Alkami Technology, Inc.

Good afternoon, ladies and gentlemen, and welcome to the Alchemy Technology Fourth Quarter 2024 Financial Results Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, February 27th of 2025. I'd like to turn the conference over to Steve Koch, Vice President of Investor Relations. Steve, please go ahead.

Thank you, Alan. With me on today's caller, Alex Schutman, Chief Executive Officer, and Brian 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 in the section in our latest 10-K. Statements made during the call are being made as of today, and we undertake no obligation to update or revise these statements. Also, unless otherwise stated, financial measures discussed on 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 gap financial measures can be found in our earnings press release and in our filings with the SEC. I'll turn the call over to Alex.

Thank you, Steve. Good afternoon, and thank you all for joining us. I'm pleased to report another great quarter of financial results for Alchemy, which contributed to an outstanding four-year performance. During the fourth quarter of 2024, Alchemy grew revenue 26% and generated over $10 million in adjusted EBITDA. In addition, we ended the quarter with 20 million users on the Alchemy platform, and that is up 2.5 million users compared to the prior year. For the full year of 2024, we delivered revenue growth of 26%, adjusted EBITDA margin expansion of 900 basis points, and improved operating cash flow by over $36 million. We are proud of these results as our execution continues to track the multi-year revenue and profit targets Brian and I provided at the beginning of 2023. I'd like to make a few comments on the quarter and the year, and then I'll discuss our plans to acquire Mantle. In our fourth quarter 2021 earnings call, We outlined a five-point plan to drive our desired long-term business outcomes. First, we would succeed in the bank market as we had in the credit union market. Second, we would leverage add-on sales to drive growth. Third, we would invest in our platform for efficiency and differentiation. Fourth, we would become a destination company for talent. And fifth, acquisitions would be part of our growth equation. Alchemy's current business results are an outcome of excellent progress on these five business objectives. At the end of 2024, we had 42 banks under contract, including 23 live on the Alchemy platform and 19 in our backlog. This compares to eight banks on our platform at the end of 2021. We remained focused on the credit union market as we were investing in the bank market. And in 2024, we became the number one digital banking provider in the credit union market in terms of mobile users. As a reminder, our longer term goal is to generate half our new logo wins in the bank market and half in the credit union market. Since 2021, we have almost doubled the participation of add-on sales to Alchemy's new bookings. In 2024, add-on sales represented 45% of new bookings at Alchemy compared to 24% in 2021. Our client sales team has been a key part of increasing or revenue per user by 30% since the end of 2021, and they have more than tripled our annual renewal count over that period with 42 in 2024 versus 12 in 2021. Within Alchemy, within the Alchemy platform, our investments have improved quality, resiliency, and scalability. We migrated over 90% of our platform's microservice traffic to Kubernetes and enabled auto-scaling capabilities. Our availability has increased to 99.99% for 2024, and we believe we are the only provider that includes maintenance windows in our availability calculations. Our hosting cost per user has improved by 26% from our quarterly high water mark over the last three years, and platform investments have improved the efficiency of implementations. Hosting cost and implementation efficiency have been prime drivers of an improvement in gross margin of almost 600 basis points since 2021. On the talent front, we've increased our retention rate 10% to 85% since 2021. Our employee engagement scores are 82% favorable. And in 2024, the awards Alchemy won include Best Culture, Best Sales Team, Best Product Team, Best HR Team, Best Engineering Team, Best Leadership Team, and Best Places to Work in FinTech. This leads me to the final business objective we discussed, which is to grow through acquisitions that fit into the strategy and business model of Alchemy. We are excited to add Mantle's people, products, and clients to Alchemy. Nathaniel, Ben, and the rest of the Mantle team have built a great company that solves a really hard problem which is critical to our market. And most importantly, they've done it with a great culture and a commitment to the customer. Mantle offers the premier SaaS solution for onboarding and account opening and serves as the front door for deposit originations for both consumer and business accounts in a wide variety of financial institutions. Over the last couple of years, we've heard from our clients and the broader market about the increasing strategic need to improve the way they open accounts for new customers and add products for existing customers. For example, Alchemy fielded a study in October 2024 in which we asked regional and community financial institutions what their top investment priority will be in 2025. Out of 12 possible choices, the top-ranked investment priority was technology to improve the customer or member experience, including an account opening platform. This option was number one among credit union respondents and number two among banks. The need to improve the account opening experience has become critical for community banks and credit unions in a world that expects an elegant digital offering. These financial institutions are under intense competitive pressure from mega banks and fintechs who have invested heavily to create better digital technology. When these dynamics are considered with predictions of the upcoming greatest wealth transfer in history, every client executive I meet is prioritizing the creation of an improved onboarding experience across all their channels. Mantle is unique in that it offers a multi-tenant or agnostic single platform that enables financial institutions to support all channels in onboarding deposit accounts, including digital, in-branch, call center, and relationship managers. It addresses the needs of both consumers and businesses, and it automates the onboarding process for virtually all deposit account teams. Mantle is proven technology, as they have 145 clients under contract, including 112 financial institutions in production, ranging in size from 80 million to over 20 billion in assets. Of these, approximately 70% are banks. Mantle's bank penetration and the minimal overlap between Mantle and Alchemy's client base creates a great cross-sell opportunity for both Alchemy and Mantle. With this acquisition, Alchemy solidifies its position as the premier digital and sales and service platform in the industry. After the Mantle transaction closes, Alchemy will have the three market-leading required technologies for a bank or credit union to onboard, engage, and grow their account base in a secure environment. These three technologies are onboarding and account opening, digital banking, and data and analytics. For onboarding, Mantle will create a single onboarding and account opening solution that works across all channels for all customer types for the majority of deposit products. This offering is already proven to boost deposit growth with a higher converting application, higher initial funding, and less fraud than competitive alternatives. For engagement, Alchemy's digital banking solution was awarded Best Banking App by Tarasheet in 2024. It is the fastest growing digital banking platform among all U.S. financial institutions. And it serves over 20 million users with a single code base and a multi-tenant environment. For growth, Alchemy's data and marketing solution is built for financial institutions and provides 50,000 descriptive data tags and a dozen AI predictive models trained on analyzing more than 18 billion core transactions, which improves personalized targeting and cross-selling to increase revenue and reduce churn. But when these solutions are used in an integrated manner, the Alchemy digital sales and service platform will create more client value, enabling Alchemy's clients to have a competitive advantage in their market. Alchemy will become the ultimate land and expand solution for banks and credit unions. Let me give you three examples. First, driving retail to business expansion. Using Alchemy data and marketing, a financial institution could promote a business deposit account to a retail account holder with a history of business transactions, onboard the new deposit account in minutes using Mantle, and guide the account holder on new features and functionality in Alchemy Digital Banking. Next, improving account opening conversion. A financial institution could identify customers or members who have abandoned the account opening experience in Mantle, use Alchemy's data and marketing to run targeted marketing campaigns to encourage conversion, and guide the customer on features and functionalities in the Alchemy digital banking platform. And finally, increasing accounts and digital users. Either through auto registration by mantle into Alchemy digital banking, or by leveraging Alchemy data and marketing to target new customers that have not registered, the addition of an onboarding and account opening system will create a flywheel effect for increasing digital banking users and number of accounts per household. which is a benefit both for Alchemy and our clients. We believe this acquisition unlocks portions of our TAM by increasing our competitive advantage. Complementing our digital sales and service platform with an industry-leading onboarding and account opening experience will drive growth in new digital banking client wins. In addition, we're excited to place the Mantle product suite into the hands of our client sales team who have demonstrated success in growing Alchemy client relationships and cross-selling products from our segment and ACH Alert acquisitions. In closing, I'm proud of our results from 2024. I'm excited about the momentum we take into 2025, and I'm eager to close the mantle transaction and bring these new capabilities to our market with an intent for Alchemy to be the number one digital banking platform. Thank you to our employees, clients, and investors for continuing to say yes to Alchemy. We take your trust personally, and we will continue to execute on our commitments. I'll now hand the call to Brian.