ALKT - NASDAQ

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. [Operator Instructions] I'd like to turn the conference over to Steve Calk, Vice President of Investor Relations. Steve, please go ahead.

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 the understanding of 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.

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, Alchemy 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 that 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 continue to trend of record attendance for us and with the majority of attendees and 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 to 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, 5 Alkami clients purchased MANTL and 2 of our forecasted first quarter new logos as to revise 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 in 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 outcome is put 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 for February 27, 2026, whichever comes first. I'll now hand the call to Bryan to take us through our financial results.

Thanks, Alex, and good afternoon, everyone. Before we dive into the financial results, I want to take a moment to say a little more about the news that Alex just shared. After 36 years of experiences and relationships, I will forever cherish and having the opportunity to be a part of successful organizations I've decided to retire, resulting in my resignation as the Chief Financial Officer of Alkami Technology. I will continue as Alkami's CFO while the company identifies and onboard a replacement or February 27, 2026, whichever date occurs first. I also plan to continue in a consultative capacity through December of 2026 or an earlier date if my services are no longer necessary to ensure a smooth transition of responsibilities. This was not an easy decision for me, but I believe it is the right time for my family as we move into the next chapter of life. I want to express my heartfelt gratitude to all Alkamists, especially the CFO team, as well as our Board of Directors and our shareholders for the support and trust you placed in me over the years. It has been an incredible journey, and I am proud of what we've accomplished together -- particularly in driving the company's growth and scaling its profitability. We have a strong leadership team in place, and I'm confident that Alkami will continue to thrive and achieve its objective of becoming the number one digital banking platform. Thank you again for your support. Now I'll turn to discuss our financial performance. In the first quarter of 2025, we continue to drive exceptional revenue growth and exceeded our profitability goals. We also completed the acquisition of MANTL, the largest in our history, completed a convertible notes offering and expanded our credit facility. Today, we are reporting results inclusive of the MANTL acquisition, which we closed on March 17, 2025. Consistent with our prior acquisitions, we do not include acquired clients or users in our digital banking platform counts. Our reported clients and users reflect only those on our digital banking platform. All other financial metrics include the impact from acquisitions, such as ARR, ARR backlog and average revenue per user. In the first quarter, we achieved total revenue of $97.8 million, representing year-over-year growth of 28.5% and improved adjusted EBITDA to $12.1 million compared to $3.8 million in the year ago quarter. Revenue for the first quarter included a few unexpected items, such as $1.4 million from closing the MANTL acquisition earlier than expected and $600,000 of revenue originally expected to occur in the second quarter of 2025 related to our annual client conference, Co:lab. Subscription revenue grew 27% in the first quarter and represented 95% of total revenue. We increased ARR by 33% and exited the quarter at $404 million. We currently have approximately $68 million of ARR in backlog for implementation, the majority of which will occur over the next 12 months. Included in our backlog are 36 new digital banking clients, representing 1.1 million digital users. We exited the quarter with 278 live clients and 20.5 million registered users on our digital banking platform, representing registered user growth of approximately $2.3 million or 13% compared to last year. Over the last 12 months, we implemented 37 financial institutions and 3 clients left our platform. As a reminder, because of the long-term nature of our contracts, we have 3 to 4 quarters of visibility into upcoming client attrition. Currently, we expect to churn 4 clients in 2025 and representing less than 1% of ARR. Over the long-term, we modeled digital banking ARR churn at 2% to 3% per year. The primary driver of churn continues to be M&A and consolidation within our client base. We ended the quarter with an RPU of $19.74 and up 18% compared to a year ago, driven by the acquisition of MANTL, add-on sale success and the addition of new clients who tend to onboard with a higher average RPU. We continue to see broad-based demand across our product portfolio, evidenced by our sales pipeline new logo and client renewal success, our ability to cross-sell new products into our installed base and now the rate in which we are seeing the market adopt the MANTL onboarding and account opening solution. For the first quarter, we signed four new digital banking platform clients and renewed for existing clients, representing eight contract signings. MANTL added 16 new clients 5 of which are Alkami Digital Banking clients. Excluding MANTL's performance, our add-on sales effort represented approximately 57% of new sales for the quarter. Regarding renewals, we expect a total of 25 renewals in 2025, slightly below our recent average as we pulled forward several renewals into 2024. Our remaining performance obligation was approximately $1.6 billion, representing 3.9 times our ARR and up 31% compared to a year ago. Now turning to gross margin. For the first quarter of 2025, we delivered non-GAAP gross margin of 64.3% representing over 250 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-sales operation. Moving to operating expenses. For the first quarter 2025, operating expenses of $51.2 million or 52% of revenue represented year-over-year operating leverage of approximately 500 basis points. We primarily drove operating leverage across R&D and G&A, where we continue to realize operational scale. Related sales and marketing expense, we typically conduct Co:lab in the second quarter resulting in approximately $3 million of seasonally higher expense during this quarter. However, in 2025, Co:lab occurred during the first and second quarters, resulting in seasonally higher operating expenses in both quarters. Regarding go-to-market efficiency, we continue to rank among the best in SaaS. During the last 12 months, we increased ARR $1.20 for each dollar of sales and marketing spend, excluding the impact from the MANTL acquisition and the timing of Co:lab. Our adjusted EBITDA in the first quarter was $12.1 million, better than the high end of our expectations and representing an adjusted EBITDA margin at 12.3%. We are investing in our captive offshore capability, and as we discussed in the last several quarters, we expect an investment of approximately $5 million during 2025. We're 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 $95 million of cash and marketable securities. We also announced an amendment to our credit facility, which expanded our revolver from $125 million to $225 million and extended the maturity date to February of 2030. Before turning to guidance, let me provide a post-closing recap of the MANTL acquisition. We closed the MANTL acquisition on March 17, a few weeks earlier than expected. As we announced in February's press release, we agreed to acquire MANTL for an enterprise value of $400 million on a debt-free and cash-free basis and also subject to customary purchase price adjustments. After these adjustments, the final enterprise value is $393 million, which includes the following: $375 million of purchase consideration, $11 million in equity compensation from MANTL employees replacing their invested equity compensation at the time of acquisition and $7 million categorize as current period compensation and prepaid compensation, which is presented as a cash outflow from operating activities on the cash flow statement. The $375 million of purchase consideration was financed as follows: $13 million from our balance sheet cash, $60 million from our credit facility and $302 million from net proceeds of convertible notes issued on March 10, after the accounting for the cost of the capped [ph] call. The convertible notes had a 1.5% coupon and a 37.5% conversion premium. As mentioned earlier, we also entered into a capped call transaction linked to the convertible notes, effectively raising the conversion premium to 100%. Now turning to guidance. For the second quarter of 2025, we are providing guidance for revenue in the range of $109 million to $110.5 million, which represents total revenue growth of 33% to 35%. For adjusted EBITDA, we are providing second quarter guidance in the range of $9 million to $10 million, which includes a full quarter of adjusted EBITDA loss from MANTL. For the full year of 2025, we are providing guidance for revenue in the range of $443 million to $447 million representing total revenue growth of 33% to 34% and organic revenue growth of 25% to 26%. We are also providing adjusted EBITDA guidance of $49.5 million to $52.5 million. For full year guidance, it includes a revenue contribution of approximately $31.4 million and an adjusted EBITDA loss of $5 million from the MANTL acquisition. We believe the MANTL business will be accretive to adjusted EBITDA in 2026. We expect MANTL's ARR under contract at December 31, 2025, and to be approximately $60 million, representing a growth rate of about 30% when compared to the same metric at the end of 2024. In closing, we continue to drive great financial results while executing against our long-term objectives. We continue to leverage our unique financial model and strengthen our competitive position, making us one of the premier SaaS investments in the market. With that, I'll hand the call to the operator to take your questions.

Thank you. [Operator Instructions] Your first question comes from the line of Alexei Gogolev from JPMorgan. Your line is now open.

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.

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.

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

That's right. And so the way that -- and I outlined this on the call, that the way that we treat all of our acquisitions, if -- we include all the ARR in the RPU calculation. However, we only include digital banking platform of registered users. And so as a result of that, MANTL contributed about $1.80 to RPU this quarter and then going forward, we'll expect a more normalized growth rate of around 7%, 8%.

Got it. Thank you so much.

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

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?

Yes. Thanks. We were pleased that in the first quarter, in the first quarter, MANTL had 5 transactions that they sold into the Alkami base. And what's exciting for us is that's really before we start to put in the effort to do all of the account planning work, the account profiling work, getting the sales teams working together on pursuits. And so that initial success, along with the progress that we're seeing internally provides us a lot of confidence in the cross-selling opportunity within the base. I would expect -- if you looked at our ACH acquisition, that was more of a stand-alone product, and it was applicable to some parts of our base. The segment acquisition was more of a product that would be integrated into our sales motion, and it has been more applicable to our entire base. My expectation would be that the MANTL acquisition behaves more like the segment acquisition than the ACH Alert acquisition.

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 the traction for segment to become a part of like 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.

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?

Yes. When we made the -- in our last call, when we made the announcement about MANTL, what we said at that time, which is still the same today is that MANTL has a group of development customers for whom they are building an LOS capability. And we are eagerly tracking that effort. And when that effort is successful, then as a company, we'll make a decision whether or not we're bringing an LOS application to market. So I want to be clear that this is still a development effort, it's a development effort with a set of clients. We expect the effort to be successful, but we'll make a decision about bringing a product to market more broadly after we see the results of that development effort.

Understood. Thanks for taking the questions.

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

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?

Right now, we're seeing balanced demand on both banks and credit unions. As we discussed in the acquisition call, the -- one of the things that we really liked on the culture and the people of MANTL is the product itself serves both banks and credit unions and serves both retail and commercial. So right now, we're seeing a pretty balanced demand in both cases. What's driving the demand, and I mentioned this on the call, every one of our customers -- if you think about the credit side, the average age of a customer in a credit union tends to skew a little bit older than the average age of a customer in a bank. And every one of our CEOs knows that and every one of our CEOs is developing strategies to attract the next generation of members. And the most important element of the strategy to attract that next generation of members is an account opening experience that matches the kind of account opening experience that folks are used to in all other aspects of their lives. So for us, what's exciting is it's balanced demand in both bank and credit union, but the demographics and the business strategy in the credit union, we think, are going to be a really nice tailwind for driving MANTL into the credit union space.

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?

Yes. So we got 36 clients in backlog in 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. MANTL has a significant ARR backlog as well as a significant number of financial institutions backlog. It's around 50 financial institutions and backlog for now.

That's great color. Appreciate you taking the questions. Congrats.

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

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's 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?

The thesis that we had in the acquisition remains how we plan to execute the business. There's a fantastic sales and marketing machine inside of mantle. And that machine is going to continue to run and sell MANTL new logos in the broader market side of -- outside of the Alkami customer base. Then we have our client sales executive team that's assigned to our customer base. They will be selling MANTL into our customer base. And then we have an Alkami new logo sales team that's selling new logo online banking, and they are selling MANTL into new logo online banking opportunities. So that was the thesis that we had when we made the acquisition, and that's the plan that at least for this -- at this point in time, that's the plan that we're going to continue to execute against.

Got it. And as a follow-up, really nice result on the RPO growth this quarter. And I understand some of it is from -- some of this probably from MANTL, but I was wondering if you could parse out how much of the growth was on an organic basis? And if there were anything unusual in terms of like larger deals or pull forwards and renewals that occurred during the quarter?

No. We experienced in 2024 -- we had a lot of good renewal success. A lot of the pull forwards we experienced were in 2024. We had eight total contract signings in the first quarter of 2025. Half of those were renewals. The -- so the combination of those eight though, were the driver of organic RPO growth, which is around 20%. And then, of course, we drop in MANTL that drives the other 11 percentage points of growth year-over-year.

Got it. Thanks for all the color. And Bryan, congratulations on your announcement.

Thanks, Chad.

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

Great. Thanks for taking the questions. I have my congrats. You'll be missed. Sorry to see you going, but certainly wish you all the best. A number of questions, a few housekeeping mostly. In terms of the analytics side, I want to circle back to that maybe a little bit. Where is that in terms of I think I might have heard Alex reference an attach rate on new bookings? But just if you could state that again and maybe in the context of total revenue, wondering where you are at this point in terms of analytics?

Yes, we don't split out the revenue, Jeff, as you can imagine, because the way we go to market is a combined offering. And when you start unpacking discounts and those kinds of things. You really kind of start losing the trail on revenue at an individual basis. But what we've been experiencing, and this has been for, I would say, the last 4 to 6 quarters, we're having an attachment rate of about 70% of MANTL on all new logo -- I'm sorry, yes, segment on new logo wins. And then even for ACH Alert, when it's a bank FI that we're winning, we have an attachment rate at 75% up to 80%. So MANTL carries a much higher average ARR than both of those solutions and we feel that we can achieve somewhere close to the segment attachment rate. So when you think in terms of deal value, a couple of things should happen. We should see a higher deal value. And then with the MANTL differentiation, we should also start experiencing a bit higher win rate on new logo wins.

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?

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, 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.

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 those sell that into a new logo for those products. So in other words, not a part of a new logo deal. And so 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.

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 continue 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's coming from or most interestingly, maybe changes in where that share gain is coming from?

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.

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.

Great. Thanks for taking the questions guys, appreciate it.

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

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

We did I decide? Pat, I knew out of everyone who asked me this question, it was going to be Pat Walravens. And I'm going to miss you Pat because I really enjoy working with you. But no, seriously, to answer the question, this is obviously a big decision for me. It's one where you take a lot of things into consideration. And I reflected on really the success we've had at Alkami, and then you factor in your age and changing family circumstances and those kinds of considerations and then you make the decision. And so the decision for me was really 2026 is the year that I plan to walk away from this. And so then you really come down to a couple of other key considerations is, well, what's the best time to announce that once you make the casual decision, not really the formal decision of communicating the company. And what I thought about, Pat, as it relates to that is really how are you leaving the company where you were the because it's very important to me that I'm walking away from a company knowing that it's performing well and it's going to continue to perform well. Bryan Hill's CFO exit is not going to be a situation where a company drops off after the CFO leaves. And that's very, very important because we've accomplished way too much at Alkami for that to be the case. And then the last consideration -- or I guess, a couple more considerations is around, well, what about the team? What about the CFO team. And the CFO team is more than ready to deal with the challenges that can occur by bringing in a new CFO. It is the absolute best CFO team I've ever worked with and I'm very proud to have built this team over the last 6 years. And then finally, it's how much time do you want to give and provide the company. And in order for Alkami to bring in the right CFO, which it should attract top talent, given our performance, given the management team and what we're trying to accomplish here I wanted to make sure that Alex and the Board had plenty of time to find the right candidate. So not a situation where there's a quick exit of a CFO and there's a shot clock running that the company feels like they need to make a rush decision. I mean Alkami and Alex, needs to do this very thoughtfully. And they need to do it quite honestly, with the transparency of it being known what's going on and not a confidential search and those kinds of things. So really, all that played into it, Pat, and that's how we landed where we are today.

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

We've scraped some of Bryan's skin cells, and we've sent them off to a DNA place, and we're cloning him right now. So I would -- I'd just echo what Bryan said. I think the company, plus Bryan, Bryan, have been thoughtful about providing investors with a long transition plan and then making the situation public so that we can execute a public search with an asset like Alkami, it's going to be a whole lot more effective executing a public search than trying to run a financial search.

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?

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. And 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, which is going to 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.

Great. Thank you both.

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

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?

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 your competition is chime. And 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. And what those bank or credit CEOs will tell me is they are personally embarrassed about the experience that they are providing to somebody where it's 20 minutes. It's walk into the branch and signed 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 China experience. And when you're faced with an existential need to add customers and to add members and to 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.

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?

There's not -- in our view, there's not any major blockers there from an integration perspective. I mean there's several different integrations you really have to think about. The first is how broadly have they integrated into the core offering of the larger core providers and MANTL has made a ton of progress there. In fact, that's probably one of their more significant differentiators. And then there's the integration into our platform from a technology perspective. So we're delivering more when you sell MANTL and Alkami together versus MANTL combined with 1 of our competitors. That will take a little bit of time to accomplish but we're already making moves in that direction. And then finally, there's the integration as it relates to operations and go to market. And as Alex pointed out in his prepared comments, we're already making a lot of progress in that area. So the MANTL team, the more I'm around them. the more impressed I am and impressed with this acquisition, how it is the correct strategy for Alkami. I mean it involved a lot of acquisitions over the last 36 years, and I think MANTL is going to prove to be one of the best.

Great. Thank you very much.

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

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?

I'll tell you, the big thing that kind of came out in a discussion is open banking really going to occur? And the reality is if open banking occurs, we think it's an opportunity for our customers to take share if they've got the right technology. Because all of a sudden, if you've got portability of accounts, and you're in a local community and you feel disconnected from a megabank and you've got the right technology to move people over to your institution it gives you an opportunity to take share. So to the extent that open banking ever materializes in the conversations that we have with our customers, they think it's an opportunity for them to go on offense but they would need the technology to be able to go on offense. But that's been the majority of the conversations that I've had with folks other than within some credit union executives and this is -- I wouldn't call this as an opening up. But in some credit union executives, there's discussions about are the regulations going to change in terms of tax and credit earnings or not tax credit unions. But every single credit unit executive that I told you says, if it changes, we'll figure out, we'll make an adjustment, we'll figure out how to manage our business. So those have been the conversations that I've been part of.

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? Like what would it actually take them to push out some of these implementations by 6, 12, 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 -- what would it cost you like to derail some of the growth in the near term, if it were to happen?

The conversations that I have with customer executives, they are managing their expenses, right? So they are managing their expenses more closely than they were managing their expenses a couple of years ago. But what they're doing is they are cutting off some other projects, but they're not cutting off their digital banking project. Remember, these contracts are 5 year to 7 year contracts you have, let's call it, a 9-month to a year process to go through the conversion. So when you back up from the date that they made the conversion to go live back up a year, and then say, maybe a 9-month sales cycle before that and recognize that we're selling into a budgeted line item, they're going to go through with their decision unless there was -- I can't gain it. Like there'd have to be some extraordinary dislocation for them to stop going through some of these decisions. All I can say is it could happen. To date, we haven't seen it happen. To date, we've seen people following through with their decision process their decision time lines, wanting to get -- the biggest constraint we normally have is we cap to some degree, our conversion calendar because we want to make sure that we're doing a good job for our customer. So most of the conversations we have with the customer are, hey, let's make sure that we get you into our calendar in time for when your contracts up and making sure that we're doing a good job. And I would just say, to date, we haven't had any conversations about customers slowing down their decision process based on economics on the digital banking side.

And Mayank, this isn't really a question of, are you going to cut cost 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 cut the channel that touches -- has high touch as it relates to your customer base. So that's really the decision process that they go through and they think about. As it relates to implementation time lines and those kinds of things, I mean, 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. And then we've also done 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.

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

That's a great perspective. Thank you so much for the details. Congrats.

Your next question comes from the line of Anthony Dellis [ph] from KeyBank Capital Markets. Your line is now open.

Hi, this is Anthony Dellis [ph] on for Alex Markgraff. Alex, your comments regarding clients not reducing digital banking is clear. However, I'm curious if you've observed any changes to the structures of the deals from your pipeline conversations due to the macro environment. And then my second question is, as Alkami has made this push to serve more banks. Is there anything you can share on how recent banking implementations have impacted your pipeline conversations with other banks? Thank you.

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. And 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. So in summary, my expectation would be as we convert the customers that are 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. And so as these banks start seeing other customers come live on our platform, that will increase their confidence to not stay with the incumbent and move over to Alkami.

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

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

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

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

Thank you.

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

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.