ALKAMI TECHNOLOGY, INC. Q3 FY2026 earnings call

• Strategic Clarity and Independence: Management concluded a strategic review, deciding to remain an independent public company to maximize shareholder value. This decision aims to remove uncertainty that had previously acted as an overhang on new logo acquisition.
• New Business Momentum: Signed five new digital banking relationships (three banks, two credit unions) and 14 new Mantle clients in Q3. Year-to-date, there are 16 new digital banking logos. A record seven core conversions were completed this year, including six large clients.
• AI and Product Strategy (DSSP): Alchemy is positioning itself as the infrastructure layer for AI agents in banking. They are building agentic experiences inside client apps (e.g., KYC, document review) and connectors for general-purpose AI assistants. Approximately 10% of current revenue comes from AI products like fraud management.
• Operational Execution: Launched four digital banking clients in a single day (a record). Added 2.8 million users to the digital banking platform over the last 12 months. Live ARR grew 19% to $533 million, with a backlog of $56 million expected to convert over the next 12 months.
• Client Retention and Growth: Churn is less than 1% annually. Average ARR per client reached ~$1.7 million, with 56 clients now at or above $2 million ARR. ARPU increased 5% year-over-year to $21.88.

The transcript does not provide a breakdown of financial performance by specific product segments (e.g., Digital Banking vs. Mantle) in absolute terms or revenue contribution percentages. It reports consolidated revenue of $134.9 million, with subscription revenue representing 96% of the total. The DSSP (Digital Banking, Account Opening, and Data/Marketing) bundle is highlighted as a key growth driver, with 60 clients contracted for all three products.

• Q4 2026 Revenue: Raised to $139.7 million – $141.2 million (15.6% – 16.9% YoY growth). Guidance reflects non-recurring Q3 one-time revenue and higher third-party costs.
• Q4 2026 Adjusted EBITDA: Raised to $30 million – $31 million (21.7% margin at midpoint).
• Full Year 2026 Revenue: Raised to $530.5 million – $532 million (19.6% – 19.9% YoY growth), driven by heavy Q4 launch schedule and cross-sell momentum.
• Full Year 2026 Adjusted EBITDA: Raised to $98 million – $99 million (18.5% margin at midpoint).
• Stock-Based Compensation: Expected to be less than 14% of revenue for the full year.
• Long-Term Targets: Path to 'Rule of 45' by 2030, assuming gross margins approaching 70%, ~300 bps annual adjusted EBITDA margin expansion, and SBC falling below 10% of revenue.
• 2027 Outlook: Full-year 2027 guidance will be provided during the Q4 call; management expects continued margin expansion driven by AI efficiencies and cost discipline.

• M&A Uncertainty Impact: Speculation regarding potential ownership changes created uncertainty for customers and prospects, negatively impacting new logo business prior to the strategic review conclusion.
• Gross Margin Pressure: Third-quarter gross margin was 63.1%, below expectations, primarily due to higher-than-anticipated third-party product costs which fluctuate with product mix.
• Execution Risk in Core Conversions: While core conversions are high-impact, they require significant operational execution to migrate legacy systems successfully.
• AI Adoption Pace: Client adoption of agentic AI features is evolving in stages (assist -> recommend -> act), requiring careful governance and integration with existing policy settings.

Q: Chris Kennedy asked for more detail on how M&A speculation impacted new logo wins and what the current pipeline looks like now that the strategic review is concluded. / A: Alex Shootman explained that the uncertainty surrounding Alchemy's future ownership acted as an overhang on new business acquisition throughout the year. He noted that while the Q3 new logo count (five digital banking relationships) was consistent with historical norms, the market hesitation has now dissipated following the Board's unanimous decision to remain independent. Management believes this clarity will allow the business to return to its normal cadence for winning new clients.

Q: Analysts sought clarification on why Q4 revenue guidance was slightly lower than some models anticipated despite strong Q3 results, and whether this signals a slowdown. / A: Cassandra Hudson clarified that the Q4 outlook ($139.7-$141.2 million) is lower than some projections because it excludes one-time revenue that benefited Q3 and reflects slightly higher third-party costs based on Q3's product mix. She emphasized that these factors do not change the positive view for the full year, leading to an upward revision in full-year targets. The outlook still reflects a heavy Q4 launch schedule and sustained cross-sell momentum.

Q: Questions were raised about the sustainability of gross margin expansion given the recent dip in Q3 and the role of third-party costs. / A: Cassandra Hudson stated that Q3 gross margin (63.1%) was below expectations due to higher third-party product costs, which comprise roughly a third of revenue and vary with mix. However, she reaffirmed the commitment to expanding gross margin as the company scales. Management expects AI-driven efficiencies in hosting, implementation, and support to gradually improve the cost structure and contribute to long-term margin expansion in 2027.