Alkami sets terms for $300 million convertible notes offering

PLANO, Texas - Alkami Technology, Inc. (NASDAQ: ALKT), a provider of cloud-based digital banking solutions with a market capitalization of $2.44 billion, has announced the pricing for its $300 million private offering of 1.50% convertible senior notes due 2030. The company, which has seen its stock decline 34.92% year-to-date, maintains strong revenue growth of 26.06% over the last twelve months. According to InvestingPro analysis, the company operates with a moderate debt level and maintains healthy liquidity ratios. The sale of the notes is set to conclude on March 13, 2025, given that all standard closing conditions are met. Additionally, Alkami has given the initial purchasers an option to buy up to an additional $45 million in notes within a 13-day timeframe starting from the issuance date.

Interest on these notes will be paid semi-annually, starting September 15, 2025, and the notes will mature on March 15, 2030, unless they are repurchased, redeemed, or converted earlier. Conversion rights for the notes are subject to certain conditions and will fully open up on November 15, 2029, until two trading days before the maturity date. Alkami retains the choice to settle conversions in cash, shares of its common stock, or a combination thereof. The initial conversion rate is set at 30.4681 shares per $1,000 principal amount of notes, translating to an initial conversion price of around $32.82 per share.

Alkami can redeem the notes for cash under specific circumstances starting March 20, 2028, and up to the 62nd scheduled trading day before they mature. If Alkami experiences a "fundamental change," as per the indenture terms, noteholders may demand that their notes be repurchased for cash at the principal amount plus any accrued and unpaid interest.

The company anticipates net proceeds of roughly $290.3 million from the offering, or $334.0 million if the additional notes are fully purchased. These funds are primarily earmarked for the acquisition of Fin Technologies, Inc. dba MANTL, with any leftover proceeds allocated for general corporate purposes. With a current ratio of 3.98, Alkami’s liquid assets comfortably exceed its short-term obligations, positioning it well for this strategic acquisition. InvestingPro subscribers can access detailed financial health metrics and 14 additional investment tips for ALKT. The completion of the MANTL acquisition is independent of the offering’s closing, and there is no guarantee that the acquisition will proceed.

In conjunction with the note pricing, Alkami has entered into capped call transactions to potentially minimize common stock dilution or offset cash payments upon note conversion. These transactions are subject to market conditions and may influence Alkami’s common stock price or the notes’ market value.

The notes and any shares of common stock that may be issued upon their conversion have not been registered under the Securities Act or any other securities laws. They will be offered and sold only in accordance with exemptions from registration requirements.

This news article is based on a press release statement and contains no offers or solicitations for the purchase or sale of the notes or any shares of common stock. While currently not profitable, analysts tracked by InvestingPro expect Alkami to turn profitable this year, with price targets ranging from $32 to $54 per share. For comprehensive analysis including Fair Value calculations, growth prospects, and expert insights, access the full Pro Research Report, available exclusively to InvestingPro subscribers.

In other recent news, Alkami Technology Inc. reported its fourth-quarter 2024 earnings, revealing a significant miss on earnings per share (EPS) expectations. The company posted an EPS of -0.08, falling short of the forecasted 0.08, although revenue slightly exceeded expectations at $89.66 million, marking a 26% year-over-year increase. Despite this revenue growth, the EPS miss has raised concerns about potential challenges in cost management or operational efficiency. Additionally, Alkami announced plans for a $300 million convertible notes offering to qualified institutional buyers, aimed at financing the acquisition of MANTL and other corporate purposes.

Alkami’s acquisition of MANTL, valued at $400 million, is expected to enhance its product offerings and improve its ability to secure new banking clients. KeyBanc Capital Markets revised Alkami’s stock price target downward to $45 from $50, maintaining an Overweight rating, following the company’s revenue report and the strategic acquisition announcement. Analyst Alex Markgraff noted that the acquisition is seen as a strategic move to complete Alkami’s product offerings, with potential revenue synergies driving growth. The fiscal year 2025 guidance for organic revenue from Alkami was slightly below analyst expectations, but the inclusion of MANTL is projected to lead to increased scrutiny of the FY25 implied guidance.

Furthermore, Alkami demonstrated robust revenue growth for the full year 2024, with total revenue reaching $333.8 million, a 26% increase from the previous year. The company’s adjusted EBITDA also improved significantly to $26.9 million, compared to a loss of $1.6 million in 2023. Looking ahead, Alkami has set a revenue guidance range of $440-$445 million for 2025, with the MANTL acquisition anticipated to contribute $30 million in revenue. This acquisition is expected to be accretive to adjusted EBITDA starting in 2026, according to the company’s guidance.

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