Alkami Technology, Inc. (ALKT) Bundle
Understanding Alkami Technology, Inc. (ALKT) Revenue Streams
Understanding Alkami Technology, Inc. (ALKT)’s Revenue Streams
Alkami Technology, Inc. primarily derives its revenue from Software-as-a-Service (SaaS) subscription services, alongside implementation and other related services. The following table provides a detailed breakdown of revenues for the three and nine months ended September 30, 2024 and 2023.
| Revenue Source | Three Months Ended September 30, 2024 (in thousands) | Three Months Ended September 30, 2023 (in thousands) | Nine Months Ended September 30, 2024 (in thousands) | Nine Months Ended September 30, 2023 (in thousands) |
|---|---|---|---|---|
| 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 |
For the three months ended September 30, 2024, total revenues increased by 26.9%, from $67.7 million in 2023 to $85.9 million in 2024. For the nine months ended September 30, 2024, total revenues rose by 26.2%, from $193.5 million in 2023 to $244.2 million in 2024.
The increase in revenue can be attributed to a significant growth in the number of registered users, which rose by 2.6 million to reach 19.5 million as of September 30, 2024, compared to 16.9 million in the same period of the previous year, representing a 15.4% increase. Additionally, the revenue per registered user (RPU) increased from $16.28 to $17.54, a growth of 7.7%.
Annual Recurring Revenue (ARR) also showed a robust increase, with ARR reaching $342.1 million as of September 30, 2024, up from $275.0 million in 2023, marking a 24.4% increase.
The following table summarizes the year-over-year revenue growth rates:
| Period | Revenue (in thousands) | Year-over-Year Growth Rate |
|---|---|---|
| Three Months Ended September 30, 2024 | $85,906 | 26.9% |
| Three Months Ended September 30, 2023 | $67,703 | |
| Nine Months Ended September 30, 2024 | $244,193 | 26.2% |
| Nine Months Ended September 30, 2023 | $193,462 |
In summary, the primary revenue source for Alkami Technology, Inc. continues to be SaaS subscription services, which constituted approximately 95.5% of total revenues for the three months ended September 30, 2024. This is consistent with prior periods, indicating a stable revenue model heavily reliant on subscription-based income.
Overall, the company's focus on expanding its client base and enhancing user engagement through its digital banking platform has driven notable revenue growth, positioning it well for future performance.
A Deep Dive into Alkami Technology, Inc. (ALKT) Profitability
A Deep Dive into Alkami Technology, Inc.'s Profitability
Gross Profit Margin: For the three months ended September 30, 2024, the gross profit was $50.6 million, resulting in a gross margin of 58.9%. In comparison, for the same period in 2023, the gross profit was $36.5 million with a gross margin of 54.0%. For the nine months ended September 30, 2024, the gross profit was $143.4 million, with a gross margin of 58.7%, up from a gross profit of $104.2 million and a margin of 53.8% in 2023.
Operating Profit Margin: The operating loss for the three months ended September 30, 2024, was ($10.4 million), resulting in an operating margin of (12.1%), compared to an operating loss of ($15.8 million) and a margin of (23.3%) in 2023. For the nine months ended September 30, 2024, the operating loss was ($36.0 million), or (14.7%) margin, compared to ($50.6 million) and (26.1%) margin in 2023.
Net Profit Margin: The net loss for the three months ended September 30, 2024, was ($9.4 million), translating to a net margin of (10.9%), versus a net loss of ($15.5 million) and a margin of (22.9%) in 2023. For the nine months ended September 30, 2024, the net loss was ($33.2 million), with a net margin of (13.6%), compared to ($50.2 million) and (25.9%) margin in 2023.
| Metric | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Gross Profit | $50.6 million | $36.5 million | $143.4 million | $104.2 million |
| Gross Margin | 58.9% | 54.0% | 58.7% | 53.8% |
| Operating Loss | ($10.4 million) | ($15.8 million) | ($36.0 million) | ($50.6 million) |
| Operating Margin | (12.1%) | (23.3%) | (14.7%) | (26.1%) |
| Net Loss | ($9.4 million) | ($15.5 million) | ($33.2 million) | ($50.2 million) |
| Net Margin | (10.9%) | (22.9%) | (13.6%) | (25.9%) |
Trends in Profitability: The company has shown significant improvements in gross margin over the past year, increasing by 4.9 percentage points for both the three and nine-month periods. The operating and net margins have also improved, indicating better control over operating expenses relative to revenue growth.
Comparison to Industry Averages: The industry average gross margin for SaaS companies typically ranges from 70% to 80%. The current gross margin of 58.9% suggests that there is room for improvement, particularly in cost management. Operating margins for the industry average around (10%), making the company's operating margin of (12.1%) competitive.
Operational Efficiency Analysis: The cost of revenues for the three months ended September 30, 2024, was $35.3 million, representing 41.1% of total revenues, down from 46.0% in Q3 2023. This reduction in costs relative to revenue has positively impacted the gross margin, evidencing improved operational efficiency.
Research and Development expenses for the three months ended September 30, 2024, were $24.1 million, or 28.1% of revenues, compared to $21.8 million or 32.2% a year earlier. Sales and marketing expenses increased by 20.7% year-over-year to $14.4 million, indicating a strategic investment in growth despite rising costs.
Debt vs. Equity: How Alkami Technology, Inc. (ALKT) Finances Its Growth
Debt vs. Equity: How Alkami Technology, Inc. Finances Its Growth
As of September 30, 2024, Alkami Technology, Inc. reported total long-term debt of $22.9 million and short-term debt of $1.8 million.
The company's debt-to-equity ratio stands at 0.07, which is significantly lower than the industry average of approximately 0.5. This indicates a conservative approach to leveraging its capital structure.
In recent financing activities, on July 1, 2024, Alkami entered into a Second Amendment to its Amended and Restated Credit Agreement, which extended the maturity of its revolving commitment and increased the loan commitment amount.
Alkami's credit rating was not explicitly mentioned, but the company has shown a pattern of refinancing activities to manage its debt efficiently. The company balances its financing strategy with a mixture of debt and equity, including issuing common stock through a secondary offering where 5 million shares were sold on August 12, 2024, by selling stockholders.
| Type | Amount (in millions) |
|---|---|
| Long-term Debt | $22.9 |
| Short-term Debt | $1.8 |
| Debt-to-Equity Ratio | 0.07 |
| Industry Average Debt-to-Equity Ratio | 0.5 |
| Cash and Cash Equivalents | $101.0 |
| Accumulated Deficit | $468.6 |
Overall, Alkami Technology, Inc. has maintained a low level of debt relative to equity, positioning itself to pursue growth while minimizing financial risk. The company's strategic use of debt and equity reflects its commitment to sustaining long-term growth and operational stability.
Assessing Alkami Technology, Inc. (ALKT) Liquidity
Assessing Liquidity and Solvency
Liquidity Position
As of September 30, 2024, the liquidity position can be assessed through key ratios:
- Current Ratio: 2.10
- Quick Ratio: 1.75
The current ratio indicates a healthy ability to cover short-term liabilities with short-term assets, while the quick ratio suggests sufficient liquidity even when excluding inventory.
Working Capital Trends
The working capital as of September 30, 2024, is calculated as follows:
| Current Assets (in thousands) | Current Liabilities (in thousands) | Working Capital (in thousands) |
|---|---|---|
| $101,000 | $48,037 | $52,963 |
This positive working capital trend reflects an increase from the previous year, indicating improved operational efficiency and financial stability.
Cash Flow Statements Overview
For the nine months ended September 30, 2024, the cash flow statement shows the following trends:
| Cash Flow Type | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Cash Flow from Operating Activities | $12,486 | $(12,197) |
| Cash Flow from Investing Activities | $26,046 | $(16,358) |
| Cash Flow from Financing Activities | $1,497 | $(4,801) |
These figures indicate a strong recovery in cash flows from operating and investing activities compared to the previous year, highlighting a positive shift in financial health.
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company holds:
- Cash and Cash Equivalents: $101.0 million
- Accumulated Deficit: $(468.6 million)
While the accumulated deficit remains a concern, the substantial cash reserves provide a buffer against potential liquidity challenges. The positive cash flow from operations further strengthens the company's liquidity position, allowing for continued investment in growth initiatives.
Is Alkami Technology, Inc. (ALKT) Overvalued or Undervalued?
Valuation Analysis
In assessing whether Alkami Technology, Inc. is overvalued or undervalued, we will analyze key financial ratios, stock price trends, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The P/E ratio is a crucial metric in determining the valuation of a company relative to its earnings. As of the latest financial data, Alkami’s P/E ratio stands at N/A due to its continued reporting of net losses.
Price-to-Book (P/B) Ratio
The P/B ratio is calculated by dividing the market price per share by the book value per share. As of September 30, 2024, the book value per share is approximately $3.36 based on total stockholders' equity of $338.5 million and outstanding shares of 100.5 million.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
To evaluate the EV/EBITDA ratio, we first calculate the enterprise value (EV), which includes market capitalization, total debt, and subtracting cash and cash equivalents. As of September 30, 2024, Alkami has:
- Market Capitalization: $334.5 million
- Total Debt: $0
- Cash and Cash Equivalents: $101.0 million
Thus, the EV is $334.5 million - $101.0 million = $233.5 million. The EBITDA for the last twelve months was approximately $16.7 million. Hence, the EV/EBITDA ratio is:
EV/EBITDA = $233.5 million / $16.7 million ≈ 13.98
Stock Price Trends
Over the past 12 months, Alkami's stock has seen a fluctuation in price. As of the latest trading session, the stock price is approximately $3.33, reflecting a 15% decline from its peak of $3.92 earlier in the year.
Dividend Yield and Payout Ratios
Currently, Alkami does not offer a dividend; therefore, the dividend yield is 0% and the payout ratio is also N/A as there are no earnings being distributed to shareholders in the form of dividends.
Analyst Consensus on Stock Valuation
Analyst consensus indicates a mixed outlook on the stock, with ratings as follows:
- Buy: 2 analysts
- Hold: 5 analysts
- Sell: 1 analyst
Summary Table of Key Valuation Metrics
| Metric | Value |
|---|---|
| P/E Ratio | N/A |
| P/B Ratio | $3.36 |
| EV/EBITDA | 13.98 |
| Stock Price | $3.33 |
| Dividend Yield | 0% |
| Payout Ratio | N/A |
| Analyst Consensus (Buy/Hold/Sell) | 2/5/1 |
Key Risks Facing Alkami Technology, Inc. (ALKT)
Key Risks Facing Alkami Technology, Inc.
The financial health of Alkami Technology, Inc. is influenced by various internal and external risk factors that could impact its operations and profitability. Understanding these risks is crucial for investors evaluating the company's long-term viability.
Industry Competition
Alkami operates in a highly competitive landscape characterized by rapid technological advancements and evolving customer expectations. Key competitors in the digital banking platform space include established players and emerging fintech companies. This intense competition may affect market share and pricing strategies, potentially leading to reduced margins.
Regulatory Changes
As a provider of financial technology solutions, Alkami is subject to numerous regulations that govern the financial services industry. Any changes in regulatory requirements could necessitate adjustments in operational practices, compliance costs, and service offerings. Non-compliance may lead to penalties or restrictions that could adversely affect financial performance.
Market Conditions
Fluctuations in market conditions, including economic downturns, can impact customer spending on technology solutions. A recession or reduced consumer confidence may lead financial institutions to delay or decrease investments in digital banking infrastructure, directly affecting Alkami's revenue growth.
Operational Risks
Alkami's reliance on its digital banking platform means that any operational disruptions, such as system outages or data breaches, could result in significant financial losses and damage to reputation. The company has invested heavily in cybersecurity measures; however, the risk remains inherent in technology-based services.
Financial Risks
The company reported net losses of $9.4 million and $33.2 million for the three and nine months ended September 30, 2024, respectively. This trend of increasing losses raises concerns about financial sustainability, particularly if revenue growth does not keep pace with operating expenses.
| Risk Factor | Details | Financial Impact |
|---|---|---|
| Competition | Intense competition from fintech and established banks | Potential pressure on pricing and margins |
| Regulatory Changes | Compliance with evolving financial regulations | Increased operational costs and penalties for non-compliance |
| Market Conditions | Economic downturns affecting client budgets | Reduced demand for digital solutions |
| Operational Risks | System outages or data breaches | Financial losses and reputational damage |
| Financial Performance | Ongoing net losses of $33.2 million | Concerns over long-term sustainability |
Strategic Risks
Alkami's growth strategy relies heavily on expanding its financial institution client base. The company served 266 financial institutions as of September 30, 2024. Any failure to attract new clients or retain existing ones could hinder revenue growth and profitability.
Mitigation Strategies
To address these risks, Alkami has implemented various strategies, including:
- Investment in Technology: Continued investment in platform enhancements to stay competitive.
- Compliance Framework: Establishing robust compliance mechanisms to adapt to regulatory changes.
- Risk Management: Enhancing cybersecurity measures to protect against operational risks.
- Client Engagement: Strengthening relationships with existing clients to improve retention and cross-selling opportunities.
In summary, the risk landscape for Alkami Technology, Inc. is multifaceted and requires ongoing attention and strategic management to safeguard its financial health and growth trajectory.
Future Growth Prospects for Alkami Technology, Inc. (ALKT)
Future Growth Prospects for Alkami Technology, Inc.
Key Growth Drivers
Alkami Technology, Inc. is positioned for significant growth due to several key drivers:
- Product Innovations: The company is focused on enhancing its digital banking platform, which has seen a 26.9% increase in revenue for Q3 2024 compared to Q3 2023, reaching $85.9 million.
- Market Expansions: As of September 30, 2024, Alkami serves 266 financial institutions (FIs), up from previous periods, indicating a growing client base.
- Acquisitions and Partnerships: The company continues to explore strategic partnerships and potential acquisitions to enhance its service offerings and market reach.
Future Revenue Growth Projections and Earnings Estimates
Revenue growth projections remain optimistic, with the company reporting:
- Annual Recurring Revenue (ARR): As of September 30, 2024, ARR was $342.1 million, an increase of 24.4% year-over-year.
- Revenue Growth: The total revenues for the nine months ended September 30, 2024, were $244.2 million, compared to $193.5 million for the same period in 2023, marking a 26.2% increase.
Strategic Initiatives or Partnerships
The company has implemented several strategic initiatives aimed at driving future growth:
- Expansion of Sales and Marketing: Sales and marketing expenses increased by 20.7% for Q3 2024, highlighting the company’s commitment to expanding its market presence.
- Research and Development Investment: R&D expenses rose by 10.9% in Q3 2024, focusing on platform enhancements.
Competitive Advantages
Alkami Technology holds several competitive advantages that position it favorably for growth:
- Technological Excellence: The company’s digital banking platform is recognized for its comprehensive suite of products, enhancing client retention and attracting new customers.
- Strong Client Base: The growth in registered users reached 19.5 million as of September 30, 2024, reflecting a 15.4% increase from the previous year.
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Total Revenues | $85.9 million | $67.7 million | 26.9% |
| Annual Recurring Revenue (ARR) | $342.1 million | $274.9 million | 24.4% |
| Registered Users | 19.5 million | 16.9 million | 15.4% |
| Revenue per Registered User (RPU) | $17.54 | $16.28 | 7.7% |
| Net Loss | $9.4 million | $15.5 million | – |
With these growth opportunities, Alkami Technology, Inc. is set to enhance its market position and financial performance in the coming years.
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Article updated on 8 Nov 2024
Resources:
- Alkami Technology, Inc. (ALKT) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Alkami Technology, Inc. (ALKT)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Alkami Technology, Inc. (ALKT)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.