Perfect. We will go ahead and get it started. Thank you everyone for joining us. Amanda, thank you so much for being here.
Thank you so much.
For the-
It's been nice and cool.
Yeah, that's right.
I appreciate that. Not going to overheat.
It's very nice, yeah. For those that don't know, Amanda is the CFO at Klaviyo. Before we get started, just a quick compliance. My name is Arjun Bhatia. I am the research analyst here at William Blair, who covers Klaviyo. I am required to inform you that a full list of disclosures can be found at williamblair.com. Okay. With that, let's get started. I'm looking forward to this conversation. I think one of the interesting things about Klaviyo just has been the transformation that you've been on, over the last, at least, I don't know, 18 months. I think you've rolled out this vision of the autonomous B2C CRM, which is very aligned with your customer base. What does that mean and how are you changing from this data and marketing platform to something more holistic?
How is your value proposition for your customers evolving with this vision of the B2C CRM?
Our value proposition and the value we deliver from customers has always been the fact that we help them drive more revenue. We help their businesses grow by helping them to build personalized relationships with their consumers, and do it in a way that feels one-to-one, but does so at internet scale. The way that I think about it is, it's like your favorite brand or your favorite salesperson at your favorite store. Mine at the store that I shop at most often is a salesperson who happens to be named Evelyn. When I talk to her, she knows everything about me. She knows what events do I have coming up. She knows what I've bought in the past. She helps me handle my returns. She reminds me of gift cards that I have. Some of those you may notice are sales and marketing use cases.
Some of them are service, it's all wrapped up into one relationship. Same thing, I talk to her across channels. I text her, I email her, I visit her in person in the store. It's this consistent relationship that you've got across channels and brands, and that's what retailers and what B2C businesses are trying to build. Everyone wants the ability to be able to communicate with each customer as if they're your only customer. Klaviyo, where we started, was actually building a database to bring together all the information that a B2C business knows about their consumers, bring it into one place, and use it to power personalized relationships, starting with marketing. Consumer brands don't want to just have it relate to marketing.
They want it to interact with service, again, with every single touch point across every single channel, and that's what we help brands do. Today, we serve over 196,000 brands. We have 8 billion consumer profiles across our database, and we serve brands of all sizes, ranging from entrepreneurs who are just starting out, all the way up to established brands and businesses like Mattel and Hershey and Belkin, who are large enterprises. Just because they're large, doesn't mean they want to be any less personalized.
Yeah. In that example, Klaviyo is the engine and the infrastructure that is feeding that data to the salesperson you're talking to let them know, "This is Amanda.
Right.
This is what she likes. This is what she's bought in the past.
This is what has bought in the past. This is the way that she's going to interact best with your brand. The other example I think of, I have one of my very favorite Klaviyo brands that I love to get information from, and they send me a message, this is going to sound extreme, but every day. You know what. I open it almost every day because I love that brand so much. I get really excited. It happens to be, the first name of the brand is Veronica, and it's started by two sisters named Veronica. When I see what the Veronicas are recommending right now, I get really excited. Our former head of investor relations, who you may know.
Yeah
his favorite was an outdoor brand. If an outdoor brand, I like being outdoors, but if an outdoor brand sent me something every day, I would be like, "No, please stop." Maybe once every three months, I'm good.
Right.
Klaviyo helps you interact with a consumer in the way that they want to be interacted with, that's appropriate for how engaged they are in your brand.
Yeah. From frequency, channel, and every everything.
Frequency, channel, you name it. We can actually personalize it, not just how frequently you send something, but we can personalize it down to, you prefer to open your messages in the morning. I prefer to open mine in the afternoon. We can personalize your send time based on an AI-driven prediction of what's going to be the best way to communicate individually with you.
Interesting. For the brand, now that that's your customer, what does the ROI for them look like when personalization increases? How does it end up flowing through their business, and how do you help them improve their operations and customer outcomes?
It's an excellent question. I'll point to two different things. One, in our business, when you're communicating with someone, particularly from a marketing perspective, we have two different types of messages that folks generally send. They generally send either what we call a campaign, and a campaign goes out to everyone it's being sent to all at the same time. It might be tweaked and personalized. The Valentine's Day campaign for one of our customers might be different if you're buying their beauty products as opposed to their baby products. Everybody's getting it at the same time. You have what we call it a flow, but it's basically an automation. It's a triggered event based on something that that particular consumer is doing at that particular time.
An automation might be, we have an automation for consumers who are new to the brand, or we have an automation for consumers who haven't purchased in a certain amount of time to try and win them back into the brand. An automation many people would've heard of, would be if someone browses something and puts it in their cart and then doesn't click through to purchase, we'll send a reminder based on that. Each of those is triggered based on a real-time, live action. A flow generates 10 times more revenue per message compared to a static campaign. 10 times more. The ROI on that is incredibly high.
Yeah
Shows the benefit of this targeting and the automation. Another example is personalization. Personalized send time drives 35% better outcomes than sending send time that's generalized across everybody. What we see in our business is when we're driving that higher revenue per message, customers lean in more because they're driving higher revenue.
Yeah.
It encourages them to send more interactions, which then in turn grows their business, which grows our business.
Right. It's a growth engine.
It's a growth engine.
Yeah. Okay. Very interesting. I want to talk about AI because a lot of what you're saying in terms of intelligent send times, data, these are all so critical to AI. I think there's a real debate in the market about is AI a competitive threat? Is it a tailwind? I would love to just hear your view on that in terms of Klaviyo. What are your moats from an AI defensibility perspective, and then what are you doing on the offensive side to actually help it benefit your business?
AI is absolutely a tailwind for our business. It's increasing demand, and it's increasing usage for our product. The moat that we bring that is even more important in an AI-driven world is the fact that we started as a data platform. We are indispensable infrastructure for our customers because we have not only all of their data about their consumers, but we have 196,000 customers, 8 billion consumer profiles. We ingest close to 4 billion data points per day, and all of that gives us remarkable intelligence about what behaviors consumers are taking and importantly, what outcomes that drives.
We have a closed loop, continuous learning process that says this action tends to lead to this outcome, and that enables us, and importantly, the agents that we're building, to be even smarter in helping make recommendations to our customers and take actions that are going to drive higher revenue, higher growth for them, and means higher growth for us.
The data in this instance, it sounds like there's two components. One is your customer's consumer data. Th eir customer's data, and then the other is the learnings that you're encoding into your platform to help it benefit. Which is the customer's data versus Klaviyo's data?
Yeah.
Yeah.
The customer has all of their own data and what they bring and what they're able to access, for instance, through the MCP server integration that we have, is to access all of their own data and what works for their consumer set.
Yep.
The learning that they get and the benefit from being on the Klaviyo platform is that we also bring all of this intelligence from all of the other experiences across all our consumers. We don't share personal information across consumers. It's more the generic learning of this type of action tends to lead to this type of.
Right
outcome.
Yeah.
It enables us to do things like we have with our Composer product, an analytic agent. That analytic agent is based on all of our learning across all of our customers over time about what works and what doesn't. We recently used the analytic agent with one of our apparel brand customers who we work with. They had over 100 automations set up in Klaviyo. They felt like things probably weren't working exactly as designed, but it's hard after you've built up 100 automations to remember what all of those designs were. They ran our analytic agent. It found 16 issues with different automations that they had that were fairly critical issues. It made recommendations. They said, "Yes, I want to make that change, that automation," and they saw a 40% increase in the revenue that they were generating.
Without those insights about what input drives what outcome, they wouldn't have been able to drive that increase in revenue.
Interesting. Okay. Maybe on that topic, let's talk about your agentic suite.
You started with two initial agents, which are your Marketing Agent, which is now Composer Agent, and your Customer Agent. Just talk about what these two core pillars of your agentic suite are, and I think everyone's trying to figure out also how does Klaviyo end up monetizing these, or what's the tailwind that emerges. I would love to hear about the pricing model and how that works as well.
Happy to talk it through. I'll probably talk about AI and how it monetizes in our business in three ways. One is each of our agents, Marketing Agent/now Composer and Customer Agent, and then also how it increases usage of the overall platform. With Marketing Agent and Composer, we're in private beta right now. Composer has two core elements to it. One is a creation agent that allows you to vibe code marketing. We call it vibe marketing.
You can now, instead of having to create a drag and drop linear flow model of what you want to do and how do I want to position my text boxes, and you name it, you can just tell Klaviyo, "I want to send a Fourth of July campaign to my VIP customers who have bought Fourth of July products from me in the past." It will generate the content for you. It will create the segment that you should send it to. It'll create the imagery, and off you go, and you can generate some really strong outcomes. We've seen customers type in a vibe, a prompt, Klaviyo generates the campaign, they send it, and they generate really high revenue from those campaigns. That is creation, which is take your idea, use natural language, turn it into an outcome.
The second part of it is the analytic agent, which is this ability to go in and understand what's happening in your marketing, where you could be doing better, and then actually implement making it happen. The analogy I use is it's a little bit the same way that the new Anthropic model combs through and finds security flaws. Klaviyo's analytic agent will comb through your marketing plans and find places where you have the opportunity to get even better.
Yeah.
It generates outcomes like the 40% uplift. From a monetization standpoint, it's not currently being separately monetized, but we are getting very close to that. Right now, we're in private beta, and as we expand the beta, we will start to monetize this separately, and it'll be based on some proxy of the number of tokens that they're using. What we've been focusing on thus far is will that usage drive great outcomes for our customers? If it drives great revenue for them, then we know that we have confidence that they'll adopt and continue using it.
Okay.
That's marketing.
Yep.
Yeah, go ahead.
These are consumption-based sort of pricing models that are tied to usage.
That's right.
obviously. Okay.
For those who are newer to the Klaviyo story, one thing that I think is really important to understand is we do not price based on seats. It's not just our AI products that are priced based on consumption and usage. Our entire product suite is priced based on consumption and usage, and it has been from the very start. We want our incentives to be aligned with our customers, so we price either based on their data that they store with us in the form of a consumer profile, or we price based on sends. In this case, we price based on token usage. In case of Customer Agent, on the service side, we price based on outcomes. When we can resolve a consumer's question, that's when we charge for it.
Value is aligned with the customers, yeah.
Very much so.
Okay. Just on the point on sort of where we are in the monetization journey, it seems like the tailwind from AI is still very much ahead of us. How would you sort of just characterize, these products are still in beta, but how would you characterize sort of customer readiness to adopt these? Maybe, if there's some feedback from beta that you can share, that would be kind of interesting, too.
Sure. Let me start on the Composer side, and then we can maybe transition into the Customer Agent. On the Composer side, we had one customer who's in the beard grooming space who we work with, who said, "This is the best product I have seen in the last couple of years.
He said, "This solves my team's number one pain point, which is our marketing structure has grown so much that it's hard to understand how it all fits together and make sure it's all optimized." He said, "I think this also solves the number one pain point of my peers at other companies as well on their teams, too." The feedback has been just phenomenal in terms of the impact that it can drive. Customer Agent, on the service side, we're seeing similar strong feedback. That one is live in markets. We're not in beta there. We're in general availability. We're monetizing for it already today, and customers are seeing some great results. We have a brand, Naked Wardrobe, and there's a video from one of the folks at Naked Wardrobe that's on our website with an interview with him.
I would encourage folks to watch it if you have a few minutes. They're driving high resolution rates, and importantly, they're driving 28% higher average order value using Klaviyo's Customer Agent because our Customer Agent isn't just resolving support questions. Their Customer Agent is selling. It's selling at 2:00 A.M. when you wouldn't necessarily have a human available to speak to, and so that increases their revenue. It's not just cost avoidance. It's actually a revenue driver for them, too.
Yeah. Very interesting. I want to maybe switch gears to an adjacent topic, which is agentic commerce. That's sort of a big underlying and ongoing change happening in the ecosystem. A lot of your customers are retail and e-commerce brands. You're partnered with Shopify, which is also leading this charge to agentic commerce. What does that mean for Klaviyo? How does it impact your positioning as a company if agentic commerce does take off? Yeah.
Yeah. We're really excited about it, and we do have a strong partnership with Shopify that goes back many years. We also have a partnership with Google, who is one of Shopify's partners in the agentic commerce and the protocol space. What we believe is that agentic commerce opens up new ways for brands to be discovered, and that is exciting for our customers because they want to be discovered in as many places as they can be. Similar to the way that I think you hear from Shopify, we want our brands to be able to communicate with their customers across any and all channel that those customers want to be on, whether that is shopping agentically, whether that is shopping through social media, so we have partnerships as well with TikTok and with Meta, or whether that is shopping through a brand's own store.
You want to be able to have a really consistent experience. What we hear from brands is once they get discovered on those platforms, they want a way to build a one-to-one relationship with their consumers. They want to take that agentic source of the initial relationship and turn it into an ongoing loyal customer relationship directly with that brand, and that's exactly what Klaviyo does. Our customers are seeing significant increases in the number of leads that are coming in and the number of connections that they're getting through agentic commerce and through LLMs. What they're partnering with Klaviyo on is once this customer comes in, how do I convert them into a repeat buyer as directly as I can?
Yeah, as a consumer, once you discover a brand and you like them. You don't need to go necessarily back to the discovery phase. You can just deal directly with their brand as long as.
That's right.
they know you.
Yeah. That's right. One of my other favorite Klaviyo customers is a jeans brand. Last year, I was looking for a new favorite pair of jeans. I went to an LLM for advice on what might fit and what's in style. I tried a few different ones and picked a favorite, but then now I go back directly to that brand.
Right.
They're always, now they've figured out that I am a repeat buyer who responds particularly well to what's new and what's on sale. I get direct communications about, "We're having a sale. Here's the latest style.
Yeah.
This is what we think you ought to do.
Yeah
It works.
The personalization works. There we go.
That's right.
All right. Let's maybe talk about just growth algorithm for the company. You grew over 30% last year as a business. In Q1, it was high 20s growth. For investors maybe that are newer to the story, just help frame what the building blocks to growth going forward look like. Is it new customers, expansions, AI- monetization? How does that all fit in?
Yeah. The way that I would think about growth in our business is I would think about our business as a series of S-curves. Our business originally when we started many years ago, was primarily targeted at email for small and medium businesses, primarily in the Americas. As we've grown and expanded, we've layered on a series of new S-curves from a product, a geography, and a customer type standpoint that are really helping to drive our growth going forward. On the new product side, we added several years ago, text messaging. Text messaging as of last fall was $180 million in revenue on a trailing 12-month basis. It's now close to 30% of our customers who are in the mid-market, or sorry, the SMB and up space, who are text messaging customers of ours.
Yet there is still really rapid growth happening in that space as we continue to gain share and brands continue to consolidate. Another S-curve and growth lever for us is in international. When I started at Klaviyo, we only operated in English. Didn't matter if you sat in America or if you sat in Spain or if you sat in Sweden, you were going to interact with Klaviyo in English. Today we're in 11 languages. We went from six SMS markets, I think several when I was beginning, or actually when we went public, to now we're in north of 20, or close to 20. We just continue this international expansion at a really rapid pace.
In fact, our international business, not only is rapidly growing, I think last quarter was 39% year-over-year, but our continental European business, all of the business in the EMEA outside of the U.K., just had its sixth straight quarter of greater than 50% year-over-year growth. International is another important growth driver for us. The last is the expansion into mid-market and enterprise. Again, we historically started with SMBs, but now if you look at our customer base, we have a significant portion of our customers who are generating north of $50,000 in ARR with us. Even more importantly, the number of customers who are over $1 million with us doubled year-over-year last year. Our top 10 customers, the average is now north of $2 million.
The perception of Klaviyo as oriented towards smaller business is really, I think, shifting. That's an incredibly important segment for us.
Yeah.
Mid-market and enterprise continues to grow. Now we've got brands, as I said, like Hershey and Mattel, and we're helping these larger businesses really transform for this new era of consumer engagement.
I think it was last quarter, I think you disclosed a $6 million-
We did.
ARR-
Yes
customer deal, which is quite large.
Yeah.
Yeah. Certainly I think the traction up market is noticeable. Maybe talk about sort of the adaptability of the platform to serve these really small customers as well as these large brands. How does the value prop differ, and how do you notice, are there differences in how a large customer might use or deploy Klaviyo versus smaller customers?
What I will say, let me start with what's universal and then let's go into what's different. What is universal is that every single brand, regardless of size, wants to be able to communicate with every one of their consumers as if they were their only consumer. Every brand is thinking about, how do I drive revenue from my loyal consumers? Because it's getting increasingly expensive these days to go out and acquire new customers. The return on ad spending is going down. The targeting is getting harder. Klaviyo is the one who helps brands drive their LTV in a world where their CAC is going up.
Now that is universal. We drive their revenue and their growth and help them drive personalization. What's unique about brands on the enterprise and mid-market side is that those brands are generally dealing with legacy technology stacks, frequently fairly disjointed. Their data lives in multiple places. They might have multiple point solutions for different channels, and it makes it really, really hard for the brand to execute on what they know they want to do, which is to drive these personalized relationships. One of our brands came to us the summer before last. They had actually been the largest customer of one of the big legacy providers. They'd been with that legacy provider for four years, and in four years, they'd put in four automations. Four automations.
Let me contrast that with the apparel brand who we were just talking about, who was on Klaviyo, who had 100 automations set up.
Wow. Yeah.
It wasn't that they didn't have great ideas. They're an incredibly strong marketing team. They just couldn't execute on it, because to customize anything in this legacy product would take a team of engineers, and it would take a year.
Yeah.
With Klaviyo, they can turn from idea into reality right away. They can get one consistent end-to-end view of the customer life cycle, that just makes their communication so much more powerful. A great example of that is Patagonia. Patagonia was a long-time email customer of ours. They were using a different provider for their text messaging. They really wanted to be able to get into WhatsApp and in particular, RCS. The problem that they were having was that their consumers were getting duplicative, in some cases overlapping, in some cases conflicting messages across email and text messaging. With Klaviyo, they were able to unify that. They created one single omni-channel customer journey. Now they're getting into RCS as well. They really wanted to see the benefits of that single platform that Klaviyo can provide.
Okay. Perfect. Maybe I want to touch on some more near-term and topical items from last quarter. I think one of the big things was this price increase. You mentioned you have this SMS business that is growing quite quickly. I think last quarter you talked about how the carriers are raising price for sending a text message, and you've decided sort of to absorb that price increase up until this point. Maybe just talk about that decision of why you decided to hold back price and didn't pass it on to your customers, and how that might change going forward.
The decision was for many of our competitors, they pass through these carrier fees automatically. We made the decision when we launched SMS to price all-in-one, not to separately charge for the Klaviyo fee compared to the carrier fee, because our customers wanted that consistency, that predictability, and that ability to manage to the single all-in price.
Carrier fees are a normal part of our business that is typical in the text messaging space. We're used to handling these increases as they come along from time to time. We saw a stepped-up level in Q4, still not enough to be worth the customer disruption. We really wanted to be very customer first in this decision. The carrier fees have continued. It is something that we're thinking about how we will handle that in the back half of the year now that they've materially changed. We wanted folks to be aware of it, just as we think about the overall interaction. The origin of the decision was really around how do we be customer first, and how do we help our customers have that predictability?
Right.
One question that you may have gotten that I just want to clarify for this group as well is that the impact, if and when we do choose to decide to pass through those carrier fees, it does not have really a material impact on the revenue in the back half of the year. Our beat and our raise for the full year, that raise is not driven by anything related to carrier fees. It really is this underlying momentum that we're seeing in the business.
Okay. Got it. Those are all the factors you talked about, up-market, international, new products.
Exactly.
Okay. Perfect. Well, we are up on time, so I will leave it there. Amanda, thank you so much.
Thanks so much.
Appreciate the time.