This new, which is why we also had the delay. You know, work PC and work IT is not the same as home. Amanda, just to kind of kick us off, like, if you think about... Oh, yeah, maybe, before I go there, guys, I'll start with a couple of questions. I don't have, like, the whole schedule, so if you have questions, either raise your hand on the OpenExchange here and I can see it, or Email Bloomberg us. Email me, and then I can do it from here, so that should kind of work as well. But yeah, let's start. Amanda, you just had, like a, your first public quarter.
A good few things happened since, so it's kind of like to refresh everyone, just what were the highlights from your perspective?
Sure. Thank you so much, and thank you so much for hosting today. We really appreciate it. And thank you so much to everybody who is joining us today. So, you know, it was, it was a very strong Q3 for us. And it was strong. We delivered on all three core elements of what we think of as our financial framework at Klaviyo. So that is delivering rapid growth at scale in an efficient manner. So rapid growth, 48% year-on-year growth; at scale, $176 million in revenue for the quarter; and in an efficient manner, doing that with 10% non-GAAP operating margins. And for us, the big driver of that in the highlights is it really all starts with our customers.
So this quarter, we surpassed 135,000 customers, which is, you know, we are so appreciative of businesses of all sizes who are coming to Klaviyo to be our, part of our customers. We are also excited about the expansion that we're seeing with those customers. Net revenue retention over 119% this quarter. That is our eighth quarter in a row over 115%, and that's a testament to the trust that our customers put in us and our ability to grow with their businesses as they're growing.
Mm.
Another big highlight for us was our growth in the mid-market, so our customers over 50,000. We had 1,699 of those this quarter. That's up 89% year-on-year, so significant growth. And then from a product standpoint, a couple of things that we're really excited about this quarter. First is we launched our CDP, where we're for the first time offering a separate product that is based on our underlying database technology, and then we also continue to make progress on AI. So this quarter, we launched our segmentation AI engine, letting people use natural language to generate segments, which we saw a lot of our customers use over Black Friday, Cyber Monday.
Oh, wow, already. Okay, that's really amazing. Okay. Then, I know because we, because we're... Like, a lot of people saw you on the roadshow, we had, like, the Q1 , but maybe remind us a little bit, like, before we go deeper into the more specific stuff, like, on the revenue model-
Mm-hmm
Like, I'm still getting quite a few questions, like, how does it work from a client's perspective? And, like, for example, does that, you know, how does Q4 work? It looks like a bigger quarter, like, but how does it feed into that revenue model?
Sure, um-
or driven by?
We are primarily a monthly subscription business.
Mm.
Those subscriptions are, you know, set rate per month, and that subscription is based on, on the email side, the number of profiles you have and the number of messages that you send, and on the SMS side, it's based on the number of messages that you send.
Mm.
What that really is reflective of is the data that a customer is storing with us and then also the way that they're using that data to power that communication.
Mm.
Big revenue drivers for us, if you think over the long term, big revenue drivers for us are some of what I just spoke about. Growing with new customers, expanding with those customers as they add new products into their Klaviyo offering. It's growing in the mid-market, and it's growing internationally. And then over the longer term, it would be expanding into new verticals and expanding into new products as well.
And how does pricing work then? Like, if you think about, like, Q4 seems kind of bigger for you, like, you know, like, but if I do a monthly contract, like, how does it work? So overage or how do you... You know?
Yeah, a great question. Because it is month-to-month, our customers can right-size their plans each month-
Oh, wow
... Depending on the, you know, where their business is in that given month.
Mm.
For an email subscription, which is based on the number of profiles that they have, tends to be steady because once a customer is introduced into a brand, they tend to wanna continue to communicate with that consumer.
Yeah.
On the SMS side, we do see some seasonality in the business. So during Q4, let's say if I were a brand who was typically sending 1,000 messages per month, I might be on a 1,000 message per month SMS plan. But maybe during the month of November, I decide that I'm gonna send 2,000 messages because it's Black Friday, Cyber Monday-
Yeah
... I wanna get my customers engaged. I will upgrade to a higher subscription plan, and then when I decide that the holiday season is done and I'm ready to go back down to my normal rate, I might downgrade into a, you know, my go-forward rate going forward.
Yeah. Okay, and then, like, does that mean, like, for example, you would shut someone off, like, if they want to, if their messages are over 1,000, and then it doesn't work anymore? Like, or how does it ...
Yeah, it's a great question, and actually, the way that it works is it's a seamless, seamless upgrade from our customer standpoint.
Mm.
And that was in response to questions that we got from our customers. 'Cause what they said was, "If I have 1,000 messages and I decide to send out a campaign that has 1,100 messages, the last thing I wanna do is get a note from Klaviyo saying, 'By the way, we didn't send those last 100 notes.'
Yeah.
Let's have a conversation about your plan.
Yeah.
So we're actually making them able to upgrade in an automatic, no-touch way. We automatically upgrade them to the plan that they want. Once they've sent the campaign, then they can look at, "Is this the right plan level for me?
But would they have to manually bring it down again?
They would then manually bring it down-
Yeah
... If they decide, to-
To do that, yeah.
Yeah, to do that.
Yeah, yeah. Okay.
For the most part, as I said, on the email side, once a consumer profile is in someone's database, they're gonna wanna continue communicating with them-
Yeah
... on a monthly basis.
Yeah, yeah. Okay, makes sense. And then the, like, let's talk a little bit about on the go-to-market side. Like, so Shopify, kind of, I still get a lot of questions about that in terms of like, okay, remind us of the relationship and, and the, like, how does it play out for you?
Yeah. Shopify is an incredibly important partner for us. We love working with them. But, you know, I think our founders are very like-minded. They are very close. We're both very customer-focused, we're both very product-led, and we've developed a really strong partnership over the years.
Mm.
They made an investment in us last year, and we cemented a partnership agreement with them. And what that partnership agreement is, is that we are the preferred email provider for Shopify Plus.
Mm.
We also have joint go-to-market agreements, where we participate in co-product development together. We go out and we speak to customers together, we do some marketing and development together.
And then how does the... Is there a revenue profit split? Like, how do you do that?
Yeah. So on the Shopify Plus side, there is a revenue sharing for every customer who we share in common-
Mm.
where we have a per month fee that's part of the agreement. And then on the Shopify Core side, we have a set percentage for every customer who they refer to us.
Yeah.
So if you look at our numbers for last year in Q4, that number, the total fees that were associated with that was about $5.6 million in Q4. Year to date, it's about $16 million.
Mm.
So it's an important part of our customer acquisition cost, but also we're investing behind, you know, the whole ecosystem, which for us is really important. Not only the relationship with Shopify, but also with the partners who we work with in the form of marketing agencies, our own outbound sales force, who's communicating with customers, and our own marketing as well.
And the, there are also like... That's the other more technicalities, like around the warrants. Like, so how did they- how do they play in?
Yeah. So, as part of the partnership agreement, Shopify made a cash investment in the business, and they also received warrants, which are in exchange for some of the co-marketing agreements that we have with them-
Oh, okay
... and the work that we're doing.
Do they, do they go away at some point, or?
The warrants vest over a seven-year time period, which is the seven-year... or sorry, the time period of the agreement.
Yeah. Okay, perfect. One quick clarification. Yeah. The $5.6 million was in Q3 of the revenue sharing fees as well. Oh, okay. Yeah, yeah, yeah from Shopify. Yeah, yeah. Okay, yeah, makes sense. Okay, helpful. And then, the the other big point that comes up a lot in customer con- or, sorry, investor conversation is around the price increases.
Yeah.
So, remind us what you did there, and then I'll talk next then about the implications.
Yeah. So, you know, our pricing philosophy is that we are a premium product, and the reason we're able to provide premium services is because we deliver on two things that are really hard to do at once. One is we are incredibly easy to use, and the second is we're very sophisticated in the use cases that we let customers do in the product because we have the database integrated. And so because we're a premium product, we charge a premium price for it.
Mm.
The price increase last year was that we found that in certain segments of the market, our pricing was not necessarily aligned to that philosophy.
Mm.
There were certain parts of the market where we were actually priced at a discount relative to competitors.
Mm.
We wanted to make sure that we were price aligned to the value that we were charging. So the price was increased, primarily at that higher end of the market.
Okay.
And then it happened in Q3 of last year.
Yeah.
Right at the end of Q3, so you primarily saw the price impact roll through in Q4-
Yeah
of last year.
I mean, like, in theory, like, did the customer, like, from a customer engagement perspective, like, being cheap -
Mm-hmm
... in theory, the customer says like: "Oh, yeah, great, I'll take it." Or like, you know, how does that impact the conversation with customers?
Yeah. What's interesting was that it actually had a little bit of a credibility impact of customers would say: "Well, if you're a premium product-
Mm
You should be premium priced to the market. If you're at a discount to the market, are you really?
Yeah
-that strong?" And so, it actually helped us in our conversations with customers because we could then say, "Yes, we have a product that is really high quality and is priced appropriately for the quality that we're providing.
There's almost like too good to be true-
Right
... or like, kind of like, and then it kind of created new discussions then. Yeah.
That's right.
So that's only on the high end. So what did anything happen on the low end of the market?
In the lowest tier of the market, the plan prices stayed the same. There was a little bit of a price increase in the middle tier of the market as well.
Yeah. And then how did you, If you think about it, that's the follow-on question that you obviously get is then: so how do we think about future price increases now? Is that like, you know, like, is there a key to this? How do you think about that?
Yeah. The way we think about price increases is the price increases in the future will be linked to improvements in the product.
Mm.
You know, we had, in this case, not changed prices in eight years, but we have made significant changes and improvements in the product over that eight years. In the future, what we're looking to do is make sure that we have that tighter alignment between the investments that we're making in the product, the increased ROI that it's driving for our customers, and then the way that we're able to monetize that ROI.
Yeah. Okay. Yeah, okay, makes sense. And then, guys, just for the webcast, like, I have a couple of basic questions. And so you can see I'm hitting a lot of the points already, but, like, I wanna make sure that you know, like, the questions will come for you, like, very soon. The other thing is, like, if you think about the setup now, and I apologize for the questions already, for the question already. Is like you're profitable-
Mm-hmm
... and you're cash flow generative. And, I guess a year ago, it would've been like, "Well, what's wrong with you?" Now it's kind of a, like, a positive thing.
Yeah.
Talk a little bit about that. Is that a philosophy question from the, from senior management? You know, it's just the business model is very strong. Like, how do you think about that?
Yeah. It's one of the beauties as a CFO of working with Andrew and Ed, who are our co-founders.
Yeah
... is that this is very much part of the DNA of the company. Andrew and Ed have always believed that you don't have to make a choice between having best-in-class growth rates and best-in-class efficiency, that we can grow really quickly and do it in an efficient manner, both at the same time.
Mm-hmm.
If we're thoughtful and choiceful about the business model choices that we make.
Hmm.
And so, you know, that has been always part of how we operate, is that we're gonna be a business who's gonna grow rapidly, but do it in an efficient manner, that it doesn't have to be an either/or.
You, I mean, you have a very decent profitability. How do you guys think about the trajectory from here?
Yeah. The way we think about it from here, we've shown a tremendous increase in profitability over the last 12 months. As we right-sized some of our marketing spend, we doubled down on the investments that were working. We pulled back on some things where we weren't seeing the unit economics that we wanted.
Hmm.
Now, as we go forward, we're in the early days of going after a massive TAM, and so we wanna make sure that we're investing appropriately to go out and capture that growth and capture that market share that's ahead of us. I would anticipate, as we said on our Q3 call, that our margins over the next year will be more stable-
Hmm
... compared to where they are this year. And then over the longer term, as I think we said in our IPO roadshow, we would expect to then start to see more leverage in the business over time.
Yeah. Okay, and then the... And that's the last question that I have on my one, and then I can hand it over to the audience. Like, I mean, maybe one and a half questions. Sorry, Jane. The, if you think about guidance, like obviously, you know, you had now the your first public quarter, and then the question that always comes from investors is like: So you beat by around 5%. Like, how do I think about guidance philosophy, you know? Is there... You know, we have- we don't have a pattern. We only have one data point.
Yeah.
So when, for you as the CFO, and, you know, you and I talked about it before the IPO even-
Mm-hmm
... like, you need to, you need to kind of understand where, who you are and what you're, what you wanna do. How do I think about that, and so how, where did you come out here?
Yeah, and I appreciate that, and I appreciate the conversations we've had about it, you know, since the beginning of getting to know each other. Our goal is that we are trying to build trust and credibility in the public market, and we have a guidance philosophy that is aligned to where we are in our stage in evolution as a business, right? If you think about us compared to maybe some companies who went public in 2020 or 2021, as a reminder, we're a scale business.
Mm-hmm.
You know, we're well north of $600 million in revenue in the trailing 12 months. We are a business who's profitable. We have over 130,000 customers, which makes the business predictable. And so our philosophy is therefore not to drive outsized beats. It is to have consistency in a way that's aligned to our position as a predictable scale software company.
Mm-hmm. Okay, and then, the questions are starting to come in here from the audience, and, I'll take them here. But the one that comes up a lot is basically any comments around, you know, we just had the, you know, Thanksgiving, Cyber Monday. How do we have to think about this year so far, if you can comment?
Yeah. You know, we're in the middle of the quarter, and so we, you know, can't comment on business in the middle of the quarter. But we did see some really interesting trends and patterns.
Mm.
One of the wonderful things about Klaviyo is we have visibility across so much of the e-commerce and the retail space, and some of the interesting trends that we saw, one is that retailers were really focused this holiday period on how do they drive lifetime value-
Mm
... with their customers, and how do they drive repeat purchases? And this is consistent with a lot of what we're hearing from our customers right now, that customer acquisition is getting more and more expensive, and they wanna figure out, how do I drive repeat purchases from the folks who are already engaged with my brand? So some of the interesting data points that we saw there, across our customers' total revenue, a little less than half, 47% to be precise, came from, consumers who were repeat buyers with that brand. And of the revenue that was generated through Klaviyo-attributed messaging, Klaviyo-attributed-
Mm
... value is what we call that, almost 75%, it was 74% was the number, came from repeat buyers. So consumer brands are thinking about: How do I engage with my customers, and how do I engage to keep them in my brand once I've acquired them?
Yeah. Okay, then it goes deeper in here, so just to warn you. So the question is, someone said in the holiday season, 2021, 2022, there was lower Fidelity through Facebook and Google, and that meant more people spend on email and SMS.
Mm-hmm.
Now the question is, now that there's better visibility, does that negatively impact, you know, like, you know, the current environment, for example? And how do customers think about, like, ROI in that respect?
Yeah, what we see and hear from our customers is that they still think about very, very strong ROI coming from the spending that they have with Klaviyo. It is not unusual for our customers to have, you know, 10, 20, even 50x return on the investment that they get in Klaviyo in the form of the revenue that they're generating through Klaviyo.
Mm.
and so what we see in, you know, through the times when it is easier to acquire customers and through times when it is more challenging, is that our customers really want to double down on mining and building those relationships with their existing customer base. One statistic that we see in our business that is, really interesting to us is looking at the relative growth rates of Klaviyo-attributed value compared to their total-
Mm
... GMV, and we see an outsized growth rate in their KAV, which says to us they're increasingly relying on Klaviyo to help drive their revenue.
Yeah. Okay, perfect. Next question from the audience is, like: Can you talk about NRR, and maybe we do it a little bit broader. Talk about the NRR level that we have at the moment, and then what was the impact from pricing? And so hence, how do we have to think of but how, how do we have to think about NRR going forward?
Yeah. So, you know, first let me give an overview of what drives our NRR.
Yeah.
NRR is driven by, one, you know, our customer retention. Are we providing value and working with customers in ways that are helping their businesses be successful and stick with Klaviyo? A big part of that for us is the value that we drive for them, which makes it sticky.
Mm.
The way that we drive expansion comes from three ways. We expand with our business as our customers' businesses grow, and that is the largest portion of our expansion, because we align our success with their success. As they add new customers into their business, as they send those customers new, more messages, their Klaviyo subscription grows, which grows their business with us because it's reflective of their business expanding. So that's the largest driver of expansion.
Yeah.
The second is the cross-selling multiple products. We started out originally with one offering, which was our data plus email offering. We added a second offering two years ago in the form of SMS. It was at the start of 2021, so I guess maybe almost three years ago now.
Yeah.
And SMS, as of our last disclosure, is just shy of 15% of our customers have SMS. So there's a lot of room there to continue to expand and cross-sell multiple products. And then the third, which is much smaller but can increase in our business over time, is cross-selling to multiple brands within the same family.
Yeah.
So an example of this would be the Unilever Prestige Brand Group. Dermalogica was an example in our S-1, where we landed with one of the brands in the portfolio. They, they recommended us to another brand, who recommended us to another brand, and we've now grown that relationship. That mid-market and up business is a smaller portion of our revenue right now, but as it grows, I think that lever will become-
Then you get the price. So yeah, yeah.
Yeah.
I mean, what are you seeing there in terms of like, as we talk about demand, like, do those mid-market guys will they be more sticky? Like, I mean, what are you seeing at the moment in terms of stickiness anyway?
Yeah, what we do see with that mid-market customer is that they tend to have a higher, higher retention. So, you know, once those customers land with us, they tend to be very, very sticky over time.
Yeah. Yeah, yeah.
Yeah.
Okay. And then next question I got from the audience is about on the CDP, CDP platform, can you talk a little bit about how do you add value there? You know, how does it fit into the existing products?
Yeah. So, what our CDP is and the way that it adds value is that our customers, we have over 300 native automatic integrations that customers can add into their Klaviyo account, where they're linking different data sources into Klaviyo-
Mm-hmm
... to bring all of their consumer data into one place and give them a full, robust view of those consumers. Think of it almost like a CRM for a B2C business. What the CDP then allows them to do is to take that data and use it in more sophisticated and different ways. So it allows them to either take that data and pipe it into other systems. It allows them to do more reporting on top of the data, or allows them to do some more advanced analytics that they might then feed into some of their marketing communications. So a very popular use case among our CDP customers is RFM, or recency, frequency, monetary-
Mm-hmm
... segmentation, where customers are looking to segment their customers based on how engaged they are in the brand, and then as a customer moves either up or down in their engagement, use it to send targeted communication. So if you have been buying from my brand every month like clockwork-
Yeah
... and then all of a sudden, two or three months go by and I don't hear from you, you can use RFM analysis to say, "It's time to engage Raimo again, and how do I get you back into the brand family?
Yeah, yeah. Okay, yeah, yeah. Okay. And then, I mean, how broadly do you think you can... If you think about your client base, like, how broadly can this be sold into? Like, is it, like, for everyone? Like, do you need to-
Yeah, you know, it will tend to skew to the larger brands within our, customer base who have more customer data.
Mm.
I would say even at the higher end of the small and medium business space, they have a lot of customer data that they're looking to bring in and to be able to use.
Is pricing on a data volume basis, or how do you do that?
Pricing is based on the number of profiles.
Number of profiles.
Yeah.
Okay, yeah. Okay. And then, like, if you think about the customers that you're finding here, is that, like, all new customers, or is that, like... Where, where are those customers coming from?
Currently the product is for customers who are existing Klaviyo customers who want to add on and have the CDP, CDP capabilities added on to their existing Klaviyo subscription.
Yeah.
Over time, it will become a product that, you know, becomes the tip of the spear as the initial sale.
Yeah.
And we're seeing a mix of customers, some of whom are greenfield. This is the first CDP they've ever bought. Some of whom are coming to Klaviyo from another CDP, where they're finding that, you know, it was hard to implement and maybe tough to find the value to get the practical use cases out of, and they love that Klaviyo is so simple to use and quick to drive to value.
Yeah. Okay. Then for the audience, the raise hand function doesn't really work on my iPad, so you need to email me if you want to get the questions in. Next question I had was around competition, like, especially on the look below—I think it's below you. Like,
Mm-hmm
... Intuit is making a lot more noise around Mailchimp.
Yeah.
Well, maybe talk broader, or broadly, about competition, but then talk about, like, what you see there, if that extra investment is kind of making an impact.
Yeah. You know, when I, when I think about competition, I would think about two things that really differentiate Klaviyo-
Mm
... which is we are very easy to use, and we offer robust functionality and sophisticated functionality. So on the easy to use, you don't have to be able to code to use it. It's very simple to set up, quick time to value. But at the same time, you're able to offer those capabilities with advanced segmentation, with artificial intelligence and machine learning embedded in to do predictive analytics, to make recommendations on products that you should use... and, with real-time action, so that as you are identifying a customer on the site, you can immediately translate that into how do you communicate that?
Mm.
With many of the other offerings, it's an either/or. It either can be easy to use or can be sophisticated and advanced capabilities, and we let customers do both.
Yeah. Okay, good. Next question I got here is, like, can you talk about the expansion into other verticals, and also, like, using partners for that?
Yeah. So we are early days, and if you think about where our growth is gonna come from the next few years, it's gonna be those near-term drivers in our existing verticals. Over the longer term, we'll see growth coming from these new verticals as well. So an early foray that we have into new verticals was our launch over the summer of Klaviyo for Wellness.
Mm.
In wellness, we have partnered with Mindbody, Boulevard, and Zenoti, who are three commerce platforms and, you know, management platforms in the wellness space. And we are working together with them to, you know, we're part of their app stores, and we are working on joint go-to-market programs with them to serve customers there. I think back to speaking about us as almost a CRM for B2C business, what we find is that having all of the customer data in one place is incredibly powerful for all kinds of consumer businesses.
Yeah.
Just like a retailer is looking to drive a repeat purchase of, you know, socks-
Mm.
-or coffee creamers or you name it, a wellness business is looking to drive repeat services. So it's a very similar concept that from a data structure and a product standpoint, doesn't require much tweaking on our part to be able to serve these, new customers in these new verticals.
Mm. Okay. The next question I had was, that I got in here was, can you talk about... You talked about, Shopify-
Mm-hmm
... and their partnership here. Like, how is there an argument to think about penetration in there, or can you just speak to that in terms of, like, you know, obviously, you know, they have, what, two million customers?
Mm.
Something like that. You know, where, like you, you are not quite there yet. And then, like, how do you... is that kind of a number that we need to that we can compare with each other? Just, could you speak to that a little bit, yeah?
Yeah. So, you know, we have a really strong partnership with Shopify across their entire business. I would say that, you know, we have a strong partnership in the Shopify Plus ecosystem as the recommended email provider.
Yeah.
And there, you know, as we look at that market size there, we see ample room for growth, both in increasing our penetration within that space, and then also because Shopify is driving really strong growth of Shopify Plus, so that market continues to expand. Outside of Shopify Plus and Shopify Core, there are so many merchants in Shopify Core, and we think our penetration there is very, very low.
Mm.
There's probably a group of those who are less applicable to Klaviyo, the folks who are really literally just starting out and only have a small handful of customers. But once customers get to enough size and scale that they are trying to segment their consumers and be more personalized in a way that they need to automate at scale, then Klaviyo starts to be a really good fit.
Yeah.
And then I think the other wonderful thing about the Shopify partnership is that it's not only a strong partnership, you know, with Shopify, it also has become a model for how we build partnerships with other platforms as well. And so, you know, we've got partnerships across e-commerce, you know, with BigCommerce, with WooCommerce, with Wix, with PrestaShop over in Europe-
Mm
... that are all modeled on this great relationship that we have, where we're jointly, you know, thinking about products-
Mm
... and how do we work together across the ecosystem?
Yeah. I mean, on that note, there's a question I just got, is the next... If you think international is still a bit early on your journey, but, like, how do you think about it now?
Yeah. International is already a significant portion of our business. It's over 30% of our business. I think it was 31% in Q3. And that is increasing in penetration because it's growing faster than the overall business.
Mm.
But I think we're still early days. We opened our office in London about four years ago, and we opened our office in Sydney last year. We currently only operate in English, and we only operate in U.S. dollars.
Okay.
And so as we make it easier for customers to come to us by localizing the customer journey in their native language, localizing the product over time, but I would say probably farther out on the horizon, you know, starting to look at multiple currencies as well, I think we will, you know, just continue to grow really rapidly internationally.
Yeah. Okay. And I'm jumping a little bit on the questions, given that they come from the audience. But, you talked about the guidance philosophy.
Mm-hmm.
But if you think Q4 has a lot of, like, moving parts of people moving up and down in their-
Yeah
... in their plans, like, how do you get visibility, or how do you get comfortable in the guidance then?
Yeah. It's a great question. We spoke about this, I think, a little on the... I think it was in the Q&A section of the earnings call, that because the beauty of having 130,000 customers is that you have a rich customer data set and a rich history of customer behavior over time.
Yeah.
And so we can watch the trends literally, you know, on a day-to-day basis of how is customer behavior trending over time? How does that compare to what we expect? How does it compare to prior years? How does it vary by product, by customer size, and so forth? And seeing all of that rich data and understanding from our history what the patterns tend to be is what gives us comfort-
Mm
... with the guidance that we've issued.
Okay, good. Makes sense.
I will say on Q4 and some of the seasonality to one of the earlier questions that you asked, you know, because our customers ramp up so much communication in Q4, we tend to see a stronger seasonal quarter in Q4. And then as they normalize, particularly on the SMS side, their plans back to what a more typical run rate would be—we said tend to see more level in Q1, without as much sequential growth as customers kind of right size to-
Yeah
where they wanna be in the next year,
Mm-hmm.
Then they go from there.
Yeah, okay. Yeah, makes sense. And then, this is a good one here, and I don't have an answer. Well, obviously, I shouldn't, but that's why we're asking you. If you think about next year, like there's a lot of like noise around Google, I think Yahoo as well, with cleaning up inboxes. There's kind of limits on like how much emails can be sent, et cetera. Like-
Mm-hmm
... can you speak to that? And will that impact you guys?
I think that it, it improves and increases the value that Klaviyo provides, because so much of what, both on the email side, and we believe eventually will happen on the SMS side as well, is that consumers and the companies who are helping them are looking for ways to sort through the noise-
Mm
... and to really find who are the brands who I wanna engage with? Who are the brands who are really personalized to me, where it's a targeted brand who I really wanna be a part of, and then how do I filter that out? So what we see from our customers is that the more personalized they can be in their communication to their consumers, the better their response rates are, the better their conversion rates are, and then to some of this question, even deliverability as well.
Mm.
From Black Friday, Cyber Monday, for instance, what we saw was that of the communications, the emails that were sent, that were personalized in some way, the conversion rate was actually 40% higher.
Wow! Okay, yeah.
We think that the more, you know, noise that is out there, the more that it increases the premium and the importance of being able to personalize with data in a real scalable way, which is what Klaviyo helps companies do.
Yeah. Okay, yeah, that's really helpful. And then, a quick question on, there were signals in the market in Q3 at, you know, more the HR back office space, but like more weakness in SMB. Like, how do you think, customers react to your offering if, you know, the environment is a little bit tougher?
Yeah. In a tougher environment, what's interesting is that we think that in a tougher environment, they actually come to rely on Klaviyo more.
Wow
... because in a tougher environment, they're thinking about: What is the most efficient and most effective way that I can have to drive my top line? And they're thinking about, you know, "I really wanna be making the smart investments that are gonna keep the revenue coming in the door," and that's what Klaviyo does-
Mm
... ’cause we generate incredibly high ROI in the form of top-line revenue. And so, you know, they may be thoughtful about, "How much am I spending on advertising?" They may be thoughtful about, "How much am I spending on back office?" They certainly are thoughtful about making sure that they have the right sized plan within Klaviyo, but the last thing they wanna do is to be cutting off communication with one of my most valuable resources I have-
Yeah
... which is my existing customer database.
Yeah, so it's got... Yeah, it's selling, yeah. In this environment, you need to sell, yeah.
Yeah.
The next question is on and you move upmarket a little bit. If you go, mid-market or enterprise or whatever you define-
Mm-hmm
... however you define it, how do you think about... You know, the question is, how large are the sales to need to be? Is it like a big sales investment or like, you know, are we thinking like a classic SAP enterprise sales force? Like, can you speak to that a little bit?
Yeah. For us, it is an evolution more than a revolution in our sales motion.
Yeah.
So we started with an outbound sales motion a few years ago. We've been gradually building out the size of that team, and we are moving from small business into mid-market. I would say the real true enterprise, enterprise is for us, you know, starting to appear in our customer base, but for the most part, you know, further out on the horizon for us. So we're making some targeted investments, which we spoke about on our Q3 call, in Q4 and into next year, on, you know, building out our quota-carrying sales force.
Mm.
But doing so in a way that is really measured and thoughtful about what's the speed at which we can effectively hire and integrate people, and doing it in a way that is really thoughtful about unit economics.
Mm.
Again, it's the wonderful thing about working with Andrew. He always wants to understand-
Mm-hmm, unit
... the unit economics of this investment, and is it a good investment to make?
Yeah, yeah. And then, staying on sales a little bit, like, talk a little bit about how do you get the cross-selling from SMS done? And then, you know, that's a good segment into like more the other products as well, a little bit in terms of like, you know, how does cross-selling work for you guys?
Yeah. So if cross-selling is part of the initial sale, it's handled through the, you know, new account rep who is going into a brand for the first time and selling them the data plus email product, and then hopefully attaching SMS at the start. For selling into our existing customer base, we have, what we term a customer growth team-
Mm
... who is going in and selling SMS across our existing customer base. And so they are looking at places where, you know, working with our customer success team, understanding where the opportunities are. In some cases, you know, pull from customers who are saying, "Hey, I feel like I'm not as effective cross-channel as I could be, because I have these two channels who are separated." So one of the things that we have seen in SMS that's most powerful is the power of better together and the power of the full Klaviyo story. Because customers don't want to be spending their time piping data back and forth between two systems.
Yeah.
They don't wanna be spending their time logging out of one and logging into another, and they don't wanna spend their time trying to triangulate a single source of truth about a customer. They want one view of the customer, and they wanna be able to communicate with that customer seamlessly, whether it's an email or SMS. With Klaviyo, we help them be able to do that in a way that is really easy and really clear.
Yeah. Okay, perfect. And jumping a little bit, but like, it's a question I got through the process quite a bit. So Shopify, before they worked with you guys, they were, you know, they had a partnership with Mailchimp.
Mm-hmm.
And then something happened, whatever, and that, you know, that partnership, you know, didn't really work anymore. And like now you are the, you know, the big partner there. With Meta, parent of Instagram, like is there a risk that, you know, they come back together? Like, how do you see that kind of playing out for you guys?
You know, I think Shopify has been really clear about their support and partnership with Klaviyo in multiple forms. You know, I think we have a written agreement that, you know, is in place for a specific period of time. But I think more important even than that, we have two companies who are very philosophically aligned, right?
Mm.
I was actually communicating with Shopify's CFO not too long ago, and he said, "Remember, you know, Tobi doesn't usually do videos." But we are such supporters of Klaviyo that, you know, that was an important, important thing for us, was to support you. I think we could ask-
Yeah
... to support you guys through the IPO. I think it's because we're so philosophically aligned on always being customer-centric and developing really great products that our customers love. And the fact that we are, you know, economically aligned because they are monetizing a lot based on GMV. What do we help our customers do? We help our customers grow GMV, so it's a win-win.
Yeah. It's the last question I have so far. If guys, if you want more questions, so you need to kind of hurry it up because our time is slowly running out. It's a good, more broad-based question. It's more like a more philosophical question, I think I would call it. Amanda, for you, like, you have been kind of CFO within Walmart, but it was like, you know, was not a public company. Like, now you're kind of a CFO of a public company. What's been your learning so far?
Yeah. It's just so much fun. I will say, you know, what really drew me to Klaviyo was three things, and all three things of those have absolutely turned out to be true. I wanted to be part of a company that had a product that customers loved, that, you know, when you spoke to customers, one of the things I love about Klaviyo, you asked a question about pricing-
Mm.
You will go online sometimes and read reviews, and customers will write, "Klaviyo is a premium price product, and it is worth every penny." "You should buy that.
Yeah.
I believe that having an amazing product that customers love is the foundation of any good business, and then you can build a go-to- market motion around that. That was the first thing that drew me here. The second was being part of a company where we have some secular tailwinds at our back.
Mm.
The question that I think someone asked earlier about what's happening with privacy and with tracking and with regulation, and I think it's only going to get harder and harder for businesses who are trying to operate based on third-party data.
Yeah.
The businesses who win are gonna be those who make great use of their first-party data, and that's what we help companies do. And the third was I wanted to be a part of a great team. Andrew, Ed, now Steve, who has joined the business, it's just a great group of people.
Mm-hmm.
As a CFO, selfishly, it's great to be aligned with a great group of people who are wildly ambitious in building a great company-
Yeah
... but also very passionate about doing it in an efficient manner, which makes my job nice and easy.
Yeah.
And so, yeah, it's just been a ton of fun.
And then, I mean, there's another question I got that I might squeeze in because it, yeah, fits right in here. It's like, if a, if a software company goes public, one of the reasons why you do go public is you get more publicity, or you're more-
Mm-hmm
... in the, in media, et cetera. Have you seen that boost already? Do you notice it in your customer conversation, that it comes up more, et cetera, or is it too early?
Yeah, I think it's early days. You know, we did say that on the day of the IPO, you know, we saw a record number of, you know, record website traffic. But I think, as we thought about going public, for us, it was for a few reasons. One, you know, we aspire to be an amazing software success story over many, you know, not just years, but decades, and all of those great software companies out there are public, so we knew that was gonna be important to us at some point in the future.
Mm.
And then it does help with brand credibility, particularly as we expand into the mid-market and eventually up into the enterprise. Those brands wanna know that they're partnering with someone who's gonna be there for them for the long term.
Yeah.
Having that public market credibility really helps for them to have the confidence in us as strong partners.
Perfect. The last chance, guys, no more questions here, actually, so I'll kind of hand it back. Thanks. Or no, not hand it back. That sounds like a very small
Yeah.
Hey, guys, thanks for joining us. If you have any more questions, please email me, and I can kind of forward it to Jack, and then we can get back to you guys. But, thanks for joining here. I really enjoyed it. So thank you.
Thank you.
Thank you.
Appreciate it.