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What changed in ALKAMI TECHNOLOGY, INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of ALKAMI TECHNOLOGY, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+282 added−277 removedSource: 10-K (2024-02-29) vs 10-K (2023-02-24)

Top changes in ALKAMI TECHNOLOGY, INC.'s 2023 10-K

282 paragraphs added · 277 removed · 236 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

62 edited+8 added−6 removed86 unchanged
Biggest changeIn 2022, for instance, we were recognized as "Best Place to Work in Financial Technology", "Best and Brightest Companies to Work For in Dallas", "IDC FinTech Top 100", as well as the "Best Company for Career Growth", "Best Engineering Team, and "Best Place to Work in Dallas" from Comparably. 11 Table of Contents Government Regulation We are a technology service provider to FIs in the United States that are subject to regulation, supervision and examination by a number of regulatory agencies, including the Office of the Comptroller of the Currency (the “OCC”), the NCUA, the Board of Governors of the Federal Reserve System (the “Federal Reserve”), the Federal Deposit Insurance Corporation (the “FDIC”) and other federal or state agencies that regulate or supervise FIs in the United States.
Biggest changeGovernment Regulation We are a technology service provider to FIs in the United States that are subject to regulation, supervision and examination by a number of regulatory agencies, including the Office of the Comptroller of the Currency (the “OCC”), the NCUA, the Board of Governors of the Federal Reserve System (the “Federal Reserve”), the Federal Deposit Insurance Corporation (the “FDIC”) and other federal or state agencies that regulate or supervise FIs in the United States.
The Alkami Platform offers an end-to-end set of digital banking software products.
The Alkami Digital Banking Platform offers an end-to-end set of digital banking software products.
Powered by data scientists and artificial intelligence, Segmint’s innovative product line offers a variety of ways to optimally use customer data to deepen relationships and grow the customer’s business. Our Solution The Alkami Platform provides FIs with a complete digital banking solution designed to facilitate and meet the needs of both retail and business users.
Powered by data scientists and artificial intelligence, Segmint’s innovative product line offers a variety of ways to optimally use customer data to deepen relationships and grow the customer’s business. Our Solution The Alkami Digital Banking Platform provides FIs with a complete digital banking solution designed to facilitate and meet the needs of both retail and business users.
We believe the review of this feedback has served to help us promote and improve our culture across our organization and has led us to create, implement or enhance a host of programs and initiatives: • embracing remote work and enabling our employees to do their best work from anywhere in the United States allowing them to balance their work obligations with their personal lives; • learning and development programs that are designed to invest in the professional growth and continuous learning of employees and to cultivate leadership talent; • performance feedback and talent review programs designed to assess and identify areas for continued learning and training opportunities for employees and a succession bench for critical roles; • wellness, benefits and flexible time-off programs designed to assist employees and their families with maintaining physical and emotional wellbeing, while balancing the demands of being part of a high-growth company; • internship and cohort programs that seek to identify and attract diverse talent and offer opportunities for professional learning and potential future employment opportunities with Alkami; • employee committees focused on embracing our culture, diversity and inclusion; and • charitable causes to help create opportunities for employees to join together to make a difference in the workplace and local communities.
We believe the review of this feedback has served to help us promote and improve our culture across our organization and has led us to create, implement or enhance a host of programs and initiatives: • embracing remote work and enabling our employees to do their best work from anywhere in the United States allowing them to balance their work obligations with their personal lives; • learning and development programs that are designed to invest in the professional growth and continuous learning of employees and to cultivate leadership talent; • performance feedback and talent review programs designed to assess and identify areas for continued learning and training opportunities for employees and a succession bench for critical roles; • wellness, benefits and flexible time-off programs designed to assist employees and their families with maintaining physical and emotional wellbeing, while balancing the demands of being part of a high-growth company; • cohort programs that seek to identify and attract diverse talent and offer opportunities for professional learning and potential future employment opportunities with Alkami; • employee committees focused on embracing our culture, diversity and inclusion; and • charitable causes to help create opportunities for employees to join together to make a difference in the workplace and local communities.
Our third-party partnerships and integrations are a crucial element of the Alkami Platform, enabling FIs to choose from, and connect with, a broad array of third-party service providers essential to the curation of a customized digital experience.
Our third-party partnerships and integrations are a crucial element of the Alkami Digital Banking Platform, enabling FIs to choose from, and connect with, a broad array of third-party service providers essential to the curation of a customized digital experience.
Our solution, the Alkami Platform, allows FIs to onboard and engage new users, accelerate revenues and meaningfully improve operational efficiency, all with the support of a proprietary, true cloud-based, multi-tenant architecture. We cultivate deep relationships with our clients through long-term, subscription-based contractual arrangements, aligning our growth with our clients’ success and generating an attractive unit economic model.
Our solution, the Alkami Digital Banking Platform, allows FIs to onboard and engage new users, accelerate revenues, and meaningfully improve operational efficiency, all with the support of a proprietary, true cloud-based, multi-tenant architecture. We cultivate deep relationships with our clients through long-term, subscription-based contractual arrangements, aligning our growth with our clients’ success and generating an attractive unit economic model.
See “Risk Factors—Risks Relating to Cybersecurity or Data Privacy—Privacy and data security concerns, data collection and transfer restrictions, contractual obligations and U.S. and foreign laws, regulations and industry standards related to data privacy, security and protection could limit the use and adoption of the Alkami Platform and materially and adversely affect our business, financial condition and results of operations.” Available Information Our website address is www.alkami.com.
See “Risk Factors—Risks Relating to Cybersecurity or Data Privacy—Privacy and data security concerns, data collection and transfer restrictions, contractual obligations and U.S. and foreign laws, regulations and industry standards related to data privacy, security and protection could limit the use and adoption of the Alkami Digital Banking Platform and materially and adversely affect our business, financial condition and results of operations.” Available Information Our website address is www.alkami.com.
As we enhanced our product suite to include greater depth of functionality for business banking in particular, we significantly expanded our addressable market as FIs increasingly seek a single digital banking platform for all their retail and business banking needs. Our target client base includes the top 2,000 FIs by assets, with the exception of the megabanks.
As we enhanced our product suite to include greater depth of functionality for business banking in particular, we significantly expanded our addressable market as FIs increasingly seek a single digital banking platform for all their retail and business banking needs. Our target client base includes the top 2,500 FIs by assets, with the exception of the megabanks.
Across our clients’ customer base, the average registered user logged onto the digital application three to four times per week, in 2022, providing our clients more opportunities to engage with their customers than a physical branch-based relationship, further highlighting the motivation for our clients to promote client customer digital adoption.
Across our clients’ customer base, the average registered user logged onto the digital application three to four times per week, in 2023, providing our clients more opportunities to engage with their customers than a physical branch-based relationship, further highlighting the motivation for our clients to promote client customer digital adoption.
The benefits of this infrastructure include resiliency, reliability and increased security; we achieved an average of 99.9% uptime in the year ended December 31, 2022. True cloud infrastructure is also remarkably scalable, allowing us to pursue our growth objectives without technological limitation.
The benefits of this infrastructure include resiliency, reliability and increased security; we achieved an average of 99.9% uptime in the year ended December 31, 2023. True cloud infrastructure is also remarkably scalable, allowing us to pursue our growth objectives without technological limitation.
Our Platform and Ecosystem The Alkami Platform is a multi-tenant, single code base, continuous delivery platform powered by a true cloud infrastructure. Our platform integrates with core system providers and other third-party fintech providers, and acts as the primary interaction point among consumers, businesses and FIs.
Our Platform and Ecosystem The Alkami Digital Banking Platform is a multi-tenant, single code base, continuous delivery platform powered by a true cloud infrastructure. Our platform integrates with core system providers and other third-party fintech providers, and acts as the primary interaction point among consumers, businesses and FIs.
Privacy and Information Safeguard Laws In the ordinary course of our business, we and our clients using our solutions access, collect, store, use transmit and otherwise process certain types of data, including personal information (“PI”), which subjects us and our clients to certain privacy and information security laws in the United States and internationally, including, for example, the CCPA, the CPRA and other state privacy regulations, and other laws, rules and regulations designed to regulate consumer information and data privacy, security and protection, and mitigate identity theft.
Privacy and Information Safeguard Laws In the ordinary course of our business, we and our clients using our solutions access, collect, store, use transmit and otherwise process certain types of data, including personal information (“PI”), which subjects us and our clients to certain privacy and information security laws in the United States and internationally, including, for example, the CCPA, as amended by the CPRA, and other state privacy regulations, and other laws, rules and regulations designed to regulate consumer information and data privacy, security and protection, and mitigate identity theft.
Our client success team is responsible for nurturing relationships holistically throughout the duration of the contract, ensuring that we understand their needs in real time and that our clients are deriving maximum value from the Alkami Platform.
Our client success team is responsible for nurturing relationships holistically throughout the duration of the contract, ensuring that we understand their needs in real time and that our clients are deriving maximum value from the Alkami Digital Banking Platform.
As compared to the 2021 new client cohort, our 2022 new client cohort, on average, utilizes more products resulting in a higher annual recurring revenue per new client and higher revenue per user per new client. • Broaden and enhance product suite: We intend to invest to continue to enhance our product suite.
As compared to the 2022 new client cohort, our 2023 new client cohort, on average, utilizes more products, resulting in a higher annual recurring revenue per new client and higher revenue per user per new client. • Broaden and enhance product suite: We intend to invest to continue to enhance our product suite.
We derive our revenues predominantly from multi-year contracts for the Alkami digital banking platform that have had an average contract life of 70 months as of December 31, 2022. We predominantly employ a per-registered-user pricing model, with incremental fees above certain contractual client minimum commitments for each licensed solution.
We derive our revenues predominantly from multi-year contracts for the Alkami Digital Banking Platform that have had an average contract life of approximately 70 months as of December 31, 2023. We predominantly employ a per-registered-user pricing model, with incremental fees above certain contractual client minimum commitments for each licensed solution.
Consequently, the industry highly values platforms that mitigate much of this complexity with modern architectures that enable real-time integrations to all constituents of the digital banking ecosystem. • Focus on security: The increasingly interconnected and digital nature of finance renders FIs particularly vulnerable to cybersecurity attacks given the attractive nature of FIs as protectors of both capital and personal information.
Consequently, the industry highly values platforms that mitigate much of this complexity with modern architectures that enable real-time integrations to all constituents of the digital banking ecosystem. 5 Table of Contents • Focus on security: The increasingly interconnected and digital nature of finance renders FIs particularly vulnerable to cybersecurity attacks given the attractive nature of FIs as protectors of both capital and personal information.
The key differentiators of the Alkami Platform include: • User experience : Personalized and seamless digital experience across user interaction points, including desktop, mobile, chat and SMS, establishing durable connections between FIs and their customers. • Integrations : Scalability and extensibility driven by more than 280 real-time integrations to back office systems and third-party fintech solutions as of December 31, 2022, including core systems, payment cards, mortgages, bill pay, electronic documents, money movement, personal financial management and account opening. • Deep data capabilities : Data synchronized and stored from back office systems and third-party fintech solutions and synthesized into meaningful insights, targeted content and other areas of monetization.
The key differentiators of the Alkami Digital Banking Platform include: • User experience : Personalized and seamless digital experience across user interaction points, including desktop, mobile, chat and SMS, establishing durable connections between FIs and their customers. • Integrations : Scalability and extensibility driven by more than 300 real-time integrations to back office systems and third-party fintech solutions as of December 31, 2023, including core systems, payment cards, mortgages, bill pay, electronic documents, money movement, personal financial management and account opening. • Deep data capabilities : Data synchronized and stored from back office systems and third-party fintech solutions and synthesized into meaningful insights, targeted content and other areas of monetization.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for more information. 4 Table of Contents Our Industry The United States banking industry is massive, with almost $26 trillion in assets on the balance sheets of over 9,500 FIs as of December 31, 2021, according to call report data published by the Federal Financial Institutions Examinations Council (“FFIEC”) and the National Credit Union Administration (“NCUA”).
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for more information. 4 Table of Contents Our Industry The United States banking industry is massive, with almost $26 trillion in assets on the balance sheets of nearly 9,500 FIs as of December 31, 2022, according to call report data published by the Federal Financial Institutions Examinations Council (“FFIEC”) and the National Credit Union Administration (“NCUA”).
The technology that powers our platform is foundational to our success and ability to deliver a distinct value proposition to our clients, characterized by the following: • Premier user experience: The Alkami Platform enables our clients to leverage technology to deliver a premier user experience.
The technology that powers our platform is foundational to our success and ability to deliver a distinct value proposition to our clients, characterized by the following: • Premier user experience: The Alkami Digital Banking Platform enables our clients to leverage technology to deliver a premier user experience.
Many of our competitors have significantly more financial, technical, marketing and other resources than we have, may devote greater resources to the promotion, sale and support of their systems than we can, have more extensive client bases and broader client relationships than we 10 Table of Contents have and have longer operating histories and greater name recognition than we have.
Many of our competitors have significantly more financial, technical, marketing and other resources than we have, may devote greater resources to the promotion, sale and support of their systems than we can, have more extensive client bases and broader client relationships than we have and have longer operating histories and greater name recognition than we have.
In addition, under certain of these laws, we must provide notice to 12 Table of Contents consumers of our policies and practices for sharing PI with third parties, provide advance notice of any changes to our policies and, with limited exceptions, give consumers the right to prevent use of their PI and disclosure of it to third parties.
In addition, under certain of these laws, we must provide notice to consumers of our policies and practices for sharing PI with third parties, provide advance notice of any changes to our policies and, with limited exceptions, give consumers the right to prevent use of their PI and disclosure of it to third parties.
On April 25, 2022 we completed our merger with Segmint, Inc. (“Segmint”). Segmint operates a marketing analytics and messaging delivery platform with patented software that enables financial institutions and merchants to understand and leverage data, interact with customers, and measure results.
On April 25, 2022, we completed our merger with Segmint, Inc. (“Segmint”). Segmint operates a marketing analytics and messaging delivery platform with patented software that enables FIs and merchants to understand and leverage data, interact with customers, and measure results.
These laws impose obligations with respect to the collection, processing, storage, disposal, use, transfer, retention and disclosure of PI, and require that financial services providers have in place policies regarding information privacy and security.
These laws 12 Table of Contents impose obligations with respect to the collection, processing, storage, disposal, use, transfer, retention and disclosure of PI, and require that financial services providers have in place policies regarding information privacy and security.
Users are able to make healthier financial decisions, while our FIs gain valuable insights, enabling them to drive targeted marketing and product origination. • Security & Fraud Protection: Includes risk-based multi-factor authentication and suspicious transaction monitoring as well as multi-channel payment fraud prevention and information reporting tools.
Users are able to make healthier financial decisions, while our FIs gain valuable insights, enabling them to drive targeted marketing and product origination. 8 Table of Contents • Security & Fraud Protection: Includes risk-based multi-factor authentication and suspicious transaction monitoring as well as multi-channel payment fraud prevention and information reporting tools.
We expect cross-sell to continue to contribute meaningfully to our growth. ◦ Customer penetration: While we recently achieved more than 14.5 million live registered digital banking users (“registered users”), we estimate this only represents 75% of our clients’ total customers as of December 31, 2022.
We expect cross-sell to continue to contribute meaningfully to our growth. ◦ Customer penetration: While we recently achieved more than 17.5 million live registered digital banking users (“registered users”), we estimate this only represents 75% of our clients’ total customers as of December 31, 2023.
The largest FIs have the financial flexibility to make significant investments; the four largest banks in the United States, based on asset size, spent more than $30 billion in aggregate on technology in 2021, according to their public disclosures, reflecting their commitment to protect and extend leadership through technology.
The largest FIs have the financial flexibility to make significant investments; the four largest banks in the United States, based on asset size, spent more than $35 billion in aggregate on technology in 2022, according to their public disclosures, reflecting their commitment to protect and extend leadership through technology.
To remain competitive, we believe we must continue to invest in research and development, sales and marketing, client support and our business operations generally. Human Capital Resources As of December 31, 2022, we had 851 employees. We consider our current relationship with our employees to be good.
To remain competitive, we believe we must continue to invest in research and development, sales and marketing, client support and our business operations generally. Human Capital Resources As of December 31, 2023, we had 917 employees. We consider our current relationship with our employees to be good.
In order to comply with the privacy and information security laws, we have confidentiality and information security standards and procedures in place for our business activities and our third-party vendors and service providers.
To assist our efforts to comply with the privacy and information security laws, we have confidentiality and information security standards and procedures in place for our business activities and our third-party vendors and service providers.
We believe this is critical to FIs as their models shift from physical to digital, enabling the creation of a digital community in the image of their broader brands and aligned with their strategic objectives. The Alkami Platform maintains more than 280 integrations to more than 1,000 endpoints, as of December 31, 2022.
We believe this is critical to FIs as their models shift from physical to digital, enabling the creation of a digital community in the image of their broader brands and aligned with their strategic objectives. The Alkami Digital Banking Platform maintains more than 300 integrations to more than 1,000 endpoints, as of December 31, 2023.
The United States banking industry generated over $900 billion in gross income in 2021, according to FFIEC and NCUA call reports, highlighting a significant market opportunity that drives intense competition and a magnitude of economic importance which requires considerable regulation, both locally and nationally.
The United States banking industry generated over $1 trillion in gross income in 2022, according to FFIEC and NCUA call reports, highlighting a significant market opportunity that drives intense competition and a magnitude of economic importance which requires considerable regulation, both locally and nationally.
We founded Alkami to help level the playing field for FIs. Our vision was to create a platform that combined premium technology and fintech solutions in one integrated ecosystem, delivered as a SaaS solution and providing our clients’ customers with a single point of access to all things digital.
We founded Alkami to help level the playing field for FIs. Since then, our vision has been to create a platform that combines premium technology and fintech solutions in one integrated ecosystem, delivered as a SaaS solution and providing our clients’ customers with a single point of access to all things digital.
Our pricing is tiered, with per-registered-user discounts applied as clients achieve higher levels of customer penetration, incentivizing our clients to internally market and promote digital engagement. Our ability to grow revenues through deeper client customer penetration and cross-sell allowed us to increase annual recurring revenue of clients existing at December 31, 2022, 2021 and 2020 115%, 115% and 117%, respectively.
Our pricing is tiered, with per-registered-user discounts applied as clients achieve higher levels of customer penetration, incentivizing our clients to internally market and promote digital engagement. Our ability to grow revenues through deeper client customer penetration and cross-sell allowed us to increase annual recurring revenue from clients existing at December 31, 2023 by 115%.
Due to our architecture, adding products through our single code base is fast, simple and cost-effective, and we expect product penetration to continue to increase as we broaden our product suite. As of December 31, 2022, our client base, on average, used 12 of our 32 offered products.
Due to our architecture, adding products through our single code base is fast, simple and cost-effective, and we expect product penetration to continue to increase as we broaden our product suite. As of December 31, 2023, our client base, on average, used 13 of our 33 offered products.
We had 14.5 million, 12.4 million, and 9.7 million live registered users as of December 31, 2022, 2021, and 2020, respectively, representing a growth rate for one of our key revenue drivers of 17.7% from 2021 to 2022 and 27.6% from 2020 to 2021.
We had 17.5 million, 14.5 million, and 12.4 million live registered users as of December 31, 2023, 2022, and 2021, respectively, representing a growth rate for one of our key revenue drivers of 20.4% from 2022 to 2023 and 17.7% from 2021 to 2022.
In 2022 and 2021, we spent 33.9% and 32.1%, respectively, of revenues on research and development, underlining our commitment to ongoing innovation.
In 2023 and 2022, we spent 32.0% and 33.9%, respectively, of revenues on research and development, underlining our commitment to ongoing innovation.
We incurred net losses of $58.6 million, $46.8 million, and $51.4 million for 2022, 2021, and 2020, respectively, largely due to significant continued investment in sales, marketing, product development and post-sales client activities.
We incurred net losses of $62.9 million, $58.6 million, and $46.8 million for 2023, 2022, and 2021, respectively, largely due to significant continued investment in sales, marketing, product development and post-sales client activities.
Our Clients As of December 31, 2022, we served over 550 clients, of which 199 are FI clients of the Alkami Platform, including community, regional and super-regional credit unions and banks across both retail and business banking. Our original product suite was retail focused.
Our Clients As of December 31, 2023, we served over 650 clients, of which 236 are FI clients of the Alkami Digital Banking Platform, including community, regional and super-regional credit unions and banks across both retail and business banking. Our original product suite was retail focused.
Our clients choose the Alkami Platform to: • Onboard new registered users efficiently. • Engage registered users with self-service functions, proactive alerting and financial insights. • Grow revenues and registered users through new product and service offerings. • Guard registered user data and interactions to mitigate fraud. 7 Table of Contents We deliver this value proposition through the following eight product categories, encompassing 32 products and more than 280 integrations as of December 31, 2022: • Account Opening & Loan Origination : Allows our clients’ customers to create and manage deposit accounts, including checking, savings, CD and Money Market accounts.
Our clients choose the Alkami Digital Banking Platform to: • Onboard new registered users efficiently. • Engage registered users with self-service functions, proactive alerting and financial insights. • Grow revenues and registered users through new product and service offerings. • Guard registered user data and interactions to mitigate fraud. 7 Table of Contents We deliver this value proposition through the following 10 product categories, encompassing 33 products and more than 300 integrations as of December 31, 2023: • Digital Account Opening : Allows our clients’ customers to open new deposit accounts, including checking, savings, CD and Money Market accounts.
Given the long-term nature of our contracts for the Alkami Platform, a typical sales cycle can range from approximately three to 12 months, with the subsequent implementation timeframe generally ranging from six to 12 months depending on the depth of integration.
We primarily go to market through an internal sales force. Given the long-term nature of our contracts for the Alkami Digital Banking Platform, a typical sales cycle can range from approximately three to 12 months, with the subsequent implementation timeframe generally ranging from six to 12 months depending on the depth of integration.
Our total revenues were $204.3 million, $152.2 million, and $112.1 million for 2022, 2021, and 2020, respectively, representing growth rates of 34.2% from 2021 to 2022 and 35.7% from 2020 to 2021. SaaS subscription services, as further described below, represented 95.2%, 94.4%, and 93.7% of total revenues for 2022, 2021, and 2020, respectively.
Our total revenues were $264.8 million, $204.3 million, and $152.2 million for 2023, 2022, and 2021, respectively, representing growth rates of 29.6% from 2022 to 2023 and 34.2% from 2021 to 2022. SaaS subscription services, as further described below, represented 95.3%, 95.2%, and 94.4% of total revenues for 2023, 2022, and 2021, respectively.
We offered nine products when we 6 Table of Contents launched Alkami Business Banking in 2015, and as of December 31, 2022, 32 products were available through the Alkami Platform and our clients had purchased an average of 10 products from us.
We offered nine products when we launched Alkami Business Banking in 2015, and as of December 31, 2023, 33 products were available through the Alkami Digital Banking Platform, and our clients had purchased an average of 13 products from us.
Cross-sell contributed 37% of total contract value (“TCV”) in 2022, compared to 24% in 2021, highlighting our significant continued opportunity to grow within our existing client base.
Cross-sell contributed 35% of total contract value (“TCV”) in 2023, highlighting our significant continued opportunity to grow within our existing client base.
The modern bank robber is armed with no more than a computer and can attack from anywhere in the world, and consequently, FIs are constantly under threat.
The modern bank robber is armed with no more than a computer and can attack from anywhere in the world, and consequently, FIs are constantly under threat. For this reason, FIs are making substantial technology investments in cybersecurity and security more broadly.
These laws may also require us to notify relevant law enforcement, regulators or consumer reporting agencies in the event of a data breach. Some laws may also impose physical and electronic security requirements regarding the safeguarding of PI.
These laws, as well as new regulations promulgated by the SEC, may also require us to notify relevant law enforcement, regulators, or consumer reporting agencies and/or investors in the event of certain types of cyberattacks or a data breaches. Some laws may also impose physical and electronic security requirements regarding the safeguarding of PI.
We believe that the comprehensive integration among our solution offerings and our clients’ internal and third-party systems, combined with our deep industry expertise, including our domain expertise in retail and business banking, reputation for consistent, high-quality client support, pace at which we bring innovation to market, and unified cloud-based digital banking and SaaS solutions distinguish us from the competition.
We believe that the comprehensive integration among our solution offerings and our clients’ internal and third-party systems, combined with our deep industry expertise, including our domain expertise in retail and business banking, reputation for consistent, high-quality client support, pace at which we bring innovation to market, and unified cloud-based digital banking and SaaS solutions distinguish us from the competition. 10 Table of Contents With respect to our digital banking platform, we compete against a number of companies, including NCR Corporation, Q2 Holdings, Inc. and Temenos AG in the online, consumer and small business banking space.
Our Growth Strategies We intend to continue to invest to grow our business and expand our addressable market by applying the following strategies: • Deepen existing client relationships: We expect to continue to deepen our existing client relationships, increasing both the number of registered users and the number of products per client: ◦ Cross-sell: We continue to broaden our product set to address the needs of our client base.
The Alkami Digital Banking Platform delivers tangible results to clients, including increased registered user growth, increased product usage, operational efficiencies and customer retention. 6 Table of Contents Our Growth Strategies We intend to continue to invest to grow our business and expand our addressable market by applying the following strategies: • Deepen existing client relationships: We expect to continue to deepen our existing client relationships, increasing both the number of registered users and the number of products per client: ◦ Cross-sell: We continue to broaden our product set to address the needs of our client base.
Over the course of a client relationship, we seek to expand the number of products our clients embed within their digital experience as well as the digital penetration of the clients’ customer base.
Over the course of a client relationship, we seek to expand the number of products our clients embed within their digital experience as well as the digital penetration of the clients’ customer base. No single client represented more than 5% of our total revenues in the year ended December 31, 2023.
These FIs range from megabanks, which collectively held approximately $9 trillion, or 36% of FI assets in the United States, as of December 31, 2021, to significantly smaller local community banks and affinity credit unions.
These FIs range from megabanks, which collectively held approximately $12 trillion in assets, to significantly smaller local community banks and affinity credit unions.
This offering enhances many of our clients’ digital platforms and gives them the opportunity to digitize and replace many of the processes which formerly required a physical branch visit.
This offering enhances many of our clients’ digital platforms and gives them the opportunity to digitize and replace many of the processes which formerly required a physical branch visit. • Marketing: Enables clients to deliver tailored, relevant and timely content via targeted marketing campaigns and educational outreaches to their customers.
We focus on this subsection of the broader market because we view this base as offering the greatest potential lifetime value, considering the cost and resources to acquire and service the relationship. Unlike the long tail of very small institutions, this target client base is also far more likely to grow organically and through acquisition.
We focus on this subsection of the broader market because we view this base as offering the greatest potential lifetime value, considering the cost and resources to acquire and service the relationship.
Our acquisition of Segmint added unique data models and customer segmentation tools (Key Lifestyle Indicators, or “KLIs”) to our platform’s capabilities, enabling our clients to creatively segment and refine their marketing campaigns. 8 Table of Contents • Money Movement: Includes fully integrated money movement tools to increase deposits and drive consistent user engagement.
Our acquisition of Segmint added unique data models and customer segmentation tools (Key Lifestyle Indicators or “KLIs”) to our platform's capabilities, enabling our clients to creatively segment and refine their marketing campaigns. • Data Insights: Enables clients to build internal analytical tools.
For this reason, FIs are making substantial technology investments in cybersecurity and security more broadly. 5 Table of Contents FIs take varying approaches to technological evolution, partially driven by philosophy, but predominantly driven by resources that are available to them.
FIs take varying approaches to technological evolution, partially driven by philosophy, but predominantly driven by resources that are available to them.
With respect to our digital banking platform, we compete against a number of companies, including NCR Corporation, Q2 Holdings, Inc. and Temenos AG in the online, consumer and small business banking space. We also compete with core processing vendors that also provide digital banking solutions such as Fiserv, Inc., Jack Henry and Associates, Inc. and Fidelity National Information Services, Inc.
We also compete with core processing vendors that also provide digital banking solutions such as Fiserv, Inc., Jack Henry and Associates, Inc. and Fidelity National Information Services, Inc.
However, banking is not a static industry, and over the last several decades, technology has emerged as a differentiating factor among FIs, driving market share gains, operational efficiencies and improved regulatory compliance.
We believe based on third party estimates this segment of the market represents an opportunity of more than 200 million registered users and offers the greatest potential lifetime value, considering the cost and resources to acquire and service the relationship However, banking is not a static industry, and over the last several decades, technology has emerged as a differentiating factor among FIs, driving market share gains, operational efficiencies and improved regulatory compliance.
Our typical FI relationship begins with a subset of the Alkami Platform as part of a SaaS subscription contract, and we have had an average contract life for those contracts of approximately 70 months as of December 31, 2022.
Unlike the long tail of very small institutions, this target client base is also far more likely to grow organically and through acquisition. 9 Table of Contents Our typical FI relationship begins with a subset of the Alkami Digital Banking Platform as part of a SaaS subscription contract, with an average contract life for those contracts of approximately 70 months as of December 31, 2023.
This depth of product configurability and optionality is made possible by the software adapters we have built to standardize access to solutions offered by third-party vendors. The Alkami Value Proposition We have grown rapidly since 2009 by understanding our clients’ objectives and pain points, including adding nearly 4.9 million live registered users from December 31, 2020 to December 31, 2022.
The Alkami Value Proposition We have grown rapidly since 2009 by understanding our clients’ objectives and pain points, including adding more than 5 million live registered users from December 31, 2021 to December 31, 2023.
This team is responsible for outbound lead generation, driving new business and helping to manage account relationships and renewals, further driving adoption of our solution within and across lines of business. These teams maintain close relationships with existing clients and act as advisors to each FI to help identify and understand their unique needs, challenges, goals and opportunities.
These teams maintain close relationships with existing clients and act as advisors to each FI to help identify and understand their unique needs, challenges, goals and opportunities. We utilize a dedicated sales team in order to drive additional adoption of products within existing clients.
This includes our SDK and application program interfaces (“APIs”). • Financial Wellness: Aggregates and synthesizes information that client customers need in order to make informed financial decisions. This includes basic account aggregation, credit score monitoring, transaction data enrichment and access to third-party financial management products.
This includes basic account aggregation, credit score monitoring, transaction data enrichment, home value tracking, savings goals, and access to third-party financial management products.
Our culture is expressed by our six Essential Culture Compounds: Optimistic Perseverance, Courageous Innovation, Caring Collaboration, Transparent Communication, Trusted Accountability and Real Fun! We regularly conduct employee surveys to better understand the level of employee engagement and the effectiveness of our programs and initiatives.
Our culture is expressed by our Values: The Customer is our North Star, We Win Together, How You Show Up Matters, Seek the Answer and Finish Strong. We regularly conduct employee surveys to better understand the level of employee engagement and the effectiveness of our programs and initiatives.
While most competitors currently provide third-party products via an intrusive, off-brand, sign-on screen, the Alkami Platform seamlessly integrates third-party services into a consistent digital banking experience that is portable across multiple user interfaces. Our Technology and Architecture Our platform is true cloud and entirely hosted and delivered on AWS.
The Alkami Digital Banking Platform seamlessly integrates third-party services into a consistent digital banking experience that is portable across multiple user interfaces. • Customer Service: Includes a suite of products digitizing and streamlining communications around largely administrative functions.
Products range from basic SMS and push notification capabilities to digital authentication and chat and conversational tools, both digitally as well as by human interaction. • Extensibility: Allows for platform extension without sacrificing continuous integration and delivery of the underlying Alkami Platform.
Products range from basic SMS and push notification capabilities to digital authentication and chat and conversational tools, both digitally as well as by human interaction. • Commercial Banking: Through real-time insight into cash position and our data capabilities, we equip clients to compete for businesses of all sizes—all while simplifying the back office with a single platform with an industry-leading user experience.
Our 2022 client cohort, however, has contracted for 17 of our offered products, on average. Our target clients vary in size, generally ranging from approximately $500 million to $100 billion in assets and from approximately 10,000 to 2 million digital banking users.
Our 2023 client cohort, however, has contracted for 18 of our offered products, on average. Our target clients include the top 2,500 FIs by assets excluding those with assets greater than $450 billion (“megabanks”). We had 236, 199 and 177 FIs as Alkami Digital Banking Platform clients as of December 31, 2023, 2022, and 2021, respectively.
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We had 199, 177 and 151 FIs as Alkami Platform clients as of December 31, 2022, 2021, and 2020, respectively. We primarily go to market through an internal sales force.
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Our addressable market consists of financial institutions with assets of $100 million to $450 billion representing over 250 million registered users. Within this market, we target the top 2,500 FIs by assets excluding megabanks.
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The Alkami Platform delivers tangible results to clients, including increased registered user growth, increased product usage, operational efficiencies and customer retention.
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This depth of product configurability and optionality is made possible by the software adapters we have built to standardize access to solutions offered by third-party vendors.
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Our acquisition of MK added the ability to offer new customer account opening for deposit accounts as well as loan origination for personal and business credit cards and personal loans to our platform’s capabilities. • Card Experience : Includes features that allow for cardholder alerts and control preferences as well as card account maintenance features for self-service. • Client Service: Includes a suite of products digitizing and streamlining communications around largely administrative functions.
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Our acquisition of Segmint added unique data models and customer segmentation tools (primarily KLIs) to our platform's capabilities, enabling our clients to better understand, model, and predict their customers' preferences, lifestyle, and financial needs. • Card Experience : Includes features that allow for cardholder alerts and control preferences, card account maintenance features for self-service, and digital card capabilities. • Money Movement: Includes fully integrated money movement tools to increase deposits, facilitate payments and transfers, and drive consistent user engagement.
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Our acquisition of ACH Alert enhanced our platform’s capabilities in this product category. • Marketing & Analytics: Enables our clients to build internal analytical tools and enables clients to deliver tailored, relevant and timely content via targeted marketing campaigns and educational outreaches to their customers.
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Our commercial banking solution includes comprehensive payment and receivable solutions, sub-user permissions management, automated billing, payment fraud prevention, and actionable reporting all built into a secure and scalable platform. • Financial Wellness: Aggregates and synthesizes information that client customers need in order to make informed financial decisions.
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No single client represented more than 5% of our total revenues in the year ended December 31, 2022. 9 Table of Contents Sales and Marketing Our sales team includes representatives focused on new platform sales, a cross-sell team and client success managers.
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Our acquisition of ACH Alert enhanced our platform’s capabilities in this product category. • Extensibility: Enables clients to embrace and extend the Alkami Digital Banking Platform using our SDK and application program interfaces (“APIs”).
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We utilize a dedicated sales team in order to drive additional adoption of products within existing clients.
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This includes the ability to integrate with internal systems & the broader fintech ecosystem, modify & customize workflows, and elevate the look and feel of the Alkami Digital Banking Platform. Our Technology and Architecture Our platform is true cloud and entirely hosted and delivered on AWS.
Added
Sales and Marketing Our sales team includes representatives focused on new platform sales, a cross-sell team and client success managers. This team is responsible for outbound lead generation, driving new business and helping to manage account relationships and renewals, further driving adoption of our solution within and across lines of business.
Added
In 2023, for instance, we were recognized as a "Best Place to Work in Financial Technology," a "Best and Brightest Companies to Work For in Dallas," as well as a "Best Company for Career Growth," a "Best 11 Table of Contents Engineering Team,” and a "Best Product and Design Team" from Comparably.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur principal risks include risks associated with: • managing our rapid growth; • attracting new clients and retaining and broadening our existing clients’ use of our solutions; • maintaining, protecting and enhancing our brand; • predicting the long-term rate of client subscription renewals or adoption of our solutions; • the unpredictable and time-consuming nature of our sales cycles; • integration with and reliance on third-party software, content and services; • integrating our solutions with other systems used by our clients; • satisfying our clients and meeting their digital banking needs; • our dependence on the data centers operated by third parties and third party internet hosting providers; • defects, errors or performance problems associated with our solutions; • retaining our management team and key employees and recruiting and retaining new employees; • managing the increased complexity of our solutions and a higher volume of implementations; • providing client support; • acquiring or investing in other companies or pursuing business partnerships; • natural or man-made disasters; • cybersecurity breaches or other compromises of our security measures or those of third parties upon which we rely; • increased privacy concerns, laws, regulations and standards and our processing and use of the personal information of end users; • intense competition in the markets we serve; • reliance on the financial services industry as the source of our revenue in the event of any downturn, consolidation or decrease in technological spend in such industry; • evolving technological requirements and changes and additions to our solution offerings; • the political, economic and competitive conditions in the markets and jurisdictions where we operate; • regulations and laws applicable to us, our clients and our solutions; • protecting our intellectual property rights and defending ourselves against claims that we are misappropriating the intellectual property rights of others; • using open-source software in our solutions; • complying with license or technology agreements with third parties and our ability to enter into additional license or technology agreements on reasonable terms; • litigation or threats of litigation; • the fluctuation of our quarterly and annual results of operations relative to our expectations and guidance; • the way we recognize revenue, which has the effect of delaying changes in the subscriptions for our solutions from being reflected in our operating results; • our limited operating history, our history of operating losses and our ability to use our net operating loss (“NOL”) carryforwards; • our ability to raise sufficient capital and the resulting dilution and the terms of our Amended Credit Agreement (as defined below); • our status as an emerging growth company; • future sales of shares of our common stock, our lack of an intention to pay dividends and significant influence of our principal stockholders; and 13 Table of Contents • anti-takeover provisions in our charter documents and Delaware law.
Biggest changeOur principal risks include risks associated with: • managing our rapid growth; • attracting new clients and retaining and broadening our existing clients’ use of our solutions; • maintaining, protecting and enhancing our brand; • predicting the long-term rate of client subscription renewals or adoption of our solutions; • the unpredictable and time-consuming nature of our sales cycles; • integration with and reliance on third-party software, content and services; • integrating our solutions with other systems used by our clients; • satisfying our clients and meeting their digital banking needs; • our dependence on the data centers operated by third parties and third-party internet hosting providers; • defects, errors or performance problems associated with our solutions; • retaining our management team and key employees and recruiting and retaining new employees; • managing the increased complexity of our clients’ integration and functionality requirements; • shifts in the number of account holders and registered users of our solutions, their use of our solutions and our clients’ implementation and client support needs; • acquiring or investing in other companies or pursuing business partnerships; • natural or man-made disasters; • cybersecurity breaches or other compromises of our security measures or those of third parties upon which we rely; • privacy and data security concerns, laws, regulations and standards and our processing and use of the PI of end users; • intense competition in the markets we serve; • reliance on the financial services industry as the source of our revenue in the event of any downturn, consolidation or decrease in technological spend in such industry; • evolving technological requirements and changes and additions to our solution offerings; • the political, economic and competitive conditions in the markets and jurisdictions where we operate; • regulations and laws applicable to us, our clients and our solutions; • protecting our intellectual property rights and defending ourselves against claims that we are misappropriating the intellectual property rights of others; • using open-source software in our solutions or risks resulting in the disclosure our proprietary source code to our clients; • complying with license or technology agreements with third parties and our ability to enter into additional license or technology agreements on reasonable terms; • litigation or threats of litigation; • the fluctuation of our quarterly and annual results of operations relative to our expectations and guidance; • the way we recognize revenue, which has the effect of delaying changes in the subscriptions for our solutions from being reflected in our operating results; • our limited operating history, our history of operating losses and our ability to use our net operating loss (“NOL”) carryforwards; 13 Table of Contents • our ability to raise sufficient capital and the resulting dilution and the terms of our Amended Credit Agreement (as defined below); • our status as an emerging growth company; • future sales of shares of our common stock, our lack of an intention to pay dividends and significant influence of our principal stockholders; • anti-takeover and exclusive forum provisions in our governing documents.
These provisions include: • a classified board of directors with three-year staggered terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors; • no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors; • the ability of our board of directors to authorize the issuance of shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquiror; 28 Table of Contents • the ability of our board of directors to alter our amended and restated bylaws without obtaining stockholder approval; • the required approval of at least 66 2/3% of the shares entitled to vote at an election of directors to adopt, amend or repeal our amended and restated bylaws or to repeal certain provisions of our amended and restated certificate of incorporation, including anti-takeover provisions related to our classified board of directors, voting in the election of directors, rights to fill board vacancies, the ability of our board of directors to alter our amended and restated bylaws without stockholder approval, the inability of stockholders to force consideration of a proposal or to take action, including the removal of directors; • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; • the requirement that a special meeting of stockholders may be called only by our board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; and • advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of us.
These provisions include: • a classified board of directors with three-year staggered terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors; • no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors; • the ability of our board of directors to authorize the issuance of shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquiror; • the ability of our board of directors to alter our amended and restated bylaws without obtaining stockholder approval; • the required approval of at least 66 2/3% of the shares entitled to vote at an election of directors to adopt, amend or repeal our amended and restated bylaws or to repeal certain provisions of our amended and restated certificate of incorporation, including anti-takeover provisions related to our classified board of directors, voting in the election of directors, rights to fill board vacancies, the ability of our board of directors to alter our amended and restated bylaws without stockholder approval, the inability of stockholders to force consideration of a proposal or to take action, including the removal of directors; • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; • the requirement that a special meeting of stockholders may be called only by our board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; and • advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of us.
Our success and future growth depend upon the continued services of our management team, in particular Alex Shootman, our Chief Executive Officer, Stephen Bohanon, our co-founder and Chief Strategy and Product Officer, W. Bryan Hill, our Chief Financial Officer, and other key employees, including in the areas of research and development, marketing, sales, services and general and administrative functions.
Our success and future growth depend upon the continued services of our management team, in particular Alex Shootman, our Chief Executive Officer, Stephen Bohanon, our co-founder and Chief Strategy Officer, W. Bryan Hill, our Chief Financial Officer, and other key employees, including in the areas of research and development, marketing, sales, services and general and administrative functions.
Prospective clients often undertake a prolonged evaluation process, which typically involves not only our solutions, but also those of our competitors. We may spend substantial time, effort and money on our sales and marketing efforts without any assurance that our efforts will produce any sales.
Prospective clients often undertake a prolonged evaluation process, which typically involves not only our solutions, but also those of our competitors. We spend substantial time, effort and money on our sales and marketing efforts without any assurance that our efforts will produce any sales.
Factors that might cause quarterly or annual fluctuations in our results of operations include: • the timing of large subscriptions and client terminations, renewals or failures to renew; 25 Table of Contents • our ability to attract new clients and retain and grow revenues from existing clients; • our ability to maintain, expand, train and achieve an acceptable level of production from our sales and marketing teams; • the timing of our introduction of new solutions or updates to existing solutions; • our ability to grow and maintain our relationships with our ecosystem of third-party partners, including integration partners and referral partners; • the success of our clients’ businesses; • new government regulations; • changes in our pricing policies or those of our competitors; • the amount and timing of our expenses related to the expansion of our business, operations and infrastructure; • any impairment of our intangible assets, capitalized software, long-lived assets or goodwill; • future costs related to acquisitions of content, technologies or businesses and their integration; • natural disasters, outbreaks of disease or public health crises; and • general economic conditions.
Factors that might cause quarterly or annual fluctuations in our results of operations include: • the timing of large subscriptions and client terminations, renewals or failures to renew; • our ability to attract new clients and retain and grow revenues from existing clients; • our ability to maintain, expand, train and achieve an acceptable level of production from our sales and marketing teams; • the timing of our introduction of new solutions or updates to existing solutions; • our ability to grow and maintain our relationships with our ecosystem of third-party partners, including integration partners and referral partners; • the success of our clients’ businesses; • new government regulations; • changes in our pricing policies or those of our competitors; • the amount and timing of our expenses related to the expansion of our business, operations and infrastructure; • any impairment of our intangible assets, capitalized software, long-lived assets or goodwill; • future costs related to acquisitions of content, technologies or businesses and their integration; • natural disasters, outbreaks of disease or public health crises; and • general economic conditions.
A vulnerability in our third-party providers’ software or systems, a failure of our third-party providers’ safeguards, policies or procedures, or a breach of a third-party provider’s software or systems could result in the compromise of the confidentiality, integrity or availability of our systems or the data housed in our third-party solutions.
A vulnerability in our third-party providers’ software or systems, a failure of our third-party providers’ safeguards, policies or procedures, or a breach of a third-party provider’s software or systems could result in the compromise of the confidentiality, integrity or availability of our IT Systems or the data housed in our third-party solutions.
As a result, if we earn net taxable income, our ability to use our pre-change NOL carryforwards to offset post-change taxable income may be subject to limitations. In addition, a portion of our NOLs generated in prior periods, if not utilized, will begin to expire in 2033 and 2024 for federal and state purposes, respectively.
As a result, if we earn net taxable income, our ability to use our pre-change NOL carryforwards to offset post-change taxable income may be subject to limitations. In addition, a portion of our NOLs generated in prior periods, if not utilized, will begin to expire in 2034 and 2024 for federal and state purposes, respectively.
The Alkami Platform integrates with other third-party systems used by our clients, including core processing and payment systems. We do not have formal arrangements with many of these third-party providers regarding our access to their application program interfaces to enable these client integrations.
The Alkami Digital Banking Platform integrates with other third-party systems used by our clients, including core processing and payment systems. We do not have formal arrangements with many of these third-party providers regarding our access to their application program interfaces to enable these client integrations.
Certain elements of our solutions process and store PI, including banking and payment data and other PI regarding our clients’ customers, such as social security numbers, and we may also have access to PI during various stages of the implementation process or during the course of providing client support.
In addition certain elements of our solutions process and store PI, including banking and payment data and other PI regarding our clients’ customers, such as social security numbers, and we may also have access to PI during various stages of the implementation process or during the course of providing client support.
Potential clients may also prefer to continue their relationship with their existing partner rather than change to a new partner regardless of product performance or features. As a result, even if the features of the Alkami Platform are superior, clients may not purchase our solution.
Potential clients may also prefer to continue their relationship with their existing partner rather than change to a new partner regardless of product performance or features. As a result, even if the features of the Alkami Digital Banking Platform are superior, clients may not purchase our solution.
The Alkami Platform is complex and may contain defects or errors when implemented or when new functionality is released, or when we modify, enhance, upgrade and implement new systems, procedures and controls to reflect changes in our business, technological advancements and changing industry trends.
The Alkami Digital Banking Platform is complex and may contain defects or errors when implemented or when new functionality is released, or when we modify, enhance, upgrade and implement new systems, procedures and controls to reflect changes in our business, technological advancements and changing industry trends.
Threats to our computer systems and those of our third-party providers or clients may result from human error, fraud or malice on the part of employees or third parties, including state-sponsored organizations with significant financial and technological resources, or from accidental technological failure.
Threats to our IT Systems and those of our third-party providers or clients may result from human error, fraud or malice on the part of employees or third parties, including state-sponsored organizations with significant financial and technological resources, or from accidental technological failure.
Third-party advocates and individuals with disabilities seek changes to existing law and regulation, or advocate for novel legal rulings in court, against FIs when desktop websites or mobile applications do not meet or exceed the Web Content Accessibility Guidelines 2.1 digital accessibility standard, which was developed in part to help ensure that the content developed for banks, credit unions and other financial institutions can be accessed and used by 22 Table of Contents people with or without disabilities.
Third-party advocates and individuals with disabilities seek changes to existing law and regulation, or advocate for novel legal rulings in court, against FIs when desktop websites or mobile applications do not meet or exceed the Web Content Accessibility Guidelines 2.1 digital accessibility standard, which was developed in part to help ensure that the content developed for banks, credit unions and other financial institutions can be accessed and used by people with or without disabilities.
Consequently, your only opportunity to achieve a return on your investment in our company will be if the market price of our common stock appreciates and you sell your shares at a profit. The principal stockholders of Alkami will continue to have significant influence over the election of the board of directors and approval of any significant corporate actions.
Consequently, your only opportunity to achieve a return on your investment in our company will be if the market price of our common stock appreciates and you sell your shares at a profit. 28 Table of Contents The principal stockholders of Alkami will continue to have significant influence over the election of the board of directors and approval of any significant corporate actions.
We cannot ensure that any limitations of liability provisions in our client and user agreements, contracts with third-party providers and other contracts for a security lapse or breach or other security-related matter would be enforceable or adequate or would otherwise protect us from any liabilities or damages with respect to any particular claim.
We cannot ensure that any limitations of liability provisions in our client and user agreements, contracts with third-party providers and other contracts for a security lapse or breach or other security-related matter would be 19 Table of Contents enforceable or adequate or would otherwise protect us from any liabilities or damages with respect to any particular claim.
Any such incidents may also result in regulatory investigations and orders, litigation, disputes, investigations, indemnity obligations, damages for contract breach or penalties for violation of applicable laws or regulations. Also, our reputation could suffer irreparable harm, causing our current and prospective clients to decline to use our solutions in the future.
Any such incidents may also result in regulatory investigations and orders, litigation (including class actions), disputes, investigations, indemnity obligations, damages for contract breach or penalties for violation of applicable laws or regulations. Also, our reputation could suffer irreparable harm, causing our current and prospective clients to decline to use our solutions in the future.
Our ability to monitor such third parties’ security measures is limited, and a vulnerability in a third-party system with which we integrate could result in unauthorized access to or disclosure, modification, misuse, loss or destruction of our clients’ and client customers’ PI and other data, including our business information.
Our ability to monitor such third parties’ security measures is limited, and a vulnerability in a third-party system with which we integrate could result in a disruption to our IT Systems or unauthorized access to or disclosure, modification, misuse, loss or destruction of our clients’ and client customers’ PI and other data, including our business information.
Defects, errors or other performance problems in the Alkami Platform could harm our reputation, result in significant costs to us, impair our ability to sell our solutions and subject us to substantial liability.
Defects, errors or other performance problems in the Alkami Digital Banking Platform could harm our reputation, result in significant costs to us, impair our ability to sell our solutions and subject us to substantial liability.
Our renewal rates may decline or fluctuate as a result of a number of factors, including our clients’ satisfaction with our pricing or our solutions or their ability to continue their operations or spending levels. As we sign more contracts, we will generally have an increasing amount of contracts coming up for renewal.
Our renewal rates may decline or fluctuate as a result of a number of factors, including our clients’ satisfaction with our pricing or our solutions or their 14 Table of Contents ability to continue their operations or spending levels. As we sign more contracts, we will generally have an increasing amount of contracts coming up for renewal.
If any of our clients fail or merge with, or are acquired by, other entities, such as FIs that have internally developed banking technology solutions or that are not our clients or use our solutions less, our business, financial condition and results of operations could be materially and adversely affected.
If any of our clients fail or merge with, or are acquired by, other entities, such as FIs that have internally developed banking technology solutions or that are not our clients or use our solutions less, our business, financial condition and results of operations could be 21 Table of Contents materially and adversely affected.
Additionally, our software utilizes open-source software and any defects or security vulnerabilities in such open-source software could materially and adversely affect our business, financial condition and results of operations. 16 Table of Contents We rely on our management team and other key employees, and the loss of one or more key employees could harm our business.
Additionally, our software utilizes open-source software and any defects or security vulnerabilities in such open-source software could materially and adversely affect our business, financial condition and results of operations. We rely on our management team and other key employees, and the loss of one or more key employees could harm our business.
Given the unpredictability of the timing, nature and scope of cybersecurity attacks and other security-related incidents, our technology may fail to adequately secure the data and PI we maintain in our databases, and we cannot entirely eliminate the risk of improper or unauthorized access to or disclosure of data or PI, other security events that impact the integrity or availability of data, PI or our systems and operations, and data contained in such systems and operations, or the related costs we may incur to mitigate the consequences from such events.
Given the unpredictability of the timing, nature and scope of cybersecurity attacks and other security-related incidents, our technology may fail to adequately secure IT Systems or the data and PI we maintain in our databases, and we cannot entirely eliminate the risk of improper or unauthorized access to or disclosure of data or PI, other security events that impact the confidentiality, integrity or availability of data, PI or our IT Systems, or the related costs we may incur to mitigate the consequences from such events.
We may not be able to obtain adequate remedies for such breaches. Additionally, to the extent that our employees, independent contractors or other third parties with whom we do business use intellectual 23 Table of Contents property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.
We may not be able to obtain adequate remedies for such breaches. Additionally, to the extent that our employees, independent contractors or other third parties with whom we do business use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.
The outcome of any allegation is often uncertain. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential 24 Table of Contents information could be compromised by disclosure during this type of litigation.
The outcome of any allegation is often uncertain. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.
Each of these could have a material adverse effect on our business, financial condition and results of operations. Claims by others that we infringe upon, misappropriate or otherwise violate their intellectual property or other proprietary technology rights could have a material and adverse effect on our business, financial condition and results of operations.
Each of these could have a material adverse effect on our business, financial condition and results of operations. 24 Table of Contents Claims by others that we infringe upon, misappropriate or otherwise violate their intellectual property or other proprietary technology rights could have a material and adverse effect on our business, financial condition and results of operations.
Such royalties are a component of the cost of our products or services and may affect the margins on our products and services. In addition, such licenses may be non-exclusive, which could give our competitors access to the same intellectual property licensed to us.
Such royalties are a component of the cost of our products or services 25 Table of Contents and may affect the margins on our products and services. In addition, such licenses may be non-exclusive, which could give our competitors access to the same intellectual property licensed to us.
We may be unable to anticipate or prevent techniques used to obtain unauthorized 18 Table of Contents access or to sabotage systems, react in a timely manner or implement adequate preventative measures. Additionally, we and client customers integrate our solutions with certain third-party systems used by our clients which may have access to PI and other data about our clients.
We may be unable to anticipate or prevent techniques used to obtain unauthorized access or to sabotage systems, react in a timely manner or implement adequate preventative measures. Additionally, we and client customers integrate our solutions with certain third-party systems used by our clients which may have access to PI and other data about our clients.
Any of these actions could result in liability, lost business, increased insurance costs, difficulty in collecting accounts receivable, costly litigation or adverse publicity, which could materially and adversely affect our business, financial condition and results of operations.
Any of these actions could result in liability, 16 Table of Contents lost business, increased insurance costs, difficulty in collecting accounts receivable, costly litigation or adverse publicity, which could materially and adversely affect our business, financial condition and results of operations.
We have in the past considered and we may in the future consider, potential strategic transactions, including acquisitions of, or investments in, businesses, technologies, services, solutions and other assets. We also may enter into relationships with other businesses to expand our solutions, which could involve preferred or exclusive licenses, additional channels of distribution, discount pricing or investments in other companies.
We have in the past executed and we may in the future consider executing, strategic transactions, including acquisitions of, or investments in, businesses, technologies, services, solutions and other assets. We also may enter into relationships with other businesses to expand our solutions, which could involve preferred or exclusive licenses, additional channels of distribution, discount pricing or investments in other companies.
Our directors, officers and other principal stockholders, in the aggregate, beneficially owned approximately 61% of the outstanding shares of Alkami as of December 31, 2022. These stockholders currently have, and likely will continue to have, significant influence with respect to the election of our board of directors and approval or disapproval of all significant corporate actions.
Our directors, officers and other principal stockholders, in the aggregate, beneficially owned approximately 56% of the outstanding shares of Alkami as of December 31, 2023. These stockholders currently have, and likely will continue to have, significant influence with respect to the election of our board of directors and approval or disapproval of all significant corporate actions.
We, like other organizations, particularly in the financial technology sector, routinely are subject to cybersecurity threats, privacy breaches, insider threats, data breaches or other incidents that may either result in threatened or actual exposure resulting in unauthorized access, disclosure and misuse of PI or other information regarding clients, client customers, vendors, employees, third-party providers, or our company and business, and our technologies, systems and networks have been subject to attempted cybersecurity attacks.
We, like other organizations, particularly in the financial technology sector, routinely are subject to and vulnerable to cybersecurity threats, privacy breaches, insider threats, data breaches or other incidents that threaten the confidentiality, integrity and availability of critical IT Systems and may either result in threatened or actual exposure resulting in unauthorized access, disclosure and misuse of PI or other information regarding clients, client customers, vendors, employees, third-party providers, or our company and business, and our technologies, IT Systems and networks have been subject to attempted cybersecurity attacks.
Nothing in our current certificate of incorporation or bylaws or our restated certificate of incorporation or amended and restated bylaws precludes stockholders that assert claims under the Exchange Act from bringing such claims in federal court, to the extent that the Exchange Act confers exclusive federal jurisdiction over such claims, subject to applicable law. Item 1B. Unresolved Staff Comments.
Nothing in our current certificate of incorporation or bylaws or our restated certificate of incorporation or amended and restated bylaws precludes stockholders that assert claims under the Exchange Act from bringing such claims in federal court, to the extent that the Exchange Act confers exclusive federal jurisdiction over such claims, subject to applicable law.
As of December 31, 2022 we had four U.S. registered patents related to automated clearing house transaction notifications and the facilitation of transaction disputes and 26 issued patents, inclusive of U.S. registered patents and international patents, as well as six patent applications pending in the United States, related to our Segmint marketing technology business.
As of December 31, 2023, we had four U.S. registered patents related to automated clearing house transaction notifications and the facilitation of transaction disputes and 24 issued patents, inclusive of U.S. registered patents and international patents, as well as five patent applications pending in the United States, related to our Segmint marketing technology business.
The EU has adopted the General Data Protection Regulation (“GDPR”), which went into effect in May 2018 and contains numerous requirements and changes from previously existing EU law, including more robust obligations on data processors and heavier documentation requirements for data protection compliance programs by companies.
The EU has adopted the General Data Protection Regulation (“GDPR”), which contains numerous requirements and changes from previously existing EU law, including more robust obligations on data processors and heavier documentation requirements for data protection compliance programs by companies.
Our clients and prospective clients, as FIs, are highly regulated and are generally required to comply with stringent regulations in connection with performing business functions that our solutions address.
Our clients and prospective clients, as FIs, are highly regulated and are generally required to comply with stringent regulations in connection with managing their vendors, in particular those that are performing business functions that our solutions address.
If we are not able to detect and identify activity on our platform that might be nefarious in nature or design processes or systems to reduce the impact of similar activity at a third-party provider, our clients and/or client customers could suffer harm.
If we are not able to detect and identify activity on our platform that might be nefarious in nature or design processes or systems to reduce the impact of similar activity at a third-party provider, our clients and/or client customers could suffer harm, including because many of our products and services are integrated with or connected to our clients’ systems and processes.
The effects of the CCPA and the CPRA are potentially significant and may require us to modify our data collection or processing practices and policies and to incur substantial costs and expenses in an effort to comply and increase our potential exposure to regulatory enforcement and/or litigation.
The effects of existing state legislation, including the CCPA and the CPRA, are significant and has required and may require us in the future to modify our data collection or processing practices and policies and to incur substantial costs and expenses in an effort to comply and increase our potential exposure to regulatory enforcement and/or litigation.
These rules also impose requirements for the safeguarding and proper destruction of personal information through the issuance of data security standards or guidelines. In addition, many states in which we operate have laws that protect the privacy and security of sensitive and personal information.
These rules also impose requirements for the safeguarding and proper destruction of personal information through the issuance of data security standards or guidelines. In addition, every state in which we operate (and the District of Columbia) has laws that protect the privacy and security of sensitive and personal information.
Our subscription model also makes it difficult for us to rapidly increase our revenues through additional sales in any period, as we generally recognize subscription revenues from new clients over the applicable subscription terms.
Our subscription model also makes it difficult for us to rapidly increase our revenues through additional sales in any period, as we generally recognize subscription revenues from new clients over the applicable subscription terms once they have begun live use of our services.
For example, California enacted the California Consumer Privacy Act of 2018 (“CCPA”) which went into effect in January 2020 and became enforceable by the California Attorney General in July 2020, and which, among other things, requires companies covered by the legislation to provide new disclosures to California consumers and afford such consumers new rights, including the right to access and delete certain personal information, as well as the right to opt-out of certain sales of personal information.
For example, California enacted the California Consumer Privacy Act of 2018 (“CCPA”) which, among other things, requires companies covered by the legislation to provide new disclosures to California consumers and afford such consumers new rights, including the right to access and delete certain personal information, as well as the right to opt-out of certain sales of personal information.
Negotiating these transactions can be time-consuming, difficult and expensive, and our ability to close these transactions may be subject to approvals that are beyond our control. In addition, we have limited experience in acquiring other businesses.
Negotiating these transactions can be time-consuming, difficult and expensive, and our ability to close these transactions may be subject to approvals that are beyond our control. In addition, we have limited experience in acquiring other businesses and the market reaction to our acquisitions may be unfavorable, which may impact our stock price.
The CCPA provides for civil penalties for violations, as well as a private right of action for certain data breaches that result in the loss of personal information. This private right of action may increase the likelihood of, and risks associated with, data breach litigation. Additionally, the California Privacy Rights Act (“CPRA”) was passed in November 2020.
The CCPA provides for civil penalties for violations, as well as a private right of action for certain data breaches that result in the loss of personal information. This private right of action may increase the likelihood of, and risks associated with, data breach litigation.
We also have incurred debt pursuant to our Amended Credit Agreement (as defined below), and the lenders have rights senior to holders of common stock to make claims on our assets.
We also have incurred debt pursuant to our Amended Credit Agreement (as defined below), and the lenders have rights senior to holders of common stock to make claims on our assets. The terms of our Amended Credit Agreement could restrict our operations, and we may be unable to service or repay the debt.
If the use of our digital banking solutions increases, or if our clients demand more advanced features from our solutions, we will need to devote additional resources to improving our solutions, and we also may need to expand our technical infrastructure at a more rapid pace than we 15 Table of Contents have in the past.
In addition, negative publicity resulting from issues related to our client relationships, regardless of accuracy, may adversely affect our ability to attract new clients and maintain and expand our relationships with existing clients. 15 Table of Contents If the use of our digital banking solutions increases, or if our clients demand more advanced features from our solutions, we will need to devote additional resources to improving our solutions, and we also may need to expand our technical infrastructure at a more rapid pace than we have in the past.
Additionally, our clients may be subject to differing privacy laws, rules and legislation, which may mean that they require us to be bound by varying contractual requirements applicable to certain other jurisdictions.
Any such laws, rules and regulations may be inconsistent among different jurisdictions, subject to differing interpretations or may conflict with our current or future practices. Additionally, our clients may be subject to differing privacy laws, rules and legislation, which may mean that they require us to be bound by varying contractual requirements applicable to certain other jurisdictions.
For example, as a result of obligations under our client contracts, we are required to comply with certain provisions of the Gramm-Leach-Bliley Act (“GLBA”) related to the privacy of consumer information and may be subject to other privacy, security and digital accessibility requirements because of the solutions we provide to FIs.
In recent years, there has been increasing enforcement activity in the areas of digital accessibility, privacy, data protection and information security in various markets in which our customers operate. 22 Table of Contents For example, as a result of obligations under our client contracts, we are required to comply with certain provisions of the Gramm-Leach-Bliley Act (“GLBA”) related to the privacy of consumer information and may be subject to other privacy, security and digital accessibility requirements because of the solutions we provide to FIs.
Cybersecurity attacks and other malicious internet-based activity continue to increase, evolve in nature and become more sophisticated, and providers of digital products and services have been and are expected to continue to be targeted.
Cybersecurity attacks and other malicious internet-based activity continue to increase, evolve in nature and become more sophisticated, and providers of digital products and services have been and are expected to continue to be targeted. Furthermore, the use of generative artificial intelligence has made it easier for threat actors to develop and evolve attacks.
As a result, the substantial majority of the revenues we report in each quarter is related to agreements entered into during previous quarters. Consequently, a change in the level of new client agreements or implementations in any quarter may have a small impact on our revenues in that quarter but will affect our revenues in future quarters.
Consequently, a change in the level of new client agreements or implementations in any quarter may have a small impact on our revenues in that quarter but will affect our revenues in future quarters.
Because we recognize revenues from our solutions over the terms of our client agreements, the impact of changes in the subscriptions for our solutions will not be immediately reflected in our operating results. We generally recognize revenues from subscription fees paid by clients over their contractual term.
Because we recognize revenues from our solutions over the terms of our client agreements, beginning from live use of the service, the impact of changes in the subscriptions for our solutions will not be immediately reflected in our operating results.
There may be, and have been in the past, unlawful attempts to disrupt or gain access to our information technology systems that may result in unauthorized access to or disclosure of client customer PI or other data and disruption of our or our clients’ operations.
We have experienced unlawful attempts to disrupt or gain access to our IT Systems, and we are vulnerable to future attacks that may result in unauthorized access to or disclosure of client customer PI or other data and disruption of our or our clients’ operations.
In addition, any such 20 Table of Contents action, particularly to the extent we were found to be guilty of violations or otherwise liable for damages, would damage our reputation and adversely affect our business, financial condition and results of operations.
In addition, any such action, particularly to the extent we were found to be guilty of violations or otherwise liable for damages, would damage our reputation and adversely affect our business, financial condition and results of operations. We cannot yet fully determine the impact these or future laws, rules, regulations and industry standards may have on our business or operations.
We may not be able to find and identify desirable acquisition targets, we may incorrectly estimate the value of an acquisition target and we may not be successful in entering into an agreement with any particular target.
If an acquired business fails to meet our expectations, our business, financial condition and results of operations could be materially and adversely affected. We may not be able to find and identify desirable acquisition targets, we may incorrectly estimate the value of an acquisition target and we may not be successful in entering into an agreement with any particular target.
It is possible these conditions may continue into the future, and even if conditions improve for FIs, there can be no guarantee that these conditions will not reoccur.
In the recent past, FIs have experienced consolidation, distress and failure, and very few new FIs are being created. It is possible these conditions may continue into the future, and even if conditions improve for FIs, there can be no guarantee that these conditions will not reoccur.
We intend to continue to expend significant resources to support further growth and extend the functionality of our solutions, expand our sales and product development headcount and increase our marketing activities. We will also face increased costs associated with growth, the expansion of our client base and the costs of being a public company.
We intend to continue to expend significant resources to support further growth and extend the functionality of our solutions, expand our sales and product development headcount and increase our marketing activities.
Although we maintain policies, procedures and technological safeguards and administrative controls designed to protect our information technology system and applications, violations of such policies, procedures and safeguards have occurred in the past and, despite the security measures we have in place, there can be no assurance that our safety and security measures (and those of our third-party providers) will prevent damage to, or interruption or breach of, our information systems and operations.
Additionally, geopolitical events and resulting government activity could also lead to information security threats and attacks by affected jurisdictions and their sympathizers. 18 Table of Contents Although we maintain policies, procedures and technological safeguards and administrative controls designed to protect our information technology system and applications, violations of such policies, procedures and safeguards have occurred in the past and, despite the security measures we have in place, there can be no assurance that our cybersecurity risk management program and processes (or those of our third-party providers or partners) will prevent damage to, or interruption or breach of, our IT Systems and operations.
Section 382 of the Code may further limit our ability to utilize our pre-change NOLs or other pre-change tax attributes if we undergo a future ownership change.
Section 382 of the Code may further limit our ability to utilize our pre-change NOLs or other pre-change tax attributes if we undergo a future ownership change. We have experienced ownership changes in the past and could experience one or more ownership changes in the future, some of which changes may be outside our control.
If we fail to achieve the necessary level of efficiency in our organization as we grow, our business, financial condition and results of operations could be harmed. Additionally, if we do not effectively manage the growth of our business and operations, the quality of our solutions could suffer, which would negatively affect our brand, operating results and overall business.
Additionally, if we do not effectively manage the growth and required maturation of our business and operations, the quality of our solutions could suffer, which would negatively affect our brand, operating results and overall business.
The life cycles of our solutions are difficult to estimate. Rapid technological changes and the introduction of new products and enhancements by new or existing competitors or large FIs could undermine our 21 Table of Contents current market position.
The life cycles of our solutions are difficult to estimate. Rapid technological changes and the introduction of new products and enhancements by new or existing competitors or large FIs could undermine our current market position. Other means of digital banking may be developed or adopted in the future, and our solutions may not be compatible with these new technologies.
The terms of our Amended Credit Agreement could restrict our operations, and we may be unable to service or repay the debt. 26 Table of Contents Furthermore, if we issue additional equity securities, stockholders may experience dilution, and the new equity securities could have rights senior to those of our common stock.
Furthermore, if we issue additional equity securities, stockholders may experience dilution, and the new equity securities could have rights senior to those of our common stock.
We cannot assure you that our business will generate sufficient cash flow from operations or that future financing will be available to us in amounts sufficient to enable us to make required and timely payments on our indebtedness, or to fund our operations.
We cannot assure you that our business will generate sufficient cash flow from operations or that future financing will be available to us in amounts sufficient to enable us to make required and timely payments on our indebtedness, or to fund our operations. 27 Table of Contents In addition, our obligations under the Amended Credit Agreement are guaranteed by our subsidiaries and secured by all or substantially all of our assets and our subsidiaries’ assets.
The successful assertion of one or more claims against us, the inadequacy or denial of coverage under our insurance policies, litigation to pursue claims under our policies or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or coinsurance requirements, could materially and adversely affect our business, financial condition and results of operations. 19 Table of Contents Privacy and data security concerns, data collection and transfer restrictions, contractual obligations and U.S. and foreign laws, regulations and industry standards related to data privacy, security and protection could limit the use and adoption of the Alkami Platform and materially and adversely affect our business, financial condition and results of operations.
The successful assertion of one or more claims against us, the inadequacy or denial of coverage under our insurance policies, litigation to pursue claims under our policies or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or coinsurance requirements, could materially and adversely affect our business, financial condition and results of operations.
If that were to happen, we may not be able to repay all of the amounts that would become due under our indebtedness or refinance our debt, which could materially harm our business and force us to seek bankruptcy protection. 27 Table of Contents Our outstanding indebtedness and any future indebtedness, combined with our other financial obligations, could increase our vulnerability to adverse changes in general economic, industry and market conditions, limit our flexibility in planning for, or reacting to, changes in our business and the industry and impose a competitive disadvantage compared to our competitors that have less debt or better debt servicing options.
Any future indebtedness, combined with our other financial obligations, could increase our vulnerability to adverse changes in general economic, industry and market conditions, limit our flexibility in planning for, or reacting to, changes in our business and the industry and impose a competitive disadvantage compared to our competitors that have less debt or better debt servicing options.
In addition, our trademarks may be contested or found to be unenforceable, weak or invalid, and we may not be able to prevent third parties from infringing or otherwise violating them.
In addition, our trademarks may be contested or found to be unenforceable, weak or invalid, and we may not be able to prevent third parties from infringing or otherwise violating them. 23 Table of Contents We will not be able to protect our intellectual property rights if we are unable to enforce our rights or if we do not detect unauthorized use of our intellectual property rights.
If our clients do not renew their subscriptions for our solutions on similar pricing terms, our revenues may decline and it could have a material and adverse effect on our business, financial condition and results of operations. 14 Table of Contents Additionally, as the markets for our solutions continue to develop, we may be unable to attract new clients based on the same subscription model that we have used historically.
If our clients do not renew their subscriptions for our solutions on similar pricing terms, our revenues may decline and it could have a material and adverse effect on our business, financial condition and results of operations.
If we do not help our clients quickly resolve any post-implementation issues and provide effective ongoing client support, our ability to sell additional solutions to existing and future clients could suffer and our reputation and our business, financial condition and results of operations could be materially and adversely affected.
If we do not help our clients quickly resolve any post-implementation issues and provide effective ongoing client support, our ability to sell additional solutions to existing and future clients could suffer and our reputation and our business, financial condition and results of operations could be materially and adversely affected. 17 Table of Contents We may acquire or invest in companies, or pursue business partnerships, which may divert our management’s attention or result in dilution to our stockholders, and we may be unable to integrate acquired businesses and technologies successfully or achieve the expected benefits of such acquisitions, investments or partnerships.
Federal, state and international regulations may require us or our clients to notify governmental entities and individuals of data security incidents involving certain types of PI or information technology systems. Security compromises experienced by others in our industry, our clients, our third-party providers or us may lead to public disclosures and widespread negative publicity.
Security compromises experienced by others in our industry, our clients, our third-party providers or us may lead to public disclosures and widespread negative publicity.
It is also difficult to predict the level and timing of sales opportunities that come from our referral partners. Events affecting our clients’ businesses may occur during the sales cycle that could affect the size or timing of a purchase, contributing to more unpredictability in our business and results of operations.
Events affecting our clients’ businesses may occur during the sales cycle that could affect the size or timing of a purchase, contributing to more unpredictability in our business and results of operations. As a result of these factors, we may face greater costs, longer sales cycles and less predictability in the future.
Internationally, many jurisdictions have established their own data privacy and security legal framework with which we or our clients may need to comply as client customers travel outside of the United States, including, but not limited to, the European Union (“EU”).
In addition, new privacy and security legislation may add additional complexity, variation in requirements, restrictions and potential legal risk, require additional investment of resources in compliance programs, impact strategies and the availability of previously useful data and could result in increased compliance costs and/or changes in business practices and policies 20 Table of Contents Internationally, many jurisdictions have established their own data privacy and security legal framework with which we or our clients may need to comply as client customers travel outside of the United States, including, but not limited to, the European Union (“EU”).
Maintaining adequate research and development resources to meet the demands of the market is essential. The process of developing new technologies and solutions is complex and expensive.
In addition, the technological needs of and services provided by, FIs may change if they or their competitors offer new services to account holders. Maintaining adequate research and development resources to meet the demands of the market is essential. The process of developing new technologies and solutions is complex and expensive.
Current or future criminal capabilities, discovery of existing or new vulnerabilities and attempts to exploit those vulnerabilities or other developments, may compromise or breach our systems or solutions. In the event our or our third-party providers’ protection efforts are unsuccessful and our systems or solutions are compromised, we could suffer substantial harm.
In the event our or our third-party providers’ protection efforts are unsuccessful and our IT Systems or solutions are compromised, we could suffer substantial harm.
We derive all of our revenues from FIs, whose industry has experienced significant pressure in recent years due to economic and political uncertainty, liquidity concerns and increased regulation. In the recent past, FIs have experienced consolidation, distress and failure, and very few new FIs are being created.
We derive all of our revenues from FIs, whose industry has experienced significant pressure in recent years due to economic and political uncertainty, liquidity concerns, the rapid and sustained increase in interest rates, exposure to loan assets and lending policies and the value, if any, of underlying collateral and increased regulation.
If we raise additional capital through debt financing, the terms of any new debt could further restrict our ability to operate our business. On April 29, 2022, the Company entered into an amended and restated credit agreement with Silicon Valley Bank, Comerica Bank, and Canadian Imperial Bank of Commerce (the “Amended Credit Agreement”).
If we raise additional capital through debt financing, the terms of any new debt could further restrict our ability to operate our business.
Because of our position in the financial services industry, we believe that we are likely to continue to be a target of such threats and attacks. Additionally, geopolitical events and resulting government activity could also lead to information security threats and attacks by affected jurisdictions and their sympathizers.
Because of our position in the financial services industry, we expect to continue to be a target of such threats and attacks.
Effective in most material respects beginning on January 1, 2023, the CPRA imposes additional obligations on companies covered by the legislation and will significantly modify the CCPA, including by expanding consumers’ rights with respect to certain sensitive personal information.
Additionally, the California Privacy Rights Act (“CPRA”), passed in November 2020, imposes additional obligations on companies covered by the legislation and significantly modifies the CCPA, including by expanding consumers’ rights with respect to certain sensitive personal information. The CPRA also created a new state agency vested with authority to implement and enforce the CCPA and the CPRA.
In addition, our obligations under the Amended Credit Agreement are guaranteed by our subsidiaries and secured by all or substantially all of our assets and our subsidiaries’ assets. The security interest granted over our assets could limit our ability to obtain additional debt financing.
The security interest granted over our assets could limit our ability to obtain additional debt financing.
As a result of these factors, we may face greater costs, longer sales cycles and less predictability in the future. We leverage third-party software, content and services for use with our solutions.
We leverage third-party software, content and services for use with our solutions.
Moreover, large or influential FI clients may demand more favorable pricing or other contract terms from us.
Additionally, as the markets for our solutions continue to develop, we may be unable to attract new clients based on the same subscription model that we have used historically. Moreover, large or influential FI clients may demand more favorable pricing or other contract terms from us.
Additionally, we cannot guarantee that our insurance coverage would be sufficient to cover all losses. Further, the Alkami Platform involves flexible and complex software solutions, and there is a risk that configurations of, or defects in, the solutions or errors in implementation could create vulnerabilities to security breaches or incidents.
Additionally, we cannot guarantee that our insurance coverage would be sufficient to cover all losses or that relevant insurance will be available in the future on economic terms or at all.
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In addition, negative publicity resulting from issues related to our client relationships, regardless of accuracy, may adversely affect our ability to attract new clients and maintain and expand our relationships with existing clients.
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If we fail to achieve the necessary level of efficiency in our organization as we grow, our business, financial condition and results of operations could be harmed.

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Item 2. Properties

Properties — owned and leased real estate

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We lease approximately 125,000 square feet of office space under an operating leases for our corporate headquarters in Plano, Texas with an initial term that expires on August 31, 2028, with the option to extend the lease for either two additional terms of five years each or one additional term of ten years.
Added
On September 5, 2023, the Company entered into a Sixth Amendment to the Amended and Restated Office Lease, which, among other things, reduces the leased space in Plano, Texas from approximately 125,468 square feet to 83,939 square feet, effective December 31, 2023, and also extends the term for the remaining reduced leased space to August 31, 2033.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings. From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. Our management believes that there are no claims or actions pending against us, the ultimate disposition of which would have a material impact on our business, financial condition, results of operations or cash flows. Item 4.
Biggest changeOur management believes that there are no claims or actions pending against us, the ultimate disposition of which would have a material impact on our business, financial 30 Table of Contents condition, results of operations or cash flows. Item 4. Mine Safety Disclosures. Not applicable. 31 Table of Contents PART II
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Mine Safety Disclosures. Not applicable. 29 Table of Contents PART II
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Item 3. Legal Proceedings. From time to time, we may become involved in legal proceedings arising in the ordinary course of our business.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeNote that historic stock price performance is not necessarily indicative of future stock price performance. 30 Table of Contents Issuer Purchases of Equity Securities We did not repurchase any of our equity securities during the three months ended December 31, 2022. Item 6. [Reserved] 31 Table of Contents
Biggest changeIssuer Purchases of Equity Securities We did not repurchase any of our equity securities during the three months ended December 31, 2023. Item 6. [Reserved] 32 Table of Contents
The graph set forth below compares the cumulative total stockholder return on our common stock between April 14, 2021 (the date of our IPO) and December 31, 2022, with the cumulative total return of the S&P 1500 Application Software Index and the Russell 2000 Index.
The graph set forth below compares the cumulative total stockholder return on our common stock between April 14, 2021 (the date of our IPO) and December 31, 2023, with the cumulative total return of the S&P 1500 Application Software Index and the Russell 2000 Index.
Our initial public offering (“IPO”) was priced at $30.00 per share on April 15, 2021. As of December 31, 2022, we had 23 holders of record of our common stock.
Our initial public offering (“IPO”) was priced at $30.00 per share on April 15, 2021. As of December 31, 2023, we had 19 holders of record of our common stock.
This graph assumes the investment of $100 at the closing stock price on April 14, 2021 in our common stock and the S&P 1500 Application Software Index and Russell 2000 Index, and assumes the reinvestment of dividends, if any.
This graph assumes the investment of $100 at the closing stock price on April 14, 2021 in our common stock and the S&P 1500 Application Software Index and Russell 2000 Index, and assumes the reinvestment of dividends, if any. Note that historic stock price performance is not necessarily indicative of future stock price performance.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeAmortization of Acquired Intangibles Amortization of acquired intangibles increased $0.8 million for the year ended December 31, 2022 compared to 2021, primarily due to additional amortization of intangible assets related to the acquisitions of MK in September 2021 and Segmint in April 2022. 37 Table of Contents Non-Operating Income (Expense) Non-operating expense decreased $2.4 million for 2022 compared to 2021, primarily due to a decrease in loss on financial instruments of $3.0 million in non-operating loss related to the increase in fair value of our warrant liabilities for the year ended December 31, 2021, partially offset by higher net interest expense of $0.5 million for the year ended December 31, 2022.
Biggest changeAmortization of Acquired Intangibles Amortization of acquired intangibles increased $0.3 million for the year ended December 31, 2023 compared to 2022, primarily due to additional amortization of intangible assets related to the acquisitions of Segmint in April 2022.
For each client, we invoice monthly a contractual minimum fee for each licensed solution. In addition, we invoice monthly an additional subscription fee for the number of registered users using each solution and the number of bill-pay and certain other transactions those registered users conduct through our digital banking platform in excess of their contractual minimum commitments.
For each client, we invoice monthly a contractual minimum fee for each licensed solution. In addition, we invoice monthly an additional subscription fee for the number of registered users using each solution and the number of bill-pay and certain other transactions those registered users conduct through our digital banking platform in excess of their contractual client minimum commitments.
Acquisition-related expenses, net, include the accrual of deferred compensation due to the former owner of ACH Alert, in addition to acquisition-related expenses associated with the acquisitions of MK and Segmint, primarily related to legal, consulting, and professional fees. In addition, these expenses are inclusive of any (gain) loss on revaluation of contingent consideration. Amortization of Acquired Intangibles.
Acquisition-related expenses, net, include the accrual of deferred compensation due to the former owner of ACH Alert, in addition to acquisition-related expenses associated with the acquisitions of MK and Segmint, primarily related to legal, consulting, and professional fees. In addition, these expenses are inclusive of any gain or loss on revaluation of contingent consideration. Amortization of Acquired Intangibles.
We believe that our existing cash resources, including our Amended Credit Agreement, will be sufficient to finance our continued operations, growth strategy, planned capital expenditures and the additional expenses we expect to incur as a public company for the short term (at least the next 12 months) and longer term.
We believe that our existing cash resources, including our Amended Credit Agreement, will be sufficient to finance our continued operations, growth strategy, planned capital expenditures and the additional expenses we expect to incur as a public company for the short term (at least the next 12 months) and longer term (beyond the next 12 months).
The net cash outflows from the change in our net operating assets and liabilities were primarily due to an $8.4 million increase in deferred implementation costs, $3.2 million increase in prepaid expenses and other assets, a $4.0 million increase in accounts receivable, and a $1.4 million decrease in accounts payable and accrued liabilities, partially offset by a $0.5 million increase in deferred revenues.
The net cash outflows from the change in our net operating assets and liabilities were primarily due to an $7.8 million increase in deferred implementation costs, $3.2 million increase in prepaid expenses and other assets, a $4.0 million increase in accounts receivable, and a $1.4 million decrease in accounts payable and accrued liabilities, partially offset by a $0.5 million increase in deferred revenues.
In particular, our single code base, built on a multi-tenant infrastructure and combined with continuous software delivery enables us to bring new, innovative products to market quickly and positions us with what we believe is market-leading breadth in terms of product offerings and feature sets.
Our single code base, built on a multi-tenant infrastructure and combined with continuous software delivery enables us to bring new, innovative products to market quickly and positions us with what we believe is market-leading breadth in terms of product offerings and feature sets.
Other costs not directly recoverable from future revenues are expensed in the period incurred. We intend to continue to increase our investments in our implementation, client support and client success teams and technology infrastructure to serve our clients and support our growth.
Other costs not directly recoverable from future revenues are expensed in the period incurred. We intend to continue to increase our investments in our implementation, client support teams and technology infrastructure to serve our clients and support our growth.
We believe growth in the number of registered users provides important information about our ability to expand market adoption of our digital banking platform and its associated software products, and to grow revenues over time.
We believe growth in the number of registered users provides important information about our ability to expand market adoption of our digital banking platform and its associated software products, and therefore to grow revenues over time.
Amortization of acquired intangibles represents the amortization of intangibles recorded in connection with our business acquisitions, which are amortized on a straight-line basis over the estimated useful lives of the related assets.
Amortization of acquired intangibles represents the amortization of intangible assets recorded in connection with our business acquisitions, which are amortized on a straight-line basis over the estimated useful lives of the related assets.
Our solution, the Alkami Platform, allows FIs to onboard and engage new users, accelerate revenues and meaningfully improve operational efficiency, all with the support of a proprietary, true cloud-based, multi-tenant architecture. We cultivate deep relationships with our clients through long-term, subscription-based contractual arrangements, aligning our growth with our clients’ success and generating an attractive unit economic model.
Our solution, the Alkami Digital Banking Platform, allows FIs to onboard and engage new users, accelerate revenues, and meaningfully improve operational efficiency, all with the support of a proprietary, true cloud-based, multi-tenant architecture. We cultivate deep relationships with our clients through long-term, subscription-based contractual arrangements, aligning our growth with our clients’ success and generating an attractive unit economic model.
This includes the costs of our implementation, client support and client success teams, development personnel responsible for maintaining and releasing updates to our platform, as well as third-party cloud-based hosting services. Cost of revenues also includes the direct costs of bill-pay services and other third-party intellectual property included in our solutions, the amortization of acquired technology and depreciation.
This includes the costs of our implementation, client support, and development personnel responsible for maintaining and releasing updates to our platform, as well as third-party cloud-based hosting services. Cost of revenues also includes the direct costs of bill-pay services and other third-party intellectual property included in our solutions, the amortization of acquired technology and depreciation.
Components of Results of Operations Revenues Our client relationships are predominantly based on multi-year contracts for the Alkami Platform that have had an average contract life of 70 months as of December 31, 2022. We derive the majority of our revenues from SaaS subscription services charged for the use of our digital banking solution.
Components of Results of Operations Revenues Our client relationships are predominantly based on multi-year contracts for the Alkami Digital Banking Platform that have had an average contract life of approximately 70 months as of December 31, 2023. We derive the majority of our revenues from SaaS subscription services charged for the use of our digital banking solution.
The key differentiators of the Alkami Platform include: • User experience : Personalized and seamless digital experience across user interaction points, including mobile, chat and SMS, establishing durable connections between FIs and their customers. • Integrations : Scalability and extensibility driven by more than 280 real-time integrations to back office systems and third-party fintech solutions as of December 31, 2022, including core systems, payment cards, mortgages, bill pay, electronic documents, money movement, personal financial management and account opening. • Deep data capabilities : Data synchronized and stored from back office systems and third-party fintech solutions and synthesized into meaningful insights, targeted content and other areas of monetization.
The key differentiators of the Alkami Digital Banking Platform include: • User experience : Personalized and seamless digital experience across user interaction points, including desktop, mobile, chat and SMS, establishing durable connections between FIs and their customers. • Integrations : Scalability and extensibility driven by more than 300 real-time integrations to back-office systems and third-party fintech solutions as of December 31, 2023, including core systems, payment cards, mortgages, bill pay, electronic documents, money movement, personal financial management and account opening. • Deep data capabilities : Data synchronized and stored from back-office systems and third-party fintech solutions and synthesized into meaningful insights, targeted content, and other areas of monetization.
A discussion regarding our financial condition and results of operation for the fiscal year ended December 31, 2022, compared to the fiscal year ended December 31, 2021, is presented below.
A discussion regarding our financial condition and results of operation for the fiscal year ended December 31, 2023, compared to the fiscal year ended December 31, 2022, is presented below.
We expect sales and marketing expenses will continue to increase as we expand our direct sales teams to pursue our market opportunity. 34 Table of Contents General and Administrative .
We expect sales and marketing expenses will continue to increase as we expand our direct sales teams to pursue our market opportunity. 35 Table of Contents General and Administrative .
We had 22 client renewals in the year ended December 31, 2022. We expect client renewals to continue to play a key role in our future success. Continued Leadership in Innovation. Our ability to maintain a differentiated platform and offering is dependent upon our pace of innovation.
We had 31 client renewals in the year ended December 31, 2023. We expect client renewals to continue to play a key role in our future success. Continued Leadership in Innovation. Our ability to maintain a differentiated platform and offering is dependent upon our pace of innovation.
These fees are not distinct from the underlying licensed SaaS subscription services. As a result, we recognize the resulting revenues on a straight-line basis over the client’s initial agreement term for our licensed SaaS solutions, commencing upon launch. Occasionally, our clients request custom development and other professional services, which we provide.
These fees are not distinct from the underlying licensed SaaS subscription services. 34 Table of Contents As a result, we recognize the resulting revenues on a straight-line basis over the client’s initial agreement term for our licensed SaaS solutions, commencing upon launch. Occasionally, our clients request custom development and other professional services, which we provide.
Our platform model with 280 integrations as of December 31, 2022 enables us to deliver thousands of configurations aligned with the digital platform strategies adopted by our clients. We expect our future success in winning new clients to be partially driven by our ability to continue to develop and deliver new, innovative products to FI clients in a timely manner.
Our platform model with 300 integrations as of December 31, 2023 enables us to deliver thousands of configurations aligned with the digital platform strategies adopted by our clients. We expect our future success in winning new clients to be partially driven by our ability to continue to develop and deliver new, innovative products to FI clients in a timely manner.
In addition, we also include third-party contractor expenses, software development and testing tools, allocated corporate expenses, and other expenses related to developing new solutions and upgrading and enhancing existing solutions. We expect research and development costs to increase as we expand our platform with new features and functionality as well as enhance the existing Alkami Platform. Sales and Marketing.
In addition, we also include third-party contractor expenses, software development and testing tools, allocated corporate expenses, and other expenses related to developing new solutions and upgrading and enhancing existing solutions. We expect research and development costs to increase as we expand our platform with new features and functionality as well as enhance the existing Alkami Digital Banking Platform.
Contingent consideration classified 41 Table of Contents as a liability is remeasured to fair value at each reporting date until the contingency is resolved, with any changes in fair value recognized in our consolidated statements of operations.
Contingent consideration classified as a liability is remeasured to fair value at each reporting date until the contingency is resolved, with any changes in fair value recognized in our consolidated statements of operations.
A discussion regarding our financial condition and results of operations for fiscal year ended December 31, 2021, compared to the fiscal year ended December 31, 2020, can be found under Item 7 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on February 25, 2022.
A discussion regarding our financial condition and results of operations for fiscal year ended December 31, 2022, compared to the fiscal year ended December 31, 2021, can be found under Item 7 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 24, 2023.
Net Cash Used in Investing Activities During the year ended December 31, 2022, net cash used in investing activities was $224.0 million, primarily consisting of $187.2 million for the purchase of marketable securities, $131.8 million related to our acquisition of Segmint, $3.6 million related to capitalized software development costs, and capital expenditures related to updates for computer and other equipment of $1.1 million, partially offset by $99.8 million in proceeds from maturities and redemptions of marketable securities.
During the year ended December 31, 2022, net cash used in investing activities was $223.7 million, primarily consisting of $187.2 million for the purchase of marketable securities, $131.8 million related to our acquisition of Segmint, $3.4 million related to capitalized software development costs, and capital expenditures related to updates for computer and other equipment of $1.1 million, partially offset by $99.8 million in proceeds from maturities and redemptions of marketable securities.
These are generally one-time 33 Table of Contents requests and involve unique, non-standard features, functions or integrations that are intended to enhance or modify their licensed SaaS solutions. We recognize revenues at the point in time the services are transferred to the client.
These are generally one-time requests and involve unique, non-standard features, functions or integrations that are intended to enhance or modify their licensed SaaS solutions. We recognize revenues at the point in time the services are transferred to the client.
Non-operating Income (Expense) Non-operating income (expense) consists primarily of interest income from our cash balances, interest expense from borrowings under our revolving line of credit, amortization of deferred debt costs, unrealized losses on marketable securities, and changes in fair value of warrants and tranche rights.
Non-operating Income (Expense) Non-operating income (expense) consists primarily of interest income from our cash balances, interest expense from borrowings under our revolving line of credit, amortization of deferred debt costs, unrealized gains or losses on marketable securities, realized gains on sales of marketable securities, and changes in fair value of warrants and tranche rights.
We believe adjusted EBITDA provides investors and other users of our financial information consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations. Adjusted EBITDA was $(17.6) million, $(22.0) million, and $(23.4) million for the years ended December 31, 2022, 2021, and 2020, respectively. Annual Recurring Revenue (ARR).
We believe adjusted EBITDA provides investors and other users of our financial information consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations. Adjusted EBITDA was $(1.6) million, $(17.6) million, and $(22.0) million for the years ended December 31, 2023, 2022, and 2021, respectively. Annual Recurring Revenue (ARR).
The non-cash charges were primarily comprised of depreciation and amortization expense of $8.1 million and stock-based compensation expense of $45.4 million, partially offset by a $15.5 million gain on revaluation of contingent consideration and a $0.7 million benefit from deferred taxes.
The non-cash charges were primarily comprised of depreciation and amortization expense of $8.1 million and stock-based compensation expense of $44.6 million, partially offset by a $15.5 million gain from revaluation of contingent consideration and a $0.7 million benefit from deferred taxes.
We calculate ARR by aggregating annualized recurring revenue related to SaaS subscription services recognized in the last month of the reporting period as well as the next 12 months of expected implementation services revenues for all clients on the platform in the last month of the reporting period.
We calculate ARR by aggregating annualized recurring revenue related to SaaS subscription services recognized in the last month of the reporting period as well as the next 12 months of expected implementation services revenues in the last month of the reporting period.
RPU growth was primarily driven by cross-sell activity to existing clients, higher average RPU of new clients implemented in 2022 on our digital banking platform compared to aggregate RPU and the subscription revenue contribution from the Segmint acquisition of $8.3 million.
RPU growth was primarily driven by cross-sell activity to existing clients, higher average RPU of new clients implemented in 2023 on our digital banking platform compared to aggregate RPU and the subscription revenue contribution from the Segmint acquisition of $6.2 million.
We derive our revenues predominantly from multi-year contracts for the Alkami Platform that are based on an average contract life of approximately 70 months as of December 31, 2022. We predominantly employ a per-registered-user pricing model, with incremental fees above certain contractual minimum commitments for each licensed solution.
We derive our Alkami Digital Banking Platform revenues almost entirely from multi-year contracts that are based on an average contract life of approximately 70 months as of December 31, 2023. We predominantly employ a per-registered-user pricing model, with incremental fees above certain contractual client minimum commitments for each licensed solution.
We remain committed to investing in our platform, notably through our research and development spend, which was 33.9% of our revenues for the year ended December 31, 2022. Our future success will depend on our continued leadership in innovation.
We remain committed to investing in our platform, notably through our research and development spend, which was 32.0% of our revenues for the year ended December 31, 2023. Our future success will depend on our continued leadership in innovation.
The increase in cost of revenues was primarily driven by a $9.4 million increase in personnel-related costs (which includes stock-based compensation of $2.2 million) resulting from headcount increases supporting our growth in the following teams: client implementation, site reliability engineering and client support, as well as $9.1 million in higher costs of our third-party partners where we resell their solutions as part of the digital platform, $2.3 million in incremental hosting costs incurred from an increase in revenues derived from existing and new client growth, and $0.3 million in higher computer hardware and software costs.
The increase in cost of revenues was primarily driven by a $5.7 million increase in personnel-related costs (which includes stock-based compensation of $1.1 million) resulting from headcount increases supporting our growth in the following teams: client implementation, site reliability engineering and client support, as well as $13.0 million in higher costs of our third-party partners where we resell their solutions as part of the digital platform, $3.9 million in incremental hosting costs incurred from an increase in revenues derived from existing and new client growth, $1.4 million of higher amortization of intangibles, primarily related to the acquisition of Segmint in April 2022, $0.1 million in higher computer hardware and software costs, and higher miscellaneous other costs of $0.7 million.
SaaS subscription revenues, as further described below, represented 95.2%, 94.4%, and 93.7% of total revenues for the years ended December 31, 2022, 2021, and 2020, respectively.
SaaS subscription revenues, as further described below, represented 95.3%, 95.2%, and 94.4% of total revenues for the years ended December 31, 2023, 2022, and 2021, respectively.
Our effective tax rate differs from the statutory tax rate primarily due to the impact of the valuation allowance against the Company’s deferred tax assets. Liquidity and Capital Resources As of December 31, 2022, we had $196.4 million in cash and cash equivalents and marketable securities, and an accumulated deficit of $372.5 million.
Our effective tax rate differs from the statutory tax rate primarily due to the impact of the valuation allowance against the Company’s deferred tax assets. Liquidity and Capital Resources As of December 31, 2023, we had $92.1 million in cash and cash equivalents and marketable securities, and an accumulated deficit of $435.4 million.
The major components of cost of revenues represented the following percentages of revenues for the year ended December 31, 2022: third-party hosting services (7.8%), the direct costs of bill-pay and other third-party intellectual property included in our solutions (16.3%), our implementation team (10.3%), our client success team (4.5%) our development team responsible for maintaining and releasing updates to our platform (3.6%), stock-based compensation (2.1%), amortization of intangible assets (1.9%), and other expenses (0.3%).
The major components of cost of revenues represented the following percentages of revenues for the year ended December 31, 2022: third-party hosting services (7.8%), the direct costs of bill-pay and other third-party intellectual property included in our solutions (16.3%), our implementation and client support teams (14.8%), our development team responsible for maintaining and releasing updates to our platform (3.6%), stock-based compensation (2.1%), amortization (2.2%), and depreciation (0.1%).
Net Cash Provided by Financing Activities For the year ended December 31, 2022, net cash provided by financing activities was $61.2 million, which was primarily due to proceeds of $85.0 million from issuance of long-term debt, proceeds of $2.4 million from the exercise of stock options to purchase 1.1 million shares of our common stock, and proceeds from issuances under the Employee Stock Purchase Plan (“ESPP”) of $2.9 million, partially offset by $24.7 million of principal payments on debt, payments for taxes related to net settlement of equity awards of $2.7 million, payment of acquisition related holdback of $1.0 million and debt issuance costs paid of $0.8 million.
Net Cash (Used in) Provided by Financing Activities For the year ended December 31, 2023, net cash used in financing activities was $87.8 million, which was primarily due to $85.0 million of principal payments on term debt, payments for taxes related to net settlement of equity awards of $16.0 million, payment of acquisition related holdback of $3.6 million and debt issuance costs paid of $0.3 million, partially offset by proceeds of $13.0 million from the exercise of stock options to purchase 2.2 million shares of our common stock and proceeds from issuances under the Employee Stock Purchase Plan (“ESPP”) of $4.1 million.
Principal payments on the Amended Term Loan are due in quarterly installments equal to an initial amount of approximately $1.1 million, beginning on June 30, 2023 and continuing through March 31, 2024, and increasing to approximately $2.1 million, beginning on June 30, 2024 through the Amended Credit Agreement maturity date.
Principal payments on the Term Loan are due in quarterly installments equal to an initial amount of approximately $1.1 million, beginning on June 30, 2023 and continuing through March 31, 2024, and increasing to approximately $2.1 million beginning on June 30, 2024 through the Amended Credit Agreement maturity date. Once repaid or prepaid, the Term Loan may not be re-borrowed.
In the year ended December 31, 2022, these expenses were offset by the $15.5 million gain on contingent consideration related to the purchase of MK. (2) Adjusted EBITDA is a non-GAAP financial measure and should not be considered an alternative to GAAP net loss as a measure of operating performance or as a measure of liquidity.
These expenses are offset by the $15.5 million gain from contingent consideration related to the purchase of MK. (2) Adjusted EBITDA is a non-GAAP financial measure and should not be considered an alternative to GAAP net loss as a measure of operating performance or as a measure of liquidity.
The Amended Credit Agreement contains customary affirmative and negative covenants, as well as (i) an annual recurring revenue growth covenant requiring the loan parties to have recurring revenues in any four consecutive fiscal quarter period in an amount that is 10% greater than the recurring revenues for the corresponding four consecutive quarter period in the previous year and (ii) a liquidity (defined as the aggregate amount of cash in bank accounts subject to a control agreement plus availability under the Revolving Facility) covenant, requiring the loan parties to have liquidity, tested on the last day of each calendar month, of $15.0 million or more.
Before the Financial Covenant Trigger Date, the following covenants are applicable: (i) an annual recurring revenue growth covenant requiring the loan parties to have recurring revenues in any four consecutive fiscal quarter period in an amount that is 10% greater than the recurring revenues for the corresponding four consecutive quarter period in the previous year; and (ii) a liquidity (defined as the aggregate amount of cash in bank accounts subject to a control agreement plus availability under the Revolving Facility) covenant, requiring the loan parties to have liquidity, tested on the last day of each calendar month, of $20.0 million or more.
We define adjusted EBITDA as net loss before provision (benefit) for income taxes; loss on financial instruments; interest expense, net; depreciation and amortization; stock-based compensation expense; expenses related to tender offer; and acquisition-related expenses, net.
We define adjusted EBITDA as net loss before provision (benefit) for income taxes; (gain) loss on financial instruments; interest (income) expense, net; depreciation and amortization; stock-based compensation expense; acquisition-related expenses, net; and loss on extinguishment of debt.
Sales and marketing expenses consist primarily of personnel-related costs of our sales, marketing and a portion of account management employees, including salaries, bonuses, commissions, other incentive-related compensation, employee benefits and stock-based compensation.
Sales and Marketing. Sales and marketing expenses consist primarily of personnel-related costs of our sales, marketing, and our client success employees, including salaries, bonuses, commissions, other incentive-related compensation, employee benefits and stock-based compensation.
Recently Issued Accounting Pronouncements See Note 2 of the Notes to the Consolidated Financial Statements for a discussion of recent accounting pronouncements and future application of accounting standards. Emerging Growth Company Status We are an “emerging growth company,” as defined in the JOBS Act.
Recently Issued Accounting Pronouncements See Note 2 of the Notes to the Consolidated Financial Statements for a discussion of recent accounting pronouncements and future application of accounting standards. Emerging Growth Company Status We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”).
We had 14.5 million, 12.4 million, and 9.7 million registered users as of December 31, 2022, 2021, and 2020, respectively, representing an increase of 2.2 million registered users, or 17.7%, from 2021 to 2022 and an increase of 2.7 million registered users, or 27.8%, from 2020 to 2021. Revenue per Registered User (RPU).
We had 17.5 million, 14.5 million, and 12.4 million registered users as of December 31, 2023, 2022, and 2021, respectively, representing an increase of 3.0 million registered users, or 20.4%, from 2022 to 2023 and an increase of 2.2 million registered users, or 17.7%, from 2021 to 2022. Revenue per Registered User (RPU).
We primarily go to market through an internal sales force. Given the long-term nature of our Alkami Platform contracts, a typical sales cycle can range from approximately three to 12 months, with the subsequent implementation timeframe generally ranging from six to 12 months depending on the depth of integration.
Given the long-term nature of our Alkami Digital Banking Platform contracts, a typical sales cycle can range from approximately three to 12 months, with the subsequent implementation timeframe generally ranging from six to 12 months depending on the depth of integration.
The increase in revenues was primarily due to registered user growth of 2.2 million, comprised of 1.1 million in registered user growth from existing clients (net of attrition) and 1.1 million in registered users from new clients implemented through our digital banking platform (contractual minimums). In addition, increased revenues were due to RPU growth of 13.7%.
The increase in revenues was primarily due to registered user growth of 3.0 million, comprised of 1.5 million in registered user growth from existing clients and 1.5 million in registered users from new clients implemented through our digital banking platform (contractual minimums). In addition, increased revenues were due to RPU growth of 6.9%.
Provision (Benefit) for Income Taxes The Company recorded a benefit for income taxes of $0.5 million and a provision for income taxes of $0.2 million, resulting in an effective tax rate of 0.8% and (0.4)% for 2022 and 2021, respectively.
Provision (Benefit) for Income Taxes The Company recorded a provision for income taxes of less than $0.1 million and a benefit for income taxes of $0.5 million, resulting in an effective tax rate of (0.1)% and 0.8% for 2023 and 2022, respectively.
The net cash outflows from the change in our net operating assets and liabilities were primarily due to a $6.8 million increase in accounts payable and accrued liabilities and a net $0.8 million in other balance sheet changes, partially offset by a $6.3 million increase in accounts receivable, and a $4.7 million increase in deferred implementation costs.
The net cash outflows from the change in our net operating assets and liabilities were primarily due to an $7.7 million increase in deferred implementation costs and a $9.3 million increase in accounts receivable, partially offset by a $3.6 million increase in deferred revenues, $0.4 million decrease in prepaid expenses and other assets, and a $0.1 million increase in accounts payable and accrued liabilities.
The major components of cost of revenues represented the following percentages of revenues for the year ended December 31, 2021: third-party hosting services (8.6%), the direct costs of bill-pay and other third-party intellectual property included in our solutions (16.0%), our implementation team (9.4%), our client success team (5.2%), our development team responsible for maintaining and releasing updates to our platform (3.8%), stock-based compensation (1.3%), amortization of intangible assets (0.5%), and other expenses (0.2%).
The major components of cost of revenues represented the following percentages of revenues for the year ended December 31, 2023: third-party hosting services (7.5%), the direct costs of bill-pay and other third-party intellectual property included in our solutions (17.4%), our implementation and client support teams (12.7%), our development team responsible for maintaining and releasing updates to our platform (3.3%), stock-based compensation (2.1%), amortization (2.5%), and depreciation (0.1%).
Our gross margin for the years ended December 31, 2022, 2021, and 2020 was 53.0%, 55.1%, and 52.8%, respectively.
Our gross margin for the years ended December 31, 2023, 2022, and 2021 was 54.4%, 53.0%, and 55.1%, respectively.
The following disaggregates our revenues for the years ended December 31, 2022, 2021, and 2020 by major source: Year Ended December 31, 2022 2021 2020 (In thousands) SaaS subscription services $ 194,387 $ 143,575 $ 105,049 Implementation services 6,941 6,291 5,212 Other services 2,942 2,293 1,881 Total revenues $ 204,270 $ 152,159 $ 112,142 See Note 5 of the Notes to the Consolidated Financial Statements for additional detail.
The following disaggregates our revenues for the years ended December 31, 2023, 2022, and 2021 by major source: Year ended December 31, 2023 2022 2021 (in thousands) SaaS subscription services $ 252,348 $ 194,387 $ 143,575 Implementation services 8,488 6,941 6,291 Other services 3,995 2,942 2,293 Total revenues $ 264,831 $ 204,270 $ 152,159 See Note 5 of the Notes to the Consolidated Financial Statements for additional detail.
Such decisions include the selection of the appropriate accounting principles to be applied and the assumptions on which to base accounting estimates. In reaching such decisions, we apply judgments based on our understanding and analysis of relevant circumstances, historical experience, and actuarial valuations. Actual amounts could differ from those estimated at the time the consolidated financial statements are prepared.
In reaching such decisions, we apply judgments based on our understanding and analysis of relevant circumstances, historical experience, and actuarial valuations. Actual amounts could differ from those estimated at the time the consolidated financial statements are prepared.
Off-Balance Sheet Arrangements We did not have during the periods presented, and we do not currently have, any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Amortization expense totaled $0.4 million for the year ended December 31, 2023 and $0.3 million for the year ended December 31, 2022. 41 Table of Contents Off-Balance Sheet Arrangements During the periods presented, we did not have, and we do not currently have, any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
We incurred 32 Table of Contents net losses of $58.6 million, $46.8 million, and $51.4 million for the years ended December 31, 2022, 2021, and 2020, respectively, largely due to significant continued investment in sales, marketing, product development and post-sales client activities. Recent Developments Merger with Segmint .
We incurred 33 Table of Contents net losses of $62.9 million, $58.6 million, and $46.8 million for the years ended December 31, 2023, 2022, and 2021, respectively, largely due to significant continued investment in sales, marketing, product development and post-sales client activities. Recent Developments Banking and Regulatory Environment Developments.
For the years ended December 31, 2022, 2021, and 2020 our total revenues were $204.3 million, $152.2 million, and $112.1 million, respectively, representing a growth rate of 34.2% from 2021 to 2022 and 35.7% from 2020 to 2021.
For the years ended December 31, 2023, 2022, and 2021, our total revenues were $264.8 million, $204.3 million, and $152.2 million, respectively, representing a growth rate of 29.6% from 2022 to 2023 and 34.2% from 2021 to 2022.
ARR was $226.1 million, $169.0 million, and $128.0 million as of December 31, 2022, 2021, and 2020, respectively, representing an increase of $57.1 million, or 33.8%, from 2021 to 2022 and an increase of $41.0 million, or 32.0%, from 2020 to 2021. Registered Users.
ARR was $291.0 million, $226.1 million, and $169.0 million as of December 31, 2023, 2022, and 2021, respectively, representing an increase of $64.9 million, or 28.7%, from 2022 to 2023 and an increase of $57.1 million, or 33.8%, from 2021 to 2022. Registered Users.
The Alkami Platform offers an end-to-end set of software products. Our typical relationship with an FI begins with a set of core functional components, which can extend over time to include a rounded suite of products across account opening, card experience, client service, extensibility, financial wellness, security and fraud protection, marketing and analytics and money movement.
Our typical relationship with an FI begins with a set of core functional components, which can extend over time to include a rounded suite of products across account opening and loan origination, card experience, client service, extensibility, financial wellness, security and fraud protection, marketing and analytics and money movement. We primarily go to market through an internal sales force.
During the term of the contract, clients may purchase additional professional services to modify or enhance their licensed SaaS solutions. These services are distinct performance obligations recognized when control of the enhancement is transferred to the client.
During the term of the contract, clients may purchase additional professional services to modify or enhance their licensed SaaS solutions. These services are distinct performance obligations recognized when control of the enhancement is transferred to the client. 42 Table of Contents Business Combinations Our acquisitions are accounted for using the acquisition method of business combinations accounting.
Sales and Marketing Sales and marketing expenses increased $12.6 million, or 52.3%, for 2022 compared to 2021. The increase was primarily due to a $8.3 million increase in personnel-related costs (which includes stock-based compensation of $2.6 million) resulting from headcount growth in our sales and marketing teams.
The increase was primarily due to a $9.7 million increase in personnel-related costs (which includes stock-based compensation of $3.2 million) resulting from headcount growth in our sales and marketing teams.
The average RPU of users from new clients implemented on our digital platform in the last year of $18.04 as of December 31, 2022, is 16.0% higher 36 Table of Contents than the aggregate RPU as of December 31, 2022.
The average RPU of users from new clients implemented on our digital platform in the last year of $17.94 as of December 31, 2023, is 8.0% higher than the aggregate RPU as of December 31, 2023.
Within the next 12 months, the Company is obligated to pay principal of $3.2 million of this total debt. Refer to Note 8 of the Notes to the Consolidated Financial Statements for further details. Additionally, we have material future purchase commitments for services which are legally binding and that specify all significant terms including price and/or quantity.
Refer to Note 8 of the Notes to the Consolidated Financial Statements for further details. Additionally, we have material future purchase commitments for services which are legally binding and that specify all significant terms including price and/or quantity. Total future commitments for these obligations over the next five years is $37.4 million.
Once repaid or prepaid, the Amended Term Loan may not be re-borrowed. Borrowings under the Amended Credit Agreement bear interest at a variable rate based upon the Secured Overnight Financing Rate (“SOFR”) plus a margin of 3.00% to 3.50% per annum depending on the applicable recurring revenue leverage ratio.
Before the Financial Covenant Trigger Date, borrowings under the Amended Credit Agreement bear interest at a variable rate based upon the Secured Overnight Financing Rate (the “SOFR”) plus a margin of 3.00% to 3.50% per annum depending on the applicable recurring revenue leverage ratio.
Year Ended December 31, ($ In thousands, except share and per share amounts) 2022 2021 2020 Revenues $ 204,270 $ 152,159 $ 112,142 Cost of revenues (1) 95,946 68,352 52,986 Gross profit 108,324 83,807 59,156 Operating expenses (1) : Research and development 69,329 48,800 40,209 Sales and marketing 36,811 24,174 16,683 General and administrative 71,247 50,398 36,437 Acquisition-related expenses, net (12,529) 2,983 839 Amortization of acquired intangibles 1,155 368 91 Total operating expenses 166,013 126,723 94,259 Loss from operations (57,689) (42,916) (35,103) Non-operating income (expense): Interest income 2,696 487 55 Interest expense (3,868) (1,186) (489) Loss on financial instruments (200) (3,035) (15,818) Loss before income taxes (59,061) (46,650) (51,355) Provision (benefit) for income taxes (461) 172 — Net loss $ (58,600) $ (46,822) $ (51,355) (1) Includes stock-based compensation expenses as follows: Year Ended December 31, ($ in thousands) 2022 2021 2020 Cost of revenues $ 4,389 $ 1,973 $ 369 Research and development 11,398 2,915 417 Sales and marketing 4,042 1,028 147 General and administrative 24,763 8,619 1,021 Total stock-based compensation expenses $ 44,592 $ 14,535 $ 1,954 35 Table of Contents The following table presents our reconciliation of GAAP net loss to adjusted EBITDA for the periods indicated.
Year ended December 31, ($ in thousands, except share and per share amounts) 2023 2022 2021 Revenues $ 264,831 $ 204,270 $ 152,159 Cost of revenues (1) 120,720 95,946 68,352 Gross profit 144,111 108,324 83,807 Operating expenses (1) : Research and development 84,661 69,329 48,800 Sales and marketing 48,557 36,811 24,174 General and administrative 72,900 71,247 50,398 Acquisition-related expenses, net 263 (12,529) 2,983 Amortization of acquired intangibles 1,435 1,155 368 Total operating expenses 207,816 166,013 126,723 Loss from operations (63,705) (57,689) (42,916) Non-operating income (expense): Interest income 8,095 2,696 487 Interest expense (7,384) (3,850) (1,186) Gain (loss) on financial instruments 534 (200) (3,035) Loss on extinguishment of debt (409) (18) — Loss before income taxes (62,869) (59,061) (46,650) Provision (benefit) for income taxes 44 (461) 172 Net loss $ (62,913) $ (58,600) $ (46,822) (1) Includes stock-based compensation expenses as follows: 36 Table of Contents Year ended December 31, ($ in thousands) 2023 2022 2021 Cost of revenues $ 5,584 $ 4,389 $ 1,973 Research and development 15,995 11,398 2,915 Sales and marketing 7,220 4,042 1,028 General and administrative 22,432 24,763 8,619 Total stock-based compensation expenses $ 51,231 $ 44,592 $ 14,535 The following table presents our reconciliation of GAAP net loss to adjusted EBITDA for the periods indicated.
Our future capital requirements will depend on many factors, including revenue growth and costs incurred to support client usage and growth in our client base, increased research and development expenses to support the growth of our business and related infrastructure, increased general and administrative expenses associated with being a publicly traded company, investments in office facilities and other capital expenditure requirements and any potential future acquisitions or other strategic transactions.
With the proceeds from our IPO, the Company paid in full accumulated dividends on our previously outstanding shares of Series B redeemable convertible preferred stock, which totaled approximately $5.0 million. 39 Table of Contents Our future capital requirements will depend on many factors, including revenue growth and costs incurred to support client usage and growth in our client base, increased research and development expenses to support the growth of our business and related infrastructure, increased general and administrative expenses associated with being a publicly traded company, investments in office facilities and other capital expenditure requirements and any potential future acquisitions or other strategic transactions.
During the year ended December 31, 2021, net cash used in operating activities was $29.0 million, which consisted of a net loss of $46.8 million, adjusted by non-cash charges of $21.1 million and net cash outflows from the change in net operating assets and liabilities of $3.3 million.
During the year ended December 31, 2022, net cash used in operating activities was $38.0 million, which consisted of a net loss of $58.6 million, adjusted by non-cash charges of $36.5 million and net cash outflows from the change in net operating assets and liabilities of $15.9 million.
Unamortized debt issuance costs totaled $0.7 million, $0.1 million, and $0.1 million as of December 31, 2022, 2021, and 2020, respectively. Amortization expense totaled $0.3 million for the year ended December 31, 2022 and $0.2 million for the year ended December 31, 2021.
Unamortized debt issuance costs totaled $0.3 million, $0.7 million, and $0.1 million as of December 31, 2023, 2022, and 2021, respectively.
Obligations under the Amended Credit Agreement are guaranteed by our subsidiaries and secured by all or substantially all of our assets and our subsidiaries’ assets pursuant to an Amended and Restated Guarantee and Collateral Agreement executed contemporaneously with the Amended Credit Agreement.
Obligations under the Amended Credit Agreement are guaranteed by the Company’s subsidiaries and secured by all or substantially all of the assets of the Company and its subsidiaries pursuant to an Amended and Restated Guarantee and Collateral Agreement. The Amended Credit Agreement contains customary affirmative and negative covenants.
Year ended December 31, ($ in thousands) 2022 2021 2020 Net loss $ (58,600) $ (46,822) $ (51,355) Provision (benefit) for income taxes (461) 172 — Loss on financial instruments 200 3,035 15,818 Interest expense, net 1,172 699 434 Depreciation and amortization 8,075 3,443 2,775 Stock-based compensation expense 44,592 14,535 1,954 Expenses related to tender offer — — 6,091 Acquisition-related expenses, net (1) (12,529) 2,983 839 Adjusted EBITDA (2) $ (17,551) $ (21,955) $ (23,444) (1) Acquisition-related expenses, net, includes the accrual of deferred compensation due to the former owner of ACH Alert, in addition to acquisition-related expenses associated with the acquisitions of MK and Segmint, primarily related to legal, consulting, and professional fees.
Year ended December 31, ($ in thousands) 2023 2022 2021 Net loss $ (62,913) $ (58,600) $ (46,822) Provision (benefit) for income taxes 44 (461) 172 (Gain) loss on financial instruments (534) 200 3,035 Interest (income) expense, net (711) 1,154 699 Depreciation and amortization 10,631 8,075 3,443 Stock-based compensation expense 51,231 44,592 14,535 Acquisition-related expenses, net (1) 263 (12,529) 2,983 Loss on extinguishment of debt 409 18 — Adjusted EBITDA (2) $ (1,580) $ (17,551) $ (21,955) (1) Acquisition-related expenses, net, for the year ended December 31, 2023 includes expenses associated with the acquisition of Segmint, primarily related to legal, consulting, and professional fees.
The difference in the effective tax rate for the year ended December 31, 2022 as compared to 2021 is primarily the result of a lower valuation allowance recorded in the current year due to utilization of net operating losses, the impact of tax expense (benefits) related to stock-based compensation recorded in each of the respective periods, and state income taxes.
The difference in the effective tax rate for the year ended December 31, 2023 as compared to 2022 is primarily the result of deferred tax expense related to the net operating loss carryforwards subject to Section 382 limitation and the impact of tax expense (benefits) related to stock-based compensation recorded in each of the respective periods.
Implementation and integration of the digital banking platform is complex, and we have determined that the one-time, upfront services are not distinct.
Clients are typically charged a one-time, upfront implementation fee and recurring annual and monthly access fees for the use of our digital banking solution. Implementation and integration of the digital banking platform is complex, and we have determined that the one-time, upfront services are not distinct.
Cost of Revenues and Gross Margin Year ended December 31, Change ($ in thousands) 2022 2021 $ % Cost of revenues $ 95,946 $ 68,352 $ 27,594 40.4 % Percentage of revenues 47.0 % 44.9 % 2.1 % 4.7 % Cost of Revenues Cost of revenues increased $27.6 million, or 40.4%, for 2022 compared to 2021, generating a gross margin of 53.0% for 2022 compared to a gross margin of 55.1% for 2021.
Cost of Revenues and Gross Margin Year ended December 31, Change ($ in thousands) 2023 2022 $ % Cost of revenues $ 120,720 $ 95,946 $ 24,774 25.8 % Percentage of revenues 45.6 % 47.0 % (1.4) % (3.0) % Cost of Revenues Cost of revenues increased $24.8 million, or 25.8%, for 2023 compared to 2022, generating a gross margin of 54.4% for 2023 compared to a gross margin of 53.0% for 2022.
Our most critical accounting estimates include the following: 40 Table of Contents Revenue Recognition We derive the majority of our revenues from SaaS subscription services charged for the use of our digital banking solutions.
Our most critical accounting estimates include the following: Revenue Recognition We derive the majority of our revenues from SaaS subscription services charged for the use of our digital banking solutions. SaaS subscription services are generally recognized as revenues over the term of the contract as a series of distinct SaaS services bundled into a single performance obligation.
General and Administrative General and administrative expenses increased $20.8 million, or 41.4%, for 2022 compared to 2021, the increase in general and administrative expenses was primarily due to a $16.6 million increase in personnel-related and other costs (which includes stock-based compensation of $16.1 million).
General and Administrative General and administrative expenses increased $1.7 million, or 2.3%, for 2023 compared to 2022, the increase was primarily due to a $1.9 million increase in personnel-costs (which includes lower stock-based compensation of $2.3 million) resulting from headcount growth, and higher software costs of $1.1 million.
The Amended Credit Agreement includes the following, among other features: • Revolving Facility: The Amended Credit Agreement provides $40.0 million in aggregate commitments for secured revolving loans (“Amended Revolving Facility”) and there were no outstanding borrowing as of December 31, 2022. • Term Loan: A term loan of $85.0 million (the “Amended Term Loan”) was borrowed on the closing date of the Amended Credit Agreement.
The Amended Credit Agreement, inclusive of changes established by the First Amendment, includes the following, among other features: • Revolving Facility: The Amended Credit Agreement provides $60.0 million in aggregate commitments for secured revolving loans (“Revolving Facility”), of which there were no outstanding borrowings as of December 31, 2023. • Term Loan: A term loan of $85.0 million (the “Term Loan”) was borrowed on April 29, 2022, the proceeds of which were used to replenish cash used to fund the acquisition of Segmint, which closed on April 25, 2022.
Operating Expenses Year ended December 31, Change ($ in thousands) 2022 2021 $ % Research and development $ 69,329 $ 48,800 $ 20,529 42.1 % Sales and marketing 36,811 24,174 12,637 52.3 % General and administrative 71,247 50,398 20,849 41.4 % Acquisition-related expenses, net (12,529) 2,983 (15,512) (520.0) % Amortization of acquired intangibles 1,155 368 787 213.9 % Total operating expenses $ 166,013 $ 126,723 $ 39,290 31.0 % Percentage of revenues 81.3 % 83.3 % Research and Development Research and development expenses increased $20.5 million, or 42.1%, for 2022 compared to 2021, primarily due to a $15.4 million increase in personnel-related costs (which includes stock-based compensation of $6.6 million) resulting from headcount growth, information technology and product teams dedicated to platform enhancements and innovation, as well as $0.1 million in higher consulting costs, $0.6 million in higher hosting costs, and $5.0 million of additional costs related to the Segmint acquisition (which includes stock-based compensation of $1.9 million).
Operating Expenses Year ended December 31, Change ($ in thousands) 2023 2022 $ % Research and development $ 84,661 $ 69,329 $ 15,332 22.1 % Sales and marketing 48,557 36,811 11,746 31.9 % General and administrative 72,900 71,247 1,653 2.3 % Acquisition-related expenses, net 263 (12,529) 12,792 (102.1) % Amortization of acquired intangibles 1,435 1,155 280 24.2 % Total operating expenses $ 207,816 $ 166,013 $ 41,803 25.2 % Percentage of revenues 78.5 % 81.3 % Research and Development Research and development expenses increased $15.3 million, or 22.1%, for 2023 compared to 2022, primarily due to a $15.7 million increase in personnel-related costs (which includes stock-based compensation of $4.6 million) resulting from headcount growth, $1.7 million in higher hosting costs, and higher miscellaneous other costs of $0.2 million.
Contractual Obligations and Commitments The Company believes it has sufficient liquidity to fund its operations and meet its short-term and long-term obligations. The Company's material future obligations include the contractual and purchase commitments described below. The Company has a contractual commitment to repay its long-term debt of $85.0 million based on the defined terms of our Amended Credit Agreement.
Contractual Obligations and Commitments The Company believes it has sufficient liquidity to fund its operations and meet its short-term and long-term obligations. The Company's material future obligations include the contractual and purchase commitments described below. On December 29, 2023, the Company paid the remaining outstanding principal balance of its term loan of $82.9 million.
Finally, we have operating leases for real estate and equipment that include future minimum payments with initial terms of one year or more. Total future operating lease payments at December 31, 2022 are $22.2 million. Within the next 12 months, operating lease payments are expected to be $3.8 million.
Of this amount, $23.8 million is due within the next 12 months. Refer to Note 13 of the Notes to the Consolidated Financial Statements for further details. Finally, we have operating leases for real estate and equipment that include future minimum payments with initial terms of one year or more.
The following table presents our selected consolidated statements of operations data for the years ended December 31, 2022, 2021, and 2020.
Results of Operations The results of operations presented below should be reviewed in conjunction with the consolidated financial statements and notes included elsewhere in this filing. The following table presents our selected consolidated statements of operations data for the years ended December 31, 2023, 2022, and 2021.
Total interest expense, including commitment fees and unused line fees, for the years ended December 31, 2022, 2021, and 2020, was $3.9 million, $1.2 million, and $0.5 million, respectively. In conjunction with closing the Amended Credit Agreement in 2022, we incurred issuance costs of $0.8 million, which were deferred and were scheduled to be amortized over the three-year term.
In conjunction with closing the Amended Credit Agreement in 2022 and the First Amendment in 2023, we incurred issuance costs of $0.8 million and $0.3 million, respectively, which were deferred and were scheduled to be amortized over the remaining term of the agreement.
During the year ended December 31, 2021, net cash used in investing activities was $22.0 million, primarily consisting of $18.0 million for the purchase of MK, $0.3 million related to the finalization of working capital adjustments on our acquisition of ACH Alert, $2.6 million related to capitalized software development costs, and capital expenditures related to updates for computer and other equipment of $1.1 million.
Net Cash Provided by (Used in) Investing Activities During the year ended December 31, 2023, net cash provided by investing activities was $33.9 million, primarily consisting of $181.0 million in proceeds from sales, maturities and redemptions of marketable securities, partially offset by $140.8 million for the purchase of marketable securities, $5.2 million related to capitalized software development costs, and capital expenditures related to updates for computer and other equipment of $1.1 million.
Any equity financing we may undertake could be dilutive to our existing stockholders, and any additional debt financing we may undertake could require debt service and financial and operational requirements that could adversely affect our business. 38 Table of Contents Cash Flows The following table summarizes our cash flows for the periods indicated: Year ended December 31, (in thousands) 2022 2021 Net cash used in operating activities $ (37,788) $ (28,959) Net cash used in investing activities (224,008) (22,023) Net cash provided by financing activities 61,179 192,273 Net Cash Used in Operating Activities During the year ended December 31, 2022, net cash used in operating activities was $37.8 million, which consisted of a net loss of $58.6 million, adjusted by non-cash charges of $37.3 million and net cash outflows from the change in net operating assets and liabilities of $16.5 million.
Cash Flows The following table summarizes our cash flows for the periods indicated: Year ended December 31, (in thousands) 2023 2022 Net cash used in operating activities $ (17,502) $ (38,045) Net cash provided by (used in) investing activities $ 33,911 $ (223,751) Net cash (used in) provided by financing activities $ (87,819) $ 61,179 Net Cash Used in Operating Activities During the year ended December 31, 2023, net cash used in operating activities was $17.5 million, which consisted of a net loss of $62.9 million, adjusted by non-cash charges of $58.2 million and net cash outflows from the change in net operating assets and liabilities of $12.8 million.
In addition, we incurred $2.7 million of additional costs related to the Segmint acquisition (which includes stock-based compensation of $0.4 million), $0.5 million in higher consulting costs, $0.4 million in higher travel costs, and $1.0 million in higher costs related to industry conferences and trade shows, as we return to pre-COVID-19 pandemic sales activities, such as our in-person client conference, Co:Lab.
In addition, we incurred $0.9 million in higher costs related to industry conferences and trade shows, including enhanced client experiences at our in-person client conference, Co:lab, $0.6 million higher travel costs for the sales team, and higher miscellaneous other costs of $0.5 million.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeBecause of the short-term maturities of our cash, cash equivalents, restricted cash, and marketable securities, we do not believe that an increase in market rates would have any significant negative impact on the realized value of our investments. 42 Table of Contents
Biggest changeBecause of the short-term maturities of our cash, cash equivalents, restricted cash, and marketable securities, we do not believe that an increase in market rates would have any significant negative impact on the realized value of our investments. 43 Table of Contents

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