alk-20240930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission File Number 001-40321

ALKAMI TECHNOLOGY, INC.

(Exact Name of Registrant as Specified in its Charter)


Delaware		45-3060776
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

5601 Granite Parkway,	Suite 120
Plano,	TX	75204
(Address of Principal Executive Offices)		(Zip Code)

(877) 725-5264

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value per share	ALKT	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Smaller reporting company	☐
Accelerated filer	☒	Emerging growth company	☒
Non-accelerated filer	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of registrant’s common stock outstanding as of September 30, 2024 was 100,496,654.


TABLE OF CONTENTS


PART I ‑ FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Unaudited Condensed Consolidated Balance Sheets	1
	Unaudited Condensed Consolidated Statements of Operations	2
	Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity	3
	Unaudited Condensed Consolidated Statements of Cash Flows	4
	Notes to the Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 4.	Controls and Procedures	24

PART II ‑ OTHER INFORMATION
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 3.	Defaults Upon Senior Securities	25
Item 4.	Mine Safety Disclosures	25
Item 5.	Other Information	25
Item 6.	Exhibits	26

Signatures		27

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

ALKAMI TECHNOLOGY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

(UNAUDITED)


	September 30,		December 31,
	2024		2023
Assets
Current assets
Cash and cash equivalents	$	80,956	$	40,927
Marketable securities	20,033		51,196
Accounts receivable, net	42,408		35,499
Deferred costs, current	12,046		10,329
Prepaid expenses and other current assets	13,563		10,634
Total current assets	169,006		148,585
Property and equipment, net	21,038		16,946
Right-of-use assets	14,875		15,754
Deferred costs, net of current portion	34,666		30,734
Intangibles, net	30,718		35,807
Goodwill	148,050		148,050
Other assets	3,840		3,949
Total assets	$	422,193	$	399,825
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable	$	5,591	$	7,478
Accrued liabilities	28,049		19,763
Deferred revenues, current portion	13,088		10,984
Lease liabilities, current portion	1,309		1,205
Total current liabilities	48,037		39,430
Deferred revenues, net of current portion	16,267		15,384
Deferred income taxes	1,774		1,713
Lease liabilities, net of current portion	17,395		18,052
Other non-current liabilities	216		305
Total liabilities	83,689		74,884
Stockholders’ Equity
Preferred stock, $0.001 par value, 10,000,000 shares authorized and 0 shares issued and outstanding as of September 30, 2024 and December 31, 2023	—		—
Common stock, $0.001 par value, 500,000,000 shares authorized; and 100,496,654 and 96,722,098 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively	100		97
Additional paid-in capital	806,962		760,210
Accumulated deficit	(468,558)		(435,366)
Total stockholders’ equity	338,504		324,941
Total liabilities and stockholders' equity	$	422,193	$	399,825

The above financial statements should be read in conjunction with the Notes to the Unaudited Condensed Consolidated Financial Statements.

ALKAMI TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

(UNAUDITED)


	Three months ended September 30,				Nine months ended September 30,
	2024		2023		2024		2023
Revenues	$	85,906	$	67,703	$	244,193	$	193,462
Cost of revenues(1)	35,289		31,153		100,773		89,300
Gross profit	50,617		36,550		143,420		104,162
Operating expenses:
Research and development	24,133		21,755		70,862		63,170
Sales and marketing	14,406		11,933		45,213		36,694
General and administrative	22,147		18,290		62,074		53,608
Acquisition-related expenses	—		—		195		220
Amortization of acquired intangibles	359		359		1,076		1,076
Total operating expenses	61,045		52,337		179,420		154,768
Loss from operations	(10,428)		(15,787)		(36,000)		(50,606)
Non-operating income (expense):
Interest income	1,147		2,080		3,490		5,822
Interest expense	(180)		(1,931)		(327)		(5,514)
Gain on financial instruments	—		201		—		421
Loss before income taxes	(9,461)		(15,437)		(32,837)		(49,877)
Provision (benefit) for income taxes	(19)		39		355		323
Net loss	$	(9,442)	$	(15,476)	$	(33,192)	$	(50,200)
Net loss per share attributable to common stockholders:
Basic and diluted	$	(0.09)	$	(0.16)	$	(0.34)	$	(0.54)
Weighted-average number of shares of common stock outstanding:
Basic and diluted	99,435,002		94,675,358		98,165,903		93,477,486

(1) Includes amortization of acquired technology of $1.3 million for both the three months ended September 30, 2024 and 2023, and $4.0 million for both the nine months ended September 30, 2024 and 2023.

The above financial statements should be read in conjunction with the Notes to the Unaudited Condensed Consolidated Financial Statements.

ALKAMI TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands, except share data)

(UNAUDITED)


		Three months ended September 30, 2024
	Common Stock		Additional Paid-in Capital			Accumulated Deficit		Total Stockholders’ Equity
		Shares			Amount
Balance June 30, 2024		98,985,370	$	99		$	786,201	$	(459,116)	$	327,184
Stock-based compensation		—	—			15,633		—		15,633
Issuance of common stock upon restricted stock unit vesting		716,460	1			(1)		—		—
Exercised stock options		794,824	—			5,154				5,154
Payments for taxes related to net settlement of equity awards		—	—			(25)		—		(25)
Net loss		—	—			—		(9,442)		(9,442)
Balance September 30, 2024		100,496,654	$	100		$	806,962	$	(468,558)	$	338,504


		Three months ended September 30, 2023
	Common Stock			Additional Paid-in Capital			Accumulated Deficit		Total Stockholders’ Equity
			Shares			Amount
Balance June 30, 2023			94,228,876	$	94		$	729,607	$	(407,177)	$	322,524
Stock-based compensation			—	—			14,326		—		14,326
Issuance of common stock upon restricted stock unit vesting			484,736	—			(1)		—		(1)
Exercised stock options			648,175	1			4,484		—		4,485
Payments for taxes related to net settlement of equity awards			—	—			(4,204)		—		(4,204)
Net loss			—	—			—		(15,476)		(15,476)
Balance September 30, 2023			95,361,787	$	95		$	744,212	$	(422,653)	$	321,654


		Nine months ended September 30, 2024
	Common Stock			Additional Paid-in Capital			Accumulated Deficit		Total Stockholders’ Equity
			Shares			Amount
Balance December 31, 2023			96,722,098	$	97		$	760,210	$	(435,366)	$	324,941
Stock-based compensation			—	—			44,895		—		44,895
Issuance of common stock upon restricted stock unit vesting			1,737,951	2			(2)		—		—
Common stock issued under Employee Stock Purchase Plan (ESPP)			216,174	—			2,598		—		2,598
Exercised stock options			1,820,431	1			12,081		—		12,082
Payments for taxes related to net settlement of equity awards			—	—			(12,820)		—		(12,820)
Net loss			—	—			—		(33,192)		(33,192)
Balance September 30, 2024			100,496,654	$	100		$	806,962	$	(468,558)	$	338,504


		Nine months ended September 30, 2023
	Common Stock			Additional Paid-in Capital			Accumulated Deficit		Total Stockholders’ Equity
			Shares			Amount
Balance December 31, 2022			92,112,749	$	92		$	706,407	$	(372,453)	$	334,046
Stock-based compensation			—	—			39,143		—		39,143
Issuance of common stock upon restricted stock unit vesting			1,488,164	1			(1)		—		—
Common stock issued under ESPP			271,880	—			2,407				2,407
Exercised stock options			1,488,994	2			7,285		—		7,287
Payments for taxes related to net settlement of equity awards			—	—			(11,029)		—		(11,029)
Net loss			—	—			—		(50,200)		(50,200)
Balance September 30, 2023			95,361,787	$	95		$	744,212	$	(422,653)	$	321,654

The above financial statements should be read in conjunction with the Notes to the Unaudited Condensed Consolidated Financial Statements.

ALKAMI TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(UNAUDITED)


	Nine months ended September 30,
	2024		2023
Cash flows from operating activities:
Net loss	$	(33,192)	$	(50,200)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization expense	7,854		7,841
Accrued interest on marketable securities, net	(928)		(2,059)
Stock-based compensation expense	43,822		37,914
Amortization of debt issuance costs	161		110
Gain on financial instruments	—		(430)
Gain on lease modification	—		(375)
Deferred taxes	61		118
Changes in operating assets and liabilities:
Accounts receivable	(6,909)		(5,020)
Prepaid expenses and other current assets	(2,619)		(2,631)
Accounts payable and accrued liabilities	6,316		5,223
Deferred costs	(5,067)		(3,959)
Deferred revenues	2,987		1,271
Net cash provided by (used in) operating activities	12,486		(12,197)
Cash flows from investing activities:
Purchase of marketable securities	(30,721)		(109,593)
Proceeds from sales, maturities and redemptions of marketable securities	62,812		97,852
Purchases of property and equipment	(1,036)		(774)
Capitalized software development costs(1)	(5,009)		(3,843)

Net cash provided by (used in) investing activities	26,046		(16,358)
Cash flows from financing activities:
Principal payments on debt	—		(2,125)
Debt issuance costs paid	(363)		(341)
Proceeds from ESPP issuances	2,598		2,407
Payment of holdback funds from acquisition	—		(1,000)
Payments for taxes related to net settlement of equity awards	(12,820)		(11,029)
Proceeds from stock option exercises	12,082		7,287
Net cash provided by (used in) financing activities	1,497		(4,801)
Net increase (decrease) in cash and cash equivalents and restricted cash	40,029		(33,356)
Cash and cash equivalents and restricted cash, beginning of period	40,927		112,337
Cash and cash equivalents and restricted cash, end of period	$	80,956	$	78,981

(1) See Note 3 for additional information regarding non-cash investing activities for the nine months ended September 30, 2024 and 2023 related to capitalized software development costs.

The above financial statements should be read in conjunction with the Notes to the Unaudited Condensed Consolidated Financial Statements.

ALKAMI TECHNOLOGY, INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

(in thousands, except share and per share data)

(Unaudited)

Note 1. Organization

Description of Business

Alkami Technology, Inc. (the “Company”) is a cloud-based digital banking solutions provider. The Company inspires and empowers community, regional and super-regional financial institutions (“FIs”) to compete with large, technologically advanced and well-resourced banks in the United States. The Company’s solution, the Alkami Digital Banking Platform, allows FIs to onboard and engage new users, accelerate revenues and meaningfully improve operational efficiency, all with the support of a proprietary, true cloud-based, multi-tenant architecture. The Company cultivates deep relationships with its clients through long-term, subscription-based contractual arrangements, aligning its growth with its clients’ success and generating an attractive unit economic model. The Company was incorporated in Delaware in August 2011, and its principal offices are located in Plano, Texas.

Note 2. Summary of Significant Accounting Policies

The accompanying condensed consolidated financial statements reflect the application of significant accounting policies as described below.

Basis of Presentation and Consolidation

The interim unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. All intercompany accounts and transactions are eliminated.

In the Company's opinion, the accompanying interim unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments, consisting of normal, recurring adjustments, necessary to present fairly the financial position, results of operations and cash flows for the periods indicated. Certain information and disclosures normally included in the notes to the annual consolidated financial statements prepared in accordance with GAAP have been omitted from these interim unaudited condensed consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, these interim unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the accompanying notes for the fiscal year ended December 31, 2023, which are included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 29, 2024. Operating results for the three and nine months ended September 30, 2024 are not necessarily indicative of results that may be expected for any other interim period or for the year ending December 31, 2024.

The Company has no sources of other comprehensive income, and accordingly, net loss presented each period is the same as comprehensive loss.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Significant estimates and assumptions include determining the timing and amount of revenue recognition and business combinations.

Recent Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU No. 2023-07 amended the existing segment reporting requirements by requiring disclosure of the significant segment expenses based on how management internally views segment information and by allowing the disclosure of more than one measure of segment profit or loss, as well as by expanding the interim period segment requirements. The ASU also requires single-reportable segment entities to report the disclosures required under ASC Topic 280, Segment Reporting. ASU No. 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company is currently evaluating the impact the updated standard will have on its financial statement disclosures.

In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 expands disclosures in the rate reconciliation and requires disclosure of income taxes paid by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. ASU 2023-09 should be applied prospectively; however, retrospective application is permitted. The Company is currently evaluating the impact the updated standard will have on its financial statement disclosures.

Note 3. Property and Equipment, Net

Depreciation and amortization expense was $1.0 million and $2.8 million for the three and nine months ended September 30, 2024, respectively, and $1.0 million and $2.8 million for the three and nine months ended September 30, 2023, respectively.

Property and equipment, net, includes the following amounts at September 30, 2024 and December 31, 2023:


(in thousands)	Useful Life	September 30, 2024		December 31, 2023
Software	2 to 5 years	$	198	$	920
Capitalized software development costs	5 years	17,895		12,263
Computers and equipment	3 years	2,336		6,359
Furniture and fixtures	5 years	426		3,988
Leasehold improvements	3 to 10 years	10,228		12,312
		$	31,083	$	35,842
Less: accumulated depreciation and amortization		(10,045)		(18,896)
Property and equipment, net		$	21,038	$	16,946

For both the nine months ended September 30, 2024 and 2023, the Company had non-cash investing activities of $0.6 million for capitalized stock-based compensation related to capitalized software development costs. Additionally, the Company recognized stock-based compensation expense through the amortization of capitalized stock-based compensation associated with capitalized software development costs of less than $0.1 million and $0.1 million for the three and nine months ended September 30, 2024, respectively, and none for both the three and nine months ended September 30, 2023.

Note 4. Revenues and Deferred Costs

The Company derives the majority of its revenues from recurring monthly subscription fees charged for the use of its software-as-a-service (“SaaS”) subscription services. Subscription revenues are generally recognized as revenue over the term of the contract as a series of distinct SaaS services bundled into a single performance obligation. Clients are usually charged a one-time, upfront implementation fee and recurring annual and monthly access fees for the use of the online digital relationship banking solution. Implementation and integration of the digital banking platform is complex, and the Company has determined that the one-time, upfront services do not transfer a promised service to the client. As these services are not distinct, they are bundled into the SaaS series of services, and the associated fees are recognized on a straight-line basis over the subscription term. Other services include professional services and custom development.

The following table disaggregates the Company's revenue by major source for the three and nine months ended September 30, 2024 and 2023:


	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2024		2023		2024		2023
SaaS subscription services	$	82,054	$	64,758	$	233,437	$	183,446
Implementation services	1,832		2,077		5,790		6,961
Other services	2,020		868		4,966		3,055
Total revenues	$	85,906	$	67,703	$	244,193	$	193,462

The Company recognized approximately $6.5 million of revenue during the nine months ended September 30, 2024 that was included in deferred revenues in the accompanying condensed consolidated balance sheets as of the beginning of the reporting period. For those contracts that were wholly or partially unsatisfied as of September 30, 2024, the Company’s remaining performance obligation totaled approximately $1.3 billion. The Company expects to recognize approximately 47.0% of these remaining obligations as revenue over the next 24 months, an additional 35.4% in the next 25 to 48 months, and the remaining balance thereafter. This estimate does not include estimated consideration for excess user and transaction processing fees that the Company expects to earn under its subscription contracts.

Contract assets totaled $1.2 million and $1.5 million as of September 30, 2024 and December 31, 2023, respectively, which are included in other assets in the accompanying condensed consolidated balance sheets.

Deferred Cost Recognition

The Company capitalized $3.1 million and $6.0 million in deferred commissions costs during the three and nine months ended September 30, 2024, respectively, and $1.6 million and $4.4 million for the three and nine months ended September 30, 2023, respectively, and recognized amortization of $1.3 million and $3.8 million during the three and nine months ended September 30, 2024, respectively, and $1.0 million and $2.7 million during the three and nine months ended September 30, 2023, respectively. Amortization expense is included in sales and marketing expenses in the accompanying condensed consolidated statements of operations. Deferred commissions are considered costs to obtain a contract and are included in deferred costs in the accompanying condensed consolidated balance sheets in the amount of $23.4 million and $21.2 million as of September 30, 2024 and December 31, 2023, respectively.

The Company capitalized implementation costs of $2.4 million and $7.6 million during the three and nine months ended September 30, 2024, respectively, and $2.3 million and $6.4 million for the three and nine months ended September 30, 2023, respectively, and recognized

amortization of $1.4 million and $4.1 million during the three and nine months ended September 30, 2024, respectively, and $1.3 million and $3.6 million for the three and nine months ended September 30, 2023, respectively. Amortization expense is included in cost of revenues in the accompanying condensed consolidated statements of operations. These deferred costs are considered costs to fulfill client contracts and are included in deferred costs in the accompanying condensed consolidated balance sheets in the amount of $23.4 million and $19.8 million as of September 30, 2024 and December 31, 2023, respectively.

SEC Form 10-Q filed by Alkami Technology Inc.