Participants

Steve Calk Calk; Head- Investor Relations; Alkami Technology Inc

Alex Shootman; Chief Executive Officer, Director; Alkami Technology Inc

W. Bryan Hill; Chief Financial Officer, Treasurer; Alkami Technology Inc

Patrick Walravens; Analyst; Citibank

Cristopher Kennedy; Analyst; William Blair

Adam Hotchkiss; Analyst; Goldman Sachs

Presentation

Operator

Good afternoon, ladies and gentlemen, and welcome to the Alkami Technology Fourth Quarter 2024 Financial Results Conference Call. (Operator Instructions) This call is being recorded on Thursday, February 27, 2025. I'd like to turn the conference over to Steve Calk. Vice President of Investor Relations. Steve, please go ahead.

Steve Calk Calk

Thank you Alan. With me on today's call are Alex Shootman, Chief Executive Officer; and Bryan Hill, 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 in the section in our latest 10-K. 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 on 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 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.

Alex Shootman

Thank you, Steve. Good afternoon, and thank you all for joining us. I'm pleased to report another great quarter of financial results for Alkami, which contributed to an outstanding full year performance.
During the fourth quarter of 2024, Alkami grew revenue 26% and generated over $10 million in adjusted EBITDA. In addition, we ended the quarter with 20 million users on the Alkami platform, and that is up 2.5 million 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 million. We are proud of these results as our execution continues to track the multiyear revenue and profit targets Bryan 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 Mantel. In our fourth quarter 2021 earnings call, we outlined a 5-point plan to drive our desired long-term business outcomes. 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, we would invest in our platform for efficiency and differentiation; fourth, we would become a destination company for talent; and fifth, acquisitions would be part of our growth equation. Alkami's current business results are an outcome of excellent progress on these 5 business objectives.
At the end of 2024, we had 42 banks under contract, including 23 live on the Alkami platform in '19 in our backlog. This compares to 8 banks on our platform at the end of 2021. We remain focused on the credit union market as we were investing in the bank market. And in 2024, we became the #1 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 of the credit union market.
Since 2021, we have almost doubled the participation of add-on sales to Alkami's new bookings. In 2024, add-on sales represented 45% of new bookings at Alkami compared to 24% in 2021. Our client sales team has been a key part of increasing or revenue per user by 30% since the end of 2021, and they have more than tripled our annual renewal count over that period with 42 in 2024 versus 12 in 2021. Within Alkami -- within the Alkami 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, and we believe we are the only provider that includes maintenance windows in our availability calculations. Our hosting cost per user has improved by 26% from our quarterly high watermark over the last 3 years and platform investments have improved the efficiency of implementations. Hosting cost and implementation efficiency have been prime drivers of an improved -- 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 Alkami won include best culture, best sales team, best product team, best HR team, best engineering team, best leadership team and 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 of Alkami. We are excited to add Mantle's people, products and clients to Alkami.
Nathaniel, Ben and the rest of the MANTL 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. MANTL 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 clients and the broader market about the increasing strategic need to improve the way they open accounts for new customers and add products for existing customers. For example, Alkami 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 topped rank investment priority was technology to improve the customer or member experience, including an account opening platform. This option was #1 among credit union respondents and #2 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 upcoming greatest wealth transfer in history, every client executive I meet is prioritizing the creation of an improved onboarding experience across all their channels.
MANTL is unique in that it offers a multi-team or 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 accounting. MANTL is proven technology as they have 145 clients under contract, including 112 financial institutions in production, ranging in size from $80 million to over $20 billion in assets. Of these, approximately 70% are banks. Mantel's bank penetration and the minimal overlap between MANTL and Alkami's client base creates a great cross-sell opportunity for both Alkami and MANTL.
With this acquisition, Alkami solidifies its position as the premier digital and sales and service platform in the industry. After the MANTL transaction closes, Alkami will have the 3 market-leading required technologies for a bank or credit union to onboard, engage and grow their account base in a secured environment. These 3 technologies are onboarding and account opening, digital banking, of data and analytics. For onboarding, MANTL 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 has already proven to boost deposit growth with a higher converting application, higher initial funding and less fraud than competitive alternatives.
For engagement, Alkami's digital banking solution was awarded best banking app by TearSheet in 2024. It is the fastest-growing digital banking platform among all U.S. financial institutions and it serves over 20 million users with a single code base and a multi-tenant environment. For growth, Alkami's data and marketing solution is built for financial institutions and provides 50,000 descriptive data tags and a dozen AI predictive models trained on analyzing more than 18 billion 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 Alkami digital sales and service platform will create more client value, enabling Alkami's clients to have a competitive advantage in their market.
Alkami will become the ultimate land-and-expand solution for banks and credit unions. Let me give you 3 examples. First, driving retail to business expansion. Using Alkami data and marketing, a financial institution could promote a business deposit account to a retail account holder with a history of business transactions, onboard the new deposit account in minutes using MANTL, and guide the account holder on new features and functionality and Alkami Digital Banking.
Next, improving account opening conversion. A financial institution could identify customers or members who have abandoned the account opening experience in MANTL, use Alkami's digital and -- Alkami's data and marketing to run targeted marketing campaigns to encourage conversion and guide the customer on features and functionalities in the Alkami Digital Banking platform. And finally, increasing accounts and digital users, either through auto registration by MANTL into Alkami Digital Banking, or by leveraging Alkami data 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 Alkami 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 MANTL 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 MANTL transaction in these new capabilities to our market with an intent for Alkami to be the #1 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 Bryan.

W. Bryan Hill

Thanks, Alex, and good afternoon, everyone. In 2024, we continue to drive industry-leading revenue growth and outperform on our profitability goals. For the year, we achieved total revenue of $333.8 million, representing year-over-year growth of 26% and improved adjusted EBITDA to $26.9 million compared to a loss of $1.6 million 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 2024, we achieved revenue of $89.7 million, 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 million.
We currently have approximately $56.5 million of ARR in backlog for implementation, the majority of which will occur over the next 12 months Included in our backlog are 39 new clients representing 1.3 million digital users. We exited the quarter with 272 clients and 20 million registered users on our digital banking platform representing registered user growth of approximately $2.5 million or 14% compared to last year.
Over the last 12 months, we implemented 38 financial institutions supporting 1.2 million digital users. In addition, our existing clients increased their digital user adoption by 1.3 million users. As a reminder, because of the long-term nature of our contracts, we have 3 to 4 quarters of visibility into upcoming client attrition. During 2024, we churned less than 1% of our digital banking ARR. Over the long term, we modeled digital banking ARR churn at 2% to 3% per year, but expect to do much better in 2025.
Currently, we expect to churn 4 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 sales 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 2024 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. And 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 are 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 obligation was just under $1.4 billion, representing 3.8x our ARR and up 20% compared to a year ago.
Now turning to gross margin. For the fourth quarter of 2024, we delivered non-GAAP gross margin of 63.1% representing nearly 280 basis points of expansion compared to the prior year. We achieved gross margin expansion through continued improvement in our hosting costs and platform investments as well as operating leverage across our post-sale operations. As a reminder, our 2026 gross margin objective is 65%.
Moving to operating expenses. For the fourth quarter of 2024, non-GAAP operating expenses of $46.8 million 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&A, where we continue to realize operational scale. In addition, we continue to achieve a high level of sales team productivity and go-to-market efficiency. For the last 12 months, we increased our ARR $64.8 million while investing $50.7 million in non-GAAP sales and marketing, representing an efficiency ratio of 1.3:1.
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 $10.2 million, 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 million 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 million of cash and marketable securities. In 2024, we produced operating cash flow of $18.6 million, an improvement of $36.1 million compared to 2023. We've also just announced an amendment to our credit facility, which expands our revolver from $125 million to $225 million and extends the maturity date to February of 2030.
Before turning to guidance, let me provide some additional commentary on the MANTL 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 unlike us among digital banking providers, and similar to our acquisitions of ACH Alert segment, we believe MANTL 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 MANTL for an enterprise value of $400 million on a debt-free cash-free basis and subject to customary purchase price adjustments, which we expect to be approximately $7 million. We plan to issue restricted stock units to MANTL employees with an estimated value of $13 million at transaction closing and replacement or unvested compensatory stock options.
The resulting purchase price of $380 million is expected to be funded with cash. We have multiple options to fund the $380 million cash purchase price. Our options include balance sheet liquidity and revolver capacity and a universal shelf that can be used for equity, equity-linked or debt financing. We are 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 7x projected ARR under contract at the end of 2025. 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 2025, we are providing guidance for revenue in the range of $93.5 million to $95 million, which represents total revenue growth of 23% to 25%. For adjusted EBITDA, we are providing first quarter guidance in the range of $9.5 million to $10.5 million. For full year 2025, we are providing guidance for revenue in the range of $440 million to $445 million, representing total revenue growth of 32% to 33%. We are also just providing adjusted EBITDA guidance of $47 million to $51 million.
Assuming an acquisition close date of March 31, full year guidance includes revenue contribution of approximately $30 million and an adjusted EBITDA loss of $5 million from the MANTL acquisition. We believe the MANTL business will be accretive to adjusted EBITDA starting in 2026. We expect MANTL's ARR under contract at December 31, 2025, to be approximately $60 million, representing a growth rate above 30% when compared to the same metric at the end of 2024.
In closing, I'm very pleased with our 2024 financial performance. Our team delivered best-in-class growth, continued operating leverage and superior go-to-market efficiency. We continue to perform among the best SaaS companies. And now with the leading omnichannel account opening solution in MANTL 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.

Question and Answer Session

Operator

(Operator Instructions) Your first question comes from Andrew Schmidt of Citi.

This is David Wielansky on for Andrew Schmidt. How does MANTL compare with your existing account opening solutions? And I was wondering if you could give more details on the potential impact of the cross-sell opportunity there.

Alex Shootman

Thank you for the question. The current account opening offering that we have is digital only for just 1 or 2 deposit types. And as we got into that market, and listen 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, can 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, how 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 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 15 to 20 years of almost 0 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 MANTL product does.

W. Bryan Hill

We have been providing more of our longer-term guidance. and very consistent with 2024. So user growth organic user growth. So excluding the MANTL acquisition, we would expect user growth in that 14% to 15% range, which is very consistent with 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 MANTL acquisition once we move into providing more combined guidance on a go-forward basis is consideration of the MANTL client base, the incremental users that will come with the MANTL client base and the RPU. And so let me give you a couple of examples. MANTL today has 112 clients under contract and those clients carry an average RPU between $5 and $6. So it's a nice add, but they're going to bring about 8 million digital users to Alkami. And there's very little overlap as Alex commented on in his prepared comments between the 2 client bases.
So they're very complementary in nature. The MANTL client base is 70% banks and 30% credit unions. The Alkami client base is 90% credit unions and 10% banks at the moment. So not nice complementary to each to one another, but with very little overlap. So what you'll ultimately find is our user count will jump to $28 million, $29 million, but you're adding those users at a $5 to $6 RPU.

Operator

Your next question comes from Saket Kalia of Barclays.

This is Ryan Pagolia on for Saket tonight. Maybe just to start on the MANTL deal. Certainly, interesting. I'm curious what you see in terms of the competitive environment in the 7 market? Is it similar to your core digital banking space where it's a lot of the corporate buyers that you might be running up against?
Or would there be other competitors that you might expect to go more head-to-head with this type of acquisition?

Alex Shootman

There's really -- when we talk with our clients, there's really 3 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 MANTL is that with what a MANTL customer experience is, and this is the design of their product, the way that they 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 MANTL is 5 minutes compared with 15 minutes in the industry and a medium business account opening experience in MANTL is 8 minutes compared with 3.5 hours in the industry and 85% of the applications received an automated decision. So that's what we were looking at when we got excited about MANTL is yes. There are 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 MANTL technology delivers is far superior to anything else that was on the market.

Right. That's super helpful. Bryan, maybe a follow-up for you. I think in the press release, you mentioned that while there's an EBITDA loss for mental this year, you expect it to be EBITDA accretive in fiscal '26. 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?

W. Bryan Hill

So as it relates to revenue synergies, we're really expecting those to occur or be more evident in 2026 and primarily in the back half of 2026. As I mentioned in the previous question from David City, the client bases are very complementary to one another. So there is going to be a nice opportunity for revenue synergy. As it relates to expense synergies, the MANTL -- scaling the MANTL operation, they'll be able to leverage things such as G&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 1. Because keep in mind, MANTL 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 even drive further revenue growth.

Operator

Your next question comes from Patrick Walravens of Citibank.

Patrick Walravens

Great. Congratulations. Alex, I would love to hear sort of the background to the deal, when did you first meet them how did the process unfold? And how do we get to this transaction?

Alex Shootman

Well, the 2 companies have known about each of this since 2019. So we know we've -- we've known them and they've known us and we've stayed in relationship for quite a while. And I would characterize this as deal that evolved through understanding each other's culture, understanding the people that were running their company and the quality of people that are running their company and also listening to our customers. Pat, last year, we had our Customer Advisory Board together in June at 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 and 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'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 to both attract members so we can get deposits and then also cross-sell other products to our customers or our members. So Alkami, 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 respected each other for a long time. 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 MANTL. So 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 thing to do.

W. Bryan Hill

And Pat, I'll add a couple of more comments to this. I mean, 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 the 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 MANTL for a long time. And MANTL, 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 Alkami 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 2024. And here we are today, and we're announced saying what we are extremely excited about, which is the future of Alkami and really the very early beginnings of building a $1 billion revenue company over the next 4 to 5 years.

Operator

Your next question comes from Cris Kennedy of William Blair.

Cristopher Kennedy

Thanks for all of the details. Just wanted to focus a little bit. It seems like mantles 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?

Alex Shootman

It played in a couple of different ways. As you know, we're focused on the bank market and being able to pair 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, nonprofits, trust to states. So that capability was really interesting to us in terms of Alkami's 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 MANTL into the credit union installed base for Alkami not just because they've got a good consumer product, but because they've got a good business product as well.
So there's really kind of both of those things. One, it matches our strategy of investing in the bank market. But number two, as Bryan said, there's virtually no overlap between the 2 companies from a customer base, I think it's less than 10 accounts. And because of some of the transformation that's happening in the credit union market, the coverage that MANTL has for both consumer and business was really attractive as we think about the potential for cross-sell in the future.

Cristopher Kennedy

Great. And then, I guess, just another quick one on MANTL. I know the question was asked earlier, but the prospects for EBITDA to go from a negative to a positive. Can you just double-click on that again?

W. Bryan Hill

Yes, Cris, that's primarily driven by just revenue scale mean MANTL exiting 2025 with $60 million of revenue under contract, and that's growing north of 30%. So they're still relatively a small business that's becoming a larger business. with a very fast growth trajectory. And it's Alkami, relying -- leaning on Alkami, and Alkami's go-to-market, Alkami's R&D, Alkami's G&A, those areas to drive future profitability, scale for MANTL. So it's really the 2 companies working together in Alkami being able -- or rather MANTL being able to lean on Alkami for those areas within its business to help it scale.

Alex Shootman

I mean, one of the things that many of the analysts that both Bryan and I have met with for many quarters, I've asked us about acquisitions. And we said when we do an acquisition, it will be strategic and it will also fit into the Alkami's business model. And so the thing that we do like about MANTL. MANTL is a growth company. So this is not a situation where, as Bryan said earlier, we want to cut a lot of expense to figure out it them into some model.
This is a situation where they're a well-run company that can leverage some things within Alkami. So that, as Bryan mentioned, in 2026, we see this as accretive to our business.

W. Bryan Hill

Yes. But Cris, as you look out over a multiyear period, think about -- you should think about MANTL being a couple of points of incremental organic growth. You should think about now being accretive to gross margin, and MANTL will be a drag of 1 to 2 points on EBITDA margin for the next 2 to 3 years and then reaching and conforming to an Alkami EBITDA margin profile beyond that.

Operator

Our next question comes from Adam Hotchkiss of Goldman Sachs.

Adam Hotchkiss

I just want to follow up on the last question around MANTL's existing base. When you were evaluating MANTL. To what degree do you think that you're going to be able to cross-sell the Alkami platform into MANTL'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?

W. Bryan Hill

The existing MANTL client-based segment is very similar to Alkami. And what I mean by that is financial institutions with assets between $500 million and $10 billion, that represents a significant percentage of the MANTL client base, and it's also similar to Alkami. Our sweet spot where we have found the greatest penetration has been assets in the size of $500 million to $10 billion for financial institutions. So there's no reason to expect that we would not have the ability to cross-sell the Alkami digital banking platform into the MANTL base or to sell the MANTL 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.

Adam Hotchkiss

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

W. Bryan Hill

We're having success cross-selling whether it's time for a renewal or not. So our client sales team has really begun to gain momentum and has a pretty strong ability to cross-sell into a client whether it's 1 year after signing the contract, the client just went live or if it's 5, 6 years later at the point of renewal. So we would expect than our client sales team to continue to contribute in that 45% plus to total contract value sold.

Operator

Your next question comes from Alex Smith of JPMorgan.

So first, I was hoping to start on the gross profit margin line. You've had pretty stable gross profit margin expansion since at least 2020. And I think you mentioned that MANTL 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?

W. Bryan Hill

Yes. So what we've provided is by 2026, the Alkami core business will be at a gross margin. We gave that guidance at longer-term guide about 3 years ago. We're a bit ahead of that. We'll exit 2025 at a run rate of 65%.
And you should expect MANTL to be accretive 100 basis points. .

That's very helpful. And as we think through the other OpEx line items and the EBITDA deficit that MANTL calls us for the first year, how would you allocate those costs roughly?

W. Bryan Hill

Well, let's just talk about the EBITDA loss. So you should think about of $5 million of EBITDA loss occurring over the second, third and fourth quarters of 2025, $2 million in the second quarter, $2 million in the third quarter and around $1 million in the fourth quarter. From a gross margin perspective, MANTL has been able to achieve around a 75% gross margin. The OpEx -- the OpEx categories from a from a contribution by category, they're a little bit heavier on sales and marketing than Alkami is, but they align pretty closely to how Alkami aligns.

Operator

Your next question comes from Jeff Van Rhee of Craig Hallum Capital Group.

This is Daniel on for Jeff. Just on the cross-sell motion, how that will look. If the -- if I'm understanding correctly, in the Alkami 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 Alkami 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 MANTL to cross-sell?

Alex Shootman

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 Alkami's product the product that we have today, given our product penetration in our customer base, the majority of our customers will have the following scenario as opposed to an Alkami product. They'll either be trying to use something off of their legacy core. They'll be using another third-party product.
And -- but in a lot of cases, they will have tried to write some of their own software to stitch together this process. Some of the things that are really unique about mantle is how they've streamlined the process and embedded automated KYC, as 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 and they're able to deliver today. So I 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 mantle 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 bring the MANTL 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 MANTL side, just as they work with a lot of other people in the marketplace, like I believe they're part of the Q2 marketplace. Just how those relationships have all be impacted after getting acquired by you guys? Is there any inherent churn contemplated there?

Alex Shootman

We would hope that they would continue to be successful in all the markets that they serve. 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 can imagine that our product teams have already had a lot of great ideas. One of the things that Bryan talked about earlier and I talked about it in my prepared remarks, is if you think about having transactional data that you're using in the onboarding process and then the 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 MANTL, with our data and marketing platform.

Operator

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.