Alkami Technology, Inc.

Welcome to the second quarter 2021 Alchemy Technologies Financial Results Conference Call. My name is Vanessa, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. During the question-and-answer session, if you have a question, please press star, then 1 on your touch-tone phone. Please note that this conference is being recorded. I will now turn the call over to your host Rhett Butler, Vice President, Investor Relations.

Thank you, Vanessa. Good afternoon and welcome to Alchemy's earnings call for the second quarter ended June 30th, 2021. With me on today's call are Mike Hanson, Alchemy's Chief Executive Officer, Stephen Bohannon, Alchemy's Co-Founder and Chief Strategy and Sales Officer, and Brian Hill, Alchemy's Chief Financial Officer. During the course of today's conference call, we may make forward-looking statements including statements regarding trends, strategies, and the anticipated performance of the company. These forward-looking statements are based on management's current views and expectations and are subject to various risks and uncertainties, including risks related to our operating and financial performance. Our actual results may differ materially from those contemplated by these forward-looking statements, and we can give no assurance that such expectations or any of our forward-looking statements will prove to be correct. Please refer to the risk factors included in our filings with the Securities and Exchange Commission, which are available on our investor relations website, and the press release distributed earlier this afternoon regarding the financial results we will discuss today to review important factors that could cause actual results to differ materially from those reflected in the forward-looking statements. Forward-looking statements made during the call are being made as of today, August 4th, 2021, based on the facts available to us today, and we undertake no obligation to update or revise any forward-looking statements. Also, unless otherwise stated, all financial measures discussed on this call will be on a non-GAAP basis because we believe these measures to be useful to investors in the understanding of our financial results. A reconciliation of each comparable GAAP metric can be found in today's earnings release which is available on our website, investors.alchemy.com, and as an exhibit to the Form 8K furnished with the SEC today. With that, thank you all for joining us on the call, and I'll turn it over to Mike.

Thank you, Rhett, and thank you to everyone joining us today for this, our second earnings call. Since we were here in early May, the team of over 640 alchemists and our partners have continued to be hard at work executing against our mission, and we are very excited to be sharing the results today. While Brian will get more into the details momentarily, or as you may have seen in the press release a bit ago, financial performance during the second quarter was again solid across all of our metrics. Additionally, during the quarter, we continued to advance the important aspects of our business, including the go-to-market, product, operational, technical, compliance, security, and even aspects of our business. And now about 10 months in, we continue to be on track with our integration and synergy objectives with our ACH Alert acquisition with some news to share later in the call. As we look at our end market, the community and the regional financial institutions in the U.S., we think the digital transformation of financial services is continuing to accelerate. In our view, a number of factors contribute to this acceleration. First, we continue to see significant market investments in fintech and financial services offerings and companies. These investments in the form of IPOs and private equity and venture capital transactions are powering existing and new players to create or scale targeted digital financial products and even offerings including cryptocurrency for consumers and businesses alike. There are even frequent examples of these investments resulting in M&A activity in the space as well. Further, the big tech companies and major retailers also remain active, expanding their digital capabilities in the financial services space from digitally provisioned credit cards and prepaid cards to checking accounts to buy now, pay later offers, and yes, even crypto. And of course, the megabanks are continuing to up the ante in their own right, with just one of them spending approximately $11 billion on technology annually. As a result of these factors, we believe our end market continues to move at a relentlessly accelerating pace, reflected by the interest of so many players to digitally expand or redefine or disintermediate financial services for consumers and businesses in the U.S. This competitive landscape for financial services requires the financial institutions squarely in Alchemy's addressable market to move at a speed and certainty to identify and seize their strategic opportunities enabled by the technology and concurrently identify and respond to the strategic threats from competitors that have often greater resources. It is this dynamic landscape of our end market that continues to propel market demand for Alchemy's digital platform, one that continues to advance at speed and allows our clients to innovate quickly and compete effectively against others with many times their scale. We continue to believe the battle for relevance and success in this digitally transforming market for the community and regional bank or credit union has never been more important. As a bit more color on this transformation, in June we solicited feedback from 150 leaders in regional and community financial institutions that had influence over their digital banking decisions. Two-thirds of these respondents were senior executives within their institutions. When I asked to identify their institution's greatest risk over the next 18 months, the risk titled changing technology landscape was cited more often than any other risk listed, including the risks of interest rate environment, cyber threats, and uncertain regulatory environment. We believe that the digitally focused community and regional financial institutions aware of this risk and armed with the right tools to complement their own unique capabilities have thrived and can continue to thrive in this digital world. To continue to do so, they will increasingly need innovation and extensible platforms like Alchemy that can deliver digital innovation at speed and scale to power their strategies over the long term. In terms of results from our community and regional financial institution clients, we have seen them continue to perform exceptionally well in terms of supporting their employees, consumers, businesses, and communities during these times. Stories and happenings abound of FIs going the extra mile. And it's kudos to our clients and their teams for what they have done and how they've done it. And their success is equally evident in their business results with year-over-year asset and deposit growth well above the industry average. and digital user growth of our clients exceeding 17%. To give you an idea of how our digital banking platform helps power the results of a financial institution, I'll take a couple of minutes to outline the results of a client through a specific case study. The case study is from a strong West Coast financial institution in a very competitive market with over 100,000 digital users and over $2 billion in assets. We completed the implementation and launched them during the second quarter of last year with 14 products. Financial institutions had specific strategic needs they were looking to Alchemy to help with. Naturally, the main focuses were around improving their end user experience, their end user sentiment or satisfaction for their app, let's say app store ratings, their overall end user satisfaction of the digital channel, NPS scores, their digital user growth, and their mobile banking penetration. I'll touch a bit on each of those. First, after researching top tier financial institutions and finding their user sentiment average 4.8, our client set a stretch goal of achieving a 4.9 rating. Prior to converting to the Alchemy platform, they had an iOS rating of about 2.9 and Google rating of about 4.3 for a weighted average of about 3.0. Post conversion to Alchemy, their app rating skyrocketed to an iOS rating of 4.9 with nearly 13,000 reviews and a Google rating of 4.9 with nearly 1,800 reviews for a weighted average of about 4.9 stars. This equates to a 63% increase in end user satisfaction. Second, after due diligence with other financial institutions, the client determined that most digital banking platform conversions result in an NPS score drop for the digital channel of at least 10 points with the recovery taking at least a year. Together, we executed a plan to deal with those realities around a big change event, and together with their help of the Alchemy platform, they fully recovered to their previous NPS score of a very lofty 85.6 in six months, and within a year, they were beating their old lofty scores. This performance ranked them at sixth overall versus the large survey firms' peer data. Third, our client obviously wanted to grow their digital engagement with their new and existing customers and members and to grow their digital users in that way. And prior to the Alchemy platform conversions, they experienced about an 11% annualized user growth. And post conversion, their annualized user growth results and expectations have grown significantly to around 18%. What is exciting about this is not only the strong user growth, but the fact that that growth was relatively consistent between the new and existing customers and members. This translates to tremendous success engaging these new customer members, but also significant results in penetrating their existing base. Lastly, given the importance of the digital channel, mobile banking penetration and engagement were incredibly important factors for our client. Prior to the Alchemy platform conversion, their mobile conversion was 50% against an average of about 54%. Post-conversion, mobile penetration was 66%. This incredible success and an and a testament to our client's team capabilities and strategies combined with the power of the Alchemy platform. It is client success stories like this that power us here at Alchemy and form the bedrock of our innovation motion, ensuring our solutions deliver the results for our clients' digital strategies today and tomorrow. Results through this innovation motion are at the center of each of our four key growth drivers discussed in our last call. Brian will briefly highlight these drivers again in his remarks following Stephen's in a few moments. Next, let me turn it over to Stephen Bohannon to update you on our innovation and go-to-market activities. I'll be back at the end of the prepared remarks with a few comments before we go to Q&A. With that, I'll turn it over to you, Stephen.