Alkami Technology, Inc. Third Quarter 2026 Financial Results - ALKAMI TECHNOLOGY INC

Financial Performance:

• Q3 2026 revenue reached $134.9 million, up 19% year-over-year, exceeding the high end of guidance.
• Subscription revenue grew 20% and constituted 96% of total revenue.
• Live ARR increased 19% to $533 million; backlog stands at $56 million (approx. 31 new clients, 1M users).
• Q3 adjusted EBITDA was $26.3 million (19.5% margin), beating guidance; full-year adjusted EBITDA raised to $98–$99 million (18.5% midpoint margin).
• Gross margin was 63.1% (below expectations) due to higher third-party product mix costs; full-year margin expansion of >500 bps expected.
• Operating expenses were $59.4 million (44% of revenue), down 600 bps YoY due to personnel efficiencies.
• Operating cash flow was nearly $22 million; company holds $85 million in cash and marketable securities.
• Stock repurchases totaled $20 million YTD; ARPU increased 5% YoY to $21.88.

Guidance and Future Outlook:

• Q4 2026 revenue guidance raised to $139.7–$141.2 million (15.6–16.9% growth); adjusted EBITDA guidance raised to $30–$31 million (21.7% margin).
• Full-year 2026 revenue guidance raised to $530.5–$532 million (19.6–19.9% growth); adjusted EBITDA guidance raised to $98–$99 million.
• Stock-based compensation expected to be <14% of revenue for the full year.
• Long-term "Rule of 45" by 2030 maintained: Gross margin ~70%, annual adjusted EBITDA margin expansion of ~300 bps, and SBC <10% of revenue.
• 2027 full-year guidance to be provided in Q4 earnings; expected to rely on 19% live ARR growth, $56M backlog, and continued ARPU growth.
• Margins expected to improve in 2027 as AI efficiencies in cost structure mature.

Business Segments and Product Lines:

• DSSP (Digital Banking, Account Opening, Data/Marketing): 60 clients contracted for all three products; pipeline consistent with historical norms despite recent strategic review uncertainty.
• Digital Banking: 323 live clients with 24.4M registered users (+13% YoY); 229 financial institutions onboarded since 2020; 8.4M account holders on platform.
• Mantle: 14 new clients added in Q3; 5 additional clients contracted for DSSP integration.
• Core Conversions: Record of 7 conversions completed in 2026 (including 6 largest clients with 3.5M users); expected to nearly double in 2027.
• New Products: Launched 4 digital banking clients in a single day (record); 3 AI agents in beta (insider onboarding, account opening, KYC, document review).
• AI Initiatives: Building agentic conversational experiences inside apps and connectors to general-purpose AI assistants for external banking interactions.

Market and Competitive Landscape:

• Focus on regional and community financial institutions ($500M–$10B assets) and banks; targeting "front door" shift from mobile apps to AI agents.
• Strategic review concluded in September; board unanimously chose to remain an independent public company, removing uncertainty for prospects.
• Win rates in the bank market are up; previously, potential clients paused decisions due to rumors of Alchemy being sold.
• Treasury management software features largely complete for the target community bank segment.
• Competitive advantage cited as ability to run a multi-tenant platform where clients configure 4,000 policy settings across 25 systems of record.

Risks and Challenges:

• Customer Uncertainty: Strategic review rumors previously pressured new logo wins, though pipeline remains consistent.
• Margin Pressure: Third-party product costs (approx. 1/3 of revenue) fluctuate with mix; Q3 gross margin below expectations due to this factor.
• Timing Variability: Core conversion revenue is lumpy and subject to scheduling variability based on client testing cycles.
• Management Turnover: Departures of CTO, Chief Accounting Officer, and Mantle CCO noted; management states these were unrelated and operations are stable.
• Capital Constraints: Cash balance < $100M limits aggressive M&A; focus remains on integrating Mantle and disciplined capital allocation.

Management Commentary and Tone:

• Tone: Confident and forward-looking; management expresses pride in execution and clarity on long-term AI strategy.
• Strategic Clarity: Emphasized that removing the "for sale" overhang is critical to restoring normal sales cadence.
• AI Vision: Frame AI as the next generation "front door" to banking, with Alchemy providing the infrastructure, control, and data layers for agentic actions.
• Internal Efficiency: Alchemy's internal AI platform (used by 100+ employees) is positioned for external commercialization as an enterprise workspace.

Analyst Questions and Answers:

• New Logos/Pipeline: Alex confirmed pipeline is normal; previously lost deals were due to client risk aversion regarding ownership, now resolved. No specific 2027 booking guidance given yet.
• Management Turnover: Clarified CTO departure led to combined CTO/CPO role for better alignment; other exits were unrelated personnel decisions.
• Treasury Management: Feature parity with competitors expected by year-end; majority of required 24-28 features now live or in beta.
• Q4 Guidance/Costs: Q4 margin dip attributed to shifted one-time revenue ($800k core conversion) and third-party mix; full year outlook remains strong.
• Capital Allocation: Buybacks are opportunistic and aim to offset dilution; M&A is opportunistic but currently secondary to Mantle integration.
• Gross Margin Path: 70% long-term target maintained; short-term decisions may prioritize customer-facing features (e.g., PCI 4.0 compliance) over immediate margin optimization.

Other Key Points:

• 36 new client implementations completed in the last 12 months supporting 1.4M digital users.
• Churn on digital banking ARR is <1% annually, typically driven by client mergers.
• Remaining Performance Obligations (RPO) at $1.7 billion (3.2x live ARR), providing strong long-term visibility.
• Clients are adopting AI in stages: assist first, then recommend, then prepare actions for approval, with full agentic action last.
• Alchemy is positioned to serve both internal institutional AI agents and external consumer-facing AI assistants.