Alkami Technology, Inc. Price & Performance (ALKT)

A reconciliation of the comparable GAAP financial measures can be found in our earnings press release and in our filings with the SEC. Now I'll turn the call over to Alex. Thank you, Steve.

Good afternoon, and thank you all for joining us.

I'm pleased to report another great quarter of financial full year performance. During the fourth quarter of twenty twenty four, Alchemy grew revenue 26% and generated over $10,000,000 in adjusted EBITDA. In addition, we ended the quarter with 20,000,000 users on the Alchemy platform and that is up 2,500,000 users compared to the prior year. For the full year of 2024, we delivered revenue growth of 26% adjusted EBITDA margin expansion of 900 basis points and improved operating cash flow by over $36,000,000 We are proud of these results as our execution continues to track the multiyear revenue and profit targets Brian and I provided at the beginning of 2023. I'd like to make a few comments on the quarter and the year, and then I'll discuss our plans to acquire Mantle. In our fourth quarter twenty twenty one, earnings call, we outlined a five point plan to drive our desired long term business outlook. First, we would succeed in the bank market as we had in the credit union market. Second, we would leverage add on sales to drive growth. Third, will invest in our platform for efficiency and differentiation. Fourth, we would become a destination company for talent And fifth, acquisitions would be part our growth equation.

Alchemy's current business results are an outcome of excellent progress on these five business objectives. At the end of twenty twenty four, we had 42 banks under contract including 23 live on the Alchemy platform and twenty nineteen in our backlog.

This compares to eight banks on our platform at the end of twenty twenty one. We remain focused on the credit union market as we were investing in the bank market, and in 2024, we became the number one digital banking provider in the credit union market in terms of mobile users.

As a reminder, our longer term goal is to generate half our new logo wins in the bank market and half in the credit union market. Since 2021, we have almost doubled the participation of add on sales to Alchemy's new bookings. In 2024, add on sales represented 45% of new bookings at compared to 24% in 2021. Our client sales team has been a key part of increasing our revenue per user by 30% since the end of twenty twenty one, they have more than tripled our annual renewal count over that period with 42 in 2024 versus 12 in 2021. Within Alchemy within the Alchemy platform, our investments have improved quality, resiliency and scalability. We migrated over 90% of our platform's microservice track to Kubernetes and enabled auto scaling capabilities. Our availability has increased to 99.99% for 2024 we believe we are the only provider that includes maintenance windows in our availability Our hosting cost per user has improved by 26% from our quarterly high watermark over the last three years and platform investments have improved the efficiency of implementations. Hosting cost and implementation efficiency have been prime drivers of an improvement in gross margin of almost 600 basis points since 2021.

On the talent front, we've increased our retention rate 10% to 85% since 2021, Our employee engagement scores are 82% favorable.

And in 2024, the awards Alchemy won include best culture, best sales team, best product team, best HR team, best engineering team, best leadership team, the best places to work in fintech. This leads me to the final business objective we discussed which is to grow through acquisitions that fit into the strategy and business model [indiscernible] We are excited to add Manta's people, products and clients to Alchemy Alkami. Nathaniel, Ben, and the rest of the Mantle team have built a great company that solves a really hard problem, which is critical to our market. And most importantly, they've done it with a great culture and a commitment to the customer. Mantle offers the premier SaaS solution for onboarding and account opening and serves as the front door for deposit originations for both consumer and business accounts in a wide variety of financial institutions. Over the last couple of years, we've heard from our about the increasing strategic need to improve the way they open accounts for new customers and add products for existing customers. For example, Alchemy fielded a study in October 2024 in which we asked regional and community financial institutions what their top investment priority will be in 2025.

Out of 12 possible choices, the top rank investment priority was technology, to improve the customer, member experience including an account opening platform. This option was number one among credit union respondents and number two among banks. The need to improve the account opening experience has become critical for community banks and credit unions in a world that expects an elegant digital offering, These financial institutions are under intense competitive pressure from mega banks and fintechs who have invested heavily to create better digital technology When these dynamics are considered with predictions of the upcoming greatest wealth transfer in history, every client I executive I meet is prioritizing the creation of an improved onboarding experience across all their channels. MANTAL is unique in that it offers a multi tenant core agnostic single platform that enables financial institutions to support all channels in onboarding deposit accounts. Including digital, in branch call center and relationship managers. It addresses the needs of both consumers and businesses and it automates the onboarding process for virtually all deposit account teams. Mantle is proven technology because they have 145 clients under contract, including 112 financial institutions in production, ranging in size from 80,000,000 to over $20,000,000,000 in assets.

Of these, approximately 70% are banks, Menthol's bank penetration and the minimal overlap between Mantral and Alchemy's client base creates a great cross sell opportunity for both Alchemy and Mantle Alkami. With this acquisition, Alchemy solidifies its position as the premier digital and sales and service platform in the industry. After the Mantle transaction closes, Alchemy will have the three market leading required technologies for a bank or credit union to onboard engage and grow their account base in a secure environment. These three technologies are onboarding and account opening, digital banking, and data and analytics. For onboarding, Manta will create a single onboarding and account opening solution that works across all channels for all customer types for the majority of deposit products. This offering is already proven to boost deposit growth with a higher converting application higher initial funding and less fraud and competitive alternatives. For engagement, Alchemy's digital banking solution was awarded Best Banking App by Tear Sheet in 2024 It is the fastest growing digital banking platform among all U. S. Financial institutions and it serves over 20,000,000 users with a single codebase a multi tenant environment. For growth, Alchemy's data and marketing solution is built for financial institution institutions and provides 50,000 descriptive data tags and a dozen AI predictive models trained on analyzing more than 8,000,000,000 core transactions which improves personalized targeting and cross selling to increase revenue and reduce churn.

But when these solutions are used in an integrated manner, the Alchemy Alkami sales and service enabling Alchemy's clients to have a competitive advantage in their market. Alchemy will become the ultimate land and expand solution for banks and credit unions. Let me give you three examples. First, driving retail to business expansion. Using Alchemy Alkami and Marketing, a financial institution could promote a business to a retail account holder with a history of business transactions. Onboard the new deposit account in minutes using Mantle, and guide the account holder on new features and functionality in Alchemy Digital Banking. Next, improving account opening conversion. A financial institution could identify customers or members who have abandoned the account opening experience in Manta use Alchemy's digital Alchemy's data and marketing to run targeted marketing campaigns to encourage conversion and guide the customer on features and functionalities in the Alchemy Digital Banking platform. And finally, increasing accounts and digital users. Either through auto registration by Mantle and the Alchemy Digital Banking, or by leveraging Alchemy Alkami and Marketing to target new customers that have not registered the addition of an onboarding and account opening system will create a flywheel effect for digital bank for increasing digital banking users and number of accounts per household.

Which is a benefit both for Alchemy and our clients. We believe this acquisition unlocks portions of our TAM by increasing our competitive advantage. Complementing our digital sales and service platform, with an industry leading onboarding and account opening experience will drive growth in new digital banking client wins.

In addition, we're excited to place the Manfel product suite into the hands of our client sales team who have demonstrated success in growing Alkami client relationships and cross selling products from our segment and ACH Alert acquisitions. In closing, I'm proud of our results from 2024. I'm excited about the momentum we take into 2025. And I'm eager to close the Mantle transaction these new capabilities to our market, with an intent for Alchemy to be the number one digital banking platform. Thank you to our employees, clients and investors for continuing to say yes to Alkami. We take your trust personally and we will continue to execute on our commitments. I'll now hand the call to Brian.

Thanks, Alex, and good afternoon, everyone. In 2024, we continue to drive industry leading revenue growth outperform on our profitability goals. For the year, we achieved total revenue of $333,800,000 representing year over year growth of 26%. And improved adjusted EBITDA to $26,900,000 compared to a loss of $1,600,000 in 2023. Subscription revenue grew 26.5% in 2024 and represented almost 96% of total revenue. Our fourth quarter results were a strong finish to the year. And we are entering 2025 with good momentum. For the fourth quarter of twenty twenty four, we achieved revenue of $89,700,000 representing growth of 26%. Subscription revenue grew 25% and represented 96% of total revenue. We increased ARR by 22% and exited the quarter at $356,000,000 We currently have approximately $56,500,000 of ARR backlog for implementation the majority of which will occur over the next twelve months.

Included in our backlog are 39 new clients representing 1,300,000 digital users. We exited the quarter with two seventy two clients and 20,000,000 registered users on our digital banking platform, representing registered user growth of approximately 2,500,000 or 14% compared to last year. Over the last twelve months, we implemented 38 financial institutions supporting 1,200,000 digital users. In addition, our existing clients increased their digital user adoption As a reminder, because of the long term nature of our contracts, we have three to four quarters of visibility into upcoming client attrition. During 2024, turned less than 1% of our digital banking ARR. Over the long term, we model digital banking ARR churn at 2% to 3% per year but expect to do much better in 2025. Currently, we expect to churn four clients in 2025, representing 175,000 users and less than 1%. Of ARR. We ended the quarter with an RPU of $17.81 up 7% compared to a year ago driven by add on sale success and the addition of new clients who tend to onboard with a higher average RPU. For example, new digital banking clients implemented for the fourth quarter with an RPU of $23.55 reflecting greater product adoption when compared to our installed base.

We are seeing broad based demand across our product portfolio. For the year, we signed 35 new digital banking platform clients including 15 banks, and our add on sales effort represented approximately 45% of twenty twenty four new sales, In addition to add on sales, our client sales team is responsible for client contract renewals, We renewed 42 client relationships in 2024, Added together with 35 new logo wins, this represents 77 competitive wins for the year compared to 70 in 2023. In total, our 2024 renewal cohort increased ARR run rate 12% at the time of renewal once again outperforming prior year cohorts as financial institutions keeping their functionality competitive with their industry competition. In 2025, we expect approximately 25 renewals, slightly below our recent average as we pull forward several renewals into 2024. And finally, our remaining performance our ARR and up 20% compared to a year ago. Now turning to gross margin. For the fourth quarter of twenty twenty four, we delivered non GAAP gross margin of 63.1% representing nearly two eighty basis points of expansion compared to the prior year. We achieved gross margin expansion through continued improvement our hosting costs and platform investments, as well as operating leverage across our post sale operations.

As a reminder, our 2026 gross margin objective 65%. Moving to operating expenses. For the fourth quarter of twenty twenty four, non GAAP operating expenses of $46,800,000 or 52% of revenue represented year over year operating leverage of approximately 500 basis points. We derived operating leverage across each operating expense category but primarily in G and A where we continue to realize operational [indiscernible] In addition, we continue to achieve a high level of sales team productivity and go to market efficiency. For the last twelve months, we increased our ARR $64,800,000 while investing $50,700,000 in non GAAP sales and marketing, representing an efficiency ratio of 1.3 to one. We believe this ranks Alchemy among the best in SaaS in terms of sales and marketing efficiency. Our adjusted EBITDA in the fourth quarter was $10,200,000 better than the high end of our expectations. Our adjusted EBITDA margin for the quarter was 11.3% and when combined with our revenue growth, rate results in achieving Rule of 37, We have started to invest in our captive offshore capability as we discussed last quarter we expect an investment of approximately $5,000,000 in 2025. We are still planning to complete the transition from our current vendor during 2026 and we do not anticipate any impact on our 2026 financial targets although we do expect to see a positive impact on margins beyond 2026.

Related to our balance sheet, we ended the quarter with just under $116,000,000 of cash and marketable In 2024, produced operating cash flow of $18,600,000 improvement of $36,100,000 compared to 2023. We've also just announced an amendment to our credit facility, which expands our revolver from 125,000,000 to $225,000,000 extends the maturity date to February. Before turning to guidance, let me provide some additional commentary on the Manal acquisition. This is a very attractive transaction that will position us as a clear leader in digital banking with a powerful platform to help financial institutions onboard, engage and grow their customer relationships. There will be no one like us among digital banking providers and similar to our acquisitions at ACH Alerts segment, we believe Manta will help differentiate our platform drive further success in digital banking client wins, and contribute to our current success cross selling products into our digital banking installed base. As discussed in today's press release, we've agreed to acquire Mantel for an enterprise value of $400,000,000 on a debt free cash free basis and subject to customary purchase price adjustments, which we expect to be approximately $7,000,000 We plan to issue restricted stock units to mantle employees with an estimated value of $13,000,000 at transaction closing and replacement for unvested compensatory stock options.

The resulting purchase price of $380,000,000 is expected to be funded with cash. We have multiple options to fund the $380,000,000 cash purchase price. Our options include balance sheet liquidity, revolver capacity and a universal shelf that can be used for equity, equity linked or debt financing. We're evaluating these options as we approach closing. Closing is expected to occur before the beginning of the second quarter and is subject to customary provisions including HSR approval. The purchase price represents less than seven times projected ARR under contract at the end of twenty twenty five.

We believe the acquisition has an IRR of about 30% before considering revenue synergies expected to start during 2026. Now turning to guidance. For the first quarter of twenty twenty five, EBITDA we are providing first quarter guidance in the range of $9,500,000 to $10,500,000 For full year 2025, we are providing guidance for revenue in the range of $440,000,000 dollars to $445,000,000 representing total revenue growth of 32% to 33%. We were also at just providing adjusted EBITDA guidance of $47,000,000 to $51,000,000 Assuming an acquisition close date of March 31, full year guidance includes revenue contribution of approximately $30,000,000 and an adjusted EBITDA loss of 5,000,000 from the Mantle acquisition. We believe the Mantle business will be accretive to adjusted EBITDA starting in 2026. We expect MANTAL's ARR under contract at dollars representing a growth rate above 30% when compared to the same metric at the end of In closing, I'm very pleased with our 2024 financial Our team delivered best in class growth continued operating leverage and superior go to market efficiency continue to perform among the best SaaS companies And now with the leading omnichannel account opening solution in Mantle, we believe an unequivocal category leader in an industry that already enjoys strong tailwinds, and many years of innovation ahead.

With that, I'll hand the call to the operator to take your questions. Thank you. Ladies and gentlemen, we will now begin the question and answer session.

Should you wish to decline from the polling process, please lift the handset before pressing any keys. Your first question comes from Andrew Schmidt of Citi. Your line is already open. This is David Wielinski on for Andrew Schmidt.

Thank you for taking my questions.

How does Mantle compare with your existing account opening solutions I was wondering if you could give more details on the potential impact of the cross sell opportunity there? Thank you for the question. The current account opening offering that we have digital only for just one or two deposit types.

And as we got into that market, and listened to what our customers were trying to do, They really needed to be able to have an account opening solution that could operate in digital, could operate in call centers, in branch and even if you think about commercial banking with a relationship manager, and they needed to have the ability to support a whole lot more different types of products and specialty account structures retirement accounts, health savings accounts, trust accounts, escrow accounts, lots of different types of account roles. Whether it would be beneficiary, custodian, guardian, and none of those were things that we were offering with our with our current product. And then I would say because of what I would call more of a normalization of interest rates, we all went through about fifteen to twenty years of almost zero interest rates. And now that interest rates are what you might consider a little bit more normal, the ability to attract deposits as well as make loans has become critical to the financial institutions So in summary, our current product did a few things, did a few things well. But it did not meet all of the needs of the market.

And that's what the mantle product does.

Thank you for that. And then what is embedded in the 2025 outlook between new user growth and ARPU expansion? And could there be more of a skew towards user growth assuming a pick [indiscernible] The guidance that we provided for 2025, I mean, it's in line with what we have been providing on more of our longer term guidance. And very consistent with 2024. So user growth organic user growth, so excluding the Mantle acquisition, we would expect user growth in that 14% to 15% range, which is very 2024. ARPU expansion will be in a 6% to 8% range, again, very consistent with 2024. What we haven't yet determined yet and we will before once we close the Manalak acquisition and once we move into providing more combined guidance on a go forward basis is consideration of the Manal client base, the incremental users that will come with the Mantle client base and the RPU. And so I want to give you a couple of examples. Mantle today has 112 clients under contract. And those clients carry an average RPU between $5 and $6 So it's a nice RPU add, but they're going to bring about 8,000,000 digital users to Alkami.

And there's very little overlap as Alex commented on in his prepared comments between the two client bases. So they're very complementary in nature. The mantle client base is 70 The Alkami client base is 90% credit unions and 10% banks at the moment. So not [indiscernible] to each to one another but with very little overlap. So So what you'll ultimately find is our user count will jump to $28,000,000 $29,000,000 but you're adding those users at a $5 to $6 RPU.

Very clear. Thank you.

Your next question comes from [indiscernible] Your line is already open.

Hey, Tim. This is Ryan Patterley on Saket tonight. Thanks for taking the question. Maybe just to start on the MANTEL deal. Certainly interesting. I'm curious what you see in terms of the competitive environment in the second market. Is it similar to your core digital banking space where it's a lot of the corporate buyers you might be running up against or would there be other competitors that you might expect to go more head to head with with this type of acquisition?

There's really when we talk with our clients, there's really three alternatives that they pursue in trying to deliver this type of capability to their customers or their members. One is they've got a very outdated capability from a core provider. The second is there are some smaller players that are in the market that they look at.

And many of them also tried to write some of their own software to try to stitch together the experience. What we liked about Mantle is that with what a mental customer experiences and this is the design of their product the way that they've thought about the user experience across the end to end process and the fact that they're core agnostic and they've built technology that allows them to integrate very well with over 20 different core systems. So a median retail account opening experience within Mancel is five minutes compared with fifteen minutes in the industry and a median business count opening experience in Mantle is eight minutes compared with three point five hours in the industry and 85% of the applications receive an automated decision. So that's what we were looking at when we got excited about Mantle is, yes, there's some other small players Yes, there's some legacy core technology Yes, there's customers that have tried to write their own but the outcomes that the Mantle technology delivers is far superior to anything else that was on the market.

That's super helpful. Brian, maybe a follow-up for you. I think in the press release you mentioned that while there's an EBITDA loss for MANTAL year, you expect it to be EBITDA accretive in fiscal twenty twenty six. Just wondering, are you including any expense synergies from this deal at all? Or is that just purely driven by sort of revenue synergies and cross sell that sort of thing?

Thanks.

So as it relates to revenue synergies, we're really or be more evident in 2026 and primarily in the back half of twenty twenty six. And as I mentioned in the previous question from Dave at Citi, the client bases are very complementary to one another. So there is going to be a nice opportunity for revenue synergy. [indiscernible] [indiscernible] scaling the mantle operation, they'll be able to leverage things such as G and A within Alkami, at some point, we'll be able to leverage the global capability center that we're developing in 2025 in India. So it's more about helping mantle scale more efficiently. Than it is having cost cutting synergies on day one because keep in mind, Mantle is a fast growing business. We do not want to do anything to upset the growth trajectory that they're currently experiencing. We're here to identify synergies from a go to market perspective and to even drive further revenue growth.

Very helpful. Thanks guys.

Your next question comes from Patrick Walravens of Citibank.

Your line is already open.

Oh, great. Thank you. Citizens, Congratulations, you guys. Alex, I would love to hear the background to the deal. When did you first meet them? How did the process unfold? And how did we get to this transaction? Well, the two companies have known about each other since 2019. [indiscernible] we've known them and they've known us and we've we've stayed in relationship for quite a while. And I would characterize this as a deal that evolved through understanding each other's culture, understanding the people that we're running their company and the quality of people that were running their company And also listening to our customers, Pat, last year we had our Customer Advisory Board together in June at a a customer location outside of Denver, Colorado. And we treat that Customer Advisory Board very strategically. We meet with them not about features and functions, but they help us guide the long term future of the company.

And we were reviewing several different options that Alchemy could invest in fraud detection, continued investment in our data platform, [indiscernible] several other areas And at the end, They kind of huddled and came back to us and said, there's something that's a bigger issue than us.

We've all got these legacy systems. We We've got different underwriting platforms, things like that. But what we really need is we need a great end to end onboarding experience for our members both attract members so we can get deposits and then also cross sell cross sell other products to our customers or our members Alchemy, what we really need you to do is deliver to us that great end to end experience. So Pat, we've known each other for a long time. We've The market need was really speaking to us wanting to do something in this space And then as I said, we've just spent a lot of time getting to know each other, getting to know their management team, One of the things we really cherish is the ability for our culture to treat our customers as the North Star And that was evident within all the investigation that we did with with Mantle. So, Pat, probably more than you want to know, but I would characterize this as we've known each other for a long time. We knew there was a strategic need in the market. And we got to know each other for a period of many months to make sure that this was the right the right thing to do.

And then Pat, I'll add a couple more comments to this. Strategically, I mean, taking what we view as the absolute best asset in the space, the most disruptive, elegant digital experience as it relates to onboarding. Pairing that with similar accolades as it relates to the digital banking platform. And then finally combining that with what we view as the best marketing data analytics solution I mean that creates a network effect, a flywheel effect, in revenue of all of those offerings that we believe is very powerful And then when it's just a front end to back end digital twins to the branch and delivers that experience There is no other digital banking platform or technology provider in the space that can deliver the front to back offering that I just described. And so we've been watching Manel for a long time.

And Mantle, it's always when is the right time to do an acquisition of this type. And Mantle was at a point to where raising capital would be an alternative or potentially finding a strategic partner. And for all the reasons that Alex just described, finding a home at Alchemy really was the best decision that they felt that they could come to. And so after years of talking to them and staying close to them, it all manifested late twenty twenty four and here we are today and we're announcing what we're extremely excited about which is the future of Alchemy Alkami really the very early beginnings of building a $1,000,000,000 revenue company over the next four to five years.

All right. That's super helpful. Thank you both.

Your next question comes from Chris Kennedy, of William Blair. Your line is already open.

Good afternoon and thanks for all of the details. Just wanted to focus a little bit. It seems like Mantel's has a really good presence within banks and doing kind of business banking activities. Just talk about kind of how that dynamic played into the acquisition?

It played in a couple of different ways. As you know, we're focused on the bank market. And being able to pair The onboarding and account opening platform that serves both consumer and business and all sorts of business types, right, whether it's sole proprietorship, general partnerships, [indiscernible] So that capability was really interesting to us in terms of Alchemy's Alkami long term strategic direction, where we've been investing in the bank market. But the other thing that's been really interesting is probably 45% of the credit unions that I meet with have a commercial strategy.

And so this also fits into us being able to bring Mantle into the credit union installed base for Alchemy not just because they've got a good consumer product, but because they've got a good business product as well. So it's really kind of both of those things. One, it matches our strategy of investing market. But number two, as Brian said, there's virtually no overlap between the two two companies from our customer base, I think, is probably less than 10 accounts. Because of some of the transformation that's happening in the credit union market, the coverage that Mantle has for both consumer and business was really attractive as we think about the potential for cross sell in the future.

Great. Thank you for that. And then I guess just another quick one on Manseld. I know the question was asked [indiscernible] The prospects for EBITDA to go from a negative to a positive. Can you just double click on that? Again. Thank you.

Yes, Chris, that's primarily driven by just revenue scale. I mean, Mantle exiting 2025 was $60,000,000 of revenue under contract and that's growing north of 30%. So there's still relatively small business that's becoming a larger business. With a very fast growth trajectory and it's Alkami relying leaning on Alchemy and Alchemy's go to market, Alchemy's R and D, Alchemy's G and A, those areas to drive future profitability scale for Mantle. So it's really the two companies working together and Alchemy being able or rather Mantle being able to lean on Alchemy for those areas within its business to help [indiscernible] I mean, one of the things that many of the analysts that both Brian and I have met with for many quarters have asked us about acquisitions. And we said when we do an acquisition, it will be strategic. And it will also fit into the Alkami business model. And so the thing that we do like about Mantle, Mantle is a growth company. This is not a situation where as Brian said earlier, we want to cut a lot of expense to figure out fit them into some model. This is a situation where they're a well run company [indiscernible] can leverage some things within Alchemy so that as Brian mentioned in 2026, we see this as as accretive to our business.

Understood. Thanks a lot.

Yes. But Chris, as you look out over a multiyear Think about you should think about Mantle being a couple of points of incremental organic growth you should think about MAO being accretive to gross margin and Mantle will be a drag of one to two points on EBITDA margin for the next two to three years and then reaching and EBITDA margin profile beyond that.

Understood. Very clear. Thank you.

Your next question comes from Adam Hochkiss of Goldman Sachs.

Your line is already open.

Great. Thanks so much for taking the questions. I just want to follow-up on the last question around Mantle's existing base. When you were evaluating Mantle, to what degree, do you think that you're going to be able to cross sell the Alchemy platform into MANTAL's customers.

I know these contracts are a little bit longer than other industries and there may be a little bit less visibility into that. But what comfort do you have over the next couple of years that you might see some incremental success or accelerated bank traction due to that? Thanks so much.

The existing Manel client base segments very similar to Alkami. What I mean by that is financial institutions with assets between $500,000,000 and $10,000,000,000 that represents a significant percentage of the Manta client base and that's also similar to Alchemy Alkami. Our sweet spot where we have found the greatest penetration has been assets in the size of $500,000,000 to $10,000,000,000 for financial institutions. So there's no reason to to expect that we would not have the ability to cross sell the Alchemy Alkami banking platform into the Mantle base or to sell the Mantle solution and offering into the Alkami installed base. So we think it's very complementary We feel that both companies have had significant success in the same area and segmentation of the market.

Okay. That's really clear. Thanks. And then just on the renewal pull forward you mentioned, just curious if that impacts your cross sell or expansion opportunities into 2025 and how you would typically see a year after a pull forward of renewals be impacted from a growth perspective? Thanks so much.

We're having success cross selling whether it's a time for a renewal or not.

So our client sales team has really begun to to gain momentum and has a pretty strong ability to cross sell into a client whether it's one year after signing the contract and the client just went live or if it's five, six years later at the point of renewal. So we would expect that our client sales team to continue to contribute in that 45% plus to total contract value sold.

Very clear. Thanks so much.

Your next question comes from Alice Smith of JPMorgan. Your line is already open.

Start on the gross profit margin line. You've had pretty stable gross profit margin expansion since it least 2020. And I think you mentioned that Mantle should be gross profit margin accretive in 2025. Can you remind us your thinking about longer term margin trajectory for the gross profit margin line? Yes. So what we've provided is by 2026, the Alchemy core business will be at 65% gross margin. We gave that guidance at longer term guide about three years ago. We're a bit ahead of that. We'll exit 2025 at a run rate of 65% and you should expect Mantle to be accretive 100 basis points.

That's very helpful. Thank you.

As we think through the other OpEx line items and the EBITDA deficit that Mantle causes for the first year, How would you allocate those costs roughly?

Well, let's just talk about the EBITDA loss.

So you should think about $5,000,000 of EBITDA loss occurring over the second, third and fourth quarters of $20.25 dollars 2,000,000 in the second quarter $2,000,000 in the third quarter and around $1,000,000 in the fourth quarter. From a gross margin, perspective, Mantle has been able to achieve around the 75% The OpEx cat award The OpEx categories from a from a contribution by category they're a little bit heavier on sales and marketing than Alchemy is, but they align pretty closely to how Alchemy aligns.

Makes a lot of sense. Thanks so much.

Your next question comes from [indiscernible] of Craig Hallum Capital Group. Your line is already open. Hey, guys. Congrats on the quarter. This is Daniel on for Jeff.

Just one, the cross sell motion, how that will look? If the if I'm understanding correctly and the Alchemy account opening offering currently doesn't cover some of the needs that the customers have such that a lot of them will maybe have some other offering in place. Just what does the Alchemy base have right now for the most part? And so what sort of would that be that you'd be displacing as you're coming in with mantle to cross sell?

Yes. As I said earlier, the customer base will have a range of technologies that they're trying to use to accomplish this. They might have and given Alchemy's product the product that we have today, given our product penetration in our customer the majority of our customers will have the following scenario as opposed to an Alchemy product.

They'll either be trying to use something off of their legacy core they'll be using another third party product But in a lot of cases, they will have tried to write some of their own software to stitch together this this process. Some of the things that are really unique about Mantle how they've streamlined the process and embedded Automated KYC is an example. And so when a customer sees this process, and how it manifests itself from a user experience, it's just a very different experience than they're able to deliver today. So would anticipate that our client sales team that covers our existing bank customers and our existing credit union customers will be after closure we'll be bringing the Nantel product to any or all of our customers for the potential of cross sell. There's not really a customer that we have that we would not the mantle product to from a cross sell perspective.

Okay. That's helpful. And then sort of just on the flip side, on the impact on the Manel side, just as they work with a lot of other people in the market [indiscernible] how will those relationships, if at all, be impacted after getting acquired by you guys? Is there any inherent churn contemplated there?

We would hope that they would continue to be successful in all the markets that they serve.

That That's our goal. Our goal would not be to do anything that would truncate their success in any market that they're serving. That said, you could imagine that our product teams have already had a lot of great ideas One of the things that Brian talked about earlier I talked about in my prepared remarks is if you think about having transactional data that you're using in the onboarding process And then that onboarding process is showing up natively in the digital banking experience that's a really attractive design for a client. So we're not going to do anything to truncate any of their success in any market. But you would imagine that we've got a lot of product ideas in terms of how we integrate digital banking with Mantle with our data and marketing [indiscernible] Congrats.

There are no further questions at this time.

So this concludes today's conference call. Thank you for your participation and you may now disconnect.