Bryan Hill: Yeah. I mean the way that we evaluate win rates as we evaluate it over a longer continuum of time of any one quarter, and we’ve been consistently on a trailing 12 month basis being in the mid-teens, kind of executing in the mid-teens level as it relates to banks. Compared to credit unions where we’re in more like the mid-30s in terms of win rates on a historical basis, looking at 12-month periods of time. We feel that again by 2026, we can push our win rate to be more commensurate with the credit union space, with success in the four areas that I just outlined on my last question.
Jacob Stephan: Okay, got it. And I guess maybe the 1.4 times, you know, sales efficiency kind of ARR divided by sales and marketing expenditures, obviously that’s nice, that’s high, but maybe you could just kind of touch on a question, you know. Why wouldn’t you spend more if you’re kind of getting that at such a high efficiency rate?
Alex Shootman: Great thing about our market is that the customers are very well known and there’s a lot of data about the customers. If you think about markets where you have to spend a lot of money on sales and marketing, it’s either because you’re trying to stimulate the market, you’ve got a product that’s a new product or a new concept, and you have to stimulate demand, or the market is very, very large and you have to be found by people that have a need. The great thing for us is we don’t have to do either one of those things in terms of the regional and community financial institution market. Digital banking is a known solution, people have it. It’s a budgeted line item, so you’re not having to spend sales and marketing dollars to stimulate demand.
And then the great thing about this market is because it’s regulated, there’s a tremendous amount of information that’s published about all of the financial institutions. What that results in is our ability to create territories that are pretty precise in terms of when people are going to be coming up on their contract and it allows us to spend marketing dollars, that is — that’s very precise. So for us to all of a sudden double our sales and marketing expense, we don’t think would be prudent because of the nature of the market itself. And so the nature of the market allows us to maintain the spend envelope that we have on sales and marketing and still drive the business performance that we have.
Bryan Hill: Yeah. And I’ll make a couple more comments to what Alex just how he just answered. You know, we are investing more in sales and marketing. We were growing sales and marketing just at or slightly below our revenue growth rate. And we expect to maintain a between 14% and 15% of revenue for sales and marketing. But what that really does for us is that allows us to then take the sales and marketing dollars we otherwise would have invested in, and allocate those to our platform. And that really provides more value for the end market, it provides more value for our client base versus spending more, investing more heavily in sales and marketing. And that’s the way that companies always approach go-to-market is best platform wins and by having a very efficient sales and marketing ratio and result, allows us to invest more in our platform.
Operator: Your next question comes from the line of Alexei Gogolev with JP Morgan.
Elyse Kanner: Hi, this is Elyse Kanner on for Alexei Gogolev. So my first question was regarding gross margin. You kind of talked about how it was largely driven by the focus on containerization and reducing hosting costs. I was wondering what do you see as the exit rate for the year and kind of the cadence of margin expansion we can expect here and if there’s any upside to the 2026 target that you mentioned, you’d likely exceed?
Bryan Hill: Yes. So we’re still committed to the 65% gross margin for 2026. We’re not making a move from that. And the way that we have described our progression to 65% is on average gross margin expansion of 200 basis points per year. It just so happens in Q1, we did far better than that. And I would expect in 2024, we’re going to do a bit better than 200 basis points per year. And the factors that are going to drive that will be continued success and becoming more efficient with our hosting cost per user as well as a lot of the activities and initiatives we have around implementation and other post-sale operations, but more efficiency in those areas.
Alex Shootman: You know, I would just add from a commentary perspective. We’re really pleased with the results that we’re getting from the investment in the platform, that is not just delivering improved gross margin, which is important, but it’s delivering increased customer satisfaction, that attractiveness to Alkami. And we’re really pleased with what the services team is doing in terms of how they’re onboarding customers, and how they’re thinking about the roles and responsibilities when they’re onboarding customers, where they’ve just turned out to be doing some things that allow us to scale. As we continue to onboard, we think more customers than anybody else. So Alkami is really pleased with what the implementation teams are doing, and what the platform teams are doing, in terms of both business results and customer satisfaction.
Elyse Kanner: Got it. Thank you. And then a quick follow-up. You were talking about how a lot of your RPU expansion comes from new customers adopting more products. Do you have any breakdown between how banks versus credit unions are adopting your products, if there are trends that maybe one adopting more than the other?
Bryan Hill: It’s about the same. But one a couple of products are included in just about —
Alex Shootman: Huge difference between banks and credit unions.
Bryan Hill: Yeah. The product adoption is about the same except for a couple of the different products that banks will always take. In general, about 85% of the commercial banks that we sell, will take our ACH Alert product, which is a high RPU product. And then they always take our commercial banking product, which is also a high RPU product. So I’ll give you some ideas of what I mean by higher RPU and how those products can drive a higher RPU. When you look at our backlog today, we have 42 clients in backlog, of those 27 are banks, and 17 — 15 of those are — 27 of those are credit unions and 15 of those are banks. The credit unions have an average RPU of $22 and the banks have an average RPU of $27. So our overall backlog is about $24, and banks are driving up the higher average. Compare that to our company average of $16.71. So as new logos are coming on, they’re coming on at a much higher RPU than the existing base today.
