Q1 2024 Klaviyo Inc Earnings Call

Operator: Good afternoon, and welcome to Klaviyo's first quarter of fiscal 2024 earnings conference call. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad.

Good afternoon, and welcome to <unk> first quarter of fiscal 'twenty 'twenty four earnings conference call. After the Speakers' remarks, there will be a question and answer session. If you'd like to ask a question. During this time simply press the Starkey followed by the number one on your telephone keypad.

If you would like to withdraw your question Press Star one again, thank you Whit.

Operator: If you would like to withdraw your question, press star 1 again. With that said, I'd like to turn the call over to Jack Grant, Senior Director of Investor Relations and Strategic Finance. Please go ahead.

Operator: With that I'd like to turn the call over to Jack <unk> Senior director of Investor Relations and strategic finance.

Jack: Please go ahead.

Jack Grant: Thanks, Operator. I'm excited to welcome you to Klaviyo's first quarter 2024 earnings call. We will be discussing the results announced in the press release issued after the market closed today. Please refer to our Investor Relations website at investors.klaviyo.com for more information and a supplemental presentation related to today's earnings announcement. With me on the call today are Andrew Bialecki, co-founder and chief executive officer, and Amanda Whalen, chief financial officer. During today's call, we will make statements regarding our business that may be considered forward-looking under applicable securities laws and the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements concerning our outlook for the second quarter and full year 2024. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from expectations and reflect our views only as of today.

Jack: Thanks, Operator, I'm excited to welcome you to <unk> first quarter 2024 earnings call, we will be discussing the results announced in the press release issued after the market close today. Please refer to our Investor Relations website at investors <unk> Dot com for more information in the supplemental presentation related to <unk>.

Jack: As earnings announcements.

Jack: With me on the call today are Andrew by Lucky Co founder and Chief Executive Officer, and Amanda Wheeler Chief Financial Officer.

Jack Grant: During today's call, we will make statements regarding our business that may be considered forward looking under applicable securities laws and the safe Harbor provisions of the private Securities Litigation Reform Act of 1995, including statements concerning our outlook for the second quarter and full year 2024.

Jack: These forward looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from expectations and reflect our views only as of today.

Jack Grant: We assume no obligation to update any such forward-looking statements as a result of new information, future events, or changes in our expectations, except as required by law. For a discussion of the material risks and uncertainties that could affect our actual results, please refer to the risks and uncertainties described under the heading Risk Factors in our quarterly report on Form 10-Q for the quarter ended March 31st, 2024, that is filed with the Security and Exchange Commission, or SEC, and the subsequent filings made by us with the SEC, which may be obtained on the SEC's website at www.sec.gov and on our Investor

Jack: We assume no obligation to update any such forward looking statements as a result of new information future events or changes in our expectations, except as required by law.

Jack: For a discussion of the material risks and uncertainties that could affect our actual results. Please refer to the risks and uncertainties described under the heading risk factors in our quarterly report on Form 10-Q for the quarter ended March 31, 2024 that is filed with the Securities and Exchange Commission or SEC and in subsequent filings made by us with the.

Jack: SEC, which may be obtained on the Sec's website at Www Dot SEC Gov and on our Investor Relations website.

Jack Grant: In addition, today's call includes the presentation of certain non-debt financial measures. These measures should be considered as a supplement to and not a substitute for GAP financial measures. Reconciliations to the most directly comparable gap measures can be found in today's earnings press release or earnings release supplemental materials distributed after market close today, which are available on our investor relations website. With that, I'll now turn it over to Andrew. Thanks, Jack.

Jack: In addition, today's call includes a presentation of certain non-GAAP financial measures. These measures should be considered as a supplement to and not a substitute for GAAP financial measures reconciliations to the most directly comparable GAAP measures can be found in today's earnings press release or earnings release supplemental materials distributed after market close today.

Jack Grant: <unk>, which are available on our Investor relations website with that I'll now turn it over to Andrew.

Andrew Bialecki: Thank you to everyone for joining us today. We're pleased to share our strong first quarter results. Consumer-facing businesses of all sizes across the world are using our platform to power smarter digital relations. This quarter, we had a number of exciting product launches, along with investments in our product, engineering, hardware ecosystem, and customer service role to provide the tools our customers need to drive revenue. I'll cover these topics, then turn it over to Amanda to cover our financial results and provide our outlook for the second quarter and full year 2021. Later, we'll open up the call for Q&A.

Andrew: Thanks, Jack Thank you to everyone for joining us today, we're pleased to share our strong first quarter results consumer.

Andrew: Consumer facing businesses of all sizes across the world are using our platform to power smarter digital relationships.

Andrew: This quarter, we had a number of exciting product launches along with investments in our product engineering partner ecosystem and customer facing role to provide the tools our customers need to drive revenue growth.

Andrew: I'll cover these topics and turn it over to Amanda to cover our financial results and provide our outlook for the second quarter and full year 2024.

Amanda Whalen: Later, we will open up the call for Q&A.

Andrew Bialecki: This was a strong start to the year for our business as we grew our revenue 35% year over year to $210 million while generating 14% non-GAAP operating margin and $23 million of free cash. We continue to make progress in the mid-market, internationally, and integrating artificial intelligence into our products. We just returned from our Klaviyo London conference, known as A-London.

Amanda Whalen: This was a strong start to the year for our business as we grew our revenue 35% year over year to $210 million, while generating 14% non-GAAP operating margin and $23 million of free cash flow.

Amanda Whalen: We continued to make progress in the mid market internationally and integrating artificial intelligence into our products.

Andrew Bialecki: We just returned from our Collegial London conference known as paint on it.

Andrew Bialecki: We like to get close to our customers and partners, and it was great to see so many of them at the largest K-London ever and our largest in-person event since 2019. I was inspired by the energy from our customers, partners, and employees for what we were building. One of the people I spoke with remarked that Klaviyo was the standard on which they judged the quality of software and the ecosystem around it.

Andrew Bialecki: We'd like to get close to our customers and partners and it was great to see so many of them at the largest hey, London ever and our largest in personal debt in 2019.

Amanda Whalen: I was inspired by the energy from our customers partners employees for what we are building.

Amanda Whalen: One of the people I spoke with remarks, <unk> with the standard on which they judge the quality of software and ecosystem around it.

Andrew Bialecki: This was a further validation of the opportunity we have with consumer-facing businesses across, We're doubling down with our community. Our customers are trusting us with their most valuable asset, their consumer databases, and the power of smarter digital. We continue to see retail and e-commerce brands of all types turn to Klaviyo to drive revenue. Bain & Company recently put out their 2024 list of insurgent brands.

Amanda Whalen: This was a further validation of the opportunity we have with consumer facing businesses across the world.

Amanda Whalen: We're doubling down with our community our customers are trusting us with their most valuable asset they are consumer databases power smarter digital glacier.

Amanda Whalen: We continue to see retail and E Commerce brands, all highest turned to <unk> to drive revenue.

Amanda Whalen: Gaming company recently put out their 2024 list of insurgent brands.

Andrew Bialecki: The list of the fastest-growing consumer... These companies all have at least $25 million in revenue and are growing at least 10 times faster than their peers. We're proud to serve over 70% of these 97 brands, with companies like Poppy, Liquid Death, Momobuku, Van Leeuwen Ice Cream, and Dr. Squash all relying on Klaviyo to drive their revenue growth. During the quarter, we also closed new business with Fila and Fruit of the Loom.

Amanda Whalen: A list of the fastest growing consumer brand.

Amanda Whalen: These companies all have at least $25 million in revenue and are growing at least 10 times faster than their peers.

Amanda Whalen: We're proud to serve over 70% of these 97 brand.

Amanda Whalen: With companies like Poppy liquid debt Momofuku van Leeuwen ice cream and Doctor squash, all relying on <unk> to drive their revenue growth.

Amanda Whalen: During the quarter, we also closed new business with Gila and critical item from.

Andrew Bialecki: From the hottest and up-and-coming disruptors to the already established household names, businesses are finding us to drive. We continue to drive momentum in the mid-market during the... We now have 2,157 customers generating over $50,000 in ARR, which is up 59% year over. These customers represent 31% of our ARR, up from 23% compared to a year ago. This quarter marks the first time this cohort represents over 30% of our customers. In the last 12 months, we've seen significant growth in the size of businesses like this that rely on us. As of the end of the quarter, our top 10 customers have an average ARR of about $1.5 million, which is up over 70% year-on-year. This speaks to the value that we provide for our community.

Amanda Whalen: From the hottest and up and coming Disruptors.

Amanda Whalen: Reestablished household name.

Amanda Whalen: It says are finding us to drive revenue.

Amanda Whalen: We continue to drive momentum in the mid market during the quarter.

Amanda Whalen: And now have 2157 customers generating over $50000 in Iraq, which is up 59% year over year.

Amanda Whalen: These customers represent 31% of our air are up from 23% compared to a year ago.

Andrew Bialecki: This quarter marks the first time this cohort represent over 30% of our business.

Amanda Whalen: In the last 12 months, we've seen significant growth in the size of businesses like this that rely on us.

Andrew Bialecki: As of the end of the quarter, our top 10 customers have an average error or about $1 $5 million, which is up over 70% year on year.

Amanda Whalen: This speaks to the value that we provide for our customers.

Andrew Bialecki: During the first quarter, we landed one of the largest deals in our company history with the top online fashion store. This business came to us because of the quality of our Shopify integration and enhancements to the platform we've made over the past. They're taking advantage of our platform to consolidate their channels across email, SMS, and Questionnaire. Since going live in the first quarter, they have sent over 1 billion push notifications. Once they fully roll out, they expect to be sending up to 13 billion emails.

Amanda Whalen: During the first quarter, we landed one of the largest deal in our company history with a top online fashion store for women.

Amanda Whalen: This business came to us because of the quality of our shopify integration enhancements to the platform. We have made over the past few years.

Andrew Bialecki: We're taking advantage of our platform to consolidate their channel across E mail SMS and push notification.

Amanda Whalen: Since going live in the first quarter.

Amanda Whalen: Over 1 billion push notification to their consumers.

Amanda Whalen: Once they fully rollout they expect to be sending up to $13 billion per year.

Andrew Bialecki: Because of our investments in the scalability and reliability of our platform, we help power smarter digital relationships for businesses all over the world. Another new customer during the quarter was Harry Ellen International, and their portfolio brands include Callaway, Original Penguin, and Raffaella. Perry Ellis was facing a few key challenges with their existing tech stack of multiple email providers; you'll be able to have a single view of their customers, leading to better reporting, the ability to A-B test, and improve their consumer address.

Amanda Whalen: Because of our investments and the scalability and reliability of our platform. We help power smarter is old relationships for businesses of all sizes.

Amanda Whalen: Another new customer during the quarter with Perry Ellis International and their portfolio of brands, including Callaway for original Penguin Raphaela.

Andrew Bialecki: Perry Ellis was facing a few key challenges with their existing tech stack, but multiple email providers.

Amanda Whalen: The cranial there'll be able to have a single view of their consumers.

Andrew Bialecki: Turning to better reporting abilities to Asia and improved their consumer journey.

Andrew Bialecki: They'll also be able to replicate their successful strategies across brands and reduce the time to experiment with automation. We're excited to help Perielis with their goal of driving more revenue. Our Land and Expand model continues to drive successful outcomes for both customers and for us. After first becoming a customer in the summer of last year, Helen of Troy's home and outdoor brands, including Hydroblast, OXO, and Osprey, have been driving success after consolidating email and SMS.

Amanda Whalen: You'll also be able to replicate the successful strategies across brands and reduce the time to experiment with automated blood.

Speaker Change: We're excited to help Perry Ellis with their goal of driving more revenue growth.

Amanda Whalen: Our land and expand model continues to drive successful outcomes for both customers and for us.

Andrew Bialecki: After our first becoming a customer in the summer of last year, Helen of Troy's, AUM and outdoor brands, including Hydro flask, OXXO and Osprey had been driving success after consolidating email and SMS with us.

Andrew Bialecki: During the quarter, we expanded our business with them, which included both an expansion in their SMS volume and adding on to our CDP auction. The quality of our native integration has allowed them to free up developer hours and better harness their first-party data for their markets. We're seeing the benefits of our strong partner ecosystem to help drive our growth. One expansion win during the quarter was with Andy Swim, a swimwear company that we co-sold with our partner LuckinCon. Andy Swim has been an email customer of ours and now they are consolidating their email and SMS. Consolidating with Klaviyo is additionally allowing Luckin Co. to grow their own business with Andy Swim.

Andrew Bialecki: During the quarter, we expanded our business with them, which include both an expansion in their SMS volume.

Amanda Whalen: And adding on our CDP offering.

Andrew Bialecki: The quality of our native integration has allowed them to pre up developer hours and better harnessed their first party data for their market.

Amanda Whalen: We're seeing benefits of our strong partner ecosystem helped drive our bit.

Amanda Whalen: One expansion win during the quarter was with Andy swim swimwear accompany that with coastal with our partner locking up.

Amanda Whalen: Any swim at denim email customer of ours, and now are consolidating their email and SMS with us.

Amanda Whalen: Solving with <unk>, Additionally, allowing walking co to grow their own business, but Andy swimming in Canada.

Andrew Bialecki: This is a great example of how we love to lean on our partners to drive fantastic customer outcomes and help our customers power smarter. Now, I'd like to take a few minutes to speak about some of our progress internationally. As I mentioned, we just returned from our MIA Focus Conference, Klaviyo London, or KLON.

Amanda Whalen: This is a great example of how we love to lean on our partners to drive fantastic customer outcomes and help our customers power smarter digital relationships.

Amanda Whalen: Now I'd like to take a few minutes to speak about some of our progress internationally as I mentioned, we just returned from our <unk> focused comprehend Lady or London or came on it and we're really excited about our opportunity to grow that business.

Andrew Bialecki: And we're really excited about our opportunity to grow that. Amir revenue grew 43% year-over-year during the quarter, and we see a strong opportunity to continue to grow there with more localized. During the quarter, we added Manicurist, a fast-growing beauty brand based in Florida, as a customer. After running a trial of Klaviyo in some of their smaller geographies, And Akira saw strong results and fast-tracked their migration.

Amanda Whalen: EMEA revenue grew 43% year over year during the quarter and we see a strong opportunity to continue to grow there with more localized offerings.

Amanda Whalen: During the quarter. We added many tourists are fast growing beauty brand based in France as a customer after running a trial of <unk> in some of their smaller geographies any curious saw a strong result, and fast track their migration to quite yet for <unk>.

Andrew Bialecki: We're excited to welcome them on board, and they're a great example of the success we're seeing internationally. The EMEA and APAC regions represented a little over 30% of our revenue in Q1. And we're excited for our opportunity to expand our global footprint. On the product front, we have a number of recent announcements that will help grow our international presence. At K-London, we announced further progress on some of our efforts in internationalization and localization. We now provide SMS coverage in nine.

Andrew Bialecki: Sided to welcome them on board and are a great example of the success we're seeing internationally.

Amanda Whalen: EMEA and APAC regions represented a little over 30% of our revenue in Q1, and we're excited for our opportunity to expand our global footprint in the future as well.

Amanda Whalen: On the product front, we have a number of recent announcements that will help grow our international business.

Andrew Bialecki: I can't London, we announced further progress on some of our effort on internationalization and localization.

Andrew Bialecki: We now provide SNF coverage in nine countries with more expected to come in the next few months.

Andrew Bialecki: More are expected to come in the next few months. Our ability to extend our SMS capabilities across geographies has met our international customers' needs to more easily market to consumers across various, Our intent is to add even more customers across Europe and allow them to connect with their consumers across the world. In fact, we recently announced our first localized French user interface, with our French rollout going live later this month.

Amanda Whalen: Our ability to extend our <unk> capabilities across geographies has met our international customers need to more easily market to consumers across various geographies.

Amanda Whalen: Our intent is to add even more customers across Europe and allow them to connect with their consumers across channels.

Amanda Whalen: In fact, we recently announced our first localized branch user interface with our France rollout going live later this month.

Andrew Bialecki: This will be the first time our platform is offered in a local language other than English. When we began marketing locally in French, we saw a meaningful increase in our self-serve conversion rate. We'll be continuing to roll out new languages and localized webpages on a targeted basis over the coming months. At KMRD, we also announce the upcoming general availability of the Klaviyo Portfolio. Klaviyo Portfolio Streamlines Multi-Account Management with Unified Insights Across Brands

Amanda Whalen: This will be the first time our platform is offered in a local language other than English.

Amanda Whalen: When we began marketing locally and French we saw a meaningful increase in our self serve conversion rates.

Andrew Bialecki: We will be continuing to rollout new languages, and localized web pages on a targeted basis over the coming quarters.

Amanda Whalen: That came on day, we also announced the upcoming general availability of <unk> portfolio.

Amanda Whalen: Clearly our portfolio streamline multi cloud management with unified insights across brands.

Andrew Bialecki: Simplifies operations and allows for efficient spend management and swift campaign execution by centralizing control and amplifying marketing success across diverse brands. Portfolio allows for better multi-account management for our customer base and is really geared towards two primary types of our customers: international and those in the middle.

Amanda Whalen: <unk> operation that allows for efficient spend management and Swift campaign execution by centralizing control and amplifying marketing success across diverse brands in Rio.

Andrew Bialecki: And both of these types of customers tend to operate across multiple markets, and one of our recent customer wins, Liberated Brands, which includes Volcom, Quicksilver, Roxy, and Luca, is using Portfolio to have a unified view of their digital relationships across their full brand portfolio. This quarter, we further built out our key differentiator of higher quality segmentation with our new segment preview. Now, customers can view a preview of their segment count while improving the speed of building the correct segment, reducing support load, and improving manual segment processing.

Amanda Whalen: Portfolio allows for better Multishot management for our customer base is really geared towards two primary types of our customers International and those are in the mid market as both of these types of customers tend to operate across multiple markets and brands one of our recent customer wins liberated brand, which includes ball com quick silver rock.

Amanda Whalen: And Luka did using portfolio have a unified view of their digital relationships across the full brand portfolio.

Amanda Whalen: This quarter, we further built out our key differentiator of higher quality segmentation with our new segment for your future.

Amanda Whalen: Now customers can view a preview of their segment count while building it in.

Amanda Whalen: Improving speed of building, the correct segment, reducing support load and improving manual segment processing.

Andrew Bialecki: Finally, on the product side, we continued our momentum in artificial intelligence with the new launch of Health AI. Health AI uses natural language processing to allow customers to ask questions directly in Klaviyo and get answers in a self-serve manner. We've seen healthy usage of our AI-based features, but more importantly, we're seeing proof points of AI driving real outcomes for us.

Amanda Whalen: Finally on the product front, we continued our momentum in artificial intelligence with the new launch upheld AI.

Amanda Whalen: Healthy I use natural language processing to allow customers to ask questions directly and Claudio and get answers and a self served manner.

Amanda Whalen: We see healthy usage of our AI based features but more importantly, we're seeing proof points of AI driving real outcomes for our customers.

Andrew Bialecki: We are seeing fast-growing adoption, with over 20% of our customers using artificial intelligence features, including Segments AI, Email AI, Word AI, and SMS Assistant during the last 12 months. In the last 12 months, our customers have created over 650,000 objects using those AI tools. It has additionally helped our customers generate hundreds of millions of dollars in Klaviyo attributed value, or KAV, through a Segments AI sensor. Forms AI is driving significant value as well One of our customers, Tata Harper, a natural luxury skincare brand, uses Forms.ai to optimize the placement and timing of sign-up forms on their website.

Amanda Whalen: We're seeing fast growing adoption with over 20% of our customers using artificial intelligence features including segments, AI, AI or AI and SNS assistant during the quarter.

Amanda Whalen: In the last 12 months, our customers have created over 650000 objects using those AI teachers with.

Amanda Whalen: Additionally, help our customers generate hundreds of millions of dollars and clear truly value for K D through segments AI centric launch.

Amanda Whalen: Forum's AI is driving significant value as well one of our customers Tata Harper a natural luxury skin care brand.

Amanda Whalen: Used forms AI to optimize the placement and timing of sign up form on their website.

Andrew Bialecki: Twenty different variations of two forms were automatically generated and tested, and then thirty days after the test, compared to thirty days prior, form submissions for both had jumped over sixty-five percent. We're continuing to invest across products to provide our customers the tools to drive revenue. We're working to drive usage and adoption of our platform by improving our user interfaces and embedding artificial intelligence. On the go-to-market front, we're continuing to invest across sales and marketing to make sure that we are reaching customers across the board.

Amanda Whalen: 20 different variation Q forums, where automatically generated and tested and then 30 days after the tests compared to the 30 days prior form submissions for both had jumped over 65%.

Amanda Whalen: We're continuing to invest across products to provide our customers the tools to drive revenue.

Andrew Bialecki: We're working to drive usage and adoption of our platform by improving our user interfaces and embedding artificial intelligence functionality.

Amanda Whalen: On the go to market front, we're continuing to invest across sales and marketing to make sure we are reaching customers across the globe.

Andrew Bialecki: We're further building out our sales capacity and partner network to expand our footprint. We're improving our ability to articulate the value of our platform and close larger deals. On the international front, we'll be taking the learnings from France to be well-positioned for further localization. Lastly, before turning it over to Amanda, I'd like to provide a couple of updates on our team. First, I want to announce that our CTO Alan Chavez has decided to step down at the end of this calendar year to spend more time with his family. I want to personally thank Alan for his significant contribution over the last four and a half years to build Klaviyo into the company it is today. When Alan joined, we had fewer than 40 engineers, and he's helped us scale tremendously and build a world-class team and a strong leader I greatly appreciate all of his effort and wish him well.

Amanda Whalen: For further building out our sales capacity and partner network to expand our footprint internationally.

Amanda Whalen: We're improving our ability to articulate the value of our platform and closed larger accounts.

Amanda Whalen: On the international front, we will be taking the learnings from France to be well positioned for further localized expansion.

Andrew Bialecki: I'd also like to welcome Carmel Galvin as our new Chief People Officer. Carmel is going to be leading our global people operations team in HR functions, including talent acquisition and retention, training and development, diversity and inclusion, and corporate social responsibility. Carmel has significant experience within the soccer industry, most recently serving as the chief people officer for Manchester United.

Amanda Whalen: Lastly, before turning it over to Amanda I'd like to provide a couple of updates on our team.

Alan: First I want to announce that our CTO Alan Charlotte has decided to step down at the end of this calendar year spent more time with his family.

Andrew Bialecki: I want to personally thank Alan for his significant contribution over the last four and a half years to build <unk> into the company. It is today.

Andrew Bialecki: When I joined we had fewer than 40 engineers and he has helped us scale tremendously and build a world class team and a strong leadership bench.

Speaker Change: We appreciate all of his efforts and wish him well.

Andrew Bialecki: We're excited to have Carmel on board to help shape and guide our company culture as we build a world-class, proud of our results, and confident in the momentum our business has to drive strong, efficient growth in 2024. And with that, I'll turn it over to Amanda to cover the financials and our outlook.

Speaker Change: I'd also like to welcome Caramel Galvin as our new Chief people Officer, Carmelo is going to be leading our global people operations team and HR function, including talent acquisition and retention training and development diversity inclusion and corporate social responsibility.

Speaker Change: <unk> has significant experience within the soccer industry. Most recently, serving as the chief people officer stripe.

Speaker Change: We're excited to have caramel onboard to help shape and guide our company culture as we build a world class team.

Amanda: We're proud of our results and confident in the momentum our business has to drive strong efficient growth in 2024 and beyond.

Speaker Change: With that I'll turn it over to Amanda to cover the financials and our outlook.

Speaker Change: Yeah.

Amanda Whalen: Thanks, Andrew. Today, I will provide a brief overview of our first quarter 2024 financial results and discuss guidance for our second quarter and full year. As a quick reminder, today's discussion includes non-GAAP financial matters. Please refer to the tables in our earnings release for a Reconciliation of Gaps to the Most Directly Comparable Non-GAAP Financial Measure. As Andrew noted, we started the year with a strong first quarter.

Amanda: Thanks, Andrew today, I will provide a brief overview of our first quarter 2024 financial results and discuss guidance for our second quarter full year 2024.

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

Amanda: As Andrew noted we started the year with a strong first quarter, we continued to see strong growth at scale in an efficient manner in line with our financial framework.

Amanda Whalen: We continue to see strong growth at scale in an efficient manner, in line with our financial targets. In the first quarter, we generated $210 million, representing year over year growth of 35, and we delivered a 14% non-gap operating. We continue to perform across our four primary growth factors, namely adding new.

Amanda Whalen: In the first quarter, we generated $210 million in revenue.

Amanda: Representing year over year growth of 35% and we deliver a 14% non-GAAP operating margin.

Amanda Whalen: We continue to perform across our four primary growth factors, adding new customers expanding with those customers expanding internationally and growing into the mid market.

Amanda Whalen: In terms of adding new customers, we increased our customer base 17% year-over-year and are proud to now serve over 146,000 customers. We're seeing consistent trends with regard to the logo, and a bit of softness on the new logo edition, particularly amongst our smallest entrepreneurs. As a reminder, while we continue to target entrepreneurs, we're doing it through continued investment in product, and we are intentionally shifting more of our go-to-market, Ford's S&Bs in the mid-market. While net new logo ads were down in the quarter, revenue dollars from the new logo cohort were up year over year.

Amanda: In terms of adding new customers, we increased our customer base, 17% year over year and I'm proud to now serve over 146000 customers.

Amanda: We're seeing consistent trends with regards to logo retention and a bit of softness on the new logo addition side, particularly amongst our smallest entrepreneur customers.

Amanda: As a reminder, while we continue to target entrepreneurs, we're doing it through continued investment in product and we are intentionally shifting more of our go to market investments or to Smes and mid market.

Amanda: While net new logo adds were down in the quarter revenue dollars from the new logo cohort was up year over year.

Amanda Whalen: You'll see this reflected in our average revenue per customer, which continues to increase and was approximately $5,800 in Q1, up 15% year-over-year. We are continuing to grow with our customers, as evidenced by our dollar-based Net Revenue Retention Rate, or NRR, of $114,000. As discussed last quarter, we expected our NRR to decline from the prior due to the impact of lapping our September 2022 crisis and Suspending Trends we discussed on our last call.

Amanda: Youll see this reflected in our average revenue per customer, which continues to increase and was approximately $5800 in Q1 up 15% year over year.

Amanda: We are continuing to expand with our customers as evidenced by our dollar based net revenue retention rate or NR or 114%.

Amanda Whalen: As discussed last quarter, we expected our in our arch a decline from the prior period due to the impact of lapping our September 2022 price increase and the spending trends we discussed on our last call.

Amanda Whalen: Consistent with last quarter, we are not seeing Yahoo and Google's updated requirements impact our customers' upgrade behavior, and we have not seen any material changes in our understanding of the requirements. We are continuing to see our customers drive strong KAV, or Klaviyo Attributed Value, through our platform's capability. Ashley Hines, Mary G. Cooley, Keith Whalen, Kiersten Kuehl, James Wood, Sitikantha Panigrahi, Andrew Bialecki, Keith Weiss, Elizabeth Porter, Gabriela Borges, Raimo Lenschow, Sitikantha Panigrahi, Andrew Bialecki, Klaviyo, Andrew Bialecki, Klaviyo, Andrew, Klaviyo, Andrew, Andrew, Andrew, Andrew, Andrew, Andrew, Andrew, Andrew, Andrew, Andrew, Andrew, Internationally, our aggregate revenue from EMEA and APAC increased 40% year-over-year in Q1, as we continue to increase our global vision.

Amanda: Consistent with last quarter, we are not seeing Yahoo, and Google updated requirements impact our customers upgrade behavior and we have not seen any material changes in our unsubscribe rates we.

Amanda: We are continuing to see our customers drive strong K a D. Oar claim you know attributed value through our platform's capabilities, particularly through the ability to personalize segments their consumer basis.

Amanda Whalen: Internationally, our aggregate revenue from EMEA and APAC increased 40% year over year in Q1, as we continued to increase our global business.

Amanda Whalen: We're seeing particular strengths in Europe. We have seen strong growth in the UK, Germany, France, and the Netherlands. Finally, we're seeing more and more businesses in the mid-market. We ended the first quarter with 2,157, generating over $50,000 in ARR. This represented 69% year-over-year growth.

Amanda Whalen: We're seeing particular strength in Europe with strong growth in the UK, Germany, France, and the Netherlands.

Amanda Whalen: Finally, we're seeing more and more businesses in the mid market turning to US. We ended the first quarter of with 2157 customers generating over $50000 in IRR.

Amanda: This represented 69% year over year growth.

Amanda Whalen: As Andrew mentioned, we hit an important milestone this quarter, with over 30% of our ARR now coming from New Zealand. Moving down the income statement, I will be discussing results on a non-GAAP basis. Gross profit for the quarter was $167.6 million, representing a gross margin of $80 million.

Amanda: As Andrew mentioned, we hit an important milestone this quarter with over 30% of our air are.

Amanda: Now coming from these customers.

Amanda: Moving down the income statement I will be discussing our results on a non-GAAP basis.

Amanda: Gross profit for the quarter was 167 6 million, representing a gross margin of 80%.

Amanda Whalen: This marks a two-and-a-half point improvement compared to Q1 2020. We continue to see the benefits of our R&D team's efforts in system and cloud engineering. We've continued to migrate volume to our Klaviyo male transfer agent, KMTA.

Amanda: This marks a two and a half point improvement compared to Q1 2023.

Amanda: We continue to see the benefits of our R&D teams efforts on system and cloud engineering optimization.

Amanda: We've continued to migrate volume chart <unk> mail transfer agent Kmt yet.

Amanda Whalen: Looking ahead, we expect to see these efforts help to offset a portion of the higher costs associated with them. For the full year, we continue to expect a couple of points of headwinds on our gross margin compared to last year. Compared to Q1, we expect a couple of points of headwinds to gross margin over the next two quarters and a further decline in the fourth quarter due to the growth and seasonality of S&P. Turning to operating expenses, sales and marketing expense were $66.7 million, or 32% of revenue for the quarter.

Amanda: Looking ahead, we expect to see these efforts helped to offset a portion of the higher costs associated with the mass channel.

Amanda: For the full year, we continue to expect a couple of points of headwinds on our gross margin compared to last year.

Amanda: Compared to Q1, we expect a couple of points of headwind to gross margin over the next two quarters and a further decline in the fourth quarter due to the growth and seasonality of SMS.

Amanda: Turning to operating expenses sales and marketing expenses were $66 $7 million or 32% of revenue for the quarter.

Amanda Whalen: We've continued to invest in marketing programs to generate demand and Sales Headcount to grow our capacity to serve our international and mid-market customers. Our new Klaviyo narrative that we rolled out in Q1 is ready. We continue to closely monitor the unit economics of the different investments we are making, and we will continue to make investments where we see the right level. R&D expense was $41.7 million, or 20% of revenue. We're continuing to invest in our core products, AI capabilities, and our new offerings, many of which Andrew highlighted earlier. Finally, G&A expense was $29.8 million, or 14% of revenue.

Amanda: We've continued to invest in marketing programs to generate demand.

Amanda: And sales head count to our capacity to serve our international and mid market customers.

Amanda: Our new claim Dio narrative that we rolled out in Q1 is breathtaking.

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

Amanda: R&D expense was $41 $7 million or 20% of revenue.

Amanda: We're continuing to invest behind our core products.

Amanda: Our capabilities and our newer offerings, many of which Andrew highlighted earlier.

Amanda Whalen: Finally, G&A expense was $29 $8 million or 14% of revenue we.

Amanda Whalen: We are now lapping investments tied to public company readiness, and we expect to get more leverage from this line. For Q1, our operating income was $29.3 million, representing an operating margin of 14. We also generated free cash flow of $23 million during the quarter, up 65% year-over-year, and leading to a two-point improvement in free cash flow margin year-over-year, to give some perspective on our ability to generate sustainable cash flows. Our trailing 12-month free cash flow increased by $123 million compared to the prior year. Finally, turning to the balance sheet, we finished the quarter with $756.9 million in cash, cash equivalents, and restricted cash with no debt.

Amanda: We are now lapping investments tied to public company readiness and expect to get more leverage from this line over time.

Amanda Whalen: For Q1, our operating income was $29 3 million, representing an operating margin of 14%.

Amanda Whalen: We also generated free cash flow of $23 million during the quarter up 65% year over year and leading to a two point improvement in free cash flow margin year over year.

Amanda: To give some perspective on our ability to generate sustainable cash flow, our trailing 12 month free cash flow increased by $123 million compared to the prior year.

Amanda: Finally, turning to the balance sheet, we finished the quarter with $756 $9 million in cash cash equivalents and restricted cash with no debt.

Amanda Whalen: Next, I'd like to talk about our outlook for the second quarter and full year 2020. As a reminder, we experience typical seasonality in our models. As we discussed last, the second quarter typically has modest sequential revenue growth due to the lagging impact of downgrades after the holiday season. For the second quarter, we expect revenue to be in the range of $211 million to $213 million, representing growth of 28 to 29 percent year-over-year.

Speaker Change: Next I'd like to talk about our outlook for the second quarter and full year 2024.

Speaker Change: As a reminder, we experienced typical seasonality in our model as.

Amanda: As we discussed last quarter, the second quarter typically has modest sequential revenue growth due to the lagging impact of downgrades after the holiday season.

Amanda Whalen: For the second quarter, we expect revenue to be in the range of $211 million to $213 million representing growth of 28% to 29% year over year.

Amanda Whalen: We expect non-GAAP operating income to be in the range of $19.5 to $22.5 million, representing a non-GAAP operating margin of 9% to 11%. This sequential step down in operating margin is due to the timing of some investments made late in the first quarter, which have a greater dollar impact in the second quarter, particularly in engineering and go-to For the second quarter, we expect fully diluted shares outstanding to be approximately 298.

Amanda: We expect non-GAAP operating income to be in the range of 19, five to $22 $5 million, representing a non-GAAP operating margin of 9% to 11%.

Amanda Whalen: This sequential step down in operating margin is due to the timing of some investments made late in the first quarter, which have a greater dollar impact in the second quarter, particularly in engineering and go to market.

Amanda Whalen: For the second quarter, we expect fully diluted shares outstanding to be approximately $298 million.

Amanda Whalen: For the full year, we are increasing our revenue in the range of $899 to $907 million, representing growth of 29% to 30% year-over-year. We expect non-GAAP operating income to be in the range of $97 to $105 million, representing a non-GAAP operating margin of 11 to 12.

Amanda: For the full year, we are increasing our revenue guidance span the range of $899 million to $907 million representing growth of 29% to 30% year over year.

Amanda: We expect non-GAAP operating income to be in the range of $97 million to $105 million, representing a non-GAAP operating margin of 11% to 12%.

Amanda Whalen: As we spoke about last year, as the year progresses, we are making incremental investments across go-to-market and product opportunities to set Klaviyo up for long-term growth. Based on the timing of these investments, we expect to see some year-over-year operating margins deleveraged in the third quarter as well, with margin expansion in our seasonally strong fourth quarter. Finally, for the full year, we expect fully diluted share counts to be

Amanda Whalen: As we spoke about last year as the year progresses, we are making incremental investments across go to market and product Opportunistically just that claim you up for long term growth.

Amanda: Based on the timing of these investments we expect to see some year over year operating margin deleverage in the third quarter as well with margin expansion in our seasonally strong fourth quarter.

Amanda: Finally for the full year, we expect fully diluted share count to be approximately 298 million.

Amanda Whalen: To close out, we delivered strong results this quarter with healthy growth on the top line and strong operating income and pre-COVID. We are excited for this year and for the long-term opportunity ahead of us, and we are focused on executing against it for our students. And with that, we'll open up the call to Q&A. Operator?

Amanda Whalen: To close out we delivered strong results this quarter with healthy growth on the top line and strong operating income and free cash flow.

Amanda: We are excited for this year and for the long term opportunity ahead of us and we are focused on executing against that for our shareholders.

Speaker Change: And with that well open up the call for Q&A.

Amanda Whalen: Greater.

Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the call. If you would like to withdraw your question, simply press star 1 again.

Speaker Change: Thank you we will now begin the question and answer session. If you have dialed in and we would like to ask a question. Please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question simply press Star one again.

Operator: We do want to involve as many analysts as possible on the call, so please limit yourself to one question before returning. We'll go to our first question from Arjun Bhatia at William Blair. Perfect. Thank you so much.

Amanda: We do want to incorporate as many analysts as possible on the call. Please limit to one question before returning to the queue.

Amanda: Well go to our first question from Arjun Bhatia at William Blair.

Andrew Bialecki: And congratulations on the nice results here. To start with, maybe Andrew, I just wanted to touch on, I think, one of the disclosures that you'd given, which was around some of your larger customers, the top 10. I think they had over a seven-figure average ARR, and it sounds like the landing, the customers that you're landing are also getting larger and larger. Maybe just help us frame a little bit where you're targeting your go-to-market resources, especially the sales reps that you're investing in. And how do you view what the upper bound is of your target market? Or is there one as you, you know, look to move further into the mid market? Sure. Thanks, Arjun.

Arjun Rohit Bhatia: Perfect. Thank you so much.

Arjun Rohit Bhatia: Cracks on the nice results here.

Andrew Bialecki: To start with maybe.

Arjun Rohit Bhatia: Maybe Andrew I, just wanted to touch on I think one of the disclosures that you heard Kevin.

Arjun Rohit Bhatia: It was around some of your larger customers the top 10.

Arjun Rohit Bhatia: Over a seven figure average IRR and it sounds like the landing new customers that you're landing are also getting larger and larger maybe just help us.

Arjun Rohit Bhatia: I'm, a little bit you're where you're targeting your go to market resources, especially those sales reps, so you're investing in and how do you view, what the upper bound of your target market or is there one.

Arjun Rohit Bhatia: Look to move further into the.

Arjun Rohit Bhatia: The mid market.

Andrew Bialecki: Yeah, we're very happy with the results we're seeing there. And we shared that because, to answer your question on the upper bound, we don't see a strong upper bound on the side of business that can be Klaviyo. We continue to see that there are a lot of legacy marketing platforms out there, a lot of folks running on those. There are a lot of point solutions that just do, you know, just do email, just do SMS, just do one channel.

Speaker Change: Sure. Thanks Jorgen.

Speaker Change: Yes, we're very happy with the results, we're seeing there and we've shared that because to answer your question around up or down we don't see a strong upper bound on the side of the business it can be on <unk>.

Speaker Change: We continue to see that there is a lot of legacy marketing platforms out there are a lot of folks running on there is a lot of point solutions.

Speaker Change: Jeff does just that email adjusted that's been asked just one channel.

Andrew Bialecki: And the fact that we built this great customer database and it's integrated with marketing and all of the channels in one place makes it much easier to use. We integrate directly with folks, retail, and e-com stacks, and all that adds up to better access to data and more personalization, which is what everybody's after. So just to give you a quick example, you know we had a sporting goods store with over 100 locations.

Andrew Bialecki: And the fact that we built this great customer database and it's integrated with marketing and all of the channels in one place.

Arjun Rohit Bhatia: It's much easier to use we integrate directly with both retail and E com stacks.

Arjun Rohit Bhatia: And all of that adds up to better access to data and more personalization, which is what everybody is after.

Andrew Bialecki: So just to give you a quick example.

Arjun Rohit Bhatia: We had a sporting goods store with over 100 locations. They were on one of these legacy.

Andrew Bialecki: You know, they were on one of these legacy email marketing platforms with a point solution for SMS. They consolidated all that for us for better access to that data so they could experiment more quickly.

Arjun Rohit Bhatia: E mail marketing platforms with a point solution.

Arjun Rohit Bhatia: Consolidated all of that to us for better access to that data. So they can experiment more quickly.

Andrew Bialecki: And they know that's going to lead to, you know, more engagement from customers and more revenue growth. So we think we can take that into the mid-market and beyond. And then for our sales team, you know, we've been ramping up capacity in a very intentional way. And we've got that focus today really on that mid-market segment, as well as expanding coverage internationally. So we're very excited about the growth that we've seen there, and we think there's a lot more to come. We'll move next to Rob Oliver at.

Andrew Bialecki: I know that's going to lead to more engagement from customers and more revenue growth.

Arjun Rohit Bhatia: So we think we can take that as the mid market and beyond and then for our sales team.

Arjun Rohit Bhatia: Ramping up capacity.

Arjun Rohit Bhatia: A very intentional way.

Andrew Bialecki: And we've got that focus today really on that mid market segment.

Andrew Bialecki: As well as expanding coverage internationally. So we're very excited about the growth that we've seen there and we think there is a lot more to come.

Arjun Rohit Bhatia: Awesome.

Arjun Rohit Bhatia: Well move next to Rob Oliver at Baird.

Amanda Whalen: Amanda, I wanted to just ask you a little bit. You talked a little bit about the seasonality in the SMS portion of the business, and I just wanted to see if there had been any change to that at all, and then maybe get an updated view from you relative to the macro. Lots of different investments that you guys are making, and obviously quite a dynamic macro, so just wanted to get an update from you on what you guys are seeing in terms of macro opportunities. Thanks.

Andrew Bialecki: Thanks.

Robert Cooney Oliver: Amanda I wanted to just ask you a little bit you talked a little bit about the seasonality.

Robert Cooney Oliver: In the SMS portion of the business and I just wanted to see if there had been any change to that at all and then maybe get an updated view from you relative to the macro a lot of different investments that you guys are making and obviously quite a dynamic macro. So just wanted to get an update from you on what.

Amanda Whalen: You guys are seeing in terms of the macro opportunity.

Amanda Whalen: Sure. Thanks, Rob. Yeah, in terms of SMS and seasonality, what we see continues to be very consistent with SMS. Generally, with SMS, it tends to be more points in time, you know, high priority communication that tends to be linked to some of the peak holiday shopping periods. So we see SMS peak during those holiday shopping periods. So, of course, during Q4, Black Friday, Cyber Monday, being the natural one that we're all familiar with, interestingly, there's a little bit of seasonality, which you can see in Q1 and into Q2, and some of what we were talking about in gross margin, that Q1 is a little bit lighter from a holiday period.

Speaker Change: Sure. Thanks, Ross Yeah in terms of the SMS and seasonality what do we see continues to be very consistent with SMS.

Amanda Whalen: Generally with Eskom as it tends to be more points in time, you know high priority communication that tends to be linked to some of the peak holiday shopping periods that we see SMS peak during those holiday shopping period. So of course during Q4, Black Friday, cyber Monday being the natural one that we're all familiar with interim.

Amanda Whalen: Suddenly there is a little bit of seasonality, which you can see in Q1 and into Q2 and some of what we were talking about in gross margin that Q1 is a little bit lighter from a holiday period Q2, you have more of those big shopping holidays coming back around again between mother's day father's day Memorial day, the lead up to the fourth of July and but again all of that is very consistent with what we've seen.

Amanda Whalen: In Q2, you have more of those big shopping holidays coming back around again, between Mother's Day, Father's Day, Memorial Day, and the lead up to the 4th of July. But again, all of that is very consistent with what we've seen from SMS in the past. So no real change there. In terms of what we're seeing on the macro, based on what we're seeing, what I would say is it's steady. It's not getting better, but it's also not getting worse.

Arjun Rohit Bhatia: From asking that SMS in the past so no no real change there in terms of what we're seeing on the macro them based on what we're seeing what I would say, it's steady it's not getting better but it's also not getting worse, we do see some linkage in the macro to some of the trends that we called out on customer behavior.

Amanda Whalen: We do see some linkage in the macro to some of the trends that we called out on customer behavior on our last call, and we think that some of that is coming from the macro. But again, what we see there is that those trends are consistent, they're steady, and they're very stable.

Arjun Rohit Bhatia: On our last call and we think that some of that is coming from the macro.

Amanda Whalen: The other trend that we see that's interesting is that our customers' GMV growth is pretty stable as well, and we continue to see the pattern that we have seen over time, which is that their KAV, or Klaviyo Attributed Value, is growing faster than their GMV. And the reason it's growing faster than their GMV is we are a platform that drives revenue for them. We have built our software to be a must-have, not a nice-to-have, because we are the platform that you count on to help drive your top line.

Arjun Rohit Bhatia: But again, what we see there is that those trends are consistent they are steady and they are very stable and the other trend that we see that's interesting is our customers GMB growth is pretty stable as well and we continue to see the pattern that we've seen over time, which is that their K a V or claim you attributed value is growing faster than they are.

Arjun Rohit Bhatia: G M D and the reason, it's growing passenger or GMB is we're a platform could drive some revenue for them. We have built our software to be a must have not a nice to have because we are the software that you can count on to help drive your top line and so we're continuing to focus on in the macro environment is focusing on helping our customers drive growth. So we're running players and we're building cons.

Amanda Whalen: And so what we're continuing to focus on in this macro environment is helping our customers drive growth. So we're running plays, and we're building content for our customers on what are the best practices that they can use to get the most out of Klaviyo. And a great example of that that has come recently is one of our customers, Made In, who's in the codeware space. They've used Segments AI to generate over 30 segments, and those 30 segments are generating over $2 million. Great trends in terms of the way that our customers are relying on us to help drive. We'll go next to Elizabeth. Great, thanks. This is Katie Kieser on for Elizabeth Porter.

Arjun Rohit Bhatia: <unk> for our customers on what are the best practices because they can use to get the most out of claim you as possible and a great example of that good has come recently as one of our customers made in his in the cookware space they've used segments AI could generate over 30 segments and those 30 segments are generating over $2 million in.

Arjun Rohit Bhatia: So great trends in terms of the way that our customers are relying on us to help drive growth.

Arjun Rohit Bhatia: Okay.

Arjun Rohit Bhatia: We'll go next to Elizabeth <unk>.

Katie Kieser: And Stanley.

Arjun Rohit Bhatia: Great. Thanks. This is Katie keizer on for Elizabeth Puerto Tonight.

Amanda Whalen: Gratz on the quarter. I wanted to ask one on NRR, provide more visibility into the expansion behavior of customers in the quarter. I appreciate that NRR is impacted by lapping the price, but it would be helpful to better understand the health of Bend and perhaps how we can think about the NRR trend. Sure, thanks so much.

Katie Keizer: That's on the quarter.

Katie Kieser: I wanted to ask one on NR or can you provide more visibility into the expansion behavior of customers in the quarter I appreciate that and are always impacted by lapping the price increase so it would be helpful to better understand the health of customers expanding spend and perhaps how we can think about theater our trend over the next few quarters. Thanks a lot.

Amanda Whalen: As we look across our peer set and others who play in our space, we feel really positive about where we are with our NRR. I think 114% is a great expansion trend to have, and we're pleased with where we are. We did talk about last quarter that we expected NRR to tick down, and just as you mentioned, that's due to a couple of factors.

Speaker Change: Alright, thanks, so much.

Speaker Change: We look across our peer set and the others who.

Speaker Change: Hi.

Amanda Whalen: In our space, we feel really positive about where we are with our <unk> I think a 114% isn't great expansion trend to have and yeah. We're pleased with where we are we did talk about last quarter that we expected in her to tick down and just as you mentioned that's due to a couple of factors and we expected it to tick down because we're lapping the price.

Amanda Whalen: We expected it to take a dive because we're lapping the price increase and also because we continue to see, as I just talked about when we were speaking about the macro, the customer behavior trends that we called out last year. So, as we look forward in NRR, I would anticipate that it will continue to decline a few more points over the next few years. And as a reminder, another factor that is going on there is that when we land larger customers, some of those big deals who Andrew spoke about earlier, they tend to make larger purchases up front. That's reflected in their land and then not so much in the NRR.

Amanda Whalen: Increase and also because we continue to see as I just talked about when we're speaking about the macro.

Speaker Change: Customer behavior trends that we called out last quarter.

Speaker Change: So as we look forward and NR I would anticipate that it will continue to decline a few more points over the next three quarters and as a reminder, another factor that is going on in there is that when we land larger customers. Some of those big deals here Andrew spoke about earlier, they tend to make larger purchases upfront.

Speaker Change: As reflected in their land and then not so much in the in our expansion.

Amanda Whalen: As we think about NRR and where it is going over time, one of the things that we're particularly proud of is how sticky our product is. It's so important to our customers because of the high ROI that we're driving for them and also because of how foundational we are to their tech stack because we are the central source of customer data for them. So we think our gross retention, which is, of course, an important part of that NRR number, is really best in class for the size of businesses that we serve. Take our next question from Gabriela Borges at Goldman Sachs. Hi, this is Callie Valente on behalf of Gabriela.

Speaker Change: We think about NR and where it is every time one of the things that we're particularly proud of is how sticky are product as it's so important to our customers because of the high ROI that we're driving for them and also because of how foundation, where we are to their tech stack. Because we are the central source of customer data for them. So we think our.

Speaker Change: Gross retention, which is a person an important part of that inner number is really best in class for the size of the businesses that we serve.

Speaker Change: Okay.

Speaker Change: We'll take our next question from Gabriela Borges at Goldman Sachs.

Speaker Change: Hi, This is Kelly Valencia on for Gabriela I'm really nice to see the upside to revenue in the quarter I just wanted to dig in a little bit what was the main driver of that what was the biggest part of your business that surprised to the upside.

Amanda Whalen: Really nice to see the upside to revenue in the quarter. Just wanted to dig in a little bit. What was the main driver of that?

Andrew Bialecki: What was the biggest part of your business that surprised you on the upside in the quarter? Sure. I'll go back to what Amanda just talked about.

Kelly Valencia: In the quarter.

Andrew Bialecki: You think about our growth levers. We think about adding more customers. We continue to see across F&B, and then we talked about mid-market, just great adoption, folks moving off of older newsletter platforms or legacy marketing suites towards something that has a customer database as a central point and then consolidating marketing channels. So we continue to add customers. We continue to see a lot of adoption of SMS and other products. We talked about that ticking up. And then, you know, yeah, mid-market internationally. We touched on that before. I'll just hit on international briefly.

Andrew Bialecki: Sure.

Kelly Valencia: We attribute I mean I'll go back to what Amanda just talked about you think about like our growth levers, we think about adding more customers.

Andrew Bialecki: We continue to see across F&B and I will talk about mid market just great adoption folks.

Kelly Valencia: Moving off of.

Andrew Bialecki: <unk> newsletter platforms or legacy marketing suites towards something that has a database for Davis.

Kelly Valencia: Central point, and then consolidated marketing channels. So continue to add customers. We continue to see a lot of adoption of SMS and other products, we talked about that ticking up.

Kelly Valencia: And then.

Kelly Valencia: Yes mid market internationally touching that before I'll just hit on international briefly.

Andrew Bialecki: We're still very impressed by our growth there, and we're making investments across product and sales to drive that. You know, from the portfolio release we just launched last week, internationalizing Klaviyo now in the French language, and just continuing to expand with partners internationally. So across our four key drivers, I think we're seeing a lot of momentum there, and that's why we're very bullish about your headlines. Now, we'll move next to Brent Bracelin at Piper. Thank you. Good afternoon. You know, Avi, I wanted to take a step back.

Kelly Valencia: We're still very impressed by our growth there and we're making investments across product and sales to drive that.

Kelly Valencia: From the portfolio release, we just launched last week internationalize.

Kelly Valencia: Internationalize <unk> now in the French language.

Kelly Valencia: And just continue to expand with partners.

Kelly Valencia: Carter's internationally, so across our four key drivers I think we're seeing a lot of momentum there and that's why we're very bullish about.

Kelly Valencia: Go ahead.

Brent Alan Bracelin: Well move next to Brent bracelet at Piper Sandler.

Andrew Bialecki: There aren't many 800 million ARR businesses with 70% SMB exposure that are still growing. 35% We're seeing flowing growth across the broader SMB software category, but the Klaviyo spend category feels different. It feels slightly more insulated.

Brent Alan Bracelin: Thank you good afternoon.

Brent Alan Bracelin: Avi I wanted to take a step back there.

Brent Alan Bracelin: There are many $800 million of Aero businesses with 70% SMB.

Brent: SMB exposures that are still growing 35%.

Brent Alan Bracelin: What we're seeing slowing our growth across the broader SMB software category, but the equation spend category.

Brent: Different I feel slightly more insulated.

Andrew Bialecki: Can you maybe just step back and walk through maybe why that customer database coupled with marketing gives you maybe a little higher priority from a spend prioritization standpoint? Any color there, just given the concerns that investors have around SMB spend would be super helpful. Yeah, absolutely.

Brent Alan Bracelin: Can you, maybe just step back and walk through maybe why that that customer base customer database, coupled with marketing.

Andrew Bialecki: Gives you maybe a little higher priority from a spend prioritization standpoint any color. There just given the concerns that investors have around F&B spend would be super helpful. Thanks.

Andrew Bialecki: You know, we often think about when we talk to our customers, you know, what are the kind of nice-to-have pieces of software versus what are the must-haves? And, you know, from day one, we try to position Klaviyo as a must-have, really because we're driving revenue. Amanda talked about how for our customers, a greater, you know, increasing percentage of their sales are coming through Klaviyo. And we think that, you know, there's two parts that make us a must-have.

Speaker Change: Yeah absolutely.

Speaker Change: We often think about when we talk to our customers.

Speaker Change: What are the kind of nice to have pieces of software versus what are the must haves and from day. One we've tried to position <unk> as a must have really because we are driving revenue Amanda talked about how for our customers a greater increase in percentage of their sales are coming through <unk>.

Andrew Bialecki: The first is being the central source of truth about all your customers and being able then to use that, not just in our market, you know, with our marketing products, email, SMS, etc., but also to use that data in other applications.

Speaker Change: And we think that there is two parts to make us amongst app. The first has been the central source of truth.

Brent Alan Bracelin: About all your customers and being able then to use that not just with our market with our marketing products E Mail SMS et cetera.

Andrew Bialecki: We've got hundreds of applications that plug into Klaviyo, so that centrality really matters. And then the second part is, you know, we built in attribution, the ability to really measure your results. I think if you're a product that can tie back, you know, usage of that product directly to real revenue, real profit, that's a huge driver. In fact, when you think about what we're doing with artificial intelligence, that's a big part of the story.

Brent Alan Bracelin: But also they can use that data and other applications. We've got hundreds of applications deployed into <unk>, so that centrality really matters.

Brent Alan Bracelin: And then the second part is we built in attribution and the ability to really measure your results.

Brent Alan Bracelin: If you are a product that can tie back usage of that product directly to real revenue real profit.

Kelly Valencia: Huge driver and in fact, when you think about what we're doing with artificial intelligence.

Andrew Bialecki: When we started Klaviyo, the whole idea was, you know, better, more personalized experiences would be more engaging, and those would drive more revenue. And as we extend that with our product strategy, as we invest in AI, we think about that as a big driver of, you know, helping businesses increase customer engagement and revenue by being able to run more experiments, being able to optimize the marketing campaigns they're running. So I think when budgets get a little bit tighter, everybody kind of looks at which software is a must-have, and I think because we're driving revenue, we fit in. Our next question comes from Raimo Lenschow at Barker. Thank you.

Kelly Valencia: That's a big part of the story when we started <unk> the whole idea was better and more personalized experiences those would be more engaging those are going to drive more revenue and as you extend that with our product strategy.

Brent Alan Bracelin: As we invest in AI, we think about that as a big driver of helping businesses increase.

Raimo Lenschow: Customer engagement and revenue by being able to run more experiments being able to optimize our marketing campaigns are running so.

Raimo Lenschow: I think when budgets get a little bit tighter everybody kind of looks at which software is a must have and I think because we're driving revenue we didn't have them.

Raimo Lenschow: Our next question comes from Raimo <unk> at Barclays.

Raimo: Okay. Thank you.

Raimo: If you think about it.

Amanda Whalen: If you think about it, Amanda, you've got a question already about the health of the SMB space. The geographic differences, if you think about it, if you listened to Shopify yesterday, Europe was not as strong as the U.S., does that impact your, do you see any of that from a geographic perspective? And does that impact your European build-out, that you might kind of think about resource allocation differently? Yeah, great question

Raimo Lenschow: I remember you got a question already about the health of the SMB space there.

Amanda Whalen: Geographic differences, if you think about it if you listened to Shopify yesterday Europe was not as strong as Steve is that does that.

Amanda Whalen: Impact your do you see any of that from a geographic perspective.

Raimo: European Buildout that you might kind of think about resource allocation differently. Thank you.

Amanda Whalen: So, you know, as we called out on the call, we're actually seeing strength in Europe. So, you know, our European business was up over 40% in revenue year over year, and we're seeing particular strength in France, the Netherlands, Germany, and the UK, in particular. So, yeah, I think we are a little bit in the early days in our penetration in Europe, particularly as we're just now starting to make that really important step in the road to launching in a new language, starting with French.

Speaker Change: Yeah, Great question, so as we called out on the call, we're actually seeing strength in Europe. So our European business was up over 40% in revenue year over year and were seeing particular strength.

Speaker Change:

Speaker Change: Netherlands, Germany U K in particular, so you know I think we are a little bit earlier days in our penetration in Europe, particularly as we're just now starting to make that really important inroad in launching in a new language starting with French.

Amanda Whalen: You know, we're launching SMS in new markets, and there are just so many SMBs who are out there. You know, if you look at our customers and our customer account, we're continuing to see strength from Europe. And that's why, you know, we're leaning into expanding to new countries, adding new languages, because we see lots of opportunity, not only great results there, but opportunities ahead. Thank you. I will go next to Scott Berg.

Speaker Change: Launching SMS in new markets and there's just so many smbs who are out there. If you look at our our customers and our customer count we're continuing to see strength from Europe, and that's why we're leaning into expanding in new countries, adding new languages, because we see lots of opportunity not only great result.

Scott Randolph Berg: Fair bit opportunity ahead.

Scott Randolph Berg: Perfect. Thank you.

Amanda Whalen: We'll go next to Scott Berg at Needham.

Andrew Bialecki: Hi, everyone. It's a really nice quarter here. Congratulations! And thanks for taking my question. AV, I wanted to ask a question about your AI functionality. You've been able to release, you know, several components of it over the last few quarters. As you look at your customer base in terms of what they're using that functionality most frequently, where do they start? What do you see them, maybe over the course of time, use maybe more often than others?

Scott Randolph Berg: Hi, everyone, a really nice quarter here, congrats and thanks for taking my questions.

Andrew Bialecki: <unk> I wanted to ask a question on your AI functionality, you've been able to release.

Scott Randolph Berg: Several components of that over the last few quarters as you look at your customer base in terms of what they're using that functionality most frequently where did they start what do you see them maybe over the course of time used maybe more often than others, maybe just help us understand that AI journey from what you've seen at least initially today.

Andrew Bialecki: Maybe just help us understand that AI journey from what you've seen, at least initially. Yeah, absolutely. And to tie back, you know, it's been a major focus of ours for the last, you know, five, six, seven years. So let me describe our AI strategy in three parts. The first part is all about productivity. When you look at Klaviyo AI, a big portion of the features there, segments AI, email AI, or SMS, you know, assistance, flows AI, forms AI, they're all about how to help you use more Klaviyo, create more, run more experiments.

AV: Yeah, absolutely the tieback as of May its been a major focus of ours for the last 567 years. So let me describe our AI strategy in three parts.

Andrew Bialecki: The first part is all about productivity when you look at <unk>, a big portion of the features they're segments AI female AI are SMS.

Andrew Bialecki: The assistance flows AI forms AI, they're all about how to help you use more clearly create more run more experiments we have a heuristic internally that we believe we can help marketers businesses get twice as much done that's going to lead to lots more of experiments and thats going to lead to lift <unk> and usage. So on that front we're seeing.

Andrew Bialecki: We have a heuristic internally that we believe we can help marketers, businesses, get twice as much done. That's going to lead to lots more experiments, and that's going to lead to a lift in KAV and usage.

Andrew Bialecki: So on that front, we're seeing lots of adoption, and we're very happy with how that's progressing. So that's part one, productivity. Part two is the optimization of those marketing strategies. So, you know, we talked about an example of Forms.ai in the opening remarks. You know, by running more variations of, say, a form on a website, that leads to a better sign-up rate, that leads to more subscribers, which ultimately leads to more revenue. So that's part two.

Scott Randolph Berg: Lots of adoption, we're very happy with how that's progressing so that's part one productivity part two is optimization then of those marketing strategies.

Andrew Bialecki: We talked about an example of forums AI in our opening remarks.

Andrew Bialecki: By running more variation to say a form on our web site that leads to a better sign up rate that leads to more subscribers, which ultimately leads to more revenue.

Andrew Bialecki: So that part two and then part three that I'm really excited about is how do we not just help people improve the marketing, they're doing but actually come up with net new marketing strategies.

Andrew Bialecki: And then part three that I'm really excited about is how do we not just help people improve the marketing they're doing but actually come up with new marketing strategies? If you're a business that has hundreds of thousands or millions of consumers, there are lots of opportunities for personalization, for segments of your customer base, matching them up with just the right product at the right time. And our artificial intelligence can help find those campaigns, and those are additive to the KV and the revenue that folks are driving through Klaviyo today.

Andrew Bialecki: Business that has hundreds of thousands or millions of consumers. There are lots of opportunities for personalization for segments of your customer base.

Andrew Bialecki: Matching them up with just the right product at the right time, and our artificial intelligence can help find those campaigns and those are additive to the cave and the revenue that folks are driving through.

Andrew Bialecki: Later today, so across those three things productivity optimization and an expanding your marketing strategy. We've shipped the most products on the first part on productivity and that's where we're seeing the most usage, but I expect over the coming quarters youre going to see more in buckets, two and three on optimization expand your marketing strategy.

Andrew Bialecki: So across those three things, productivity, optimization, and then expanding your marketing strategy, we've shipped the most products in the first part of productivity, and that's where we're seeing the most usage. But I expect over the coming quarters, you're going to see more in buckets two and three on optimization, and expanding your marketing strategy. And then I think for our customers, all of those are valuable. But as you think about being able to think of new marketing strategies, those are extremely valuable. And so while we're not trying to monetize, say, the productivity tool indirectly, we're building that into our product as part of what makes us a best-in-class product.

Andrew Bialecki: Then I think for our customers.

Andrew Bialecki: All of those are valuable, but as you think about being able to think of net new marketing strategies and those are extremely valuable.

Andrew Bialecki: And so while we're not trying to monetize it a productivity tool and directly we're building that into our building that into our products. It is part of what makes US a best in class product I think as we start to optimize the marketing that folks are doing or can help them cope with net new campaigns. There is going to be opportunities there as we drive adoption for.

Andrew Bialecki: I think as we start to optimize the marketing that folks are doing or can help them come up with net new campaigns, there's going to be opportunities there as we drive adoption for additional either products or different pricing and packaging. So to round it all out, we built Klaviyo as this revenue engine for businesses. You know, when we started out, it really took more of a sophisticated marketer. We've actually started to build a lot of that intelligence directly into our products. And I think we're still very early in getting our customers to shift over to that model, really relying on us. But I think that's coming.

Andrew Bialecki: <unk>, either products or different pricing and packaging.

Andrew Bialecki: Yes, it's around all of that we built <unk> as this revenue engine for businesses.

Andrew Bialecki: We started out it really took more of a sophisticated marketer, we would actually start to build a lot of that intelligence directly into our products and I think we're still we're very early in <unk>.

Andrew Bialecki: Getting our customers to shift over to that model really relying on us I think that's coming.

Andrew Bialecki: And I think that's a big opportunity for the whole the mall category in space.

Andrew Bialecki: And I think that's a big opportunity for the whole category in this space. Next, we'll go to Terry Tillman at Tourist Security. Yeah, good afternoon, A.B., Amanda, and Jack. Thanks for taking my question as well. A.B., it actually relates to, so you clearly have to go to market investment and be pulled up market. But I'm curious about, from an innovation perspective, what do you see as more of an unlocking opportunity, whether it's the CDP or portfolio or some of the AI capabilities that I think Scott asked about? Just curious a little bit more about them and what they need, and maybe you even see RFPs. What is the more meaningful unlock potential with some of these newer products?

Andrew Bialecki: Next we'll go to Terry Tillman at Truth Securities.

Terrell Frederick Tillman: Yes, good afternoon, maybe Amanda and Jack Thanks for taking my question as well it'd be it actually relates to so you clearly have to go to market investments.

Terrell Frederick Tillman: And being pulled upmarket, but I'm curious about from an innovation perspective, what do you see as more of an unlocking opportunity, whether it's the CDP or portfolio or with some of the AI capabilities to the fixed Scott asked about just curious a little bit more.

Terrell Frederick Tillman: For them and what they need and then maybe you even see rfps what is the more meaningful unlocked potential there with some of these newer products. Thank you.

Andrew Bialecki: Thank you. Yeah, thanks, Tony. And I'll take this, clarify, but I'll take this more for as we move up market, what we're seeing from folks. So, I mean, the first thing is that it all starts with the central source of truth, you know, our CDP, this customer database. You know, just to touch on the CDP and the progress we're seeing there. I'm really excited about the adoption and the pipeline, the demand that we're seeing there. You know, we mentioned Helen of Troy adopting our CDP almost right away. I think you can think about the CDP as two opportunities. One is, you know, data governance and federation.

Speaker Change: Yeah, Thanks, Terry I'll take this.

Terrell Frederick Tillman: I will take us more for as we move up market, what we're seeing from folks. So I mean, the first is it all starts with the central source of truth.

Andrew Bialecki: Our CDP this customer database.

Andrew Bialecki: Just to touch on the CDP and the progress we're seeing there I'm really excited about the adoption in the pipeline and the demand that we're seeing there.

Andrew Bialecki: Mentioned Helen of Troy adopting our CDP almost right away I think you can figure out that CDP is two opportunities one is data governance and federation. So one thing we're seeing from larger businesses. They want all their consumer data in one place and they wanted to easily integrate not spring to marketing, but the advertising the customer service I went to their website and we're providing.

Andrew Bialecki: So, one thing we're seeing from larger businesses; they want all their consumer data in one place, and they want it to easily integrate, not just into marketing, but into advertising, to customer service, onto their website. And we're providing for that. And so that's a real differentiator. The second thing that we're focused on is really rounding out the marketing stack for a lot of these bigger businesses. A lot of them still rely on point solutions for different channels.

Andrew Bialecki: Adding to that and so that's a real differentiator.

Andrew Bialecki: The second thing that we're focused on is really rounding out the marketing stack for a lot of these bigger businesses a lot of them still rely on point solutions for different channels. They want all of that to be orchestrated to be.

Andrew Bialecki: To work together and we've been able to prove out with some of our larger customers that there's real lift.

Andrew Bialecki: They want all of that to be orchestrated, to work together. And we've been able to prove with some of our larger customers that there's real lift in doing email and SMS and other channels all together. Not only does it reduce complexity, but actually, consumers like it better. It's a better consumer experience.

Andrew Bialecki: In doing E mail, and SMS and other channels altogether, not only to reduce complexity actually consumers like it better it's a better consumer experience.

Andrew Bialecki: So, adding on those marketing channels over time, you know, one of the things we found with CDP is that it's not just about data governance, but there's actually an analytics play. Part of our CDP feature set allows our customers to run more advanced reports, some of which are out of the box, to help them discover some new marketing ideas. For example, we've had large customers that have used our RFM analysis that's out of the box to discover customers that used to be really loyal but have since lapsed, and we quickly create marketing campaigns based on that. That's something that, in the past, was an idea folks had, but it would take months to actually implement.

Andrew Bialecki: Adding on those marketing channels over time, one of the things we found with Edp is that its not about data governance, but there is actually an analytics play.

Andrew Bialecki: With part of our CDP feature set.

Andrew Bialecki: Laos, our customers to run more advanced reports some of it some of which are out of the box to help them discover some new marketing ideas.

Andrew Bialecki: For example, we've had large customers that have used our RF M analysis thats out of the box to discover customers that used to be really loyal but defense lapsed and quickly create marketing campaigns based on that that's something that in the past. It was an idea folks had but it would take months to actually implement and we've made it something you can do in hours or days.

Andrew Bialecki: And we've made it something you can do in hours or days. So, you take all those new things and then, later on, some of the productivity boosts, the optimizations with machine learning and artificial intelligence. I think that's the complete picture. I think, you know, for these larger businesses, they really want a complete stack that allows them to store customer data and then drive personalized consumer experiences all in one place. And so, we're trying to do that both with the products we offer and then making sure that we integrate with the other software they're using. We'll move next to Siti Panigrahi at Mizzou.

Sitikantha Panigrahi: So you take all those things layer on some of the productivity boost the optima optimizations with machine learning and artificial intelligence I think thats. The complete picture I think for these larger bids that they really want a complete stack that allows them to store customer data and then drive personalized consumer experiences.

Sitikantha Panigrahi: All in one place and so we're trying to do that both of the products. We offer but then making sure that we integrate with the other software they are using.

Andrew Bialecki: Okay.

Sitikantha Panigrahi: Well move next to city Pan in Korea at Mizuho Group.

Andrew Bialecki: Hi. Thanks for taking my question. It's great to see this largest online fashion store deal that you talked about with Shopify integration. As you look at the opportunity in the Shopify Plus install base with your partnership, what kind of opportunity, how many do you think you can further penetrate that base? And when you see this kind of opportunity, is this mostly a displacement?

Sitikantha Panigrahi: Hi, Thanks for taking my question, it's great to see this largest online fishing store deal that you've talked about this with shopify integration.

Andrew Bialecki: As you look at the opportunity in the soft refi plus installed base with your partner say, Oh, what kind of opportunity.

Andrew Bialecki: Many you think you can further penetrating that base and what do you see this kind of opportunity is this mostly a displacement do they use some sort of service or.

Andrew Bialecki: Or is it more of a greenfield opportunity.

Andrew Bialecki: Do they use some sort of service, or is it more of a greenfield opportunity? Yeah, so we loved working with Shopify, and we continue to partner really closely with Shopify Plus in particular. We mentioned that our Shopify integration and our relationship is so strong. Our two products work really well together, and that matters a lot for personalization.

Speaker Change: Yeah, So our loved working with Shopify and we continue to partner really closely.

Andrew Bialecki: <unk> plus in particular, we mentioned that.

Andrew Bialecki: <unk> integration.

Andrew Bialecki: And our bullish if that is so strong our two products work really well together and that matters a lot for personalization. So I think as you know for Shopify plus merchants those businesses.

Andrew Bialecki: So I think as for Shopify Plus merchants, those businesses, we've got strong market share, but we still think there's a lot of room to go, not just in terms of adding additional customers but also in expanding how we can use data from Shopify in our customer database and then use it across more marketing channels and more parts of the consumer experience. When I talk to customers and partners, they really like that vision, and a lot of them are looking for us to give them that roadmap.

Andrew Bialecki: We've got strong market share, but we still think there's a lot of room to go not just in terms of adding additional.

Andrew Bialecki: Customers, but also in expanding how we can use data from shopify in our customer database and then use it across more marketing channels and more parts of the consumer experience.

Andrew Bialecki: When I talk to customers and partners they really like.

Andrew Bialecki: That vision and a lot of them are looking for us to give them that road map and Thats a lot of what our sales team I talked about the customer growth team. We have it helps our customers adopt more flavor.

Andrew Bialecki: And that's a lot of what our sales team, I talked about the customer growth team that we have, that helps our customers adopt more Klaviyo. So we're very happy with the progress that we've made to date in the Shopify Plus ecosystem. We think there's a lot of room to grow there as well. Next, we'll move next to Derrick Wood at TD Cal.

James Derrick Wood: So we're very happy with the progress that we've made to date and the shopify plus ecosystem and we think theres a lot of room to grow there as well.

Andrew Bialecki: Okay.

Andrew Bialecki: Well move next to Derrick wood at TD Cowen.

Amanda Whalen: Thanks, Amanda. You have a strong customer acquisition engine at the lower end of the market, but you're also investing more resources up market. So I wanted to get a sense of how to think about the impacts on new customer generation levels in 2024, especially in light of the macro and some of the comments you made. We did see that new customers dropped down to 3k, and if you want, should we be thinking that's kind of the new run rate, or are there other seasonal factors, quarter to quarter, that we should expect as we progress through the year? Yeah, great question. Thanks, Derek.

James Derrick Wood: Thanks, Amanda you have the strong customer acquisition engine at the lower end of the market, but you're also investing more resources upmarket. So I wanted to get a sense of how to think about the impact on new customer generation levels in 2020 for especially in light of the macro and some of the comments you.

Speaker Change: We did see that new customers dropped down to three three K in Q1 should we be thinking that's kind of a new run rate or are there other seasonal factors quarter to quarter that.

Speaker Change: We should expect as we progress through the year.

Amanda Whalen: As we discussed on the call, we did see a bit of softness in the new logo ads. And in terms of the count, that was really focused on the lower end of the market. We think what's going on there is a combination of a couple of things. We think it's a combination of macro and the macro environment, as well as the intentional investment decisions that you referred to, which is, we are continuing to target entrepreneurs, but we're doing it really through products.

Amanda Whalen: Yeah, Great question. Thanks Derek.

Amanda Whalen: We discussed on the call we did see a bit of softness in the new logo adds and in terms of the account that was really focused at the lower end of the market. We think what's going on there is a combination of a couple of things. We think it's a combination of macro and the macro environment as well as the intentional investment decisions that you referred to which is we are continuing.

Amanda Whalen: To target entrepreneurs, but we're doing it really through products and then we're intentionally shifting more of our good market.

Amanda Whalen: And then we're intentionally shifting more of our good market towards those S&Bs and the mid market. But when you look at the net logo counts, those smaller customers have a disproportionate impact on the logo count, and they have a smaller impact on total revenue.

Amanda Whalen: Towards those smbs and mid market.

Amanda Whalen: When you look at the net logo counts those smaller customers. They have a disproportionate impact on the logo count and they have a smaller impact on total revenue now and interesting trends that we're seeing in the business within there is that if you look across each of our customer groups. The entrepreneurs smbs in the mid market within each of those customer.

Amanda Whalen: Now, an interesting trend that we are seeing in the business is that if you look across each of our customer groups, the entrepreneurs, the S&Bs in the mid market, within each of those customer groups, we are closing higher ASP customers. Customers are growing their businesses, they are turning to us to drive more of their revenue, and that results in them signing up for larger plans. So, going forward, as you think about the balance for the rest of the year, I would expect we're going to continue to grow new logos, but it's going to be more moderated growth in the total number of new logos that we're adding and more of a balance there between growth in logos and growth in ASP. That's great.

Amanda Whalen: Groups, we are closing higher ASP customers customers are growing their businesses. They are turning to us to drive more of their revenue and that results in them signing up for larger plans.

Amanda Whalen: So going forward as you think about the balance of the rest of the year I would expect we're going to continue to grow new logos, but it's going to be more moderated growth on total number of new logos that we're adding in more of a balance there between the growth and logos and growth in asps.

Andrew Bialecki: I'll add one thing on top of what Amanda just shared. So our product teams are obviously still very focused on delivering a great out-of-the-box experience regardless of the stage of the business, whether you're just starting out or you're already a large enterprise. And within the mid-market, within this kind of SMB, you know, more established businesses, we still think we have a long way to go in terms of market share.

Amanda Whalen: That's great I'll add one thing on top of what amount of your shared so our pricings are obviously still very focused on delivering a great out of the box experience regardless of the state of the business, whether you're just starting out or you're already a large enterprise.

Andrew Bialecki: And within that we talked about mid market within this kind of SMB more established businesses. We still think we have a long way to go in terms of market share.

Andrew Bialecki: We talked about our relationship with Shopify and Shopify Plus and growing there. There's also, you know; we continue to invest in existing partnerships and platforms. There are other platforms in the retail and e-commerce space that we're doing more work with. And then also, internationally. We think there's a lot of, you know, as Amanda mentioned, we're relatively early in growing internationally. We think there are a lot of SMBs, a large quantity of customers that should be running on Klaviyo. Next, we'll go to Tyler Radke at Citi.

Andrew Bialecki: Talking about our relationship with Shopify, and Shopify, plus and growing there Theres also continue invest in existing partnerships and platforms.

Andrew Bialecki: Other platforms in the retail and e-commerce space that we're doing more work with and then also internationally. We think there's a lot of as Matt mentioned, we're relatively early.

Tyler Maverick Radke: And growing internationally, we think there's a lot of smbs large quantity of customers that should be running on Colombia.

Andrew Bialecki: Next we'll go to Tyler Radke of Citi.

Andrew Bialecki: Yeah.

Andrew Bialecki: Yeah, thanks for taking the question. A similar question on going to market. It's, I guess, a two parter here.

Tyler Maverick Radke: Yeah. Thanks for taking the question.

Tyler Maverick Radke: Question on.

Tyler Maverick Radke: Go to market.

Tyler Maverick Radke: I guess two parter here number one it looks like sales and marketing.

Tyler Maverick Radke: Down a bit sequentially could you just talk about kind of the changes in spend that youre seeing there and then.

Tyler Maverick Radke: Where are you focusing the go to market investments here that you talked about some international opportunities, especially in France.

Tyler Maverick Radke: Are there certain industries that you're leaning into more if you could just talk about where youre targeting those investments. Thank you.

Andrew Bialecki: Number one, it looks like sales and marketing ticked down a bit sequentially. Could you just talk about kind of the changes in spend that you're seeing there? And then, you know, where are you focusing the go-to-market investments here? Have you talked about some international opportunities, especially in France? You know, are there certain industries that you're leaning into more? If you could just talk about where you're targeting those investments? Thank you. Great, thanks.

Tyler Maverick Radke: Okay. Thanks, I'll talk a little bit about like our strategy and <unk> talked to that the trend in sales and marketing spend.

Andrew Bialecki: I'll talk a little bit about our strategy, and then Amanda can talk about the trends and some of the marketing spend. So I mentioned that, you know, on the sales side, we've been increasing sales capacity very intentionally to focus on three core areas. The first being mid-market, where we're seeing, you know, strong growth. The second is internationally, where we think, again, there is a big opportunity. And then there is what we call our customer growth team that works with existing Klaviyo customers to help them adopt the full Klaviyo platform.

Andrew Bialecki: So I mentioned that on the sales side, we have been increasing sales capacity.

Amanda Whalen: Very intentionally to focus on three core areas.

Andrew Bialecki: The first being mid market, where we're seeing strong growth. The second is internationally, where we think again big opportunity and then the third is what we call our customer growth team that works with existing <unk> customers to help them adopt the full <unk> platform.

Andrew Bialecki: So that's going well, and, you know, we think we're well positioned there. On the marketing side, you know, we're in some of these newer areas. We mentioned mid-market, and we mentioned international. We're investing in our brand and folks knowing who we are, and also creating, you know, moments for folks to really attach to us. You saw our Klaviyo AI launch a few months ago.

Amanda Whalen: It's going well and we think we're well positioned there on the marketing side.

Andrew Bialecki: We're in some of these newer areas.

Andrew Bialecki: Mid market, we mentioned international.

Andrew Bialecki: We're investing in brand and folks knowing who we are.

Andrew Bialecki: And also creating moments for folks to really attach to US you saw our <unk> launch.

Andrew Bialecki: Months ago, we're big believers in customer events, our Palladium, London conference, bringing together both existing customers to use more cloud deals as well as net new customers meet those meet existing customers and learn from their experience.

Andrew Bialecki: We're big believers in customer events. Our Klaviyo London conference brings together both existing customers to use more Klaviyo as well as net new customers to meet existing customers and learn from their experience. So we also, we really like what we're seeing from those investments as well. You know, finally, I'll mention that on the marketing side, we're doing a lot of educating the market, even some existing customers, about all of our products, especially our newer products.

Andrew Bialecki: So we really like what we're seeing from those investments as well.

Andrew Bialecki: Finally, I'll mention that on the marketing side, we're doing a lot of educating the market and even some existing customers.

Andrew Bialecki: All of our products, especially our newer products.

Andrew Bialecki: You know, just to give you a little example, I talked to a lot of customers who are advanced email users of ours, but they're still learning about what SMS can bring to their business or what other channels or CDP can bring.

Andrew Bialecki: Sure.

Andrew Bialecki: To give you a little example, I talked a lot of customers who are advanced E mail users of ours, but they are still learning about what SMS can bring to their business or what other channels are CDP can bring and so we think there is a lot of upside upside there.

Andrew Bialecki: And so we think there's a lot of upside there. So we're doing all of that, still very much focused on retail and e-commerce, and with strong commitments to good unit economics and experimenting and staying disciplined. So, it's primarily marketing and marketing timing, because we have a lot of marketing programs that are linked to the holiday shopping season.

Andrew Bialecki: So we're doing all of that still very much focused on retail and e-commerce.

Andrew Bialecki: And with strong commitments to good unit economics, and experimenting and staying disciplined.

Andrew Bialecki: Thanks, and then regarding the sequential step down in sales and marketing that you asked about that has to do with the seasonality of investment. So it's primarily marketing and marketing timing because we have a lot of marketing programs that are linked to the holiday shopping season as Andrew said, we're continuing to invest in sales capacity, we will be ramping up marketing programs, particularly.

Amanda Whalen: As Andrew said, we're continuing to invest in sales capacity. We'll be ramping up marketing programs, particularly through the second half of the year. And you can see the timing of that reflected in some of the comments that we had in our prepared remarks, talking about how we expect operating margins to unfold over the course of the year.

Amanda Whalen: Through the second half of the year and you can see the timing of that reflected in some of the comments that we had in our prepared remarks talking about how we expect operating margins to unfold over the course of the year.

Amanda Whalen: We will take our next question from DJ Hynes of Canaccord.

Andrew Bialecki: Hey guys, congrats on the nice quarter. AB, maybe we can go back to that large win with the women's online fashion brand. Curious what the RFT looked like there?

Speaker Change: Hey, guys congrats on nice quarter.

Amanda Whalen: Maybe you can go back to that large win with a woman's online fashion brand curious what the RFP look like there.

Andrew Bialecki: Who else was involved? How long was the sales cycle? Kind of what ultimately tipped the decision in your favor would be helpful color.

Andrew Bialecki: He was involved how long is the sales cycle kind of what ultimately took the decision in your favor it would be helpful color.

Andrew Bialecki: Sure. So, in the mid-market and enterprise, we still see a lot of older tech, and that obviously doesn't include the back-end customer database that we have, which limits the amount of personalization and the kinds of experiences you can build across email, SMS, and other channels. You know, legacy tech, as well as just like point solutions, things that just help with one marketing channel. In that particular case, that actual customer had been on Klaviyo a few years ago and had thought they'd outgrown us, but then they'd since grown a lot.

AB: Sure so in the Midmarket and enterprise.

Andrew Bialecki: It's a lot of older Tac.

Andrew Bialecki: Obviously it doesn't include the backend customer database that we have which limits the amount of personalization and the kinds of experiences you can build across email SMS and other channels.

Andrew Bialecki: So legacy tax as well as just like point Felicia just help with one marketing channel at a time.

Andrew Bialecki: In that particular case the actual customer.

Andrew Bialecki: And then enclave, you're a few years ago and had thought they'd outgrown us, but then it <unk> grown a lot we've scaled up our systems.

Andrew Bialecki: We've scaled up our systems, and they came back, and they came back for a lot of reasons that I hear from a lot of our customers. Our integration tightly with their back-end retail and e-commerce systems, as well as integrations into their more, you know, consumer-facing, you know, with their website and things that sit outside of marketing. So those integrations, combined with the ease of use, the ability to get a lot of things done, I think that access to data and being able to use that to personalize, plus where we're going.

Andrew Bialecki: And they came back and they came back for a lot of reasons that I hear from a lot of our customers.

Andrew Bialecki: Integration tightly with their backend back.

Andrew Bialecki: Backend retail and e-commerce systems, as well as integrations into their more consumer.

Andrew Bialecki: Consumer facing with their website.

Andrew Bialecki: And things that sit outside of marketing so those integrations combined with ease of use the ability to get a lot of things done.

Andrew Bialecki: I think that's the access to data and being able to use that to personalize plus where we're going I.

Andrew Bialecki: You know, I talk to a lot of our larger customers. They're really excited about the idea of not just our customer database and installing channels but also what we're going to be able to do with artificial intelligence and the ability to take the data you have and plug it into every aspect of the consumer experience. A lot of our, you know, larger mid-market and enterprise brands still feel like they haven't been able to fully stitch that together. They don't have a single source of truth for consumer data.

Andrew Bialecki: I talked to a lot of our larger customers. They are really excited about the idea of not just.

Andrew Bialecki: Our customer database and selling channel, but also what we're going to be able to deal with artificial intelligence and the ability to take the data you have and plug it into every aspect of the consumer experience a lot of our.

Andrew Bialecki: Larger mid market and enterprise brands.

Andrew Bialecki: They still feel like they haven't been able to fully stitch that together. They don't have a single source of truth for consumer data.

Andrew Bialecki: You know, not all of the front office pieces, the software that interfaces with the consumer, they don't all talk to each other. I think with Klaviyo, we've really got a shot at being that company. And that's what we talk about, that we're going to move quickly to build products that both address, you know, what they want to do with data and marketing today but also build out this broader, you know, CRM for consumer businesses. So I think both where we are and where we're going, you know, that's what makes it interesting. We'll go next to Nick Altman at Scotiabank.

Nicholas William Altmann: Not all of the front office piece of software that interfaces with the consumer they don't talk to each other.

Nicholas William Altmann: With <unk>, we've really got a shot at being that company.

Nicholas William Altmann: And that's what we've talked about is that we're going to move quickly to build products that both addresses what they want to do with data and marketing today, but also build out this broader CRM for consumer businesses.

Andrew Bialecki: But where we are and where we're going.

Nicholas William Altmann: That's what makes it interesting.

Nicholas William Altmann: We'll go next to Nick Altmann at Scotiabank.

Andrew Bialecki: Awesome. Thanks, guys. I wanted to build on Raimo's question on the international side. Andrew, just given you guys are coming off the EMEA event, and you guys have rolled out a plethora of features, I was wondering if you could just maybe talk about how those conversations with international customers are different from those with U.S. customers, just in terms of buying propensity, where they're at with their MarTech journeys, interest in various channels Any other color you can provide and how those conversations differ with international versus U.S. customers would be interesting. Yeah, sure. Yeah, it was a great event.

Nicholas William Altmann: Awesome. Thanks, guys.

Nicholas William Altmann: I wanted to build on <unk> question on the international side Andrew.

Andrew Bialecki: Andrew just given you guys are coming off the EMEA event and you guys have rolled out the plethora of features here that those international customers. I was wondering if you could just maybe talk about how those conversations with international customers are different from your.

Andrew Bialecki: Customers in the U S. Just in terms of buying propensity, where they're at what their martech journeys interest in various channels willingness to consolidate et cetera, just any other color you can provide and how those conversations differ with international versus U S customer it would be interesting. Thanks.

Andrew Bialecki: And it's always great to get hands-on with customers and hear from them directly about what really matters. So first, the sophistication level, both in Europe and in Asia, is excellent. I mean, these are businesses that are really driven; they know what they want to do, they know the data they should have access to, and they've got a lot of ideas on how to put it to work. You know, the challenge for a lot of businesses both in Europe and Asia is really about complexity.

Andrew Bialecki: Yes sure yes, there is a great event and it's always great to get hands on with customer to hear from them directly about what really matters.

Andrew Bialecki: So first the sophistication level, both in Europe and in Asia is excellent I mean these are businesses that are theyre really driven they know what they want to do they know the day to day should have access to and they've got a lot of ideas on how to put it to work.

Andrew Bialecki: The challenge for a lot of both in Europe, and Asia, It's really about complexity and because we're reducing that that's that's really I mean, thats the winning value prop to.

Andrew Bialecki: And because we're reducing that, that's, that's, that's, the winning value prop. I mean, to give you a quick story, you know, we launched Klaviyo Portfolio, a set of tools to manage, you know, multiple Klaviyo accounts, multiple regions, multiple brands all in one place. And when we were at the event, I asked a panel of customers, I said, hey, how many of you log into Klaviyo at least once, you know, multiple accounts at least once a week? Almost everybody raised their hand. I said, "How many of you log into at least 10 different Klaviyo accounts every week?", and not many hands went down.

Andrew Bialecki: To give you a quick story.

Andrew Bialecki: We launched <unk> portfolio, a set of tools to manage multiple accounts multiple regions multiple brand all in one place.

Andrew Bialecki: We were at the event I ask.

Andrew Bialecki: Panel of customers I said, how many of you log into <unk> at least once multiple accounts at least once a week almost everybody raised their hand and said how many of your log into at least 10 different play deal counts every week.

Andrew Bialecki: Still, the majority of folks were working either across brands, or they had different, you know, stores, different websites for every single region in Europe. So we're launching features like that to help reduce the complexity. We did Klaviyo Portfolio. We spent the last, you know, 12 months really building out all the plumbing so we could internationalize our products, both the actual software itself, as well as all of our technical documentation, all of our guides, and tutorials. We just launched that with France.

Andrew Bialecki: And not many hands went down it's still the majority of folks were working either across brands or they had different stores different websites for every single region in Europe. So we're launching features like that to help reduce the complexity.

Andrew Bialecki: Particularly our portfolio we spent the last.

Andrew Bialecki: At 12 months.

Andrew Bialecki: Building on all the plumbing, so we could internationalize our products.

Andrew Bialecki: Both the actual like software itself as well as all of our technical documentation all of our guide in Q2, <unk>, We just launched that with France.

Andrew Bialecki: The team put in a huge effort to do that, but they set it up in such a way that we're going to be able to quickly move from English to French to many other languages, which will help us address more of, you know, our international customers and who should be future customers. So, you kind of add up all those pieces, as well as we've got hundreds of partners over in Europe that are very sophisticated, very focused on, you know, a lot of great ideas. That, plus our platform partners, plus a growing number of customers, that's creating a flywheel that's allowing us to then overlay, you know, additional sales, headcount, you know, run marketing campaigns, and grow internationally at this. Now, Great, thanks. This is Kyle Dealon for Jaxnator.

Kyle Dealon: The team put a huge effort to do that but set up in such a way that we're going to be able to quickly move from English to French to many other languages, which will help us address more of.

Kyle Dealon: The international our international customers and who should be future customers.

Andrew Bialecki: You kind of add up all those pieces.

Kyle Dealon: As well as we've got hundreds of partners over in Europe. They are very sophisticated very focused on a lot of great ideas.

Kyle Dealon: Plus our platform partners plus a growing number of customers, that's creating a flywheel, that's allowing us to then overlay additional sales head count.

Andrew Bialecki: Run marketing campaigns and grow internationally. Additionally.

Andrew Bialecki: We'll go next to Jackson Ader at Keybanc.

Andrew Bialecki: Maybe just a quick clarifying question first. I think, you know, the mention of the thoughtfulness in spending towards the back half of last year, particularly in December, and it sounded like SMS aside, it was kind of throughout the bit. Did that thoughtfulness carry through the entire quarter here when we talk about kind of a similar backdrop, and it was more so a quarter of just, you know, better productivity or execution up in the mid-market?

Kyle Dealon: Great. Thanks. This is Kyle the Alon for Jackson Ader, maybe just a quick clarifying question first I think.

Andrew Bialecki: The mention of the thoughtfulness in spend in towards the back half of last year, particularly in December and it sounded like SMS side. It was kind of throughout the business.

Andrew Bialecki: Did that thoughtfulness carried through the entire quarter here when we when we talk about kind of a similar backdrop and it was more so a quarter of just better productivity or execution up in the mid market and then.

Andrew Bialecki: And then secondarily, is there any color you guys could kind of provide for us on that 50K plus customer cohort? Is that growth primarily being driven by the larger companies, or is there still a fair bit of mix there coming from customers kind of growing up into that cohort? Thanks. Sure. Great question.

Andrew Bialecki: Secondarily is there any color you guys could kind of provide for us on that 50, K plus customer cohort is that is that growth primarily being driven by the larger lands or is there still a fair a fair bit of mix that are coming from customers kind of growing up into that into that cohort. Thanks.

Amanda Whalen: Thank you. So, with regard to thoughtfulness and the trends that we're seeing in customer behavior, the themes are very consistent with what we spoke about last quarter. So, this quarter was less focused on SMS, but the overall magnitude of the trends that we're seeing in customer expansion remains very consistent. And generally, what we're seeing is that customers continue to expand their plans with us. They're just doing it at a more moderated rate.

Andrew Bialecki: Sure.

Speaker Change: Great question. Thank you so yeah with regards to the thoughtfulness and the trends that we're seeing in customer behavior. The themes are very consistent with what we spoke about last quarter. So this quarter. It was less focused on SMS, but the overall magnitude of the trends that we're seeing in customer expansion remains very consistent and generally what we're seeing is that they continue to expand.

Amanda Whalen: Your plans with us Theyre just doing it at a more moderated rate and the reasons behind it when we talk to customers and look into the data is that they are being targeted in the email and SMS <unk> and they are being more proactive in managing the plans to make sure that theyre planned size aligns to the usage that they're driving.

Amanda Whalen: And the reasons behind it, when we talk to customers and look into the data, are that they're being targeted in the emails and the SMS that they send, and they're being more proactive and managing the plans to make sure that their plan size aligns to the usage that they're driving. And both of those things contribute really well to high ROI. And what we see when we look across our customer base is that customers with high ROI have high retention.

Amanda Whalen: Both of those things contribute really well to high ROI and what we see when we look across our customer base is our customers with high ROI have high retention and that one of our key competitive Differentiators is the fact that we let customers be very very targeted very intentional build relationships with the data.

Amanda Whalen: And one of our key competitive differentiators is the fact that we let customers be very, very targeted, very intentional, build relationships with data, and that helps them be more effective in their marketing. So, overall, I think both of those are very good for the business.

Amanda Whalen: And should that helps them be more effective in their marketing. So over time, we think both of those are very good trends.

Amanda Whalen: And we've just got to figure out how we can continue to help them drive revenue, and how do we share in that value? And then regarding the 50K customer mix, you know, it's important to remember, I guess, first, the seasonality of our business. The second half of the year, and, in particular, the fourth quarter, is the biggest expansion, and expansion is a key driver of that number of 50K ads.

Amanda Whalen: In the business and we've just got to figure out how do we continue to help them drive revenue and how do we share in that value that we're creating.

Amanda Whalen: And then regarding the 50 K customer mix.

Amanda Whalen: I remember I guess first the seasonality of our business the second half of the year and in particular, the fourth quarter is the biggest expansion site for us and expansion is a key driver of that number at 50 K ads. So overall, we're really pleased with the progress that we're seeing there we're really pleased with it.

Andrew Bialecki: So overall, we're really pleased with the progress that we're seeing there. We're really pleased with the, you know, the continued ads that, and proud of the miles. And those are all the questions I have for today's call. With that, I'll turn the call back over to Andrew Bialecki for closing remarks.

Andrew Bialecki: Continued adds that we have.

Andrew Bialecki: So that's a milestone that we reached that we spoke about on the call that over 30% of our IRR is now coming from this 50, K plus cohort of customers.

Andrew Bialecki: Okay.

Andrew Bialecki: And those are all the questions I have for dates for today's call with that I will turn the call back over to Andrew by Lucky.

Andrew Bialecki: Keith for closing remarks.

Andrew Bialecki: Well, thank you all for joining us on today's call. We want to again thank our Klaviyo team, our customers, and our partners for a great start to the year. We're very excited for the year ahead. Have a nice evening, everyone! And this concludes today's conference call. Thank you for your participation. You may now disconnect. We're very excited for the year ahead. Have a nice evening, everyone!

Andrew Bialecki: Great well. Thank you all for joining us on today's call and again, thank our <unk> team, our customers and our partners for a great start to the year.

Andrew Bialecki: We're very excited for the year ahead have a nice evening everyone.

Andrew Bialecki: And this concludes today's conference call. Thank you for your participation you may now disconnect.

Andrew Bialecki: You start to the year.

Andrew Bialecki: We're very excited for the year ahead have a nice evening.