KVYO - Earnings call 4 2023

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Operator

Good afternoon, and welcome to Klaviyo's Fourth Quarter of Fiscal 2023 Earnings Conference Call. [Operator Instructions] Thank you.

With that, I'd like to turn the call over to Jack Grant, Senior Director of Investor Relations and Strategic Finance.

Jack Grant

Thanks, operator. I'm excited to welcome you to Klaviyo's Fourth Quarter and Full Year 2023 Earnings Call.

the market in closed discussing issued press be the after today. will results a announced release We Please refer to to for more our Investor Relations and supplemental website a presentation related today's announcement. information earnings at investors.klaviyo.com

on Executive and Chief me Co-Founder Officer. Chief Officer; the Andrew Amanda are With Bialecki, today and Financial Whalen, call

Reform under including make of and laws numerous to the law. or obligation subject concerning harbor provisions During will changes our for quarter any new as such reflect that securities uncertainties and statements today's our events actual cause the call, views XXXX, may XXXX. and applicable a except required business information, Private Act Securities by our outlook forward-looking full only Litigation the future regarding are statements statements to results These update we as today. be of could result no considered to risks forward-looking as first of statements forward-looking in safe materially assume expectations and differ expectations, from of our that We year

XXXX, on annual SEC, at be and XX, website in filed SEC, on for quarterly September Relations be our actual Form Exchange on material the report Commission, the heading For our could our Risk on for affect under the please in and subsequent Investor website. uncertainties us XX-K refer year www.sec.gov uncertainties XX, to Factors XXXX, our obtained that including by SEC's filed which filings December of to made risks with risks XX-Q the ended and Form and SEC, the discussion the Securities results, the quarter ended described and with may the report with or

market financial supplemental call found These release supplement measures Reconciliations or release be be non-GAAP materials GAAP can earnings available after measures. includes as GAAP to today, in Relations a not measures on which our In press close today's are a should substitute most the comparable distributed measures. Investor for today's directly addition, to and website. considered financial earnings

it to turn that, over Andrew. now With I'll

Andrew Bialecki

Thank everyone joining Jack. today. you us Thanks, for to

quarter customers, holiday results We The our well to I delivered our and ensuring fourth updates our are excited and as partners great to thank a season. full the both share them. is we across Klaviyo as to business. for want the fiscal team customers our fourth critical and had quarter year for

call, cover I'll with wrap products, some today's on I'll of the up our highlights Q&A. full followed more and our turn year before call financial through over we'll go the to XXXX then we first and in the the to our our from detail up quarter, some by results market, areas. focus fiscal provide for and Amanda it On outlook open XXXX updates for year quarter

help digital drive $XX success Whether is is a our We empower or revenue helped like customer our in smarter a we KAV Attributed household measure or Value success. billion business generate already just name started Mattel, our over relationships well by Klaviyo We customers growth. in and XXXX. getting

these our XX% revenue detail. The over quarter. strong million year business marked $XXX in cash revenue. over more from growing Amanda progress more quarter our This resonate to customers, as will our growth into and first grew internationally in million on areas I'd cover and call year-over-year like past a generated to few quarterly growth our flow. expanding those we mid-market. free the across in continuing was key We're adding the notable another that for initiatives. scaling with quarter out customers, We're drove we $XXX see fourth moments the strategy

we important generated growth. our nearly hour, $XX in our customers, customers very We help know million their and the KAV. peak power At for are holidays the

weekend, up was Brown. DSCM, by Beauty. drive KAV The used BFCM from stories to over record-setting favorite X-figure Jones company Monday by is a a Road the team Friday Jones for my their Klaviyo Road cosmetic XXX% DSCM Bobby during with of year-over-year. Road One Jones brand Black help or started Cyber their

used working more see of many driven broadly into They personalization the this. with by execute segmentation customer industry. best practices base across loyal Road to their Jones strategy more we leaned the their

drive We stories revenue on our and proud customers continue growth and own channel, empower them like with able marketing an to drive these We're their complement their destiny. spend to where provide of networks. efficient our customers advertising and we're amplifies to for

their for Collectively, our there customers did to and meet demands. were we them lot a role, of marketing

delivered peak BFCM the Black systems almost XX.X billion this of Xx messages Friday total Cyber messages at total XX.X to per compared minute number weekend. We delivered during and XXXX. Monday times Our million messages the

improve continuing deliverability product are we We're to our ensure our providing to customers. excellent for

our One tools messages the the been X infrastructure Klaviyo's over how team and e-mail BFCM customers' through focus delivered reduce providing the e-mail efficiently, and agent weekend. lower-level can own billion to us need of customers driving to control transfer of to our on recent our deliver visibility on platform R&D our focuses they messages ensuring with has adding costs. We're more we during while We scale revenue. give

Dive's growing fastest-growing brands an to Klaviyo our turn success CPG We're of of some X X of X their out power XX in top rely that business. for brands fastest-growing there, the to on in the to eye of continuing Retail including customers on XXXX we growth. brands We're own are and the DC fact our XXXX, powering proud top keep numerator into

and STANLEY drive their Leading their business Good XXXX all was us. banner American, companies Sugar us. of chose to year a Home revenue growth Flowers for brands Shave Klaviyo Nutrition Penon -- with choosing like flood, XXXX, Dollar expanding with

differentiator mid-market. our easily retailer to and a harness women-owned of chose ability threads, Our mid-market fresh in first-party the that clean businesses excited the data be one the a to country customers' We're during continues in the fastest-growing Klaviyo payroll quarter.

view clean fresh first-party are of threads customers allowing revenue. API all their to more and and drive complete integration better for native of their a leverage XXX-plus Our data

about looking the their and their to opportunity and customers. looking to vendor excited as for continue our We're serve stack are to more digital tech us customers And to large more relationships. consolidate one

the European journeys consolidate subscription. e-mail quarter, and reminders existing we saw to customer and centers able with channel create their lack unified to are e-mail SMS from They Klaviyo appointment their and During across outreach SMS now customer marketing updates.

expanding are we success to Finally, see continuing and e-commerce retail our markets. beyond core

more added a than FXX and the During training, quarter, locations a training X,XXX customer. operator as center we with fitness

their now drive personal increased With integration automation automations edition. and unable to efforts targeting use build flows journeys. their they their to marketing MINDBODY previous to were and customer providers, incorporate more They're into going our to into help

beyond It's days seeing e-commerce. our number of offerings, an vertical proof these in early new but and to are scale points ability retail we increasing

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and First, set makes predictive easier think up the marketers content to safety just about future right it's Klaviyo, not of more the to that business-to-consumer you the effortlessly. marketing the empowering more send at and it productive. then creation time, is message revenue-driving In made messages generative ideas AI refine generate autonomous. about made process and we personal AI It's right time, AI

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the In early addition CDP on has provident. offerings, new feedback to been our

and files, data. drive to able specifically was Frame analyzing data data cleaning adopters and the and CSP across early our editing reporting, exporting management of One efficiencies their manually

over their X app per hours As a for result week, their one users. under of their adopting our they saved XX customer strategy consolidating and million retention roof supercharge data CDP,

We shipped in hundreds features new our of customers XXXX. for

users. our past our This and core feature, components particularly for our landscape. with needed tools to going drive our new pair our for through an improvements customers were flows UI excited the UI to editing, core quarter, our new improved a launches for We're evolving the approach allows updated updated to Just revenue modernized with about provide a functionality. more customers updated for to

for industry was large requirements from centers. around These deliverability, recent and focus and the our One span e-mail consumer of the Google Yahoo! changes on updated experience. overall to

and on As changes drive are we customers believe the a positive personalized business relevant to for our more industry. these experiences, enabling focused consumer

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compliant working with to ensure have it with easy to customers requirements. make updated We they our been the are

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meaningful we impact to don't anticipate business. time, this a our At

the that content term, Over provide believe win companies market. deliver and the to targeted personalized, ability relevant will customers the that the we long their

drive building across focused localization the on for we mid-market Klaviyo. the for tools globe growth. of We'll and internationalization to R&D, make new more a continuing easier are and to it to and customers, customers to features behind while those growing invest and customers, planting continuing We near-term our into continue growth drivers, to expanding key have X few this year. expanding strong internationally mid-market growth We're seeds more the priorities use Within even all launching with adding longer-term sizes beyond, be efforts. our

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we areas. new On capacity the mid-market teams, cross-selling sales focus installed are front, and we and acquisition our have sales, Within growing focused few go-to-market base. our international across into on a our customer

focused with further customers, supporting on these expansion. are and our For we customers to adoption teams drive larger cross-functional

marketing on powers Klaviyo evolving platform tell our in our relationships. brand capabilities is platform the focused that is digital Marketing businesses. better full the smarter story to for of narrative

Finally, help be announced to their the the great recently ecosystem to A Klaviyo. partners our example year invest Cateron beyond. partner customers building system to portfolio to partnership technology with out further to El of ensure capabilities our integrators the our agencies, and succeed behind ecosystem our right and we're growing upcoming of enhance X,XXX-plus with going continue is We'll them marketing companies. this have

Amanda? Amanda that, detail. to And over with cover more it to financials turn the I'll in

Amanda Whalen

brief for XXXX. I financial of quarter a Thanks, will discuss overview our our and first and year and full Andrew. Today, guidance full quarter provide XXXX fourth results year

measures. tables As non-GAAP directly Please measures. GAAP a includes in our for comparable release the to quick reminder, today's earnings a financial the most financial non-GAAP reconciliation to of discussion refer

We are with pleased our financial performance.

representing customers' year-over-year manner, margin. financial an and the generated We seasonally growth. framework. fourth $XXX.X the shopping our and most operating quarter, continue holiday in is quarter our our growth of efficient for delivered scale business critical The in success. in growth us line shared non-GAAP In season X% of their at and with for fourth our year customers with XX%, in rapid delivered due an revenue, we model million see during to strong time we the We to how scales their

new adding growing those vectors, main X by into and powered is growth mid-market. with Our customers, internationally expanding the customers, expanding

We continue each to these on perform of factors.

XXX,XXX proud of serve over customers. year-over-year adding base In new increased terms our customers, we customer and XX% to now are

by X evidenced our in capabilities. our continuing the expand NAV are customers our from QX footprint. dollar-based EMEA customers in up We Internationally, customers use which retention XX% SMS our NRR, now offering, percentage points with increased or XXX%. as our year-over-year continue to our of XX% from see highlights our year, as global and to rate, revenue value last increase aggregate platform APAC of we

we're history ARR. for well, company of more Success larger ended turning annualized growth which in increase in QX, Finally, QX was This mid-market customers our as to businesses year-on-year seeing in quarter the us. customer and and evident revenue customers quarter the year-over-year. $X,XXX in this was with of the net with is an adds in cohort. more XX% per our $XX,XXX fourth customer generating XX% largest over X,XXX represented We

end being compared who we prior price due impact their to our level with XXXX the increase. the last our X to years As spend SMS expected, SMS December, particularly NRR the use lapping experienced of back saw holidays, thoughtful of the offering. dial spend, saw September at which regards decline more after we our In Historically, period slight year. the customers prior our of weeks of among the this a from customers their to overall customers

we to Looking lapping quarters. and expect increase these in coming headwinds trends the post the price ahead, to NRR

to through the to continue platform's consumer particularly ability segment customers This strong helps customer personalize retention. high our drive through Our ROI strong KAV drive and their bases. capabilities

margin the of Gross down was marks representing results I a to million, discussing XXXX. gross compared income QX will profit statement. This be a Moving for improvement a XX%. on non-GAAP $XXX.X the X-point basis. quarter

incurred of the credits quarter, milestone-based million a the improvement X-point to our we or $X During hosting. benefit X- from related cloud

our team's engineering of We system continue and benefits on cloud to the R&D efforts see optimization.

to KMTA of efforts are while efficiency. great a initiatives, Our experiences customer simultaneously around our provide this. Andrew Through able better that highlighted these example increasing we are

we help we couple with the of a associated headwind see while of gross points to SMS this a do of part expect ahead, margin Looking offset channel, these costs higher year. to the our on expect

Sales expenses. marketing $XX.X Turning and quarter. XX% was revenue operating of the to expense million for or

and we As investing we capacity. areas said include quarter, program marketing headcount grow our in sales to are last spend

are monitor unit making, will to we the of investments make the We level closely continue we we and returns. where continue economics see different investments right to of

yield drive the in mid-market bit ROI. of take to that overall SMB Some investments a our investments longer than strong

of AI to capabilities expense R&D was invest behind offerings. newer our revenue. continuing $XX.X product, XX% million We're and our or

we Finally, over G&A leverage This was expense of continue expect XX% more $XX.X million revenue. to get or is an time. area where to

For QX, income $XX.X representing million, of was an operating margin our operating X%.

For an a margin fiscal compared marking of to year, we finished XX%, 'XX. improvement the operating full with XX-point

million of $XXX We free generated during quarter flow for million cash year. the and $XX.X also the

year-over-year. Our improvement full year flow free an was cash points XX%, XX of margin

flow Our to performance this we year generating growth. need and belief as our growth further to we cash do supports that invest drive long-term not between choose

million in quarter, is quarter reflected sheet. with One debt. the is during $XXX.X net million models we equity note activity with no $XX.X this vested turning for cash, flow. settle using that and the restricted cash cash, cash our from excluded and Finally, in free cash the of which financing is your balance finished activities, to did We equivalents

like full XXXX. for the our I'd and year outlook to Now first talk about quarter

we reminder, typical As a business. the seasonality in experienced

picking turn, a as QX. tightening result the of exhibit customers and again our up modest lightest Cyber I their sequential holidays. QX response before in quarter belts holidays. mentioned is Monday back as consumers their strongest QX back seasonally QX upticks traditionally earlier, quarter in to QX is after pare spend Friday and the As In our Black typically

revenue of XXXX. experienced the in we Looking ahead, assume in follow quarter by will trends XXXX fiscal linearity we the

our environment, our Given we're the guidance factoring trends seen into in and guidance. customer current continuation macro with we've setting the recent prudence a of spend

For million XX% to representing revenue of year-over-year. quarter, growth $XXX the expect the $XXX be range first to we to in XX% of million,

the to of operating range income representing operating $XX.X margin $XX.X non-GAAP XX%. to in XX% to non-GAAP million a expect We be million, of

particularly first we capacity. are quarter, to the In sales in continuing invest, our

muted the expect of flow we to cash payments. QX vendor be timing addition, will due free In

For first be expect shares fully quarter, diluted the outstanding million. $XXX to we

we year, million, to XX% $XXX in million the are full guiding $XXX representing year-over-year. the revenue to be to growth of For of XX% range

be operating operating range million, non-GAAP We a income representing $XX non-GAAP of margin million to expect approximately the $XXX XX%. in to of

expect on investments. front-load first As we Klaviyo quarter, making we last the these of product investments, we go-to-market some to highlighted in operating investments are the see margin long-term in growth. fiscal of the 'XX, year Based and as deleverage set across we year-over-year half in for up to timing

we latter our fourth We expect quarter. of part leverage the as in strong more into seasonally year the head

for $XXX million. diluted expect share the fully full Finally, count year, we to be

close healthy delivered flow results To strong quarter line strong cash we the free and out, a growth on line top with bottom rapid this with generation.

for this year we on it against focused ahead opportunity for long-term executing of We are our excited us, and shareholders. are the and for

we'll with the And up Q&A. open call for that, Operator?

Operator

comes Your Raimo from Instructions] first the line with of question Barclays. [Operator Lenschow

Raimo Lenschow

Two from big going a the quick a about AB, moment like to me. industry limit what impacting at talk Congrats one of providers internet bit you want discussion there's the seeing, questions. follow-up in And like how how on One, doing had a Amanda, there? that's your from customer and Can then what about I spam. are customers little conversation please. you're some

Andrew Bialecki

Yes. Thanks, Great. Raimo.

of So and changes first, the from Yahoo! Google on others. and some

the volume. our of customers seen, e-mail We've that happening to and built about updated not impact to product. out with with compliant our directly. As all well, compliance. of them at And actually not business. in it this our is our to we They get talked get customers regulations. actually, meaningful haven't we bulk a our remarks, through And compliance customer we're prepared in base We centers. the anticipating point, lot working automatically entire We're qualify don't a stand even working been

actually, work. very our have So do customers to don't little

good where factors really they're I doing at. So about was the

On points, the give we of a only measure consumer thus far, To like as we data changes by we've on consumer a of a side, you from X,XXX increase we're haven't percent. seen also in subscriber and seen that watching behavior. any that rates e-mail, couple

of small into data hearing directly, of really any reports observing while rates. visibility we're perfect to we're So a we we also increase then like them not as get for And Spamport. actually watch from SPAM for number. we customers have well. don't the when reports things and that, not anecdotally, talk ISPs, in material can the we broad changes some And in there And

So overall, then consumers we great a that the our amount in it's inbox. their think just feel get really customers, thing businesses more spam And I good and for in about consumers. noise broadly, reducing of

think providers the that right and like that's engaging, on that's personalized. I content box focus love. platforms highly -- consumers delivering product And what and what ours

we business And as the so we will to serve that think be stay long that, we shape. as doing true very

Raimo Lenschow

That's can between the time returns us between to sells does like Amanda, productive, clear. half, in a can help think get since to you the and dynamic long in you And cetera? the investments about Perfect. the market, like, if company for how first new the et of talk terms public very investments then, in little about relatively like understand take -- you're example, to investment and bit returns. you a guys it Just

Amanda Whalen

we the unit between as make timing Yes, talk economics investments. we the always get focused about think Thanks, that we Raimo. when are returns, we and as investments these about we

the in that we and think food business a it, payback. on of Andrew -- focused days So investments cash we've payback going the to terms and original Ed fast back the strapping make as been always about

is they In they we're payback model of payback, really a the LTV one payback -- nature longer but a that They the investments have investments beautiful things to have just them. making a with see do little SMBs bit about strong longer tend periods upfront. to as they the is that mid-market, we focused to associated larger of those on shorter So take bit tax. are there,

mid-market make to that. And in those the cycles sure making for or we're business, to in we're X months. is week the sales SMB it business that the balance managing relative our pretty important short section it's investments, our of We business. also others. is the then these across as the the that watching are in portion measure we're cycles portfolio So our not remember across And sales to in whether in healthy

up. And so payback these tend period ramp to a pretty have nice investments as they

Operator

question comes line Stanley. next of Elizabeth with Your the Morgan from Porter

Unknown Analyst

like that really to what's the be customers Excellent. follow-up number Can This Two size actually Keith I XX,XXX to taking new Elizabeth. how mid-market And as at expanding Congratulations a And existing plus tying talk SMS, sitting mid-market driving realm of how of really customers just on coming that year-on-year. then in a to XX,XXX extent impressive and have net for of in that customer us a realm? is CDP, of growth? maybe versus One for questions. growing just their quarter. from a is nice Amanda that is on on well. on Weiss a about motion XX% customer coming much you much like customer the of XX,XXX

Andrew Bialecki

Thanks.

record, growth enterprise a of as seeing in they're the great for They're the and customer number. think I animatic their on So platform, mid-market database relates excited also additionally applications it. for that That marketing is one about looking XX,XXX to of year-on-year we're to brands for and truth making demonstrates to shift one we're progress complete, their X% we're And looking that customer customers mean, very for layer mid-market. with the comment source other top marketing. I then be I

as customer brings integrate their service. of central consumer that customer experience, their all Klaviyo to that we they're well recognize that, the products, set with our gosh, now it And SMS. the our But initially this company APIs database Klaviyo to you using and there's large app as So just work is into e-mail to other marketing mobile data. of give use for a website, example, for parts an that cosmetics realized

relates like with healthy So had We've customers in with out existing few there. of it And we're the some last months. lands. as just increasingly reviews actually a new it's seeing land now of -- that's as what largest mix, but well well net as and our play it's SMS, part the even CDP to expanding logo as new initially

there. lot we've really a development, to more there's parts on we story together, And good of do market I we're a different that's really, are fit. really scalability working platform. mean, So constantly future trend. our around got a think durable consolidation the But product of this really your consumer test

Unknown Analyst

the million make appreciate That margins of it. ton to. of like a credits. I the in a sure basing on makes gross to margin just from the where of sense. we're equation, points the $X pressure from couple And clarity I outperformance this the Got When benefit the versus right we're on thinking about of to want year, milestone number. Amanda, you then, kind guided gross side huge of

a level? in are So like the should XX% Or like milestone start That at those we time. credit? point was

it's we just a me from see like pressure? see right of like pressure to should number there? we're points and that of you can of then points we where help couple anchor be So starting Like going couple from those of what's just the started XX%

Amanda Whalen

Yes.

somewhat of the that in the to high you're margins business going X it the So about the that is the I happening first range. would will being gross our course I counterbalance thinking think each think year, of over year, factors you're in XXs right, And other. half see about which

to great drive higher On and had to we to R&D has that negotiations supplier the we've the margins. benefits we our optimization helping combined engineering some cloud positive those see the continue pricing side, gross team our from on and done that side, have that are support with

The expands, counterbalance some and pressure margin. business on SMS grows as to our gross it that creates

balance continue but SMS those the be offset we'll think we support will over by the So of it have the engineering expansion. the the to course from year, of optimization,

Operator

of next Goldman comes question from Your Sachs. Borges the Gabriela with line

Gabriela Borges

more seeing typical like customers up I little on of health sounds Andrew what on in think thoughtful the level prior versus what with you a seasonality. little being driving what follow on spending. and installed just and outlook the to more macro the wanted a years beyond Amanda's the you're of base the Maybe comment muted more is XQ color Amanda,

Amanda Whalen

question. Great Gabriela. Thanks,

who So what per thoughtful, those was think e-mail. QX for are using couple true you in SMS, about usage we product saw our of customers things a addition particularly message And customers SMS happen. mature more in seeing customers so if e-mail, SMS with use than of in their more the costs being who to we're as

thing given the subscriptions month. is to their in managing messages size managing thing send First their targeted they're usage more be that in thoughtful and is with messages. we're And sure aligns more to from more that our they're then that any they're learning being make how proactive seeing and that ROI the they plans those high make with sure second to the that of driving the size subscription

our you that one if business of business remember, as value for with we is the Now principles our a customers. our that we align operating provide

the targeted in help we're high high spend really stickiness that and stickiness really that So we think to retention. messages and up that in shows create the generate that, ROI platform, ROI fact customers that strong able that

in high right share other to the The does thing helps that stickiness that it customers. value time us in for over we create that that ROI is earn

who about guidance a company to think a and relates we've keep we prudent our the we're we're important confident company the in spoken on so you that also business. it's mind, a our in that strive where for year, as way a provide it how Now in scale ability that realistic this the view business. before as We're about fact to forecast And to to our deliver.

We have XXX,XXX customers. over

decade operating that foundation of for plus data all really strong a a have gives And us history. of We forecasting.

company is the not health is is who clearer our view seeing the investors outlook that to we're really and our it going trends and you business. that a to the trying over we with exceed we're to our provide. What So of be a intention significantly do share with in

Operator

line the of Sandler. Brent from comes question next with Your Piper Bracelin

Brent Bracelin

If price is? start growth I'll was with the sustainable XX% algorithm, That about prior what I you and the driving that growth saw similar price you ARPC ARPC actually now anniversaried here. growth. what Maybe XX%. that talk the about how to think customer Amanda growth was to we've you increase. Can is just increase

Amanda Whalen

Yes.

I that that products right base about continuing grow to that is grows, our business we're you're think sell thinking things, as and have to continuing them. which we more to that's the installed

forward, continue move combination we you'll we as And by overall, more think continued the logos logo as those by by going higher business with the new growth, new in to ASPs the the count increasingly, think moving upmarket. strong we expansion maybe with mix forward. In logos, So of driven as customers. about are we powered logo growth with about to being but going see opposed into driven mid-market, strong higher

expansion that If of mentioned, We you remains And subscriptions products. with business our looks like add just customers time. their to our healthy. what I sticking drivers customers over we It over continue see new platform grow and expansion then remains they think the about retention as time, with other see gross consistent. as

as new revenue forward well going that and So in balance healthy strength we'll I drives logo balance cross-sell the what the as see customer. between upsell and net-net, the such is think per acquisition

Brent Bracelin

Cyber you quickly then are Black volumes just were color you that And that? infrastructure. there. ramp that should sent doing mentioned think infrastructure? I Why you the AB, benefits? Helpful it Can how that into And was X% click infrastructure double Friday see volumes investment, into for e-mail of Monday we then your the

Andrew Bialecki

infrastructure by MTA, really Sure. engineering Yes. That team. kind R&D so of the our e-mail Klaviyo underlying excellent some

of done to of we've messages integrates how type pieces a from lot So software you that you and stack then store messages. think deliver, into how that this data, verticalized the design maybe different you the e-mail about case, if purpose is, extend obviously in

gives for one thing the infrastructure, are benefits into talked advantages. about So us little some messages much cost visibility that customers performing. more real is how are But Owning of the our their bit actually, there we that big us to a deliverability.

results. better to So visibility on our control bulk but then we customers than gives more we get can deliverability, pass that also

example think where do to customer to job basically of we're an can different where think vertically we a I engineering our parts experience. integrating of aggressive solution problems be of the own that's we going So on

fact excited Black the quickly over break very up then judicious But of messages Monday about how the on we're to the is testament So volume of the engineering we've volume. we've done. ramping, billion that And quality we just part over X Cyber the had about that that. being Friday

Operator

line next Arjun William question of the comes Your with Blair. Bhatia from

Arjun Bhatia

And your third-party that e-mail about cetera? any, that at Gmail this Yahoo! I some bit And the maybe combine kind emphasis on of to from getting on Congrats year. kind cookies the little maybe of the just other for capabilities, data Can greater a might Andrew, messaging, accrue with quarter. and changes what if benefit, wanted data touch of deprecated techs, what this over et talk a that bit what and data? means we'll on side of personalized little segmentation you a personalization first-party year

Andrew Bialecki

of is Well, think ownership whole consumer ethos -- Absolutely. around I giving core, in data. businesses their our

So that collect we cookies, more that help to or business data. on cookies use the and first-party emphasis of actually collect

and So we case, of that cart you behaviors about in back can into that it personalization some adding that on what this think at, to using their build products like the looking have. to algorithms is routing somebody

good the also for businesses. most important is SMEs, like privacy, mid-market, their I business a it's debt data net for building industry. talking customers. the little the We're our for same the what think So It's the for is about true in change consumer that any -- change could this is asset is

So our to, pull them together. one, that is at job we help all look

with tie And also built tooling do of how like technology. of critically of bunch some then sunsetting third-party the we've the equipment But back to you that help to a so action. of source central truth

the So next of XX example customers starting months more you coming some and sophisticated an actually about that you marketing, the over use something gave beat excited coming start to directly data and on very That's our into productize years. website. I of to we're

Arjun Bhatia

time, And those and capturing I AI capabilities? generative AI least -- pricing autonomous about How keep you're you those will value the touch kind all or thinking Okay. capabilities deliver and can that at value then launching Super some on that helpful. to of additional you that in capabilities are if new. the customers the of incremental for

Andrew Bialecki

that excited launched experience and the We've been X means in CRM, performance. drive literally not Klaviyo years. the about last do customers technology. talk autonomous. future more the And marketing, we Coming get you strategy AI being productivity for just to to at years. that Yes. revenue X, Great. most core iteratively thinking about gains, through brand. that able launch of for AI, future I really honestly, better means taking then building up like creative core of into we're Very our just about and that the our it's That that X, for excited investing our freeing one marketing. on And like can up the been think the over today using back working of couple customer with when but about marketers to be with We've last to around AI

you things think existing Klaviyo couple really and now cool for a adding one if us about is where tool kit features then So the AI the of pieces. that

you allowing sets those to easier return a made and finding interesting by second. customers. clearing, queries that in users segmentation generated about We've lot So define AI, now language with with a talk lot natural of

program. about able from whole talked AI, an just language the of with side pieces also e-mail We natural a being creative whole design chunks, to e-mail

of that optimize you tune about variables for create a generic ability capabilities lot and form talked optimization. that, to you can those its some on automatic combine like of the the we'll AI and also You Forms your performance. with the We actually a website,

SKU. find literally customers So and those to in They give that and it from discover. last of of you some it in our there when you up, that to campaigns profiles as out learning by year, example, that is our our sending of we're half marketing. that add will is to sets e-mail of all opportunities AI number for I one. capabilities. not more do a to which back year. and AI revenue apply using increase customers our about last think machine product. do kind of hard really you what over started summer like of note an XX% today our toolkit not better customers, the means only we use They monetizing one an To of when the we're of do analytics you and that Klaviyo, directly into example are through separate monetize were it e-mail to domain monetizing results. And That's the segmentation our our artificial Willowsee, Forms of predictive their But literally directly then the monetization, e-mail lift AI started stuff capabilities in they grew intelligence

we Now make commons, as over there kind opportunity that add increasingly marketing the marketers modify an and chair, of put capabilities, that to be real a we dollar more do think we there's that time, opportunity on we Morgan will director's provide. uplift

Operator

question comes line Citi. Tyler next Your Radke of with the from

Tyler Radke

seen typically December in then you Or below bit Does has that in continue additions talk just additions was softness well? December. at of Amanda, into kind to customer an impact was think just what side? back curious, February? little in a I SMS just that Can going QX of the that event? total QX? that that, do have saw the end total think about you January did And or customer as you've what you the of on around commentary -- end

Amanda Whalen

Tyler. question. Yes. Thanks, Great

separate think So X and about take I would separately them as things. them

the what there. we're customer and net On seeing adds

about think and you sales engine is pointed. where marketing our If

Our in sales and SMBs is mid-market. at largely pointed marketing engine the

upmarket, customer see as customer end more the with of the in expansion and marketing revenue the which maybe focus in the see that And so our we you XX,XXX as customer much market. lands, we're and expect expansion at going sales average we per efforts not of to larger in lower the

At we same growth. come are a time, businesses that to of are -- the our with to sizes we think going great all drive for we place

about that way you so and be would models the drive great But going that building revenue as our to maybe market going customer a think think our those into and as the is product everybody end really these more of ads it And we building the easy adds growth and in forward. we algorithm trends, continuing financial about the our -- more which we customer and use. forward, through for lower at to per outlook outlook products moderate about makes think factored

January seeing of similar at are what we and I end February your February, January for in the as about say in would the then And and question what about are spoke we QX. trends to

appreciate our that that those targeted, the because And to ROI. more we really messages. their their ROI sizes, to thoughtful over about customers We've into the making want being macro messages given their are driving targeted guidance. we sure that They're our messages environment, we plan long spend. sure making They're So built high term, customers highly personalized that see aligns their and high just sending be are that usage.

Operator

Your next with the Rob Oliver line Baird. question of comes from

Robert Oliver

one AB two for you in as well. squeeze for and I'll then Amanda, you. one

MINDBODY just win to sort obviously, came we expect look sense So you wanted for guys. talk when mid-market fitness just strong And out of then pipeline And to we the that retail sales very via folks, Amanda, Internet a play that partnership. called out the diversification progression might should your you. within to I get away that how of you for how AB, you throughout and marketing expect that and from the And 'XX?

Just the versus mid-market what seems and up. see Clearly, obviously, what my a it we'd just around NRR SMB difference see follow-up is between like a would we trends. big big at

for trends expected -- there to you but they really out, high helpful. up those expecting would been just have stronger the than wanted a end have at not of curious of to color Any be that get hold the steady, break sense market? Just

Andrew Bialecki

the for Great. question. Thanks

a speak our So little e-commerce. growth of outside bit

but over some really more I we're We're seeing and bit here, little we're -- businesses to early of a of give outside early Klaviyo. retail, signs color. still encouraging of it's So moving seeing e-commerce --

really So that our we're it's cohort X% seeing growth still e-commerce, to represents of the due revenue but less growing than rapidly. strong in

chain, locations pizza there's of consolidated SMS bought pizza I'll with a you about point-of-sale centers, more, market their first-party XXX system training. we they on So our with FXX one integration chain products. advantage at Klaviyo our spend of as as over consumer all our also both another give WAC And They data. they're talked -- European Ola manage well essentially e-mail and down taking

with our if there going e-commerce, that is we're collecting them going as and automation on beyond. drive think customers, database. ever I campaigns, their And you relationships back data on consumers well allow thing work. their to retail little of to more put many We're do So to to and building the that importance is seeing ultimately the how to seeing data that all focus like we're So everybody of in for in consumer more targeted up as that's that all a having in in as more bit, e-commerce direct leverage same and create focused it

that. part seeing I beyond within with vertical -- in fit, both e-commerce new think And we've got really a product good market that we're retail. then and extends expansion

Amanda Whalen

We how do not depending customers our size NRR the see of the Yes. have variation mid-market And they depending any on as really strong side, that to regards in SMS. more it customer varies and I would out tend call on customer.

think, the more that more of necessarily of way higher the I really, that talked impact being that some using how as a SMS per they they're they're more, business. size of message use being price that about than I mid-market pronounced is the product among trends we've seen channel So about more it's question related users, of the the maybe and what it thoughtful to in the but

with course to the down we our the practices. about really doubling think best the that overall, we Related on customers do about we doing help year, are how what way we're and of

that is ROI that helps strong we channels. but Because differentiator expansion do helps as getting of drive growth high great drive well. they're we coming KAV to continue can So real what also can as the the retention to we out so it us, KAV think per that message that, things them these they generate only that, highest to ability help that not are our generate the to a usage and for

Operator

the next comes Hynes from Canaccord. line with of DJ Your question

David Hynes

understand totally maybe conversion ask versus for thoughtfulness So cost on there. Rob's about KAV the building on given just comments I question use. AB, to want on the last SMS higher I Is gets difference customers e-mail question those working way which hoped? there, versus of, SMS SMS. using discernible a that guess up e-mail-only there you I that and the are the is

Andrew Bialecki

Sure.

our that how of experiences very KAV the And data billion. do one, actually over for a $XX first-party to drove continues deliver and we drive last amount us. customers excited I'm about consolidate customer that year, Northstar work -- said, So to be I like then they're And to you put their conversion. are to trying that

no, So difference to between like about structure. slightly different we're material you there. the Metis e-mail SMS, question cost said before, not and a any seeing changes And

little there ROI always a be is the different. to going So bit

our help one through can also from see discover And is results. both use they cases personalization, deliver channels, products, both getting to that more their were on... of product, the and but customers through getting segmentation, helping the experiences we're them more into really layer apply customers we more our to more great focused better goals on However,

Operator

question line Securities. with comes the of next Truist Tillman from Your Terrell

Terrell Tillman

And revenue? more market where market it a EMEA? pivot then of it your that percentage ground? drift and about potential directly Should 'XX a pretty pulled talking just we as to some And just to that going they're international. it you're in in I'm a it's in opposed of getting lot some expect benefits is from -- you more substantial multiparter, Shopify as single well, boots SMS seeing that question. but is the kind ask from because of actually to are with attacking still about higher Should we growth in on a of

Andrew Bialecki

question. the for Awesome. Thanks, Terry,

growth So on we're very another bullish international, to yes, strong on. area Continue drive that I there. mean,

EMEA and up XX%. revenue over aggregate APAC was Our

about you is as seeing I'll drivers. X It's where that commenting that tell of very excited on we're going. without our the key strong So X we're growth distribution domestically well.

couple of there's on a that doing. front, So things that we're

both to then working is Shopify to And we we of about, internationalized front partners, the putting We're strategy localized working on, the side, side, still we're and product-led thoughtful our actually strategy interface. following our to market, watching and Klaviyo adoption our because a later is grow go we're in then haven't That's year. And talked Amanda also -- there's this ship big and about a intentional where with On and we're something we'll product and history locally. as on line. very go-to-market how core others, part our globally see trends. is product company, those market with

And expect course, ever seen. I really nice going yes, that to see of I've there. we're So growth

Operator

Panigrahi Your line next question with Siti the Mizuho. comes from of

Sitikantha Panigrahi

have ask few that months interest kind kind announced what of got so wanted CDP seeing wondering a use far? you're to guys of you you I What cases feedback or about back, there?

Andrew Bialecki

Great. Yes.

So last analysis you summer. think and launch and And can of about We're adopt use our product seeing reporting CDP the cases. especially a lot customers those.

give example CDP. you an are of customers So to using our just how

turn they're and into that able encase, and the -- of really those. advantage and We So analysis SMS using to can doing loyal, of have campaigns advanced you immediately retailer that taking Klaviyo some automation used a analytics Klaviyo do to and the then on as but frequency be database, and and pet there's large who that's customers finding inside around e-mail monetizing that,

of lot a analytics company, X emerging. a actually are one that the of loop what tightening is pointing that the what work activation tools set that's one in different in age kind we're worlds of the So of between part, seeing kind to and then of for we're traditionally -- those was part

CDP, still coming psyche there it's there's adoption early lot think a with more a So for that's seeing but we're I us, and

Operator

Your next line Needham. question the comes Scott from Berg with of

Scott Berg

of in a fiscal to of divergence free Amanda, there as improvement first account margins the half? the Is even think be that Or from taking well? some year-over-year pretty year year. some for impressive the right 'XX cash after about way there. to will the between spending year there flow in last and free the margins operating cash in you There's spread about margins flow terms X-point had a

Amanda Whalen

was of and our margin points of year-over-year, that out. I month-to-month, Great margins margin I are Yes. relatively our expansion and are you. expect operating operating it long very cash because appreciate the majority over year. payments income track question, time. XX thank would in the and those indeed In strong general, monthly our free coming are calling flow a over that going closely to customers term,

some on to payments other. some vendors. may But year-to-year literally should see depending tend pretty You to happen timing particular variation of in when the you to those closely general, track each see

Operator

question that time Derrick question, Wood more have the of comes one from TD We with for line Cowen. and

James Wood

reps And ramping to there AB, Amanda, marketing of trying versus expenses been big in productivity as hiring about up the dimensionalize in able to a progressed increase headcount? last few much sales creating follow-up to months? Are levers guess love would market adding as of new how sequential you just the was spend in and was activity much seasonal how to some hear and I of over to are XXXX? you kind Great. new how capacity quarter. this how has was it marketing feeling sales you trending And growth with a

Andrew Bialecki

and start let Derrick, add Amanda on. I'll I'll

customers mentioned but and about making. of growth of products that sales not with to just Their excited marketing So buy, growing expanding a the they the getting we're very us. mid-market, and internationally. expand investments number we're some logos, key new levers of experience We

investments drivers date. marketing So our to of were there X

areas, a increasing a about the portion our well as we're is more call team, is, sales more mid-market in mentioned, first And we as customers of and is customer growth focused The international driving what of staff. Klaviyo you adopt greater couple product as to expanding which

So part number one. that's

part second marketing. the is making into we're additional And investments

customers using lot as who fans customers. story, We're super lead-in a of to have We in are their Klaviyo. caption find customer a these additional

sharing that stories to drive up and net customer funnel of ramping ultimately, in those top awareness, we're new acquisition. So marketing the and investment success,

unit of are is So the was still on, which I, drivers, those and what Amanda X like roots the in we're very strong general, founded economics. well, Klaviyo in leaders good like

we're monitor going and but be experiment, ROI to to also and very the continue closely So business. the economics disciplined

Amanda Whalen

Yes.

we quarter model I that investments historically, year. prepare think capacity investing year those are build build as the and of If of first over flow the have for More Friday the into third Cyber ramp then your so would on the how up we're the to trends weighted to you we to of half we the mentioned up half as sales to how in Monday, about towards the course year. seasonally, investments, the and of the might call, continue. ramped back heading Black into And as heading marketing expect the

Operator

for are I to over Those have the all closing turn I'll the call. questions call back remarks. today's that, Bialecki Andrew With for

Andrew Bialecki

Great. call. Klaviyo work for us XXXX. their Well, for today's joining thank team for want I delivering all again entire customers our in the you to on thank great

we're there. March say Have the ahead. attending evening. year conferences be of you the look and forward excited we're internally, nice We'll and seeing in we many Morgan KeyBanc and Stanley As X% done, a for to

Operator

call. today's concludes This

now disconnect. You may

Klaviyo (KVYO) 27 Feb 242023 Q4 Earnings call transcript