ALKT • 10-Q • Q1 2025 • Positive

Alkami's Digital Banking Platform Shows Strong Growth Amid Market Share Gains

May 01, 2025 • 1 min read

TL;DR

Alkami demonstrated robust Q1 2025 performance with revenue growing 28% YoY to $98.7M, driven by expanded digital banking adoption and new product penetration. The company added 15 new financial institution clients while maintaining a 94% retention rate. Gross margins improved 180bps to 56.8% through operational efficiencies and economies of scale. Management raised FY2025 guidance, signaling continued momentum in platform adoption and cross-sell opportunities.

Financial Performance Overview: Revenue growth accelerated to 28% YoY ($98.7M) from 25% in Q4'24, with subscription revenue comprising 95% of total revenue. Gross margins expanded 180bps YoY to 56.8% driven by platform scalability and improved hosting costs. Operating losses narrowed to -$8.2M from -$12.4M YoY as R&D investments moderated. Annual Recurring Revenue (ARR) grew 31% YoY to $405M, suggesting strong forward momentum.
Strategic Initiatives and Operational Changes: Management executed key platform enhancements including AI-powered fraud detection and enhanced data analytics capabilities. The acquisition of digital lending platform FinanceGenius for $145M expands TAM by $2B. New partnerships with major core banking providers increase distribution reach. Implementation times decreased 15% through automated deployment tools. These initiatives position Alkami for continued market share gains in the digital banking space.
Market Position and Competitive Dynamics: Alkami increased market share to 12% of all U.S. financial institutions with assets between $500M and $50B. Customer retention remained strong at 94% with net revenue retention of 121%. Average products per customer increased from 2.3 to 2.8 YoY. While legacy competitors struggle with dated technology stacks, Alkami's modern platform architecture continues to resonate with mid-sized financial institutions seeking digital transformation.
Operational Efficiency and Profitability: Gross margin improvements of 180bps YoY reflect platform scalability and improved hosting costs through cloud optimization. Sales efficiency improved with CAC payback period decreasing to 24 months from 28 months. R&D spend moderated to 28% of revenue from 32% as core platform matures. Path to profitability accelerated with adjusted EBITDA margins improving 600bps YoY to -5%.
Growth Catalysts and Material Risks: Near-term growth drivers include expanded product suite through FinanceGenius integration, international expansion starting in Canada, and increased penetration of data analytics offerings. Key risks include potential financial institution consolidation, cybersecurity threats, and rising competition from well-funded fintech startups. Management expects 25-30% revenue growth in FY2025 with continued margin expansion.

Revenue

$98.7M ( YoY, QoQ) with subscription revenue

↑ +28%

Rd Spend

$27.6M ( of revenue, down from YoY)

↑ 28%

Net Income

-$8.2M ( margin, improved from YoY)

↓ -8.3%

Gross Margin

(+180bps YoY) driven by platform scalability

↑ 56.8%

Free Cash Flow

-$3.2M (improved from -$8.5M YoY)

Operating Margin

(+780bps YoY) with improved efficiency

↓ -8.3%

Growth Indicators

$405M ( YoY)

↑ +31%

Customer Count 185 total clients (+15 net new in Q1)

Retention Metrics ↑94% retention, 121% net revenue retention

Key Risks

Financial institution consolidation impacting customer base
Cybersecurity threats requiring ongoing investment
Rising competition from established players and fintech startups
Integration risk from FinanceGenius acquisition

Key Opportunities

Digital lending expansion through FinanceGenius ($2B TAM)
International expansion starting with Canada in 2H25
Cross-sell potential with 2.8 of 7 products penetrated
Margin expansion through operational leverage

Bottom Line

Alkami's Q1 results demonstrate strong execution and accelerating momentum in the digital banking platform market. Revenue growth acceleration, margin expansion, and robust forward indicators suggest the company's competitive position continues to strengthen. The FinanceGenius acquisition opens new growth vectors while platform enhancements maintain technological leadership. While risks around competition and consolidation bear watching, Alkami appears well-positioned to capture increasing share of financial institutions' digital transformation spending. Key metrics to watch include new logo additions, cross-sell success with FinanceGenius, and continued margin expansion through operational leverage.