at which we are seeing market adoption of the MANTL onboarding and account opening solution. In the first quarter, we signed four new digital banking platform clients and renewed contracts with existing clients, totaling eight contract signings. MANTL contributed 16 new clients, five of which are Alkami Digital Banking clients. Excluding MANTL's performance, our add-on sales represented about 57% of new sales for the quarter. Regarding renewals, we expect a total of 25 in 2025, slightly below our recent average as we moved several renewals forward to 2024. Our remaining performance obligation stood at approximately $1.6 billion, representing 3.9 times our ARR and up 31% compared to last year. Now turning to gross margin, we reported a non-GAAP gross margin of 64.3% for the first quarter of 2025, an expansion of over 250 basis points from the previous year. This expansion resulted from continuous improvements in our hosting costs and platform investments as well as operational leverage across our post-sales operations. Moving to operating expenses, we recorded $51.2 million in operating expenses for the first quarter of 2025, which is 52% of our revenue and reflects year-over-year operating leverage of about 500 basis points. We particularly realized operating leverage in R&D and G&A, continuing to achieve operational scale. Concerning sales and marketing expenses, we generally conduct Co:lab in the second quarter, resulting in approximately $3 million of seasonally higher expenses during that quarter. However, in 2025, Co:lab took place in both the first and second quarters, leading to seasonally higher operating expenses in both periods. In terms of go-to-market efficiency, we rank among the best in SaaS. Over the last 12 months, we increased ARR by $1.20 for each dollar spent on sales and marketing, excluding the impact of the MANTL acquisition and the timing of Co:lab. Our adjusted EBITDA for the first quarter was $12.1 million, surpassing our expectations and representing an adjusted EBITDA margin of 12.3%. We are investing in our offshore capabilities and expect an investment of around $5 million during 2025 as we transition from our current vendor in 2026. We do not anticipate any impact on our 2026 financial targets, with positive impacts on margins expected afterwards. Regarding our balance sheet, we ended the quarter with $95 million in cash and marketable securities. We also announced an amendment to our credit facility, increasing our revolver from $125 million to $225 million and extending its maturity date to February 2030. Before I provide guidance, here’s a recap of the MANTL acquisition. We closed the MANTL acquisition on March 17, a few weeks earlier than planned. As stated in our February press release, we agreed to acquire MANTL for an enterprise value of $400 million on a debt-free and cash-free basis, subject to customary purchase price adjustments. After these adjustments, the final enterprise value comes to $393 million, which includes: $375 million of purchase consideration, $11 million in equity compensation for MANTL employees to replace their invested equity compensation at the time of acquisition, and $7 million for current period and prepaid compensation, categorized as cash outflows in operating activities on the cash flow statement. We financed the $375 million purchase consideration as follows: $13 million from our cash reserves, $60 million from our credit facility, and $302 million from net proceeds from convertible notes issued on March 10, after the capped call costs. The convertible notes have a 1.5% coupon and a 37.5% conversion premium, which we effectively raised to 100% through a capped call transaction linked to the notes. Now, regarding guidance, for the second quarter of 2025, we expect revenue to range between $109 million and $110.5 million, which represents a growth rate of 33% to 35%. For adjusted EBITDA, we anticipate a range of $9 million to $10 million, accounting for a full quarter of adjusted EBITDA loss from MANTL. For the full year of 2025, we project revenue between $443 million and $447 million, which indicates total revenue growth of 33% to 34% and organic growth of 25% to 26%. We also expect adjusted EBITDA to range from $49.5 million to $52.5 million. This guidance includes a revenue contribution of about $31.4 million and an adjusted EBITDA loss of $5 million from the MANTL acquisition, but we believe MANTL will contribute positively to adjusted EBITDA in 2026. We anticipate MANTL's ARR under contract by December 31, 2025, to be around $60 million, signifying a growth rate of about 30% compared to the end of 2024. In conclusion, we continue to deliver strong financial results while pursuing our long-term goals. We leverage our unique financial model and reinforce our competitive position, making us a premier SaaS investment in the market. With that, I will hand the call over to the operator to take your questions.

Operator, Operator

Thank you. Your first question comes from Alexei Gogolev from JPMorgan. Your line is now open.

Elyse Kanner, Analyst

Hi, this is Elyse Kanner on for Alexei Gogolev. So you did confirm the $5 million in spend for the offshore initiative. Was it still a lighter expense in Q1, and is kind of the cadence of the expense and benefits still proceeding as expected? Thank you.

Bryan Hill, CFO

That's right. It is a lighter expense in Q1. And actually, the majority of that expense will be concentrated in the third and fourth quarter of 2025. But we're making a lot of progress. I mean we now have Alkamists in our India Global Capability Center. So we're super excited about that. We also feel that by the end of this year, we'll start approaching 170, 180 offshore employees. And keep in mind, many of those are transferring from the current provider that we have today. That's a third-party provider. We exited 2024 with around 125 consultants from that third party.

Elyse Kanner, Analyst

Got it, thank you. And then when you cited the growth in revenue per user, what was the order of factors that you mentioned for how much they're contributing? So is MANTL maybe the largest contributor to that growth, followed by success in add-on sales and then new clients adopting more products?

Bryan Hill, CFO

That's correct. As I mentioned during the call, we factor all of our acquisitions into the annual recurring revenue calculation, but we only consider registered users from our digital banking platform. Consequently, MANTL added approximately $1.80 to our revenue per user this quarter, and moving forward, we anticipate a more steady growth rate of about 7% to 8%.

Operator, Operator

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

Christopher Kennedy, Analyst

Good afternoon. Thanks for taking the question. And congratulations, Bryan, on the announcement. Alex, you talked about the strong cross-selling initially at MANTL. Can you just frame the opportunity there and maybe compare it with the experience that you've had at ACH Alert or Segment?

Alex Shootman, CEO

We were pleased that in the first quarter, MANTL had five transactions with the Alkami base. It's exciting that this success came before we put in effort for account planning and profiling, and began collaborating with sales teams. This initial achievement, combined with the internal progress, gives us confidence in the cross-selling potential within the base. If you compare it to our ACH acquisition, which was more standalone and applicable to certain segments, the Segment acquisition was designed to integrate into our sales approach and is relevant to our entire base. I anticipate that the MANTL acquisition will function more like the Segment acquisition than the ACH Alert one.

Bryan Hill, CFO

Yes. And Chris, I'll add a couple of comments to Alex's. What we found with Segment, as you're aware, given it's a sales and marketing product, it's a kind of a newer solution in the space. It took us a while to identify how to get to the right buyer in our end market. And so it took some time to gain traction for Segment to become a part of now 70% of our new logo transactions, and then even the cross-sell effort was a little bit more challenging because it was generally a different buyer in the financial institution. That's not the case with MANTL. MANTL oftentimes is the same or certainly common interest buyer in the financial institution. MANTL has a more established go-to-market effort in place. And so I would expect the success that we ultimately have realized on Segment, we're going to achieve that much sooner as it relates to MANTL.

Christopher Kennedy, Analyst

Got it. Very helpful. And then just a follow-up on MANTL. The account opening is clear. Can you just talk a little bit about the LOS opportunity with MANTL and kind of what the competitive landscape is in that market?

Alex Shootman, CEO

Yes. When we announced MANTL in our last call, we mentioned that they have a group of development customers for whom they are creating a loan origination system capability. We are closely monitoring that effort. Once that initiative is successful, we will decide as a company whether to bring a loan origination system application to market. It’s important to note that this remains a development initiative with a specific set of clients. We anticipate success in this effort, but we will make a decision about a broader product launch once we evaluate the results of the development work.

Christopher Kennedy, Analyst

Understood. Thanks for taking the questions.

Operator, Operator

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

Jacob Stephan, Analyst

Hey guys, appreciate you taking the question, and congrats, Bryan, on all the success you've had with Alkami here. Just wanted to touch a little bit on the MANTL acquisition. Maybe you could kind of tell us where you're seeing the most traction? Is it on the credit union side? Is it banks? Is it broad?

Alex Shootman, CEO

Currently, we are observing balanced demand from both banks and credit unions. As we noted during the acquisition call, we were particularly drawn to MANTL's culture and its product, which caters to both banks and credit unions, as well as to retail and commercial needs. At this time, demand is fairly even across both sectors. What’s driving this demand is the fact that, on the credit side, the typical customer in a credit union tends to be somewhat older than the average bank customer. All our CEOs are aware of this and are formulating strategies to appeal to the younger generation of members. A key component of this strategy is creating an account opening experience that aligns with what people expect in other areas of their lives. We find it encouraging that demand is balanced for both banks and credit unions. Moreover, the demographic trends and business strategies within credit unions are likely to provide a beneficial boost for MANTL's growth in that space.

Jacob Stephan, Analyst

Okay. Got it. That's helpful. And then maybe just touching on the backlog, $68 million of ARR; it sounds like a lot of that kind of uptick is from the MANTL acquisition, but maybe what's the breakdown of banks to credit unions in that 36 new customers?

Bryan Hill, CFO

Yes. So we've got 36 clients in backlog; 16 of those are banks. As you would expect, the banks are carrying a much higher RPU of around $30. The credit unions are carrying an RPU of just under $20. The sequential step-up in backlog from Q4 is largely driven by MANTL, which has a significant ARR backlog, as well as a significant number of financial institutions in backlog for now.

Operator, Operator

Your next question comes from the line of Charles Nabhan from Stephens. Your line is now open.

Charles Nabhan, Analyst

Good afternoon. Thanks for taking my questions. I want to ask Chris' question from a slightly different angle. It sounds like there's some early signs of progress in terms of cross-selling MANTL into your existing base. So I understand you didn't change the assumptions for the full year 2025 guide. But is there anything that has occurred over the past few weeks since the close that made you rethink or change the way you're going to approach sales and marketing or cross-sell, maybe accelerating some of your initiatives over the next year to drive synergies over the medium to long term?

Alex Shootman, CEO

The strategy we had when acquiring the company remains central to how we plan to operate the business. MANTL has a strong sales and marketing engine that will keep driving sales and attracting new clients beyond the existing Alkami customer base. Our client sales team is dedicated to selling MANTL to our current customers, while our Alkami new logo sales team is focused on selling new online banking services, including MANTL, to new clients. This was the strategy we envisioned at the time of acquisition, and at this stage, we intend to continue executing it.

Charles Nabhan, Analyst

Got it. As a follow-up, great job on the RPO growth this quarter. I understand some of it may come from MANTL, but could you clarify how much of the growth was organic? Additionally, were there any unusual factors, such as larger deals, pull-forwards, or renewals that took place during the quarter?

Bryan Hill, CFO

No. In 2024, we had significant success with renewals, and many of the pull-forwards occurred during that year. In the first quarter of 2025, we signed eight contracts, half of which were renewals. These eight contracts contributed to an organic RPO growth of around 20%. Additionally, the inclusion of MANTL accounted for another 11 percentage points of year-over-year growth.

Operator, Operator

Your next question comes from the line of Jeff Van Rhee from Craig Hallum. Your line is now open.

Jeff Van Rhee, Analyst

Thank you for taking the questions. Congratulations on your next steps; you will be missed. I wish you all the best. I have a few questions, mainly some housekeeping matters. I would like to revisit the analytics aspect. I believe Alex mentioned an attach rate on new bookings, could you please clarify that for me again? Additionally, I am curious about its relation to total revenue and where the analytics stand at this point.

Bryan Hill, CFO

We do not disclose revenue separately, as our market approach is based on a combined offering. Breaking down discounts and similar factors complicates the individual revenue picture. Over the last four to six quarters, we've seen an attachment rate of about 70% for MANTL with new logo wins. For ACH Alert, when we secure a bank financial institution, the attachment rate is between 75% and 80%. MANTL has a significantly higher average annual recurring revenue compared to those other solutions, and we believe we can achieve an attachment rate similar to Segment's. Therefore, we anticipate higher deal values and, with MANTL's unique features, a better win rate on new logo acquisitions.

Jeff Van Rhee, Analyst

Very helpful. And you continue to see the add-ons ramp as well. Any thoughts on goals for add-ons as a percent of the bookings for the year, for 2025?

Alex Shootman, CEO

I think the long-term shape of the business that we've articulated for a few years is that in terms of new ARR, we'd like half of that to come from add-on sales and half of that to come from new logos. And in terms of new logos themselves, over time, we'd like half of that to come from credit unions and half of that to come from banks.

Bryan Hill, CFO

That's right. And I'll only qualify what Alex just mentioned, is will include MANTL as an add-on sale just like we do Segment and ACH Alert when we sell that into a new logo for those products. So in other words, not a part of a new logo deal. You will see the 50% from add-on sales trend up over time as MANTL continues to have success just adding new logos to their book of business.

Jeff Van Rhee, Analyst

Yes, very helpful. And then maybe just last, I think, Alex, it might have been in the script of the release because you talked about continuing to lead the industry and share gains. Just expand on that a little bit. Any thoughts on any quantification around that? Or in particular, where that share gain is coming from or most interestingly, maybe changes in where that share gain is coming from?

Alex Shootman, CEO

Those comments would be related to third-party data that measures users, digital users in the marketplace. And the third-party data that we use is FI Navigator, and so that's the source of the data.

Bryan Hill, CFO

Yes. When you look at the top 5 market share owners in terms of users, Alkami is outperforming all 5 at a pretty fast rate. No one's really adding 2.5 million to 3 million digital users a year. But in terms of just pure percentage gain and market share, Alkami is leading the pack.

Operator, Operator

Your next question comes from the line of Patrick Walravens from Citizens Bank. Your line is now open.

Patrick Walravens, Analyst

Okay. Great. So Bryan, everyone else is congratulating you, but I'm sad to see you go. So when did you decide?

Bryan Hill, CFO

I knew that Pat Walravens would be the one to ask me this question, and I’m going to miss working with you, Pat. To answer your question, this is a significant decision for me that involves a lot of considerations. I reflected on the success we've had at Alkami, along with my age and my changing family circumstances, which all played a role in my decision. I've decided that 2026 will be the year I step away. Another key factor is choosing the right time to announce this once I've made the decision, although it's not the formal communication. It’s important to me to leave the company in a strong position, ensuring that it will continue to thrive after I depart. I want to make it clear that Bryan Hill's exit as CFO will not lead to a downturn for the company. We've achieved too much for that to happen. Additionally, I have full confidence in our CFO team, which is ready to tackle any challenges that may arise with a new CFO. I take great pride in the team we’ve built over the past six years. Finally, I want to ensure we allocate enough time for Alkami to find the right successor. It’s crucial that the company attracts top talent given our performance, and I want Alex and the Board to have ample time to make this important decision thoughtfully and transparently, rather than rushing it. All of these factors contributed to where we are today.

Patrick Walravens, Analyst

Yes. That's actually super helpful. Okay. So Alex, for you, what are you looking for in the next candidate?

Alex Shootman, CEO

We've collected some of Bryan's skin cells and sent them to a DNA lab, and we're currently cloning him. I want to echo what Bryan mentioned. The company, along with Bryan, has been considerate in providing investors with a comprehensive transition plan and in making the situation public. This way, we can conduct a public search with an asset like Alkami, which will be far more effective than pursuing a financial search.

Patrick Walravens, Analyst

All right. Great. And if I could do one more, just big picture, Alex, what's the most important thing for you to get right over the next year?

Alex Shootman, CEO

We have an opportunity to really create some space between us and the market from a differentiation perspective, in the use cases and problems that we solve by bringing together digital banking, onboarding and account opening, and our data platform. When we do that, as a digital banking provider, there's just going to be a lot of space between us and everybody else, which is going to, in my opinion, really help our win rate. So that's probably the most important thing that we can do, Pat, in the near term is take what we understand as the use cases that we can deliver with this technology and bring it to life in some customers, and then have those customers show the outcomes that they've achieved from Alkami, and that's going to help with our competitive win rates.

Patrick Walravens, Analyst

Great. Thank you both.

Operator, Operator

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

Adam Hotchkiss, Analyst

Great. Thanks so much for taking the questions. Pat is difficult to follow up on, but echoing my best wishes to you going forward, Bryan. I wanted to touch back on just broader capital allocation priorities at banks. You mentioned the $0.90 out of $1 going to digital account opening. I thought that was a pretty striking concentration. Curious how sustainable you think that is? And maybe just remind us what it is about the environment we're in today, whether that's just the operating environment or where FIs are in their broader digital banking transformation that's driving that?

Alex Shootman, CEO

I want you to picture in your mind for a bit; you're in a regional bank or a credit union. And the technology platform that you have is an amalgamation of several different legacy capabilities that you're trying to operate on. And now your competition is chasing you; your competition is Chime. When somebody's opening an account in either of those environments, it's a very elegant 1-minute or 2-minute experience that looks like any other new digital experience that they have. Now you're this regional bank, and you're trying to recreate that experience and do that across all of these legacy technologies. Those bank or credit CEOs will tell me they are personally embarrassed about the experience they are providing to somebody where it's 20 minutes. It's walking into the branch and signing some paperwork. It's just nothing that is anything close to what people experience. Well, the combination of Alkami and MANTL allows a regional institution to punch way above its weight and deliver an experience that's every bit as good as a Chase experience or a Chime experience. When you're faced with an existential need to add customers and add members and add deposits for the long-term health of your institution, it's a really nice environment to sell into when you've got the right products.

Adam Hotchkiss, Analyst

Okay. Understood. That's really helpful color. And then, Bryan, would you just remind us the integration lift that's left for Ante? I know you mentioned a couple of cross-sells already, which is great to hear, but what about the product makes it either easier or harder to fully integrate than some of your other acquisitions?

Bryan Hill, CFO

In our view, there are no significant obstacles to integration. There are various integrations to consider. The first is how well they've integrated into the core offerings of the larger providers, and MANTL has made substantial progress in that area, which is a key differentiator for them. Then, there's the technology integration into our platform. When selling MANTL alongside Alkami, we offer more than if MANTL is paired with one of our competitors. While achieving this will take some time, we are already moving in that direction. Lastly, there's the integration related to operations and go-to-market strategies. As Alex mentioned, we are making considerable progress in that aspect as well. The more I interact with the MANTL team, the more impressed I become, and I truly believe this acquisition aligns perfectly with Alkami's strategy. Throughout our 36 years of acquisitions, I believe MANTL will be one of the best.

Adam Hotchkiss, Analyst

Great. Thank you very much.

Operator, Operator

Your next question comes from the line of Mayank Tandon from Needham. Your line is now open.

Mayank Tandon, Analyst

Thank you. Good evening. Bryan, let me extend my congratulations as well. It's been a pleasure working with you. You will be missed. To Alex. Alex, as we came into this year, there was a lot of talk about deregulation in the banking industry. I know it's still early days with the new administration. What's sort of the feedback from your customers, both prospective customers and current customers on any potential deregulation? And if you could be a little bit more specific in terms of if it does happen, what are the implications for a company like Alkami?

Alex Shootman, CEO

The main topic that emerged from our discussions is whether open banking will actually take place. We believe that if open banking does happen, it could provide our customers with an opportunity to gain market share, provided they have the right technology. With account portability, if someone feels disconnected from a large bank in their local community and has access to the necessary technology to switch to a different institution, it opens up the possibility for gaining new customers. Our conversations with clients suggest that they see open banking as a chance to be proactive, although they require the appropriate technology to do so. Most of my discussions have revolved around this point. Additionally, among some credit union executives, there have been talks about potential regulatory changes affecting tax and credit earnings for credit unions. All the credit union executives I have spoken to have indicated that if these changes occur, they will find a way to adapt their business. These have been the key discussions I’ve engaged in.

Mayank Tandon, Analyst

Got it. And then let me ask you this. I buy into the view, as you said, this is mission-critical. And the banks are still spending despite all the uncertain environment that we're in right now. What would it take for banks to then maybe slower spending? Have they talked about that? What would it actually take them to push out some of these implementations by 6, 12, or 18 months? We haven't seen that yet, and it's great to hear the visibility in your model, but I'm just sort of playing devil's advocate. What would it cost you to derail some of the growth in the near term, if it were to happen?

Alex Shootman, CEO

The discussions I have with customer executives indicate that they are closely managing their expenses compared to a couple of years ago. While they are cutting some projects, they are not cutting their digital banking initiatives. These contracts typically last between 5 to 7 years, and there is a 9-month to 1-year process for conversion. When you consider the timeline from the conversion date back to when the decision was made and factor in a sales cycle of about 9 months, they are working within a budgeted line item. They are likely to follow through on their decisions unless there are extraordinary circumstances that would cause a change. To date, we haven't observed any significant disruptions in their decision-making processes. Customers seem committed to their plans and timelines, and our main concern is managing our conversion calendar effectively to serve them well. So far, we have not encountered any discussions about customers delaying their decisions due to economic factors in the digital banking sector.

Bryan Hill, CFO

And Mayank, this isn't really a question of, are you going to cut costs as it relates to your digital banking platform. As financial institutions are looking for areas for opportunity, most of them are working in a distributed network, and distributed networks are expensive. But if you have a channel that can touch 100% of your base or you have the same cost in a single location that touches 10% of your base, you're going to reevaluate the distribution of your offering versus cutting the channel that has high touch as it relates to your customer base. That's really the decision process they go through and they think about. As it relates to implementation timelines and those kinds of things, they want to move to the new platform as soon as they can. So the real question for Alkami is to make sure that you're investing in your platform, which we do, you're continuing to create a gap, and you can widen that gap from what the incumbent offers today, which we do both organically. We've also done this with MANTL and the Segment and ACH Alert acquisitions, and it's always staying ahead of the competition because the focus on digital banking is only going to increase; it's not going to decrease.

Alex Shootman, CEO

So I would characterize our posture as rational optimists. We're aware that something could change. We have not seen anything change yet in the demand environment.

Operator, Operator

Your next question comes from Anthony Dellis from KeyBank Capital Markets. Your line is now open.

Unidentified Analyst, Analyst

Hi, this is Anthony Dellis on for Alex Markgraff. Alex, your comments about clients maintaining their digital banking activities are clear. However, I'm interested to know if you've seen any changes in the structure of the deals based on your discussions in light of the current macro environment. Additionally, as Alkami seeks to serve more banks, can you provide any insights into how recent banking implementations have influenced your conversations with other banks? Thank you.

Alex Shootman, CEO

I'll kind of turn to Bryan. I haven't seen any deal construction differences in the new logos that are coming into our deals in terms of the price points or the number of products that they're buying. What's going to begin to occur when we're talking to new banks that will emerge as we convert the bank customers that are in implementation into live customers is the new customers are going to increase their confidence in signing on to Alkami because we'll now have 3 examples, 4 examples, 5 examples, or more on a particular core. In the bank market, there's a concentration of cores that's a little bit higher concentration in the bank market than there is in the credit union market. In summary, my expectation would be as we convert the customers in the implementation pipeline into live customers, that will increase our win rate over our number one competitor, which I want to remind us all that our number one competitor is staying with the incumbent.

Operator, Operator

Your next question comes from the line of Alexei Gogolev from JPMorgan. Your line is now open.

Alexei Gogolev, Analyst

Hi, one more quick one from me. How much of ARR was inorganic this quarter?

Bryan Hill, CFO

Our organic ARR growth was right at 22% for the quarter.

Alexei Gogolev, Analyst

Got it. Okay. Thank you so much and congrats again, Bryan.

Operator, Operator

There are no further questions at this time. I'll now hand the call over to Alex Shootman for closing remarks.

Alex Shootman, CEO

Okay. Thank you, everyone, for joining us today to our investors for your questions and for following the company; to our clients for your continued partnership; and to our Alkamists for outstanding work in the quarter. Have a great evening, and thank you very much.

Operator, Operator

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.