ALKAMI TECHNOLOGY, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our condensed consolidated
financial statements and related notes and other financial information included
elsewhere in this Quarterly Report on Form 10-Q and in our other filings with
the Securities and Exchange Commission ("SEC"), including the audited
consolidated financial statements and the accompanying notes for the fiscal year
ended December 31, 2021, which are included in our Annual Report on Form 10-K
for the year ended December 31, 2021, filed with the SEC on February 25, 2022.

Unless the context otherwise requires, all references in this report to the “Company”, “Alkami,” “we”, “us” and “our” means Alkami Technology, Inc.a
Delaware company, and its consolidated subsidiary taken as a whole.

Caution Regarding Forward-Looking Statements

Any statements made in this Quarterly Report on Form 10-Q that are not
statements of historical fact, including statements about our beliefs and
expectations, are forward-looking statements and should be evaluated as such.
Forward-looking statements include information concerning possible or assumed
future results of operations, including descriptions of our business plan and
strategies. These statements often include words such as "anticipate," "expect,"
"suggests," "plan," "believe," "intend," "estimates," "targets," "projects,"
"should," "could," "would," "may," "will," "forecast" and other similar
expressions. We base these forward-looking statements on our current
expectations, plans and assumptions that we have made in light of our experience
in the industry, as well as our perceptions of historical trends, current
conditions, expected future developments and other factors we believe are
appropriate under the circumstances at such time. Forward-looking statements are
not guarantees of future performance or results and are subject to and involve
risks, uncertainties and assumptions. Although we believe that these
forward-looking statements are based on reasonable assumptions at the time they
are made, you should be aware that many factors could affect our actual results
or results of operations and could cause actual results to differ materially
from those expressed in the forward-looking statements. The following important
factors, along with the factors discussed in "Risk Factors" in the Annual Report
on Form 10-K, may materially affect such forward-looking statements:

•our ability to manage our rapid growth;
•our ability to attract new clients and retain and broaden our existing clients'
use of our solutions;
•our ability to maintain, protect and enhance our brand;
•our ability to predict the long-term rate of client subscription renewals or
adoption of our solutions;
•the unpredictable and time-consuming nature of our sales cycles;
•our integration with and reliance on third-party software, content and
services;
•defects, errors or performance problems associated with our solutions;
•retaining our management team and key employees and recruiting and retaining
new employees;
•managing the increased complexity of our solutions and a higher volume of
implementations;
•providing client support;
•mergers and acquisitions;
•intense competition in the markets we serve;
•our focus and reliance on the financial services industry as the source of our
revenue;
•evolving technological requirements and changes and additions to our solution
offerings;
•regulations applicable to us, our clients and our solutions;
•security breaches or other compromises of our security measures or those of
third parties upon which we rely, including in connection with cybersecurity;
•increased privacy concerns and our processing and use of the personal
information of end users;
•protecting our intellectual property rights and defending ourselves against
claims that we are misappropriating the intellectual property rights of others;
•open-source software in our solutions;
•litigation or threats of litigation;
•the fluctuation of our quarterly and annual results of operations relative to
our expectations and guidance;
•the way we recognize revenue, which has the effect of delaying changes in the
subscriptions for our solutions from being reflected in our operating results;
•changes in financial accounting standards or practices;
•our limited operating history, our history of operating losses and our ability
to use our net operating loss ("NOL") carryforwards;
•our ability to raise sufficient capital and the resulting dilution and the
terms of our credit agreement;
•stock price volatility and no intention to pay dividends;
•maintaining proper and effective internal controls;
•expenses and administrative burdens as a public company; and
•anti-takeover provisions in our charter documents and Delaware law.

Given these risks and uncertainties, readers are cautioned not to place undue reliance on these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

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Insight

Alkami is a cloud-based digital banking solutions provider. We inspire and
empower community, regional and super-regional financial institutions ("FIs") to
compete with large, technologically advanced and well-resourced banks in the
United States. Our solution, the Alkami Platform, allows FIs to onboard and
engage new users, accelerate revenues and meaningfully improve operational
efficiency, all with the support of a proprietary, true cloud-based,
multi-tenant architecture. We cultivate deep relationships with our clients
through long-term, subscription-based contractual arrangements, aligning our
growth with our clients' success and generating an attractive unit economic
model.

Alkami was founded to help level the playing field for FIs. Since then, our
vision has been to create a platform that combines premium technology and
fintech solutions in one integrated ecosystem, delivered as a
software-as-a-service ("SaaS") solution and providing our clients' customers
with a single point of access to all things digital. We have invested
significant resources to build a technology stack that prioritized innovation
velocity and speed-to-market given the importance of product depth and
functionality in winning and retaining clients. In fiscal 2020, we acquired ACH
Alert, LLC ("ACH Alert") to pursue adjacent product opportunities, such as fraud
prevention and to expand our addressable market. In September 2021, we acquired
MK Decisioning Systems, LLC ("MK"), a technology platform for digital account
opening, credit card and loan origination solutions. In April 2022, we acquired
Segmint Inc. ("Segmint"), a leading cloud-based financial data analytics and
transaction data cleansing provider.

Our domain expertise in retail and business banking has enabled us to develop a
suite of products tailored to address key challenges faced by FIs. Due to our
architecture, adding products through our single code base is fast, simple and
cost-effective. The key differentiators of the Alkami Platform include:

• User Experience: Personalized and seamless digital experience across user interaction points including mobile, chat and SMS, building lasting connections between FIs and their customers.

•Integrations: Scalability and extensibility driven by more than 270 real-time
integrations to back office systems and third-party fintech solutions as of
September 30, 2022, including core systems, payment cards, mortgages, bill pay,
electronic documents, money movement, personal financial management and account
opening.

• Deep Data Capabilities: Data synced and stored from back-office systems and third-party fintech solutions and synthesized into meaningful insights, targeted content, and other monetization areas.

The Alkami Platform offers an end-to-end set of software products. Our typical
relationship with an FI begins with a set of core functional components, which
can extend over time to include a rounded suite of products across account
opening, card experience, client service, extensibility, financial wellness,
security and fraud protection, marketing and analytics and money movement.

We primarily go to market through an internal sales force. Given the long-term nature of our contracts, a typical sales cycle can range from approximately three to 12 months, with subsequent implementation time typically ranging from six to 12 months depending on the depth of integration.

We derive our Alkami Platform revenues almost entirely from multi-year contracts
that are based on an average contract life of approximately 70 months as of
September 30, 2022. We predominantly employ a per-registered-user pricing model,
with incremental fees above certain contractual minimum commitments for each
licensed solution. Our pricing is tiered, with per-registered-user discounts
applied as clients achieve higher levels of customer penetration, incentivizing
our clients to internally market and promote digital engagement.

To support our growth and capitalize on our market opportunity, we have
increased our operating expenses across all aspects of our business. In research
and development, we continue to focus on innovation and bringing novel
capabilities to our platform, extending our product depth. Similarly, we
continue to expand our sales and marketing organization focusing on new client
wins, cross-selling opportunities and client renewals.

For the three months ended September 30, 2022 and 2021, our total revenues were
$53.4 million and $39.8 million, respectively, representing a 34.3% increase
period-over-period. For the nine months ended September 30, 2022 and 2021, our
total revenues were $148.7 million and $109.7 million, respectively,
representing a 35.6% increase period-over-period. SaaS subscription revenues, as
further described below, represented 94.9% and 95.0% of total revenues for the
three and nine months ended September 30, 2022, respectively and 94.3% and 94.4%
of total revenues for the three and nine months ended September 30, 2021,
respectively. We incurred net losses of $20.0 million and $53.7 million for the
three and nine months ended September 30, 2022, respectively, and net losses of
$11.2 million and $33.5 million for the three and nine months ended September
30, 2021, respectively, largely on the basis of significant continued investment
in sales, marketing, product development and post-sales client activities.

RECENT DEVELOPMENTS

Merger with Segmint. On April 25, 2022, the Company consummated its previously
announced merger with Segmint, pursuant to the Agreement and Plan of Merger (the
"Merger Agreement"), dated March 25, 2022, with Segmint surviving as a wholly
owned subsidiary of the Company. Segmint operates a marketing analytics and
messaging delivery platform with patented software that enables financial
institutions and merchants to understand and leverage data, interact with
customers and measure results. The aggregate consideration paid in exchange for
all of the outstanding equity interests of Segmint was approximately $135.0
million. A portion of the consideration was placed into escrow to secure certain
post-closing indemnification obligations in the Merger Agreement.

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Factors Affecting Our Results of Operations

Growing our FI Client Base. A key part of our strategy is to grow our FI client
base. As of September 30, 2022, we served 190 FIs through the Alkami Platform
and over 330 clients through the ACH Alert, MK and Segmint products,
representing 70.1% annual client growth since September 30, 2021. Each of our
digital banking client wins is a competitive takeaway, and as such, our
historical ability to grow our client base has been a function of product depth,
technological excellence and a sales and marketing function able to match our
solutions with the strategic objectives of our clients. Our future success will
significantly depend on our ability to continue to grow our FI client base
through competitive wins.

Deepening Client Customer Penetration. We primarily generate revenues through a
per-registered-user pricing model. Once we onboard a client, our ability to help
drive incremental client customer digital adoption translates to additional
revenues with very limited additional spend. Our FI clients are incentivized to
market and encourage digital account sign-up based on identifiable improvement
in customer engagement as well as discounts received based on certain levels of
customer penetration. We expect to continue to support digital adoption by
client customers through continued investments in new products and platform
enhancements. Our future success will depend on our ability to continue to
deepen client customer penetration.

Expanding our Product Suite. Product depth is a key determinant in winning new
clients. In a replacement market, we win based on our ability to bring a product
suite to market that is superior to the incumbent, as well as to our broader
competition. Of equal importance is the ability to cohesively deliver a deep
product suite with as little friction as possible to the client customer. The
depth of our product suite is a function of technology and platform
partnerships. Our platform model with more than 270 integrations as of September
30, 2022 enables us to deliver thousands of configurations aligned with the
digital platform strategies adopted by our clients. We expect our future success
in winning new clients to be partially driven by our ability to continue to
develop and deliver new, innovative products to FI clients in a timely manner.
Furthermore, expanding our product suite expands our RPU potential. For
additional information regarding RPU, see "Key Business Metrics."

Client Renewals. Our model and the stability of our revenue base is, in part,
driven by our ability to renew our clients. In addition to extending existing
relationships, renewals provide an opportunity to grow minimum contract value,
as over the course of a contract term our clients often grow or their needs
evolve. Client renewals are also an important lever in driving our long-term
gross margin targets. We had six and 11 client renewals in the three and nine
months ended September 30, 2022, respectively. We expect client renewals to
continue to play a key role in our future success.

Continued Leadership in Innovation. Our ability to maintain a differentiated
platform and offering is dependent upon our pace of innovation. In particular,
our single code base, built on a multi-tenant infrastructure and combined with
continuous software delivery enables us to bring new, innovative products to
market quickly and positions us with what we believe is market-leading breadth
in terms of product offerings and feature set. We remain committed to investing
in our platform, notably through our research and development spend, which was
34.1% and 32.9% of our revenues for the three and nine months ended September
30, 2022, respectively. Our future success will depend on our continued
leadership in innovation.

COVID-19 Impact. The continued global impact of COVID-19 has resulted in various
measures to combat the spread of the virus. With the development of variants,
the status of ongoing measures varies widely. We transitioned our employee base
to work-from-home in March 2020, creating challenges in executing sales and
implementations that have resurfaced due to the renewal of certain actions and
restrictions in response to the ongoing COVID-19 pandemic and which may be
exacerbated if such actions or restrictions are prolonged. We continue to face
significant uncertainty concerning the duration of the COVID-19 pandemic as well
as the severity of any future infection surges.

Components of operating results

Revenue

Our digital banking client relationships are primarily based on multi-year
contracts that have an average contract life of 70 months as of September 30,
2022. We derive the majority of our revenues from SaaS subscription services
charged for the use of our digital banking solution. For each client, we invoice
monthly a contractual minimum fee for each licensed solution. In addition, we
invoice monthly an additional subscription fee for the number of registered
users using each solution and the number of bill-pay and certain other
transactions those registered users conduct through our digital banking platform
in excess of their contractual minimum commitments. Our pricing is tiered, with
per-registered-user discounts applied as clients achieve higher levels of
customer penetration, incentivizing our clients to internally market our
products and promote digital engagement. Variable consideration earned for
subscription fees in excess of contractual minimums is recognized as revenues in
the month of actual usage. SaaS subscription services also include annual and
monthly charges for maintenance and support services which are recognized on a
straight-line basis over the contract term.

We receive implementation and other upfront fees for the implementation,
configuration and integration of our digital banking platform. We typically
invoice these services as a fixed price per contract. These fees are not
distinct from the underlying licensed SaaS subscription services. As a result,
we recognize the resulting revenues on a straight-line basis over the client's
initial agreement term for our licensed SaaS solutions, commencing upon launch.

Occasionally, our clients request custom development and other professional
services, which we provide. These are generally one-time requests and involve
unique, non-standard features, functions or integrations that are intended to
enhance or modify their licensed SaaS solutions. We recognize revenues at the
point in time the services are transferred to the client.

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The following disaggregates our revenue for the three and nine months ended
September 30, 2022 and 2021 by main source:

                                                  Three months ended September 30,               Nine months ended September 30,
                                                     2022                    2021                   2022                    2021
(In thousands)
SaaS subscription services                    $         50,697          $    37,486          $        141,287          $   103,582
Implementation services                                  1,922                1,591                     5,503                4,604
Other services                                             793                  684                     1,942                1,538
Total revenues                                $         53,412          $    39,761          $        148,732          $   109,724


See Note 5 of the Notes to our unaudited condensed consolidated financial statements for further details.

Revenue Cost and Gross Margin

Cost of revenues is comprised primarily of salaries and other personnel-related
costs, including employee benefits, bonuses, stock-based compensation, travel
and related costs for employees supporting our SaaS subscription, implementation
and other services. This includes the costs of our implementation, client
support and client success teams, development personnel responsible for
maintaining and releasing updates to our platform, as well as third-party
cloud-based hosting services. Cost of revenues also includes the direct costs of
bill-pay services and other third-party intellectual property included in our
solutions, the amortization of acquired technology, the amortization of
capitalized internal use software, and depreciation.

We capitalize certain personnel costs directly related to the implementation of
our solutions to the extent those costs are recoverable from future revenues. We
amortize the costs for an implementation once revenue recognition commences. The
amortization period is typically five to seven years which represents the
expected period of client benefit. Other costs not directly recoverable from
future revenues are expensed in the period incurred.

We intend to continue to increase our investments in our implementation, client
support and client success teams and technology infrastructure to serve our
clients and support our growth. We expect cost of revenues to continue to grow
in absolute dollars as we grow our business, but to vary as a percentage of
revenues from period to period as a function of the utilization of
implementation and support personnel and the extent to which we recognize fees
from bill-pay services and other third-party functionality integrated into our
solutions. Our gross margin for the three and nine months ended September 30,
2022 was 51.6% and 53.6%, respectively, and 56.3% and 55.3% for the three and
nine months ended September 30, 2021, respectively.

The major components of cost of revenues represented the following percentages
of revenues for the three months ended September 30, 2022: third-party hosting
services (7.7%), the direct costs of bill-pay and other third-party intellectual
property included in our solutions (17.7%), our implementation team (10.8%), our
client success team (5.4%), our development team responsible for maintaining and
releasing updates to our platform (4.2%) and amortization of intangible assets
(2.5%). The major components of cost of revenues represented the following
percentages of revenues for the three months ended September 30, 2021:
third-party hosting services (7.9%), the direct costs of bill-pay and other
third-party intellectual property included in our solutions (17.0%), our
implementation team (9.3%), our client success team (5.4%), our development team
responsible for maintaining and releasing updates to our platform (3.8%) and
amortization of intangible assets (0.3%).

The major components of cost of revenues represented the following percentages
of revenues for the nine months ended September 30, 2022: third-party hosting
services (7.7%), the direct costs of bill-pay and other third-party intellectual
property included in our solutions (16.6%), our implementation team (10.7%), our
client success team (5.5%), our development team responsible for maintaining and
releasing updates to our platform (4.2%) and amortization of intangibles (1.7%).
The major components of cost of revenues represented the following percentages
of revenues for the nine months ended September 30, 2021: third-party hosting
services (8.8%), the direct costs of bill-pay and other third-party intellectual
property included in our solutions (16.2%), our implementation team (9.6%), our
client success team (5.7%), our development team responsible for maintaining and
releasing updates to our platform (4.1%) and amortization of intangible assets
(0.3%).

Operating Expenses

Research and Development. Research and development costs consist primarily of
personnel-related costs for our engineering, information technology and product
employees, including salaries, bonuses, other incentive-related compensation,
employee benefits and stock-based compensation. In addition, we also include
third-party contractor expenses, software development and testing tools,
allocated corporate expenses, and other expenses related to developing new
solutions and upgrading and enhancing existing solutions. We expect research and
development costs to increase as we expand our platform with new features and
functionality as well as enhance the existing Alkami Platform.

Sales and Marketing. Sales and marketing expenses consist primarily of
personnel-related costs of our sales, marketing and a portion of account
management employees, including salaries, bonuses, commissions, other
incentive-related compensation, employee benefits and stock-based compensation.
Sales and marketing expenses also include travel and related costs, outside
consulting fees and marketing programs, including lead generation, costs of our
annual client conference, advertising, trade shows and other event expenses. We
expect sales and marketing expenses will continue to increase as we expand our
direct sales teams to pursue our market opportunity.

General and Administrative. General and administrative expenses consist
primarily of personnel-related costs for our executive, finance, legal, human
resources, information technology, security and compliance and other
administrative employees, including salaries, bonuses, commissions, other
incentive-related compensation, employee benefits and stock-based compensation.
General and administrative expenses also
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include accounting, auditing and legal professional services fees, travel and
other unallocated corporate-related expenses such as the cost of our facilities,
employee relations, corporate telecommunication and software. We expect that
general and administrative expenses will continue to increase as we scale our
business and as we incur costs associated with being a publicly traded company,
including legal, audit, business insurance and consulting fees.

Acquisition-Related Expenses, net. Acquisition-related expenses, net, include
the accrual of deferred compensation due to the former owner of ACH Alert, in
addition to acquisition-related expenses associated with the acquisitions of MK
and Segmint, primarily related to legal, consulting, and professional fees. In
addition, these expenses are inclusive of any (gain) loss on revaluation of
contingent consideration.

Amortization of acquired intangible assets. Amortization of acquired intangibles represents the amortization of intangible assets recognized in connection with our business acquisitions, which are amortized on a straight-line basis over the estimated useful lives of the related assets.

Non-operating income (expenses)

Non-operating income (expense) consists primarily of interest income from our
cash balances, interest expense from borrowings under our revolving line of
credit, amortization of deferred debt costs, unrealized losses on marketable
securities, and changes in fair value of warrants, and tranche rights.

Provision (benefit) for income taxes

As a result of our valuation allowance, provision (benefit) for income taxes
consists primarily of state income taxes and deferred taxes related to the tax
amortization of acquired goodwill. Our effective tax rate differs from the
statutory tax rate primarily due to the impact of the valuation allowance
against our deferred tax assets.
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Operating results

The results of operations presented below should be reviewed in conjunction with
the condensed consolidated financial statements and notes included elsewhere in
this filing. The following table presents our selected consolidated statements
of operations data for the three and nine months ended September 30, 2022 and
2021.
                                               Three months ended September 30,            Nine months ended September 30,
($ In thousands, except share and per
share amounts)                                     2022                2021                   2022                   2021
Revenues                                      $    53,412          $   

39,761 $148,732 $109,724
Revenue cost(1)(2)

                             25,844              17,387                    69,081              49,064
Gross profit                                       27,568              22,374                    79,651              60,660
Operating expenses(2):
Research and development                           18,222              12,877                    48,973              35,897
Sales and marketing                                 9,721               7,216                    27,822              17,858
General and administrative                         18,337              12,415                    54,114              34,348
Acquisition-related expenses, net                     737                 915                       155               2,177
Amortization of acquired intangibles                  370                  93                       796                 274
Total operating expenses                           47,387              33,516                   131,860              90,554
Loss from operations                              (19,819)            (11,142)                  (52,209)            (29,894)
Non-operating income (expense):
Interest income                                       851                 223                     1,383                 364
Interest expense                                   (1,185)               (300)                   (2,336)               (908)
Loss on financial instruments                         (59)                  -                      (446)             (3,035)
Loss before income taxes                          (20,212)            (11,219)                  (53,608)            (33,473)
Provision (benefit) for income taxes                 (163)                  -                        80                   -
Net loss                                      $   (20,049)         $  (11,219)         $        (53,688)         $  (33,473)

(1) Includes the amortization of technology acquired from $1.4 million and
$0.1 million for the three months ended September 30, 2022 and 2021, respectively, and $2.6 million and $0.4 million for the nine months ended
September 30, 2022 and 2021, respectively.

(2) Includes stock-based compensation expense as follows:

                                       Three months ended September 30,     

End of nine months September 30,

                                           2022                 2021                 2022                 2021
($ in thousands)
Cost of revenues                      $      1,244          $      544          $      3,278          $    1,242
Research and development                     3,023                 793                 7,487               1,795
Sales and marketing                          1,112                 266                 2,859                 609
General and administrative                   6,535               1,748                19,332               4,147
Total stock-based compensation
expenses                              $     11,914          $    3,351          $     32,956          $    7,793



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The following table presents our reconciliation of GAAP net loss to Adjusted EBITDA for the periods indicated.

                                                      Three months ended September 30,            Nine months ended September 30,
                                                          2022                2021                   2022                   2021
($ in thousands)
Net loss                                             $   (20,049)         $

(11,219) ($53,688) ($33,473)
Provision (benefit) for income taxes

                        (163)                  -                        80                   -
Loss on financial instruments                                 59                   -                       446               3,035
Interest expense, net                                        334                  77                       953                 544
Depreciation and amortization                              2,550                 802                     5,512               2,384
Stock-based compensation expense                          11,914               3,352                    32,956               7,793

Acquisition-related expenses, net(1)                         737                 915                       155               2,177
Adjusted EBITDA (2)                                  $    (4,618)         $   (6,073)         $        (13,586)         $  (17,540)



(1) Acquisition-related expenses, net, include the accrual of deferred
compensation due to the former owner of ACH Alert, in addition to
acquisition-related expenses associated with the acquisitions of MK and Segmint,
primarily related to legal, consulting, and professional fees. In the nine
months ended September 30, 2022, these expenses are offset by the $2.7 million
gain on contingent consideration related to the purchase of MK.

(2) Adjusted EBITDA is a non-GAAP financial measure and should not be considered
an alternative to GAAP net loss as a measure of operating performance or as a
measure of liquidity. For additional information regarding adjusted EBITDA, see
"Key Business Metrics."

Key Business Metrics

Adjusted EBITDA. Adjusted EBITDA is a non-GAAP financial measure and should not
be considered an alternative to GAAP net loss as a measure of operating
performance or as a measure of liquidity. We define adjusted EBITDA as net loss
before provision (benefit) for income taxes; loss on financial instruments;
interest expense, net; depreciation and amortization; stock-based compensation
expense; and acquisition-related expenses, net. We believe adjusted EBITDA
provides investors and other users of our financial information consistency and
comparability with our past financial performance and facilitates
period-to-period comparisons of operations. Adjusted EBITDA was $(4.6) million
and $(13.6) million for the three and nine months ended September 30, 2022,
respectively, and $(6.1) million and $(17.5) million for the three and nine
months ended September 30, 2021, respectively.

Annual Recurring Revenue (ARR). We calculate ARR by aggregating annualized
recurring revenue related to SaaS subscription services recognized in the last
month of the reporting period as well as the next 12 months of expected
implementation services revenues for all clients on the platform in the last
month of the reporting period. We believe ARR provides important information
about our future revenue potential, our ability to acquire new clients, and our
ability to maintain and expand our relationship with existing clients. ARR was
$213.6 million as of September 30, 2022 and $154.8 million as of September 30,
2021, an increase of $58.8 million, or 38.0%.

Registered Users. We define a registered user as an individual or business
related to an account holder of an FI client on our digital banking platform who
has registered to use one or more of our solutions and has current access to use
those solutions as of the last day of the reporting period presented. We price
our digital banking platform based on the number of registered users, so as the
number of registered users of our digital banking platform increases, our ARR
grows. We believe growth in the number of registered users provides important
information about our ability to expand market adoption of our digital banking
platform and its associated software products, and therefore to grow revenues
over time. We had 13.7 million registered users as of September 30, 2022 and
11.4 million as of September 30, 2021, an increase of 2.3 million, or 20.3%.

Revenue per Registered User (RPU). We calculate RPU by dividing ARR as of the
last day of the reporting period by the number of registered users as of the
last day of the reporting period. We believe RPU provides important information
about our ability to grow the number of software products adopted by new clients
over time, as well as our ability to expand the number of software products that
our existing clients add to their contracts with us over time. RPU was $15.57 as
of September 30, 2022 and $13.57 as of September 30, 2021, an increase of $2.00,
or 14.7%.
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Comparison of three and nine months completed September 30, 2022 and 2021

Revenues
                         Three months ended September 30,                 Change                  Nine months ended September 30,                  Change
                             2022                2021                $                %               2022                2021                $                %
($ in thousands)
Revenues                 $   53,412          $  39,761          $ 13,651            34.3  %       $  148,732          $ 109,724          $ 39,008            35.6  %

                                  September 30,
                             2022                2021
Annual Recurring Revenue
(ARR)                    $  213,640          $ 154,805          $ 58,835            38.0  %
Registered Users             13,726             11,408             2,318            20.3  %
Revenue per Registered
User (RPU)               $    15.57          $   13.57          $   2.00            14.7  %



Revenues increased $13.7 million, or 34.3%, and $39.0 million, or 35.6% for the
three and nine months ended September 30, 2022, respectively, compared to the
same periods in 2021.

The increase of $13.7 million in revenues for the three months ended September
30, 2022 was primarily due to registered user growth from new and existing
clients, RPU growth, and the acquisition of Segmint completed on April 25, 2022,
which contributed $3.3 million for the three months ended September 30, 2022.

The increase of $39.0 million in revenues for the nine months ended September
30, 2022 was primarily due to registered user growth of 2.3 million, or 20.3%,
driven by the implementation of 29 new financial institutions supporting 1.2
million digital users and increased digital user adoption from our existing
clients of 1.5 million users, or 12%, partially offset by a 0.4 million decrease
in users due to client losses. In addition, increased revenues were due to RPU
growth of 14.7%. RPU growth was primarily driven by cross-sell activity to
existing clients, higher average RPU of new clients implemented in the last 12
months on our digital banking platform compared to aggregate RPU and the
acquisition of Segmint completed on April 25, 2022, which contributed $5.6
million in the nine months ended September 30, 2022. The average RPU of users
from new clients implemented on our digital platform in the last 12 months of
$17.40 as of September 30, 2022, is 11.75% higher than the aggregate RPU as of
September 30, 2022.

Revenue Cost and Gross Margin

                                Three months ended September
                                             30,                               Change                  Nine months ended September 30,                 Change
                                   2022               2021               $                %                2022               2021                $                %
($ in thousands)
Cost of revenues               $  25,844           $ 17,387          $ 8,457             48.6  %       $  69,081           $ 49,064          $ 20,017            40.8  %
Percentage of revenues              48.4   %           43.7  %           4.7  %          10.8  %            46.4   %           44.7  %            1.7  %          3.8  %



Cost of Revenues

Cost of revenues increased $8.5 million, or 48.6%, and $20.0 million, or 40.8%,
for the three and nine months ended September 30, 2022, respectively, compared
to the same periods in 2021, generating a gross margin of 51.6% and 53.6% for
the three and nine months ended September 30, 2022, respectively, compared to a
gross margin of 56.3% and 55.3% for the same periods in 2021.

The increase in cost of revenues for the three months ended September 30, 2022
was primarily driven by a $2.7 million increase in personnel-related costs
(which includes stock-based compensation of $0.6 million) resulting from
headcount increases supporting our growth in site reliability engineering,
client implementation and client support, as well as $2.3 million in higher
costs of our third-party partners where we resell their solutions as part of the
digital platform, a $0.8 million increase in hosting costs, $0.8 million of
additional costs related to the acquisition of Segmint (which includes
stock-based compensation of $0.1 million) and $1.3 million of amortization of
intangibles, $1.1 million of which is related to the acquisition of Segmint.

The increase in cost of revenues for the nine months ended September 30, 2022
was primarily driven by an $7.0 million increase in personnel-related costs
(which includes stock-based compensation of $1.8 million) resulting from
headcount increases supporting our growth in the following teams: site
reliability engineering, client implementation and client support, as well as
$6.6 million in higher costs of our third-party partners where we resell their
solutions as part of the digital platform, $1.4 million in incremental hosting
costs incurred from an increase in revenues derived from existing and new client
growth, $0.4 million in higher consulting costs, $0.3 million in higher travel
costs and $0.3 million in higher computer hardware and software costs. In
addition, we incurred $1.5 million of additional costs related to the
acquisition of Segmint (which includes stock-based compensation of $0.2 million)
and $2.2 million of amortization of intangibles, $1.7 million of which is
related to the acquisition of Segmint. We expect the cost of revenues will
continue to increase as SaaS subscription services and the associated
implementation services increase over time.
                                      24
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Operating Expenses
                                       Three months ended September
                                                    30,                               Change                  Nine months ended September 30,                   Change
                                          2022               2021                $                %                2022               2021                $                %
($ in thousands)
Research and development              $  18,222           $ 12,877          $  5,345            41.5  %       $   48,973           $ 35,897          $ 13,076             36.4  %
Sales and marketing                       9,721              7,216             2,505            34.7  %           27,822             17,858             9,964             55.8  %
General and administrative               18,337             12,415             5,922            47.7  %           54,114             34,348            19,766             57.5  %
Acquisition-related expenses, net           737                915              (178)          (19.5) %              155              2,177            (2,022)           (92.9) %
Amortization of acquired intangibles        370                 93               277           297.8  %              796                274               522            190.5  %
Total operating expenses              $  47,387           $ 33,516          $ 13,871            41.4  %       $  131,860           $ 90,554          $ 41,306             45.6  %
Percentage of revenues                     88.7   %           84.3  %                                               88.7   %           82.5  %



Research and Development

Research and development expenses increased $5.3 million, or 41.5%, and
$13.1 million, or 36.4%, for the three and nine months ended September 30, 2022,
respectively, compared to the same periods in 2021. For the three months ended
September 30, 2022, the increase was primarily due to a $3.8 million increase in
personnel-related costs (which includes stock-based compensation of $1.5
million) resulting from headcount growth in our engineering, information
technology and product teams dedicated to platform enhancements and innovation.
In addition, we incurred $1.9 million of additional costs related to the Segmint
acquisition (which includes stock-based compensation of $0.7 million). These
increases are partially offset by $0.5 million in lower consulting costs.

For the nine months ended September 30, 2022, the increase was primarily due to
a $8.8 million increase in personnel-related costs (which includes stock-based
compensation of $4.5 million) resulting from headcount growth in our
engineering, information technology and product teams dedicated to platform
enhancements and innovation, as well as $0.5 million in higher consulting costs,
$0.4 million in higher hosting costs, and $3.0 million of additional costs
related to the Segmint acquisition (which includes stock-based compensation of
$1.2 million).

Sales and Marketing

Sales and marketing expenses increased $2.5 million, or 34.7%, and $10.0
million, or 55.8%, for the three and nine months ended September 30, 2022,
respectively, compared to the same periods in 2021. For the three months ended
September 30, 2022, the increase was primarily due to a $1.9 million increase in
personnel-related costs (which includes stock-based compensation of $0.7
million) resulting from headcount growth in our sales and marketing teams. In
addition, we incurred $1.0 million of additional costs related to the Segmint
acquisition (which includes stock-based compensation of $0.2 million), $0.4
million in higher consulting costs, and $0.4 million in higher travel costs for
the sales team, partially offset by $1.1 million in lower costs related to
timing of our annual client conference.

For the nine months ended September 30, 2022, the increase was primarily due to
a $6.2 million increase in personnel-related costs (which includes stock-based
compensation of $2.0 million) resulting from headcount growth in our sales and
marketing teams. In addition, we incurred $1.8 million of additional costs
related to the Segmint acquisition (which includes stock-based compensation of
$0.3 million), $0.6 million in higher consulting costs, $0.6 million in higher
travel costs for the sales team and $0.8 million in higher costs related to
industry conferences and trade shows as we return to pre-COVID-19 pandemic sales
activities such as our in-person client conference, Co:Lab.

General and administrative

General and administrative expenses increased $5.9 million, or 47.7%, and $19.8
million, or 57.5%, for the three and nine months ended September 30, 2022,
respectively, compared to the same periods in 2021. For the three months ended
September 30, 2022, the increase was primarily due to a $4.9 million increase in
personnel-related and other costs (which includes stock-based compensation of
$4.6 million). In addition, we incurred $0.6 million of additional costs related
to the Segmint acquisition (which includes stock-based compensation of $0.2
million), $0.2 million in higher audit and consulting costs, and $0.3 million in
higher software costs.

For the nine months ended September 30, 2022, the increase in general and
administrative expenses was primarily due to a $16.1 million increase in
personnel-related and other costs (which includes stock-based compensation of
$14.9 million). In addition, we incurred $0.9 million of additional costs
related to the Segmint acquisition (which includes stock-based compensation of
$0.3 million), $1.5 million of increased insurance costs for public company
director and officer coverage and $1.0 million in higher software costs.

Acquisition-related costs, net

Acquisition-related expenses, net decreased $0.2 million and $2.0 million for
the three and nine months ended September 30, 2022, respectively, compared to
the same periods in 2021. For the three months ended September 30, 2022, the
decrease was primarily due to expenses incurred for the MK acquisition that
closed in the three months ended September 30, 2021. For the nine months ended
September 30, 2022, the decrease was primarily due to the $2.7 million gain on
contingent consideration related to the purchase of MK, partially offset by $0.8
million of increased acquisition expenses related to legal, consulting, and
professional fees for the acquisition of Segmint.

                                      25
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Amortization of acquired intangible assets

Amortization of acquired intangibles increased $0.3 million and $0.5 million for
the three and nine months ended September 30, 2022, respectively, compared to
the same periods in 2021, primarily due to additional amortization of intangible
assets related to the acquisitions of MK in September 2021 and Segmint in April
2022.

Net non-operating income (expenses)

Non-operating expense increased $0.3 million for the three months ended
September 30, 2022, compared to same period in 2021, the increase was primarily
due to $0.3 million in higher net interest expense. Non-operating expense
decreased $2.2 million for the nine months ended September 30, 2022, compared to
same period in 2021, primarily due $3.0 million in non-operating loss related to
the increase in fair value of our warrant liabilities for the nine months ended
September 30, 2021, partially offset by higher net interest expense of $0.4
million and $0.4 million of unrealized losses on marketable securities for the
nine months ended September 30, 2022.

Provision (benefit) for income taxes

The Company recorded an income tax benefit of $0.2 million and an income tax
expense of $0.1 million for the three and nine months ended September 30, 2022,
respectively, resulting in an effective tax rate of 0.8% and (0.2)%,
respectively, compared to no income tax expense for the three and nine months
ended September 30, 2021.

The difference in the effective tax rate for the three and nine months ended
September 30, 2022 as compared to the same periods in 2021 is primarily due to
state income taxes and deferred taxes related to the tax amortization of
acquired goodwill. This was partially offset by a $0.3 million deferred tax
benefit attributable to the partial release of the Company's pre-existing
valuation allowance related to the Segmint business combination, recorded in the
three months ended September 30, 2022.

Our effective tax rate differs from the statutory tax rate primarily due to the impact of the full valuation allowance on the Company’s deferred tax assets.

Cash and capital resources

As of September 30, 2022, we had $208.9 million in cash and cash equivalents and
marketable securities, and an accumulated deficit of $367.5 million. Our net
losses have been driven by our investments in developing our digital banking
platform, expanding our sales, marketing and implementation organizations and
scaling our administrative functions to support our rapid growth.

We have financed our operations primarily through the net proceeds we have
received from the sales of our redeemable convertible preferred stock and common
stock, cash generated from the sale of SaaS subscription services and borrowings
under our Amended Credit Agreement (as defined below).

On April 15, 2021, we completed our initial public offering ("IPO"), in which we
issued and sold 6,900,000 shares of our common stock, including 900,000 shares
of common stock that were sold pursuant to the exercise in full of the
underwriters' option to purchase additional shares of common stock at $30.00 per
share. Our IPO resulted in net proceeds of $192.8 million after deducting
underwriting discounts, commissions and other offering costs. With the proceeds
from our IPO, the Company paid in full accumulated dividends on our previously
outstanding shares of Series B redeemable convertible preferred stock, which
totaled approximately $5.0 million.

Our future capital requirements will depend on many factors, including revenue
growth and costs incurred to support client usage and growth in our client base,
increased research and development expenses to support the growth of our
business and related infrastructure, increased general and administrative
expenses associated with being a publicly traded company, investments in office
facilities and other capital expenditure requirements and any potential future
acquisitions or other strategic transactions.

We believe that our existing cash resources, including our Amended Credit
Agreement, will be sufficient to finance our continued operations, growth
strategy, planned capital expenditures and the additional expenses we expect to
incur as a public company for the short term (at least the next 12 months) and
longer term. We may from time to time seek to raise additional capital to
support our growth. Any equity financing we may undertake could be dilutive to
our existing stockholders, and any additional debt financing we may undertake
could require debt service and financial and operational requirements that could
adversely affect our business.

                                      26
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Cash flow

The following table summarizes our cash flows for the periods indicated:

                                                   Nine months ended September 30,
(in thousands)                                           2022               

2021

Net cash used in operating activities       $        (24,045)                  $ (16,802)
Net cash used in investing activities               (247,674)               

(20,471)

Net cash provided by financing activities             62,893                

186 886

Net cash used in operating activities

During the nine months ended September 30, 2022, net cash used in operating
activities was $24.0 million, which consisted of a net loss of $53.7 million,
adjusted by non-cash charges of $36.8 million and net cash outflows from the
change in net operating assets and liabilities of $7.2 million. The non-cash
charges were primarily comprised of depreciation and amortization expense of
$5.5 million, stock-based compensation expense of $33.6 million, and net other
changes in non-cash charges of $0.4 million, partially offset by a gain on
revaluation of contingent consideration of $2.7 million. The net cash outflows
from the change in our net operating assets and liabilities were primarily due
to a $3.7 million increase in accounts receivable, a $2.8 million increase in
prepaid expenses and other current assets, a $3.8 million increase in deferred
implementation costs, and a net $0.5 million in other balance sheet changes,
partially offset by a $3.6 million increase in accounts payable and accrued
liabilities.

During the nine months ended September 30, 2021, net cash used in operating
activities was $16.8 million, which consisted of a net loss of $33.5 million,
adjusted by non-cash charges of $13.3 million and net cash inflows from the
change in net operating assets and liabilities of $3.4 million. The non-cash
charges were primarily comprised of a non-operating loss related to the increase
in fair value of warrant liabilities of $3.0 million, depreciation and
amortization expense of $2.4 million, and stock-based compensation expense of
$7.8 million. The net cash inflows from the change in our net operating assets
and liabilities were primarily due to a $12.8 million increase in accounts
payable and accrued liabilities, partially offset by a $5.7 million increase in
accounts receivable, a $0.7 million increase in prepaid expenses and other
current assets, and a net $3.0 million in other balance sheet changes.

Net cash used in investment activities

During the nine months ended September 30, 2022, net cash used in investing
activities was $247.7 million, primarily consisting of $164.1 million for the
purchase of marketable securities, $131.3 million related to our acquisition of
Segmint, $2.8 million related to capitalized software development costs, and
capital expenditures related to updates for computer and other equipment of
$1.0 million, partially offset by $51.5 million in proceeds from maturities and
redemptions of marketable securities.

In the nine months ended September 30, 2021the net cash used in investing activities was $20.5 millioncomposed mainly of $18 million for the purchase of MK, $0.3 million related to the finalization of working capital adjustments on our acquisition of ACH Alert, $1.3 million related to capitalized software development costs and capital expenditures related to computer and other equipment updates of $0.9 million.

Net cash provided by financing activities

For the nine months ended September 30, 2022, net cash provided by financing
activities was $62.9 million, which was primarily due to proceeds of $85.0
million from issuance of long-term debt, $2.1 million from the exercise of stock
options to purchase 0.9 million shares of our common stock, and proceeds from
issuances under the Employee Stock Purchase Plan ("ESPP") of $1.8 million,
partially offset by $24.7 million of principal payments on debt, payments for
taxes related to net settlement of equity awards of $0.6 million, and debt
issuance costs paid of $0.8 million.

For the nine months ended September 30, 2021, net cash provided by financing
activities was $186.9 million, which was primarily due to the receipt of
proceeds from our IPO of $192.8 million and proceeds of $6.4 million from the
exercise of stock options to purchase 4.1 million shares of our common stock,
partially offset by the cash payment of our Series B dividend of $5.0 million
upon the consummation of our IPO, the $4.5 million payment of deferred IPO
issuance costs, and the repurchase of shares of our common stock in the amount
of $3.5 million.

Amended Credit Agreement

On April 29, 2022, we entered into an amended and restated credit agreement with
Silicon Valley Bank, Comerica Bank, and Canadian Imperial Bank of Commerce (the
"Amended Credit Agreement"). The Amended Credit Agreement amends and restates
the prior credit facility provided by Silicon Valley Bank and KeyBank National
Association. The Amended Credit Agreement matures on April 29, 2025. The Amended
Credit Agreement includes the following, among other features:

• Revolving facility: the amended credit agreement provides $40.0 million in total commitments for secured revolving loans (“Amended Revolving Facility”).

•Term Loan: A term loan of $85.0 million (the "Amended Term Loan") was borrowed
on the closing date of the Amended Credit Agreement. The additional proceeds
received from the Amended Term Loan were used to replenish cash used to fund the
acquisition of Segmint, which closed on April 25, 2022.

• Accordion Feature: The Amended Credit Agreement also allows us, subject to certain conditions, to request additional revolving loan commitments in an aggregate principal amount of up to $50.0 million.

                                      27
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Amended Revolving Facility loans under the Amended Credit Agreement may be
voluntarily prepaid and re-borrowed. Principal payments on the Amended Term Loan
are due in quarterly installments equal to an initial amount of approximately
$1.1 million, beginning on June 30, 2023 and continuing through March 31, 2024,
and increasing to approximately $2.1 million beginning on June 30, 2024 through
the Amended Credit Agreement maturity date. Once repaid or prepaid, the Amended
Term Loan may not be re-borrowed.

Borrowings under the Amended Credit Agreement bear interest at a variable rate
based upon the Secured Overnight Financing Rate ("SOFR") plus a margin of 3.00%
to 3.50% per annum depending on the applicable recurring revenue leverage ratio.
If the SOFR rate is ever less than 0%, then the SOFR rate shall be deemed to be
0%. The Amended Credit Agreement is subject to certain liquidity and operating
covenants and includes customary representations and warranties, affirmative and
negative covenants and events of default.

Obligations under the Amended Credit Agreement are secured by our subsidiaries and secured by all or substantially all of our assets and the assets of our subsidiaries pursuant to an amended and restated security and surety agreement executed in concurrently with the Amended Credit Agreement.

The Amended Credit Agreement contains customary affirmative and negative
covenants, as well as (i) an annual recurring revenue growth covenant requiring
the loan parties to have recurring revenues in any four consecutive fiscal
quarter period in an amount that is 10% greater than the recurring revenues for
the corresponding four consecutive quarter period in the previous year and (ii)
a liquidity (defined as the aggregate amount of cash in bank accounts subject to
a control agreement plus availability under the Revolving Facility) covenant,
requiring the loan parties to have liquidity, tested on the last day of each
calendar month, of $15.0 million or more. The Amended Credit Agreement also
contains customary events of default, which if they occur, could result in the
termination of commitments under the Amended Credit Agreement, the declaration
that all outstanding loans are immediately due and payable in whole or in part,
and the requirement to maintain cash collateral deposits in respect of
outstanding letters of credit.

Total interest expense, including commitment fees and unused line fees, for the
three and nine months ended September 30, 2022 was $1.2 million and $2.3
million, respectively, and $0.3 million and $0.9 million for the three and nine
months ended September 30, 2021, respectively. In conjunction with closing the
Amended Credit Agreement in 2022, we incurred issuance costs of $0.8 million,
which were deferred and were scheduled to be amortized over the three-year term.
Unamortized debt issuance costs totaled $0.5 million and $0.1 million as of
September 30, 2022 and December 31, 2021, respectively. Amortization expense was
less than $0.7 million and $0.9 million for the three and nine months ended
September 30, 2022, respectively. Amortization expense was $0.2 million and
$0.6 million for the three and nine months ended September 30, 2021,
respectively.

Contractual obligations and commitments

There were no material changes to our contractual obligations and commitments as
of September 30, 2022 compared to those discussed as of December 31, 2021 in our
Annual Report on Form 10-K for the year ended December 31, 2021, filed with the
SEC on February 25, 2022.

Off-balance sheet arrangements

We did not have during the periods presented, and we do not currently have, any
off-balance sheet financing arrangements or any relationships with
unconsolidated entities or financial partnerships, including entities sometimes
referred to as structured finance or special purpose entities, that were
established for the purpose of facilitating off-balance sheet arrangements or
other contractually narrow or limited purposes.

Critical Accounting Policies and Significant Judgments and Estimates

In preparing our unaudited condensed consolidated financial statements in
conformity with GAAP, we must make decisions that impact the reported amounts of
assets, liabilities, revenues and expenses, and the related disclosures. Such
decisions include the selection of the appropriate accounting principles to be
applied and the assumptions on which to base accounting estimates. In reaching
such decisions, we apply judgments based on our understanding and analysis of
relevant circumstances, historical experience, and actuarial valuations. Actual
amounts could differ from those estimated at the time the condensed consolidated
financial statements are prepared.

There have been no material changes to our critical accounting policies and
estimates as compared to the critical accounting policies and estimates
described in "Management's Discussion and Analysis of Financial Condition and
Results of Operations" set forth in our Annual Report on Form 10-K for the year
ended December 31, 2021, filed with the SEC on February 25, 2022.

Recently issued accounting pronouncements

See Note 2 of the Notes to our unaudited condensed consolidated financial statements included elsewhere in this report for a discussion of recent accounting pronouncements and future application of accounting standards.

Emerging Growth Company Status

We are an "emerging growth company," as defined in the JOBS Act. Under the JOBS
Act, emerging growth companies can delay adopting new or revised accounting
standards issued subsequent to the enactment of the JOBS Act until such time as
those standards apply to private companies. We have elected to use this extended
transition period to enable us to comply with new or revised accounting
standards that have different effective dates for public and private companies
until the earlier of the date we (i) are no longer an emerging growth company or
(ii) affirmatively and irrevocably opt out of the extended transition period
provided in the JOBS Act. As a result, our consolidated financial statements may
not be comparable to companies that comply with new or revised accounting
pronouncements as of public company effective dates.
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