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What changed in ALKAMI TECHNOLOGY, INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of ALKAMI TECHNOLOGY, INC.'s 2023 and 2024 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 2024 report.

+287 added−292 removedSource: 10-K (2025-02-28) vs 10-K (2024-02-29)

Top changes in ALKAMI TECHNOLOGY, INC.'s 2024 10-K

287 paragraphs added · 292 removed · 230 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

54 edited+2 added−4 removed98 unchanged
Biggest changeOur 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.
Biggest changeOur Clients As of December 31, 2024, we served 272 FIs through the Alkami Digital Banking Platform and over 750 clients when including unique clients only subscribing to one or a combination of ACH Alert, MK or Segmint products. Our clients include community, regional and super-regional credit unions and banks across both retail and business banking.
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.
We believe based on third-party estimates that 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.
See “Risk Factors—Risks Relating to Our Intellectual Property, Software and Third-Party Licenses—Claims by others that we infringe, misappropriate or otherwise violate their proprietary technology or other rights could have a material and adverse effect on our business, financial condition and results of operations.” Our Competition The market for digital solutions for financial services providers is highly competitive.
See “Risk Factors—Risks Relating to Our Intellectual Property, Software and Third-Party Licenses—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.” Our Competition The market for digital solutions for financial services providers is highly competitive.
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.
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 data breaches. Some laws may also impose physical and electronic security requirements regarding the safeguarding of PI.
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.
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, 2024, 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.
We believe the principal competitive factors for our solutions in the financial services markets we serve include the following: • alignment with the missions of our clients; • ability to provide a single platform for our clients’ consumer and commercial customers; • full-feature functionality across digital channels; • ability to integrate targeted offers for client customers across digital channels; • ability to support FIs in acquiring deposits with open API technologies; • SaaS delivery and pricing model; • ability to support both internal and external developers to quickly integrate with third-party applications and systems utilizing a software development kit; • design of the client customer experience, including modern, intuitive and touch-centric features; • configurability and branding capabilities for clients; • familiarity of workflows and terminology and feature-on-demand functionality; • integrated multi-layered security and compliance of solutions with regulatory requirements; • quality of implementation, integration and support services; • domain expertise and innovation in financial services technology; • price of solutions; • ability to innovate and respond to client needs rapidly; and • rate of development, deployment and enhancement of solutions.
We believe the principal competitive factors for our solutions in the financial services markets we serve include the following: • alignment with the missions of our clients; • ability to provide a single platform for our clients’ consumer and commercial customers; • full-feature functionality across digital channels; • ability to integrate targeted offers for client customers across digital channels; • ability to support FIs in acquiring deposits with open API technologies; • SaaS delivery and pricing model; • ability to support both internal and external developers to quickly integrate with third-party applications and systems utilizing a SDK; • design of the client customer experience, including modern, intuitive and touch-centric features; • configurability and branding capabilities for clients; • familiarity of workflows and terminology and feature-on-demand functionality; • integrated multi-layered security and compliance of solutions with regulatory requirements; • quality of implementation, integration and support services; • domain expertise and innovation in financial services technology; • price of solutions; • ability to innovate and respond to client needs rapidly; and • rate of development, deployment and enhancement of solutions.
Our solutions must enable our clients to comply with applicable legal and regulatory requirements, including, without limitation, those under the following laws and regulations: • the Dodd-Frank Act; • the Electronic Funds Transfer Act and Regulation E; • the Electronic Signatures in Global and National Commerce Act; • usury laws; • the Gramm-Leach-Bliley Act; • the Fair Credit Reporting Act; • laws and regulations against unfair, deceptive or abusive acts or practices; • the California Consumer Privacy Act of 2018 (“CCPA”), the California Privacy Rights Act (“CPRA”) and other federal, state and international data privacy, security and protection laws and regulations; • the Privacy of Consumer Financial Information regulations; • the Bank Secrecy Act and the USA PATRIOT Act of 2001; • the FFIEC IT Handbook and related booklets, statements and guidance, including the Guidance on Supervision of Technology Services Providers and the Guidance on Outsourcing Technology Services promulgated by the FFIEC; • the OCC’s “Third-Party Relationships: Risk Management Guidance”; • the NCUA’s Guidelines for Safekeeping of Member Information; • the Federal Credit Union Act; and • other federal, state and international laws and regulations.
Our solutions must enable our clients to comply with applicable legal and regulatory requirements, including, without limitation, those under the following laws and regulations: • the Dodd-Frank Act; • the Electronic Funds Transfer Act and Regulation E; • the Electronic Signatures in Global and National Commerce Act; • usury laws; • the Gramm-Leach-Bliley Act (“GLBA”); • the Fair Credit Reporting Act; • laws and regulations against unfair, deceptive or abusive acts or practices; • the California Consumer Privacy Act of 2018 (“CCPA”) and other federal, state and international data privacy, security and protection laws and regulations; • the Privacy of Consumer Financial Information regulations; • the Bank Secrecy Act and the USA PATRIOT Act of 2001; • the FFIEC IT Handbook and related booklets, statements and guidance, including the Guidance on Supervision of Technology Services Providers and the Guidance on Outsourcing Technology Services promulgated by the FFIEC; • the OCC’s “Third-Party Relationships: Risk Management Guidance”; • the NCUA’s Guidelines for Safekeeping of Member Information; • the Federal Credit Union Act; and • other federal, state and international laws and regulations.
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.
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. • Business 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.
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.
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, 2024.
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.
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 Candescent, Q2 Holdings, Inc. and Temenos AG in the online, consumer and small business banking space.
In a world where our clients receive hundreds of millions of access requests per month from unverified sources, our security infrastructure is a key element of our value proposition, particularly against new entrants. While our products and solutions are highly configurable, in certain instances our clients will request custom development and other professional services which we provide.
In a world where our clients receive hundreds of millions of access requests per month from unverified sources, our security infrastructure is a key element of our value proposition, particularly against new entrants. While our products and solutions are highly configurable, in certain instances our clients will request custom development and other professional services that we provide.
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.
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 a broad pool of talent and offer opportunities for professional learning and potential future employment opportunities with Alkami; • employee committees focused on embracing our culture, inclusion, and belonging; and • charitable causes to help create opportunities for employees to join together to make a difference in the workplace and local communities.
Further, all 50 states and the District of Columbia have adopted data breach notification laws that impose, in varying degrees, an obligation to notify affected individuals in the event of a data or security breach or compromise, including when their PI has or may have been accessed by an unauthorized person.
Further, all 50 U.S. states and the District of Columbia have adopted data breach notification laws that impose, in varying degrees, an obligation to notify affected individuals in the event of a data or security breach or compromise, including when their PI has or may have been accessed by an unauthorized person.
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.
Our business 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.
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.
This offering enhances many of our clients’ digital platforms and gives them the opportunity to digitize and replace many of the processes that 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.
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.
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, 2024. True cloud infrastructure is also remarkably scalable, allowing us to pursue our growth objectives without technological limitation.
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.
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, 2024.
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.
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 34 products and more than 300 integrations as of December 31, 2024: • Digital Account Opening : Allows our clients’ customers to open new deposit accounts, including checking, savings, CD and Money Market accounts.
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.
In 2024, for instance, we were recognized as a "Best Place to 11 Table of Contents 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 Engineering Team,” and a "Best Product and Design Team" from Comparably.
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.
As compared to the 2023 new client cohort, our 2024 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.
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.
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.
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.
Our addressable market consists of FIs 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.
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.
Across our clients’ customer base, the average registered user logged onto the digital application three times per week, in 2024, 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.
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.
We derive our revenues almost entirely 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, 2024. We predominantly employ a per-registered-user pricing model, with incremental fees above certain contractual client minimum commitments for each licensed solution.
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.
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.
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.
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 $45 billion in aggregate on technology in 2024, 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, 2023, we had 917 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, 2024, we had 938 employees. We consider our current relationship with our employees to be good.
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.
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 as of December 31, 2024.
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.
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, 2022 to December 31, 2024.
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.
We incurred net losses of $40.8 million, $62.9 million, and $58.6 million for 2024, 2023, and 2022, respectively, largely due to significant continued investment in sales, marketing, product development and post-sales client activities.
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.
This includes the ability to integrate with internal systems and the broader fintech ecosystem, modify and 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 Amazon Web Services (“AWS”).
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.
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 materially and adversely affect our business, financial condition and results of operations.” Available Information Our website address is www.alkami.com.
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.
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 GLBA, CCPA and other state privacy regulations, and other laws, rules and regulations 12 Table of Contents designed to regulate consumer information and data privacy, security and protection, and mitigate identity theft.
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”).
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 software development kit (“SDK”) and application program interfaces (“APIs”).
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.
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, 2024, our client base, on average, used 14 of our 34 offered products.
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.
Our 2024 new client cohort has contracted, on average, for 20 of our offered products. Our target clients include the top 2,500 FIs by assets excluding those with assets greater than $450 billion (“megabanks”). We had 272, 236 and 199 FIs as Alkami Digital Banking Platform clients as of December 31, 2024, 2023, and 2022, respectively.
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.
We had 20.0 million, 17.5 million, and 14.5 million live registered users as of December 31, 2024, 2023, and 2022, respectively, representing a growth rate for one of our key revenue drivers of 14.2% from 2023 to 2024 and 20.4% from 2022 to 2023.
Cross-sell contributed 35% of total contract value (“TCV”) in 2023, highlighting our significant continued opportunity to grow within our existing client base.
Cross-sell contributed 45% of total contract value (“TCV”) in 2024, highlighting our significant continued opportunity to grow within our existing client base.
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.
We expect cross-sell to continue to contribute meaningfully to our growth. ◦ Customer penetration: While we recently achieved more than 20.0 million live registered digital banking users (“registered users”), we estimate this only represents 72% of our clients’ total customers as of December 31, 2024.
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.
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, marketing, data insights, card experience, money movement, customer service, business banking, financial wellness, security and fraud protection and extensibility.
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.
Our total revenues were $333.8 million, $264.8 million, and $204.3 million for 2024, 2023, and 2022, respectively, representing growth rates of 26.1% from 2023 to 2024 and 29.6% from 2022 to 2023. SaaS subscription services, as further described below, represented 95.6%, 95.3%, and 95.2% of total revenues for 2024, 2023, and 2022, respectively.
In addition, in September 2021, we acquired MK Decisioning Systems, LLC (“MK”), a technology platform for digital account opening, credit card and loan origination solutions. In April 2022, we acquired Segmint Inc. (“Segmint”), a leading cloud-based financial data analytics and transaction data cleansing provider.
In addition, in September 2021, we acquired MK Decisioning Systems, LLC (“MK”), a technology platform for digital account opening, credit card and loan origination solutions. In April 2022, we acquired Segmint Inc. (“Segmint”), a leading cloud-based financial data analytics and transaction data cleansing provider. During 2024, we established a new subsidiary in India to support potential future operational needs.
In 2023 and 2022, we spent 32.0% and 33.9%, respectively, of revenues on research and development, underlining our commitment to ongoing innovation.
In 2024 and 2023, we spent 28.8% and 32.0%, respectively, of revenues on research and development, underlining our commitment to ongoing innovation.
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.
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: 6 Table of Contents ◦ Cross-sell: We continue to broaden our product set to address the needs of our 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. For this reason, FIs are making substantial technology investments in cybersecurity and security more broadly.
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.
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.
We offered nine products in 2015, and as of December 31, 2024, 34 products were available through the Alkami Digital Banking Platform. During 2024, our clients purchased an average of 14 products from us.
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 target client base includes the top 2,500 FIs by assets, with the exception of the megabanks. 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.
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.
While our original product suite was retail focused, 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 domain expertise in retail and business banking has enabled us to develop a suite of products tailored to address key challenges faced by FIs.
As of December 31, 2024, this entity had immaterial operations and did not have a significant impact on our business operations. Our domain expertise in retail and business banking has enabled us to develop a suite of products tailored to address key challenges faced by FIs.
Similarly, we continue to expand our sales and marketing organization focusing on new client wins, cross-selling opportunities and client renewals.
In research and development, we continue to focus on innovation and bringing novel capabilities to our platform, extending our product depth. Similarly, we continue to expand our sales and marketing organization focusing on new client wins, cross-selling opportunities and client renewals.
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.
Our acquisition of ACH Alert brought an additional fraud prevention tool to our product suite. 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.
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%.
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.
FIs take varying approaches to technological evolution, partially driven by philosophy, but predominantly driven by resources that are available to them.
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.
This has forced FIs to seek retail and commercial deposits, in many cases leading to increased FI focus on digital account opening and digital banking user experience. The heightened focus on technology and security in addressing the evolution of the banking industry has driven massive spend.
Emerging technologies are increasingly built to perform routinized tasks associated with this function, freeing up resources to be reinvested in growth. The heightened focus on technology and security in addressing the evolution of the banking industry has driven massive spend.
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To support our growth and capitalize on our market opportunity, we have increased our operating expenses across all aspects of our business. In research and development, we continue to focus on innovation and bringing novel capabilities to our platform, extending our product depth.
Added
Our ability to grow revenues through deeper client customer penetration and cross-sell allowed us to increase annual recurring revenue from existing digital banking clients as of December 31, 2023 to 113% as of December 31, 2024 To support our growth and capitalize on our market opportunity, we have increased our operating expenses across all aspects of our business.
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Emerging technologies are increasingly built to perform routinized tasks associated with this function, freeing up resources to be reinvested in growth. • Importance of deposits: The recent improvement in the interest rate environment, which began as the Federal Reserve increased its target interest rate to combat inflation, has increased the relative attractiveness of non-bank deposits to savers, caused reductions in deposits held at FIs, and put immense pressure on FI funding costs, potentially compressing interest income spreads that FIs earn between taking deposits and providing loans.
Added
The Alkami Digital Banking Platform delivers tangible results to clients, including increased registered user growth, increased product usage, operational efficiencies and customer retention.
Removed
Our acquisition of ACH Alert, which was completed in October 2020, brought an additional fraud prevention tool to our product suite while also providing access to an additional 95 clients that were either live or under contract with ACH Alert at the time of the acquisition.
Removed
In September 2021, we acquired MK Decisioning Systems, LLC (“MK”), an early-stage technology platform for digital deposit account opening, credit card and loan origination solutions, which added deeper digital account opening and loan origination capabilities to our platform while also providing access to an additional 25 live clients at the time of the acquisition.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

70 edited+33 added−17 removed300 unchanged
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.
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 other 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; • use and reliance upon technology and development resources in India; • environmental and social matters; • 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; • reliance on the development of the market for digital banking solutions; • 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 of 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; 13 Table of Contents • 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 carryforwards; • our ability to raise sufficient capital and the resulting dilution and the terms of our Amended Credit Agreement (as defined below); • unanticipated changes in tax laws or regulations; • loss of emerging growth company status; • future strategic initiatives, including acquisitions of businesses and strategic investments; • future sales of shares of our common stock, our lack of an intention to pay dividends and significant influence of our principal stockholders; and • anti-takeover and exclusive forum provisions in our governing documents.
We also are dependent on the continued service of our existing development professionals because of the complexity of our solutions, including complexity arising as a result of the regulatory requirements that are applicable to our clients and, to a lesser extent, us, and the pace of technology changes impacting our clients.
We are also dependent on the continued service of our existing development professionals because of the complexity of our solutions, including complexity arising as a result of the regulatory requirements that are applicable to our clients and, to a lesser extent, us, and the pace of technology changes impacting our clients.
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.
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 may also 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.
Any cybersecurity attacks, security breaches, phishing attacks, ransomware attacks, computer malware, computer viruses, computer hacking attacks, unauthorized access, coding or configuration errors or similar incidents experienced by us or our third-party providers could result in operational disruptions and the loss, compromise or corruption of client or client customer data (including PI) or data we rely on to provide our solutions, including our analytics initiatives and offerings, and impair our ability to provide our solutions and meet our clients’ requirements, resulting in decreased revenues and otherwise adversely affecting our business, financial condition and results of operations.
Any cybersecurity attacks, security breaches, phishing attacks, ransomware attacks, computer malware, computer viruses, computer hacking attacks, unauthorized access, coding or configuration errors or similar incidents experienced by us or our third-party providers could result in material operational disruptions and the material loss, compromise or corruption of client or client customer data (including PI) or data we rely on to provide our solutions, including our analytics initiatives and offerings, and impair our ability to provide our solutions and meet our clients’ requirements, resulting in decreased revenues and otherwise adversely affecting our business, financial condition and results of operations.
Our amended and restated certificate of incorporation and our amended and restated bylaws provide that: (i) unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if such court does not have subject matter jurisdiction thereof, the federal district court of the State of Delaware) will, to the fullest extent permitted by law, be the sole and exclusive forum for: (A) any derivative action or proceeding brought on behalf of the Company, (B) any action asserting a claim for or based on a breach of a fiduciary duty owed by any of our current or former director, officer, other employee, agent or stockholder to the Company or our stockholders, including, without limitation, a claim alleging the aiding and abetting of such a breach of fiduciary duty, (C) any action asserting a claim against the Company or any of our current or former directors, officers, other employees, agents or stockholders arising pursuant to any provision of the Delaware General Corporation Law or our certificate of incorporation or bylaws or as to which the Delaware General Corporation Law confers jurisdiction on the Court of Chancery of the State of Delaware, or (D) any action asserting a claim related to or involving the Company that is governed by the internal affairs doctrine; (ii) unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America will, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act and the rules and regulations promulgated thereunder; (iii) the exclusive forum provisions are intended to benefit and may be enforced by the Company, our officers and directors, the underwriters to any offering giving rise to such complaint, and any other professional or entity whose profession gives authority to a statement made by that person or entity and who has prepared or certified any part of the documents underlying the offering; (iv) any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of the Company will be deemed to have notice of and consented to these provisions; and (v) failure to enforce the foregoing provisions would cause us irreparable harm, and we will be entitled to equitable relief, including injunctive relief and specific performance, to enforce the foregoing provisions.
Our amended and restated certificate of incorporation and our amended and restated bylaws provide that: (i) unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if such court does not have subject matter jurisdiction thereof, the federal district court of the State of Delaware) will, to the fullest extent permitted by law, be the sole and exclusive forum for: (A) any derivative action or proceeding brought on behalf of the Company, (B) any action asserting a claim for or based on a breach of a fiduciary duty owed by any of our current or former director, officer, other employee, agent or stockholder to the Company or our stockholders, including, without 30 Table of Contents limitation, a claim alleging the aiding and abetting of such a breach of fiduciary duty, (C) any action asserting a claim against the Company or any of our current or former directors, officers, other employees, agents or stockholders arising pursuant to any provision of the Delaware General Corporation Law or our certificate of incorporation or bylaws or as to which the Delaware General Corporation Law confers jurisdiction on the Court of Chancery of the State of Delaware, or (D) any action asserting a claim related to or involving the Company that is governed by the internal affairs doctrine; (ii) unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America will, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act and the rules and regulations promulgated thereunder; (iii) the exclusive forum provisions are intended to benefit and may be enforced by the Company, our officers and directors, the underwriters to any offering giving rise to such complaint, and any other professional or entity whose profession gives authority to a statement made by that person or entity and who has prepared or certified any part of the documents underlying the offering; (iv) any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of the Company will be deemed to have notice of and consented to these provisions; and (v) failure to enforce the foregoing provisions would cause us irreparable harm, and we will be entitled to equitable relief, including injunctive relief and specific performance, to enforce the foregoing provisions.
Due to the size and complexity of our technology platform and services, the amount of PI and other data that we store and the number of clients, employees and third-party providers with access to PI and other data, we are potentially vulnerable to a variety of cybersecurity attacks and other security-related incidents and threats, which could result in a material adverse effect on our business, financial condition and results of operations.
Due to the size and complexity of our technology platform and services, the amount of PI and other data that we store and the number of clients, employees and third-party providers with access to PI and other data, we are vulnerable to a variety of cybersecurity attacks and other security-related incidents and threats, which could result in a material adverse effect on our business, financial condition and results of operations.
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.
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, inflation, exposure to loan assets and lending policies and the value, if any, of underlying collateral and increased regulation.
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.
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; 26 Table of Contents • natural disasters, outbreaks of disease or public health crises; and • general economic conditions.
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.
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 FIs can be accessed and used by people with or without disabilities.
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.
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 clients’ customers could suffer material harm, including because many of our products and services are integrated with or connected to our clients’ systems and processes.
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”).
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 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”).
Despite our efforts to protect our proprietary rights, there can be no assurance our intellectual property rights will be sufficient to protect against others offering products or services that are substantially similar to ours and compete with our business or that unauthorized parties may attempt to copy aspects of our technology and use information that we consider proprietary.
There can be no assurance our intellectual property rights will be sufficient to protect against others offering products or services that are substantially similar to ours and compete with our business or that unauthorized parties may attempt to copy aspects of our technology and use information that we consider proprietary.
We depend on data centers operated by third parties and third-party internet hosting providers, principally Amazon Web Services, and any disruption in the operation of these facilities or access to the internet could adversely affect our business. We primarily serve our clients from third-party data center hosting facilities provided by Amazon Web Services (“AWS”).
We depend on data centers operated by third parties and third-party internet hosting providers, principally Amazon Web Services, and any disruption in the operation of these facilities or access to the internet could adversely affect our business. We primarily serve our clients from third-party data center hosting facilities provided by AWS.
We have also entered into employment agreements with our other executive officers which provide for the payment of severance under similar circumstances as in our named executive officers’ employment agreements. The loss of one or more of our key employees could harm our business.
We have also entered into employment agreements with our other executive officers that provide for the payment of severance under similar circumstances as in our named executive officers’ employment agreements. The loss of one or more of our key employees could harm our business.
We own and manage some of these IT Systems but also rely for on IT Systems and related services that are operated, managed, integrated or otherwise provided by a host of third partners service providers, vendors, and business partners.
We own and manage some of these IT Systems but also rely on IT Systems and related services that are operated, managed, integrated or otherwise provided by a host of third-party service providers, vendors, and business partners.
If we are required to make substantial payments or undertake any of the other actions noted above as a result of any intellectual property infringement, misappropriation or violation claims against us, such payments, costs or actions could have a material adverse effect on our competitive position, business, financial condition and results of operations.
If we are required to make substantial payments or undertake any of the other actions noted above as a result of any intellectual property infringement, misappropriation or violation claims 25 Table of Contents against us, such payments, costs or actions could have a material adverse effect on our competitive position, business, financial condition and results of operations.
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.
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.
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.
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.
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.
The effects of existing state legislation, including the CCPA, are significant and have 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.
As we expand our client base, these requirements may vary from client to client, further increasing the cost of compliance and doing business. Risks Relating to Our Industry We face intense competition and could lose market share to our competitors, which could adversely affect our business, financial condition and results of operations.
As we expand our client base, these requirements may vary from client to client, further increasing the cost of compliance and doing business. 21 Table of Contents Risks Relating to Our Industry We face intense competition and could lose market share to our competitors, which could adversely affect our business, financial condition and results of operations.
Any future incurrence of debt or issuance of equity securities could adversely affect the value of our common stock. Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited. We have incurred substantial NOLs during our history.
Any future incurrence of debt or issuance of equity securities could adversely affect the value of our common stock. 27 Table of Contents Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited. We have incurred substantial NOLs during our history.
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.
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.
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.
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.
An adverse outcome in such litigation or proceedings may expose us to a loss of our competitive position, expose us to significant liabilities or require us to seek licenses that may not be available on commercially acceptable terms, if at all.
An adverse outcome in such litigation or proceedings 24 Table of Contents may expose us to a loss of our competitive position, expose us to significant liabilities or require us to seek licenses that may not be available on commercially acceptable terms, if at all.
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.
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.
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 28 Table of Contents competitive disadvantage compared to our competitors that have less debt or better debt servicing options.
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.
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.
From time to time, we have discovered, and may in the future discover, defects or errors in our solutions. Any performance problems or defects in our solutions could materially and adversely affect our business, financial condition and results of operations.
From time to time, we have discovered, and may in the future discover, defects or errors in 16 Table of Contents our solutions. Any performance problems or defects in our solutions could materially and adversely affect our business, financial condition and results of operations.
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.
Our directors, officers and other principal stockholders, in the aggregate, beneficially owned approximately 32% of the outstanding shares of Alkami as of December 31, 2024. 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.
The regulatory framework governing the collection, processing, storage, use and sharing of certain information, particularly financial and other PI, is rapidly evolving and is likely to continue to be subject to uncertainty and varying interpretations.
The regulatory framework 20 Table of Contents governing the collection, processing, storage, use and sharing of certain information, particularly financial and other PI, is rapidly evolving and is likely to continue to be subject to uncertainty and varying interpretations.
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.
Threats to our IT Systems and those of our third-party providers or clients include those resulting 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.
As a provider of technology services to such FIs, we may in the future be subject to examination by various federal and state regulatory agencies, including those agencies that comprise the Federal Financial Institutions Examination Council (“FFIEC”), and we are also required to review and perform due diligence on certain of our third-party providers.
As a provider of technology services to such FIs, we may in the future be subject to examination by various federal and state regulatory agencies, including those agencies that comprise the FFIEC, and we are also required to review and perform due diligence on certain of our third-party providers.
Our facilities would likely be costly to repair or replace, and any such efforts would likely require substantial time. Any disruptions in our operations could harm our reputation and materially and adversely affect our business, financial condition and results of operations. Moreover, although we have disaster recovery plans, they may prove inadequate.
Our facilities would likely be costly to repair or replace, and any such efforts would likely require substantial time. Any disruptions in our operations could harm our reputation and materially and adversely affect our business, financial condition and results of operations, and our disaster recovery plans may prove inadequate.
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.
Our success and future growth depend upon the continued services of our management team, in particular Alex Shootman, our Chief Executive 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.
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.
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.
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.
For example, California enacted 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.
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.
A vulnerability in our third- 19 Table of Contents 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 a material compromise to the confidentiality, integrity or availability of our IT Systems or the data housed in our third-party solutions.
In addition, while we are not regulated by the National Credit Union Administration (“NCUA”), as a result of our registration as a CUSO, we are subject to disclosure, annual reporting and other requirements imposed by the NCUA.
In addition, while we are not regulated by the NCUA, as a result of our registration as a CUSO, we are subject to disclosure, annual reporting and other requirements imposed by the NCUA.
Although we endeavor to comply with our published policies and documentation, we may at times fail to do so or be alleged to have failed to do so.
We may at times fail to comply with our published policies and documents or be alleged to have failed to do so.
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.
Given the unpredictability of the timing, nature and scope of cybersecurity attacks and other security-related incidents, it is impossible to comprehensively 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 of mitigating the consequences from such events.
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.
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 materially and adversely affect our business, financial condition and results of operations.
The introduction of new solutions by our competitors, the market acceptance of competitive solutions based on new or alternative technologies or the emergence of new technologies or solutions in the broader financial services industry could render our solutions obsolete or less effective.
The introduction of new solutions by our competitors, the market acceptance of competitive solutions based on new or alternative technologies, such as artificial intelligence and machine learning technologies, or the emergence of new technologies or solutions in the broader financial services industry could render our solutions obsolete or less effective.
The First Amendment, among other things, extended the maturity date of the Amended Credit Agreement to April 29, 2026.
The Second Amendment, among other things, extended the maturity date of the Amended Credit Agreement to April 29, 2027.
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.
We cannot anticipate or prevent all techniques used by threat actors to obtain unauthorized access or to sabotage systems or implement adequate preventative measures. Additionally, we and client customers integrate our solutions with certain third-party systems used by our clients, which have access to PI and other data about our clients.
From time to time, clients or licensors have required, and may in the future require, us to indemnify them for such infringement, misappropriation or violation, breach of confidentiality or violation of applicable law, among other things.
From time to time, clients or licensors have required, and may in the future require, us to indemnify them for such infringement, misappropriation or violation, breach of confidentiality or violation of applicable law, among other things. Some of our indemnity agreements may provide for uncapped liability and some indemnity provisions survive termination or expiration of the applicable agreement.
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.
As we sign more contracts, we will generally have an increasing amount of contracts coming up for renewal. 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.
Each jurisdiction has different rules and regulations governing sales and use, consumption, and similar taxes. These rules are subject to varying interpretation and could be changed, modified, or applied adversely to us as a result of factors outside of our control.
These rules are subject to varying interpretation and could be changed, modified, or applied adversely to us as a result of factors outside of our control.
Risks Relating to Cybersecurity or Data Privacy A breach or other compromise of our security measures or those of third parties we rely on could result in unauthorized access to personal information about our clients’ customers and other individuals and other data, or disruptions to our systems or operations, which could materially and adversely impact our reputation, business, financial condition and results of operations.
Risks Relating to Cybersecurity, Data Privacy and Artificial Intelligence A breach or other compromise of our security measures or those of third parties we rely on could materially and adversely impact our reputation, business, financial condition and results of operations.
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.
We, like other organizations, particularly in the financial technology sector, are vulnerable to and have experienced cybersecurity attacks, insider threats and other incidents that threaten the confidentiality, integrity and availability of critical IT Systems and PI or other information regarding clients, client customers, vendors, employees, third-party providers, or our company and business.
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.
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.
If we are unable to anticipate client requirements or work with our clients successfully on implementing new solutions or features in a timely manner or enhance our existing solutions to meet our clients’ requirements, our business, financial condition and results of operations could be materially and adversely affected.
If we are unable to anticipate client requirements or work with our clients successfully on implementing new solutions or features in a timely manner or enhance our existing solutions to meet our clients’ requirements, our business, financial condition and results of operations could be materially and adversely affected. 22 Table of Contents If the market for digital banking solutions develops more slowly than we expect or changes in a way that we fail to anticipate, our sales would suffer and our business, financial condition and results of operations could be materially and adversely affected.
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.
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.
Further, any failure of or delays in our systems could cause service interruptions or impaired system performance. Some of our client agreements require us to issue credits for downtime in excess of certain thresholds and in some instances give our clients the ability to terminate their agreements with us in the event of significant amounts of downtime.
Some of our client agreements require us to issue credits for downtime in excess of certain thresholds and in some instances give our clients the ability to terminate their 15 Table of Contents agreements with us in the event of significant amounts of downtime.
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.
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.
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.
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.
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.
Violations of our policies, procedures and technological safeguards and administrative controls designed to protect our IT Systems and applications have occurred in the past, and 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.
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.
For example, as a result of obligations under our client contracts, we are required to comply with certain provisions of the 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 these circumstances, it may be difficult or impossible to cure such a breach in order to prevent clients from potentially terminating their contracts with us. Furthermore, although our client contracts typically include limitations on our potential liability, we cannot ensure that such limitations of liability would be adequate.
In these circumstances, it may be difficult or impossible to cure such a breach in order to prevent clients from potentially terminating their contracts with us.
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 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, regulatory compliance and information security and the costs of being a public company.
Because of our position in the financial services industry, we expect to continue to be a target of such threats and attacks.
Because of our position in the financial services industry, we expect to continue to be a target of such threats and attacks. Additionally, geopolitical events and resulting government activity also heighten information security threats and attacks by affected jurisdictions and their sympathizers.
On June 27, 2023, the Company entered into a First Amendment (the “First Amendment”) to the Company’s Amended and Restated Credit Agreement dated as of April 29, 2022 (as amended by the First Amendment, the “Amended Credit Agreement”), with Silicon Valley Bank (“SVB”), Comerica Bank, and Canadian Imperial Bank of Commerce.
On July 1, 2024, the Company entered into a Second Amendment (the “Second Amendment”) to the Company’s Amended and Restated Credit Agreement dated as of April 29, 2022 (as amended, the “Amended Credit Agreement”), with Silicon Valley Bank (“SVB”), a division of First-Citizens Bank & Trust Company, as Administrative Agent, and the other lenders party thereto.
Further, the Alkami Digital Banking Platform involves flexible and complex software solutions, which by their very nature are subject to misconfigurations, implementation errors, “bugs,” defects or other security vulnerabilities that can lead 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. Further, the Alkami Digital Banking Platform involves flexible and complex software solutions, which by their very nature are subject to misconfigurations, implementation errors, “bugs,” defects or other security vulnerabilities.
Damage to our reputation could also reduce the value and effectiveness of our brand name and could reduce investor confidence in us and materially and adversely affect our business, financial condition and results of operations.
Damage to our reputation could also reduce the value and effectiveness of our brand name and could reduce investor confidence in us and materially and adversely affect our business, financial condition and results of operations. 14 Table of Contents We may not accurately predict the long-term rate of client subscription renewals or adoption of our solutions, or any resulting impact on our revenues or results of operations.
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.
We have limited historical data with respect to rates of client subscription renewals and cannot be certain of anticipated renewal rates. 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.
Finally, actions by regulatory authorities could influence both the decisions our clients make concerning the purchase of our solutions and the timing and implementation of these decisions. Substantial research and development and other corporate resources have been and will continue to be applied to adapt our solutions to this evolving, complex and often unpredictable regulatory environment.
Finally, actions by regulatory authorities could influence both the decisions our clients make concerning the purchase of our solutions and the timing and implementation of these decisions.
If such changes take place, there is a risk that our effective tax rate may be favorably or unfavorably affected, impacting our result of operations. Additionally, an increasing number of states have adopted laws or administrative practices that impose new taxes on all or a portion of gross revenue or impose additional tax collection obligations on out-of-state companies.
Additionally, an increasing number of states have adopted laws or administrative practices that impose new taxes on all or a portion of gross revenue or impose additional tax collection obligations on out-of-state companies. Each jurisdiction has different rules and regulations governing sales and use, consumption, and similar taxes.
Risks Relating to Our Intellectual Property, Software and Third-Party Licenses Our intellectual property rights are valuable, and any inability to protect them could reduce the value of our products, services and brand. Our trade secrets, trademarks, copyrights, patents and other intellectual property rights are important assets for us.
Substantial research and development and other corporate resources have been and will continue to be applied to adapt our solutions to this evolving, complex and often unpredictable regulatory environment. 23 Table of Contents Risks Relating to Our Intellectual Property, Software and Third-Party Licenses Our intellectual property rights are valuable, and any inability to protect them could reduce the value of our products, services and brand.
The security interest granted over our assets could limit our ability to obtain additional debt financing.
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.
We are unable to predict the effect that such sales may have on the prevailing market price of our common stock.
For example, certain significant stockholders sold 5.0 million and 7.5 million shares of our common stock in separate underwritten secondary offerings in August 2024 and November 2024, respectively. We are unable to predict the effect that future sales may have on the prevailing market price of our common stock.
Risks Related to Ownership of Our Common Stock Substantial future sales of shares of our common stock could cause the market price of our common stock to decline.
Any difficulties in the integration of acquired businesses or unexpected penalties, liabilities or asset impairments in connection with such acquisitions or investments could have a material adverse effect on our business, financial condition and results of operations. 29 Table of Contents Risks Related to Ownership of Our Common Stock Substantial future sales of shares of our common stock could cause the market price of our common stock to decline.
Removed
We may not accurately predict the long-term rate of client subscription renewals or adoption of our solutions, or any resulting impact on our revenues or results of operations. We have limited historical data with respect to rates of client subscription renewals and cannot be certain of anticipated renewal rates.
Added
Further, any failure of or delays in our systems could cause service interruptions or impaired system performance.
Removed
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.
Added
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.
Removed
Current or future criminal capabilities, including by the use of generative artificial intelligence, discovery of existing or new vulnerabilities and attempts to exploit those vulnerabilities or other developments, may compromise or breach our IT Systems or solutions.
Added
Our use and reliance upon technology and development resources in India may expose us to unanticipated costs and liabilities, which could affect our ability to realize cost savings from our technology operations in India. We have expanded our presence abroad by establishing a subsidiary in India during 2024.
Removed
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.
Added
While its operations are currently immaterial, we may face challenges related to regulatory compliance, tax implications, labor laws, currency fluctuations, and operational scaling in the future.
Removed
We also cannot be sure that our existing general liability insurance coverage and coverage for errors or omissions will be available on acceptable terms or will be available in sufficient amounts to cover one or more claims, or that our insurers will not deny or attempt to deny coverage as to any future claim.
Added
Our current and potential future operations in India are subject to certain risks, including: • difficulties and costs of staffing and managing foreign operations as well as additional employment regulations, union workforce negotiations and potential disputes; • heightened exposure to changes in economic, security and political conditions, civil unrest, armed conflicts and acts of terrorism; • different standards of protection for intellectual property rights and confidentiality; • the effects of pandemics, epidemics or other health crises on general health and economic conditions and natural disasters; • fluctuations in foreign currency exchange rates and global market volatility; • compliance with local laws and regulations, including privacy and security laws and regulations and labor laws; • compliance with laws governing doing business outside the United States, including foreign or domestic legal and regulatory requirements resulting in the imposition of new or more onerous sanctions and anti-corruption laws, export and import controls, trade restrictions, tariffs, duties, taxes, embargoes, exchange or other government controls; • laws and business practices favoring local companies; and • management of potentially adverse tax consequences from India, the United States, or both, as a result of our multi-jurisdiction operations. 18 Table of Contents The enforcement of intellectual property rights and confidentiality protections in India may not be as effective as in the U.S. or other countries.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeDirectors receive presentations on cybersecurity topics from our CISO as part of the board of directors’ continuing education. Our management team, including our CISO and CCO, is responsible for assessing and managing our material risks from cybersecurity threats.
Biggest changeAs designed, our CISO and CCO are members of the management team and are primarily responsible for assessing and managing our 31 Table of Contents material risks from cybersecurity threats, as well as our overall cybersecurity risk management program. As designed, our CISO is responsible for supervising both our internal cybersecurity personnel and our retained external cybersecurity consultants.
Key elements of our cybersecurity risk management program include: • a security team principally responsible for managing our security controls and our response to cybersecurity incidents; • a compliance team principally responsible for managing our risk assessments, which are designed to help identify material cybersecurity risks to our critical systems and information; • the use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security controls; • cybersecurity awareness training for our employees, incident response personnel, and senior management; • a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents; and • a third-party risk management process for partners and vendors.
Key elements of our cybersecurity risk management program include: • a security team principally responsible for managing our security controls and our response to cybersecurity incidents; • a compliance team principally responsible for managing our risk assessments, which are designed to help identify material cybersecurity risks to our critical systems and information; • the use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security processes; • cybersecurity awareness training for our employees, incident response personnel, and senior management; • a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents; and • a third-party risk management process for partners and vendors.
See "Risk Factors—Risks Relating to Cybersecurity or Data Privacy—A breach or other compromise of our security measures or those of third parties we rely on could result in unauthorized access to personal information about our clients’ customers and other individuals and other data, or disruptions to our systems or operations, which could materially and adversely impact our reputation, business, financial condition and results of operations." Otherwise, however, we have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected or are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial condition.
See "Risk Factors—Risks Relating to Cybersecurity or Data Privacy—A breach or other compromise of our security measures or those of third parties we rely on could materially and adversely impact our reputation, business, financial condition and results of operations.” Otherwise, however, we have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected or are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial condition.
Our CCO, who is responsible for our technology risk management program, has over 25 years of experience building and leading risk management and compliance programs in large institutions across multiple geographies.
Our interim CISO’s experience includes over 20 years of helping to build global cybersecurity programs in various industries. Our CCO, who is responsible for our technology risk management program, has over 25 years of experience building and leading risk management and compliance programs in large institutions across multiple geographies.
Removed
The team has primary responsibility for our overall cybersecurity risk management program and supervises both our internal cybersecurity personnel and our retained external cybersecurity consultants. Our CISO’s experience includes over 25 years of helping to build global cybersecurity programs in companies ranging from Fortune 50 to early stage entities.
Added
Directors receive presentations on cybersecurity topics from our CISO as part of the board of directors’ continuing education. Although our CISO resigned in January of 2025, we have elevated an internal candidate to the role of interim CISO while we search for a replacement.

Item 2. Properties

Properties — owned and leased real estate

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Removed
Item 2. Properties. Our principal executive offices are located in Plano, Texas.
Added
Item 2. Properties. Our principal executive offices are located in Plano, Texas. The leased space in Plano, Texas has approximately 83,939 square feet with a remaining term until August 31, 2033. We believe our current facilities will be adequate for our needs for the current term.
Removed
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.
Removed
We believe our current facilities will be adequate for our needs for the current term.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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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
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.
Removed
Item 3. Legal Proceedings. From time to time, we may become involved in legal proceedings arising in the ordinary course of our business.
Added
Mine Safety Disclosures. Not applicable. 32 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeOur IPO resulted in net proceeds of $192.8 million after deducting underwriting discounts, commissions and other offering costs. 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.
Biggest changeWith 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. The remainder of the net proceeds were used for general corporate purposes, including working capital and operating expenses.
Dividend Policy We have never declared or paid any cash dividends on our common stock.
Dividend Policy We have never declared nor paid any cash dividends on our common stock.
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.
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, 2024, with the cumulative total return of the S&P 1500 Application Software Index (“SP1500 ASI”) and the Russell 2000 Index (“RUT”).
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.
Our initial public offering (“IPO”) was priced at $30.00 per share on April 15, 2021. As of December 31, 2024, we had 16 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. Note that historic stock price performance is not necessarily indicative of future stock price performance.
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.
Issuer 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
Note that historic stock price performance is not necessarily indicative of future stock price performance. 33 Table of Contents Issuer Purchases of Equity Securities We did not repurchase any of our equity securities during the three months ended December 31, 2024. Item 6. [Reserved] 34 Table of Contents
Removed
There have been no material changes in the planned use of proceeds from our April 2021 common stock offering from that described in the final prospectus filed with the SEC pursuant to Rule 424(b) on April 15, 2021.
Added
The offering terminated after the sale of all securities registered pursuant to the IPO Registration Statement. Our IPO resulted in net proceeds of $192.8 million after deducting underwriting discounts, commissions and other offering costs.
Added
As of December 31, 2024, we had used all of the net proceeds from our IPO.

Item 7. Management's Discussion & Analysis

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

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Biggest changeNet 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.
Biggest changeNet Cash Provided by (Used in) Financing Activities For the year ended December 31, 2024, net cash provided by financing activities was $11.8 million, which was primarily due to proceeds of $20.2 million from stock option exercises to purchase 2.6 million shares of common stock and proceeds from issuances under the Employee Stock Purchase Plan (“ESPP”) of $4.7 million, partially offset by payments for taxes related to net settlement of equity awards of $12.8 million and debt issuance costs of $0.4 million. 42 Table of Contents 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 an 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 ESPP of $4.1 million.
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.
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, depreciation, and the amortization of acquired technology.
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.
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.
The non-cash charges were primarily comprised of depreciation and amortization expense of $10.6 million, stock-based compensation expense of $51.2 million, partially offset by accrued interest on marketable securities of $3.2 million, and other net activity of $0.4 million.
The non-cash charges were primarily comprised of depreciation and amortization expense of $10.6 million and stock-based compensation expense of $51.2 million, partially offset by accrued interest on marketable securities of $3.2 million, and other net activity of $0.4 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.
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.
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 net cash outflows from the change in our net operating assets and liabilities were primarily due to an $7.7 million increase in deferred costs and a $9.3 million increase in accounts receivable, partially offset by a $3.6 million increase in deferred revenues, a $0.4 million decrease in prepaid expenses and other assets, and a $0.1 million increase in accounts payable and accrued liabilities.
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.
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, 2024, 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.
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.
These are generally one-time requests and involve unique, non-standard features, functions, conversions, 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.
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 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, 2024. We predominantly employ a per-registered-user pricing model, with incremental fees above certain contractual client minimum commitments for each licensed solution.
As a result of our valuation allowance, provision (benefit) for income taxes consists primarily of current state income taxes and deferred taxes related to the tax amortization of acquired goodwill.
As a result of our valuation allowance, provision for income taxes consists primarily of current state income taxes and deferred taxes related to the tax amortization of acquired goodwill.
We have invested significant resources to build a technology stack that prioritized innovation velocity and speed-to-market given the importance of product depth and functionality in winning and retaining clients. In fiscal 2020, we acquired ACH Alert, LLC (“ACH Alert”) to pursue adjacent product opportunities, such as fraud prevention and to expand our addressable market.
We have invested significant resources to build a technology stack that prioritized innovation velocity and speed-to-market given the importance of product depth and functionality in winning and retaining clients. In October 2020, we acquired ACH Alert, LLC (“ACH Alert”) to pursue adjacent product opportunities, such as fraud prevention and to expand our addressable market.
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.
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, 2024. We derive the majority of our revenues from SaaS subscription services charged for the use of our digital banking solution.
We recognize variable consideration related to registered user counts in excess of the contractual minimum amounts each month. SaaS subscription revenues also includes annual and monthly charges for maintenance and support services which are recognized on a straight-line basis over the subscription term.
We recognize variable consideration related to registered user counts in excess of the contractual minimum amounts each month. SaaS subscription revenues also include annual and monthly charges for maintenance and support services, which are recognized on a straight-line basis over the subscription term.
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.
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.
We expect cost of revenues to continue to grow in absolute dollars as we grow our business, but to vary as a percentage of revenues from period to period as a function of the utilization of implementation and support personnel and the extent to which we recognize fees from bill-pay services and other third-party functionality integrated into our solutions.
We expect cost of revenues to continue to grow in absolute dollars as we grow our business, but to vary as a percentage of revenues from period to period as a function of the utilization of implementation and support personnel and the extent to which we 37 Table of Contents recognize fees from bill-pay services and other third-party functionality integrated into our solutions.
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.
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. Business Combinations Our acquisitions are accounted for using the acquisition method of business combinations accounting.
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. To support our growth and capitalize on our market opportunity, we have increased our operating expenses across all aspects of our business.
In these cases, 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. To support our growth and capitalize on our market opportunity, we have increased our operating expenses across all aspects of our business.
The Alkami Digital Banking Platform offers an end-to-end set of software products.
The Alkami Digital Banking Platform offers an end-to-end set of digital banking products.
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.
A discussion regarding our financial condition and results of operation for the fiscal year ended December 31, 2024, compared to the fiscal year ended December 31, 2023, is presented below.
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.
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.
We believe ARR provides important information about our future revenue potential, our ability to acquire new clients, and our ability to maintain and expand our relationship with existing clients.
We believe ARR provides important information about our future revenue potential, our ability to acquire new clients, and our ability to maintain and expand our relationship with existing clients. Registered Users.
After the Financial Covenant Trigger Date, the existing annual recurring revenue growth and liquidity financial covenants are no longer applicable, and the following covenants take effect: (i) a consolidated total leverage ratio requiring the ratio, as calculated at the last day of such fiscal quarter for the period of 12 consecutive months then ending, to be less than 3.50:1.00; and (ii) a consolidated fixed charge ratio requiring the ratio, for any fiscal quarter ending as calculated at the last day of such fiscal quarter for the period of 12 consecutive months then ending, to be more than 1.25:1.00.
After the Financial Covenant Trigger Date, the existing annual recurring revenue growth and liquidity financial covenants are no longer applicable, and the following covenants take effect: (i) a consolidated total leverage ratio requiring the ratio, as calculated at the last day of such fiscal quarter for the period of 12 consecutive months then ending, to be less than 3.50:1.00; and (ii) a consolidated interest coverage ratio requiring the ratio, for any fiscal quarter ending as calculated at the last day of such fiscal quarter for the period of 12 consecutive months then ending, to be more than 3.00:1.00.
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.
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; secondary offering costs; acquisition-related expenses, net; and loss on extinguishment of debt.
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.
A discussion regarding our financial condition and results of operations for fiscal year ended December 31, 2023, compared to the fiscal year ended December 31, 2022, can be found under Item 7 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 29, 2024.
General and administrative expenses also include accounting, auditing and legal professional services fees, travel and other unallocated corporate-related expenses such as the cost of our facilities, employee relations, corporate telecommunication and software.
General and administrative expenses also include accounting, auditing and legal professional services fees, secondary offering costs, travel and other unallocated corporate-related expenses, such as the cost of our facilities, employee relations, corporate telecommunication and software.
For additional information regarding adjusted EBITDA, see “Key Business Metrics.” Key Business Metrics Adjusted EBITDA. 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.
(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. For additional information regarding adjusted EBITDA, see “Key Business Metrics.” 39 Table of Contents Key Business Metrics Adjusted EBITDA.
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.
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. Revenue per Registered User (RPU).
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.
The net cash outflows from the change in our net operating assets and liabilities were primarily due to an $8.6 million increase in deferred costs, $4.0 million increase in prepaid expenses and other assets, and a $3.2 million increase in accounts receivable, partially offset by a $3.3 million increase in accounts payable and accrued liabilities, and a $2.7 million increase in deferred revenues.
In research and development, we continue to focus on innovation and bringing novel capabilities to our platform, extending our product depth. Similarly, we continue to expand our sales and marketing organization focusing on new client wins, cross-selling opportunities, and client renewals.
In research and development, we continue to focus on innovation and bringing novel capabilities to our platform, extending our product depth. Similarly, we continue to expand our sales and marketing organization focusing on new client wins, cross-selling opportunities and client 35 Table of Contents renewals.
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%.
The increase in revenues was primarily due to registered user growth of 2.5 million, comprised of 1.3 million in registered user growth from existing clients and 1.2 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 7.1%.
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.
In conjunction with closing the Amended Credit Agreement in 2022, First Amendment in 2023, and Second Amendment in 2024, we incurred issuance costs of $0.9 million, $0.3 million and $0.4 million, respectively, which were deferred and were scheduled to be amortized over the remaining term of the agreement.
Our most significant accounting policies, including Revenue Recognition, Deferred Costs to Obtain Client Contracts, Deferred Implementation Costs and Business Combinations, are described in Note 2 of the Notes to the Consolidated Financial Statements. Some of those significant accounting policies require us to make difficult, subjective, or complex judgments, or estimates.
Our most significant accounting policies, including Revenue Recognition and Business Combinations, are described in Note 2 of the Notes to the Consolidated Financial Statements. Some of those significant accounting policies require us to make difficult, subjective, or complex judgments, or estimates.
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.
We remain committed to investing in our platform, notably through our research and development spend, which was 28.8% of our revenues for the year ended December 31, 2024. Our future success will depend on our continued leadership in innovation.
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.
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, marketing, data insights, card experience, money movement, customer service, business banking, financial wellness, security and fraud protection and extensibility. We primarily go to market through an internal sales force.
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.
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.
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.
Provision for Income Taxes The Company recorded a provision for income taxes of $0.3 million and less than $0.1 million, resulting in an effective tax rate of (0.8)% and (0.1)% for 2024 and 2023, respectively.
We expect that general and administrative expenses will continue to increase as we scale our business and as we incur costs associated with being a publicly traded company, including legal, audit, business insurance and consulting fees. Acquisition-Related Expenses, net.
We expect that general and administrative expenses will continue to increase as we scale our business and as we incur costs associated with being a publicly traded company, including legal, audit, business insurance and consulting fees. Acquisition-Related Expenses, net. Acquisition-related expenses, net, include acquisition-related expenses primarily related to accrual of deferred compensation, legal, consulting and professional fees.
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.
SaaS subscription revenues, as further described below, represented 95.6%, 95.3%, and 95.2% of total revenues for the years ended December 31, 2024, 2023, and 2022, respectively.
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.
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 and realized gains on sales of marketable securities.
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 ability to maintain a differentiated platform and offering is dependent upon our pace of innovation. 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.
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.
For the years ended December 31, 2024, 2023, and 2022, our total revenues were $333.8 million, $264.8 million, and $204.3 million, respectively, representing a growth rate of 26.1% from 2023 to 2024 and 29.6% from 2022 to 2023.
The Company has a standby letter of credit in the amount of $0.3 million, which serves as security under the lease relating to the Company’s office space that expires in 2033.
The Company has a standby letter of credit in the amount of $0.3 million, which serves as security under the lease relating to the Company’s office space that expires in 2033. The Amended Credit Agreement contains customary affirmative and negative covenants.
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.
The following disaggregates our revenues for the years ended December 31, 2024, 2023, and 2022 by major source: Year ended December 31, 2024 2023 2022 (in thousands) SaaS subscription services $ 319,243 $ 252,348 $ 194,387 Implementation services 7,604 8,488 6,941 Other services 7,002 3,995 2,942 Total revenues $ 333,849 $ 264,831 $ 204,270 See Note 4 of the Notes to the Consolidated Financial Statements for additional detail.
Our gross margin for the years ended December 31, 2023, 2022, and 2021 was 54.4%, 53.0%, and 55.1%, respectively.
Our gross margin for the years ended December 31, 2024, 2023, and 2022 was 58.9%, 54.4%, and 53.0%, respectively.
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.
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.
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.
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. 41 Table of Contents Liquidity and Capital Resources As of December 31, 2024, we had $115.7 million in cash and cash equivalents and marketable securities, and an accumulated deficit of $476.2 million.
Provision (Benefit) for Income Taxes Our effective tax rate differs from the statutory tax rate primarily due to the impact of the valuation allowance against our deferred tax assets. As a result of our valuation allowance, provision (benefit) for income taxes consists primarily of state income taxes and deferred taxes related to the tax amortization of acquired goodwill.
Provision (Benefit) for Income Taxes Our effective tax rate differs from the statutory tax rate primarily due to the impact of the valuation allowance against our deferred tax assets and state tax expense.
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.
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.
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.
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.
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.
In addition, these expenses are inclusive of any gain or loss on revaluation of contingent consideration. Amortization of Acquired Intangibles. 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.
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.
Net Cash Provided by Investing Activities During the year ended December 31, 2024, net cash provided by investing activities was $23.0 million, primarily consisting of $71.3 million in proceeds from sales, maturities, and redemptions of marketable securities, partially offset by $40.4 million for the purchase of marketable securities, $6.7 million related to capitalized software development costs, and capital expenditures related to updates for computer and other equipment of $1.2 million.
Year ended December 31, ($ 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.
The following table presents our selected consolidated statements of operations data for the years ended December 31, 2024, 2023, and 2022. 38 Table of Contents Year ended December 31, ($ in thousands, except share and per share amounts) 2024 2023 2022 Revenues $ 333,849 $ 264,831 $ 204,270 Cost of revenues (1) 137,219 120,720 95,946 Gross profit 196,630 144,111 108,324 Operating expenses (1) : Research and development 96,211 84,661 69,329 Sales and marketing 59,765 48,557 36,811 General and administrative 83,650 72,900 71,247 Acquisition-related expenses, net 195 263 (12,529) Amortization of acquired intangibles 1,435 1,435 1,155 Total operating expenses 241,256 207,816 166,013 Loss from operations (44,626) (63,705) (57,689) Non-operating income (expense): Interest income 4,560 8,095 2,696 Interest expense (461) (7,384) (3,850) Gain (loss) on financial instruments — 534 (200) Loss on extinguishment of debt — (409) (18) Loss before income taxes (40,527) (62,869) (59,061) Provision (benefit) for income taxes 308 44 (461) Net loss $ (40,835) $ (62,913) $ (58,600) (1) Includes stock-based compensation expenses as follows: Year ended December 31, ($ in thousands) 2024 2023 2022 Cost of revenues $ 5,366 $ 5,584 $ 4,389 Research and development 17,279 15,995 11,398 Sales and marketing 9,049 7,220 4,042 General and administrative 27,743 22,432 24,763 Total stock-based compensation expenses $ 59,437 $ 51,231 $ 44,592 The following table presents our reconciliation of GAAP net loss to adjusted EBITDA for the periods indicated.
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.
Cash Flows The following table summarizes our cash flows for the periods indicated: Year ended December 31, (in thousands) 2024 2023 Net cash provided by (used in) operating activities $ 18,597 $ (17,502) Net cash provided by investing activities $ 23,041 $ 33,911 Net cash provided by (used in) financing activities $ 11,794 $ (87,819) Net Cash Provided by (Used in) Operating Activities During the year ended December 31, 2024, net cash provided by operating activities was $18.6 million, which consisted of a net loss of $40.8 million, adjusted by non-cash charges of $69.2 million, and net cash outflows from the change in net operating assets and liabilities of $9.8 million.
In addition, in September 2021, we acquired MK Decisioning Systems, LLC (“MK”), a technology platform for digital account opening, credit card and loan origination solutions. In April 2022, we acquired Segmint, a leading cloud-based financial data analytics and transaction data cleansing provider.
In September 2021, we acquired MK Decisioning Systems, LLC (“MK”), a technology platform for digital account opening, credit card and loan origination solutions. In April 2022, we acquired Segmint, Inc. (“Segmint”), a leading cloud-based financial data analytics and transaction data cleansing provider. During 2024, we established a new subsidiary in India to support potential future operational needs.
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.
We incurred net losses of $40.8 million, $62.9 million, and $58.6 million for the years ended December 31, 2024, 2023, and 2022, respectively, largely due to significant continued investment in sales, marketing, product development and post-sales client activities. Recent Developments Second Amendment to Amended and Restated Credit Agreement.
Non-Operating Income (Expense) Non-operating income increased $2.2 million for 2023 compared to 2022, primarily due to higher net interest income of $1.9 million and an increase in gain on financial instruments of $0.7 million, partially offset by a $0.4 million increase in loss on extinguishment of debt.
Non-Operating Income (Expense) Non-operating income increased $3.3 million for 2024 compared to 2023, primarily due to a $3.4 million increase in net interest income and a reduction in loss on extinguishment of debt of $0.4 million, partially offset by a $0.5 million reduction in gain on financial instruments related to marketable securities.
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.
The increase in cost of revenues was primarily driven by $14.6 million in higher costs of our third-party partners where we resell their solutions as part of the digital platform, and a $0.6 million increase in personnel-related costs (which includes a decrease in stock-based compensation of $0.2 million) resulting from headcount increases supporting our growth in the following teams: client implementation, site reliability engineering and client support, as well as higher miscellaneous other costs of $1.7 million.
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.
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.
Our net losses have been driven by our investments in developing our digital banking platform, expanding our sales, marketing and implementation organizations, and scaling our administrative functions to support our rapid growth.
Our net losses have been driven by our investments in developing our digital banking platform, expanding our sales, marketing and implementation organizations, and scaling our administrative functions to support our rapid growth. We have financed our operations primarily through cash generated from the sale of SaaS subscription services.
The First Amendment also added, applicable beginning June 30, 2023, a free cash flow covenant requiring, as calculated at the last day of such fiscal quarter for the period of 12 consecutive months then ending, free cash flow to be not less than $(75.0) million for the fiscal quarters ended June 30, 2023 and September 30, 2023, respectively, and $(50.0) million for the fiscal quarter ended December 31, 2023 and each fiscal quarter ending thereafter.
The Second Amendment revised the free cash flow covenant, as calculated at the last day of each fiscal quarter for the period of 12 consecutive months then ending, requiring free cash flow to be not less than $(25.0) million for the fiscal quarter ended September 30, 2024 and each fiscal quarter ending thereafter.
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%).
The major components of cost of revenues are represented in the following table as percentages of revenues for the years ended December 31, 2024, 2023, and 2022, respectively: Year ended December 31, (Cost component as a % of revenue) 2024 2023 2022 Third-party hosting services 5.9 % 7.5 % 7.8 % Direct costs of bill-pay and other third-party intellectual property 18.2 % 17.4 % 16.3 % Implementation and client support teams 9.6 % 12.7 % 14.8 % Development team (maintenance and updates) 3.6 % 3.3 % 3.6 % Amortization 2.2 % 2.5 % 2.2 % Stock-based compensation 1.6 % 2.1 % 2.1 % Depreciation — % 0.1 % 0.1 % Operating Expenses Research and Development.
Sales and marketing expenses also include travel and related costs, outside consulting fees and marketing programs, including lead generation, costs of our annual client conference, advertising, trade shows and other event expenses.
Sales and marketing expenses also include travel and related costs, outside consulting fees and marketing programs, including lead generation, costs of our annual client conference, advertising, trade shows and other event expenses. We expect sales and marketing expenses will continue to increase as we expand our direct sales teams to pursue our market opportunity. General and Administrative .
Total interest expense, including commitment fees and unused line fees, for the years ended December 31, 2023, 2022, and 2021, was $7.4 million, $3.9 million, and $1.2 million, respectively.
The Company was in compliance with all covenants as of December 31, 2024. Total interest expense, including commitment fees and unused line fees, for the years ended December 31, 2024, 2023, and 2022 was $0.5 million, $7.4 million and $3.9 million, respectively.
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).
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. Annual Recurring Revenue (ARR).
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 increase was primarily due to an $8.6 million increase in personnel-related costs (which includes stock-based compensation of $1.8 million) resulting primarily from headcount growth in our sales and marketing teams. In addition, we incurred $1.7 million in higher consulting costs, and $1.0 million in higher travel costs for our sales team.
Factors Affecting our Operating Results Growing our FI Client Base. A key part of our strategy is to grow our FI client base. As of December 31, 2023, we served 236 FIs through the Alkami Digital Banking Platform and over 650 clients when including unique clients only subscribing to one or a combination of ACH Alert, MK or Segmint products.
As of December 31, 2024, we served 272 FIs through the Alkami Digital Banking Platform and over 750 clients when including unique clients only subscribing to one or a combination of ACH Alert, MK or Segmint products.
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.
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. 44 Table of Contents 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.
These expenses were partially offset by an increase of $1.8 million in capitalized development costs and a decrease of $0.5 million in consulting costs. 38 Table of Contents Sales and Marketing Sales and marketing expenses increased $11.7 million, or 31.9%, for 2023 compared to 2022.
These expenses were partially offset by an increase of $1.4 million in capitalized development costs. Sales and Marketing Sales and marketing expenses increased $11.2 million, or 23.1%, for 2024 compared to 2023.
Unamortized debt issuance costs totaled $0.3 million, $0.7 million, and $0.1 million as of December 31, 2023, 2022, and 2021, respectively.
Unamortized debt issuance costs totaled $0.5 million, $0.3 million, and $0.7 million as of December 31, 2024, 2023, and 2022 respectively. Amortization expense totaled $0.2 million, $0.4 million, and $0.3 million for the years ended December 31, 2024, 2023, and 2022, respectively.
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.
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.
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.
RPU growth was primarily driven by cross-sell activity to existing clients and higher average RPU of new clients implemented on our digital banking platform compared to aggregate RPU. The average RPU of users from new clients implemented on our digital platform in the last year of $21.70 is 21.8% higher than the aggregate RPU as of December 31, 2024.
Operating Expenses Research and Development. Research and development costs consist primarily of personnel-related costs for our engineering, information technology and product employees, including salaries, bonuses, other incentive-related compensation, employee benefits and stock-based compensation.
Research and development costs consist primarily of personnel-related costs for our engineering, information technology and product employees, including salaries, bonuses, other incentive-related compensation, employee benefits and stock-based compensation. In addition, we also include third-party contractor expenses, software development and testing tools, allocated corporate expenses and other expenses related to developing new solutions and upgrading and enhancing existing solutions.
Operating Expenses Year ended December 31, Change ($ 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.
These expenses were partially offset by a decrease in hosting costs of $0.4 million. 40 Table of Contents Operating Expenses Year ended December 31, Change ($ in thousands) 2024 2023 $ % Research and development $ 96,211 $ 84,661 $ 11,550 13.6 % Sales and marketing 59,765 48,557 11,208 23.1 % General and administrative 83,650 72,900 10,750 14.7 % Acquisition-related expenses, net 195 263 (68) (25.9) % Amortization of acquired intangibles 1,435 1,435 — — % Total operating expenses $ 241,256 $ 207,816 $ 33,440 16.1 % Percentage of revenues 72.3 % 78.5 % Research and Development Research and development expenses increased $11.6 million, or 13.6%, for 2024 compared to 2023, primarily due to a $5.8 million increase in personnel-related costs (which includes stock-based compensation of $1.3 million) resulting primarily from headcount growth, $5.4 million in higher consulting costs, $1.1 million in higher hosting costs, and higher miscellaneous other costs of $0.7 million.
Cost of Revenues and Gross Margin Year ended December 31, Change ($ 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 $24.8 million, or 25.8%, for 2023 compared to 2022, generating a gross margin of 54.4% for 2023 compared to a gross margin of 53.0% for 2022.
Cost of Revenues Year ended December 31, Change ($ in thousands) 2024 2023 $ % Cost of revenues $ 137,219 $ 120,720 $ 16,499 13.7 % Percentage of revenues 41.1 % 45.6 % (4.5) % (9.9) % Cost of revenues increased $16.5 million, or 13.7%, for 2024 compared to 2023, generating a gross margin of 58.9% for 2024 compared to a gross margin of 54.4% for 2023.
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 increase was primarily due to a $6.5 million increase in personnel-costs (which includes stock-based compensation of $5.3 million) resulting primarily from headcount growth, higher audit and consulting fees of $2.4 million, higher software costs of $1.7 million, and $1.3 million of secondary offering costs. These expenses are partially offset by $1.1 million lower miscellaneous other costs.
Furthermore, expanding our product suite expands our Revenue per Registered User (“RPU”) potential. For additional information regarding RPU, see “Key Business Metrics.” Client Renewals. Our model and the stability of our revenue base is, in part, driven by our ability to renew 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. Furthermore, expanding our product suite expands our Revenue per Registered User (“RPU”) potential. For additional information regarding RPU, see “Key Business Metrics.” Client Renewals.
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.
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. Sales and Marketing.
In addition to extending existing relationships, renewals provide an opportunity to grow minimum contract value, as over the course of a contract term our clients often grow, or their needs evolve. Client renewals are also an important lever in driving our long-term gross margin targets, as we generally achieve approximately 70% gross margin upon renewal.
Our model and the stability of our revenue base is, in part, driven by our ability to renew our clients. In addition to extending existing relationships, renewals provide an opportunity to grow minimum contract value, as over the course of a contract term our clients often grow, or their needs evolve.
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.
Year ended December 31, ($ in thousands) 2024 2023 2022 Net loss $ (40,835) $ (62,913) $ (58,600) Provision (benefit) for income taxes 308 44 (461) (Gain) loss on financial instruments — (534) 200 Interest (income) expense, net (4,099) (711) 1,154 Depreciation and amortization 10,508 10,631 8,075 Stock-based compensation expense 59,437 51,231 44,592 Secondary offering costs (1) 1,337 — — Acquisition-related expenses, net 195 263 (12,529) Loss on extinguishment of debt — 409 18 Adjusted EBITDA (2) $ 26,851 $ (1,580) $ (17,551) (1) Pursuant to the requirements of the Fourth Amended and Restated Investors’ Rights Agreement, dated as of September 24, 2020, by and among the Company and the investors listed therein, the Company incurred secondary offering costs on behalf of the Selling Stockholders related to the offerings closed on August 12, 2024 and November 8, 2024.
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.
Our platform model with more than 300 integrations as of December 31, 2024 enables us to deliver thousands of configurations aligned with the digital platform strategies adopted by our clients.

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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 changeAssuming the amounts outstanding under our Amended Credit Agreement are fully drawn, a hypothetical 10% change in interest rates would not have a material impact on our consolidated financial statements. Our cash, cash equivalents and restricted cash consist primarily of interest-bearing accounts. Such interest-earning instruments carry a degree of interest rate risk.
Biggest changeAssuming the amounts outstanding under our Amended Credit Agreement are fully drawn, a hypothetical 10% change in interest rates would not have a material impact on our consolidated financial statements. Our cash and cash equivalents consist primarily of interest-bearing accounts. Such interest-earning instruments carry a degree of interest rate risk.
Because 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
Because of the short-term maturities of our cash, cash equivalents, 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. 45 Table of Contents

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