Alkami Technology, Inc. (ALKT) Q4 2025 Earnings Report, Transcript and Summary

Good afternoon, ladies and gentlemen, and welcome to the Alkami Technology Fourth Quarter 2025 Financial Results Conference Call. [Operator Instructions] This call is being recorded on Wednesday, February 25, 2026. I'd like to turn the conference over to Steve Calk. Steve, go ahead.

Thank you, Natasha. With me on today's call are Alex Shootman, Chief Executive Officer; and Cassandra Hudson, Chief Financial Officer. During today's call, we may make forward-looking statements about guidance and other matters regarding our future performance. These statements are based on management's current views and expectations and are subject to various risks and uncertainties. Our actual results may be materially different. For a summary of risk factors associated with our forward-looking statements, please refer to today's press release and the sections in our latest 10-K entitled Risk Factors and Forward-Looking Statements. Statements made during the call are being made as of today, and we undertake no obligation to update or revise these statements. Also, unless otherwise stated, financial measures discussed in this call will be on a non-GAAP basis. We believe these measures are useful to investors in the understanding of our financial results. A reconciliation to the comparable GAAP financial measures can be found in our earnings press release and in our filings with the SEC. I'd now like to turn the call over to Alex.

Good afternoon, and thank you all for joining us. I am pleased to announce a strong fourth quarter performance, which caps off a great year for Alkami. For both the fourth quarter and the year, Alkami exceeded consensus revenue and adjusted EBITDA estimates. In the fourth quarter, we grew revenue 35% and increased adjusted EBITDA to $19 million. And for the full year, we achieved revenue growth of 33% and adjusted EBITDA of over $59 million, which is more than double the adjusted EBITDA we delivered in 2024. The fourth quarter was a strong sales quarter with 16 new digital banking clients, including 6 banks and 33 new MANTL clients, including 18 credit unions. In 2025, we matched the best year in our history in terms of digital banking new logos with 39 new clients, and MANTL had the best new client booking year in its history. Our MANTL origination platform now has 161 clients live, of which 26 are digital banking clients, and we now have 436 clients live on one of our 2 strategic platforms. In addition to our overall performance, there are 3 areas of our business to call out: the performance of our MANTL acquisition, progress in the bank market, and our ability to integrate digital banking, deposit origination and data and marketing to improve our win rates. The performance of MANTL accelerated since we brought the 2 companies together. In addition to a full record full year new logo performance for MANTL, Q4 was a record revenue activation quarter. A competitive advantage of MANTL is the combination of digital and in-branch originations, and MANTL is now powering over 1,000 bank and credit union branches across the U.S. It was also exciting to see 2 loan origination clients go live and 13 new loan platform clients signed in Q4. We continue to make progress in the bank market, with Q4 being our 2nd best bank new logo quarter in our history. In 2025, we brought 16 banks live on our Digital Banking platform and now have 50 banks under contract with 37 logged on the Alkami platform. We released a new suite of treasury management features with a follow-on feature bundled planned for the second quarter, all of which are intended to improve win rates. We are also seeing more banks separating online banking from their core provider, creating a long growth horizon for Alkami, as 78% of banks on dominant bank cores use the legacy core provided online product versus 43% of credit unions on dominant CU cores who use the legacy online product. Part of the MANTL acquisition thesis was the creation of the Alkami Digital Sales and Service Platform, or DSSP. This is the integration of our Digital Banking, Account Origination and Data and Marketing platforms with the intent to provide a financial institution with capabilities rivaling Chase and Chime. In the second half of 2025, we demonstrated outcomes like the ability to bring on a new account holder and have them in Digital Banking with multiple products and services in less than 5 minutes. The Alkami DSSP had a positive impact on our second half performance. When we acquired MANTL, 11 clients -- 11 Alkami clients had all 3 DSSP products. At the end of 2025, we had 45 clients that have bought all 3 products. In the second half, 58% of new digital banking deals resulted in DSSP clients, and our win rates against all our competitors improved. In addition to improved win rates, we enjoy a 30% uplift in ARR when clients buy DSSP and increase the contract legs for origination and data and marketing, resulting in a total contract value uplift. The MANTL acquisition, progress in the bank market and initiation of our DSSP all contributed to a strong business performance in the second half of 2025. I'm often asked about the impact of AI on Alkami. I believe that AI's impact will be significant, but not uniform across enterprise SaaS companies, and AI will be a net positive for Alkami. Let me remind everyone about key aspects of the Alkami business model. Alkami primarily prices our products by the number of digital account holders at an institution, with secondary pricing tied to metrics like money movement usage or asset size. In addition, our clients typically sign 5- to 7-year contracts. Alkami employees have a deep understanding of the bank and credit union industry and technology. This expertise has been developed through thousands of customer engagements and is used in areas of our business like the system conversion process. These conversions last 9 to 12 months, of which only about 2 to 3 months is actual configuration time. Our clients are highly risk-averse and regulated by agencies such as FDIC, OCC, NCUA and CISA. Their Digital Banking, deposit and Loan Origination platforms embed thousands of regulatory requirements, including NFI's decisions on how they've implemented KYC, AML, OFAC, Reg E, D and Z, audit logging, examiner workflows, data retention and explainability requirements. Our platforms have to integrate into over 450 different financial technology systems, few of which have publicly available integration specifications and all of which have the potential for imposing legal liability. Customers use Alkami as a system of record to codify items like their fraud mitigation practices, money moving thresholds, business logic for products, funding and interest rates. They memorialize customer due diligence, enhanced due diligence and decision logic such as approvals, outcomes and supporting reasons. On top of Alkami's business model, AI creates revenue opportunities in the form of current and coming AI products. Segmint, the AI engine that powers our Data & Marketing platform, helps financial institutions deliver the right product to the right account holder at the right time based on behavior, transaction patterns and life events. This technology was attached to all but 2 of our new logos this year. One of the fraud products we sell uses AI to analyze how a user interacts with digital banking, identifying signals that distinguish legitimate account holders from fraud attacks even when log-ins appear valid. This technology was attached to 67% of our new logos this year. At our April Client Conference, we plan to show a new product called Alkami Code Studio. Today, clients use our SDK to extend the Alkami platform for their unique requirements. We built an AI-native closed-loop development agent optimized on over 6 million lines of SDK code from across our ecosystem. This agent will enable prop-driven deployment of our SDK, and what used to take clients months will now take days. AI models run on data. Our clients want to deploy AI, but they need a data set unique to their industry to feed their models. We spent the last 18 months building a data lake that ingests cleansed core data, digital banking data, usage patterns and other information that can be used for AI. We have the opportunity to turn this data into products that our clients can use to deploy through own AI models. Finally, AI will create leverage within Alkami. Over the last year, we've introduced Gen AI models and agents into our organization. And while we are not yet ready to change assumptions on our long-term financial models, early results are promising. We're using specialized AI agents in our development organization that in December alone changed over 1 million lines of code, leading to an 18% increase in developer productivity. We have proof of concepts underway in AI-driven test case generation, proactive anomaly detection to minimize downtime, and we are auto running agents to accelerate incident resolution. Within our customer support and implementation organization, we're also seeing results that are encouraging. Members of the implementation team are seeing on average, almost 2 hours a day, and we've been able to slow the growth of our support organization while still achieving a 9% increase in speed of ticket closures. In addition, questions routed to the engineering organization have been reduced by 29%, freeing up engineering capacity. The pace of AI disruption will be relentless. And for a specialized vertical software provider in a highly regulated industry like Alkami, it will create new opportunities. In closing, I'm energized as we start 2026. Within our ideal client profile, there are over 900 credit unions and 1,000 banks that are not using modern technology like Alkami. We continue to see steady demand for digital banking transformation. Our sales pipeline remains consistent with recent years, and Alkami has a superior position with differentiated products designed for scalability and populated with proprietary data. More than 1,200 Alkamists remain committed to our clients as our North Star and know that doing it right is as important as getting it done. Thank you, Alkamists, for who you are and for building the company where I get to work. I'll now hand the call to Cassandra to discuss our financial results.

Thanks, Alex, and good afternoon, everyone. 2025 was a standout year for Alkami. We delivered robust revenue growth while meaningfully expanding profitability and cash flow, demonstrating the durability and leverage of our model. For the full year, total revenue reached $443.6 million, up 33% year-over-year. Subscription revenue grew 32% and represented 95% of our total revenue. Adjusted EBITDA more than doubled to $59.1 million compared to $26.9 million in 2024, and our adjusted EBITDA margin expanded 530 basis points to 13.3%. Our performance built throughout the year and positioned us to exit 2025 with significant momentum. In the fourth quarter, revenue was $120.8 million, up 35% year-over-year. Subscription revenue grew 34% and again represented 95% of total revenue. We increased ARR by 35% and exited the quarter at $480 million. Importantly, we have approximately $71 million of ARR in backlog pending implementation, which includes 42 new clients, representing roughly 1.6 million digital users. We expect the majority of this backlog to launch over the next 12 months. Our results are reported inclusive of MANTL. At this point, the businesses are functionally integrated and distinguishing between organic and acquired contributions is increasingly arbitrary. In fact, more than half of our new logos in the second half purchased Digital Banking, Origination and Data & Marketing together. That's a direct reflection of the success of our Digital Sales and Service Platform strategy. DSSP strengthens our competitive position, particularly with banks, and extends contract durations across our origination in Data & Marketing products. In the near term, we anticipate that a DSSP deployment may take longer than a stand-alone origination or Data & Marketing implementation, which would shift some revenue out by a few quarters. However, that short-term timing impact is more than offset by stronger long-term economics, including higher retention, longer contract duration and greater customer lifetime value. We believe this integrated platform strategy represents a structural competitive advantage. We exited the year with 301 clients and 22.4 million registered users, an increase of 2.4 million users or 12% year-over-year. Over the past 12 months, we implemented 35 clients, supporting 1.3 million digital users, and existing clients increased their digital adoption by 1.5 million users. Our contracts provide strong visibility into attrition, typically 3 to 4 quarters in advance. In 2025, we churned less than 1% of our Digital Banking ARR. For 2026, we currently expect to churn 4 Digital Banking clients, which again represents less than 1% of ARR. This speaks to the mission-critical nature of our platform and the strength of our long-term client relationships. Revenue per user increased to $21.44, up 20% year-over-year, driven primarily by MANTL's contribution, strong cross-sell execution and increased user adoption among existing clients. Remaining performance obligations were approximately $1.7 billion or 3.6x live ARR, up 26% year-over-year, providing strong visibility into long-term revenue. Fourth quarter non-GAAP gross margin was 63.4%, up 30 basis points year-over-year. Expansion in the quarter was more modest, primarily due to higher database technology costs. We view this as a temporary increase and expect these costs to decline by the end of 2026. Full year non-GAAP gross margin was 64.1%, expanding nearly 140 basis points and driven by continued optimization of hosting costs, platform modernization and operating leverage across post-sale functions. Fourth quarter operating expenses were $57.9 million or 48% of revenue, representing 420 basis points of year-over-year expansion, primarily within R&D and G&A as we scale efficiently. Adjusted EBITDA in Q4 was $19.1 million, above the high end of our expectations, with an adjusted EBITDA margin of 15.8%. We have largely completed the initial investment phase of our captive offshore capability in India and expect incremental margin expansion as this facility reaches operational maturity in late 2026. We ended the quarter with $99.1 million in cash and marketable securities. For 2025, operating cash flow was $42.9 million, up from $18.6 million in 2024. Free cash flow was $34.2 million, driven by our enhanced profitability in the year, and we repaid $45 million on our revolving credit facility. Now turning to guidance. For Q1 2026, we expect revenue of $124.7 million to $125.7 million, representing growth of 27.5% to 28.5%, and adjusted EBITDA of $21.1 million to $21.9 million or 17.2% margin at the midpoint. As a reminder, we closed the MANTL acquisition on March 17, 2025. This timing will contribute approximately 8 percentage points of year-over-year growth to Q1 2026. Growth rates will become fully comparable beginning in Q2. For full year 2026, we expect revenue of $525.5 million to $530.5 million, representing growth of 18.5% to 19.6%, and adjusted EBITDA of $93.5 million to $97.5 million or 18.1% margin at the midpoint. Our revenue outlook reflects several underlying assumptions. We expect continued cross-sell momentum across the platform and a consistent level of ARR launches throughout the year. We also expect high single-digit ARPU growth, which incorporates a slight moderation in user growth among existing Digital Banking clients. In addition to those core drivers, we expect a 75% decline in termination fee revenue, which will reduce reported growth by a few percentage points in 2026. This impact is partially offset by the timing of the MANTL acquisition, which contributes modestly to our full year growth as mentioned previously. Turning to profitability. We expect a full year non-GAAP gross margin of approximately 65%. In the back half of 2026, we expect adjusted EBITDA margin to be north of 19%, weighted toward the fourth quarter and in line with our typical seasonal patterns. Overall, our nearly 500 basis points of margin expansion reflects leverage in the model, efficiencies from our offshore operations and continued operational discipline. In addition, we expect stock-based compensation to be between 14% and 15% of revenue. As we look ahead, we wanted to provide insight into our long-term model. These represent what we believe are achievable targets based on our long-term contracts and the current structure of our business. We remain confident in our long-term trajectory and expect to achieve a Rule of 45 by 2030. The key drivers of which include revenue growth fueled by a gradual increase in new logo wins in the bank market driven by our DSSP offering and continued leadership in the credit union market, consistent performance from our add-on sales effort and volume growth from existing customers that moderates in line with market growth, both of which we expect to drive continued RPU expansion and dollar churn of roughly 2% to 3% per year. Our long-term outlook does not assume incremental M&A. From a profitability perspective, we expect non-GAAP gross margin approaching 70% as we improve execution on bank launches over time and become more efficient at supporting our clients. Average annual adjusted EBITDA margin expansion of approximately 300 basis points driven by efficiencies from our offshore efforts in India and operational improvements from achieving greater scale, particularly in R&D and G&A. Lastly, we expect stock-based compensation to decline to approximately 10% of revenue. In closing, 2025 demonstrated the strength of Alkami's platform, the leverage in our model and the durability of our growth. We delivered best-in-class revenue growth, expanded margins meaningfully, generated strong cash flow and positioned the company for long-term value creation. We believe our Digital Sales and Service Platform strategy uniquely positions Alkami at the center of digital transformation for financial institutions, and we remain confident in our ability to deliver durable growth and increasing profitability in the years ahead. With that, operator, please open the line for questions.

[Operator Instructions] Your first question comes from Andrew Schmidt with KeyBanc Capital Markets.

I just wanted to start off on the 2026 outlook. Cassandra, you mentioned a few of the moving parts. Maybe if you could just walk through those? I think term fees were mentioned, DSSP implementation time frames, perhaps we could take a finer point there? And if there's any other factors to consider in the outlook because it does seem like the underlying demand trends are really strong, as you outlined. So important to parse out the moving parts in '26.

Sure. Thanks, Andrew. Thanks for the question. I think you're exactly right. I -- the underlying dynamics of our business are -- remain strong. And the items that we were commenting on regarding our 2026 guide are really timing related. The termination fees, in any given year, we have some amount of termination fees, and 2025 happened to be a bit of a higher year as it related to that. And I think 2026 is just a smaller amount of those fees, and it is impacting our growth by a few percentage points in the year. In addition to that, it's very early days for DSSP, but just given the fact that we're selling 3 products together, and our clients certainly have the optionality of how they will implement those on their side and what works best for them, we've been modeling slightly longer implementation cycles kind of closer to that 12-month period, which is more typical for digital banking. On a stand-alone basis, we would typically see our origination in Data & Marketing products be implementing -- implemented more around 6 months on average. So for those 2 products, in particular, when they're sold as part of a DSSP, we're modeling that revenue shifts out for 2 months as of now. Again, it's early days, and that may change over time, but felt that it was prudent to call out on the call.

Got it. That's super helpful. And I guess just a couple of follow-ups. Any other considerations in terms of implementation timing shifts outside of DSSP? And then I guess, just the second one. It sounds like as these implementations come online, they sort of lap or you sort of move past the elevated term fees, the growth could step up potentially as we go into '27. Maybe talk about that a little bit. And then I guess, what's the right baseline for pro forma growth this year? Because I know there is a little bit of MANTL that's baked in. So just as kind of a jumping off part. I know I baked a lot in there, but any help there would be helpful.

No worries. Yes, I would say those are the 2 big call-outs, along with what I think we've talked about over the past several calls and the trend that we've seen with the growth from our existing Digital Banking clients normalizing over time, right? So I think that is a factor as well for our revenue guidance that everyone should be aware of. Not ready to guide to 2027 at this point. But I think if you...

That was a good try, though.

If you isolate -- if you really isolate the term fees and the small impact from the timing of the MANTL acquisition, it should give you a good sense of where growth would be in 2026.

Our next question comes from Jacob Stephan with Lake Street.

Nice quarter. I just kind of wanted to touch on some of the milestones you hit here in 2025 and maybe kind of what you're seeing as you look at 2026 in the early kind of the first half here. Maybe if you could just kind of start with the loan activation. I know you said 2 go-lives in Q4, 13 signings in the same quarter. But maybe what are you seeing in the first half here with regards to MANTL and maybe overall DSSP?

Well, first of all, we've been really encouraged in terms of how DSSP helps with our win rate. We're -- what we're doing is creating a situation were instead of only focusing on a great user experience, which is really important. The integration of these 3 technologies actually creates a differentiated business outcome for the client. So the first integration that we're able to deliver increases the conversion rate of deposit originations, which is critical for these institutions. So what we're seeing on DSSP is our ability to connect to positive business outcomes is helping our win rate. So that's been super helpful. On the loan side, what we've talked about since the MANTL acquisition is that there is a project underway to build a loan capability. And that was driven by deposit origination clients who wanted to have an integrated front end, if you will, with both deposit origination and loan origination. The product build strategy has been to assemble a collection of lighthouse accounts, if you will, where those lighthouse accounts understand that they're participating in the build process and they're coming online as the product is becoming mature. So we're still not yet at the point where we've taken this product and are making it generally available for our entire sales force to sell. This is still something that is sold very carefully with the right type of account and knows the situation that they're getting into. And we'll be very public with you and the rest of the investment community when we consider that to be a full product in our portfolio.

Got it. And maybe just kind of touching on the full suite and bank clients specifically. We've obviously been talking about banks and their higher ARPU kind of nature to them. But now it feels like you're really starting to gain some traction with banks. Maybe you could kind of give us like a forward-looking, what's in the pipeline in terms of banks? And how do you see the mix evolving over the next 12 months?

One of the things that I mentioned was that our pipeline is consistent with previous years. The big move in the pipeline probably occurred 18 months, 2 years ago when the pipeline used to be probably 70-30 credit union and bank and it moved to about 50-50 credit union and bank. And so you should just take from my comments that consistent pipeline means that it's about 50-50 credit union banks. The dynamic that I mentioned during the call is really important to our long-term growth if you look at the difference between a bank market being a suite buyer and a credit union market being a best-of-breed buyer. And what I mentioned on the call is 78% of the institutions that are on the dominant bank cores have a V1 legacy online banking application that is tied to the core. That's what we're seeing unwind. And we've got an assumption that's built into our model that, that unwinds at a relatively measured pace over the next couple of years. So upside to our assumptions could be if that unwinds faster than we're assuming, and that would -- given our current win rates, that would take up the number of bank wins that we're assuming in our long-term model. But generally, what's win behind us in the bank market is our treasury road map is improving. Our technical skills to do the bank conversions, especially the commercial data conversions, is improving. And our knowledge of the dominant bank cores is improving. And what that does all of those things together reduces risk for a client who's making the decision to unwind from their suite purchase that they've had in the past and move to a best-of-breed purchase.

Your next question comes from Saket Kalia with Barclays.

Cassandra, maybe just to start with you. We walked through some of the moving parts on the revenue guide. But we didn't talk much about ARR. And I'm just kind of curious, I know you wouldn't necessarily guide to ARR on an out-year basis. But I'm curious, how do you think about it kind of going into '26? How much growth do you think we get from users versus maybe ARPU as we think about the building blocks?

Well, I guess I'm not prepared to kind of guide to ARR in that way. But if you think about the revenue guide, I think it translates pretty well to ARR. We expect high-digit growth in RPU. And I think we would see that flow through in the same way to ARR. And you can also see there's a pretty tight relationship in terms of the absolute dollar growth in revenue to ARR. So if you kind of look at that relationship, it should give you a good sense of how ARR will trend over time.

And then Saket, this is Alex. We're trying to share in terms of how we think about our model. If you go back 3 years ago or something like that and you looked at our customers' organic growth, it was pretty far above the general market. But all the way back at that point in time, what we were signaling is as Alkami grows and Alkami takes share, you would expect that our customers' organic growth would begin to match that of the rest of the market. And so that's one of the main things that we're trying to communicate to our investors is that which we told you several years ago, now that we've got 20-plus million account holders on the platform, that is becoming true for our company is that the customer organic growth is beginning to match the market.

That makes a lot of sense. It's a great flag and just shows how much market share you've taken over the years. So maybe that's a good segue into my follow-up for you, Alex. I mean, during your prepared remarks, you talked a little bit about customers that are still using some legacy tools, and you had some great stats on certain banks versus credit unions. But if I assume out a little bit, I guess, how do you think about the runway left maybe in terms of registered users, right, that could potentially modernize to a solution like Alkami over the coming years?

Yes. Thanks, Saket. That's one of the things I was trying to communicate in my comments. We look -- we go from TAM to SAM to ICP, right? So our ideal client profile. When we're looking at an ideal client profile, this is somebody that fits the size of institution that is the sweet spot for Alkami, right? So we would show up, and they would say what you have fits our need. And we have the experience integrating into the core that they're using. And so those are some of the numbers that I was sharing. When we look forward, there's still 1,000 banks and 900 credit unions that are in our ICP that can move to a more modern platform. Now we're going to have to compete for that with other great companies that can move to a more modern platform, and we already have experience integrating into their core. And that's one of the things that gives us a view of the durability of our growth in the future is that kind of runway that we still have in front of us.

Now have a question from Ella Smith with JPMorgan.

For my first one, I'm hoping to estimate organic ARR growth. If you assume that MANTL was about $40 million of ARR in the quarter, you get to about 24% organic ARR growth. Is that about right? Or does MANTL contribute more in ARR?

I guess, as I said on the call, it's a bit tricky to really parse that out, right? So with DSSP now, we're selling the 3 products in a bundled transaction. So it's a little bit arbitrary to determine the true organic contribution of MANTL. Kind of the math you were just walking through directionally makes sense as you think about the size of the MANTL business and how fast it's growing. But as I said, it's getting tougher and tougher to really parse that out.

That makes a lot of sense. And maybe for a quick follow-up. Your 2030 financial framework seems to imply your team's confidence that mid- to high teens revenue growth is achievable. And in this moment, there's a lot of uncertainty surrounding multiyear growth for software companies. Is there anything about Alkami or the market you would highlight that would give investors greater confidence surrounding Alkami's top line growth?

I mean, I think we've -- very consistent with what we were just talking about on 2026, we have a lot of great dynamics underpinning our business model. We have long-term contracts, a very sticky product, mission critical in a lot of ways. And so I think that is a really good setup for very durable growth in the next several years. Just to be clear on the long-term model framework, we're not guiding to specific revenue growth in those out years beyond -- not guiding to anything beyond 2026. We're really focused on achieving that Rule of 45 and expanding our adjusted EBITDA margin. Maybe a couple of things that might help you as you think about the model. In terms of how things will pace out over the years from margin expansion standpoint, we would expect that expansion to be more front-end loaded. So in the earlier is kind of consistent with the guidance I just gave for 2026 and the expansion we've seen over the past several years, we'll continue to see greater leverage from scaling our platform, having disciplined expense growth and seeing a continued mix shift towards our higher-margin revenue streams. As the model matures, the pace of margin expansion will naturally moderate. So I think that just might help give you some directional guidance on the overall picture. One thing to call out on the revenue growth. If you're modeling that towards 2030, I would think of a more linear progression, just given how our business works. We're not going to see any gradual -- or we don't expect to see any gradual step-downs as we scale or any sharp inflections from year to year. So kind of to summarize that, margin expansion skews earlier in the period. Revenue growth moderates in a steady and linear fashion toward that long-term framework that I gave on the call.

Your next question comes from Cris Kennedy with William Blair.

I'd love to hear from you, Cassandra. What are the key things that you're focused on? And what do you see in the business that you're -- are your priorities now that you've got this role?

Thanks, Cris. Thanks for the question. I think -- it's been -- I've learned a lot about the digital banking market over my first 90 days or so here. I think my priorities are really on supporting our growth, especially on the new customer side and making sure that we're activating customers and launching DSSP in particular. And then also just making sure that we are getting product out the door quickly, especially on the treasury management and loan origination side, which are clearly the newer areas that we've been investing in and will drive growth for us in -- over the longer term. So I'd say those are the biggest areas of focus for me as we think about the business, and also just everything AI related. I think that's a big topic and something that we are certainly putting a lot of energy into internally.

And thanks for the 2030 framework. As part of that, is there any way to think about free cash flow conversion as you think into 2030?

Good question. I think you can see that we've been expanding free cash flow pretty steadily now, especially in 2025. And I think we'll see free cash flow conversion from adjusted EBITDA continue to improve. I think a target for us would be 90% cash -- free cash flow conversion in that 2030 time frame.

Your next question comes from Adam Hotchkiss with Goldman Sachs.

Alex, I wanted to touch back on the 900 credit unions and your ICP. I think the 1,000 banks, very clear, there's the new DSSP offering, you're working on bringing that to market. And I'm sure there's going to be a sales effort around that. How do you think about the 900 credit unions? You've had a foothold in the credit union space for a long time now, catalysts for those folks moving on to more modern solutions that you think have been barriers over the last 3 to 5, even longer years?

Well, there has not been a specific barrier. If you think about jump balls, there's a certain number of jump balls per year based upon contract expiration. So if you had a V1 product and you had a 7-year contract and you might have had some disappointment in that V1 product and you said, "Boy, I'd like to see some improvement to it," you might have decided to re-up for another 7 years on that product because you didn't want to do the conversion and you thought there was going to be some improvement to it. And then now you're coming towards the end of that product life of that contract and now you finally decided after 2 contract cycles in 14 years, I don't have the digital platform that I need. And so I'm going to go ahead and move to a new platform. So those are the dynamics that we're seeing. Once again, this is a replacement market. This is a market share gain market, and that's why we see steady growth. You never will see explosive growth from a bookings perspective one quarter over another because it is a replacement market and it depends upon people getting to the end of their contract life cycle and then making a decision to switch. Now one of the things that helps them make the decision is if there is a modern provider like an Alkami that has a track record of moving customers to a new platform. If you think about Alkami, we've -- in 3 years, we've probably moved as many customers to a new platform as we did in the prior 8 years. So now prospects are able to talk to a whole lot of clients that have gone through a conversion process. And those clients have said this conversion process is pretty good. You should take the risk, it's worth it. So if I wrap all of that together on the credit union side, there's still a lot of market share that can be gained. That market share gets gained when the contract cycles come up. The customer has to have confidence that the conversion will go well. And all of those things now exist in the market in terms of confidence it can go well, good product, happy customers. That's why we still think that we've got room to grow in the credit union space.

Okay. Alex, that's clear. And then Cassandra, just on the EBITDA margin side for '26. Appreciate all the expansion that the company has had over the last 3 years, though I think the guide came in just a little bit light of expectations on the margin side. So anything to call out there, either on operating expenses or gross margin? Or is that maybe a little bit of conservatism baked in?

Thanks for the question. I think the one thing I tried to highlight on the call was the increased database technology costs that we started to incur in Q4. And those are pretty meaningful, a couple of million dollars that we've had to absorb. And so I think that's incremental to what we were expecting. And we do expect that cost increase to be temporary. And we will still expand our adjusted EBITDA margins by another 500 basis points in 2026 even with those incremental costs, but that would be the one thing that I would call out as a bit of an incremental or new thing that we're dealing with for this year.

I'm going to be less kind than Cassandra. If you go back to beginning of 2023, one of the guides that we gave was that in 2026, we'd be at 20% adjusted EBITDA. And then when we made the MANTL acquisition, we said that, that would temper down to 19%. We've had a third-party vendor that we run their database who just doubled our license cost. And that is the exact difference that you see between the 19% that we told you and what Cassandra is guiding to right now. And so now we're going to convert off of that database because we're frustrated that we got hit with a 2x increase on the database cost, and that's why it's a short-term anomaly for us.

Your next question comes from Jeff Van Rhee Craig-Hallum.

So Alex, just in terms of the mix of displacements when you're coming in and displacing legacy fabrics or frameworks, what are you displacing now versus, call it, 2 years ago and what's changed?

Well, in the bank market, it's primarily the digital platform that's offered by the core vendor. In the credit union market, it is -- I mean, the good news for us is, you know all the players in the market. So there's probably 3 modern players in the market, one that's primarily credit union, one that's credit union and banks. We are not displacing any of those technologies, and they're not displacing Alkami. All of us are displacing legacy kind of V1. So the bank market is always a core -- Digital Banking application that's tied to core. In the credit union market, there have been some companies that in the past had very good technology, but maybe in the most recent past, say, the last 3 to 4 years, they haven't been investing in their technology. Those are the ones that we're replacing.

Okay. One brief question on the bank side. If I have it right, 10 bank wins, second half of the year versus 9 a year earlier. Just thoughts there, specifically with the go-to-market? I know you've been trying to through getting more integrations and other things that you think will improve the ability to go sell that. But I know it's been a focus. Just where are we in terms of figuring that out? And what has to happen for that really to start to accelerate for you?

One of the big changes that we made from a go-to-market perspective is as we announced in the middle of the year that Nathaniel moved into the Chief Revenue Officer role, and through the back half of the year, he made a decision studying the market, studying the team, that from a new logo perspective, we would have a bank sales team and a credit union sales team on the online banking side. So that's a big change for us going into this year. We've always had a blended sales team prior to that. And now we have a concentrated sales team and a concentrated credit union team. In terms of the core integrations, we have experienced with the dominant cores that we need to do the integrations into for a client. As I may have mentioned in the third quarter call, we structured a commercial relationship that really has turned out to be a fantastic relationship with one of the core providers where we jointly do things like performance modeling with them. We've got direct support with them. And so that's helped us quite a bit in terms of allowing customers to be confident. Remember, the essential situation that we have with a bank client is they want a more modern platform. They have never existed with a best-of-breed strategy, and they need to overcome their perceived risk and get into that best-of-breed strategy. So when we can come to them, where we're working jointly with one of the core providers, we can help them see how that conversion is going to go. We can help them see what kind of support we're going to have. It really begins to derisk their decision. And Jeff, that's really what we have to do in the bank market is derisk a client's decision. Desire is to make a change, just whether or not they get comfortable with the risk.

Yes. Helpful. Maybe just last for me. Is there -- are you experiencing -- I don't know. It seems like a lack of urgency on the part of buyers that seem to have spiked maybe midyear last year. As I think about the progression of the guide through the year last year, as the year progressed, the year generally got more back-end loaded, and it was just that the go-lives were delayed. And going into midyear, I think you had 12-plus quarters, at least by my model, of mid-20s organic. And then in Q3, you dropped, call it, mid-teens and upper teens. And same for Q4, it looks like we're looking for the same in Q1. And I would have thought if a lot of those go-lives that were going to be in the second half of last year are pushing to this year, that should make up for some of these difficulties of a couple of points of termination and other things. So more like very high picture, is there some very high-level behavioral change of the buyers where there just isn't the urgency for some reason either to sign or maybe even more particularly just get these implementations live?

No, I wouldn't say so. I mean, I think the underlying business fundamentals are there. But if they haven't changed and the demand environment remains strong -- but if you think about us implementing relatively consistent level of ARR between 2025 and 2026, I think that implies a certain level of growth.

It becomes a math equation when one part is getting bigger. But we did our research. So just on the research is that 2024 had a slight decline in market jump balls, and then 2025 came back up. So, that would just be the one buyer behavior thing that we did see is a slight dip in 2024 on jump balls and pick back up in 2025.

Did you see a change -- I promise, the last one. Did you see a change in the add-on sales as a percent of bookings? I know you've been sharing that every quarter. I'm just wondering if there was any movement there this quarter?

Roughly the same, Jeff.

Your next question comes from [ Alex Newman ] with Stephens.

Just -- could you expand on some of the capabilities of the MANTL LOS, just in terms of the types of loans you can originate? Just specifically, I know there's some consumer capabilities, but if you're able to originate commercial loans? And if not, if that's on the road map?

Yes. What our customers are asking for right now that we would target is retail and HELOC down. So that would be the focus. Once again, as I said, we -- these are very selective engagements with customers right now. We'll come and tell you all when this is generally available and we're off selling it to everybody. But for the near term, this is retail and HELOC down. And as we have success with that, then we'll have optionality to build other capabilities and move into commercial market or other types of products.

Great. And then can you just provide an update on the progress of cross-sell activity between MANTL and the digital banking client base and vice versa and how that's progressing?

I think one of the things that I mentioned in my opening comments is there's 160 -- I'm doing this off the top of my head, I'm not looking at my notes -- there's 161 live clients on the deposit origination platform. And of that, there's 26 digital banking clients. I think the important one was when we put the 2 companies together, there were only 11 Alkami online banking clients that had all 3 products, that have our data marketing platform and had the origination platform. And at the end of the year, under contract are 45 clients that have all 3 products. So I think that speaks to the progress that we've made on creating demand for the integrated platform.

Okay. Awesome. And just -- if I could squeeze one more in here. Just any updates on capital allocation priorities as we head into '26?

Sure.

Well, you saw us pay down some things, that was a use of money.

Yes. And I think you'll -- we'll continue to focus on paying down at least our revolving line of credit. From a capital allocation standpoint, I mean, we're assessing that all the time. For us, opportunistic M&A continues to be a longer-term priority that from a capital allocation perspective, that we're always assessing. And share buybacks would be something that we would continue to assess as well. So no changes today in our capital allocation approach, but something that we're constantly assessing.

Thank you. And as there are no more questions, we will -- I will now say thank you for joining, and you may disconnect.