Alkami Technology, Inc.

Hello and welcome to the third quarter 2021 financial results conference call. My name is Brandon and I'll be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session during which you may dial star 1 if you have a question. Please note this conference is being recorded. I will now turn the call over to Rhett Butler, Vice President of Investor Relations, and you may begin, sir.

Thank you, operator. Good afternoon and welcome to Alchemy's earnings call for the third quarter ended September 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, November 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 gap 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 for joining us, and I'll turn it over to Mike.

Thank you, Rhett. Very well done there. And thank you, everyone, for joining us today. As you may have seen in the press release, our results for the third quarter were strong. I'll dive into a few of the highlights in the quarter in a couple of minutes. And Stephen, as always, will discuss some of our innovation initiatives and go-to-market highlights. Following Stephen, Brian will dive into the results for Q3 and our guidance for Q4 in the full year. And I'll be back again at the end of Brian's prepared remarks for a few closing comments before Q&A. However, first I wanted to address the press release that many of you have hopefully seen announcing the appointment of Alex Schutten as the new chief executive officer at Alchemy effective tomorrow, just a few hours from now. I'm so excited about this announcement and the next stages for Alchemy that his arrival represents. I believe the combination of what Alchemy is today with his complementary talents will catalyze even turbocharge the Alchemy of our next stages. He will be meeting the broader leadership team tonight, all of our alchemists in the morning through a video call, and our clients and partners moving forward. Welcome, Alex. I feel the energy already. As a bit of background, eight years ago I joined Alchemy after being inspired by the vision of co-founders. They were driven and committed to expanding financial choice and financial literacy by democratizing digital banking technology, and I wanted help. Gary, Steven, and the chairperson of the board then and now, Brian Smith, were the ones who hired me. And every day since, I have been overwhelmed by the talent and tenacity of the alchemists. The unique alchemy of purpose, people, clients, technology, partners, capital, and the community is what makes this company so extraordinary. And it's reflected in the culture within our walls and the enduring relationships we establish or reinforce daily with our clients. and our partners across the ecosystem. We've accomplished a lot and I'm so proud of all we've done and are. And today is day one of the next stage as I have made the decision to retire to make way for a new CEO to take the helm day to day while I remain a member of the board of directors. I believe Alex is the ideal leader for this next stage. He's a proven veteran and visionary in the enterprise software as a service market. He successfully scaled companies like Workfront, Aptio, Eloqua, and he has empowered their customers to innovate through modern technology. He has a track record of growing great companies from the outside in, making clients core to a company's strategy and priorities. And he also brings, along with him, new and different perspectives and experiences. And perhaps most importantly, he embodies the cultural values that make Alchemy and our remarkable client community so special, transparent, bold, innovative, collaborative. On behalf of all Alchemists, I welcome Alex and will do everything I can to support him in the future success of Alchemy. He will do and be great and do great things for Alchemy. I'd now like to make a big shift from our new CEO and take a few minutes to update you on my perspective on the overall market and the results in the quarter of the awesome team of nearly 680 alchemists today. In the last quarter, we've seen a number of market indicators that once again suggest the digital transformation of financial institutions continues to accelerate. First, according to CB Insights, the global fintech market reached a record $91.5 billion in funding so far this year, nearly doubling last year's total. In Q3, the U.S. leads the market with almost half of the FinTech funding invested. Second, one of the leading aggregators has reported that the penetration of U.S. consumers using FinTech offerings increased 52% year over year and is now hovering at around 88%, which puts consumer FinTech penetration in the same ballpark as streaming video services and social media. Third, cryptocurrency is hotter than ever. CB Insights reports that global venture capital funding in crypto and blockchain reached an all-time high of $6.5 billion in the third quarter, with the U.S. continuing to lead the world in VC funding. Fourth, we've seen increased discussions and decisions on industry consolidations of regional and community financial institutions. Generally, our clients are the acquirers. The rationale we are seeing for the increased velocity includes references to the challenges of competing in this tech-enabled world of financial services. And finally, megabanks are not standing still. One megabank recently reported their digital deposits, just digital-only deposits, grew significantly in the third quarter And this same mega bank reported a significant increase in installment loans where more than 80% of those loans were originated digitally with no contact with the branch system or the branch system. The battle for relevance and success in this increasingly digital and mobile first market has never been more significant. Our clients see it and are responding accordingly. Alchemy allows our clients to harness their own innovation and our innovation and the community's innovation through what we believe to be the best digital banking platform in the market to leapfrog others much larger in size and resources. With that in market context, let's move on to the quarterly results. I'll touch on a few highlights, but Steven and Brian will be providing additional detail and context on a number of them in their upcoming sections of prepared works. A few of the highlights are we continued our relentless focus on our clients' success in what we see as this accelerating digital transformation of financial services. Our clients count on us for a secure, performant, compliant, nimble, extensible, and market-leading platform to win. And in terms of client success, they are doing so. Our live clients grew their digital users 14% year over year, what we estimate to be at least double the annual growth rate of the overall market. Combined with new launches, we crossed over 11.4 million digital users on the digital banking platform at the end of the quarter, a quarter-over-quarter increase of about 680,000 digital users. We demonstrated aspects of the strength and resilience of our four-pronged growth strategy with each prong contributing to our results. These four prongs are client success with our platform driving user growth, client uptake or cross-sell of existing and new solutions into our white space that drive RPU growth, new logos, and inorganic opportunities to accelerate growth. Third, we continued our pedal-down commitment to innovation. Through continued investment in R&D and the acquisition of MKDecisions, we'll call it MKD for purposes of this call today, allowing us to offer digital account opening and loan origination solutions and expanding our total addressable market by approximately $2.5 billion. We enhanced our portfolio with the new strategic partnerships with NYDIG and BioCatch. We already have our first NYDIG client, Starbank, in production, allowing us and our clients to tap into a growing crypto market. We expanded our overall TAM by about 34%, from $7 billion to a total of just under $10 billion, with our potential ARP moving from $38 per digital user to about $52 per digital user. This is even before considering what we may find as we advance our cryptocurrency offerings that we've announced recently. We experienced the best total sales quarter of the year so far and saw continued top-of-funnel momentum in new sales opportunities. and we expect this momentum to continue into Q4. We delivered 37% revenue growth year-over-year while remaining ahead of our non-GAAP gross margin stated objective based on 2021 performance. Overall, I would call that a solid and strong quarter. Now I'll turn it over to Stephen Bohannon to update you on our innovation and go-to-market activities, and I'll be back at the end of the prepared remarks before Q&A to make a few closing comments. Stephen?