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

Explicit Guidance:

• Q4 2026: Revenue expected between $139.7 million and $141.2 million (15.6–16.9% YoY growth); Adjusted EBITDA expected between $30 million and $31 million (21.7% margin midpoint); Stock-based compensation expected to be <14% of revenue.
• Full Year 2026: Revenue raised to $530.5 million–$532 million (19.6–19.9% growth); Adjusted EBITDA raised to $98 million–$99 million (18.5% margin midpoint); Expect >500 basis points of margin expansion driven by operating leverage and AI-driven cost efficiencies.
• Long-Term Targets (Rule of 45 by 2030): Gross margin approaching 70%; Annual Adjusted EBITDA margin expansion of ~300 basis points; Stock-based compensation falling <10% of revenue.
• 2027 Guidance: Not provided on this call; expected to be disclosed with Q4 2026 results; expected to reflect >19% ARR growth and mid-single-digit ARPU growth.

Business-Segment Outlook:

• Digital Banking: Pipeline returning to normal cadence post-strategic review; record seven core conversions completed in 2026, with plans to nearly double that volume in 2027.
• DSSP (Digital Banking, Account Opening, Data/Marketing): 60 clients contracted for all three products; strategy focused on expanding value per client with ARPU growth driven by cross-sell and new client onboarding at higher ARPU.
• Mantle Segment: 14 new clients signed in Q3; full integration into DSSP remains a strategic priority before pursuing further M&A.
• AI Product Portfolio: AI products (including fraud management) currently contribute ~10% of revenue; investing in 2027 on agentic applications that combine data analysis and workflow optimization (e.g., fraud, onboarding, document review) beyond standard SaaS helpers.

Market and Competitive Outlook:

• Customer Behavior Shift: Anticipates the "front door" to banking shifting from mobile apps to AI agents; customers seeking to control which agents interact with their data and define approval hierarchies.
• Competitive Positioning: Alchemy positioned as the infrastructure layer ("single code-based multi-tenant") for AI agents, enabling clients to compete with megabanks via controlled agentic actions.
• Win Rates: Win rates in the bank market have hit targets; win rates in credit unions remain steady but may face ARPU pressure if mix shifts from banks (higher ARPU) to credit unions.
• Backlog: $56 million ARR backlog (31 new clients, ~1 million users) expected to go live over the next 12 months.

Macro / Industry Outlook:

• Regulatory/Security: Recent PCI 4.0 compliance and significant architectural enhancements for PII data handling prioritized over cost optimization projects in the near term; no specific plans for database conversion in 2027 at this time.
• Economic/Market Stability: Belief that client end-markets continue to invest in modernization; AI adoption is structural, with demand expected to persist regardless of short-term economic fluctuations.

Strategic Initiatives:

• AI Integration: Launching three internal AI agents in beta (Insider onboarding, account opening, KYC summary, document review); developing MCP servers to allow AI assistants to query client data securely.
• Product Expansion: Building connectors for leading general-purpose AI assistants to allow customers to bank via external agents; expanding treasury management feature set to match leading competitors by year-end.
• Capital Allocation: Opportunistic share buybacks (funded by free cash flow) to offset dilution and capitalize on attractive valuations; net leverage ratios declining; M&A remaining opportunistic but paused to focus on Mantle integration.

Risks and Headwinds to Outlook:

• One-time Revenue Timing: Q4 revenue guidance is slightly below some models due to the timing of one-time core conversion revenue (approx. $800k shifted from Q4 to Q3) and non-recurring Q3 items.
• Third-Party Costs: Approximately one-third of revenue relies on integrated third-party products; mix shifts in these products cause gross margin volatility (e.g., Q3 margin 63.1% vs expectations), with similar pressure expected in Q4.
• Customer Uncertainty: Prior speculation on Alchemy's ownership created a temporary overhang on new logo acquisition; while cleared, may result in a "lighter" booking quarter or two as the sales funnel recovers.
• ARPU Volatility: Potential deceleration in ARPU growth if mix shifts to credit unions or if cross-sell velocity slows among existing clients.

Management Tone on the Future:

• Confidence: High confidence in returning to normal business cadence and long-term margin expansion; management views the conclusion of the strategic review as a critical turning point to "maximize shareholder value."
• Strategic Focus: Shift toward "sharpening focus on profitability" in 2027; committed to "Rule of 45" by 2030 while balancing AI investment with cost discipline.
• Hedges: Cautious on specific 2027 numerical guidance pending Q4 performance; acknowledges variability in core conversion timing and third-party product mix.

Miscellaneous:

• Executive Changes: CTO role combined with Chief Product Officer role for alignment; strategic review led to a unanimous board decision to operate as an independent public company.
• User Growth: Digital banking platform now hosts 24.4 million registered users (up 2.8 million in 12 months); churn on digital banking ARR remains <1% annually.
• Cash Position: Ended Q3 2026 with $85 million in cash and marketable securities; repurchased $10 million of stock in Q3 ($20 million YTD).