Good?
Good.
All right. Why don't we go ahead and kick things off? Thanks, everyone, for joining. For those of you that don't know me, my name is Arjun Bhatia. I am the research analyst at William Blair that covers Klaviyo. For a full list of disclosures, you can go to williamblair.com. With that, it's a pleasure to introduce Amanda Whalen, CFO of Klaviyo. Thanks for being here, Amanda.
Thank you so much.
Appreciate it.
Happy to be here.
Maybe we can kick things off with just a high-level question. You're kind of approaching—I think it's been just under two years since you've been public. If I remember right, the year you were going public, you were doing about $700 million in revenue. This year, you're guiding to $1.2 billion. We're seeing some pretty good growth out of the company. Maybe reflect on the last two years as a public company. What are you proud of? What have you done well? What are some things that you wish you could do over or do better or that you're looking to change going forward just to improve the growth rate and the fundamentals of the business?
Sure. Thanks so much. We're excited to be coming up on the two-year anniversary not too long from now. We've been talking about, since we went public, four primary levers of near-term growth for Klaviyo. Adding new logos, bringing more customers in to use Klaviyo, expanding with those customers, both expanding as their business grows and adding new products, growing in the mid-market, and growing internationally. I think we've made tremendous progress across each of those four. Our customer count continues to increase. We now have over 169,000 customers who use Klaviyo, brands all the way ranging from entrepreneurs who are just starting out to iconic businesses like Hershey and Belkin, who just most recently joined Klaviyo in this last quarter, as well as some of the fastest-growing brands out there, brands like Liquid Death and Poppi in the consumer space.
Very pleased with the progress we're seeing in bringing new customers in. In expanding with existing customers, we continue to add new customers who are using our SMS product in addition to our core data plus email product. We now have over 25% of our SMB and mid-market customers using that. In particular, the two that I think we're most proud of that I would really highlight are the progress that we're making in the mid-market and enterprise and the progress that we're making internationally. In the mid-market and enterprise, as we spoke about on our last call, we have over 1,000 customers who are paying us over $100,000 in ARR.
The average size of our top 10 customers has increased very significantly since the time that we went public, or those top 10 customers now average over $1.5 million in revenue with Klaviyo. As I just mentioned, we have some big iconic brands who are using Klaviyo, brands like Reebok and Toys "R"U s, and TaylorMade and Callaway. As those brands see brands like them using Klaviyo, it brings even more brands who are interested in getting to know the business and the power that we can bring to their business. The final one internationally, when I joined the business three years ago, we only operated in English and we only operated in U.S. dollars. That was true at the time that we went public as well. Yet our business was almost 30% international.
We had a strong hypothesis that if we made the product easier for customers to use and to access in their native language, it would open up whole new pockets of demand for us. Sure enough, last year we launched in seven new languages. We have seen incredible growth internationally. It has actually accelerated in the last few quarters. Our EMEA business is growing well north of 40%. In fact, last year we launched French, German, and Spanish. France, Germany, and Spain in Q1 saw their new ARR grow over 100% year on year. That was anywhere from two to five times as quickly as those businesses had been growing the year before. Tremendous progress internationally. In terms of what we could do better, if I'm honest, if you talk to Andrew, who's our CEO and co-founder, I think he would say everything.
That is, I think, one of our greatest strengths as a company is that we are never satisfied. We are always looking for how can we go farther, how can we move faster, how can we add more value to our customers, bring more people into the brand, release more innovative products. We are never satisfied and always looking to.
It's a good mindset. All right. You mentioned 169,000 customers. Top 10 are averaging $1.5 million. Your customer base ranges from maybe a few thousand dollars a year that they're paying you ACV up to seven figures. To be spending that level, they must be seeing some ROI with the platform. What is it that Klaviyo is delivering that's so unique that they're investing seven figures, that these brands are investing seven figure plus with Klaviyo?
Yeah. What is unique about Klaviyo is how we measure our success is a metric that we call KAV, Klaviyo Attributed Value. Prior to Klaviyo, many customers in our space, or many competitors in our space, would measure success as what's your open rate? What's your click rate? When we started out and started having conversations with customers, we asked them, what really matters to you? Is it how many people opened a message, or is it how many people bought? How much is this contributing to you, helping you grow your top line? With KAV, we're able to measure how much revenue is a business generating with Klaviyo. You see it right there in the product when you log in. On the left-hand side, you see how much KAV did you generate in the last 30 days.
In the right-hand side, you see how much GMV did you generate. You can see very easily that Klaviyo is driving 20%, 30%, 40%, for some customers, 50% of their revenue coming through communications with their customers that are driven and powered by Klaviyo. Importantly, that number has credibility because it's not a guess or an estimate of, I think, if this many people opened a message that it might have generated this return. You can actually double-click into it and see it at the transaction level. You can say, I generated this much in KAV because I sent out these campaigns and I had these flows in our business. A flow is an automation active. This campaign went to these customers. These customers interacted in this way. This customer actually purchased this product.
You can trace the KAV down to the individual transaction level, which helps customers really be able to understand the ROI that Klaviyo is generating. It is not uncommon, particularly if you go on someplace like X and look at what partners and customers are saying about them. About us is for them to say, look at this return that Klaviyo is generating. For every dollar that my customer is spending with Klaviyo, they're generating not just like 10% return, but 10X return in terms of the revenue that we generate for customers. That ROI is incredibly powerful. For us, it's the most important metrics. It's how do we help our customers grow.
For customers, it's right there in the product, right? They can see.
Right there. They see it every day.
Yeah. Very interesting. OK. One of the things I like about Klaviyo, I think, is you're one of the few players in the space that's taken this sort of platform approach. You started with email marketing, expanded to broader kind of outbound customer engagement. More recently, earlier this year, you kind of evolved into your next phase, which is this B2C CRM. I think as part of that, you launched a couple of new products. You're maybe just kind of changing the way now you can engage with customers to add an inbound element. Talk about the B2C CRM vision and how Klaviyo is evolving as a platform to add more value for customers there.
Yeah. Great question. Our vision of the B2C CRM is that there are many companies out there, great companies who we respect and admire, who are CRMs for B2B businesses. The needs and requirements of B2B and B2C are very different. In a B2B business, you have a smaller number of contacts. You have more limited data points. Generally, the data that is getting entered into a CRM is being entered by a human as it is going through a process. In a B2C business, the speed of decision-making is very fast. The number of contacts that you have is thousands or millions of consumers. For each consumer, you have not just 10 or maybe 100 data points of them.
You might have thousands of data points on that consumer, everything from who they are and where they live, what they've purchased in the past, and what were they recently browsing on the site. You need a way for that data to be structured, to bring it in very easily and very quickly, make it readily available to be able to power personalized communication. That's what we do through the B2C CRM. We actually started as a database company. We didn't start in marketing automation. Little-known fact about Klaviyo. We started this with this belief that if you bring together all of the information that you know about your consumers, importantly, first-party data, not third-party. It's the direct relationship that a brand has with its consumers, that you can use that to power personalized communication at scale.
Our customers told us the first most important place they wanted to use it was marketing. We vertically integrated into marketing application, but always with this vision that if you had all of this data you know about your customers and it was readily available and accessible, you would not only want to use it for marketing, you would also want to use it to power service interactions. You would want to use it to power advanced analytics about your customers. That is really the B2C CRM vision, taking all of this consumer data and using it to power and personalize every interaction with a brand that a brand has with its consumers at scale.
Maybe before we go forward into the different products that you're now launching, just maybe clarify what sort of data Klaviyo deals with, because there's all sorts of different types of consumer data, but you deal with a very specific kind.
We deal specifically with first-party data. If you have logged on and created an account with a brand, then we are bringing together all of the data associated with the relationship between you and that brand. It is data that typically comes from an integration with their commerce platform. A brand like Shopify, which is where you are housing your website, typically is where your payments happen. From that integration, we understand what are the products that you have purchased, what is your purchase cycle, what is happening with fulfillment. We will also integrate with your shipment and fulfillment data. We will integrate with your loyalty and rewards program. Importantly, we will also integrate with your social applications.
If you are acquiring customers on Meta, you can build a custom audience with Klaviyo using the characteristics of your loyal customers and mirror that audience into Meta to make your advertising targeting more effective. Again, it is all of this data that comes directly from the one-to-one relationships, not amplified by third-party external data.
OK. Very helpful. Then going to the products, right, with the new B2C CRM launch, one of the products was service, as you mentioned, right? This is a new sort of use case for Klaviyo on top of your data platform. Why launch into service? Because it's an interesting market, right? You certainly seem to be well positioned in it, but there are competitors and incumbents in that market already with Zendesk and Salesforce and others that we know of. What's Klaviyo's edge in that space, and how are you kind of attacking that market?
Our edge in the space is the integrations that we have with the data. Again, it's this vertical integration with the underlying data platform, because when you have that vertical integration, you can make a consumer experience that is very seamless and remove a lot of friction for the consumer. To bring that to life, last weekend, over the weekend, I'd bought some jeans online. I wanted to return some of them. I went to the retailer's website. I logged on. They knew my email. They knew who I was. I clicked on my most recent order to see it. I had my order number there, and then clicked on the button that said, would you like to return this? I said, yes, I'd like to start a return.
What happened then was a new browser window opened up, and it asked for my name, my email, and my order number, everything that I had just seen on the tab. From a behind-the-scenes standpoint, the reason that that happened is that the two systems are not integrated. In that case, it would be the commerce platform where I am logging into the website and the integration with their service provider who was helping them manage returns. With Klaviyo, we already know all of that context because of the integrations we have. We know your name. We know who you are. We know the most recent purchase you have. Customer Hub, which is our first offering in service, is a flyout that opens up on the right side of the panel. Everything is right there. It is in your My Account page.
If you want to initiate a return, track a shipment, you do not have to re-enter the information because the integration is seamless. Importantly, what is different versus other products in the market, one is we have this integration. Two, you can actually turn service from being a cost center into being a revenue driver. Customer Hub not only will show you your most recent purchases, it will also say, here are things you have been browsing recently. Would you like to explore or ask any questions about any of these products? Here are products we recommend based on customers like you and/or things that you have expressed interest in in the past.
We have customers who are using Customer Hub who are seeing not only dramatic reductions in the number of tickets that are going to their live agents, importantly, they're also seeing tens of thousands of dollars per month in revenue that they're generating from this Customer Hub.
OK, so the value prop now for the customers is pretty clear. One of the other benefits I think that investors really love about platform companies is you obviously have an integrated experience. You're solving a real problem, and it's easy. You get the benefit of economics because you're cross-selling multiple solutions, and your customers can scale. How are you going to market with Customer Hub, with analytics, with some of the new products? How should we think about the uplift that you can generate with your existing customers from these solutions?
The benefit of the platform is that the underlying Klaviyo data platform, where we house all of the information that a business knows about their consumers, is the same underlying data platform that powers the marketing personalization, that also powers the service personalization, that also powers the advanced analytics. You are not recreating and rebuilding in each of those instances from a product standpoint and a margin standpoint. We are able to leverage a common data set, which just makes it seamless and structurally very helpful for us. From a go-to-market standpoint, we started originally and up until a few years ago, we were a single product company with email plus data. A few years ago, we launched SMS as our second product. It is a channel within marketing. That has given us great experience in how do we cross-sell to these different customers.
Our approach to cross-selling varies depending on the segment of the market. In smaller companies, we have more of a hunter-farmer model. In larger companies, where you have more of an ongoing relationship, we've unified that. The sales team is actually not only landing the initial sale, but cross-selling in as well. By our heritage, we are very product-led and product-driven. New products like Customer Hub in particular, Marketing Analytics as well, once you have that data set up, getting something like Customer Hub set up is actually as simple as clicking a toggle button in your account and just saying, would you like to turn this on? It instantly turns on. It leads itself very well, not only to a sales manual motion, but also to a self-serve motion as well.
Perfect. Maybe switching gears a little bit. At the beginning, you kind of mentioned one of the parts you're proud of is up market, near mid-market enterprise traction. Maybe talk about what are your ambitions up market? How high can Klaviyo go? Where is your, when you're going up market, where is the target market shifting to? What size of customer are you going after now?
When Andrew and Ed started the company and first started working together, they were actually working for a company who did data work for large enterprises, businesses like Walmart, where I came from, like Starbucks, like some of the large banks in the country. They were helping these businesses bring together their data from multiple sources and use it to power analytics and different programs. They always had the ambition and the vision that Klaviyo would be built for enterprise scale, that the intention was big businesses need to bring this together, but it is really hard when you have an antiquated disjointed tech stack to make it happen. However, early days, we started off not focusing on the enterprise, and that was because we were a bootstrapped business.
Therefore, we had a bias towards very fast cash conversion cycles so that we could continue to reinvest more in the business. The wonderful thing about SMBs is that's a pretty short sales cycle. In some parts of our business, we measure our sales cycles in days or in weeks. Even in our longest area, we're talking about it maybe in months, but not in quarters. That was always the vision with move up into the enterprise and serve these large companies. We have been building the business from the start to get ready for that. I think we're seeing great progress with the really big enterprise names, you know, names like Hershey. I think the sky's the limit.
Yeah. How do you feel as you kind of shift the focus of the business and this becomes a bigger priority? Clearly, you said the product is built for enterprise scale. How do you feel about go-to-market readiness? Are you having to augment the go-to-market motion, or can you rely on a lot of what you've built already?
We rely on a lot of what we've built already. I would think of it as an evolution in our go-to-market motion versus a wholesale revolution in the go-to-market motion. We have been building out that mid-market and enterprise team for the last couple of years now. If you look at some of our hires over the last couple of years, we've brought in folks who really have more heritage and DNA from enterprise companies who understand how do you manage and navigate a more complex sale to those customers. It is not only how do I have the strong one-to-one sales relationship primarily with historically a marketing buyer, but also now you have a more complex customer group on the other side. Also, we are bringing the power of the full Klaviyo team. It is not just a relationship with sales.
It's bringing marketing, or sorry, bringing product and engineering and the broader executive team all to bear to really build that strong customer relationship. So having folks who have seen and done that in other companies is really helping us. But again, it's a shift. It's not a wholesale change because we also, at the same time, continue to grow very strong SMB and entrepreneur business as well. And that helps give us stability as we continue to grow in the mid-market.
Can we maybe touch on that point on the recent demand environment? Because obviously, there's been a lot of noise around tariffs and what does it mean for marketing spend? What does it mean for how businesses and brands are investing in customer engagement? I'm curious what you're seeing in your base and how some of the insulating factors might be for Klaviyo if there is a downturn. If you could talk about if you're seeing any behavioral change at all in your customers, that would be great.
Sure. An important part to know about Klaviyo and how we price is that our product is priced based on the number of consumer profiles, active consumer profiles that a business stores with Klaviyo. There is a rate limiter on messages sent per profile. The way to think about a profile is a consumer who is actively engaged in the business. Now, if you're someone who has been to a website once, signed up, and then really hasn't engaged with the brand since, we would encourage our customers that that should be an inactive profile. We really want the profiles that they're paying for and that they're engaging with to be the ones who really value the brand, not ones who are just on a list but not really engaging. What does that mean for the business and our resilience?
What it tends to mean, given that the majority of our customers are retailers, most people tend to think, OK, therefore you will index to GMV. And so I should pay attention to what's happening with GMV growth because that's going to be a great leading indicator for Klaviyo. Somewhat true, but not really. Because we index to profiles, a profile is a digital relationship that a brand has with someone. In times when GMV is going great, that's because a business is adding more consumers, and those consumers are spending more. We'll capture the upside from adding more consumers, but not necessarily the upside that comes from those consumers spending more, which means that on the upside, we may not see as much volatility upwards.
On the flip side, when times are challenging, the last thing that a brand wants to do is to pull back on spending of how do I engage with my existing loyal customers. If they already know you, if you have a history of buying with them, they do not want to say, well, you know, it is a tough month. I think actually I am not going to communicate with Arjun right now because I need to be looking elsewhere to acquire new customers, which means that when times are hard, you also do not tend to see the downside. Because once a brand has someone engaged, they are very focused on how do I keep them engaged. We have been talking to our customers a lot about how they are feeling, what they are looking at in the business. What we have heard from them consistently is generally they are tentative, but they are optimistic.
They're putting in place as many contingencies and plans as they can, knowing how volatile the situation is. What they've told us is in the event that they need to pull back, Klaviyo is the last place that they would pull back on. As you talked about with ROI and KAV, that ROI is so strong. When you compare it relative to, say, spending that they have on advertising and acquiring new customers, their Klaviyo ROI is much, much higher than it is on their ad spending. What they've told us is in the event that they need to pull back, the first place they'll pull back on is on that customer acquisition. The last place they would pull back on is their retention engagement of loyal customers.
To put a finer point on it, because I think there's sometimes I hear misconceptions about it, your use case is not necessarily customer acquisition, and you're not tied to the advertising budget center. It's coming out of a different wallet in your customer base.
That's correct. Yeah.
OK. Perfect. Maybe just thinking about growth drivers, right? You're growing the top line over 30%. One of the few software companies that's still doing that. Your NRR is 108%. It implies there's a lot of growth that's coming from new customers. I'm curious what you're seeing in terms of the underlying trends of the new customer ads that you have. What are they landing with? Are you seeing the land ACVs change at all as you focus further up market? How are those customers growing once they're onboarded at Klaviyo?
Yeah. We're seeing great traction. You can see it show up in our average revenue per customer has been growing in the mid-teens consistently. That is both expansion of existing business and then, importantly, these new lands coming in larger and larger. What we're seeing is as we move into the mid-market and enterprise, those big customers land with large initial sizes. They have a good understanding of their existing customer base. They know what their account size is. They frequently land with multiple propositions for these larger companies. The fact that their tech stacks are disjointed, they're antiquated, they're hard to work with. Frequently we see these companies coming to Klaviyo for multiple products because they want to consolidate into one product, just as you talked about with the benefits of being a platform. That makes it much easier from a customer perspective.
They do not have to deal with development time to help with the integrations. They do not have to deal with the friction that comes from moving across multiple systems. They have a single source of data truth, so they can really understand what is being effective in their business. The other thing that we are seeing increasingly is customers who are landing with multiple products from the start. We talked earlier about 25% of our SMB and mid-market customers having SMS. There are a lot who do not, but should. Those tend to be customers who came to us earlier as initially email customers, and we are still working our way through cross-selling in the existing base. Increasingly, the new customers who are coming to us come with multiple products because they really want that benefit of the simplicity that comes from consolidation.
As you think about go-to-market between the land motion and the expand, we have a new expand motion now kicking in because you have new products and that just came out. How do you think the balance might look over the next year or two?
I think you'll start to see the contribution in terms of expansion from new products increasing over the next couple of years. Now, our sales team has more in the bag that they can sell. It is great that we launched SMS a few years ago and really got practice with that cross-sell motion because now we can apply those same learnings to how do we cross-sell the new products, including service and analytics as well.
OK. Now maybe switching gears to verticals because you mentioned retail is a big vertical. That's the first kind of vertical that you verticalize the platform on. How much opportunity is still left in retail? You have this strategic partnership with Shopify. That's obviously been a critical part of your story. How do you think the balance between going deeper into retail versus you've had some initiatives to expand into other verticals as well? How do you think about that balance over the next year or so?
Yeah. The retail market is a massive market.
Yeah.
Originally, we vertically focused on retail because back to being bootstrapped, one of our co-founders said, well, the product can be used in any vertical, but if we focus on one vertical, we only have to do one set of selling and enablement materials. Let's focus on retail first. Once we've tapped that market out, we can expand into other verticals as well. Here we are 10 to 15 years later, and there is still ample TAM out there in the retail space. We continue to grow in retail because when we look at the logos who are out there, there are a lot of brands who can and should be using Klaviyo but aren't today. We're going to continue to grow there.
At the same time, if you think about the consumer space and how many B2C businesses there are out there, there are lots of verticals outside retail where companies really want to be using this personalization at scale. We have announced partnerships over the last year or so in the restaurant space with Toast and Olo and Punchh. We have partnerships in the hospitality space, in hotels, with the wellness space, with a partnership with Mindbody, other places where people are looking for, and actually in some cases coming to us saying, I want to help my merchants grow. I want to help them build their business by being more personalized. Can we work together to help the merchants be successful?
It is not, I would say strategically, it's a little bit farther on the horizon for us, but we also recognize it's important to start early and get that good momentum going.
All right. We are just about out of time, so we'll leave it there. Amanda, thank you so much for joining us.
Thanks so much.
Thanks, everyone, for coming. Go ahead. There is a breakout upstairs. If you have any questions for Amanda and the team, we are upstairs in Richardson. We open Q&A, so feel free to join us. Thank you.
This presentation has now finished. Please check back shortly for the.