Klaviyo, Inc. Q3 FY2024 earnings call

• Revenue grew 34% YOY to $235 million in Q3.
• Added over 6,000 new customers, with over 157,000 customers globally.
• Strong performance in high-end market with 2,619 customers generating over $50,000 in ARR, up 54% YOY.
• Expanded SMS coverage to 18 countries, added French language support for AI features, and launched products in 5 new languages.
• Launched enhancements like enhanced email AI, portfolio level metric mapping, and new action center in RFM analysis.
• Key customer wins include Authentic Brands Group, Dragon-Bone, Pressed, The Body Shop, and Spot & Tango.
• New leadership hires: Surabhi Gupta as CTO and Adil Wali as CPO, with Ed transitioning to Chief Strategy Officer.

Klaviyo delivered strong financial performance in Q3. Revenue grew 34% year-over-year to $235 million. Non-GAAP gross profit for the quarter was $183 million, representing a non-GAAP gross margin of 78%, down 200 basis points year-over-year. International revenue grew 41% year-over-year, with EMEA delivering very strong growth at 45% year-over-year and APAC accelerating from the prior quarter. The company's product segments, including email, SMS, CDP, and reviews, contributed to overall growth, with SMS seeing increased cross-sell and international expansion driving revenue contribution.

• Fourth quarter revenue expected to be $256 million to $258 million, growing 27%-28% YOY.
• Fourth quarter non-GAAP operating income expected $7 million to $9 million, non-GAAP operating margin 3%.
• Full year revenue raised to $923 million to $925 million, growing 32%-33% YOY.
• Full year non-GAAP operating income guidance $104 million to $106 million, non-GAAP operating margin 11%.
• Expect 2025 revenue growth to decelerate modestly from Q4 guidance, with focus on international growth and continued investments.

• Gross margin pressured due to early start of Black Friday/Cyber Monday preparation increasing infrastructure and testing costs.
• Softness in the SMB market and macroeconomic pressure affecting expansion of existing products.
• Seasonality of business with Q4 gross margins expected to be down due to elevated e-mail and SMS sending volumes related to holiday season.

Q: DJ Hynes asked about customer acquisition engines like Shopify, marketing agencies, direct selling.

A: Andrew Bialecki mentioned inbound acquisition, partner programs (digital agencies, big tech platforms like Shopify), and sales team for mid-market/enterprise, with strength across all channels.

Q: Raimo Lenschow asked about macro environment impact.

A: Amanda Whalen said trends in SMB segment consistent, value-based market, diverse customer base not reliant on one type, Klaviyo not indexed to GMV.

Q: Scott Berg asked about new hires (CTO and CPO) impact on technology.

A: Andrew Bialecki said Surabhi and Ed have experience building scalable, reliable infrastructure, will help scale engineering culture.

Q: Brent Bracelin asked about next $1 billion growth, M&A, product vision.

A: Andrew Bialecki talked about expanding product portfolio beyond email to messaging, reviews, CDP, considering M&A and ecosystem partners.

Q: Michael Berg asked about international progress.

A: Amanda Whalen said EMEA strong, new languages launched, partner network helping, customer response to new languages great.

Q: Rob Oliver asked about Reviews and CDP cross-sell.

A: Andrew Bialecki said SMS cross-sell strong (80% top 50 customers use SMS), CDP driving analytics and action from insight, shortening loop from insight to action.

Q: Keith Weiss asked about NRR decline and growth impact.

A: Amanda Whalen explained NRR components, retention strong, expansion of existing products pressured by value-based market and upmarket landing, cross-sell progress with SMS, CDP, reviews.

Q: Arjun Bhatia asked about upmarket competitive dynamics and NRR for larger customers.

A: Andrew Bialecki said Klaviyo covers all channels, competitive advantage, larger customers can grow with expanded product portfolio, expand across business units/geographies.

Q: Derrick Wood asked about Q4 seasonality and gross margin.

A: Amanda Whalen said Q4 seasonally strong for adds, gross margin pressure from increased spending volumes, normal seasonality.

Q: Terrell Tillman asked about Q4 new customer seasonality and SMS volume.

A: Amanda Whalen said Q4 seasonally strong for adds, SMS seasonally strong in holiday period, customers adding subscribers, intentional about message volume.

Q: John Gomez asked about upmarket pipeline and Q4 strength.

A: Andrew Bialecki said enterprise customers typically don't make switching decisions in Q4, pipeline built up, materializes post-holidays.

Q: Mark Zgutowicz asked about Shopify enterprise impact on pipeline.

A: Andrew Bialecki said partnership with Shopify continues, complementary nature, replicate with other platforms.

Q: Kelly Valenti asked about connecting to ad audiences.

A: Andrew Bialecki said Klaviyo integrates with ad platforms, part of acquisition funnel, passes data back to ad platforms for better targeting.